Q4 2019 Earnings Call
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Oh, Yeah, I'll hand, it over ladies and gentlemen, thinking standing by welcome to the NXT I'd wed have to discuss the financial operating results for the year fourth quarter ended December 31st 2019.
I just have all this is going to listen only mode.
Good for any further questions. Please press Star then zero.
Now I'll hand, the call becomes these people today Mr., then Sally or you may begin.
Thank you operator thanks.
Good afternoon, everyone and thank you for joining our call today to discuss NXT I'd, So financial and operating results for the.
12 months and the fourth quarter ended December 31st 2019 and to provide a general update on the business. During this afternoons call.
We will be making forward looking statements, which consist of statements that cannot be confirmed by reference to existing information.
Including statements regarding our beliefs goals expectations forecasts projections and future performance and the assumptions underlying such statements. Please note that there are number of factors that will cause actual results to differ materially from our forward bookings.
Statements, including the factors identified and discussed in our SEC filings. Please recognize that except as required by applicable law. We undertake no duty to update any forward looking statements and you should not place any undue reliance on such statements.
So thank you.
It's been to sell here on together with Kevin O'connor President of Logicmark.
And before we actually get started.
I would just like to.
I'll comment briefly on the state of the World These days and wish and hope that everybody listening in all the participants on the call our remaining safe and healthy all were in certainly unchartered waters at this time and it's a true.
Trying time in a scary time quite honestly for everybody involved so.
Again hope everyone is safe and healthy and please try to remain.
At way as long as we can so thank you.
So we're going to use the same for that as we have done in the past.
I will provide a.
Summary of the financial results for the year 2019, and in particular, the fourth quarter of 19.
And talk briefly about what we see thus far happening for Q1 2020.
And then I'll turn the call over to Kevin who will provide.
An update for the listeners for the investors.
As to where Logicmark is currently in terms of its business and he'll also provide some color on our new product development efforts.
So without further Ado.
Let me get started on the financial results.
Our revenues for the 12 in three months ended December 30, Onest 2019.
Came in at approximately 17.1 million in 4 million, respectively. Our revenues were essentially flat as compared to both.
Comparable 2018 periods, our gross profit margin.
Came in about a half a million dollars better in 19 versus.
2018, primarily because a favorable product mix.
Our operating expenses from the continuing operations.
For the year into three months ended 19 were 10.15, sorry, 10.2 million and 2.1 million compared to 11.7 million and 3.1 million respectively.
I think we've we certainly talked a great deal about the efforts that we've been making in terms of reducing our overhead.
Since taking goal for in late September.
I'm happy to tell you that we've been able to reduce our our operating expenses by about $3 million on an annual basis.
Which is considerable for this size company and we believe that Theres room to.
Cut additional costs here as we you know we head into these unchartered waters, and we'll look to make further reductions there but.
I think one of the interesting.
I.
Things that I'd like to point out is if you look at the Companys trended SGN a by quarter.
In the beginning of the year, we were somewhere in the range of 2.7 million and this is just 19 now obviously these numbers were much higher in 18, but I think it shows the nice progression downward progression of these expenses, so where we where we were at 2.72 point.
8 million.
In the beginning of the year, we came all the way down to 2 million in Q4, so in my mind.
It basically confirms that a lot of the efforts that we put into reducing the and containing the SGN a are starting to show very good results and not to be redundant, but but we're also looking too.
It will take out additional costs here and I'm certain that we will so I thought that was an interesting.
Reference point, if you will operating income from our continuing ops for the year 19 came in at about 2.6 million for the year in about 800000 for the fourth quarter.
That was compared to 600000 for the year any teen enable loss of 300000 in Q4 2018, so a drastic difference and really summarized into to the strong margin gross profit margin from the favorable mix that logicmark contribute.
Coupled with the cost reductions in cost containment efforts that we implemented in early Q4.
The adjusted EBITDA or non-GAAP op income.
From operations for the year came in at $4 million and 1.1 million for the fourth quarter compared to two and a half million and 100000 for the comparable to 2018 period. So.
Considerable considerable improvement there.
Net cash provided by operating activities for the year 2019 came in at $2.2 million versus $50000 of cash flow generated from operations in 2018, another interesting appointed I'd like to re.
He's with everybody is in Q4, we generated about 800, just under $800000 in cash flow from operations in the fourth quarter alone. So if you annualize that number you're somewhere in the ballpark of 3.2 million.
Versus you know.
The two.
The 2.2 million. So it's roughly a million would have been really a million dollars battery. So again another reference point that you don't confirms that our efforts are starting to show very positive results.
In terms of.
The debt.
In 2019, we repaid a total of $3.8 million 600 of which was from the seller note, which we already talked about in the past.
And we also reduced our term loan facility by 3.2 million.
And.
That that in in of itself will save the company a substantial amount of money as we.
Move forward hearing in 2020.
Moving over to our.
Balance sheet some of the key items that I just want to pointing out we closed the year with about $1.6 million in cash.
And I'm happy to report that.
The cash at the end of March was slightly lower than that in the million and a half range. So I'm very happy about that.
In terms is that debt.
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Currently we are at about 12, and a half million dollars in term loan facility, we paid down about $850000 in the first quarter and I should also point out that included in that pay down was a prepayment of where we took some of the yet excess cash.
Flow that we generated in Q4 and de lever. So another very good sign that.
The.
The things that we're putting in place the reductions and SGN a are starting to.
Help us for sure.
And we wound up the year with $6.7 billion in stockholders' equity.
So what I'd like to now do is give you a little bit of insight as to in its very premature very preliminary but I can tell you that in terms as it relates to Q1 here 2020.
What we're seeing very preliminarily here is we're seeing a slight reduction in revenue.
On a sequential basis versus Q4 now the whole peer is and we're just starting to closing process. So.
I'll know more hopefully over the next week, but but nonetheless, the hope in the end of the we're hoping that the cost containment and the cost reductions will help help to offset some of the margin Miss I don't envision it'll be a relatively small miss in revenue we did start.
To see some softening.
Towards the end of March in logic marks revenues.
Our preliminary thoughts on that are.
It's all related to the general slowdown here in the general economy because of Cove it.
But we'll know more on that as we as we move forward.
In terms of the debt.
Again, we paid down about 850000.
I'm very excited about that one into key things that I always felt was we had a lot of leverage we're making good progress in terms of.
Reducing the debt and it's all very positive.
The obviously the big unknown for us in the big unknown for everybody.
In this environment now is what impact.
You know the virus that Coface 19 virus will have on our business, it's ultra premature to.
We're constantly studying our order patterns, we're looking at it Kevin and I are looking at this on a almost two three times a day kind of looking at the patterns trying to identify.
Anything that will help us to better understand where the business is going through this this very difficult times. So.
As we know more on will certainly try to keep everybody apprised of what we're seeing here role for Q2.
So so with that I'd like to turn it over to Kevin who will provide like I said earlier a.
An update on the logic bar business and the.
Some some commentary on the new products Kevin.
Yes, Thanks Ben.
So it has been said I'm just going to kind of go over the the logic Mark business that will go into the numbers that you went through really kind of addressed some of the business issues that we face primarily in 19, but I've been talking about will touch on the first quarter 2020, and kind of what we see is happening.
I will talk about product development as well so for 2019 has been suncor business overall remained strong.
It was not we didnt grow it was relatively flat, but our core business remains strong our margins increased.
So we were able to to protect that side of it.
Yes, I've spent most of my life in sales. So it's always a lot more fun to be growing but as our business shifted in 2019 and youre all aware of what the change that took place the focus really needed to be kind of rightsize the business get costs under control and we really focused heavily on that in the second half of 2018, managing the cost than that.
Through headcount and operations.
Part of what we signed 2019 and continuing into this year is an ongoing shift from land lines to cellular and Internet communication.
And as we've talked about the past our products need a communication path to communicate through emergency responders 911 or through friends and family. So we've continued to see that shift so our product development. It really focused on tailoring the products to communicate through.
Through cellular and internet and potentially other communication protocols.
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The business model traditionally as we've talked about in the past Ben business to business.
We sell direct to the VA and then in our commercial channel, it's primarily been through on DM, many durable medical equipment companies dealers and distributors.
And also to independent pharmacies and to companies that distribute to pharmacies. So that really was our focus.
And we kept it kind of that that.
Maintain that focus throughout the year as we move into 2020 I'll talk about some of the things that we're looking at to try and expand that again trying to balance our reach into the market growing the revenue side and also trying to protect the overall margin of the business.
New product development.
Been talked about is key to drive in revenue. So we're going to grow we really do have to be coming out with new products.
And thats been somewhat frustrated in the past being able to deliver new technology, but we are now 100% focused in the healthcare space and our core business at Logicmark is and always has been in the personal emergency response, and emergency communications business utilizing two way voice, so thats really.
What we built the business on the category that we play in the no monthly fee space were by far the largest player. There. So we're we're doing everything we can to protect and try to expand bad.
And then also look at other areas that we can provide value add into the market through our current customers and also expand the channels that we serve.
So as we focused on product development when I talked about the communication platforms. Our cellular products are really geared for the mobile part of the market.
And so we've been working on updating that from a threeg platform into the Fourg. So as everybody knows threeg is being sunset most of the networks are shifting over it sometime in 2022, and so thats been under development.
Since early to mid 2019, we're also working on other product thats really geared toward at home use that will utilize internet put communication and then it and then give the ability to call back to the user in the home.
Over Sip, so we think that with those platforms and expanding into their communication. It will be able to help us maintain a leadership position where we currently play.
And we think we have some unique offerings that will open some doors to other areas as well.
As I said both of the products development started in 2019 initially we had anticipated launching in Q1 late Q1 to potentially early Q2.
Through the development process through the engineering, we did have some challenges that developed and so that pushed it back slightly and then as Vince alluded to the corporate 19 virus as we went into first part of 2020.
It really through another qiagen wheels in terms of the supply chain and some of the engineering resources in China. So we're working through those we're still confident that we're going to be able to deliver the product from a timing standpoint at this point I would say, it's probably pushed back too late Q2 into Q3.
And we'll continue to monitor daily the progress and potential update we're also working the supply chain to make sure that as the product is ready for production that we have access to the components and everything is needed.
Does that that also we risk of potential delay there.
In 2019, R&D and Engineering Department also worked on the Mehta stats can we had talked about Mehta stats in the past about a potential business that we were going to expand into.
The engineering Department head developer portal, which could be utilized for passive remote patient monitoring.
We did have preliminary discussions in 2019 with some cost sharing insurance companies.
And looked at what the requirements we're in.
How metastatic would play in long and so we've made a decision based on what the needs would be to support that business not to launch the Mehta stats.
But we did do the engineering work to create that portal. So we are looking especially into the current environment, where a patient monitoring has the potential beyond would have traditionally looked like even a year ago. We're looking for opportunities, where we maybe able to utilize the work that's been done can launch into some new spaces. So we're working with engineering we're working.
Potential channel partners and hope to learn more as we go into Q2.
The the main products as I said are continuing to go strong we're watching in Q1 has been set a slight drop off really late in the quarter.
And as this really evolved daily and we see news update because we're working in health care to double edge sword right. There is opportunities and through some of our commercial partners. We're seeing some some pickup opportunities through pharmacies and some of the smaller resellers.
We also do a lot of work with the VA and their largest healthcare system in the country. So that present some challenges because they are focused right now on dealing with cobot 19 buyers related issues and so they are in a state of flux right. Now so we're working closely with them, making sure that weren't a position to do whatever we can to support their needs. Both currently in as much change going in the future.
We remain confident that we're going to be able to navigate through this and then when we come out on the other side that will be in a position to really expand and grow the business.
With that I'll hand, it back over to you.
Okay. Thank you Kevin Thanks for the update so so in summary.
What I would I'd like to just review with.
The investors here briefly is when we when we spoke last.
Kevin and I.
Indicated that we thought there were three key objectives or.
Three primary steps that we needed to really focus our efforts in attention to and those were you don't rightsizing. The business, obviously key very very glad that we attacked in retrospect very glad that we attack.
That one first especially in light of the the current situation now.
You know again just.
To say it again, we've taken out $3 million on an annual basis, we'll be looking too.
You know takeout more as part of an overall Kofi contingency type plan that we're currently working on now.
The second the second.
Key objective was to continue to de lever you know, our pricey term debt and build shareholder value by reducing the debt I.
I think we've made great strides in a short amount of time, we de levered by $4 million.
Thus far into the term debt currently sits at about 12 and a half million dollar so were.
Get into a more meaningful that number.
And then thirdly.
Yeah.
The key wants to develop new new products that could definitely expand the topline expand the channels that we serve and you know.
So I think in summary, I think we've made a lot of progress here in a short amount of time.
And I were working very diligently to try and get it turned around and I think we've made great progress. Unfortunately now for everybody.
We were going to struggle a little bit here like everyone else in this current environment. It just too many unknowns and it's going to take up at a time here to figure it out what the overall impact is going to be.
Very unfortunate times for everybody.
And hopefully everybody will okay, we'll be okay going through this so so with that.
I'd like to open it up for some questions. If we may Valerie.
Thank you.
Ladies and gentleman Jack the question. Please press Star then one when you touched on telecom. So we draw your questions on the can you grew correct capacity.
Please turn biologic products many roxanne.
One moment.
I'm showing no questions at this time.
Okay well. Thank thank you very much oil.
We'll we'll be communicating.
Shortly hopefully by sometime in late April when we have more clarity on.
Where where we see the impact coming from the virus on the business and will be sure to communicate and give you as much information as we possibly can at that point. Thank you again and please be safe and stay healthy. Thank you.
Thank you ladies and gentlemen, this concludes today's conference call. Thank you participating renowned disconnect.
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