Hello, everyone, and thank you for joining MedAvail's 2023 First Quarter Conference Call. My name is Alicia, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded. I now have the pleasure of handing over the call to your host, Steve Halper, Managing Director at LifeSci Advisors. Please go ahead.

Thank you all for participating in today's call. Joining me are Mark Doerr, Chief Executive Officer; and Ramona Seabaugh, Chief Financial Officer. Earlier today, MedAvail Holdings, Inc. referred to as MedAvail while the company released financial results for the first quarter 2023. 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 the call, including statements or responses in addressing your questions 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 are in response to your questions 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 the company's operating trends and future financial performance, general market and macroeconomic conditions, including the effect of inflationary pressure including any impact of adverse developments affecting the financial services industry, such as those based on liquidity constraints or concerns and events including the outbreak of war in Ukraine or the impact of COVID-19 expense management, expectations for hiring, growth in the company's organization and reimbursement, market opportunity and expansion and guidance for revenue, gross margin and operating expenses in 2023 are based upon current estimates and various assumptions. Any forward-looking statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by those forward-looking statements and do not guarantee future performance. Accordingly, you should not place undue reliance on these statements and should not rely on them in making an investment decision without considering the risks associated with such statements. For a list and description of the risks and uncertainties associated with MedAvail's business, please refer to the Risk Factors section in the company's most recent periodic reports including its annual report on Form 10-K and quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 15, 2023. MedAvail disclaims any intention or obligation except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. And with that, I will now turn the call over to Mark.

Thank you, Steve and thanks to all of you for joining us this afternoon for our First Quarter 2023 financial and operational update. During the first quarter, we continued to make excellent progress executing on our mission to become a leading pharmacy technology company following our announcement in January that we were divesting the SpotRx Pharmacy Services business which we subsequently sold to CVS during the quarter. Recall that concurrent with the sale of SpotRx, we pivoted towards our Pharmacy Technology business that we believe can address key unmet needs in the pharmacy market, including workforce shortages and medication access challenges, especially in rural, less populated areas. With the MedCenter, we bring prescription medication dispensing to the point of care through our innovative hardware and software platforms. And while it is still early, our leading indicators suggest that our strategy is working, as evidenced in part by our robust and growing pipeline, which is comprised of both existing and new partners that I will discuss in more detail shortly. Our successful integration with the Epic Willow Pharmacy Management System is providing a significant tailwind for us and is resonating with many primary care and urgent care clinics across the U.S. who utilize that system. In parallel with these activities, we are closely monitoring state regulations and playing an active role where possible, to create regulatory environments that are favorable to remote kiosks pharmacy dispensing. We played a critical role in Colorado, where legislation was just signed into law that supports our MedCenter technology and remote dispensing. We believe there will be others as additional states embrace the many advantages, kiosk dispensing to both the clinic and patient. We are executing against our plan and remain on track to nearly double our footprint this year with 25 net new dispensing MedCenters…

Thanks, Mark. I will begin with a review of the first quarter results before touching on our 2023 outlook. The following comparisons exclude discontinued operations. For the first quarter of 2023, we generated total revenue of approximately $620,000 representing growth of 134% and over Pharmacy Technology revenue in the comparable period in 2022 of $265,000 and growth of 143% over fourth quarter 2022, Pharmacy Technology revenue of $255,000. Looking at gross profit. Total gross profit for the first quarter of 2023 was 41.5%. This was in line with our expectations. We continue to anticipate a gross margin in excess of 60% for the full year, which would represent a significant improvement from our full year 2022 gross margin of 47%. Total Pharmacy Technology operating expenses for the first quarter of 2023 were $5.3 million down from $5.5 million in the first quarter of 2022. As Mark indicated, we continue to evaluate the operations of the core Pharmacy Technology business in search of additional efficiencies. Total company adjusted EBITDA for the first quarter was a loss of $3.7 million, representing a 15.9% improvement from $4.4 million loss in the first quarter of 2022. At the end of first quarter 2023, we had 80.3 million weighted average shares outstanding. In terms of our guidance for 2023, it remains unchanged from our fourth quarter update call. We anticipate adding 25 net new dispensing MedCenters throughout the course of this year, which, in addition to the 32 dispensing MedCenters we ended Q1 with would enable us to exit 2023 with a network of 57 revenue-generating MedCenters. We anticipate that full year revenue will be approximately $3 million, which represents growth of well over 100% as compared to Pharmacy Technology revenue of $1.4 million for the full year of 2022. We further assume a full…

Thank you, Ramona. To sum up. I am very pleased with the significant progress we have made in the relatively short time since we announced the sale of SpotRx to CVS in January. By focusing exclusively on the Pharmacy Technology side of the business going forward, I believe we can strike a balance between long-term top line growth and profitability. I also believe we are on the right track to be a leader in the field of pharmacy kiosk dispensing to the benefit of both clinics and patients while creating enduring value for our shareholders. At this point, we'd like to open the call for your questions. Operator?

[Operator Instructions] Our first question is from Charles Rhyee with TD Cowen.

This is Lucas on for Charles. I wanted to ask about the 25 MedCenter deployments guided for 2023. Can you give us a sense of the mix of customer type between urgent care clinics and primary care clinics and where you're seeing more traction? And then on the number of expected MedCenter deployments coming from new customers compared to existing customers, yes.

Yes, Lucas. Thank you for the question. On the mix between urgent care and primary care, we're continuing to see a pretty even mix across the 2 with probably a little bit more coming from the urgent care market, which seems to have a little more momentum in it at this point. When we look at existing customers versus new customers, new customers represent probably about 2/3 of the pipeline right now versus existing customers or about 1/3 of the pipeline based on commitments and contracted units.

Okay. Great. And then you guys noted that you were part of opening up legislation, Colorado. Curious are you guys -- I'm sorry, when it comes to your go-to-market strategy, are you guys focusing on states that you've already been in? I know you guys have presences in Florida and Arizona or are you more taking a broad-based approach? If you can give us some details on your go-to-market strategy in terms of region, that would be helpful.

Yes. We're focused primarily on the states where we've operated in where we can be a little bit more effective, more efficient and quicker on a go-to-market basis. So Texas, Florida, Louisiana, our 3 key states for us as we build out those markets, and again, can go a little bit faster. But we take a broad approach to all the states that allow for the dispensing technology. And again, there's a predominant number of states that have favorable regulations or waiver processes in them such that we believe we can cover about 72% of the population. So we're going to stay focused where we're at, but we'll also look at opportunities to expand in the new states when partners come to us. And when you bring up Colorado, again, we were active with a partner there to help push that legislation through, and we continue to speak to potential partners in new state like Colorado as an example.

Okay. And then I wanted to ask about Oak Street. I understand that you've retrieved 100% of the MedCenters that were a part of the SpotRx Pharmacy network. Has there been any conversation about potentially reigniting that relationship, given they were recently acquired, I understand there's probably a lot of moving pieces on their side, but have you gotten a sense of whether or not that relationship could return?

I can't speak specifically of any dialogue that's going on. I will say that with Oak Street, we had a very strong partnership. We did remove all the MedCenters based on the timing. I know the Oak Street acquisition was just fully completed in the last couple of weeks. And a lot of those sites were built, right, constructed from the ground up with placement for the MedCenters. So we anticipate that there could be an opportunity there based on the relationship we had based on the way that the performance was going and really the way that the design was done with the clinics, but can't elaborate any further on that particular relationship at this time.

All right. I understand. In terms of you guys having cash runway due 2025, at which point you could see being profitable. Is there any way you could kind of break down the moving pieces in terms of what we need to see to reach profitability in 2025?

I don't think at this point, we want to go through the annual expectations, but as you know, this quarter, we did spend about $2.8 million on the technology side of the house and about $6 million on the discontinued operations. We do expect largely that the expenses for the discontinued will cease after this year. So with that, perhaps you can calculate what you would expect the remaining cost to be in the further years.

Okay. Great. And then regarding the potential to see more pharmacy management system integrations in 2023. Can you give us an indication on when you expect this may take place? Should we expect it in the back half of the year? And I guess in terms of integrations translating into MedCenter deployments, can you give us a sense of whether an integration for other pharmacy management systems is opening up the opportunity to sell to new clients? Or are you having conversations with potential clients who are on pharmacy management systems that are not yet integrated into your platform that kind of warrant having to integrate with new platform or new systems?

Yes. So we routinely track in our pipeline by partner, potential partner of their pharmacy management system when we use that to guide us on where we want to focus on what I'd call full integrations. We mentioned in the prepared remarks that we were pretty close to deploying Curant. That would be a new integration that we did. And so that will help us open up to other locations with them. I would say that we're mainly focused on where we have integrations already like Epic, which is powering a pretty significant portion of our pipeline as well as McKesson EnterpriseRx Solutions just because it's more efficient and more effective. We do anticipate that we'll build out at least 1 or 2 more integrations before the end of the year. Do anticipate that will be the back half of the year given where we're at today and how we're setting up our pipeline and seeing the MedCenters come into the year and into the sales cycle. And I would say that we mentioned we did the relationship and engage on core software development company to help us along with our development and our quality assurance and they have experience working with several of the large pharmacy management systems in the industry today. And so we think that's going to help us build out those integrations in an efficient manner.

Thank you. We do not have any further questions at this time. So I'm going to hand it back to Mark Doerr for final remarks.

I just want to say thank you, again, to everyone that joined the call or webcast. We look forward to our next quarterly update in August. Have a good evening, and stay safe.

This concludes today's call. Thank you for joining. You may disconnect your lines.