TRxADE HEALTH Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 15, 2023

There are 5 speakers on the call.

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to TrackSate Health's Quarter 1 2023 Earnings Conference Call. During today's presentation, all parties will be in a listen only mode. Q and A session.

Operator

The earnings press release accompanying this conference call was issued at the close of the market today. The company's quarterly report, which includes additional information regarding the company's results of operations for the 3 months ended March 31, 2023, was filed with the SEC earlier today. On our call today is TrackSate Health's Founder, Chairman and Chief Executive Officer, Suren Ajayarapu and Prashant Patel, Interim Chief Financial Officer. A 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.

Operator

At this time, I'd like to turn the call over to Prashant Patel, company's Interim Chief Financial Officer. Prashant, the floor is yours.

Speaker 1

Thank you, operator, and thank you for joining us today. I'd like to welcome you to our Q1 2023 financial results conference call. Our press release announcing our Q1 2023 financial results Was issued after the close of market today and is posted on our website. We have also furnished such press release to the SEC on Form 8 ks. Statements made on this call and webcast will include forward looking statements.

Speaker 1

These statements include, but are not limited to, Our outlook for the company and statements that estimate our projects, future results of operations or the performance of the company, Including the potential continued impact of COVID-nineteen, increased interest rates and inflation of 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 review any forward looking statements that may be made in today's 3 call or webcast. These statements are not a guarantee of future performance and are subject to risks, uncertainties and assumptions. Information on risks, uncertainties and assumptions that may cause actual results to differ materially from forward looking statements. Please refer to the press release, risk factors and documents we filed with the Securities and Exchange Commission.

Speaker 1

These documents include, but are not limited to, our most recent annual report on Form 10 ks and subsequently filed periodic report or current report on Form 8 ks. In addition, during today's call and webcast, we will discuss non GAAP financial measures, which we believe are useful as supplemental measures of Brexit's performance. These non GAAP measures should be considered in addition to and not as substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non GAAP measures, including reconciliations with comparable GAAP results earnings press release. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of fiscal 2022.

Speaker 1

During the question and answer portion of today's call, please limit yourself At this time, I'd like to turn the call over to Surenna Charapoo, the company's Chief Executive Officer, Soren Desfloit Health.

Speaker 2

Thank you, Prashant. We continue to see improvement in 2020 Our core trackfade pharmaceutical exchange platform. Our nationwide footprint continues to grow And we remain committed to the focus of exciting new ways to support our large growing network of registered users. With the development of technology and products for our local pharmacies, we are dedicated to supporting these pharmacies with new innovative products That better enable them to service their customers and strengthen loyalty to their local retail partners. Before we do a more detailed walk through of financial and operational results for the Q1 of 2023, for those of you who are new to the company, I'd like to walk you through who we are, how we are utilizing the retail pharmacy experience through the optimization of drug procurement, prescription journey in patient engagement.

Speaker 2

Prior to the launch of TRAXADE, obtaining her codes As an independent pharmacy, as an extremely laborious and time inefficient process with no insight or transparency Into a fair market price, what others are paying for the same drug? Traditional wholesalers would provide unfavorable payment terms, slow delivery and create a difficult command room for approximately 19,400 independent pharmacies nationwide. We identified this market inefficiency as well as the incredible potential in these independent pharmacies, Which together maintained an estimated approximately $67,100,000,000 in annual purchasing power and proceeded to launch TrackSane. We design, own and operate a business to business web based market platform, Bringing together the nation's independent pharmacies with accredited national pharmaceutical suppliers to provide a uniquely efficient transparent buying and selling process. Our platform lets independent pharmacies know that they're receiving a fair price from competing suppliers in a fair payment terms often with next day delivery.

Speaker 2

We believe this radical price transparency, economy of scale and competition among suppliers leads to up to a 10% reduction in the pharmacy's total annual drug purchasing costs across distributors, saving hundreds of hours of unnecessary labor annually and eliminating negative reimbursement Fulfilling a prescription at a loss. Our revenue model is simple. We're providing an administrative fee of Up to 6% of the buying price on generic pharmaceuticals and up to 1% on brand pharmaceuticals, a pass through our pharmaceutical marketplace Similar to a PayPal or Visa like model. To date, we have seen incredible success in garnering attention independent pharmacies nationwide validating our business model. We currently have over 14,500 plus registered members on our platform with approximately 1100 new registered members added in the Q1 of 2023 impact in the Q1 of 2022.

Speaker 2

Another exciting growth metric on TrackSane platform includes A 7% increase in the volume of sales processed across our platform for the same comparable quarters. On January 20, 2023, we entered into agreements to sell 100% of the outstanding membership interests in our subsidiary companies, Community Specialty Pharmacy and Alliance Pharma Solutions. The company will receive $245,000 In consideration for both the companies, I agreed to enter into a master services agreement, which it is currently supporting. We expect the transactions to complete closing by June 30, 2023. The full details on Information regarding the transaction can be found on our Form 8 ks filed with the Securities and Exchange Commission on January 23, 2023.

Speaker 2

The sale of this subsidiary company is part of our plan to focus on our core business to business revenue model. I'd like to now turn the call over to our Interim Chief Financial Officer, Prashanth Patel, to walk through more key financial highlights Q1 of 2023. Thank

Speaker 3

you, Soren.

Speaker 1

Let us discuss Q1 2023 financial results. Consolidated revenues for the 1st 3 months of 2023 decreased 31 percent to $2,200,000 compared to revenue of $3,200,000 for the 1st 3 months of 2022. This year over year decrease in revenue was caused by decreased revenues in Trexair Prime of approximately 70%. The TrackSafe platform revenue increased 4% in 2023 compared to the same period in 2022. Our community specialty partnership revenue increased 2023 compared to 2022.

Speaker 1

Consolidated, there was a 70% improvement in gross margin for the same 3 month period ending March 31, 2023, 2022. As a percentage of revenue, TrackSafe Prime reported a gross margin of 12% for the Q1 of 2023 compared to 1% for the same period in 2022. Initiatives to improve gross margin included improved vendor pricing, vendor contracts and drop shipping. Our community specialty pharmacy recorded an increase in gross margin as a percentage of revenue, rising from a negative 30.7% in 2022 to 13.1 percent for 2023. Moving forward, the company is working to grow track state prime revenues with the foundation Our reduced overhead and improved gross margins.

Speaker 1

Consolidated gross profit for the 1st 3 months of 2023 compared to 2022 improved $221,000 but increased year over year at 69% as a percentage of revenue. Operating expenses in the 1st 3 months of 20 23 were $1,900,000 compared to $2,300,000 for the same period in 2022. There were decreases in wages and salaries, technology costs for research and development and general and administrative costs Of approximately $463,000 Also recorded are increased expenses of approximately 64,000 Net loss for the period ending March 31, 2023 was $678,000 or $0.07 per basic and diluted share outstanding Compared to $960,000 loss or $0.12 per basic and diluted share outstanding for the period ended March 31, 2022. Including the net loss is a one time loss on discontinued operations of approximately $352,000 This loss was caused by the voluntary withdrawal agreement with Exchange Health to resolve the partnership with PASRx due to its lack of performance. Year over year comparison for the Q1 periods of 2023 2022 for the adjusted detail, our non GAAP financial measures reflect Negative $600,000 for the Q1 of 2023 compared to a negative $700,000 for the same period in 2022.

Speaker 1

Looking at our balance sheet, cash was $1,200,000 as of March 31, 2023 compared with $1,100,000 As of December 31, 2022, the increase in cash is mainly driven by $850,000 received for accounts receivable advance in March health. With that, I will turn the call back to Soren for closing remarks.

Speaker 2

Thank you, Prashant. In summary, we're focusing on exciting new innovation and partnerships to drive forward our core business to business strategy while diversifying our revenue base. Taken as a whole, I think we are building an incredible compelling ecosystem. 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'll turn it over to the operator to begin the question and answer session.

Speaker 2

Operator?

Operator

Thank you, sir. We will now begin the question and answer question. If you're using speaker equipment, you will need to lift the handset before making your selection. One moment please while we poll for questions. Our first question is from Allen Klee with Maxim Group.

Operator

Please proceed with your question.

Speaker 4

Yes, hello. It's good to see the prime volume the volumes remaining positive. Starting off with the I'm sorry, I meant the platform volumes. Question on Prime. Why the decline?

Speaker 4

And you mentioned in your conversation about a desire to grow Prime, but Tell me if that's strategic or just explain why what's the strategy there? Thank you.

Speaker 2

Sure. No problem, Adam. Thank you. Appreciate your last time today. On the TrackSane Prime, we are looking for a better catalog, better pricing on our platform to offer that solution.

Speaker 2

As you're aware, our tech margins are high. That's a reason when There is a reduction in track state plan. We see that automatically, your gross margin shot up to 69%. The strategy is to find a right partner to do a drop shipment so that we don't incur double dipping in the shipping charges Coming to our warehouse and then going back to the same day to the pharmacy even though it's a convenient, we would like to offer that drop shipping services Our customer base, which will reduce our burden of The D and A still maintained enough margins out there and increased the sales. There are other reasons you saw the drop in the sales, We are picking up.

Speaker 2

We're negotiating with a better contract with our suppliers. Hope that answered the question, I will.

Speaker 4

Okay. And then in the prime business, would you comment on The mix any commentary on the mix of generics versus branded relative to kind of the normal mix? Yes.

Speaker 2

As I mentioned, the TrackSat climate still has an essence to ease. I would like to comment more on the marketplace and the mix is still Close to around 70% generics to 30% brand we want to maintain, but we're not there yet. That's probably around 55% to 60% generates and 40% rand. That's eventually, we want to grow that Towards 70 and 30

Speaker 4

split. Okay. And then the sale you mentioned the sale of 2 of your businesses that is coming up is that should be by June, right? Could you just explain a little more of the details of that if you're completely getting out of that? And what that impact could have on kind of getting rid of some burn?

Speaker 2

Sure. As we mentioned last quarter of 2022. We want to focus on our core business, which is something that B2B. The assets that are up for sale are more of a B2C side business to consumer aspect of it. And that's what we are trying to jettison and focus on the core business.

Speaker 2

And the burden and I can say it was anywhere between $150,000 to $200,000 because that was draining into the R and D Alliance Pharma Solutions and the community specialty pharmacy is not that much fun, but it's a anything that's consumer focused, we are I'd like to take the same and focus on business to business, which is nothing but the marketplace, and that's where we see the development growth potential coming forward, Both marketplace as well as TrackSat card.

Speaker 4

So the $150,000 to $200,000 of burn that were doorway, that's Is that over what what's the time period that for $150,000,000 to $200,000,000 you're referring to?

Speaker 2

Like even on a per month basis because we're spending it mostly on the R and D in the last few quarters, that will go away going After June of this year.

Speaker 4

Okay. That's great. And what would you say that the state of the independent Pharmacies is right now and when your salespeople talk to them of what they're really looking for from you guys.

Speaker 2

There's still that the transparency that other wholesalers that are not offering Plus any technology advancement for them to see their efforts to reach out to their consumer base And the competition as you are seeing mostly the spill pack wall and stuff, that's the advantage these guys are looking up to the track What is out there? Whether it's a drug pricing, whether how can they address their consumer needs? Can we able to offer any health care IT solutions? That's what they look for. But our focus is primarily on the marketplace, given the knowledge base that's coming out of our I like the analytics, card analytics piece, so there's a pricing, volume.

Speaker 2

Those are the areas that these pharmacies are going to look for In the purchasing efforts as well as any details on as well as any manufacturing Issues that are out there because the notion these are mom and pop shops that don't have the big IT infrastructure like the big box chains. One of the aspects of these guys look us up to.

Speaker 4

Thank you. Can you give us an update on Your strategy towards group purchasing organizations for your marketplace platform?

Speaker 2

I'm sorry, continue to take that question, Alan. Sorry.

Speaker 4

Basically, I know that you've had some interest To work with group purchasing organizations for track state to become essentially the big three company with a pharmacy where you would be the hopefully the majority of their drug purchases. Could you just talk about how you're thinking about today and

Operator

potential?

Speaker 2

So we're not competing with those big 3. We want to add value to our independent pharmacies So that they can have a transparency in looking at into their contract that they signed within BIG3? And can I bring that transparency to these pharmacies? What is the generic ratios That I'm buying from the big three and able to still able to deviate from and come on to our platform and buy. That's the technology that we would like to offer so that we can see the visibility and at the same time able to use the secondary suppliers that are out there.

Speaker 4

Right. But specifically, are there group purchasing organizations that you're talking to today?

Speaker 2

Yes. We're yes, we're trying to, but as I mentioned, we need to have a better catalog. So we're still able to offer that solution. We're still doing the piloting as we speak, and there's continuously the efforts are going towards And group purchasing organizations, yes.

Speaker 4

And so the so your Prime offering is what gets you the better platform. Is that the way to think about it?

Speaker 2

The Prime platform will give better Logistical solutions to my pharmacies where the marketplace will always be there to offer them look for the better pricing and better catalog.

Speaker 4

I think that's my questions. Thank you so much. Appreciate it.

Speaker 2

Thank you, Alan.

Operator

On your touch tone phone. Our next question comes from Howard Halpern with Taglich Brothers. Please proceed with your question.

Speaker 1

Good afternoon, guys.

Speaker 3

In terms of what you're seeing, this quarter seemed like A large number of community pharmacies signed up on the platform. What do you attribute that to? And should we think about That now in terms of increasing transaction volume on the platform.

Speaker 2

So, no, good afternoon, Howard. Thanks for that question. We call it as a registered member. We don't just identify as independent pharmacies alone. There are independent pharmacies, 19,400.

Speaker 2

The break up, the ones that we signed up, 1100, will attribute towards some of the clinics, Podiatrists, dermatologists, those are the ones that we're trying to bring on to platform where they have a similar situation like in these independent pharmacies, Like one nurse that's handling purchasing, doesn't have the bandwidth of the resources to shop around. Those are the areas that we are slowly Inching and expanding. So they have the same need versus the independent pharmacy for some of these products for their in house use, Not just a dispens but for their in house, transport where the registered numbers are increasing.

Speaker 3

Okay. And in terms of going forward, are you pretty much set now with this $1,900,000 to $2,000,000 Operation expense level, do you think, for until you generate more platform and prime revenue?

Speaker 2

I think so. Yes, our overhead is pretty much locked up at this time. And from now onwards, as you guys can see, That margins will grow. If I can squeeze more juice out of the same line and with the same existing expenses, yes, that will fall into our bottom line.

Speaker 3

Okay. And one final one. With you talked about negotiating with better shipping, should we expect that really any From your point of view, you're going to look at increasing prime revenue, but you're going to want to drive, Even if it's small, you want to drive incremental gross margin improvement as time goes on.

Speaker 2

That's correct. That's the reason. Yes, it's a ticket and make situation. We want to help the customers, the independent pharmacies Go marketplace, but at the same time, I want to give them distribution. We are here to help the independent pharmacies and drive their And customer base as well as service level towards our customers.

Speaker 3

Okay. Keep up the good work.

Speaker 2

Thank you, Howard.

Operator

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Suren Ajayarapu for closing remarks.

Speaker 2

Thank you, operator. I would like to thank you, all of you, for joining our earnings conference call. We look forward to continuing to update you on our ongoing progress and growth. If you are unable to answer any of your questions, please reach out to our IR department. We'll be more than happy to assist.

Speaker 2

For any of you who may have joined the call in progress, remember that the replay of this call and webcast will be available for the next 30 days on the company's website under the NASDAQ call on NASDAQ's link and that more information regarding the financial information disclosed on this call and webcast, Including the non reconciliation of non GAAP financial information can be found in our press release, which we will file after the close of the market today.

Speaker 1

Thank you all.

Operator

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

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Earnings Conference Call
TRxADE HEALTH Q1 2023
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