Conversion Labs Reports Revenue up 59% to Record $4.3 Million in Q1 2020; Raises 2020 Revenue Outlook to Exceed $36 Million

NEW YORK, May 19, 2020 (GLOBE NEWSWIRE) — Conversion Labs, Inc. (OTCQB: CVLB), a direct-to-consumer telemedicine and wellness company, reported results for the first quarter ended March 31, 2020. 
Q1 2020 Financial HighlightsRevenue was a record $4.3 million, up 59% versus Q1 2019.Gross margin totaled $2.5 million, up 28% versus Q1 2019.Customers on subscription across all brands nearly doubled over previous quarter.Based on the strong quarter and continued acceleration of the business, management increased revenue outlook for 2020 from over $30 million to more than $36 million.Q1 2020 Operational HighlightsInvestments in telemedicine business, new technology infrastructure, brand development and customer acquisition continued to strengthen foundation for accelerated growth.Received FDA 510(k) clearance the company’s Shapiro MD™ Laser Hair Restoration Device with sales launched in the current quarter. Device addresses global hair restoration market forecasted to grow at 4.6% CAGR to over $12 billion by 2026.Launched new telemedicine brand, SOSRx™, to deliver specially formulated combinations of prescription medication and over-the-counter supplies for use in disaster scenarios or times of emergency. Introduced first product in lineup, the SOSRx Disaster Pack™,  a grab-and-go portable kit that includes life-saving treatments and protections against flu epidemics, bacterial outbreaks, bioterrorism and radiation exposure.Q1 2020 Financial SummaryRevenue in the first quarter of 2020 increased 59% to a record $4.3 million from $2.7 million in the same year-ago quarter. The company’s PDFSimpli subsidiary, a software as a service (SaaS) that allows users to convert, edit, sign and share PDF documents, contributed net sales of $1.3 million, up 386% from the year-ago quarter.Gross profit in the first quarter of 2020 increased 28% to $2.5 million, compared to $2.0 million in the same year-ago quarter. Gross profit as a percentage of revenue in the first quarter of 2020 decreased to 59.1% from 73.6% in the same year-ago quarter. The decrease was due to the shift in revenue mix to lower margin supplement products, as well as due to software sales that have a cost of sales that can fluctuate due to volatility in merchant processing costs.Operating expense in the first quarter of 2020 was $4.3 million, up from $2.5 million in the same year-ago quarter. The increase was primarily due to increases of $1.1 million of selling and marketing expenses, as well $691,000 in general and administrative expenses, $37,000 in customer service expenses and $32,000 in development costs.  Net loss attributable to common stockholders for the first quarter of 2020 was $2.4 million or $(0.05) per share, as compared to a net loss attributable to common stockholders of $0.7 million or $(0.02) per share in the first quarter of 2019. The net loss for the first quarter of 2020 included certain non-cash or financing-related charges which were not incurred in the year-ago quarter, such an inventory valuation adjustment of $769,000, acceleration of debt discount of $500,000, and financing expense of $62,000.Adjusted EBITDA, a non-GAAP term, totaled a loss of $556,000 in the first quarter of 2020, compared to loss of $239,000 in the same year-ago quarter (see, see definition of this non-GAAP terms and reconciliation to GAAP, below.)The company paid off all outstanding convertible notes totaling $1.52 million, using proceeds from a term loan and a direct equity investment by an institutional healthcare investor.Cash was $358,000 at March 31, 2020, as compared to $1.1 million at December 31, 2019. The decrease in cash was due to payments of convertible notes, partially offset by increased cash provided by operating activities. As of May 18, 2020, cash totaled $1.0 million, with the increase primarily due to net proceeds from an equity offering. Management Commentary“Our record results for the first quarter were primarily due to customer growth and increased subscription revenue generated by our expanding portfolio of telemedicine brands, as well as our fast-growing software-as-a-service business,” commented Justin Schreiber, chairman and CEO of Conversion Labs. “The acceleration in our business has continued into the current quarter.”“In fact, now just halfway through the second quarter, we have already recorded revenue of more than $5.1 million,” continued Schreiber. “This means we have already exceeded the entire second quarter of last year, as well as our previous quarter results. We see this explosive growth continuing throughout the year, driven by a major consumer shift to eCommerce and telemedicine. Moreover, it demonstrates we have developed and introduced to the market the right products at the right time, along with the right technology and operational infrastructure in place to scale the business.“A major contributor to our accelerating growth has been our first telemedicine brand for men’s health, Rex MD™, launched last December. Rex MD has been initially focused on providing subscription-based medication for the treatment of erectile dysfunction, which represents a high-growth market expected to exceed $5 billion in just a few years.“We always believed if we could capture even a small percentage of this market that it would be transformational for Conversion Labs, and with the growing number of prescriptions being written daily and record revenue being generated, we are seeing this result. This success now serves as a platform to build Rex MD into a leading telemedicine brand with a broad product offering for men’s health.“We continue to invest in new product development for Rex MD and our other brands, which will feed into our growing customer base and leverage the profile data we’ve been acquiring. Our second telemedicine brand, SOS Rx, that we launched in Q1, offers prescription emergency packs for use in the event of disaster scenarios, such as flu epidemics, radiological exposure or bioterrorism. The rapid global outbreak of COVID-19 is a perfect example where preparedness could be the key to survival. A recent survey by Finder.com revealed that 68 million Americans (1 in 4) have purchased survival gear in response to unrest over political events or natural disasters. Our new SOS Disaster Pack addresses this demand.“During the quarter, we also received FDA clearance for our Shapiro MD laser hair restoration device. This innovative, easy-to-use wearable device has attracted strong customer interest given how its laser-based technology has been clinically proven to regrow hair. The addition of a proprietary, efficacious and FDA-cleared hair growth device to our Shapiro MD product line is an important step in our journey to becoming the #1 telemedicine brand in the U.S. for hair loss.”Conversion Labs’ CTO and COO, Stefan Galluppi, commented: “Our telehealth platform allows us to efficiently launch prescription and wellness product lines wherever we determine there is a market need. The platform has been developed and supported by a driven team of data analysts, designers, and engineers focused on building enduring brands that will improve the lives and health of our customers. Our platform leverages a nationwide network of licensed telehealth physicians who provide virtual medical treatment, including prescription and over the counter medications.“Perhaps the most exciting development this year has been the introduction of our new cloud-based, end-to-end telemedicine platform, Veritas MD™. Announced on May 11, the platform builds upon our existing telemedicine infrastructure and introduces new capabilities that will transform the scalability and agility of our business. Most importantly, this platform will enable our physician team to provide the highest quality care to our patients in the most efficient manner.“Key to Veritas MD’s rapid deployment was securing the exclusive rights for the North American market to certain underlying telemedicine technology that not only accelerated our platform development by months or even years, but which has also created significant competitive barriers to entry. The technology was developed through years of work by experts in technology, medicine and regulatory affairs. We expect to complete the integration of Veritas MD with our physician network and online pharmacy and fully launch it before the end of July.“Today, it is all about gaining greater efficiency and scalability with key technology that supports our expanding brand portfolio and provider network—and above all, ensures the best in quality care. This is exactly what our new digital health platform delivers. It transitions us to a vertically integrated infrastructure, where we are developing and delivering innovative health and wellness products, and servicing our customers, all the way up the value chain.”Conversion Labs’ CFO, Juan Manuel Piñeiro Dagnery, commented: “Our recent results show that the nationwide adoption of telemedicine over the past month has ‘shifted into hyper-drive’, as Forrester Research puts it. They report that virtual healthcare visits are now on pace to top 1 billion by year end. Another recent report says the global telemedicine market is expanding at a 19.3% compound annual growth rate, and will surpass $175 billion by 2026.“These reports reflect how mass numbers of consumers have suddenly discovered that telehealth provides a more convenient and safer way to consult with their doctor, and obtain prescribed medications and OTC products. Conversion Labs has emerged at the forefront of this major shift in the delivery of healthcare.“Our PDFSimpli subsidiary, with its SaaS-based offering for online PDF management, is also growing tremendously. Thousands of new user registrations are being driven by the recent massive consumer shift to online, with industrywide direct-to-consumer eCommerce sales now expected to climb more than 24% to 17.8 billion this year.“Given these strong industry tailwinds and the phenomenal traction we’re seeing so far this year, combined with our plans to expand our brands and product offerings, we are raising our outlook from $30 million to more than $36 million in revenue in 2020. We also expect to achieve significant returns to the bottom line as we leverage our well-established platform. In light of our strong growth trajectory, we may need to positively revise our outlook again following the end of the second quarter.”About Conversion Labs
Conversion Labs, Inc. is a telemedicine company with a portfolio of online direct-to-consumer brands. The company’s brands combine virtual, 24/7 medical treatment with prescription medications and unique over-the-counter products. Conversion Labs’ network of licensed physicians offers telemedicine services and direct-to-consumer pharmacy to consumers in 48 states. To learn more, please visit Conversionlabs.com.The company’s PDFSimpli subsidiary is a software-as-a-service that allows users to convert, edit, sign, and share PDF documents online. For more information, go to PDFSimpli.com.About the Use of Non-GAAP Financial Measures
The management of Conversion Labs believes that the use the non-GAAP measure, adjusted EBITDA, is helpful for an investor to assess the performance of the company. The company defines adjusted EBITDA as income (loss) attributable to common shareholders before interest, taxes, depreciation, amortization, financing expense, acceleration of debt discount, inventory valuation adjustment, and stock-based compensation expense.Adjusted EBITDA is not a measurement of financial performance under generally accepted accounting principles in the United States, or GAAP. Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company’s non-cash operating expenses, management believes that providing a non-GAAP financial measure that excludes non-cash and non-recurring expenses allows for meaningful comparisons between the company’s core business operating results and those of other companies, as well as providing the company with an important tool for financial and operational decision making and for evaluating its own core business operating results over different periods of time.The company’s adjusted EBITDA measure may not provide information that is directly comparable to that provided by other companies in its industry, as other companies in its industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. The company’s adjusted EBITDA is not a measurement of financial performance under GAAP, and should not be considered as an alternative to operating income (loss) or as an indication of operating performance or any other measure of performance derived in accordance with GAAP. Conversion Labs management does not consider adjusted EBITDA to be a substitute for, or superior to, the information provided by GAAP financial results.The following table sets-forth non-GAAP adjusted EBITDA reconciled to its nearest comparable GAAP equivalent:Important Cautions Regarding Forward-Looking Statements  
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things our plans, strategies and prospects, both business and financial, including our outlook for revenue and profitability for the year. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Many of the forward-looking statements contained in this news release may be identified by the use of forward-looking words such as “believe,” “expect,” “anticipate,” “should,” “planned,” “will,” “may,” “intend,” “estimated,” and “potential,” among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this news release include market conditions and those set forth in reports or documents that we file from time to time with the United States Securities and Exchange Commission. All forward-looking statements attributable to Conversion Labs, Inc. or a person acting on its behalf are expressly qualified in their entirety by this cautionary language.Trademarks are the property of their respective owners.Company Contact
Conversion Labs
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