ProPhase Labs, Inc. (NASDAQ:PRPH) Q4 2023 Earnings Call Transcript

ProPhase Labs, Inc. (NASDAQ:PRPH) Q4 2023 Earnings Call Transcript March 15, 2024

ProPhase Labs, Inc. misses on earnings expectations. Reported EPS is $ EPS, expectations were $-0.27. PRPH isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Noella Alexander-Young: Hello, and good morning, everyone. Welcome to today’s presentation. My name is Noella Alexander-Young, Virtual Event Moderator here at Renmark Financial Communications. On behalf of our team, we want to thank everyone for joining us today for ProPhase Labs’ Fourth Quarter and Year-End 2023 Results. ProPhase is trading on the Nasdaq under the ticker symbol PRPH. Presenting today is Ted Karkus, Chief Executive Officer. Following the presentation is a question-and-answer session for which you can participate using the Chat box on the top right-hand corner of your screen. With that being said, I will now hand the floor over to Ted.

Ted Karkus: Thank you, Noella, and thank you everyone for joining today for our — I guess this is called the year-end, even though, we’re about to start the second quarter of the following year. We’re doing things a little differently today. For those of you that don’t know, we have this fantastic relationship with Renmark Financial, and we do non-deal roadshows, virtual non-deal roadshows regularly with Renmark; we have for quite some time. We think it’s a great format. And this way, I can show all of you slides and talk through them. I think it’s a much better format. After the call, you can let me know if you like the old format better where it’s talking, but you don’t see me and you don’t see the slides. So, in any event, if you want to be updated regularly, we do — at least once a month, we’ll do a virtual non-deal roadshow presentation with Renmark, with Noella.

Noella is our fantastic moderator. I always love having her by my side. We will — I’ll do about a 30-minute presentation, and then we’ll have about a 30-minute Q&A. If you have questions, please submit your questions to Noella, and I’ll get to as many questions as possible. I hope to have a lively Q&A, so please don’t hesitate to send your questions in. I often forget to say things in the presentation, but it all comes out in the Q&A. So with that, I’d also like to highlight just very quickly, we also have a fantastic relationship with ThinkEquity, our investment bankers, who we have had a three-and-a-half-year relationship with. They raised a bunch of capital for us three years ago, but they were also instrumental in helping us to buy additional — make additional acquisitions that are now going to bear fruit as we go forward.

That’s what I’m going to be getting into in today’s call. Also appreciate H.C. Wainwright, who follows us on an analytical basis. They do excellent research as well as Diamond Equity Research. And the latest to the table, Dave Gentry at RedChip, just to call out. They’re creating some fantastic PR, which is going to bring great brand awareness, not only to ProPhase Labs, the public company, but also to Nebula Genomics. So, I think it’s going to be a win-win, and I think you’re going to start to see that in the coming weeks. You’re going to start to see, amongst other things and different initiatives that include some presence on CNBC. And so, I’m really excited for what’s to come. And so, with that, let’s get into the presentation. So first, of course, forward-looking statement.

I’m sorry I have to read this. At least our attorneys this year gave me a shorter version. Before we get started, I’d like to remind you of the company’s safe harbor language. During this presentation, we will make forward-looking statements, including statements regarding our strategies, plans, objectives, and initiatives, and underlying assumptions. While we believe that these forward-looking statements are reasonable as and when made, forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include but are not limited to our ability to obtain and maintain necessary regulatory approvals, general economic conditions, consumer demand for our products and services, challenges relating to entering into and growing new business lines, the competitive environment and the risk factors listed from time to time in our filings with the SEC filings.

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Q&A Session

This call will present non-GAAP financial measures such as adjusted EBITDA. Reconciliation of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC prior to this call and available through our website. All right, this is a much shorter slide presentation than I usually give. It’s more focused on what’s going on this year. For those of you that haven’t seen the presentation, I’d say probably half of you have, half of you have not. This is fine-tuned. It is updated with all the latest information. There’s some really nice updates that I’m excited to talk about. So first of all, I always like to say, our best is yet to come. We have a performance tracker record that I would put up against most.

You can always find the one in a thousand companies that becomes a multi-billion dollar company. Great. If you found the right tech company 10 years ago, they probably outperformed us. In fact, even some of the great ones haven’t outperformed us in the last 10 years. For all the other microcap companies, we’ve outperformed 95% of them. To make a long story short, I turned around the company that was virtually going bankrupt in 2012. I did the same thing with a company called ID Biomedical, which instead of going bankrupt was sold to GlaxoSmithKline for $1.4 billion. I was instrumental in the turnaround there. And with that experience, I did the same thing here. We had a $0.65 stock about 11 or 12 years ago. We now have paid out $2.40 in special dividends.

The stock is up 9 times. So overall, we’re up about 11 times, if you include the special dividends, in 11 years. Not a bad track record. More recently, about three years ago, so we turned around the Cold-EEZE brand, sold it for $50 million, kept the manufacturing facility. I’m going to talk about that very shortly. We got into COVID testing, and we had never been in the lab business before. We’d never been in the COVID testing business before and we got into it. My son Jason Karkus, within a short period of time, he went from a consultant to a salesman to basically taking over. We moved out the senior executives who weren’t getting the job done. Jason took over, built a roughly $200 million business over two years. Unheard of, very few companies in the country did anything similar, and we had never been in the business before.

So, it’s a history of execution, and it’s like deja vu because now we’re going to do the exact same thing with Nebula Genomics that we did with COVID testing. All right, so in addition to that, so to be clear, what we did differently from what other microcap companies did, ThinkEquity, they did a fantastic job raising capital for us three-plus years ago. Back then, we were in the Super Bowl market. We’re just based on a story. We had this high-flying stock price. They raised a bunch of money for us. But unlike all the other companies that spent all that money and are out of business now, or their stocks are down to $0.10, we strategically transitioned and planned for the future. That included with ThinkEquity in making acquisitions, one of which was Nebula Genomics, another of which is our BE-Smart esophageal cancer test.

Another one is Equivir. We’re going to be talking about all of those over the next 20 minutes and in the Q&A. So, all of this we’ve been strategically planning for several years, and now we’ve transitioned from a COVID-testing business, which ended early last year, to now as we go into 2024 and 2025, we expect to have some very explosive businesses, which I’m going to get into momentarily. So, we have a history of executing on behalf of the shareholders and as I like to say, the best is yet to come. All right. So, let’s start with Pharmaloz, which I actually find kind of humorous because historically Pharmaloz was a sleepy business. I never really even used to focus on it. When we sold the Cold-EEZE brand, humorously, if the company that acquired Cold-EEZE from us had asked for Pharmaloz, I might have thrown it in, this is five years ago.

So, we maintain Pharmaloz because it kept our infrastructure in place for selling products into 40,000 food, drug, and mass stores. We can do not only manufacturing, we can do packaging, distribution, logistics, you name it. We can do soup to nuts. We have a turnkey solution for selling products into retail stores around the country. That’s why we kept it. But what’s interesting is the global demand for lozenges has gone through the roof and the capacity globally as well as in this country has actually shrunk, especially when we’re talking about reliable capacity, it doesn’t exist. We have global brands that literally are panicking, trying to figure out how to solve their problem. They’re basically given mandates. What do we do in the United States and North America to solve our lack of lozenge manufacturing capabilities.

And so, what’s interesting is we’ve started to build our capacity and as we build it, you know the saying, if you build it, they will come, it’s already happening. So, just to go over a few bullet points. We raised prices on every single customer last year, fourth quarter last year. Those price increases all took effect in the first quarter. So, we went from being an unprofitable to a profitable business with increased revenue just by increasing prices. In addition to that, in January, we announced two new — important new lozenge lines that takes our revenues up. So, our revenues historically have been around $8 million, $10 million. Last year, they were a little over $9 million. So, with our price increases, we went up to let’s say $11 million.