TRxADE HEALTH, Inc. (MEDS) CEO Suren Ajjarapu on Q1 2022 Results - Earnings Call Transcript

May 09, 2022 8:25 PM ETTRxADE HEALTH, Inc. (MEDS)
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TRxADE HEALTH, Inc. (NASDAQ:MEDS) Q1 2022 Earnings Conference Call May 9, 2022 5:00 PM ET

Company Participants

Suren Ajjarapu – Founder, Chairman and Chief Executive Officer

Janet Huffman – Chief Financial Officer

Conference Call Participants

Howard Halpern – Taglich Brothers

Allen Klee – Maxim Group, LLC

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to TRxADE HEALTH First Quarter 2022 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. The earnings press release accompanying this conference call was issued at the close of the market today. The quarterly report, which includes additional information regarding the Company's results of operations for the quarter ended March 31 2022 was filed with the SEC earlier today. On our call today is TRxADE HEALTH Founder, Chairman, and Chief Executive Officer Suren Ajjarapu and Janet Huffman, its Chief Financial Officer. The replay of this call and webcast will be available for the next 30 days on the Company's website under the NASDAQ MEDS link. The Company's website also includes more supporting industry information. At this time, I'd like to turn the call over to Janet Huffman, the Company's Chief Financial Officer, Janet, the floor is yours.

Janet Huffman

Thank you, Operator. And thank you for joining us today. I'd like to welcome you to our 2022 first-quarter financial results conference call. Our press release announcing our 2022 first-quarter financial results was issued after the close of market today, it is posted on our website. We have also furnished said press release to the SEC on Form 8-K. Statements made on this call and webcast include forward-looking statements. These statements include but are not limited to our outlook for the Company, and statements that estimate or project future results of operations or the performance of the Company, including the potential continued impact of COVID-19 on the Company's business and results of operations.

These statements speak only as of the date hereof and the Company assumes no obligation except as required by law, to revise any forward-looking statements, that may be made in today's press release, call or webcast. These statements do not guarantee future performance and are subject to risks, uncertainties, and assumptions. Please refer to the press release and the risk factors and documents we file with the Securities and Exchange Commission, including our most recent quarterly report on Form 10-Q and any subsequently filed periodic report for current report on Form 8-K, for information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements.

In addition, during today's call and webcast, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of [Indiscernible] performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results at the end of our earnings press release. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of fiscal 2021. During the question-and-answer portion of today's call, please limit yourself to no more than one question and one follow-up. At this time, I'd like to turn the call over to Suren Ajjarapu, the Company's Chief Executive Officer. Suren, the floor is yours.

Suren Ajjarapu

Thank you, Janet. We saw revenue improvement in our first-quarter release for 2022 and our revenue base continues to return to the core traction pharmaceutical exchange platform and away from the one-time personal protective equipment sales driven by the initial onset of the COVID-19 pandemic. Our nationwide footprint continues to grow as we relentlessly focused on exciting new ways to expand proportional wallet share within our large growing network of registered users. While better enabling them to service their respective customers, the end users further growing their loyalty to their local retail pharmacy. Before we do a more detailed walk-through a financial and operational results of the 2020 to first quarter, for those of you who are new to the company, I would like to walk you through who we are, how we are digitalizing the retail pharmacy experience through the optimization of drug procurement, the prescription journey, and patient engagement. Fair to the launch of track seen.

Obtaining drug cohorts as an independent pharmacy was an extremely laborious and time-inefficient process with no insight and transparency into a fair market price. [Indiscernible] Traditional wholesalers will provide unfavorable payment terms, slow delivery and create a difficult conundrum for approximately 19,400 independent pharmacies nationwide. We identified this market inefficiency, as well as the incredible potential independent pharmacies, which together maintain an estimated approximately $67.1 billion in annual purchasing power and proceeded to large Treximet.

We designed on an operate a business-to-business web-based market platform bringing together the nation's independent pharmacies with an accredited national pharmaceutical supplier to provide a uniquely efficient and transfer the buying and selling process. Our platform lets independent pharmacies know that they are receiving a fair price from competing suppliers and have trailed payment terms and often with next-day delivery. We believe this radical price transparency, economy of scale and competition among suppliers leads up to a 10% reduction in pharmacies, total annual drug purchase costs with a drug-level savings of up to 90% on certain pharmaceutical products.

Our platform saves pharmacies from having to manually compare prices across the distributors, saving hundreds of hours of unnecessary labor annually and eliminating negative reimbursement or fulfilling a prescription at a loss. Our revenue model is simple. We've paired an administrative fee of up to 6% of the buying prices of the generic pharmaceutical and up to a 1% on the brand pharmaceutical s that pass through our pharmaceutical platform. Similar to PayPal or resell like model. Today we have seen incredible success in garnering attention from independent pharmacies, nationwide, validating our business model.

We currently have over 13,400 plus registered members on our platform with approximately 340 new registered members added to the first quarter of 2022 compared to 223 in the first quarter of 2021. Other exciting growth metric on our TRxADE platform includes a 25% increase in sales volume. Process to crossover platform in the first quarter of 2022 compared to the same quarter in 2021. TRxADE Prime has also experienced exciting growth in the first quarter of 2022, comparing the first quarter of 2022 to 2021 reflects an increase in the member of orders processed by approximately 300%.

And unit sold increased over 500%. We expect Fiscal to continue in 2022 as we expand our customer base to medical facilities and into the veterinarian-based industry. In February 2022, the Company announced a new winter with Exchange Health, LLC, SoS, RF, LLC, a pharmaceutical market plan platform. This new winter SOSRx is an exciting addition to the track seed and provide additional availability to short-dated overstock that will otherwise be subject to destruction. Our SOSRx market place brings the manufacturers and wholesalers together, providing an efficient and transparent buying and selling process. The tax rate and SOSRx marketplaces deliver radical price transparency, economy of scale, competition that benefit the independent pharmacies and the wholesalers while expanding the selling potential for such market participants.

We believe that TRxADE and SOSRx platforms provide the opportunity to deliver more affordable prescription costs for consumers. TRxADE anticipates growth in this joint winter in 2022 as more progressive manufacturers are expected to address the public need for enhanced medication accessibility and reliable supply of cost-effective pharmaceutical. In the capital market front, we continue to be proactive. At present we're at the Maxim Virtual Growth Conference on the panel, technology improving health care held on March 30. I'll also be attending LD Micro invitational, which will be held June 7 through June 9.

We attended these conferences with the goal of enhancing broader investor awareness of our company. Now I would like to turn the call over to our Chief Financial Officer, Janet Huffman to walk through some key financial strength from the first quarter of 2022.

Janet Huffman

Thank you, Suren. Let us discuss the first quarter 2022 results. Revenues for the first quarter of 2022 increased 6% to $3.2 million compared to revenue of $3.1 million in the same quarter last year. The increase in revenue was primarily due to revenue generated by the TRxADE platform and TRxADE Prime. Gross profit in the first quarter of 2022 decreased 3% to $1.3 million or 41.2% of revenues compared to $1.4 million or 45.3% of revenues in the same quarter last share. The decrease in gross profit is a result of Integra Pharma Solutions portraits a prime. Operating expenses in the first quarter of 2022 were $2.3 million compared to 2 million in the same quarter last year.

This increase was due primarily to increase salary and wages and legal expenses in the first quarter of 2022. Net loss in the first quarter of 2022 was 1 million or 0.12 per basic and diluted share outstanding compared to 0.7 million or 0.08 per basic and diluted share outstanding for the same quarter in 2021. Adjusted EBITDA, a non-GAAP financial measure, decreased to $-0.7 million compared to $-0.5 million in the same quarter last year. Looking at our balance sheet, cash and cash equivalents were $1.9 million as of March 31st, 2022, compared with $3.1 million as of December 31st, 2021. The decrease in cash was primarily due to our IT initiatives, investment in our new venture with SOSRx, increased salaries and wages and increased legal expenses for the first quarter of 2022. With that, I will turn the call back to Suren for closing remarks.

Suren Ajjarapu

Thank you, Janet. In summary, we're focusing on exciting new strategic partnerships to drive forward our core business while diversifying our revenue base. Taken as a whole, I think we are building an incredible compelling health care ecosystem allowing consumers access to an affordable healthcare while building an exciting value proposition for our stakeholders. I look forward to seeing what the future holds as we continue our rapid pace of operational execution, creating sustainable, long-term value for my fellow shareholders. With that, I will turn it over to the operator to begin the question-and-answer session. Operator.

Question-and-Answer Session

Operator

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] One moment, please. Your first question comes from the line of Howard Halpern with Taglich Brothers, please proceed with your question.

Howard Halpern

Congratulations on the quarter, top-line results look good. My question is in regards to - I guess both TRxADE and Integra where the prime offering. Do you see sequential growth occurring from this point forward in those two segments?

Suren Ajjarapu

Thank you, Howard. First of all, yes. That's what our aim and we continue to see more TRxADE, you might think this is first we released our earnings and given you the volume increase on our platform and the number of orders and a number of buyers on our TRxADE Prime.Those metrics we will continues to provide going forward. So, I think you'll see in our new press release of those metrics also.

Howard Halpern

And my follow-up would be, is there a way now that you're starting to gain volume and traction with customers in the Prime offering, is there a way to maybe improve gross profit margins in that segment?

Suren Ajjarapu

That's all good. But as you are aware, some of the TRxADE Prime, the shipping costs are a little bit higher because as you are able to see every industry is affected by the inflation. So, we may see that, probably, we cannot comment on that, but that's all our anticipation of increasing that gross profit probably towards the third quarter or fourth quarter, how the economy behaves, inflation, and the transportation costs, I'll be able to give you more definitely to answer on that.

Howard Halpern

Okay. So, for right now, low 40s, mid-40s in gross margin is a safe bet going forward until things normalize in the economy?

Suren Ajjarapu

Yes.

Howard Halpern

Okay. I'll jump back into queue.

Suren Ajjarapu

Thank you.

Operator

[Operator Instruction]. One moment, please. Your next question comes from the line of Allen Klee with Maxim Group, please proceed with your question.

Allen Klee

Hi, so for the venture with Exchange Health, SOSRx, help us understand how -- when we're going to see how we should expect the -- when the contribution from that could be material in 2022.

Suren Ajjarapu

Sure, thanks Allen. We just started that in February, we may not see towards the end of the year or beginning of next quarter of that impact because as I mentioned, it's a technology platform, got to educate both manufacturers and wholesalers or a big box chain, grocery chains and stuff like that. So, we'll continue to create the adoption for our technology, but probably towards the end of this year or beginning of next year we'll see the results.

Allen Klee

Great. And then the same question on Bonum Health and group purchasing organizations.

Suren Ajjarapu

We still yet to see some of the traction and we continue to pound on those group or just organizations. And the product availability, the key for them to jump into the marketplace as they're aware because they want to buy a 100% through us. We may see that the results coming towards the second quarter, also -- I'm sorry, third quarter and fourth-quarter.

Allen Klee

Okay. Thank you so much.

Suren Ajjarapu

Thank you.

Operator

Your next question comes from Robert Smith with the center of performance investing, please proceed with your question.

Unidentified Analyst

Good afternoon. Thanks for taking my call. My question is on, so first can you give me an idea with the continuing losses and diminishing cash, how you would think about financing your growth strategies?

Suren Ajjarapu

Thanks Robert. Yeah, we continue to operate as far as the new technology investment that we're doing. Probably we look for -- as I mentioned, the growth towards our existing platform will support our new initiatives.

Unidentified Analyst

Yeah. But your cash position continues to decline. So, what are -- what are your strategies for financing the growth of the business and running continuing losses? I mean, where you're going to get that capital from?

Suren Ajjarapu

I think we have an existing capital base that will sustain us to going forward. So, we'll keep looking at other avenues at this time, but we're -- right now, we're not looking to do any capital raise.

Operator

Your next question is a follow-up from Howard Halpern with Taglich Brothers. Please proceed with your question.

Howard Halpern

I noticed when I was looking at the queue that revenue in the specialty pharma area dipped a little bit. Was that just a one-time event or was there an event that cause that to happen and it's going to rebound back to normalcy because you've been sort of flat normally going in and around that. And this time it dipped a little bit.

Suren Ajjarapu

Yes. Going forward, as I mentioned, our focus is primarily for our marketplace and then TRxADE Prime. The reason for that reduction maybe the fourth quarter over the last month of March. It's a onetime date, but don't see it pretty much, it's a flat. But it's a 100% TRxADE health is focusing on the platform marketplace for the existing wholesaler to pharmacy, and going forward also the manufacturers to the wholesaler, both will be -- our marketplaces with the the highest priority for us.

Howard Halpern

And one just follow-up for that. Do you with the focus now -- what you've talked about the TRxADE platform, our operating expenses, where are they going to normalize down to around that $.2 million area or a little bit less than that going forward, are you able to make that adjustment?

Suren Ajjarapu

I think as we've seen, the salary increases, rate increases to keep the sustainable with existing inflation effect on our employee salaries and stuff. So, I think that's -- normally just needs around $2 million range.

Howard Halpern

Okay, thanks.

Operator

Ladies and gentlemen, we have reached the end of the question-and-answer session, and I'd like to turn the call back to Mr. Suren Ajjarapu for closing remarks.

Suren Ajjarapu

Thank you, Operator. I would also like to thank all of you for joining our earnings call today. We look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions, please reach out to our IR department, who would be more than happy to assist. For any of you who may have joined the call-in progress, remember, the replay of this call and webcast will be available for the next 30 days on the company's website under the NASDAQ MEDS link and that more information regarding the financial information and disclosed on this call and webcast, including the cancellation of our non-GAAP financial information can be found in our press release, which we filed after the close of the market today. Thank you, all.

Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.

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