Q1 2021 NXT-ID Inc Earnings and Corporate Update Call
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Ladies and gentlemen, thank you for standing by and welcome to the Index T. I D. I R update call at this time all participants are in a listen only mode. After the speaker's presentation. We'll have a question and answer session to ask a question. During the session you will need to press Star then 1 of your telephone please be advised for today's conference maybe recorded.
If you require any further assistance. Please press Star then zero I would now like to Hammer conference over to your host Vincent Maselli. Please go ahead.
Thank you Sarah good afternoon, and thank you everyone for joining our call today to discuss NXT Id's unaudited financial and operating results for the 3 months ended March 31, 2021, and a general update on the business.
As we've done in the past you know Vin Ben will discuss the financial summary, and I will then hand, the call over to Kevin O'connor, who will provide an update on the logic Mark business.
During this afternoon's call, Kevin and I 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 perform.
And the assumptions underlying such statements. Please note that there are a number of factors that will cause actual results to differ materially from our forward looking statements, including 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 before I head into the financial summary, I would just like the preface that discussion with.
A quick reminder, that when you look at the comparability to the first quarter of 2020.
You know for the.
The first quarter of 2020 was.
For all intents and purposes, a pre COVID-19 quarter for us.
Or at least 85% off the quarter was pre COVID-19 and so the you know the the results are obviously much more favorable and so from a comparability standpoint, you know, it's questionable as to whether or not were really comparing apples to apples or apples to oranges. If you will.
And you should also be reminded that Q1.2020.
From a profitability standpoint was the first time in the company's history that it had positive net income.
So without further Ado I'll head into debt the numbers.
Revenues for the 3 months ended March 31, 2020 came in at approximately $2.4 million compared to $3.7 million for the same 'twenty 'twenty period.
Gross profit for the 3 months ended March 31, 2020 came in at $1.6 million compared to approximately $2.8 million for the same period.
Operating expenses, namely SG&A for the 3 months ended March 31, 'twenty 'twenty, 1 were approximately $2.3 million compared to 1.8 million for the comparable 2020 period that increase of roughly a half a million dollars I should point out is.
All non cash related it actually had to do with stock comp expense. So you know for them from a cash standpoint, if you will the numbers were virtually spot on to you know that St 2020 period from last year.
The operating loss for the 3 months ended March 31st 2021 came in at about 783000 and for the 3 months ended March 31, 2020 operating income was approximately a million dollars.
Interest expense.
For the 3 months ended.
At March 31, 'twenty 'twenty 1 came in just under 900000 vs 600000, or thereabouts from the first quarter of 2020. The increase was all noncash related as well as you know from our you know our correspondent.
And SEC filings, we prepaid a big chunk in the first quarter all for 'twenty 'twenty, 1 we paid down prepaid I should say $5 million and the accounting rules require that we accelerate the amortization of the deferred debt related costs.
It's on the company's balance sheet, so again, all non cash related.
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Non-GAAP operating income for the 3 months ended March 31st 2021.
Adjusted for things like depreciation and amortization of intangibles and any other related noncash items.
Approximately breakeven.
In the first quarter of 2021 compared to approximately $1.3 million for the same 2020 period non-GAAP net loss for the 3 months ended March 31, 2021 adjusted for the same type of noncash items was approximately 300.
12000, compared to net income of approximately 860000.
Net cash used in operating activities for the 3 months ended March 31st was approximately a million dollars and that $1 billion was too.
Pay down a big chunk of our accounts payable.
That was carried over from year end 2020, I recall that number was about a half a million dollars and we also in an effort to bolster our inventory levels as we start to come out of the you know the COVID-19 environment.
We increased our inventories deposits by a couple of hundred thousand dollars as well to increase our inventory levels in anticipation of that.
As I've mentioned already in Q1, we prepaid roughly 5 million. In addition, we made a half a million dollars worth of scheduled amortization payments.
Which obviously was you know 1 of our key objectives.
Debt, we laid out about a year and a half ago and the cash balance at March 31st was approximately 8 and a half million dollars and as you also know in May of this year we.
Prepaid another $3 million with some of that cash that we had on the books at March 31st.
So while we've made substantial strides in reducing our leverage and I'm getting the debt reduce significantly and so with that I'll turn it over now to Kevin O'connor, who will provide an update for you on the logic Mark business Kevin.
Thanks Ben.
So I'll go through kind of a business review of logic market I won't go into the numbers because it's been had just gone through the numbers at the NXT level and really a lot of what drove that was the logic Mark business. So just kind of a recap on the business overall.
Ben talked about COVID-19, I'll address it a little bit we're not hiding behind COVID-19, but we want to make sure that people understand it had a very real impact on the business going back over the past 14 months the V. A.
As many of you know represents a significant portion of the logic business.
Largest health care system other countries. So as the country was dealing with Covid. The EBITDA was probably more heavily impacted than most health care system. It really limited the number of patient visits and our products are typically.
Prescribe it where the orders are written for them as veterans visit clinics.
Medical centers, and so as that model changed throughout Covid. It it had a significant impact.
It's been talked about in the business model, we adjusted our cost structure.
Vantage the class and really manage the work force to try and make sure that we're still supportive for customers but.
Keeping an eye on the overhead so.
Going into 'twenty 'twenty, 1 been talked about the increased inventory we did bring in additional product because we wanted to make sure as we were coming out of it for ramping back up.
We had the product to meet the demand we were careful throughout 2020 and going into 2021 that we weren't sitting on excess inventories. So.
I feel pretty strongly that the team there in Louisville has done a really nice job of managing that portion of it.
Through the first 4 months. We this is obviously Q1 review, but we do have April results, but through the first 4 months, we've seen the business ramp up nicely.
Orient February really started out slow.
March we saw a nice uptick and that continued into April. We've also seen that continuing into may. So we think that as you look at the country opening up and the impact of.
That's a nation that the VA, specifically is really benefiting from that they've opened up clinics and they are seeing a lot more patients. So we've geared up to make sure that we're meeting that demand as well and we feel optimistic that we'll continue to grow and so we're making sure that we scale the business Accordingly for my operations and inventories standpoint.
Couple of items that I wanted to address because we've talked about it in the past and I know there's been questions on it before but just provide an update on the GSA.
Contract schedule, we did submit the GSA schedule contract in fourth quarter 2020.
About the time that we got a gorgeous LTE products. So we submitted that at the time that product came in.
We got a contracting officer assigned to our case at the beginning of Q1.
Our hope was and I think we did probably given some some guidance that we were hoping to have the TSA approved by the end of March.
It got delayed and a lot of what drove that was internally at GSA. They updated all current GSA holders had to update their price and in terms of conditions. So as a new schedule that was being reviewed we got put on the backburner. So it's been somewhat frustrating, but the process is continuing to move along and we do have the type of contract in the office for assigned to it.
We're in communication with the contracting officer and its being evaluated we're providing answers as quickly as questions come in.
And I'm confident that it will move through the process and that we will get a positive outcome. It's a really clean off for we've got a long history with the VA, specifically and with government agencies. So I really don't have any concerns that they were going to be any issues that come up as.
As we've talked about we have continued to sell to the V. A while we're going through this process. So that hasn't held up any of those sales.
And once we get confirmation, but its been approved at that point, we will launch a campaign to be proactive into other government channels because with the GSA schedule, we can market them through any government agency book Federal State County, and also through tribal nation. So we've been putting together a campaign and marketing plan to take advantage of them.
That and again I remain optimistic that we will be able to the debt that approval and continue to build on that.
The other issue that we've spent time talking about this product development.
Start with an update on our boards, an LTE product, we did released that product as I mentioned in the fourth quarter.
In Q1, we really as we've started to ramp up have had great success with it.
Operating extremely well.
We are really happy with the performance of it.
And at this point it replaced our regions for that so everything that we've got going out the door is a cellular solution just for you right now.
And again, we feel pretty optimistic that it will continue to ramp up the VA has been very accepting of it and the veterans Lubbock. So again.
But throughout the year, we're going to continue to see growth there.
The other product that we've been working on it we've spent some time talking about it as a Wi Fi product.
So we had talked before about the development the testing the field testing that our timelines for production release and we are still in development of it we ran into some issues. When we did the field test them. So the process. After we did the pilot production line was that we'd put units in the field, we were evaluating performance and functionality.
There were some issues that came up so the engineering team both internally and the third party engineering group that we brought in to help push the product over the finish line are working on those and addressing them with.
And with that there is a oh.
We adjusted our board design that needs to be done there are some components that are being changed so that is in progress. It's continuing to move forward. In addition to that we also after the pilot production run for them.
There's some issues with the case design so as we're redesigning the board. We're also making modifications to the case that will improve the manufacturers the ability of the product that will make it much quicker to manufacturer and ultimately less costly. So we remain again positive about the product and its development.
We have done some field testing as I've mentioned the feedback that we're getting for the product has been excellent people that are testing. It people that we have talked to about the product.
Believe that it's going to be really well received in the market. Both at the consumer level and also in the institutional level, where we believe that there's an opportunity for it. So we'll continue to do the development once we get the new board out it's got to go through certification, we will get additional units into the field test that and make sure that.
The development and that the product is solid as we launch a new product because we're a life safety product.
It's critical that we know that when that thing goes out into the field that it's providing the functionality, but it's designed for.
But it is going to provide the life safety, but people are looking for when they acquire it through.
The whole development, we have been.
Working on our backend so it will be accessible through an app in that type of communication will take place.
And the back end portal development has gone extremely well and so that's ready to go as soon as we have the hardware issues resolved and in addition to using Wi Fi product didn't happen in the back end portal will be a platform that we'll be able to use for launch and future hardware developments off of it.
Again, we think that product category that we're going to be and where it will fit within the marketplace will be extremely positive and debt that it.
It would be a successful launch so we're frustrated at the delays that have taken place, but we are back on track and book.
Continue to do the development at the field testing done and keep everybody updated is moving.
And it is ready for launch.
So Ben at this point, that's all I've got I'll turn it back over to you.
Okay, Great Kevin. Thank you Ciara I guess at this point, we can open it up for some questions. If anybody has a question they would like to ask.
Thank you very.
As a reminder to ask a question you will need to press Star then 1 on your telephone to withdraw your question. Please press the pound key please standby, while we compile the Q&A roster.
Okay.
And there are no questions at this time.
Okay. Thank you Sarah.
So in summary.
I would just like to have some of the you know the investors who were.
Investors for the last couple of years reflect back in and they will sell the newer the newer investors reflect back on where we were roughly a year and a half ago. All waiting you know, Kevin and I stepped in here to take over the management of the business.
You know if you'll recall after we did our assessment we identified.
3 key objectives, and sometimes I chuckle, a little bit I, usually start with the SG&A, but b.
You know an accountant by trade I, usually go to the numbers first but at this time I'll start with the new products and flip it around a little bit.
Essentially we went back in September of 2019, we essentially had no products. We had you know 2 products in the pipeline. We had for G. Guardian will work that Kevin referenced earlier and we also had the Wi Fi product in.
And its early stages of development and so at this point today, obviously as you know based on what Kevin suggests that isn't talked about we're selling the product the product is an excellent excellent product. It's it's.
Just a tremendous product for the VA and its clinics.
And we think it's the best value proposition for the for the U S. Government. So great strides there, we're hoping we struggled a little bit with the Wi Fi, we're hopefully going to be back on target with production for late this year.
Very excited about that and so you know great strides there.
The debt when we took over back in September the debt was at $13.8 million were now sitting at $2.2 million in debt. That's an interest savings over that timeframe of a million and half dollars at the current interest rates.
Just a phenomenal.
Our progress in that area and then lastly, when when we stepped in just the SG&A expenses on an annual basis approximated somewhere in the range of 11, and a half to $12 million. We're currently at 6 and a half million.
Oh, an annual run rate, so just phenomenal progress in right sizing the business.
For for revenue growth going forward.
And so I just you know.
Wanted to give you a quick synopsis of I believe it's a lot of progress.
In that last year and a half so just wanted to share that with you and then lastly.
I was advised this morning by 1 of our board members that I'm being replaced as the company C E O.
I don't know who my replacement will be any further inquiries should be made directly to the to the board.
So while at this time I'd like to thank all of the investors for their support and loyalty.
We're very confident that the company will be and it's in you know in my estimation and I'm sure Kevin will that go with this the company is teed up perfectly for our revenue growth and we look forward to taking it to the next level so with that I would.
Ill tell you to have a great afternoon, and thank you for joining the call have a good day.
Ladies and gentlemen, this concludes today's conference call. We thank you for your participation you may now disconnect.
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