Progressive Care, Inc. (OTCQB:RXMD) Q4 2021 Earnings Conference Call March 28, 2022 4:30 PM ET
Company Participants
Alan Jay Weisberg – CEO
Birute Norkute – COO
Cecile Munnik – CFO
Bob Bedwell – Director of Administrative Services
Operator
All right, everybody. Welcome to the call and thank you for joining us today here March 28th for the Progressive Care 2021 Audited Financial Report and Conference Call and Investor Update. We will be joined by members of the team from Progressive Care in just a moment.
But before this call get started, please allow me to read the forward-looking statements. Now these forward-looking statements can be found within every press release and every filings with the Securities and Exchange Commission. So you need that ticker symbol to find it RXMD. And statements made on this call are not – that are not based on current or historical facts are forward-looking in nature and constitute forward-looking statements within the meaning of Section 27 A of the Securities Act of 1933 and Section 21-E of the Securities Exchange Act of 1934. Such forward-looking statements reflect the company’s expectations about its future operating results, performance and opportunities that involve substantial risks and uncertainties when used here in on this call the words anticipate, believe, estimate, upcoming, plan, target, intend and expect and similar expressions as they relate to Progressive Care, Inc., its subsidiaries or its management are intended to identify such forward-looking statements.
These forward-looking statements are based on information currently available to the company at the time of this call, and are subject to a number of risks, uncertainties and other factors that could cause company’s actual results and performances, prospects and opportunities to differ materially from those expressed or implied by these forward-looking statements.
Joining with – joining me on the call right now is the CEO and Chairman of the company, Alan Jay Weisberg. Alan, the call is now yours. Go ahead.
Alan Jay Weisberg
Hi, good afternoon, and welcome to the earnings conference call for the year ended December 31, 2021. I’m Alan Jay Weisberg, Chief Executive Officer and Chairman of the Board of Progressive Care, Inc. Joining me today are our Chief Financial Officer, Cecile; Birute, our Chief Operating Officer; and our Director of Administrative Services, Bob.
2021 was the most challenging and interesting year for Progressive Care. Our team dealt with constant COVID outbreaks, which left the company short staffed pretty much throughout the year. Due to the extremely difficult labor market share in Florida, we had limited opportunities to hire new talent and to fill positions such as pharmacy technicians, drivers, customer service reps. We also encountered COVID-impacted supply chain delays.
The pandemic kept patients from visiting their doctors as often as in the past, which led to doctors prescribing less new therapies and authorizing less refills. This introduced the delay in patient medication adherence, or in extreme cases, patients per going their medications entirely.
And on top of it all, the switch to a new software platform that not go well as it did not deliver as expected. The software could not handle the large volume of prescriptions that we fill every day. This led to continuous service disruptions that ultimately caused the loss of prescriptions. Our patients and physicians who had previously received exceptional service from us very quickly began to get disappointed and transferred their business elsewhere.
We also lost business from new healthcare organizations that were in the process of onboarding and they decided to hold off on sending their business. We also had to delay marketing for new business as a result of the software difficulties. As a result of all the performance issues, we’ve experienced with the new software during the second quarter of 2021. We made the decision to reimplement our previously pharmacy software during the third quarter of 2021.
As the continuous lack of performance with the new software had a severe impact on our pharmacy operations and results that were not sustainable. Since reimplementing of our previous pharmacy software, we have experienced a drastic improvement and quality of our service to patients. We now have more efficient workflow and quicker turnaround on deliveries, which provided us the ability to rebuild our reputation with providers.
We have experienced a 10% increase in prescription revenue from Q3 2021 $8.1 million to Q4 2021 $8.9 million. We have also experienced an 8% increase in prescription spilled from Q3 2021 106,000 to Q4 2021 114,000. I am grateful and proud of every single member of our team, as they had shown a level of courage, dedication and determination despite the challenges that 2021 brought us.
They made 2021 a record year by expanding in our COVID-19 business and generating millions of dollars in revenue, while also continuing to build a strong reputation in the 340B sector. We were also able to position Progressive Care to become an SEC reporting company. This is a very important step towards uplisting to NASDAQ, which would lead to a number of advantages, both to the company such as access to better capital markets and capital resources and also to its shareholders in the form of better liquidity and enhanced value.
We have filed a registration statement with the SEC on Form 10-12G, and expect that our new registration statement will become effective in April 2022. We then expect to file an amendment to Form S1 with audited financial statements for the year ended December 31, 2021.
Upon satisfactory completion of the SEC staff review of the amended Form S1, if declared the fact that we will be in a position to become listed on the NASDAQ capital market, if approved by NASDAQ, and complete our intended public offering with the assistance of investment advisors and underwriters. The price and net proceeds intended offering has not yet been determined.
However, any proceeds would be used for working capital for purposes, further enhancement of the various digital platforms and our ClearMetrX subsidiary and possible acquisitions and other geographic markets that we seek to serve.
And now, I’d like to turn the call to our COO, Birute. She will discuss the company’s operational issues and successes in more detail.
Birute Norkute
Hello, everyone. As with other healthcare companies, 2021 was a tough year for Progressive Care. We were challenged by the unforeseeable events associated with COVID-19 variants outbreaks throughout the end of the year. We suffered many of the same problems that other businesses experienced during the year, such as extended labor shortages due to either illness or family, hiring difficulties due to a shortage of qualified workers in the labor market, and logistical problems related to prescription drug delivery.
And as Jay previously mentioned, the switch to the new pharmacy software had an unexpected negative impact on our ability to provide level of service our company is known for. These conditions, for the first time in many years, led to a decrease in the volume of prescriptions filled during the year, as well as corresponding decrease in pharmacy revenue as compared to 2020. The losses in pharmacy revenue were offset by increased revenue year-over-year from COVID-19 testing.
So by year-end, our total net revenue for the year was about $39 million, virtually unchanged from 2020. We also experienced significant cost pressures, such as increases in drug costs from our major suppliers, higher delivery costs due to fewer price increases and other cost increases introduced by inflationary conditions in the later half of 2021.
The labor problems led the salary increases to existing employees and higher pay rate to the new employees to remain competitive with other companies in the geographic locations that we serve. PBMCs increased to over 2 million in 2021, a 700,000 increase year-over-year. These fees are withheld from our third-party payer remittances.
We received high reimbursements from third-party payers during the year, but the increases were insufficient to keep pace with our cost increase. Despite the challenges, we would like to share some highlights such as our increased presence as a leading COVID-19 testing center in South and Central Florida. We earned over 4.3 million in testing revenues during 2021, a 3.7 million increase year-over-year.
The company’s management team successfully executed on establishing itself as a trusted and reliable provider of COVID-19 testing services for international travelers, as well as major entertainment production company, some of our most recognized names in the entertainment industry. It is difficult to predict whether COVID-19 testing will record at a level experienced in 2021.
But we will continue to build ourselves as a dependable destination for rapid testing solutions would plan for future expansion into other diseases such as drugs and sexually transmitted diseases, tension for various allergies, women’s health and more. 340B revenue includes both dispensing revenue from our pharmacy operations and the third-party inefficiencies from our ClearMetrX subsidiary.
Total 340B revenue remain strong, earning over $2.8 million in 2021. Total billings on behalf of covered entities was approximately $19 million in 2021. ClearMetrX provide data management and third-party administration or TPA services for three, four a week our dental [ph]. Pharmacy analysts and Progressive manage measures such as medication adherence. These offerings cater to the glaring need for the frontline providers to understand best practices, patient behaviors, care management process and the financial mechanism behind the decisions. We provide data access and also deliver actionable insights that providers and support organizations can use to improve their practice and patient care.
The company’s TPA services include management of wholesale accounts and contract pharmacies, patient eligibility with regard to the 340B progress, development and review of 340B policies and procedures and management of receivables. We continue to excel in our 340B pharmacy services and third-party administration services as well as COVID-19 testing services.
Our 340B business has been strong as we added eight new contracts for PharmCo S 340B pharmacy services and six new contracts for third-party administrative services performs for 340B covered entities by our subsidiaries, ClearMetrX. Our core pharmacy business continued to recover through the fourth quarter. Our pharmacy counts have gradually increased in all of the regions that we operate.
We are confident we will continue to see a turnaround in our script number, and we project significantly higher script count during the remainder of 2022. Our company’s business plan remains the same to continue our transition to a model centered on prescription delivery, a continuous development of digital solutions, medication therapy, medication adherence management, and an improvement in overall experience for providers and customers that meets the needs of its surrounding communities in a value-based healthcare environment.
Patient medication management remains a new enroll in our nation’s healthcare system as patients adherence to medication therapy remains a big problem. Year-after-year, certain studies conclude that patients receive suboptimal medication management. Patients non-adherence has a direct impact on our provider in pharmacy performance ratings, which also have a significant effect on revenue earned.
Certain studies have shown that patients better adhere to their medication therapy when they receive more information about your treatment. Digital access to that information, that means, one of the best means of information delivered to patients. So we believe in our digital solutions, our push towards the use of chat and text messaging tools to communicate with our patients, as well as their providers. And our current partnership with audio will better meet the needs for delivery of that information.
I would like to share with you that we have – are having amazing progress in communicating with doctors offices, utilizing certain communication tools, it is absolutely outstanding to see how the platforms we’re using make the two-way communication with offices, physicians, and their staff seamless and productive, allowing the pharmacy staff or the physician staff to use their time providing better patient care that would have been otherwise spent on a traditional phone call process that takes sometimes a lot more time.
So imagine calling anything pharmacy. And if you need to speak with their staff or pharmacists, you might be wasting 10, 20 minutes on rows until you can be helped. With PharmCo, doctor or staff can send a message and get their answer or have problem solved almost immediately by one of our many available team members.
I’m confident that we are one of the few medication management providers that provide such communication tools that allow physicians, offices, their ability to have a direct line of communication to all of our pharmacy departments, including logistics and senior management at all times.
For us, it is another tool that makes the relationship between pharmacy and providers very sticky. Carlos Rangel, the company’s Head of Digital Transformation, is spearheading this project with me and doing an outstanding job. Thank you, Carlos. We will continue to expand the use of digital communication tools and expect to have many more providers convert to this new and in a productive way of taking care of business better.
The COVID-19-related crisis in labor markets have affected everyone, including organizations that we work with. Doctors offices are short of medical staff, which makes it more difficult for them to focus on anything besides seeing patients. Not having enough time in a day sometimes means failing to stay on top of a patient’s medication adherence measures. But with our pharmacy services, we consistently go above and beyond any other healthcare organization. And this gives us an opportunity to earn a level of trust and confidence from providers and decision makers that is very rare within the [standard treatment]. [ph]
Seeing this as an opportunity, we began offering to providers and managed care with a patient a service that allows them to rely on our staff to contact your patients for the purpose of introducing our pharmacy services. We began providing the service very recently and we will like the results.
We believe the service will enable us to have stronger conversion numbers of new patients, and therefore, will result in more prescriptions dispensing stronger prescription revenue. We follow innovations in healthcare very closely. And we are always looking for ways to implement new technologies, so we can provide faster, better service to patients and be as cost effective as possible.
Some of our solutions will look for are in robotics, which can be an expensive investment in the long run, but will provide them with return on our investment. In our past conversations, we have talked about using prescription medication kiosks that allow the pharmacy to dispense prescriptions remotely. They deal for physicians while seeing patients to sound a prescription to the pharmacy. And while patient checkout for appointments, pharmacy start with processes script and it would be ready for pickup at a robot kiosk, which is located right in a doctor’s office.
We’ve been looking and we’re involved in conversations with a potential partner. But after completing our due diligence, we have decided to continue looking for a stronger partner. I believe today, we have found that viable partner. While we are still in the early stages of our talks, and they’re not in a position to disclose much more information, we believe this could be the right partnership. We have very good ideas. And so how this technology can create more value, and very excited about the potential impact this robotic system may have on our growth, increasing our margins and market share.
As I said previously, we continue to experience cost pressures from our other operating costs. As I was saying, next day prescription delivery continued to be one of our key differentiators from our competitors. We are incurring increasing costs in delivery costs, notably fewer, a 38% increase in fiscal year 2021 over 2020 and nearly 80% increase in the – since the beginning of 2021.
We are evaluating alternatives to regular gas-based delivery vehicles, such as hybrids or full electrical vehicles. And we’ll also see an improvement in a primary factor of production pricing as chip manufacturers and the world coming back to business as usual. Electrical vehicles should provide us with material savings in delivery costs and enable the company to have a positive impacts on environments.
We continue to provide rapid detection testing for patients at our locations. Our testing sites are it work with analyzers capable of detecting positive or negative COVID-19 results within minutes. Each site is operated by clinically trained pharmacy staff and administrating services on an off site. The company has established a reputation as a reliable testing partner and according to provide testing services to international travelers and international airline chain restaurants, U.S. and international production and entertainment company and local healthcare communities.
Our testing system along with the patients, employer or coordinator in charge of scheduling with us, [they work with us] [ph] and access those results with minimal efforts. We are a recognized leader for these testing systems in Florida. And we have maintained this competitive edge as the country continues to deal with the virus.
We believe the need for testing will continue throughout 2022 as new variants of the COVID-19 virus emerge, and travel restrictions requiring vaccinations and COVID-19 testing remain in force.
Luckily, while the numbers of COVID positive cases have dropped significantly, our reputation of a reliable quality testing and compliance solutions provider to many organizations is still working well. We are being engaged in many productions and continuing to be a preferred testing destination for international travelers. I’m excited and I’m confident we are on our way to achieving rapid performance in 2022 again.
Thank you. Back to you, Jay.
Alan Jay Weisberg
Thank you, Birute. Let’s continue with a summary of our annual financial report, which provides you with our financial position as of December 31, 2021. Our results of operation and changes in stockholders’ equity for the year ended December 31, 2021 and our cash flows for the year then ended. The financial statements and the report were audited by our independent public accounting firm, Daszkal Bolton, who issued an unqualified opinion. Please be sure to review our financial report, which is available both on the OTC market’s website as well as our website.
Cecile, our CFO, will walk us through the financial results.
Cecile Munnik
Thank you, Jay. Good afternoon, everyone. We are proud to report that despite the challenges we have experienced the end of the year strong and a profitable annual earnings for 2021. For the year ended December 31, 2021 and 2020, we recognized overall revenue from operations of approximately $8.9 million in both years. This included revenue from COVID-19 testing of approximately $4.3 million and $600,000 in 2021 and 2020, respectively.
We have sold approximately 443,000 and 530,000 prescriptions during this 12 months ended December 31, 2021 and 2020, respectively, a 16% year-over-year decrease in the number of prescriptions sold. The result was outlined some of the reasons for the downturn in prescription revenue, most notably from causes-related to the COVID-19 pandemic, as well as some operational issues we have encountered, which we believe have been validated, as we have experienced a 10% increase in prescription revenue from $8.1 million in the third quarter of 2021 to $8.9 million in the fourth quarter of 2021.
In addition to the increased revenue, we have also experienced an 8% in prescription sales from approximately $106,000 in the third quarter of 2021 to $114,000 in the fourth quarter of 2021.
Gross profit margin increased from 23% for the year ended December 31, 2020 to 26% for the year ended December 31, 2021. COVID-19 testing and 340B revenue continue to be the leading contributors to the increased gross profit margin during 2021.
Our operating expenses increased by approximately $1.3 million, or 13% for the year ended December 31, 2021 as compared to 2020. The increase was mainly attributable to the following: increase in salaries, wages and employee-related expenses due to year-over-year salary increases, performance bonuses, employee turnover, and time invested in training on pharmacy software of $700,000; increase in Board of Director fees of $200,000; increase in delivery costs due to increases in fuel prices and vehicle maintenance of $100,000; increase in consulting fees of $100,000; increase in the data conversion expenses due to pharmacy system implementation of $100,000; and an increase in other operating expenses of $100,000.
The loss from operations increased proximately under $1,000 for the year ended December 31, 2021 when compared to 2020 as a result of the increased operating expenses. Despite the challenges we encountered during 2021, the company managed to achieve positive EBITDA up over $167,000 for the year compared to EBITDA of $7,000 for the year ended December 31, 2020. Our cash position was over $1.4 million on December 31, 2021, and we expect our cash position will remain around this level for 2020.
That completes my remarks on the financial results of fiscal year 2021. Back to you, Jay.
Alan Jay Weisberg
Thank you, Cecile. Our outlook for 2022 and beyond is positive. We regained some of the loss pharmacy counts during the fourth quarter of 2021 and the first quarter of 2022. We added new 340B TPA contracts that will continue growth and our ClearMetrX subsidiary. We continue development of our digital platforms. That company expects that growth and these revenue components will continue at a level at or above the growth experienced in the latter part of 2021.
We believe that our fourth quarter 2021 performance and activities have provided us with good momentum, and we expect first quarter 2022 performance to reflect that. Again, I find it important to communicate our company’s vision, here’s our company’s missions, the healthier we make our patients, the more successful our business will be. And we will not lose sight of that vision with the goal of enhancing and creating more value for our shareholders.
Progressive Care believes that investment in technology and talent will provide the type of value that company and its shareholders deserve. This is why it is so important for us to realize our planned uplist in the NASDAQ within the next couple of months. We will keep you up to date every step of the way.
We expect that the completion of the uplist in NASDAQ will have an immediate and positive impact on growth of the company, and enabling us to pick up our operational pace by having access to institutional capital and to pursue the businesses we think will help us roll out our services nationwide at a faster pace.
Meanwhile, we would do our part by staying on a steady course of growing our business. We have no doubt that optimism around Progressive Care will soon began to be reflected in the share price of our stock. We also continue to keep you up to date on our continued operating performance.
Soon, you will see our 2022 first quarter report. And now, it is expected to be filed with the SEC on Form 10-Q under a fully reporting status. On behalf of all of us working at Progressive Care, we are endlessly grateful to our shareholders for their continued confidence and support as we continue on our path for record-breaking 2022.
Today, your loyalty and support is more valuable than ever. And we are all dedicated to rewarding your continued loyalty and long-term support immensely. I remain confident that our continued march towards NASDAQ, ongoing operational progress, and the upcoming filing of our 2022 first quarter financial performance will support an organic increase in our share price, bringing us closer to our NASDAQ uplisting objective. May God bless us all and keep us and our family safe and healthy.
This concludes the remarks for our earnings call. We would like to turn now to questions that we received in advance of the earnings call. Director of Administrative Services, Bob, will review the questions that were received prior to our meeting today and provide responses.
Bob Bedwell
Thank you, Jay. We received these questions prior to Friday’s deadline for submission of questions. We will respond to each question as appropriate. We have five questions here from our shareholders. The first of which is when will the S1 filing be effective? The registration statement on Form 10 is expected to automatically become effective in the first half of April 2022. This will then make us a fully reporting company with the SEC and will greatly expedite the process of uplisting to NASDAQ.
We expect to file an amendment to Form S1 in March, which will include the annual financial statements for 2021.
Alan Jay Weisberg
Three days.
Bob Bedwell
The second question is what’s the company’s strategy? Where are your stock price before uplisting? Will the company be able to uplist in April of 2022?
We expect that our performance during the first quarter 2022 will generate more shareholder interest in our stock and will lead to more purchases. We have also hired an Investor Relations firm that specializes in companies that uplist to NASDAQ, as well as current NASDAQ reporting companies, and we expect that their efforts will generate more interest in our stock.
Also, our officers have also made recent purchases of our stock. We believe that all of these efforts will ultimately lead to an increase in our stock price that will enable us to meet the NASDAQ uplisting requirements.
Here’s our third question. Is the company considering any merger or acquisition opportunities right after the uplist. The company is constantly looking at potential acquisitions that have the proper synergies, as well as locations in strategic areas in which we would like to expand. We can accelerate those discussions with those potential acquisitions. Once we are a listed company at which time we expect that we will have more access to institutional capital.
Our fourth question, When will the company launch the telemedicine platform? Through the My back’s patient portal on our website, providers currently have the ability to schedule telehealth appointments with patients. We’re also looking to use the portal for proctoring at-home testing for PCR and antigen testing. We have those capabilities currently And we’re currently testing them.
Our fifth and final question is a company planning to go nationwide in 2022. Our goal is to become a nationwide company and the execution of the capital raise is important for this goal. We have licensing in place in states that we have identified as strategic markets that we wish to expand to, the proceeds from a capital raise will allow us to build out the infrastructure needed for this expansion. That’s all the questions we have for today. We again, thank you for taking the time to join us on this call and for submitting your operations to us. We hope that you have a great remainder of the year. And we look forward to talking with you again in May during our next earnings conference call.
Question-and-Answer Session
End of Q&A
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