MedAvail Holdings, Inc.
Q1 2021 Earnings Call Transcript

Published: 12 May 2021

[Caroline Paul:]

Thank you and thank you all for participating in today’s call. Joining me are Ed Kilroy, Chief Executive Officer; and Ryan Ferguson, Chief Financial Officer. Earlier today, MedAvail Holdings released financial results for the first quarter ended March 31, 2021. A copy of the press release is available on the company’s website. Before we begin, I’d like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance or similar statements are forward-looking statements. All forward-looking statements, including without limitation, those relating to our operating trends and future financial performance, the impact of COVID-19 on our business and prospects for recovery, expense management, expectations for hiring, growth in our organization and reimbursement, market opportunity and expansion and guidance for revenue gross margin and operating expenses in 2021 are based upon our current estimates and various assumptions.

[Ed Kilroy:]

Thank you, Caroline, and good afternoon, everyone and thank you for joining us. We have started 2021 with a solid first quarter of 30% sequential revenue growth from fourth quarter 2020. As a reminder, our business model has two business segments. The operation of our technology-enabled high touch retail pharmacy using our proprietary technology and processes, known as our Retail Pharmacy Services segment and the sale or provision of these technologies to large customers to support their own pharmacy operations known as our Pharmacy Technology segment. During the first quarter, we again had meaningful contribution from both our Retail Pharmacy Services and Pharmacy Technology segments. And as we discussed in our last call, remain on track to open operations in Florida in July. Our double digit sequential revenue growth was driven by the continued strong demand for pharmacy solutions that improved medication adherence and patient satisfaction as well as growth in our pharmacy technology business. As we have discussed on previous calls, our value proposition is fueled by our embedded onsite pharmacy model in which we are viewed as a true partner to clinics and care providers. Our onsite model consists of our proprietary robotic dispensing platform called the MedCenter, a full-time clinic account manager or CAM for short, all backed by tech enabled telepharmacy platform, including a central pharmacy.

[Ryan Ferguson:]

Thank you, Ed. Turning into our Q1 results net revenue for the three months ended March 31, 2021 was $4.0 million, a 185% increase from $1.4 million in the same period of the prior year. These results were driven by a 164% increase in retail, pharmacy services sales, and a 430% increase in our pharmacy technology sales. As I've mentioned during the first quarter, we deployed one MedCenter into the retail pharmacy services segment compared to five in the first quarter of 2020.

[Ed Kilroy:]

Thank you, Ryan. In summary, we are pleased with our first quarter performance. This was a strong quarter financially and operationally. Our team has continued to perform very well. And as we grow, we are bringing in some excellent new people who are adding important depth and additional skills and experience to the organization. It is an exciting time for us and we remain extremely enthusiastic about our company's future and our growth prospects. We are committed to continue to deliver growth and make the necessary investments to maximize long-term value for all stakeholders. With that, we will now open it up to questions. Operator?

[Operator:]

The first question comes from Charles Rhyee from Cowen. Charles, your line is open. Please go ahead.

[Charles Rhyee:]

Yes. Thanks for taking the questions. And then congratulation guys on the announcements today. Just wanted to ask really two questions, first, on the guidance here, Ed, you kind of said in terms of total deployments, you expect it to be the same as originally intended, but it's a matter of timing here. But the quarter itself, outperformed relative to what we were expecting here, maybe you can touch on sort of what you think, where we are in terms of getting back to more normalized levels as we kind of exit the pandemic here? Maybe some sort of the trends that you're seeing given, there was commentary the other week from some companies reporting that talking about pockets of weakness in terms of certain types of utilization. Just curious, if you're seeing any of that or is that just a kind of a different market segment compared to the Medicare population? And so just trying to put two and two together between sort of the guidance and sort of what per unit per deployment kind of revenue is? Thanks.

[Ed Kilroy:]

Sure. Thanks, Charles. A couple of comments. So first of all, as we've talked about before with the challenges that our clinics have had with regards to COVID, they've done a number of things. One is they've altered some of the workflow within the clinic itself and the number of face-to-face visits. And secondly, as you can imagine with the Medicare population, there's a level of – at the time nervousness about going into clinic, what we have seen over the past number of weeks and a little – I'm going to say months, but more weeks, is our the volume in the clinics face-to-face visits is climbing. Although, it's ramping back up to where we would have expected it to be, and that'll take a little bit of time, but it's climbing. And then the second thing is that, as we mentioned, that a number of our clinic partners have now stepped forward and want to begin the planning process to deploy new sites, both our current customers with additional sites and some new customers with new sites. So that's encouraging as well. But again, it's – I'm going to say on a ramp back up, it's not a switch that's being just flipped on.

[Charles Rhyee:]

Okay, great. And then just another question on Cano and Access Healthcare here, what is the timing, because I think when you talk about 45 deployments, if I remember correctly, that was not – that didn't really include these Florida clients did it. And if so, like, you're announcing it today and the central pharmacy starts in July. Are there deployments from these two new counts going to be in the back half of this year? Or should we think of it more as a 2020 to start really?

[Ed Kilroy:]

Well. So when we think about – with regards to who is in – we had a view of we'd be entering Florida this year, and we had an assumption in the 45 of how many sites we thought we could do in Florida. We haven't obviously disclosed down to that level, but you're going to assume that in our 45, we had an assumption that a handful of sites would be going into Florida. With regards to the deployment of the two announcements we made today, I would say that, I'm going to use our Michigan site as an example. We opened the pharmacy in middle December, and we deployed the first clinics really went live towards the end of January. That's the approximate timing we attempt to have with some of the clinics we've signed. So you can expect us to begin to deploy some of these new clinics approximately that timeframe after we open our central pharmacy in July.

[Charles Rhyee:]

Okay. And then just the last question, you talked about how now some of your existing clients are now talking to you about expanding, adding potentially new sites. Any of those within the 45 that we're talking about for this year, or is it really, these will all be additive to next year?

[Ed Kilroy:]

They would be in the 45 for this year. So we do have clients who have now come back and said, okay, we want to start planning for additional new sites in their network, which is really our model. Entering an enterprise customer, deploying, being successful, and then expanding throughout their network, that's really, as you know, our model and we're seeing that resurgence as well. But it's in our expectation of the 45 to this year.

[Charles Rhyee:]

Okay, great. Thank you.

[Ed Kilroy:]

Sure. Thanks, Charles.

[Operator:]

The next question comes from Brooks O'Neil of Lake Street Capital. Brooks, your line is open.

[Brooks O’Neil:]

Good afternoon, guys. Sure. Hi guys. I was hoping and maybe I missed it, but can you just talk a little bit about what you’re seeing in the seven key target markets that you’ve been in? Is it more or less the same? Are the customers in those markets, are they experiencing the same kind of impact from COVID and in response to COVID that you were talking about to an extent in the Florida market?

[Ed Kilroy:]

So Brooks, I would say the answer is yes that as we look across our fleet of installs in the four states we’re active in right now. Most of our clients had changed workflows or clinic processes during COVID, but have begun to ramp back – ramp out of it. So what I mean by that is, beginning to see more patients face-to-face because that really is a big part of their business model. So we’re seeing – starting to see more activity in the clinic, which is encouraging for us. So, I think things are returning, but as I was saying to Charles, it really is a ramp back up. Again, it’s not a switch going off. So we’ll expect that to continue to improve in the third and fourth quarters.

[Brooks O’Neil:]

All right, all that makes total sense. And then you mentioned, I think one of the things that you’re seeing, which is totally understandable is more utilization of your drive-to-home service versus in-clinic. And I was curious if you have data or are you seeing any difference in terms of adherence, which I think is one of the key elements of the benefit of the MedCenter deployments and whatnot?

[Ed Kilroy:]

So with regards to adherence, we continue to operate at above a five-star rating for adherence. So extremely high growth, the major reason why our clients want to do business with us, whether we’re doing home delivery or in-clinic dispensing, we’re still delivering the same level of compliance. What I would say is that a number of our clinic partners, as we talk to them, we are putting some initiatives in place to align our dispensing with the patient’s visit. So get more of the patients coming into clinic, walking out the door with the refills in hand, not just first fills. And so that’s important because there’s been a number of different studies over time that have been done that pointed to filling your prescription at your point of care, can have a positive impact on adherence. And so, that really is one – again, one of the reasons why people like our models, because we can service the patient with both home delivery and in-clinic dispensing.

[Brooks O’Neil:]

Sure. Well, that makes sense. Let me just ask one more. I’m excited about the compliance packaging opportunity. I see that as a big opportunity. I’m just curious if you feel like you can deploy that in the dispensing machines in the same way you do with medications today? Or will it require some change in the way you handle dispensing those packs?

[Ed Kilroy:]

No, in fact, we – the way it’s packaged, because they’re packaged and then usually put in a box that’s sent to the customer, those boxes can easily defense in our MedCenter. Now, as you would know, since it’s compliance packaging, it’s specific to an individual, but that’s a really good example of a patient’s coming into the clinic for a visit. We ensure their medication that is compliance packaged is in the MedCenter ready for them, and they can pick it up when they leave the appointment. So absolutely we can handle it and we absolutely will be doing that as we go forward.

[Brooks O’Neil:]

Great. Thank you very much for taking my questions.

[Ed Kilroy:]

Thanks, Brooks.

[Operator:]

We have no further questions registered. So I’ll hand the call back to Ed to conclude.

[Ed Kilroy:]

Thank you very much, operator. And I’d just like to thank everyone for joining us today, and I wish everyone had great evening, and we’ll talk to you at our next earnings call. Have a good evening. Thank you.