Q2 2020 NXT-ID Inc Earnings Call
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Thank you Valerie and good afternoon, everyone and thank you for joining the annex T.I.D. inc. webcast to discuss the Companys on what it did.
Operating results for the six in three months ended June 30 get 2028 to provide a general corporate update on the overall status of our business.
This has been Masoli and I'm here today, with Kevin O'connor and hedge and as we've done in on our prior webcast I will provide a financial update along with some summary commentary and Kevin will provide you with a closer look at the logic Mark operation as well as provided an update on.
Our new product development initiatives before we get started.
I'm required to read the forward looking disclosure statement.
So during this afternoons call, we we will be making forward looking statements, which consist of statements that cannot be confirmed to 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 could differ materially from our forward looking 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 right now I'd like to just take you through some highlights of the first six months and the second quarter results. These may sound redundant as you probably already had a chance to look at our most recently filed our second quarter 10-Q, but nonetheless I will.
Go through them and had some additional color where I think it might be.
Helpful. So in terms of revenues for the six in three months ended June Thirtyth 2020.
They came in at 6.2 million for the first six months and tuna half million for the second quarter obviously.
Significantly lower than the comparable 2019.
Numbers. If you will this first six months was down about 2.4 million versus last year and the second quarter was down 2 million.
In terms of our gross profit on the for the first six months at 2020. It came in at 4.6 million and 1.8 million for the second quarter also down significantly versus the comparable 19 periods at 6.6 million and 3.4 million. The good news if there was some.
With regards to gross profit is that you know our gross profit margin percentage remained above 70% in very healthy.
Our obviously you did the problem, obviously, what's been missing revenue for us.
Operating expenses for the six in three months ended June Thirtyth were down significantly up 3.7 million for the six months and 1.9 billion for the the second quarter of 2020 compared to five and half million and 2.8 million for the comparable 2019.
Periods.
Again.
We've talked a lot about the reduction in the the overhead structure of the company and that's completely.
The reason for the huge reduction in operating expenses operating income.
For the six months of.
2020 came in at just under $1 billion at 936000 and for the three months ended June Thirtyth 2020, we actually had a small operating loss of about $100000 compared to 1.1 million in operating income for the six months 2000.
Team and 600004 at the same for the second quarter of 2019 non-GAAP operating income for the six months ended June Thirtyth 2020, adjusted for depreciation amortization and other non cash charges was approximately 1.4 million and.
Point 1 million, respectively, compared to 1.9 million in 1 million for the same comparable 2019 periods.
Net cash provided by operating activities in the six months ended June Thirtyth was 6.6 million compared to point 7 million in the six months ended June Thirtyth 2019.
During the first six months of.
2020, we repaid 1.2 million in term debt.
In that six month timeframe.
Moving over to the balance sheet and I'll just hit a couple of the key balance sheet line items.
We closed the quarter read about $1.4 million in cash.
We had about $1.8 million in payables down about 300000 from yearend.
Debt was about 12.2 million.
At June Thirtyth, and our stockholders equity was about $6.7 million.
At June Thirtyth.
So obviously 2020, thus far has been a very challenging year.
While at the same time of very dynamic one for the company and for the entire world for that matter, if you'll recall approximately nine months ago I laid out three key objectives that we believed that the time, we're absolutely imperative for the company too.
Accomplish in order to stabilize and begin growing the business in those three key objectives for as follows.
We needed to rightsize the remaining business after the sale of fit pay by significantly reducing the companies.
Operating expenses or overhead.
And then to continue building shareholder value by paying down our term loan facility and thirdly assess the company's new product development efforts into determine which of these initiatives.
Sustained would add sustainable revenues to the company in the quickest shortest amount of time.
In terms of Rightsizing the business.
We actually reduced our operating expenses by over $4 million on an annual basis, which in retrospect.
It was absolutely Paramount to the company, especially in light of the current Covidien environment.
To date, we have also pay down approximately 4.7 million of our term debt facility a million and a half of which was paid thus far in 2020.
Debt pay down is obviously, an integral part at the overall equation here in very important to us as we look forward.
To moving the business forward.
In Q1 of 2020 as you'll recall, we began to see the positive results from some of our efforts.
We actually had positive net income in earnings per share for the first time and the company's history.
And then as we all know in as the whole World knows cope it 19 struck.
And it began to negatively impact the company's revenues and operating results.
Around the middle part of March 2020.
The company second quarter 2020 sales and operating results were obviously significantly impacted by coal bid as where the financial results of many other companies and in spite of our revenues being off significantly our results.
We're still very close to breakeven for the first six months of 2020.
Another way to look at it is had we not reduced our operating expenses to the level, we did and assuming that all else remain constant our loss per share would have been in the neighborhood of eight cents as compared to an actual loss per share of one cents.
With respect to our new products, we're very encouraged by the future prospects, so far new Fourg LTE product as well as the white five product, we believe that the fourg product.
As a very solid value proposition and we're very confident that the fourg product will allow us to further penetrate the fee a channel while the Wi Fi product provides us with multiple sales channel possibilities.
As such as direct to consumer medical distribution, and various assisted and independent living facilities as well as other healthcare facilities and so with that I'll I'll now turn it over to Kevin.
Who will provide an update on the logic market operation as well as.
Dive deeper into the new product development initiatives Kevin.
Yes. Thanks.
I'll just go over kind of at a high level.
Going to the numbers as you really touched on at this point, but you know to Echo would been it said going into this year. We felt like we were positioned really well and had some nice growth in Q1, and obviously as cobot impacted pretty much everybody in the economy. We felt like we were nimble enough to adjust and and move accordingly, so some of the things that.
We continue to focus on through the second quarter was.
Our workforce, maintaining a hybrid model with people working from home as well as our staffing our facility in Louisville, and really focused on continuing to support the customer needs and making sure that whatever they needed that we had the resources on hand, and we're cutting back.
But also focused on keeping the employee safe.
I'll mandates from the state of Kentucky, where our Lula facility is located were followed and throughout the process, we've maintained a safe and coal victory workplace.
Up to the current date.
We continue continued the suspension of all business travel and events through Q2 and into Q3.
We're really watching as we get through the ended the year based on a lot of the events that we would typically do on a lot of them are geared towards the a and veterans service organizations at this point any major events that we would typically participate in have been canceled for the balance of the year.
But we're continuing to monitor and if there are opportunities, especially to launch for new products and to get in front of people, who will continue to monitor opportunities and and manage the safety of the employees through the process. Some of the other things that we focused on through second quarter as far as business continuity was.
Our lease at our facility was set to expire at the end of August.
So our.
In Louisville focused on finding a new location that would better serve our needs to facility were in was was good but it really was more space than we needed from an office standpoint, and the warehouse will require some updates as we look to expand our business going forward. So.
We were able to find a great facility.
Actively close to where we currently were and negotiated a lease there that facility had just completely been renovated will say roughly $20000 a year and rent. It really one of the biggest keys is that because everything has been updated and renovated will substantially lower operating costs.
And we think that again as we expand the business and grow that it's better suited to support that growth for us. The other thing. We did was managed our head count one of the things that we looked at was maintaining an up people onboard to support the customers through all the changes that are happening we were able to participate in the payroll protection program.
So through that we had to maintain head count and not.
Eliminate employees.
We did have some attrition some employees that for personal reasons, whether they had kids at home or whatever the various reasons were chose to.
Leave and so through attrition since the beginning of coal that.
Our headcount is down 25%, but again, we were able to maintain all of the requirements for the payroll protection plan through that process.
And the other thing we've done in managing the transition to the new facility and that was completed.
Starting in June and it was completed in July but in managing the transition there we've been working with our suppliers managing inventory and making sure that we've got the right products, but we're also set up as the new products are in production and ship that we're ready to to him to take those on as well some of the customer activity through the second quarter and as we talked about.
On our last earnings call.
In the first quarter, we saw strong start and really saw drop off from mid March on from Cobot, and we saw that continue into the second quarter. We saw continued decline in April further decline in May and then in June we did start to see a rebound in the business.
And the VA had started opening backup which was really helping because they were increasing their visits and so we started seeing a rebound in july that kind of flattened and and we track closely really where are the hot spots are and what kind of impact we see from a regional standpoint, and so we maintain the kind of the run rate from June So we're opt.
Mistakes that that we have maybe seeing the worse and continue to be positioned to take advantage of growth going forward.
But through the second through the third quarter up to this point, we're feeling pretty good about the volume and feel like we're going to be position going into the end of year that we can finish strong.
Commercial sales channels actually picked up a little bit April was kind of low points for the commercial channel and what we've seen as some of the smaller businesses independent pharmacies and smaller durable medical equipment suppliers looking for additional revenue sources, because again, the smaller businesses have been impacted pretty heavily.
From the effects of cobot. So we've seen some increases there and we're optimistic again with the new products that will be able to continue that growth.
Then touch a little bit on the new product releases.
We've made progress through Q2 and into Q3.
But it is moving slower than we had projected theres a number of factors at play into that the one thing as our products in our space as you're aware our personal safety devices. So it's critical that as we're going through the production and testing process that it's got to work all the time.
And so we are in the process of doing some testing we issued a release that we started testing in July we did some alpha testing. There we are working with a third party engineering firm, that's continuing to do testing and validation.
And again, we're going through it in ticket was detailed to make sure that when the product does come out that its functioning exactly as specified.
That is going to provide real value to the markets that we're serving Vin mentioned, the fourg LTE product.
And that is in beta testing is performing extremely well, we expect shipment in quantity by late third quarter. So it's currently in production and we're very optimistic and looking forward to on the impact that that will have.
And then again on the Wi Fi product one thing is we're going through and doing the initial alpha testing, we're communicating with potential partners in the industrial or commercial space with senior living facilities. We're also talking with potential consumers and resellers and the consumer space. It's incredibly well received because the feature set of the product is unique.
It's going to be kind of a niche product because of the way, it's priced and we'll have a monthly cost. So we feel really optimistic about what it will do and driving revenue for us.
And at this point, we continue to work on that and we'll have an update as far as when that's in production and ready for full launch.
We also started preliminary design discussions on a new form factor for our Fourg LTE product, we wanted to make sure that we had a functioning fourg product in development.
Now we're looking at developing additional options and features that will be available in form factors. So that we can expand and not only into the VA market has been talked about but also one of the commercial market, where we believe there's significant opportunity.
Our primary goal really with any of the products that we're looking at is the ones that are in process for launching this year need to deliver a revenue impact and we're focused on making sure that we're going to hit the rate channels and support them in the right way, but then we also want to make sure that we continue the new product development strategy with our in House Engineering and the third party engineering to be looking down the road to me.
Make sure that we've got the products and feature sets that the market is going to be asking for.
Overall, we remain confident that the business is positioned to rebound.
Through the end of 2020 and into 2021 and again, we feel that we've got the right products to really drive some excitement and some revenue for the business.
So with had been I'll hand, it back over to you.
Thank you Kevin Thanks, Thanks for that.
Great update.
So so looking looking to Q3.
And as Kevin indicated on the curve the current order intake and the revenues thus far for the third quarter.
There are trending slightly higher than what we experienced in Q2 on a sequential basis.
Where we're cautiously optimistic at this juncture juncture for Q3, it's obviously very premature and.
We would expect that the financial results for Q3 ought to be more in line with what we experienced in Q2 could be slightly better but again it.
It's very premature and.
Especially in light of the virus resurgence.
That we're currently experiencing in many of the southern states as well some of the other states across the U.S. So we want to remain cautiously optimistic. We're obviously very pleased that the numbers look.
Slightly better at this juncture than they did last quarter.
But again, we remain cautiously optimistic.
In July 2020.
As we disclosed we raised approximately 1.8 million in equity financing proceeds on these funds are primarily earmarked for.
You know future working capital needs in the event that the virus continues to.
Continues beyond the third quarter, hopefully, we'll start to see some progress being made with the virus.
Hopefully.
We'll be.
I'll be able to move on beyond this so hopefully that's the case. In addition, we will also use some of the proceeds that we recently raised to help US you know get the Fourg in Wi Fi product initiatives over the goal line. Obviously these products are critical to our success going forward and so.
We wanted to make sure that we had.
Additional funds to help us get get to that point.
And as we've recently disclosed as well into in the recently filed 10-Q.
On we've requested a hearing upfront with NASDAQ to provide them with our plan.
To regain compliance with the listing requirements. So that we can remain on a listed Dod National exchange are hearing date is scheduled for September 10 2020.
It's been up obviously, a tough balancing act for us to remain on NASDAQ, while enabling the changes to our business model tying to take hold especially with the ongoing Colgate pandemic.
So that the impact if any of you reverse that may be required.
To remain on NASDAQ is minimal as possible, obviously, we're trying to do that.
With with everything that we have so in summary, the company continues to work very hard.
We are prepared for more hard work to get through this fab very challenging year, both firmly in securely and we remain very optimistic about our future with our new products and excited about the business for the remainder of 2020 and as we head into 2021 and so with that.
Salary I like to open it up to any questions. If anybody has any for Kevin and I.
Thanks.
Yes.
My second question.
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Telephone.
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I didn't quite sizable ones.
I'm showing no questions at this time.
Okay. Thank you thanks, everyone for joining really appreciate you taking the tying to listen in on the.
The webcast and have a very good afternoon. Thank you again have a good day.
Thanks, Ladies and gentlemen, this business.
Thanks.
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