Good afternoon, and welcome to the Harrow Health First Quarter twenty twenty one Earnings Conference Call. My name is Cole, and I'll be your operator for today's call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. And as a reminder, this conference is being recorded.
I would now like to turn the conference over to Jamie Webb, Director of Communications and Investor Relations for Hera Health. Please go ahead.
Thank you, operator. Good afternoon, and welcome to Harrow Health's first quarter twenty twenty one earnings conference call. Before we begin today, let me remind you that the company's remarks may include forward looking statements within the meaning of federal securities laws. Forward looking statements are subject to numerous risks and uncertainties, many of which are beyond Harold Health's control, including risks and uncertainties described from time to time in its SEC filings, such as the risk and uncertainties related to the company's ability to make commercially available its compounded formulations and technologies and FDA approval of certain drug candidates in a timely manner or at all. For a list and description of those risks and uncertainties, please see the risk factors section of the company's most recent annual report on Form 10 ks and subsequent quarterly reports on Form 10 Q filed with the Securities and Exchange Commission.
Health's results may differ materially from those projected. Harrow disclaims any intention or obligation to update or revise any financial projections or forward looking statements, whether because of new information, future events or otherwise. This conference call contains time sensitive information and is accurate only as of today. Additionally, Harold referred to non GAAP financial metrics, specifically adjusted EBITDA and or adjusted earnings. A reconciliation of any non GAAP measures with the most directly comparable GAAP measures is included in the company's letter to stockholders available on the website.
By now, you should have received a copy of the earnings press release. If you have not received a copy, please go to the Investor Relations page of the company's website, www.harrellinc.com. Joining me on today's call are Harrell's Chief Executive Officer, Mark Elbaum and Harold's Chief Financial Officer, Andrew Boll. With that, I'd like to turn the call over to Mark to go over some prepared remarks prior to the question and answer session. Mark?
Thanks for joining our call today. I would encourage everyone listening to review our first quarter twenty twenty one earnings release and to read our letter to stockholders, which was posted on the Investor Relations section of our website just after the close of trading today. Before we begin the Q and A portion of today's call, I'd like to quickly touch on a few items to provide some additional color on our business since we last spoke in March. The first quarter of twenty twenty one was our best financial quarter in company history. On both a year over year and a sequential quarter basis, key financial metrics reached record levels.
We also continued our recent trend of progress in terms of major milestones, customer growth, product development, and the expansion of our revenue sources. In addition, since we last spoke in March, we were able to accumulate a war chest of over $75,000,000 in new cash to fund our growth strategy, and we lowered our cost of capital in doing so. And I might add that we managed to accomplish all of this without any dilution to our common stockholders. We are pleased to report that total revenues for the first quarter were $15,400,000 and that's an increase of 31% compared with the $11,800,000 reported in the prior year period and up 6% from revenue of $14,600,000 in the fourth quarter of twenty twenty. Gross margin continued to improve, reaching a record 75.6% for the first quarter of twenty twenty one compared with 6973% in the first quarter of twenty twenty and fourth quarter of twenty twenty, respectively.
Adjusted EBITDA of $4,300,000 was another record metric compared with the $414,000 in the prior year quarter and $4,000,000 in the fourth quarter of twenty twenty. In the first quarter of twenty twenty one, segment contribution from ImprimisRx was 5,700,000, including noncash expenses related to depreciation, amortization, and stock based compensation of $383,000. That's compared to 1,500,000.0 in the prior year period and $5,000,000 in the fourth quarter of twenty twenty. This important metric demonstrates the earnings power of the ImprimisRx business separately from other Harrow businesses, assets and liabilities. As I mentioned, our first quarter results were the best in our history.
In addition, we are starting to see less week to week revenue volatility, giving us added confidence that we are headed back to consistent revenue growth. Adding to my optimism is my belief that all the pent up demand for ophthalmic procedures that have been delayed due to COVID nineteen is just about to get on track again, which will not only result in increased revenues for our customers, but will also mean increased revenues for Harrow Health. We have also made great strides in our strategy to expand beyond pharmaceutical compounding by leveraging our market position and adding high value in terms of revenue per unit and gross margins, FDA approved drugs and late stage drug candidates to our platform. Our EyePoint Pharmaceuticals partnership to market DEXYCU continues to be mutually beneficial and is confirming the prospective value and thus the validity of our expansion strategy. In addition, we are executing on our vision of serving eye care customers directly through Visionology, which will be launching regionally this week.
Visionology is our direct to consumer eye care platform that delivers a simple and seamless user experience to help patients manage their chronic eye diseases. We are very excited about this revolutionary new technology that we believe will transform the way consumers access eye care products and services. I look forward to updating you as we roll out this exciting new business. Now over the past year, we have painstakingly developed a strategy that we believe will assist us in growing the company and reaching our full potential. Now with the positive changes to our cash position, we have adequate liquidity and the financial flexibility to pursue additional acquisitions and transactions, but to also meet future challenges.
Since the close of the first quarter, we have raised more than $75,000,000 once again, all without diluting common stockholders. In April, we sold approximately 1,500,000.0 shares of our 3,500,000.0 share position in Eaton Pharmaceuticals common stock with net proceeds to Harrow of approximately $9,600,000 from the sale. Also in April, we closed an underwritten registered public offering of $50,000,000 aggregate principal amount of 8.625% unsecured senior notes that are due 2026. And then in May, closed on the underwriters over allotment option to purchase an additional $5,000,000 aggregate principal amount in those securities. In total, the senior notes offered resulted in net proceeds to the company of approximately $52,800,000.
In May, we also closed on an $11,000,000 series b preferred offering with net proceeds of $10,700,000. We used $15,500,000 to pay off our loan agreement with SWK Funding LLC, and the balance will be used to finance future acquisitions, investments in expanding our manufacturing and distribution capabilities, building out an analytical lab to lower our post production quality assurance and quality control costs and for general corporate purposes, including funding future strategic product acquisitions, related investments, and working capital. Now let's take your questions. I will pause to have our operator poll for questions. Operator?
And our first question today will come from Andrew D'Silva with B. Riley FBR. Please go ahead.
It's B. Riley Securities now, but thank you. Good afternoon, and I hope everyone is well, and congrats on the quarter. On the compounding side, just a few quick questions for me. I'll start on compounding side of the business.
I was really curious on what you're seeing driving the growth. Is it volume based or pricing based? And I know you were going into new regions and among other initiatives before the pandemic started. So I was just curious if you're also seeing success in entering new areas and obtaining new physicians too.
Annie, thanks for the question. I think there were two metrics that we reveal in the press release that highlight the answer. One, we definitely did open up new accounts, new larger accounts. And I think the other big reason is revenue per five zero three order hit an all time high. That was also in the shareholder letter, it hit $2,118 per order, which is a huge factor as well.
So those factors, I think, contributed to the record revenue number. And we also talked about the number of units shipped, which did hit an all time high as well. We shipped in the first quarter nearly 500,000 units, which was once again an all time record. So a lot of units, a lot of revenue per order, and then we also were able to increase our customer account as more physicians, ambulatory surgery centers, and hospitals join the platform.
So on the on the five zero three b side, if my memory serves me correct, that's that allows stocking orders at at ambulatory surgery centers to take place. Do you do you think that any sort of stocking related windfall took place during the the first quarter, or is that, you know, really a sustainable rate as we're going to the second quarter and in the back half of the year? Because, I mean, it's it's materially ahead of what we were looking for you to be at this point.
Yeah. I think we saw some of that in the fourth quarter, anecdotally. It's really hard to tell whether that is stocking or not. We did speak to some accounts in the fourth quarter, and we heard that there was a little bit of these stocking issues happening as more and more offices opened up. I have heard less of that in the first quarter, but that's, of course, possible.
I think that this is a good rate in terms of baseline beginning this year for unit volumes and revenue per order and and customer counts.
Alright. That's great to hear. And just moving over to Visionology, you may have mentioned this, but I am was jumping between calls. Have you been able to really identify the physician network that you're gonna be utilizing? And have you identified also, like, the core direct to consumer products that fit the radiology model yet?
Obviously, I know you could use your own compounding facilities, but there's obviously a little bit of a a business shift as you as you move into the direct to consumer model versus, you primarily focused on ambulatory surgery centers?
Yes. So Visionology is obviously direct to consumer, but it's really I think what's interesting about the model is that it's virtual to local. And so while it is the case that we're going to take care of patients using the software that we've built to make sure that they have access to medications, they have access to physicians. Every single patient in our model is actually paired with a local doctor. And I think that's what makes the model different.
We certainly are leveraging the more than 10,000 physicians that we serve in nearly every populated county across The United States. And so Visionology very much leverages the network of physicians that we've built up through our ImprimisRx business. In terms of the product mix, we're definitely interested in the dry eye space for sure. But we're having probably the worst allergy season, I think, on record. So we're very much interested in the allergy space as well.
That's a great model for us, as is presbyopia down the line, and there are other chronic care conditions. Very large market opportunities that I think fit in very well with the Visionology brand, the software, and the network that we're creating. But I do wanna highlight, I'm really excited because this is you know, three years in the making, and we are launching this week. So it's a really exciting time around here. Everybody's pumped up.
We love the software that's been built, and we're excited about the products that we're gonna be initially offering. It is a regional launch, so we're gonna be working out the kinks as we kick this off. But it is happening, and it is happening this week.
That's great. Congrats on that. Last question for me is which related to partnering activity and potential M and A. Obviously, you raised a a very specific amount of money, particularly with the preferred shares earlier than in this month. Can you talk around why that particular number was important to raise?
And on the potential strategic side, should we expect acquisitions of products to kind of resemble DEXYCU in in style or and reach? Or could it be something different, like, you know, taking a bigger position in one of your deconsolidated entities that is looking to potentially raise additional capital this year?
Yes. So the the amount of capital that we raised, you know, I I I don't think there's a a connection there between any of the the transactions that we're doing. You know, your firm actually was instrumental in in in helping us there. And so we're certainly grateful for the great work that that B. Riley Securities did in helping us build this war chest of cash, which is consistent with what we've said to our shareholders over the last three or four quarters that we intended to execute this strategy.
And as I identified in our letter to stockholders, many would oftentimes ask, how are you going to execute on a transaction given your balance sheet, your cash position? And so I think those questions should should have been answered when we're able to close on these transactions. I will say that we didn't move this cash onto our balance sheet to to it's not gonna be money in the mattress. I'll just say that. And so we have several active engagements that that are in various stages of completion.
Can't guarantee any one of them will be completed, but we did raise this cash. As I said, it is not going to be money in the mattress. We intend to put it to work. We do have a fairly decent record of investing capital in our business when we've had that opportunity. We're excited to do that, and hopefully more than one transaction this year.
In terms of the area that we'll be investing in, our ophthalmic business is focused on surgical. We're focused on chronic care conditions, and then meeting specific acute needs that happen within an office. And so, on the surgical side, there are only a few areas that we're really interested in, cataract, refractive, obviously glaucoma, and retina surgery. So products that serve those markets, and on the chronic side glaucoma, dry eye, meibomian gland dysfunction, presbyopia, allergy, there are a number of areas there. So we're going to stick with what we know.
We know the ophthalmic space pretty well. We know where we're strong, and, you know, we're we're excited to execute the strategy. I think good things are coming.
Great. Great. Thanks for the color. Congrats on the quarter, and I'm looking forward to seeing how you deploy that capital.
Thank you, Andy.
And this will conclude the question and answer session. I'd like to turn the conference back over to Mark Baum for any closing remarks.
Thank you. In closing, let me once again acknowledge and thank the Harrow family, all of our employees for their hard work and devotion to the company. It has truly been a team effort by talented professionals who demonstrate every day that the impossible can be possible when we work together with a focused commitment to serving our customers, dedication to innovation, and incredible determination. It is this focus that makes me confident in our future and looking forward with excitement to the remainder of the year. Before we close the call, I would like to remind all Harrow shareholders on this call to submit your vote for the upcoming Harrow Health annual meeting, which is on 06/03/2021.
Thank you for attending today's call. If you have any investor related questions, please email Jamie Webb at jwebb,webb,@harrowinc.com. And this will conclude our call.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.