Q1 2021 Calyxt Inc Earnings Call
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Good afternoon, ladies and gentlemen, thank you for standing by what gives you. The Calix, Inc. First quarter 2021 earnings conference call.
During todays presentation, all parties will be in a listen only mode. Following the presentation of the conference will be opened for questions. If you have a question. Please press the one followed by the four on just touched on zone.
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This conference is being recorded today may six 2021.
At this time I would like to turn the conference over to Chris Tyson Executive Vice President of MZ, North America Helix Investor Relations firm.
Please go ahead Sir.
Thank you and good afternoon, I would like to thank you all for taking time to join US for <unk> first quarter 2021 financial results Conference call.
Today are bill <unk>, Chief Financial Officer, Dr. <unk>, <unk> executive chair of the board.
Press release detailing these results crossed the wires after market close today and is available on the Companys website Calix Dot com.
Before we begin the formal presentation I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and future operational goals and industry prospects are forward looking and maybe subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call.
Please refer to the company's SEC filings for a list of associated risks.
This presentation also includes the discussion of adjusted gross margin net loss net loss per share and EBITDA, all our non-GAAP financial measures and calix, the press release and its filings with the SEC each of which is posted on the company's website at <unk> Dot Com you will find additional disclosure regarding these non-GAAP measures.
Reference to these non-GAAP financial measures should be considered in addition to GAAP financial measures and should not be considered a substitute for results that are presented in accordance with GAAP.
Finally, this conference call is being webcast. The webcast link is available on the Investor Relations section of Calix Dot com.
At this time I would like to turn the call over the Calix Chief Financial Officer.
<unk>.
Thank you Chris Thank you for joining us today for our first quarter conference call the <unk>.
First four months of 2021 included several accomplishments by our great team of scientists combined with continued execution of the transition of our soybean product line.
I'd like to begin by congratulating sort of rider on our promotion to Chief business Officer. She has made great contributions since she joined Calix in October 2020, well done Sarah and I look forward to working with you and the expanded role.
The initial testing of our next generation.
Premium high Oleic Roland Atlantic soybean oil trade has exceeded industry performance targets expected in the premium oil segment.
This achievement is the significant improvement from the first soybean products because of the Merry composition analysis indicates that our next generation soybean trade is expected to have them on the highest levels of heart healthy oleic acid and ultra low levels of the linoleic acid of any premium oil.
Essentially on par with high oleic sunflower oil.
We're excited by these results and expect high performance in terms of desirable fatty acid profile improve stability increased shelf life and reduced the polymerization the.
<unk> should be ready for commercial planting as soon as 2023.
For commercialization, we are seeking the partner with elite soybean companies to introduce the straight through their premium seats as of compelling alternative commodity soybean and other premium oils.
Our scientists have transformed the hemp genome demonstrating the ability to engineer Hampton of manner that can be used to unlock capabilities in order to selectively breed deliver improvements in hemp trades.
Historically, <unk> has been a particularly difficult crop to transform.
It is non domesticated and poorly adapted for broad acre production.
The new hemp transformation technology, we developed is enabling our team to overcome the technical hurdles presented by him.
Using our transformation tools will enable him breeders and scientists the select plant characteristics that may contribute to the establishment of hemp as a modern stable and valuable broad acre crops.
We expect this accomplishment to accelerate hemp development or not.
And I think the hemp crop, we can now deliver traits that benefit both growers and consumers who are increasingly looking for plant based on sustainable food.
<unk> Masuda.
The political nutraceuticals and more.
Most of these trades is expected to be available for commercial planting as soon as 2023.
Also shortly after quarter end, we executed a new seed sale agreement with an affiliate of the grain customer of ours and as of today, we have sold more than 50% of the 2020 grain crops the ADM with.
With the remaining grain projected to be sold the ATM throughout 2021.
And finally during the first quarter. We also made initial appointment of world renowned plant biochemistry experts to our scientific Advisory Board.
So the reports to our board of directors and is chaired by our co founder of the envoy test.
The other point. These include an Osborne from the John in the center.
Is it the sadly and associate professor of chemical engineering at Stanford and Paul Bernasconi, the former head of molecular biology at the ASF.
The C V will focus on the identification of high value plant derived products for development and commercialization using our proprietary innovation platform.
We have eight projects in later stage development, including two in phase III.
We're targeting having at least five product candidates available to begin commercial planning between now and the end of 2024.
During the quarter, we stopped development of our improved oil H O L. L product, which was being developed with a target of higher hol oil content.
Product is being developed to reduce our cost per pound of oil under our prior go to market strategy.
We also determined to pursue trade development of licensing arrangements as a baseline and go to market strategy.
Well, we opportunistically engage on alternative arrangements. Our intention is the license all products under development is true.
We intend to move our current high oleic soybean products of its go to market strategy in 2022 and are currently in discussions with potential licensors.
The transition further reduces the capital requirements for these products is expected to drive high margin royalty revenue streams from those traits of commercialized like of licensed stores in future years.
Today, we issued a press release, describing our first quarter 2021 results and were also filed on form 10-Q. This evening.
Revenue was $4 4 million in the first quarter of 2021, the increase of 2 million of 85% from the first quarter of 2020.
The increase was driven by sales of a portion of the 2020 grain crops as compared to the first quarter of 2020, when we were selling soybean oil and meal.
As of March 31, 2021, we have sold over 50% of the 2020 grain crop.
Gross margin of negative $2 3 million or negative 53% in the first quarter of 2021 compared to negative one 5 million or negative 63% in the first quarter of 2020.
Adjusted gross margin of non-GAAP measures like the negative $1 3 million or negative 31% in the first quarter of 2021.
Average of negative $1 2 million of negative 49% in the first quarter of 2020.
Improvement on a percentage basis was driven by benefits, resulting from the advancement of our soybean product line and go to market strategy.
Total operating expenses were $7 3 million in the first quarter of 2021, a decrease of $1 8 million or 20 per cent from $9 1 million in the first quarter of 2020 the.
The decrease was driven by lower personnel costs as the result of cost reduction following the advancement of the go to market strategy for our soybean product line as well as other reductions in cash expenses from the first quarter of 2020.
Net loss was $10 million in the first quarter of 2021, an improvement of $1 million or 9% from the first quarter of 2020.
Net loss per share was 27 in the first quarter of 2021, an improvement of seven cents per share or 21% from the first quarter of 2020.
Adjusted net loss was $8 8 million in the first quarter of 2021, an improvement of $2 million or eight 2% from the first quarter of 2020.
The improvement in adjusted net loss was driven by the improvement in adjusted gross margin and cost reductions from the advancement of our soybean product line go to market strategy and other reductions in operating expenses.
Adjusted net loss per share was <unk> 24 cents in the first quarter of 2021, an improvement of nine cents per share of 27% from the first quarter of 2020.
The improvement in adjusted net loss per share was driven by the change in adjusted net loss.
Adjusted EBITDA loss was $6 8 million in the first quarter of 2021, an improvement of $1 4 million or 17% from the first quarter of 2020 the.
<unk> was driven by the improvement in adjusted gross margin and cost reductions from the advancement of our soybean product line go to market strategy and other reductions in operating expenses.
Our earnings materials, which are posted on our website provide important context about the non-GAAP measures. We report and include reconciliations of these measures to the most comparable GAAP measure.
Net cash used in the first quarter of 2021 improved by $50 3 million compared to the first quarter of 2020.
The improvement was driven by changes of purchases and sales of short term investments of $47 3 million and the $2 8 million of improvement in net cash used by operating activities, primarily the result of improvements in net loss and the working capital in.
In the first quarter of 2020, the invested cash and cash equivalents and short term investments diversify our counterparty credit risk.
From a cash perspective, the first quarter of 2021 was highlighted by the significant progress we made some on grain.
Managing grow of deliveries the best match demand and reducing our operating expenses below last year and staying on track to achieve our cash operating expense annual target of $25 million or less.
We believe these actions will be enough to fund our operations for at least the next 12 months and into the second half of 2022.
Subsequent to the quarter end, we were notified by the small business administration that the full amount of our paycheck protection program loan and debt forgiveness.
We expect to record income in the second quarter of 2021 for the full amount of the loan and the associated accrued interest.
I'd now like to turn the call over to Dr. Ease of day, our executive chair for his concluding remarks, Inc.
<unk>.
Thank you Bill.
First of all months of Quincy Quincy one included the volume.
On the Brodman the now elaborate.
On the promotion of Clara rises the Chief business Officer and of Commission of our scientific Advisory Board.
The U S. A b provide us with scientific and technical expertise to leverage and grow the business the new direction and we will explore opportunities in plant derived ingredients for the rapid peak gross.
Peak advanced material your drug run flavoring coral run in more.
Yes, they'd be will seek to identify book near term will go to the deep and long term technological breakthrough some of which.
We may look to realize coupon on the sheet.
The R&D team continues to innovate, but he does he say union on looking high value Granby product the metabolite, who the use of garlock brokerage system and advanced analytic platform that build upon the loan you can promote the 80 quota.
Our AQR of less soybeans receive favorable testing results. When you thought the USD goldfine I'm, especially pleased with our successful transformation of the genome, enabling future advancements like trade delivery day.
And I've been wrong greedy these the.
The brodman underscore our ability to quickly discover understand and on the the potential of complex biological pathway to deliver the next generation of plant based solutions, we look forward to sharing more about these advanced them later this year.
The promotion of Sarah Reiter, Chief business Officer is in the recognition of a strong contribution to the business, even though of course.
With the organization and the score who will be responsible for all business the activities of the company, including finding partners for the development and commercialization of about trades and product as jewelers, who will be responsible for communications activities, including corporate communications <unk>.
Nation and product marketing, so a big congratulations to thorough.
I would like to close with a few comments on the ongoing CEO search in our last call we announced the transition of my rule of two executive share.
Day to day I am supported the leading Kylie.
CDK to T mobile.
Our search committee, which I lead has been on TV screening candidates and while it is too soon to comment on the arguments Irene of a new CEO, we are making good progress towards the successful completion of the rewind 32nd Congrats from one to go to the start of the program press too can disconnect.
At this time.
Yes.
There are many exciting developments taking place at Kelly.
As I said, you know year end, earning call we are becoming the source of power the generate brown based ingredient co innovate the product.
These products will meet the emerging customer needs across the variety of growth vector all while improving health.
Moving on Bureau of mental sustainability, and addressing climate change is the dream and the vision of colleagues.
Operator that concludes our prepared remarks. Please open the line for questions. Thank you.
Thank you.
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Our first question comes from the line of Amit Dayal with Wainwright. Please proceed with your question.
Thank you good afternoon, everyone.
Just to begin with.
Good scenario for US are you starting Steve sales only for Hol of does the supply to other products on sale.
Hey, good good.
Good afternoon.
Good question of it. So we are going to continue selling seed for our HR product.
In 2021.
And then for all products, including H O as we move forward, we intend to move to of trade go to market strategy.
So in terms of.
Some of your efforts to just make this loyalty based license based.
I know you promoted Sarah to head the BD side of the teams.
What are the sort of so let's give me sort of.
On dissipate in the region.
Transition towards more of the licensing based annuity versus the received this movie.
I think youll continue to see us do more of the same.
On the promotion of Sarah is of great instead of the great recognition of what she's done.
Have a tremendous number of licensing opportunities in front of us for all of the products that are in our.
The pipeline that we've disclosed as well as in response to a couple of the press releases that we've made related to the advancement of our technology, especially what we've done in house.
We've got a lot of inbound interest from the accomplishment that we announced.
And have no ability to transform it opens up.
The opportunity for many people including us.
Work with us to make advancements in that crop.
The transformation of ability we develop this key of editing.
Cough and performing other advanced breeding techniques.
From our perspective, we believe it unlocks new markets that were previously unavailable, including advanced materials and other complicated or complex plant based inputs.
More sustainable than the alternatives that are currently in use.
Okay understood.
And in terms of your earliest.
On the.
The timeline is.
Joining green tea.
The.
The targeted.
Yeah.
The target the timelines with any grants useful in the new soybean.
The product.
Is that a.
Most of the earlier than that or is it dependent on some other factors, which as you know.
Pushing out to 'twenty the entry.
I see.
The 2023 is the good bye.
Mark it's what our target has been for some time in the table that you're referring to there may be things that could accelerate it.
But I think I would stick with 2023 for hol coming as of as a product.
<unk> will continue until it is.
Taken over by H O L. L in 2023.
Okay.
And in terms of you know.
Operating costs.
On your cash burn et cetera.
Could you give us any clarity on you know how many quarters.
You have.
The current balance sheet.
You bet. So we ended the quarter as I said with $24 million in cash.
We made significant progress on the quarter converting our grain inventory to cash.
To continue that through the year, we're managing our growers to best match demand.
We've been very focused on reducing our operating expenses when you take those.
Elements of what we've been doing and combine that with the cash flows that we anticipate from the business development activity associated with the licensing.
The technology and trade developments that will continue to progress on we believe that our cash is sufficient to fund our operations for at least the next 12 months and into the second half of 2022.
Okay, and just one last one from me in terms of catalysts outside of you know maybe competing you're going to see usage are there any near term milestones we should be not true.
So from my perspective, the number.
Let <unk> weigh in on this one as well as we look forward certainly completing net searches.
One of the business perspective the.
Milestones that we look for would be getting too.
And the letters of intent or memorandums of understanding of whatever you want it legal term you want to put on them with our.
With partners as we think about bringing these development projects that we've had are products that we've had.
Two of close and getting somebody signed up to be our partner in.
And in the case of of soybean.
Soybeans as one of the things that we expect to go and do his work with.
From large elite.
Soybean seed companies to get our hol's right into their germplasm, which could be wonderful for us and so those of the types of things that I would look for.
As we've talked about on the path, there's still those things are still true today.
Or would you agree with what you said beer on the gross.
We made important step of who do you see the CEO search and the.
<unk> of the CEO in the company. The second one is the amount.
On from partnership.
All of the products that we have presented to you and I also had two what was the SCB comes we do go into the new products that we'll be able to disclose as being probably the.
However, we are that we could announce the relatively quickly.
So thank you for that.
That's all I have guys I appreciate it. Thank you. Thank you thanks on that.
Yeah.
Our next question comes from the line of Bobby Burleson with Canaccord. Please proceed with your questions.
Hi, Thanks for taking my questions.
So I guess so.
The first one is just.
If you had the kind of rank.
Your target commercial planting.
Opportunities for 2023 is it kind of in the order that you have on the presentation.
And is that why wheat is in a different color.
In soybeans and hemp.
And I'm talking about like just ranked in terms of in terms of.
The risk adjusted.
Most likely.
Right now it's a great question, Bobby and good to talk to the year to day from.
On our perspective, they are not listed in terms of priority order.
On the page based on how we chose the group them from a crop perspective more than anything the.
One that we are most confident from a liability perspective as the soybean the hol soybean when we made the announcement about earlier and then followed closely by the trade.
Trait that we expect to have available in 2023 as well.
Okay.
First because it's always been we've always liked the things is the HL alfalfa and on that <unk> product from the time of IPO, that's it's as simple as that.
Okay great.
And the way that you were presenting these opportunities you know a few months ago.
There were some optionality I guess.
Between the seed sales and trait licensing and now you're exclusively looking at the licensing.
Portion going forward.
Are there any cost savings when you remove that optionality of any additional head count reductions associated with the.
The eliminating the seed sale.
Part of the plan.
Great question and from from our perspective, we run of really lean organization. So.
No our expectation is that we would have any cost savings from us.
C C.
On the handling perspective.
Perspective, but we still need to do some work to get the enough.
Enough foundational feed over to a trade licenser right. So with the lean team. We have it's too early to tell but I don't think.
At this point, we would expect anything at the same time the cost avoidance.
It is significant because we know what we would have to incurred of scale up.
Level of personnel. If we were to turn this into a really large seed business also bigger than that alleviates of working capital need that the company has and that's where the real money is.
And you think about.
The cost per acre from working capital perspective is is essentially one times Cogs and we avoid that going forward. So that is the beauty of moving to the trait model that drives free cash flow much much sooner than we would get to.
If you think about it on a per acre basis than if we were going down the list.
The path.
And then if we last one from me for now if we look at.
What you announced in alfalfa with us and double the U S.
And what you're anticipating or excited about in the soybean.
With with HL silly of me.
<unk>.
Are we talking about.
Yes, the orders of magnitude larger type of licensing.
And royalty opportunity with soybean.
Some of what you might announce.
Yeah.
That is our expectation.
Order of magnitude of the of the size of the two crops is obviously very different.
The.
That particular small segment of the alfalfa crop set that are improved forge quality goes into.
The 30% ish of the alfalfa crop.
What the current size of that market as we'd expect.
R H O L L soybean given its.
High quality performance versus the industry expectations from the fatty acid profile perspective to be.
That would capture.
On a farm.
The dollar value of much greater dollar value of many times over like you just described.
Some of the when you compare the true so definitely the much bigger than alfalfa, if you'd think about it from a from that perspective, what the opportunity is.
If I could just sneak one more in here.
So.
As you expand your licensing.
Obviously it is on the account.
Town talent platform.
And you've talked about the technology licensing opportunity as well.
Is there is this kind of a proving ground or an enticement of sorts to maybe get some folks.
Pursuing of technology license.
Sensitive to develop their own.
Traits.
One of our strategies has been to be very selective in how we do this but we're definitely open to it have been and will be going forward.
I think moving into.
On more of a pure licensing company, where we license traits of technology.
Okay.
My view is no we're not but I'll throw it over the even and it's not a term that we've we've.
Talked about.
We obviously look at the.
I mean again of I prefer to leave the two my CTO of could be able to respond to the next time, but the good question Indeed.
Okay, great. Thank you.
Thank you.
Ladies and gentlemen, as a reminder to register for a question. Please press the one followed by the four on your telephone.
Sort of expensive and.
Well, it's too soon to predict what the licensing receivables will look like.
What will work to do obviously is to get paid more than annually. If we were to be paid only annually. They would be very season on probably on the first calendar quarter, but if we can work to get the the royalties paid more frequently than that that would be our objective. So too soon to tell so that's how I would think about the receivable side of the working capital of modeling and the and the other the.
The liability side of the balance sheet wood.
The remain as it is in terms of how the how it is flowing today, obviously stripping of all of the you know of granulated activity what creates of noise in the near term, but it'll it will.
Yeah, I guess normalizes you get to the first quarter of next year of this time next year.
That's actually made the original vanity or.
I appreciate that color and then with the with the Green sales. This year. The ADM. The other 50 per cent I was wondering how we should think about the caves with that is that something's gonna happen over the next quarter or something it's gonna be kind of evenly.
On out over the over the remainder of of the year.
Yeah.
It must have been to have that flow over the course of the remainder of the year.
Okay, Yeah, we'll see what we what that looks like in terms of all of it falls by quarter, but I think you know on.
Something along the over the remainder of the year is what you should stick to.
But thank you very much.
You too.
Ladies and gentlemen, as the final reminder to register for a question piece.
He spent the one followed by the four on the telephone.
Okay, Mr tastes and I'm showing no further questions on the phone lines.
Thank you.
Uh-huh.
So this concludes our call today I'd like to thank everybody for joining and if we were not able to address of your questions on today's call. Please feel free to contact us or our Investor relations firm M. G group, who would be happy to answer them operated.
Thank you.
That does conclude the conference call for today, let me think.
Thank you for your participation and I see peace disconnect. Your lines. Thank you and have a great day.
Thank you.
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