Q1 2021 Senestech Inc Earnings Call
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Good day and welcome to the domestic first quarter fiscal year 2021 financial results all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be and opportunity to ask questions to ask a question and you May Press Star then one please.
This event is being recorded I would now like to turn the conference over to Joe Diaz with Lytham partners. Please go ahead.
Thank you Paul and.
And thanks to all of you joining us today and on.
Today's call we will discuss the next.
First quarter, 2020, one financial results for the period, which ended March 31 2021.
And this on the call today are Ken Siegel, the company's Chief Executive Officer, and Tom Chesterman, The company's Chief Financial Officer and.
And at the conclusion of today's prepared remarks, we will open the call for question and answer session.
Before we begin with prepared remarks, and we submit for the record the following statement.
Statements made by the management team on <unk>. During the course of this conference call may contain forward looking statements within the meaning of section 27, a of the Securities Act of 1933 S did and.
Section 21 E of the Securities Exchange Act.
And 34 as amended and such forward looking statements are made pursuant to the safe Harbor for range of the private Securities Litigation Reform Act of 1995.
Forward looking statements describe future expectations plans and strategies.
And are generally preceded by words, such as May and future plan, our planned will or should expected.
Thanks.
Eventually or projected.
Listeners are cautioned that such statements are made from a multitude of risks and uncertainties that could cause future circumstances events or results to differ materially from those projected and the forward looking statements, including the risks that may.
Including the risks and Acura and false.
Differ materially from those projected and with forward looking statements as a result of various factors and other risks identified and our filings with Securities and Exchange Commission.
All forward looking statements contained during this conference call speak only as of this day.
And are based on management's assumptions and estimates.
And today's day.
The company does not undertake any obligation to publicly update any forward looking statements whether as a result on the receipt of new information on the occurrence of future events or otherwise.
Ted Let me turn the call over to Ken Siegel Ken. Please proceed.
Thanks, Joe Good afternoon, and thanks, all of you for joining us today.
And you saw on the press release, we issued after the close we continued the positive traction achieved last year.
With a strong first quarter.
Growing revenues and 138% compared to a year ago.
The groundwork I've talked about on the last few conference calls to obtain real world uses data of controversy.
Particularly in urban and agricultural settings has been a key driver.
The data is resonating well with potential customers, who understand now the economic benefits of adding contract test fertility management into their pest management programs.
That said, we're cognizant that we are still a long way from our potential.
And there is plenty of work to be done.
However, I am pleased with the progress to date.
So let's dive in a bit more on the progress we've made on our core areas of focus.
To remind you those include.
Obtaining compelling real world data.
Focusing our sales and marketing efforts towards high value targets.
Getting our sales team back out on the road as COVID-19 Abates.
Launching and ecommerce platform.
Repositioning contract best as part of and overall integrated pest management strategy.
Focusing our R&D efforts on product improvements and enhancements.
And finally, maintaining fiscal discipline.
While I talked about this and some length during our year end call.
The conclusion of key studies for contract testing, both agricultural and urban settings with overwhelmingly positive efficacy and economic results did in fact occur during the first quarter of 2021.
This was clearly one of the most significant progress events during the quarter and I expect it to be a driver for sales expansion and the future.
I won't go into all the details again like I did last time, but to briefly remind you of some of the specifics.
On the agricultural data first and two separate studies, one and a west coast egg farm and the other and an east coast Pullet farm contract past was added to the existing integrated pest management program.
At the West Coast Egg farm, the rat populations were surveyed monthly for over a year.
And cameras to measure the reduction and rat activity through contract <unk> treatment.
The final results confirm the contract best cut the rep population by over half within six months and.
And produce the sustained 90% decline and rat activity over the 12 months study.
And remember these results were incremental to any reductions achieved through the farms other pest management methods.
On the East Coast Pullet farm.
<unk> tracked consumption rates and economic impacts caused by rats before and after the introduction of controversy.
Staff reported and 88% improvement and pull out survival after reducing their rat population with controversy.
The annual benefit projected by the customer or adding contract test to their pest management plan was over $600000 and increased revenue and decreased cost.
And once again these are incremental benefits and results.
Rats, and poultry facilities caused significant damage and can be hazardous to the health of blocks.
Due to disease transmission equipment impairment pullet predation loss and contamination of grain and and severe cases production interruptions.
As I stated last quarter. This was exactly the type of data we needed to show customers, the unprecedented efficacy and cost effectiveness of controversy and real world settings.
And I'm pleased to add that both customers East coast and West Coast continue to deploy Contra pest.
And the P. M P who work with us on the West Coast deployment is expanding the use of contrast to other customers and sites.
And our urban deployments, we finalized 12 months of population monitoring data at two different locations.
Data collected at month 12 from cameras showed that one site had a 94% reduction and rat activity and a 98% decline and juvenile rat since the startup monitor.
Well the other site had a 99% reduction and rat activity and a 100% decline and juvenile rats during the same period.
These results clearly showed the contract versus effective and lowering populations and limiting the number of juveniles bore.
Again these results were incremental to the assistance to the city's existing protocol and.
And thus significantly enhanced the city's overall rodent control program.
With this data in hand, we've immediately commenced marketing to agricultural locations and urban locations across the U S.
We recently got confirmation that we received an order from a large eastern U S city for and implementation of contract past and within that city.
This is an exciting development so quickly on the heels of our day to completion.
And I hope foreshadows things to come and urban deployment.
Further we're aware of a pest control bid and a west coast County that specifies contract sales and another bid for a large south Western State Park.
We also expect that fertility control will become increasingly specified and locations in California and.
The effects of 17 88 become more widely known.
Because <unk> is ultimately deployed by pest control professionals, we don't always have insight into every large bid that is ongoing.
But some will bring us into the process and we are happy to help our pnp customers achieve success.
And on data.
Key component to our commercialization strategy has been the creation of partnerships and collaborations with key distributors like Agra turf distributing debt.
Service, which used to be part of univar and <unk>.
<unk> companies and other key pest management professionals.
Goal is to improve customer satisfaction through the addition of contract best fertility management and do their pest management programs.
As an example.
We expanded our distribution agreement with <unk> to include joint marketing and sales initiatives.
We will have dedicated technical field sales staff co call on accounts without recurred Aggregators and.
And the marketing teams are developing targeted awareness campaigns to meet the growing demand for controversy.
<unk> has deep experience and the pest management industry, particularly in the California market, which I'll touch on in a moment.
In connection with our enhanced commercialization activities, we also launched our corporate rebranding.
If you haven't already done so please visit our website at <unk> dot com or contract test store Dot com and take a look.
The new branding and campaign is called the pest control difference feature and controversy.
In addition to the partnerships and collaborations as well as the websites. We are also creating a loyalty and rewards program to allow customers the opportunity to earn rewards for purchases or referring their friends.
Excuse me.
On the website, we further ramped up our e-commerce capabilities, we've streamlined the buyer's journey and the online store by creating targeted product bundles for residential and professional customers.
We simplified the checkout process and and.
<unk> developed and online chat box to rapidly address customer needs.
We also established relationships with other online distributors to promote and sell our product on their sites and thereby expanding our reach.
The rebranding and the associated initiatives I, just mentioned such as partnerships and collaborations are extensions to many of the initiatives we've been putting in place and the last few quarters.
If you recall.
Last quarter, we discussed the implementation of key marketing awareness campaigns to increase qualified sales leads using both digital and traditional outreach methods.
Frequent advertising on Google and social platforms to drive traffic to our site.
And targeted email and phone campaigns to highlight our outstanding field data results.
If you recall.
When I took over as CEO and there was a lot of work that needed to be done to transition sonesta from a science based research company.
To a solutions based environmentally responsible commercial company.
And there's still work to be done, but a lot has been accomplished and I want to thank the team within the organization that is so that has worked so hard to bring us to this point.
So let me turn to California for a moment.
As most of you are aware effective January one and 2021.
$17 88.
Prohibiting the use of the four major second generation anticoagulant Rodenticides.
Went into law.
To date, we've seen good growth and California with nearly a third of our revenue during the quarter coming from that state.
This is expected to continue.
Further enhanced by the fact that Concho past is no longer a restricted use product from California.
This allows us to sell directly to more customers.
Previously and California, we could only sell contract best especially license pest control companies now since we're no longer on our U P. We can sell into the complete spectrum of customers as we can and most of the U S and.
And includes pest control companies.
And your and maintenance companies and use your customers and even residential do it yourself.
The only restriction remaining and California is that contract past can't be deployed at K through 12 schools and we're working on removing that restriction.
We're deploying additional field sales reps to California, where opportunities are highest in our target markets of agribusiness and municipalities and the Tmp's that service those markets.
Working with firms like <unk> and others, we feel good about our enhanced approach and California and look forward to improved transaction traction going forward.
Before I turn it over to Tom Let me just hit on the final point I've reiterated on the last few quarterly calls.
Operating with fiscal discipline.
While solid progress is being made on the topline and as evidenced by our 138% growth during the quarter. We don't want to get ahead of ourselves and the near term.
We reallocated resources to focus on one thing and one thing only.
Driving sales growth.
Overall, we've driven inefficiencies out of our operating structure and have significantly reduced our breakeven point.
And the most recent quarter, our cash operating expenses were $1 $6 million.
This streamlined operating structure, coupled with a balance sheet that had more than 15 million on hand at the end of March and.
And most importantly, growing sales should position us well to execute on and our strategic plans going forward.
So and turning it over to Tom Let me just reiterate a few highlights.
Number one we are laser focused on commercial execution.
We're putting together the necessary components to achieve sales growth.
We now have definitive real world data that we can share with potential customers.
This will empower our sales team to more effectively convert prospects into customers and.
We've created and efficient infrastructure for our customers to obtain contract test and deploy it effectively.
Second I believe they are a key tailwind in our favor right now.
Clearly the move by California to ban Eschar is one.
But more importantly, the move by organizations and municipalities and the U S and around the world towards Eco friendly tools is one that I believe will play in our favor and the long run.
As always.
We have a lot of work to do.
But progress is being made.
And with that let me turn it over to Tom to review the financials.
Thank you Ken.
And as a reminder to all if you have not seen our earnings press release, you can get it on our website and the Investor Relations section.
Also we expect to be filing our form 10-Q, and a day or two so this is just a summary.
Revenue for the quarter was approximately 88000 compared to approximately 37000 and the first quarter of 2020.
This represents an increase of 138% continuing recent trends and growth.
This does not include more than $20000 of backlog late orders that were not fulfilled during the first quarter, but were fulfilled in the first day of April and will be included and the second quarter numbers.
It's worth noting as was mentioned before that nearly a third of our revenue for the quarter was from from California for reasons that Ken mentioned previously.
Now that we are no longer restricted use products, and California, and assess management professionals continue to implement alternatives to the second generation anticoagulants that had been restricted.
Should see continued growth in this area.
Operating expenses were down again year over year coming in at $1 8 million for the first quarter of 2021.
Versus $2 3 million and the first quarter of 2020.
You'll note that R&D went up this is a reflection of increased regulatory effort as we continue to provide additional data to the EPA and improve our label and claims for contract first.
On a GAAP basis net loss for Q1, 2021 was $1 8 million compared to a net loss of $2 7 million for Q1 of 2020.
The adjusted EBITDA loss, which is a non-GAAP measure of operating performance for Q1 was $1 6 million versus $2 1 million in Q1 of 2020.
This reflects the reduction on operating expenses largely speaking.
Cash at the end of Q1 was approximately $15 five I'm, sorry, $15 $2 million.
As we reported on on our last conference call. This cash reflects a couple of financings and February 2021, we closed a private placement and priced at the market under NASDAQ rules, which resulted in net proceeds of approximately $9 2 million.
And in March 2021, we closed the shelf offering price at the market under NASDAQ rules and that resulted in net proceeds of $3 5 million.
Also during the quarter some warrant exercises have started.
<unk> brought in and additional $1 2 million and additional cash.
And our current burn rate. This implies that we have enough cash through 2022 or further.
We can now focus on growing the business and not on the capital structure.
With that let me have the operator open the lines for questions and coal.
And we will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two once again that it started and one to ask a question and at this time, we will pause momentarily to assemble the roster.
Ken This is this is Joe.
While the Q gets filled up and let me ask you in your prepared remarks, you mentioned that the West Coast Chicken farm and you mentioned the success of that test.
Is that chicken farms still buying product and our and you feel that there will be expanding the concept test deployment going forward.
Well as was mentioned a little bit both poultry facilities are still deploying contract best to our knowledge.
One by through a distributor and the other ones through <unk>. So we don't have direct knowledge.
Looking at the overall market, though we do know that the <unk> that we worked with on the West coast is continuing to expand contra pest deployment and his threat as other customers.
And then even looking larger the poultry market is very large and very diverse.
And the millions by itself, but the target is really much bigger for us throughout what we call the grain vector.
And that it would be on <unk>.
All of the.
The sources and uses of grain and agriculture. So it is a it is a very large market and the reason why.
Having this data we are focusing on that market as a key vertical.
Yes, sorry, I was on mute.
And you asked the question, Joe, but the other piece picking up on Tom's point on the grain vector.
The one thing we are aware of is the east coast.
Pharma is actually looking now to deploy and contract past and grain storage.
And we're looking forward to.
And moving forward with that so the whole notion of following grain across.
Protein production transport et cetera is beginning to get traction.
Yes.
And as it relates to your roster of customers who are your top.
Five largest customer thank you.
You can comment.
Yes.
Tom you want to take that.
Sure.
Don't typically named specific customers, but the top five or rather diverse group.
To distributors, which makes sense and say it fell onto a wide variety of end users.
One east Coast City, the one that just ordered for.
<unk> comments earlier, we have another large project going collaboration with island conservation that we've talked about before.
There are a large customer and and finally on the top five is actually a tie between a zoo.
And a property owner, who has begun to deploy at the properties that he owns and manages.
And.
California, obviously.
One would consider to be a very big market now that day and the eschar once the opportunity for <unk>.
Cash tax going forward, and how big and that market, how do you plan to work there.
So let me let me let me start on that one so based on what we heard and the hearings for 17 and 88.
The market.
And at least $100 million was being spent on the scars that are now being banned or limited.
So how long it will take for us to penetrate that market. It's a more difficult question. The act doesn't specifically banned the use of the best cars and all situations.
But limits their usage and you know at the outset I think PMT is there going to be looking at us and also at other alternatives. So are our key challenge is we need to work with the industry, we need to get awareness out.
To see how best we can get the pest management professionals that we can get and users to incorporate <unk> into their integrated pest management things.
So we're really optimistic about it the other piece.
And that Tom and I mentioned is controversy is now no longer restricted Houston and California.
So we can presented more broadly essentially it doesn't have to go through a campaign you can go through the do it yourself or you can go to direct end users. So we're looking at how it is we market to and through all of those different vectors, so pretty exciting.
Are there any questions and the Q.
And this will conclude the question and answer session I would like to turn the conference back over to Ken Siegel for any closing remarks.
Well again, thank all of you for joining us. This afternoon I think as you can see.
We've made significant progress on the various things that Tom and I have been laying out over the past several quarters.
We are now fully ramped and engaged on sales and marketing I think we have now established a fully capable commercial organization.
And I hope to continue to show accelerating progress two to all of you over the next several quarters. So again, thank you for joining us and have a pleasant evening.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
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Ladies and gentlemen.
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