Q2 2021 Calyxt Inc Earnings Call
[music].
Good afternoon, ladies and gentlemen, and thank you for standing by welcome to Calix. The second quarter 2021 results conference call. During today's presentation. All parties will be in a listen only mode. Following the presentation of the conference will be opened for questions.
You have a question you May press star 1 on your telephone keypad, if he would like to withdraw your question. Please press star followed by the number 2 key.
If you are using speaker equipment, please lift up the handset before making your selection.
Conference is being recorded today August 15, 2021 at this time I would like to turn the conference over to Cameron Willis.
Assistant Vice President of Argot partners Calix is investor relations firms. Thank you Sir Please go ahead.
Thank you and good afternoon.
Thank you all for taking the time to join US for Calix second quarter 2021 financial results Conference call. Your hosts today are microwave car President and Chief Executive Officer, Bill <unk>, Chief Financial Officer of Doctor Eat rebate Executive Chair Board.
The press release detailing these results crossed the wire after today's market close and is available on the company's website www Dot 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 the different 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 and adjusted EBITDA.
The non-GAAP financial measures <unk> press release, and its filings with the SEC each of which is posted on the company's website at www Dot Calix Dot Com you will find additional disclosure regarding these non-GAAP measures.
References 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 in the Investor Relations section of Www Dot Calix Dot com at this time I would like to turn the call over to Calix Executive Chair E Bay.
Thank you <unk> and thank you for joining us today for our second quarter Conference call.
I am pleased to report that we've carried the momentum of the first quarter throughout the second quarter, including several key accomplishment by our talented and dedicated team.
Before I turn the call over to Bill to growth for these achievements made me starts were introduced in the work of being Michaels com to the Sky team as President and Chief Executive Officer, and now the member of our board of directors.
Michael joins us with more than 20 years of the rational financial and investment experience and the non age the across key industries, including 10, New Trillium.
The order of G and services.
He most recently served as the vice President of M&A strategy and innovation.
The ingredients of a global.
Both of them Roku and producer of sustainable natural ingredients and renewable energy.
The skill sets will be integral as we advance cut east vision being around our cookie niche Brown based technology.
Now I'll turn the call to Michael for some brief remarks.
Thank you Ian for the warm welcome. This is an exciting time for calix and I'm thrilled to be joining the team.
The opportunity to lead Calix was compelling based on my 20, plus years of professional experience my view of the global marketplace and the opportunities that lie ahead for a company like ours.
My work has been squarely focused at the intersection of the innovation of natural resources and the sustainability of our planet consider despite the commitment of the world's largest companies to sustainable business practices much of what is happening in the global economy today is not sustainable as evidenced by a host of metrics from carbon.
Pollution to soil erosion the fee.
<unk> companies must produce products differently from sustainable sources, such as plants and then the sustainable manner. Fortunately there is a strong demand for sustainable production and the general awareness of that such an approach is required.
This shift to of sustainability economy is estimated to have a 30 trillion dollar impact in the next 3 decades across all industries and economies around the world.
<unk> fundamental business practice is what I call co designing with nature and the opportunity is significant.
And the company that has built a strong foundation over the past 10 years to become a leader in its field in terms of platform technology tenure intellectual property and industry Knowhow.
These are incredibly valuable assets in and of themselves. When you consider how relatively quickly our company today is able to apply our technology and expertise to get to proof of concept for new potential products or to identify new materials derived from plants, you will begin to understand why bill.
There is still so much value for our company to unlock.
I look forward to closely collaborating with the smart and dedicated team here to advance our business develop and commercialize high value products for our customers and partners and achieved nothing short of revolutionizing how the world uses plants with that I'll turn it over to bill for the full second quarter update Bill.
Thanks, Michael and welcome to Calix I speak for the full team in extending a warm welcome to you.
On behalf of the company I'd like to thank you for your services as executive Chair and we look forward to continuing to work with you as chair of our board.
We've made some exciting progress over the past quarter, our scientists continue to innovate around the hemp genome demonstrating the ability to engineer in a manner that can be used to unlock capabilities in order to selectively breed and deliver improvements in the species.
In May we shared the team's successful transformation of this genome.
As announced the mid July our team has expanded our breeding platform with the addition of AAA breeding technology to create pollen proof seedless hemp, which offer significant advantages in innovation crop management and harvest potential.
The additional benefits can now be delivered and for example of Seedless crop can improve fiber quality and increase yield.
Another benefit we plan to commercialize through a partner as green production for protein and oil derivatives that can be enhanced with the breeding program based on controlled pollination.
Effectively eliminating the threat of road pollinators of that can lead to suboptimal yields.
We expect this accomplishment will accelerate innovation in the species and using calix transform Inc. Transformation tools will enable our scientists and others, who have licensed the technology to select plant characteristics that may contribute to the establishment of hemp as a modern stable and valuable broad acre crops.
By modernizing this crop we can now deliver products tailored for the benefit of both growers and consumers who are increasingly looking for plant based in sustainable foods materials caused masuda Kohl's nutraceuticals and more of the.
First of these products is expected to be available for commercial planting by a partner as soon as 2023.
Since we began selling the grain to ADM in the third quarter of 2020, we have sold more than 75% of the 2020 grain crop to date with the remaining <unk> projected to be sold to them throughout 2021.
And finally in the second quarter, our net cash used by operating activities improved by $11.6 million from the same period, a year ago, driven primarily by an improvement in our working capital investment associated with the change in our go to market strategy for our soybean product line and the lower net loss in the period driven by a reduction in our operating expenses.
Following net change and other actions we have taken subsequent to that time.
In all we believe we are positioned for profitable future growth.
We believe Michael of experience in evaluating emerging technologies, and leading innovation coupled with our recognized technology platform recent technical advances and Knowhow that have led to our active partnership innovation and licensing pipeline and the strength of our base business are the building blocks for this growth as is our continued focus on <unk>.
Hence management.
As of plant based biotechnology platform company, we are focused on delivering innovations that revolutionized how the world uses plants. Our strategy is based on focusing on our core strength and research and development, including gene editing plant breeding and trait development. We believe that our platform allows us to develop innovative.
Of high value and sustainable materials and products for our world class and industry, leading customers and partners and we are proud to be the first company to successfully commercialize of gene edited food product in the United States.
As we have shared previously we have transitioned our business model to pursue product development agreements product license arrangements and technology licensing agreements as a baseline go to market strategies to allow partners to harness plant metabolism to meet their processing of downstream needs to.
To date, we've harnessed plant metabolism, and the products, including the soybean where the high oleic acid profile, our first commercial product.
In alfalfa able to be better digested by livestock, which <unk> seed company plans to commercialize and of wheat with a higher level of fiber content than than traditionally bread varieties. We've also engineered the metabolism of soybeans to improve their flavor to help enable wider adoption for plant based protein applications.
Yes.
Using our research and development expertise, we are also developing products, which focused primarily on improving climate resistance and reducing greenhouse gas emissions during food and energy production.
These product candidates in development include Winterized oats, the shortened the growing season to allow for growth in lower latitudes during the winter season.
This approach has several benefits, including transitioning greenfield to the temporary spring increasing the likelihood of high quality harvests and enabling the production of oats in the winter season, following the summer crop creating of crop value driven incentive for growers to practice winter cover.
This last point of significant because the winter cover practices sequester more carbon and prevent soil erosion in runoff.
We are continuing to develop hemp with improved characteristics for protein and oil production and for use in advanced materials.
That's a very high quality protein and offers production benefits when compared with other protein or oil crops like soy PS or canola.
Hemp can also service a wide variety of materials science needs.
Including strengthening plastics, reducing petroleum based content and providing greater strength and longevity compared to other plant based fabrics like linen or cotton.
Across these programs our platform of traits and breeding advancements minimize hemp production risk.
Prove agronomics and yield and drive quality protein and oil production as well as crop processing efficiency.
Yes.
Today, we issued a press release, describing our second quarter 2021 results and we also filed our form 10-Q. This evening.
Revenue was $11.9 million in the second quarter of 2021, an increase of $9.6 million of 415% from the second quarter of 2020. The increase was driven by the volume and mix of products sold in the quarter as calix sold 25% of the 2020 grain crop in the quarter as compared to the second quarter of 2002.
<unk>, when we were selling soybean oil and meal.
As of June 32021, we had sold over 75% of the 2020 grain crop.
Gross margin was $350000 or 3% in the second quarter of 2021 and.
An increase of $3.4 million or 112% from the second quarter of 2020.
Adjusted gross margin of non-GAAP measure was negative $1.2 million or negative 10% in the second quarter of 2021 compared to negative $800000 or negative 34% in the second quarter of 2020.
The improvement on a percentage basis and adjusted gross margin was driven by improved product mix as a result of the move to sell grain compared to selling oil and meal.
Total operating expenses were $6.3 million in the second quarter of 2021, a decrease of $1.7 million or 21% from the second quarter of 2020.
The decrease was driven by lower personnel costs as a result of cost reductions following the move to sell grain compared to selling oil and meal as well as other reductions in operating expenses from the second quarter of 2020.
Net loss was $4.8 million in the second quarter of 2021 and.
An improvement of $6.1 million or 56% from the second quarter of 2020 adjust.
Adjusted EBITDA loss was $5.8 million in the second quarter of 2021, an improvement of $700000 or 11% from the second quarter of 2020.
The improvement was driven by benefits, resulting from the move to sell grain compared to selling oil aneel and other reductions in operating expenses.
Net cash used by operating activities were $1.8 million in the second quarter of 2021 and.
An improvement of $11.6 million from the second quarter of 2020.
The improvement was driven primarily by a lower working capital investment associated with the change in our go to market strategy for our soybean product line and the lower net loss in the period driven by a reduction in our operating expenses following that change in go to market strategy and other actions we have taken subsequent to that time.
From a cash perspective, the second quarter of 2021 was highlighted by the significant progress we made selling grain.
Managing grow our deliveries to best match demand and reducing operating expenses below last year and staying on track to achieve our cash operating expenses 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.
As of June 32021, cash cash equivalents and restricted cash totaled $18.5 million.
Our earnings materials.
Each 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 for.
Our year to date financials for the first 6 months of 2021, please refer to our press release, our filings with the SEC.
Now I'd like to turn the call over to Eve for concluding remarks.
Thank you will be of.
I am proud of the progress the team has made in the first half of 2021, including the addition of Michael to the team as President and CEO and the promotion of Sarah rises the Chief business Officer.
Our scientific advisory board has become operational and in the quarter as several meetings and the input is already positively influencing our technology platform and <unk>.
Our R&D team continues to innovate by intensifying in the low key high value plant based products in mid February.
Through the use of <unk> brokerage of re system and net.
On the equal platform that build upon the running from a decade plus of engineering plan mid sublease.
I'm, especially excited by the continued innovation need him with a successful transformation of the hemp genome, enabling future advancements like trade delivery Gene ADT, Inc, and advanced Triple the plant breeding ROE Inc portfolio improve seed less.
These developments underscore bvt to quickly discover understand and on this the potential of complex plan biological pathways to deliver the next generation of brand day innovations.
So in the knee as Bina mentioned earlier with the addition of Michael to low teen.
Now transition out of the role of executive chair and will be ending the range to Michael to work with the team to advance cutting edge plant based biotechnology platform.
It has been my pleasure to work so closely with the dedicated team of executive colleagues.
And I look forward to continuing my involvement with the company.
The board.
As I've shared previously.
There are many exciting developments taking place at calix.
And I continue to believe that we are rapidly becoming the source of power the generates plan day sustainable and innovative products.
These products will meet emerging customer needs across a variety of growth sectors all of it.
While improving head in.
Ensuring umbrella of mantle of sustainability and addressing climate change.
This is the achievable vision of <unk>.
Operator that concludes our prepared remarks, please open the line for questions.
Thank you ladies and gentlemen, the floor is now open for questions.
I would like to ask a question. Please press star 1 on your telephone keypad at this time the confirmation tone will indicate your line is in the question queue.
The press Star 2 if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Once again that of Star 1 to register of questions at this time.
Our first question is coming from Laurence Alexander of Jefferies. Please go ahead.
Good afternoon could you sort of talk about <unk>.
2 things first the degree to which the.
The announcement of the change in strategy has led to a change in the types of incoming calls and then of research proposals and then how are you prioritizing between small partners large partners different markets and are there areas of research that had previously been kind.
Of Verboten.
Within the <unk> extra just not a priority of that have now moved up into the priority of this to be to make sure of platform more market relevant.
Laurence This is bill thanks for the question.
Certainly we've seen an increase in the interest in what we're doing.
Based on the advancements that we've announced surrounding <unk>.
Especially our soybeans as well.
In terms of the next generation of our soybean product and so that increased interest.
The flattering to get we also then need to as you point us to prioritize and so from our perspective.
We are looking at how do we identify.
Different verticals within those crops that we can find partners for and that has been our focus and so we've got a good idea inside we've got filters that we use are both strategic and financial that we apply.
And we work.
When those opportunities come over the wall to determine whether or not we can make it happen things like is there a financial return upfront what is the.
The size of the market how strategic is the opportunity are all things that we consider among several others.
And have you seen of difference and.
The.
Kind of willingness or the type of.
<unk> 2 of reaching out to you in terms of R&D capabilities or how they think about IP launching or value share between them and you just want to get a sense of are you.
To what extent sort of the.
Has been clear.
It looks likely of loss Lauren we will move on to the next question. Our next question.
Charleston of Canaccord Genuity. Please go ahead.
Thank you.
Okay. So.
Yes, I think probably.
First of all welcome Michael.
My first question.
We're looking at.
If we put consumer acceptance of side.
And we're starting to see a blurring the distinction between GMO and gene edited food on the regulatory front and I don't know if thats the case, but there it seems like theres some movement in that direction.
Im wondering just looking at the ear technology in terms of cost and time to market advantages versus the GMO can be kind of just review that a little bit for us.
Hello.
Yes, Sir we can hear you.
Okay.
Did you hear my question or shall I start again.
Michael or is can you. Please open.
We launched bulk of the <unk> deal.
The online.
Michael.
Okay.
I got cut off.
Thanks for the question of thanks for the warm welcome.
The question of I'll repeat it.
I'll go ahead and repeat it so I think if we just put aside the issue of consumer acceptance and kind of whether or not non GMO is embracing gene editing food to a gene edited food. When we just look at what the regulators are doing and maybe if there is some blurring there between GMO and gene edited food by regulators how would we look.
At your technology platform in terms of the cost and time to market versus GMO can we just kind of quantify maybe of review what those benefits are.
I wanted to answer your question I think 1 of the good things that we have that were facing based on the products that we're producing as they are so far from a regulatory standpoint.
We have price of the issues that.
The GMO is doing so when we look at a cost advantage.
Really it's just the 2 separate markets.
We can't really comment on what the.
The regulatory environment is going to be in the future.
With our first soybean product it was of a voluntary kind of the consultation with the FDA and there was really none of the issues that youre seeing delta.
Dealt with in the GMO market. So maher perspective, the cost structures are entirely entirely different.
Okay great.
And then.
I'm wondering you guys have had a change in go to market a couple of changes.
And you put up some nice market Tim's earlier by.
By trade and crop type.
The ear efforts are on a bunch of different crops.
And I'm wondering how how closely should we.
Follow those are earlier cans I know that seed sales are kind of now not part of the the Tam.
Tam, but should we still be getting our bearings there and then.
Are there.
What's the kind of opportunity maybe for.
The things that you haven't announced coming into your pipeline in terms of.
Potential planted acres.
Now are we at the point now where you.
We're beyond the point, where you could announce something that would be planted in 2023 or could we see announcements things that we don't know about that could show up in terms of plantings in 2023 or even earlier.
We have we're starting to get good visibility in 2023, and non a position initially announced that today.
Today, but it is starting to have great visibility.
I would continue to go with the the Tam that you've been working off of.
Now that we've recently presented to you.
We continue to look at those of those markets. So the good thing is we're feeling good about the visibility as we look out here almost a year and a half from now.
Okay, So youre not in a position where.
I guess you are along your kind of further along I guess with perspective licensees, where.
We don't know about yet in the public realm could materialize in planted acres in 2023, where we pass that window.
Well, let me ask Bill Bill you back on yet or do you want to jump in with them, Yes, I've been on for you had been back for a little while sorry about that everybody about what happened.
Hey, Bobby.
We are in terms of where we're at I think from a planning perspective in 2023, I think what's the in terms of what could be done there, perhaps could be something can happen, but otherwise I think likely not with where we're at the 2 big ones that are getting out of us where we would have something that.
I think from our perspective would be cash and revenue between now and 2023 would obviously be as weak as you think about those types of transactions to get cash number of partner to work on the product development or for licensing our technology, our churns that we absolutely expect to happen between now and then and frankly, that's a better driver of near term value for the <unk>.
<unk> been focusing on commercial planting for anything we might do.
That's how we're looking at it.
Okay.
Well, great. Thanks ill jump back into the queue.
Once again, ladies and gentlemen that is star 1 to register a question at that time.
Our next question is coming from Sameer Joshi of H C. Wainwright. Please go ahead.
Yeah. Thanks, good afternoon, everybody and Michael welcome to the team.
<unk>.
Michael just wanted to get your view on the product pipeline.
The.
Would you have.
Are you going to review the product pipeline based on discussions with the scientific advisory board or with the R&D team are.
As the product of that pipeline that we see going to see in the.
No changes to the experts.
The expected in the future.
Well again, thank you very much for the warm welcome.
Here is I am index to day, 7 and the role but the quick answer to your question is yes, I think we have.
Wanted to exciting pipeline I mean, clearly of the company has the foundation of 10 years and a tremendous amount of success here recently, but the foundation of 10 years of technology.
And certainly expect that we'll be doing a review of its 1 thing I think habit of fresh pair of eyes coming into the organization purveyor.
Able to take care of a review of the pipeline and see.
And how we can further enhance it but perhaps augmented.
So I'm excited for the future here again.
It's a very exciting time for me personally and I think also for Calix and certainly.
Any of their stakeholders.
Okay.
And then assuming that the wouldn't be any changes in terms of timing of these.
Targeted commercial planted years.
Is there any magic to the.
Deeds or is it that youre prioritizing certain products, depending on the likelihood of them being licensed.
With the partner or is it some technological challenges that are challenges.
Challenges that you are the R&D team is all of coming.
Or is that on the magic to this black of year targets.
Joe do you want speak to the targets Rupert.
You bet. So the the way that we approach the target is the.
Based on when we expect from all of the work that we've been doing any of the.
Flagging to occur post of regulatory.
The I'd be covered by your partner that's definitely 1 of our expectations as we look at things. So I think we're out of I had a good level will continuing to evaluate what we can.
Where we need to invest of where we need to take take money out. So <unk> looking forward, yeah, your assumptions fairly straightforward and good.
Okay. Thanks, that's all from the and welcome again, Michael and Thank you for shepherding the company for the last few months.
I appreciate it thank you.
Thank you at this time I'd like the kind of far back over to Mister Bill Kojak for closing comments.
The.
Thanks, everyone for joining us on a call today, if we were not able to address all of your questions on the call. Please feel free to contact us or our Investor Relations firm Argo partners, who would be happy to help you operator.
Thank you.
Ladies and gentlemen. This concludes today's event you may disconnect. The airlines at this time are like off the webcast and have a wonderful day.