Q3 2020 BioHiTech Global Inc Earnings Call
Good afternoon, and welcome to the bio.
Global third quarter 2020.
The conference call.
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I'd now like to turn the conference over to Scott Gordon President Cory.
Ill.
Hey, Scott.
Thank you Greg.
Thank you all for joining today's conference call joining me from Bio High Tech Global leadership team are Anthony Folger, Chief Executive Officer.
Smith, Chief Financial Officer.
During this call management will be making forward looking statements.
Putting statements that address hi tech global its expectations.
Future performance or operational results.
Forward looking statements involve risks and other factors that may cause actual results to differ materially from those statements.
For more information about these risks please refer to the risk factors described the biotechs. Most recently filed periodically reports.
Form 10-Q filed with the FCC Biotics press release kind of company says call, particularly the cautionary statement in it.
The content of this call contains time sensitive information that is accurate.
Accurate only as of today November 19th 20 Twond.
Kept as required by law by of high Tech disclaims any obligation to publicly update or revise any information to reflect the events or circumstances that occur after this call.
My pleasure to turn the call over the CEO after the color Tony go ahead.
Thanks, Scott and good afternoon to everyone on the call.
I'm happy to be joining you for the first on the CEO of bio <unk> the global.
Well the first joined the Companys Board of directors in 27 team I was attracted by the commodity cost effective technology solutions for sustainable waste management.
From experience I knew that those solutions address many of today's environmental problem.
Our technology can reduce landfill usage reduced the bird weights low.
Lower carbon emissions and other pollute of gases and keep plastics out of our oceans.
You can also drive renewable energy fuel production and alternative energy use.
We remain deeply committed to this mission and that's I will discuss the we're taking meaningful steps to prioritize corporate action.
These actions will reflect the strategies and initiatives designed to maximize shareholder value.
And help shareholders stay informed of our progress going forward.
Our financial performance in the third quarter of 20 Twond free.
Upward from a number of importance of that we believe are neither systemic nor recurring.
Revenue was down both sequentially and year over year, largely due to plant optimization actions at our flagship Martinsburg West Virginia free.
Resource recovery facility the temporarily reduced production.
The facility and the negative adjustment in previously estimated take or pay contract review at the facility.
In addition to the lower than expected revenues in the third quarter, our operating expenses increased 53% year over year, including the nonrecurring impairment expense related to the Martin's Berg, what's the thought the.
The expense control the certainly one of the key focus.
Of our corporate strategy moving forward.
We are keenly focused on implementing steps to reduce operating expense is the better aligned with the revenue profile.
During the third quarter.
Well, that's the Martin Berg Martinsburg facilities management team. The subsequent we've conducted a full analysis of the plant's operations in an effort to optimize production capacity.
During this process.
Certain mechanical and electrical processes and components were reconfigured.
The improved processing and capacity.
And to allow for potential additional revenue streams to be introduced.
The plant production will significantly reduce debt and that's reconfiguration process.
Until it was completed in October.
Since the facility came on line in the second quarter of 2019, we have learned a great deal.
And we've adapted a long way.
As we said in the past.
Our learnings from this initial facility using our proprietary I appreciate the biological treatment process will be critical in future opportunity when we can better optimize the construction and operation of the additional waste facility.
To this day and in October we announced the strategic investment in the land venture in Rensselaer New York.
This is the venture of where we expect to establish a renewable energy campus on the that's sort of river across from the port of all the net.
The goal of this renewable energy campus are consistent with the stated sustainability and job creation goals of the Governor of New York.
We are optimistic that we will be able to move this project and other similar projects forward do the implementation price in the future.
We were also significant discussions with other entities as they seek to address their environmental problem.
The highlight of the third quarter was the progress with the Revolution series Digesters the.
These on site food waste disposal of units convert waste into the liquid there can be safely discharge the any standard sewer line.
They can be used in the number of target markets.
Support various levels of customer food waste volume and have lower processing costs on the traditional disposal process of.
In September 2020.
Global Corporation begin installing our Revolution series Digesters aborted the carnival cruise ships in preparation for the eventual resumption of the group.
Encouragingly.
Part of what has placed $3.3 million worth of digester orders since July under our $14 million Master purchase contract.
What's more.
The delivery of most of these orders along with the additional expecting orders will happen in future quarters. That's.
This provides excellent visibility to future revenue growth.
We expect significantly more contribution from the sales of our food digester in the coming quarters.
We are pleased.
With our penetration in the cruise industry with Carnival, the world's largest cruise company in Prince of the second largest cruise company.
It is clear that our food like solutions have real value the being recognized by the title of the C.
Beyond the cruise industry and subsequent to the end of the third quarter. We received an order for seven new food waste Digesters at very attractive exact meridian health facilities in New Jersey, and New York.
On the material the water and provides additional validation that our technology is highly relevant and medical facilities there.
There are thousands of medical camp the campuses across the country that provide the additional opportunities for food digester sales in the healthcare and food service verticals.
Apart from the cruise and medical verticals, there are additional opportunities for ARPU digesters and the restaurant.
The hotel and hospitality grocery and food services industry.
We remain optimistic regarding our future prospects from market share growth.
With our food what I.
Municipal waste and alternative energy solutions.
Moving on to the health of pure eight before disinfectant system for which we have an exclusive license.
We shipped our first system to the to the cruise industry in September.
The used on the C. Dream yacht, where it is being used as a part of their different becton protocols during the day during its the sailing season.
Given the recent developments in vaccine trial, we're hopeful that of fundamental change is on the not too distant horizon.
Maintaining the confidence and safety of passengers is paramount for cruise lines and the out the pure for it.
Right before automated and Touchworks aerosol the provide the safe process.
The eliminate bacteria and viruses, including the Corona bars.
In late September we also introduced the out the pure 84 disinfectant systems of the Hazelton area of School District in Pennsylvania.
This was the first school district in the country to incorporate the Ultrapure 84 is the part of its protocol to help protect its students and schools from the spread of the overnight change.
And the other viruses and bacteria.
Nothing is more valuable the the safety and health of our children and we're extremely gratified the given the chance to contribute.
The health and safety of our country's greatest resource.
Our corporate initiatives are bound the upon of course, the a channel.
We envision driving sustainable growth.
Operating leverage Mark.
The market share capture.
And expansive business opportunities.
The PON, becoming CEO I sit down with our team and we began the map out what we believe are the keys to success per bottle high debt.
This company has a long history and we've never been more optimistic about its future.
Before us is a measurable path, which we can track access.
And I believe it falls in the five categories.
First.
We must increase revenue appreciably.
We're off to a great start.
The partnerships, we of boards with the cruise industry or historical.
We've shown with our contract the fact inside Meridian health. The there are substantial untapped markets. The digester business can bridge the.
This is just the beginning of the sustainable growth trajectory, which we believe will create lasting shareholder value.
Second.
We must make these revenue the all the more meaningful by reducing or it's just not.
[noise] efficient expense control and prudent budget managements are critical means by which our company will demonstrate our commitment to shareholders.
We've already begun this process.
And we look forward to discuss the more of these initiatives and our future communications.
Next.
We must measurably improve the operations of our facility in Martinsburg West Virginia.
This facility and our ability to leverage what we have learned there is the cornerstone of our development as the company we've had some challenges, but we've learned from them.
And I believe that the ability to take solid municipal waste and convert it into a significant revenue stream as the renewable fuel is a strong solution to multiple problems.
It reduces landfill waste stream differently, which is the pressing environmental solution and it helps the pay for itself not converting that waste into revenue.
The this and I like the share a quick success story regarding our Martin's work processing plant.
From April 1st through November 12, two of this year. Our plan provided 4400 metric tons of fuel to the nearby Argos cement production facility.
At the minimum fuel design of 6500 D.T. used per pound.
This beautiful displays the of.
Quick one of at least 2290 tons of coal from the Argos plan.
As a result of using our produced alternative fuel and then Argos plant.
Oh you are.
The Argos dropped significantly.
It's also reduce debt or Doug also resulted in a reduction of the amount of ammonia needed to control the plants title fun pollute of emission.
As I mentioned earlier, the learning that came from our experience in the Martin sperm can now be applied to our upcoming renewable energy campus.
[noise], which we intend to build upon the newly acquired land parcel in upstate New York as well as the other opportunities we're pursuing.
As these Glenn solidify the will help position us as leaders in the world of converting waste in the alternative fuel.
We're very excited.
Both may.
End of true our case to our shareholders and two of the world.
Fourth.
We must have.
Absolutely tell our story better.
We must communicate more clearly we must communicate with our shareholders.
We must communicate with our customers.
We must communicate with our suppliers.
It's the one thing for us to do the job, we set out to day, but.
We must also ensure the.
The mission.
It is understood.
We realize that we will be measured along the way and.
And we welcome that measure on.
Finally.
And this cannot be under emphasize.
The bio Tech organization is working together as the single team.
With the singular vision to achieve our mission.
We stand at multiple inflection point.
We have great products.
We have proven technology.
And we have proprietary processes.
We are learning and adapting well the lining together to provide solutions, which attack install some of the planet's most pressing environmental problem.
I've had the privilege working in one of the most complex organizations in the world the Walmart.
I know that the key to our success, there, what's providing solutions that matter.
And on aligning around that singular purpose.
I am excited to see what the future holds for us the bell, but yes as we continue on this mission.
And with that I will now turn the call over to Brian Our CFO, who will review our financial results results for the third quarter Ryan.
Thanks, Tony and Hello to everyone total revenue on the third quarter of 2002 was $740000 a decrease of 48 per cent compared to revenue of $1.4 million in the third quarter of 2019.
The revenue decline was primarily due primarily to an optimization and reconfiguration process undertaken as previewed previously described on the Martinsburg waste facility the cost its revenue declined 59% year over year to $249000 prior to a 200.
48000 dollar negative adjustment in the previously estimated and take or pay contract revenue.
Rental service and maintenance revenue also declined 13% year over year to $424000 in the third quarter of 2020.
Net sales represented primarily by the sale of our food waste Digesters, partially offset some of the revenue declines and the other areas and rose 370% year over year to $294000 man.
The management advisory fees from gold Battle, a related entity also declined from $265000 from the third quarter of 2019 to 24000 in the third quarter of 2020. This reduction in advisory fees revenue is due to a concerted effort by the company to focus.
It's more on its core efforts as demands continue to grow from its products.
Total operating expenses of 4.7 million increased.
53% year over year, and included 1.3 million and production expenses and a nonrecurring 917000 dollar impairment expense related to the construction equipment equipping and starting up of the Martinsburg facility the impairment expense and increased cost of production.
The auction stock based compensation legal and social media expenses insurance costs at the Martinsburg waste facility Dino insurance and management true transition expenses at Martin Bert Martinsburg, primarily drove the increased operating expenses compared to the third quarter.
Sure.
The loss from operations increased from.
1.6 million in the third quarter of 2019 to a loss of 3.9 million in the third quarter of 2020, the combination of lower revenue and higher operating expenses drove the increased loss from operations.
Loss per share in the third quarter of 2020 was negative 16 cents on 22 million weighted average shares outstanding compared to a net loss of 13 cents per share on.
15.6 million weighted average shares outstanding in the third quarter of 2019.
At September Thirtyth 2020, unrestricted cash was approximately 5 million during the third quarter of 2020, we completed a public offering which we sold a total of 5.2 million shares, including the underwriters' overallotment at an offering price of 1.8 the company net.
8.4 million in proceeds following closing costs.
That concludes my prepared remarks, and I'd like to turn the call back over to the operator to open the call for questions.
We will now begin the question and Thats the session.
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At this time, we'll pause momentarily to assemble our roster.
Our first question will come from Tate Sullivan of Maxim Group. Please go ahead.
Hi, Thank you again, thank you for the comments on for the West Virginia facility, I mean, and you didn't I notice you didn't mention koeppen much during your comments, but was it a decision to speed up the changes that you probably would have done anyway that that facility or with the independent of covert just start can you give just a little background of what you identified the.
Could improve that that facility. Please.
Okay, great. Thank you. Thank you for the question no we didn't mention covert a lot in the prepared remarks clearly the plant was impacted by coded as were a lot of facilities around the country.
We had we had time to when we couldn't get the.
What was that the operates the though that was the part of it on the impact on.
Created for US a timing seemed right the.
Take a look at and what we were doing and look at what we have accomplished the point.
I referred to the fact that we brought in a new or enhanced the management team.
We did that for the purpose of.
The recognize the more on that we could do better and we were committed to doing that so we brought in and the team and we listen to the team.
As we evaluated the plant as we evaluated the what was working well and.
As with any commissioning process, you're going up on that some things are working well it from things or not its deemed an opportune time.
The difficult decision to go in reconfigure it addressed what we knew needed to be a day and prepare ourselves for a for better performance in the future. So that's what we did.
Okay. Thank you and the <unk> the strategic actions that you took book in West, Virginia, and the changes that you've put in place.
What's the can you does that speed up developing the potential of their facility in New York current can you just remind me of the timing that it took where are you where you are today in New York in comparison, where you were at West Virginia, How long it took to build the facility in and started running if you can't make that comparison to what you're trying to the New York. Please.
You know I'm not sure the that we can actually make that comparison as the apples to apples to apples top of the comparison I can tell you. This that what we learned in West Virginia, We were able to go back and re implement gives us greater confidence non ability.
To to bring other units on line you know as far as the what's proposed in what in New York You know as we discussed the renewable energy campus on.
On the plan would be another facility.
Like Martinsburg, although one of the the learnings that we realized is that the we need probably a larger facility then what we have in martinsburg, probably create some efficiencies as you do that.
We also learned that it worked very well with other renewal book type of endeavors. So that's that's why when we look at the property in Rensselaer and you realize that you have the concept of the campus that allows us to the a part of the of the campus. It goes forward that bridge.
In new.
But yet proven technologies to bear.
So those are some things that we learn from as far as the the reconfiguration itself and Martin's Berg of.
Some of it was to adapt to the waste stream.
Some of it was true.
Shoot to understand that the there's a difference in the waste stream in the U.S. and Europe, where the technology has been used for sometime the we adapted.
And made the tough call to let's fix what we know needs to be fixed right now so that's what we do.
Okay, great and the last with the you mentioned with Martin spared the backup and running when you mentioned additional revenue streams or are you referring to starting the of the EPS up Srs production is or where is that something else that your friend too. Please.
Well I mean, one of the things that the we looked at when.
When we talk about additional revenue net revenue streams. There's a couple of couple of things that you look at their one of them.
Is the fact that we have the ability to adjust the blend of what we bring in to the facility slightly we think that there's opportunity to do some things what type of the ways that maybe don't require as intensive of processing. So you adjust your capabilities to adapt for that.
Net purchase.
Specific.
Uh-huh circumstance. The other thing I mean from an additional revenue stream perspective, I think the other thing that we broadly recognize I think we all have to recognize it is as we look at a campus. We began the to realize that in the campus type of a of the environment. As you. If you were the locate these plants in that.
There were other types of revenue that can be created from other types of you since the ancillary revenue, perhaps we don't know what that looks like just yet in its final stage we're.
We're learning we're adapting as we go and you know there is a so that's those are the things that we are we're working hard for the on the demand that is present in the marketplace today for some of the some of these waste streams is greater greater than what we thought there's the.
It's the the environment.
Ah creates different opportunities, so we're simply creating flexibility to maximize our ability to grab some of that opportunity.
Great. Thank you for all the all the comments have a great Restless evening. Thank you. Thank you.
This will conclude our question and answer session.
I'd like to turn the call that's backed out of the Tony for any closing remarks.
[noise] well I think we want to I want to thank all of you on off for participating on today's call and for your interest in buying back debt global.
We look forward to sharing our progress with you in feature up day.
Thank you.
Have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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