Hydreight Technologies Inc (NURS/HYDTF) Q1 2026 Earnings Call

Added: 2026-06-03

[00:00:00]Good morning everyone and welcome to Hydrate Technologies first quarter 2026 earnings conference call. All participants are in lin listenon mode and this call will be recorded as well.

[00:00:14]A replay will be uh made available on the company's investor relations website following this call and we will send an email out shortly after to our shareholder list uh just in case you do have to uh leave for any reason. We're just going to give it a few moments before we begin as we see some people in the wait room and we'll let them join here. Um, also before we begin, please note that today's remarks contain forward-looking statements within the meaning of applicable Canadian securities laws. Actual results may differ materially from those expressed or implied today. For a discussion of the assumptions and risk factors involved, please refer to the company's MDNA and other continuous disclosure comment documents filed on Cedar Plus on the company's profile. Today's discussions uh also reference certain non-GAAP financial measures including adjusted revenue, adjusted gross margin, and adjusted EBIDA.

[00:01:09]Reconsolidations to the most comparable GAP measures are provided in the company's MDNA and news release.

[00:01:19]And we're just going to give it a few moments here and then um we'll begin.

[00:01:26]Perfect. And I'll now turn the call over to Shane Madden, the chief executive officer officer of Hydrick Technologies.

[00:01:34]>> Thank you, Abby. Thank you, Abby. Uh good morning, everybody. And um thank you for joining us. I'm going to start with the with the headline uh and then I want to spend some time this morning on what drove the results, the changing regulation landscape in which we operate. Uh what we're seeing on the consumer demand side and then the results themselves.

[00:01:55]The headline is is that this was a record quarter for Hydrate. We generated 25 million of revenue in the first three months of the year. That's more than we recorded uh across the entire first three quarters of 2025 combined and roughly 70% of our full fiscal year 2025 revenue.

[00:02:15]Uh and that was delivered in just one single quarter. Uh we delivered it profitably and we and and with adjusted Ebida of 3.3 million net income of 2.6 million and our third consecutive quarter of margin expansion.

[00:02:32]For those of you who have followed the story and none of this should should feel like a surprise or that it came out of nowhere. For the better part of two years, we have been educating our shareholder base uh continually messaging quarter after quarter exactly where this business was going. Uh we told uh anybody that would listen um we were building an infrastructure that would scale that once the platform was live revenue would flow and that profitability would follow soon thereafter. uh this quarter is that TC is playing out on the page in the numbers.

[00:03:06]This is precisely what we built the company to do and we are energized that the results that we're showing uh in reality.

[00:03:16]Let me start with some questions I expect are on are on many people's minds. Um what were the one or two things that drove a record quarter like this? Was it a single large client or a particular pharmacy line perhaps? Uh to be honest the answer is is quite boring. Um more boring than I think uh most people would like. Uh and that is exactly why I find it so encouraging actually. Um there was no single driver uh no single customer, no single product. Uh rather it was everything working together at the same time uh the way it was designed to.

[00:03:51]existing partners continuing to ramp uh new partners continuing to be onboarded and our pharmacy network and product catalog deepening underneath all of it.

[00:04:02]When a quarter like this depends on an individual client or a product is very difficult to be sustainable long term.

[00:04:09]Uh however, when a when a record quarter comes from every part of the engine turning at once, it's far more durable, far more repeatable.

[00:04:17]uh I think that more than any single number is what has driven these results and gives us confidence in in what lies ahead.

[00:04:26]Next I want to address uh regulation directly uh because it is probably the single most question we get from the investor base uh and candidly that's totally understandable.

[00:04:37]The legislation and regulatory environment around digital health, teley medicine and compounded medications continues to evolve and yes in many respects it continues to tighten.

[00:04:50]Here is what every person on this call um I'd like to you know here's here's what I really would like to clearly get across that tightening is is not a threat to hydrate. It's a tailwind and I cannot say this strongly enough and we've spoken about this multiple times on multiple webinars. Um as the rules grow more complex uh as regulation increases, enforcement grows, uh the bar to operate in this space compliantly only continues to rise. uh operators who are not compliant or who try to cut corners uh will get removed or squeezed out and the businesses that want to participate in this market long term um legitimately uh scale across multiple states 50 states in most cases increasingly this they cannot do that alone uh they need you know they need precisely what we have spent years building which is a which is an ecosystem for the digital health space in the United States it's really about the division of labor.

[00:05:49]Uh our customers are the front end of the teley health funnel. Their focus is on customer acquisition, building a brand and bringing patients in the door.

[00:06:00]Uh and that is where their energy and their dollars are best spent and should be spent. A hydrate lets them focus on exactly that. Uh we take care of everything behind it. The compliance and regulatory requirements, the administration, the prescriptions, and the operational fulfillment. basically the operations of medical care. That separation is our value proposition. Um and as as the back end gets harder and more expensive to manage, more more legislatively um uh curtail, the more essential we become to the front end.

[00:06:37]So the regulatory screw continues to tighten. It only it only funnels more of these operators onto our platform, not away from it. Uh we're seeing this in real time across the platform as new operators seek us out to solve their regulatory problems. And we're seeing it not only in real time, we're seeing it in results. Um as everyone can see here from Q1.

[00:07:00]The next area I want to spend a moment on is the consumer demand side. Um and uh and what we are seeing in the market.

[00:07:07]As most people on this call know, the market for health and performance products has been growing rapidly as more and more consumers focus on fitness, recovery, longevity, weight management, and overall wellness, preventative health care as opposed to sick care. Um, peptides of course are the bell of the ball are the most well-known example of this, but it's much larger than that. And we don't have to project this trend or take it on faith. We see it um we see it in the order flow moving across our platform and we we see it accelerating.

[00:07:43]To add a little bit more color to that um and just to kind of benefit just to kind of showcase the where where this industry is going um the FDA are holding a public hearing on July 23rd. Um it is the uh pharmacy compounding advisory committee uh board of the FDA public two-day hearing in July 23rd invitingarmacies, companies, physicians to have an open um review process around seven peptides and the release of those. This is on the back of course of 14 that were released already in February. And this is the movement. uh some of the some of the peptides on there uh people would know BPC157 TB TB500 some of these things that are in the in the public space right now and um done done kind of uncompliantly but this is where absolutely the industry is going there's a second meeting already penciled in for February in 2027 and this showcases um the the movement towards preventative health care the movement towards these additional products um being accessible in a compliant fashion. Um obviously Hydrate spends a tremendous amount of money uh on compliance. Um we've been doing this for eight years. While the market has come towards us in many cases with the with these uh patient specific self-administered uh products being released over the last two years and and an ecosystem needed to support those. Um this isn't new to us.

[00:09:17]Uh so we've been structuring the company accordingly for quite a while now and we're uniquely positioned to support the businesses as these products release and as this movement continues and as regulation tightens.

[00:09:32]That's part of what makes uh this so powerful for Hydrate. The leverage our platform brings uh which is something we have talked about um before but it warrants repeating. And as new product and drug categories are released, we don't need to onboard them on a partner by partner basis. Rather, we onboard them once to our platform and then we can make them available to our entire customer base. So, one new category becomes thousands of new revenue opportunities uh for both our partners and for us in a single motion.

[00:10:04]When you layer that leverage on top of what we believe is still the early innings of a of a structural shift towards patientled healthcare, you can see why we remain so excited about the about the road ahead.

[00:10:16]Neat itself um and how this uh quarter presents the clearest signal yet that it's performing as intended. uh as the results show topline growth paired with rising profitability and operating leverage to put some numbers to that uh in Q1 we were able to grow our revenue 67% over the prior quarter with no increase in operating expenses uh that gap is the platform doing its job uh one uh our cost base the compliance framework the provider network the technology is largely fixed uh so as more volume flows uh across the platform form very little incremental cost follows it.

[00:10:58]Looking at it another way, operating expenses fell to roughly 9% of revenue this quarter. That's down from 15% just last quarter, representing a 41% overall decrease.

[00:11:10]And while we acknowledge these are already strong growth and profitability numbers, we'd ask you to keep in mind that we remain in the very early stages of scaling, having launched the VSSDH1 platform from a revenue generating perspective only three quarters ago.

[00:11:24]We believe these are early indications of what the platform will ultimately do uh once it hits its stride.

[00:11:32]As we turn to our balance sheet, we're happy to report we have only enhanced our financial position since the end of 2025. We closed the quarter with 24.2 million in cash and roughly 32 million in working capital having uh completed an overs subscribed 15 million financing in January. With that backdrop, let me turn to the financial results a little bit more detail.

[00:11:56]Revenue for the first quarter was 24.9 million compared with 4.5 million in the first quarter of 2025.

[00:12:05]I'll pause there and let that one sink in for a minute. Uh growth of approximately 450% year-over-year. Um, sequentially revenue grew 60 67% over the o over the 14.9 million we reported in the fourth quarter of 2025 on an adjusted revenue basis uh which reflects gross cash receipts before the deferral of certain business partner contract revenue. We generated 27.6 million versus 6.5 million a year ago.

[00:12:35]So again, validation of our mode um in real results as opposed to um structure.

[00:12:43]Sticking with our top line growth uh a moment longer, I want to show this next chart which uh which shows our revenue on a trailing 12-month basis.

[00:12:54]We think this does a good job of really showing uh the step change in growth we're seeing in the business right now.

[00:13:00]Uh our trailing 12-month revenue is currently 55.8 8 million uh up from 18.5 million just three quarters ago uh right before VSSDH1 launched uh that's nearly a tripling in three quarters.

[00:13:16]The most recent quarter alone added more than 20 million to our trailing revenue base uh taking us from 35.4 million to 55.8 million.

[00:13:28]That is by a wide margin the largest step change we've seen and it reflects the order uh flow building through VSDH1 and inflection we've been working toward underneath that inflection. I think the consistency is also worth noting. Uh we're now strung together more than 15 consecutive quarters of growth and unbroken uh four-year climb.

[00:13:49]again um continued validation of not only the the ecosystem that Hydrate has built but uh but basically um knowledge of where the market is going.

[00:14:00]Moving below revenue uh our our gross profit was 5.1 million uh a gross margin of approximately 20% compared with 1.5 million or roughly 33% a year ago. The decline in gross margin is a function of revenue mix as pharmacy sales which carry a lower margin significantly outpaced the growth of the other revenue streams.

[00:14:22]Operating expenses for the quarter were 2.2 million. Um and as you can see by the chart have been have been held largely flat over the past 12 months.

[00:14:31]Over the same period, uh, we've grown revenue significantly, which has driven our opex as a percentage of revenue down from 36% to under 9% in the most recent quarter.

[00:14:45]This operating leverage flows down to our adjusted EBIDA uh, which was 3.3 million for the quarter compared with approximately 200,000 a year ago. Our adjusted Ebona margin reached approximately 13.1% up from 5.9% in Q3 of 2025 and 10.6% in Q4 of 2025. Uh that represents three consecutive quarters of of margin expansion.

[00:15:13]Net income was approximately 2.6 million compared with essentially break even a year ago. In terms of cash flow, uh we used 4.9 million to fund operating activities during the quarter. Um this was driven by an increase in working capital. Um principally an increase in pharmacy sales receivables that are tied to the launch and securing of the customized compounding product lines um to secure the the expansion into these other products. Having closed the quarter with over 25 24 million in cash and a working capital surplus of over 32 million, our financial position uh remains stronger than it has uh ever been.

[00:15:57]Turning to our outlook, we have guided to 25 million of revenue for the first quarter. We delivered in line with that guidance reporting 24.9 million uh in revenue and 27.6 6 million on an adjusted revenue basis. Um for the full year, we are reaffirming our guidance of course of of a minimum of 150 million in revenue. Um as we previously stated and as we as we uh went over with the release of um additional categories of products with the movement towards um the FDA including um pharmacies and uh organizations and physicians and businesses towards this movement. Um as these products are released we see significantly significantly um strong opportunity in Q3 and Q4 of this year as well. Um it's this baseline is derived solely from existing partner relationships and currently active current programs um observable transaction volumes and contracted demand um and continued utilization of our existing pharmacy and platform infrastructure. So importantly, it does not assume any contribution from potential acquisitions, expansion into new international markets or additional enterprise partnerships beyond those already in operation today. It is what is already in the ecosystem and it is more of an executional challenge. Hence our confidence one um and our execution as you've seen in our Q1 numbers. uh on that revenue base we expect to generate an adjusted Ebida margin of approximately 15 to 17%. uh the drivers behind this number are visible to us today and our first quarter results are consistent with the trajectory that underpins the fullear outlook.

[00:17:51]To close, uh, the first quarter delivered record revenue, record profitability, positive net income, and a strong, well- capitalized balance sheet, and it validated the operating model we have spent the past several years building.

[00:18:06]Um, the regulatory landscape is moving in our favor. Uh, consumer demand for the categories we serve is accelerating and the majority of the value embedded in our existing partner base is still ahead of us. Uh we look forward to meeting again in a few months to present our Q2 results which continue to build and extend on the momentum we've presented today. Very very exciting times for the company and we appreciate uh everybody's support. Um thank you for your time this morning and continued support.

[00:18:41]>> Thank you Shane for that too and thank you everyone for joining us this morning. Uh this does conclude today's conference call and a replay will be available on the company's investor relations website at hydrate.com shortly. Uh we will now um just end this webinar here and we'll also be sharing a recording as well um shortly after via email too to everyone.

[00:19:07]Thank you so much and have a great uh rest of your day. Bye now.