We have seen a minor pullback in shares of Progressive Care Inc. (OTCMKTS:RXMD) over the past couple weeks, but the stock remains in a qualitatively different place than where it was just a few months ago. The company has turned an important corner in terms of the relationship between its potential debt-servicing burden and its cash flows from operations. And that story is likely only going to get better over time.
Why? For two main reasons: the scaling growth we are seeing in its pharmacy model and the far more scalable growth potential of its expanded model that will define the company in 2020 and beyond.
The Legacy Model
First off, the company’s legacy model is as a pharmacy operating in the state of Florida, particularly in the southeastern quadrant of the state around Miami and Fort Lauderdale. This is a business that isn’t famous for major multiples to sales in the equities market, but the company is seeing a level of growth in sales and margins that should deserve more of a multiple than we are seeing at present.
Recently, the company posted its Q3 data covering things through September, which showed consolidated quarterly year-over-year Revenue Growth of 91% to $10.14 million, gross margins expanding to 24.4% (versus Q2 22.7%, Q1 19.8%), and gross profit up 128% year-over-year to $2.47 million.
Management commentary reflected this stellar vibe: “Q3 set new records across basically all metrics. We saw accelerating growth in sales and prescriptions while continuing our strong multi-quarter trends of falling costs and expanding gross margins. Beyond the numbers, we are seeing a major positive impact from our recent Family Physicians Rx acquisition, and the Company is firing on all cylinders post-integration. Ultimately, this creates a very favorable backdrop for continued aggressive expansion in the months and quarters ahead as we prepare to launch several powerful new initiatives in Q4 and 2020.”
To follow that up, October sales and prescriptions filled set a new record performance pace for Q4 results.
The CEO, S. Parikh Mars, said: “The annualized pace we set in October equates to new records across the board as we continue to see broad-based top-line expansion on improving margins. Our $3.4 million in overall sales for October is an understatement because it leaves out the cash flows we took in during the month related to third-party billing activity. With all factors included, the number of gross billing would be closer to $4.2 million. And our 46k prescriptions filled puts Q4 on pace to handily supass our breakout Q3 performance already. Execution continues to be tremendous, and I am very proud of our talented and dedicated team.”
According to that release, the Company achieved over $3.4 million in overall October sales (not including an additional $800,000 third-party related billing activity), representing 78% annual growth in sales compared to October 2018, and 10% monthly growth in sales on a sequential monthly basis. The Company is also excited to report over 46,000 in filled prescriptions during the month, representing a 48% annual growth rate, and a 12% sequential monthly growth rate. In addition, the Company continues to see expanding bottom-line results, with gross margins tracking over 24% for October operations.
So, yes, the legacy business is booming.
The Future Vision
But the future is brighter still. As noted, the legacy business has been scaling faster than the market is used to expecting from a traditional pharmacy model. But this isn’t a traditional pharmacy. And it’s becoming less and less of a traditional pharmacy every day. Next year, the conceptual vector is set to jump into a completely different gear.
On the conference call following its Q3 report, the company discussed its vision for the future, and noted that a dramatic realignment toward a scalable model with national reach is in progress, including a transformation from a pharmacy model to a comprehensive health services model that includes significant expansion in products and services, including RXMD Therapeutics branded products in the CBD and nutraceutical space, as well as a defining expansion into the Telehealth marketplace.
The company believes its vision for monetization in telemedicine has the potential to be disruptive in the healthcare space, and will have powerful synergies with its existing legacy pharmacy business and its emerging RXMD Therapeutics.
The opportunity to capitalize on its in-house expertise to expand through disruptive technology while providing needed care and services to underserved populations is a powerful step that will drive shareholder value while achieving a tremendous positive social impact. Targeting a leadership position in this market will be a signature objective for the Company in 2020.
“Get ready for a transformation,” continued Mars. “We are extremely excited about the opportunity to monetize telemedicine in a manner that will truly change the game as it is currently played. We look forward to introducing current and prospective shareholders to this vision in the months ahead. 2019 has been a breakout year. But the core message that we have right now for our shareholders is this: expect a transformative evolutionary leap to a vastly more scalable, diversified, and higher margin Progressive Care in 2020 and beyond.”
This is a vision that is far more scalable in terms of model. And the market should begin to assign a higher multiple to all that cash flowing in from operations as it starts to leverage this fact.