NEW YORK, March 31, 2020 (GLOBE NEWSWIRE) -- Conversion Labs, Inc. (OTCQB: CVLB), a direct-to-consumer telemedicine and wellness company, reported results for the fourth quarter and full year ended December 31, 2019. Quarterly comparisons are to the same year-ago quarter.

Financial Highlights

  • Q4 2019 revenue up 81% to a record $3.9 million.

  • Full-year 2019 revenue up 50% to record $12.5 million.

  • Gross margin in Q4 2019 increased 74% to $2.9 million, and for the full year increased 45% to $9.2 million.

  • Drove more than $2.00 in revenue per every $1.00 of marketing spend.

  • Extensive investments in telemedicine business, new technology infrastructure, brand development, and customer acquisition in 2019 has positioned the company for accelerated growth, with an annualized revenue run rate of more than $18 million achieved in the first quarter of 2020.

Q4 2019 Operational Highlights

  • Officially launched new men’s telehealth brand, Rex MD.

  • Received LegitScript certification for both Shapiro MD and Rex MD brands. Certain credit card networks, such as Visa and Mastercard, require certification for telemedicine and telehealth providers; LegitScript is one of only two third-party certifiers recognized by these organizations.

  • Filed 510(k) submission to the FDA for laser therapy hair regrowth system; FDA clearance received in first quarter of 2020.

  • Rapid growth recognized with a ranking of #14 in the Digital Content, Media and Entertainment category by Deloitte in its 2019 Technology Fast 500™ list of the fastest-growing technology, media, and telecommunications companies in North America.

  • PDF Simpli, a software as a service (SaaS) application which allows users to convert, edit, sign, and share PDF documents, grew to over 4.5 million registrants globally and is now ranked in the top 5,750 websites globally.

Q4 2019 Financial Summary

Revenue in the fourth quarter of 2019 increased 81% to a record $3.9 million from $2.2 million in the same year-ago quarter. The company’s PDF Simpli subsidiary contributed net sales of $1.0 million, up 339% from the fourth quarter of 2018.

Gross margin in the fourth quarter of 2019 increased 74% to $2.9 million, as compared to $1.7 million in the same year-ago quarter. Gross margin as a percentage of revenue in the fourth quarter of 2019 decreased to 73% from 76% in the same year-ago quarter.  

Operating expenses in the fourth quarter of 2019 were $3.4 million, up from $2.5 million in the same year-ago quarter. The increase was primarily due to investments in the company’s telemedicine platform and brands. Operating expense as a percentage of revenue decreased to 86% as compared to 112% in the same year-ago quarter.

Net loss attributable to common stockholders for the fourth quarter of 2019 was $634,000 or $(0.01) per share, as compared to a net loss attributable to common stockholders of $1.2 million or $(0.03) per share in the fourth quarter of 2018. The improvement in net loss attributable to common stockholders was primarily due to the increase in revenue and decrease in operating expense as a percentage of revenue.

Cash and cash equivalents totaled $1.1 million at December 31, 2019, as compared to $180,000 at December 31, 2018. The increase in cash was due to proceeds from convertible notes, which were subsequently paid off by the company.

Full Year 2019 Financial Summary

Revenue in 2019 increased 50% to a record $12.5 million from $8.3 million in 2018. The increase in revenue was primarily due to the increase in software revenues, which accounted for about 20% of revenue.

Gross profit in 2019 increased 45% to $9.2 million, as compared to $6.3 million in 2018. Gross margin in 2019 decreased to 74% from 76% in 2019.

Operating expenses in 2019 increased to $12.1 million from $8.4 million in 2018. The increase was primarily attributable to increased marketing expenses that helped drive revenue growth during the year. Operating expenses as a percentage of revenue decreased to 97% from 101% in 2018.

Expenses also included approximately $1.7 million in non-cash and non-operational expenses, such as equity compensation and financing costs. The company also invested approximately $250,000 in Legal Simpli Software, LLC, its majority owned PDF conversion business.

Net loss attributable to common stockholders for 2019 was $3.1 million or $(0.07) per share, as compared to a net loss attributable to common stockholders of $1.2 million or $(0.05) per share in 2018. The increase in net loss attributable to common stockholders was due to the increase in expenses that helped drive revenue growth during the year.

Management Commentary

“Our record revenue for the quarter and year demonstrates the tremendous progress we’ve made since our transition to a direct-to-consumer business model in 2016,” commented Justin Schreiber, CEO of Conversion Labs. “These results, which came in above our preliminary expectations, also reflect the efforts of our talented and hardworking team of professionals who have been laser-focused on expanding our portfolio of telemedicine, online pharmacy and wellness brands.

“These record results also mark the beginning of our return on investment in building out our brand portfolio and national telehealth infrastructure. We expect these investments to drive strong revenue growth and positive cash flow in 2020. The $18 million+ annualized revenue run rate we achieved during the first quarter of 2020 demonstrates the acceleration in our business that we began to see in the fourth quarter of 2019.

“Fueling this acceleration was the launch of our first telehealth brand, Rex MD, in the fourth quarter of 2019. Rex MD is a men’s brand initially focused on the erectile dysfunction (ED) market. The global ED treatment market is expected to exceed $2.95 billion annually by 2023. Inspiring the development of this brand was the belief that capturing even a small percentage of the ED market would be transformational for our business, and this belief is starting to play out.

“Despite significant competition, our Shapiro MD continues to be a leading online brand for the treatment of hair loss in both men and women. Since its inception, Shapiro MD has received more than a billion online impressions and has acquired more than 150,000 customers. One of Shapiro MD’s strongest selling points has been its patented formulations and deep roots in clinical science, and we’ve continued to strengthen this advantage. Last week, we received FDA 510(k) clearance for our new Shapiro MD Laser Hair Restoration Device. The FDA clearance allows us to officially launch this product with the strongest claims possible for effective hair restoration.

“The addition of a proprietary, efficacious and FDA-cleared hair growth device to our Shapiro MD product line is an important milestone in our journey to becoming the #1 telemedicine brand in the U.S. for hair loss. We have strong tailwinds at our back, with the hair restoration services market projected to grow from $8.5 billion in 2018 to $12.1 billion by 2026. Supported by the telemedicine platform developed for Shapiro MD, we expect this product to be a strong revenue driver in 2020.

“We also recently launched our third telemedicine brand, SOSRx, which is designed to deliver combinations of prescription medications and over-the-counter supplies for use in disaster scenarios and emergencies. The first product in the SOS Rx lineup was launched earlier this month, the SOSRx Disaster Pack™. This exclusive ‘grab & go’ portable kit includes life-saving treatments and protective measures against flu epidemics, bacterial outbreaks, bioterrorism and radiation exposure.

“Our SOSRx brand was long in development before the recent global outbreak of the coronavirus. While this first version of the SOSRx Disaster Pack does not cover COVID-19 given the novelty of the virus, the outbreak has highlighted why emergency preparedness is essential. We believe we are a ‘first-mover’ in the market with doctor-prescribed kits like the Disaster Pack™ that provide essential medicines for unexpected disaster scenarios.

“We have also seen an increase in the growth of our majority owned subsidiary, PDF Simpli, that now has more than 4.5 million registrants. PDF Simpli grew its SaaS-based revenue by 339% to more than $1 million in Q4 2019.

“Looking ahead, we have five core priorities in 2020:

  • Continue to grow the Shapiro MD brand by improving customer experience, product extensions, and further integrating telemedicine services and online pharmacy;

  • Expand Rex MD into new Men’s health markets through the addition of new prescription and over-the-counter men’s health products;

  • Expand SOSRx by increasing customer acquisition efforts and the addition of product extensions and a doctor-developed pack for travel;

  • Support the growth of PDF Simpli, which we expect to contribute about $8 million to 2020 revenue; and

  • Opportunistically acquire, license or launch additional products synergistic with our brand portfolio and telehealth platform.”

According to company CFO, Juan Piñeiro: “These priorities set the stage for more diversified and accelerated revenue growth in 2020, as we prove out the incredible potential of our business model and its ability to achieve profitable growth. Given the strong traction we’ve seen in the first quarter of the year, we continue to believe that our revenue will exceed $30 million in 2020 with significant returns to the bottom line.”

About Conversion Labs
Conversion Labs, Inc. is a health and wellness focused e-commerce company with a portfolio of online direct-to-consumer brands. The company’s proprietary over-the-counter products and formulated medications can be prescribed online by Conversion Labs’ network of licensed telehealth physicians across the U.S. To learn more, please visit ConversionLabs.com.

Important Cautions Regarding Forward-Looking Statements
This news 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. 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
Juan Manuel Piñeiro Dagnery
CFO
Email Contact

Conversion Labs Investor & Media Relations Contact
Ron Both or Grant Stude
CMA Investor Relations
Tel (949) 432-7566
Email Contact

 

 
CONVERSION LABS, INC. (CVLB)
CONSOLIDATED STATEMENTS OF OPERATIONS
        
    For The Three Months Periods Ended  
    December 31, (unaudited)For the Years Ended December 31,
  2019  2018  2019  2018 
Revenue$3,944,454 $2,184,578 $12,468,578 $8,324,129 
Cost of revenue  $1,054,359 $523,176 $3,270,596 $1,996,222 
Gross margin  $2,890,095 $1,661,402 $9,197,982 $6,327,907 
Operating expenses:     
General and administrative $459,086 $673,966 $2,398,751 $2,288,580 
Impairment of goodwill $- $-  -  - 
Marketing and selling $2,590,653 $1,504,035 $8,170,929 $5,079,091 
Customer service expenses $161,968 $146,875 $570,763 $378,856 
Other operating expenses $130,115 $86,846 $724,270 $516,979 
Research and development $65,141 $43,378 $222,877 $120,541 
Total operating expenses $3,406,963 $2,455,100 $12,087,590 $8,384,047 
Loss from operations $(516,868)$(793,698)$(2,889,608)$(2,056,140)
Other income (expense):     
Interest (expense), net $(330,194)$(559,580)$(761,150)$(354,388)
Other income (expense), net $- $- $925,738 
Total other income, net $(330,194)$(559,580)$(761,150)$571,350 
Loss before income taxes $(847,062)$(1,353,278)$(3,650,758)$(2,410,528)
Provision (benefit) for income taxes$(122,500)$(124,700)$(122,500)$(124,700)
Net loss  $(724,562)$(1,228,578)$(3,528,258)$(1,360,090)
Net loss attributable to noncontrolling interest   $(91,050)$(53,102)$(391,055)$(119,262)
Net loss attributable to common stockholders   $(633,512)$(1,175,476)$(3,137,203)$(1,240,828)
        
Net loss per share attributable to common stockholders:   
Basic   $(0.01)$(0.03)$(0.07)$(0.05)
Diluted  $(0.01)$(0.03)$(0.07)$(0.05)
        
Weighted average common shares outstanding:   
Basic   $49,488,725 $44,187,375 $49,488,725 $44,187,375 
Diluted  $49,488,725 $44,187,375 $49,488,725 $44,187,375 
        

 

  
Conversion Labs, Inc. 
Consolidated Balance Sheets 
 December 31, 2019 December 31, 2018 
ASSETS 
Current Assets      
Cash$1,106,624  $180,093  
Accounts receivable, net 97,448   99,053  
Product deposit 150,000   33,302  
Inventory, net 950,059   1,022,616  
Other current assets 442,971   270,006  
Total Current Assets$2,747,102  $1,605,070  
       
Non-current assets      
ROU Asset 23,625   -  
Intangible assets, net 675,452   1,011,065  
Total non-current assets 699,077   1,011,065  
       
Total Assets$3,446,179  $2,616,135  
       
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)      
Current Liabilities      
Accounts payable and accrued expenses$3,051,156  $868,997  
Notes payable, net 814,734   247,416  
Contract liabilities 109,552   75,984  
Total Current Liabilities 3,975,442   1,192,397  
       
Long-term Liabilities      
Lease Liability 29,978   -  
Contingent consideration on purchase of LegalSimpli 500,000   600,000  
Liability to issue shares -   -  
Deferred tax liability 70,000   4,000  
Total Liabilities 4,575,420   1,796,397  
       
Stockholders’ Equity (Deficit)      
Common stock, $0.01 par value; 100,000,000 shares authorized, 53,404,045 and 45,267,105 shares issued, 52,888,449 and 45,267,105 outstanding as of December 31, 2019 and 2018, respectively 534,037   457,822  
Additional paid-in capital 15,236,396   12,744,249  
Accumulated (deficit) (16,594,917)  (12,140,670) 
  (824,484)  1,061,401  
Treasury stock, 515,200 and 515,200 shares, at cost (163,701)  (163,701) 
Total Conversion Labs, Inc. Stockholders’ (Deficit) (988,185)  897,700  
       
Non-controlling interest (141,056)  (77,962) 
       
Total Stockholders’ (Deficit) (1,129,241)  819,738  
       
Total Liabilities and Stockholders’ (Deficit)$3,446,179  $2,616,135