Q2 2023 Zomedica Corp Earnings Call
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Good afternoon, and welcome to the medical second quarter 2023 earnings release call. As a reminder, this call is being recorded and all participants are in listen only mode.
The call will be opened up for questions and answers following the presentation.
On today's call as the Medical's, CEO , Larry heating and CFO , Peter Donato <unk>.
Before we begin the company would like to remind everyone that various remarks about future expectations plans and prospects constitute forward looking statements for purposes of Safe Harbor Harbor provisions under the private Securities Litigation Reform Act of 1995.
So America cautions that these forward looking statements are subject to risks and uncertainties that may cause their actual results to differ materially from those indicated including risks described in the company's filings with the SEC.
Any forward looking statements made on this conference call speak only as of today's date Thursday August 10, 2023, and the company does not intend to update any of these forward looking statements to reflect events or circumstances that occur after today.
I will now pass the call over to the Americas, Chief Executive Officer, Larry heating. Please go ahead Mr. Hayden.
Thank you.
I'd like to start by thanking our shareholders for your support.
Which in our prospective investors and analysts and others are good afternoon and welcome all of you that there is a medical second quarter 2023 earnings release call.
On this call I'll be providing an update on the overall business then Peter Donato, Our Chief Financial Officer will walk you through our financial results. After our prepared remarks, we'll open the line and the webcast to your questions.
Earlier today.
Somatic <unk> released its financial results for the quarter ended June 32023.
As we reflect on these results we continue to be pleased and excited with the progress the team is making not only financially and operationally, but also towards our strategic priorities.
Financially were our top priority is to grow revenue to the point, where we are cash flow positive.
We saw considerable growth on a year over year and quarter over quarter basis.
Revenue for the second quarter was $6 million up 43% increase over the second quarter of last year, driven by organic growth within our call center and true form of platforms and the inclusion of RCC and Bad Guardian products, which were not part of our consolidated figures last year.
The $6 million in revenue generated in the second quarter also represented a 500000 or 10% step up from the first quarter of this year and represented not only our best second quarter ever.
Also our second best quarter of all time.
Pro forma continued to show increased utilization and adoption producing a 98% increase over the second quarter of 2022.
We were also pleased with the 14% year over year growth in our pulse that products as we continue to penetrate the small animal veterinary market.
Overall since our acquisition of pulse veterinary technologies about 21 months ago, we've grown the installed base of <unk> systems over 50% to over 1800 installations.
This is important since this system is a razor and blade model, where the consumable troll has produced substantial revenue for the company.
Averaging approximately 60% of total pulse that revenue.
The trove consumable revenue is up 21% from second quarter of last year, which bodes well for future revenue growth.
We continued selling that bet Guardians zero touch vital sides of remote monitor which launched in January and we're encouraged by the market's response.
On May eight we announced that we have exercised our option to acquire structured monitoring products. The makers of the vet Guardian system and expect to close on this acquisition soon subject to completion of due diligence.
We believe this transaction will enhance <unk> ability to bring the guardian groundbreaking touchless monitoring products to clinics around the world.
And this acquisition also furthers our efforts to improving margins as we will be transferring manufacturing to our facility in Roswell, Georgia.
Overall margins remained strong at 67% slightly down from Q1 due to costs associated with our <unk> launch our true form of transition at our efforts to fortify the supply chain to keep up with expected demand, we expect margins to return to historic levels in the coming quarters.
While we continue to invest in R&D and sales and marketing.
To grow commercially.
And through integration of acquired products.
We are pleased to see the increase in leverage developing on the G&A line as we continue our journey towards cash flow positive and GAAP profitability.
Strategically we continue to look for M&A opportunities that meet our rigorous internal financial and strategic hurdles.
While adhering to our five pillars, which are improving the quality of care for the pet.
The satisfaction of the pet parents.
And the workflow cash flow and profitability of our veterinarian customers.
We used our first wave of acquisitions to build our commercial infrastructure and provide our salespeople with compelling products to establish that somatic our brand as an innovator in animal health.
Now we are focused on acquisitions that will be accretive to earnings from the outset.
Achieving our strategic priorities requires a combination of growing revenue.
Manufacturing that produces substantial margins and investing in commercial capabilities to enable both organic growth as well as growth through acquisition.
This means that we will be increasing R&D spending over last year's levels as we transition the development of new true pharma assays from Corvo.
<unk>.
We will be both compensating horrible for transition services.
And also building the internal R&D team in somatic.
We will be bold compensated corvo for the development of assays already underway equine EAC th had not infectious Gi which are expected to launch later this year and also beginning development of a next wave of two former assays by our own team.
Looking ahead, our current assay development costs will be significantly lower than what we've been paying historically, but for this year, we will see increases in overall spend for R&D versus 2022 levels, when we outsourced R&D totally.
Similarly, as we continue to build a sales organization and execute marketing programs. We will continue to see increases over the levels seen in 2022, when we were first building our commercial infrastructure.
But we expect the levels that we're at now to remain fairly steady aside from expansion of the sales team itself.
We're committed to achieving positive cash flow and profitability and see the steps, we're taking now as essential in hitting those objectives as expeditiously as possible.
In closing, we're very happy with what we were able to achieve during the second quarter. We look forward to building on this momentum as we continue to be very optimistic about <unk> future.
And with that I'll hand, it over to our Chief Financial Officer, Peter Donato, who will take us through some medical second quarter 2023 financial performance and provide additional thoughts on what to expect for the rest of the year peak. Thank you Larry and good afternoon, everyone revenue for the second quarter of 2023 with just over $6 million in <unk>.
Increase of $1 8 million or 43% from the second quarter of 2022.
Organic growth was 16% with the rest coming from acquisition integration of RCC and bet Guardian product lines. We are happy to report that roughly two thirds of our $6 million in revenue came from recurring consumable revenue. In addition, and Jeep achieving Q2 2023 sales in excess of historical App.
Bridges is encouraging given that our second quarter typically typically represents our second lowest revenue quarter for the year and our first half of the year typically represents about 42% of our annual sales.
Revenue for the first half of 2023 was $11 $5 million, an increase of $3 $5 million or <unk>, 44% from the first half of last year. This increase was primarily driven by the inclusion of RCC rebuilt and that Guardian products that were not part of the consolidated figures last year.
Pulse that continues to grow organically producing a 14% over the second quarter, a 40% increase over the second quarter of last year, and an 11% increase over the first half of last year. This reflects an acceleration in growth from Q1 fueled by high margin trades in consumables, we believe pulse spec sales will remain.
Strong through the end of 2023, especially given the seasonal step up observed usually observed in the back half of our selling year and.
And we have continued efforts around developing a small animal market.
True pharma generated at 98% increase in revenue over the second quarter of last year, and a 145% increase over the first half of this year. This was driven by organic growth and our cortisol TSH and TT for assays and from our new assays launched last year FTE for an E ACTH.
H.
We believe the growth seen with true format will continue as we continue our investment in the development of additional assays, including the first assay for horses and a panel of assays for non infectious Gi disease that will that have planned launches later this year.
FCC brought in $1 million of incremental second quarter revenue and $2 $2 million of incremental first half revenue that was not present in their respective periods last year.
We continue to leverage our communication and marketing networks as well as new distribution channels and expect that the <unk> brand recognition and awareness to increase resulting in positive revenue growth for the balance of 2023.
We have seen considerable interest in our data already zero touch vital signs remote monitoring system and expect to increase revenue as we ramp up introduction of the product through our direct sales force in U S. Animal health distributors that now include Quebec, Tris Patterson Midwest and M. Wi as we entered the third quarter.
We're very excited about our <unk> digital microscopy platform that we launched at the tail end of the second quarter.
Feedback is consistent with macroeconomic trends showing a strong interest in the products fully automated slide preparation designed to significantly improve veterinary practice workflow as well as reduced the number of unreadable images due to suboptimal slide preparation.
In general we expect revenue to increase in subsequent periods benefited from the expansion of our product lines. Our recent acquisitions and our increased investment in sales marketing and related commercialization efforts. In addition sales are expected to increase sequentially and hit their historical highs that they have in the past in the fourth quarter.
Our gross profit for the second quarter of 2023 was $4 million, an increase of $1 million or <unk>, 33% from the second quarter of 2022.
Our margins remained strong at 67%.
Even with one time items, and we expect them to return to historically higher levels in the coming quarters.
Our operating expenses were up $1 $9 million or 21% from the second quarter of 2022.
Research and development expenses for the three months ended June 30th 2023 were just over $900000 compared to just over $300000 for the three months ended during 2022.
That's an increase of about $600000 or 200% they.
The increase was primarily driven by continued buildup of internal capability to develop test and manufacture our next generation of <unk> pharma and other diagnostic products when backing out one timers R&D expense would be about $600000 up about $300000 or 100% from the second quarter last.
Year.
This is consistent with larry's previous comments and relates almost exclusively to head count increases that were associated with acquisitions as we expect to ramp up our diagnostics segment.
Total G&A for the three months ended June 32023 was $9 $9 million. This compares to $8 $6 million for the three months ended last year or an increase of $1 3 million or 15%.
The sales and marketing portion of the totaled $9 9 million dollar G&A spend was $3 1 million or approximately 31% of the Grand total of the SG&A spend.
This compares to $1 $4 million for the three months ended June 32022, or approximately 16% of last year's total SG&A.
The increase in the second quarter was primarily driven by funding our commercial efforts that increased significantly over the first half of 2022.
The remaining portion of the $9 $9 million SG&A line relates to noncommercial general and administrative expense and this totaled $6 8 million for the three months ended June 32023. This compares to $7 $2 million for the second quarter of last year, and a decrease of $400000 or 6%.
<unk> I.
I am pleased to see that where we're seeing leverage on this on the administrative portion of this cash cost category, even with the increased growth in integration expenses that we've been talking about.
The operating loss for the second quarter was $6 $7 million up from $5 $9 million, a year ago, but down from $7 $5 million recorded in the first quarter when adjusted for one time items, primarily associated with our carbo true form related transition and adjustments and other adjustments to Reno earn out.
Our adjusted operating loss fell to just over $6 million.
Net loss for the three months ended June 32023 was $5 3 million or <unk> <unk> five per share that is flat with a net loss of $5 $3 million and again point out <unk> five per share from last year's second quarter.
Adjusted for onetime items, you can see that the point <unk> five per share is lower.
non-GAAP EBITDA loss, which includes adjustments for stock compensation for the three months ended June 32023 was $3 7 million compared to a loss of $2 $7 million for the three months ended last year when adjusted for onetime items associated with Carbo and true pharma, our transition to a new CFO.
No adjustments associated with the repo earn out and other onetime consulting work, our adjusted non-GAAP EBITDA fell to about $3 million. While this loss is slightly greater than last year. It could be attributed almost entirely to increased head count. We are up about 40 people from a year ago and keeping in mind during.
That time, we were very early in the process of building the company's commercial and operating infrastructure.
Moving to the balance sheet, our balance sheet remains strong with cash cash equivalents and available for sale securities of over $142 million at the end of our second quarter. This year compared to $187 million last year's second quarter, and just under $148 million at the end of this year's firm.
First quarter. The decrease in cash is primarily driven by the acquisitions of <unk> and rebuild platforms corvo related transition payments and general operating activity our cash burn for this quarter was just under $3 million when eliminating onetime items for investments acquisition related activities and other one times.
The burn rate is consistent with my previous guidance and with both expectations in prior periods, we should see improvements in the burn rate as the year progresses absent any additional one time investments later in the year.
I will now hand, the call back to Larry.
Thanks Peter.
So we had a very strong and record breaking second quarter, we were able to grow revenue by 43% as we continue to sell more of our established pharma and also that products. While at the same time benefiting from the sales coming from our <unk> and bet Guardian acquisitions.
With focused marketing and commercialization efforts increasing brand recognition.
<unk> of our vet Guardian, and <unk> products, the release of new true pharma assay. So a little bit later this year, along with expected efficiencies coming through our corvo transition work and the centralization of manufacturing and distribution capabilities to our facility in Georgia.
We believe the future is bright for <unk>.
Looking into the remainder of 2023, we will continue to work diligently to bring some vertigo suite of world, leading products to an even greater number of veterinarians and their patients.
So let me end our call or at least our prepared remarks part of it. Thank you.
Those of you that have been supportive of US America, including animal health professionals that pet owners worldwide along with the many shareholders have some medica securities with that I'm happy to open the line for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session. So do you have a question. Please press the star followed by the one on your Touchtone phone, you'll hear three ton prompt acknowledging your request questions will be taken in the order received.
Should you wish to withdraw your request. Please press the star followed by the two if you are using a speaker phone. Please lift the handset before pressing any keys.
At this time there are no questions in the queue. Please proceed with any webcast questions.
Absolutely.
So the first one.
Is from.
Well I guess I won't name them right.
The first one is what does the company's debt to income ratio look like.
Peter Thats, an easy one yeah, we don't have that so we don't have any debt right. So we did we actually have an operating loss. So we're in a loss position, but we don't have any debt so the minute.
We turned profitable that'll be very favorable.
Ratio for us and as you can see with the $142 $5 million in the bank I think we're in pretty good shape.
Quiddity perspective, so youll see a little bit of debt on the balance sheet that represents lease obligations for our facilities and actually some of those facilities. We we acquired along with the acquisitions of <unk>.
SCC and repo and we're actually in the process of.
Trying to see if we can settle those out so our debt or modest amount of debt, which is lease apple lease obligations will actually go down as we move forward go up slightly and then it will go down in our 10-Q, which we filed earlier today has a nice table in there that highlights that so you can do your own math.
The next question is regarding.
Well. The question is just buyback in the period that I don't know if thats a question or request, but in any event I will just say the same thing that we've said up until now which is that we're very much in a growth mode.
We see significant return on investment.
Of our capital both to generate organic growth and also to acquire companies and product lines that will serve the company and its shareholders very well.
Orders to come.
So at this point, we are not considering doing a stock buyback does not mean that we will never consider it but I would suggest that we would not be doing you should not expect something like that until we are cash flow breakeven.
Let's see the next question is what percentage of market capitalization has been achieved in Europe .
And I will say not nearly enough right I think the international market represents significant opportunities for us to grow to increase our rate of growth.
Which is not to say, we're not operating internationally, we are about 25% of our revenue.
Of the revenue from pulse that when we acquired them was international and about 20 or so percent of our Cc revenue historically has been international.
We have a wholly owned subsidiary in Japan, we have.
The small sub in Switzerland, we have distributors in Europe , and South America.
In Asia Pacific and <unk>.
Right now those those.
Distribution outlets have been limited to pulse that FCC.
As we complete our diligence with Guardian and look to the future. It is our expectation that we will see mark that product didn't get it overseas and we are in the process. Just now qualifying the <unk> device with CE, marking to be able to market that overseas as well. So we have significant upside.
Entity, but we are but we are currently generating about I would say somewhere between 20 and 25% of our revenue internationally.
Next is when will you sell throughout the U S with salesman.
Well update that for today's.
Today's society with salespeople and our more salespeople being added, especially with the good quarters coming up.
Yeah. So we we currently have a sales direct sales force of around 30 territories.
In addition, we have inside sales reps that cover everywhere, that's not a territory right. So you can imagine.
And there are places where it.
It's less populous and we don't have a direct rep there.
Those are covered by inside sales reps, we also have.
<unk> team of professional services veterinarians.
That are available across the country or clinical questions and for support center programs things like that.
Now.
When we were just selling to pharma and pulse that we were a 100% direct.
As we acquired CCC against on that product that product is essentially 100%.
Through distribution or online.
We have recently put the vet Guardian product.
Through distribution as Peter mentioned, we during the second quarter, we worked with various distributors he named him off.
They are now carrying about Guardian product line and we.
We are watching that very closely because that then gives us enough data to be able to decide whether we should put our remaining products through distribution as well.
There is a little bit of a margin give up but if the sales are.
We're able to really accelerate sales growth and that would be a good decision. So.
I guess, what I'm, saying is there is no veterinarian in the country today that is not able to buy our products and to be serviced by <unk>.
I'll ask the distributor partner or an online representative we do actually.
Also though plan on adding a few sale turret sales territories as appropriate and opportunistically.
Alright.
Next question.
On the previous call you said next year.
You were expecting the cash flow to breakeven are you still holding.
That.
Same presumption.
That's an easy one yes Pete.
Peter you might want to.
Give some CFO slant to that yes, I think thats right. Larry I think we were sticking to that guidance I believe it will be the second half of next year. You know as you think about cash do not cash flow breakeven, we have over $12 million annually, maybe even a little higher than that and noncash expenses. So if you kind of extrapolate at 70% margins or better.
And add that to last year sales youll get a number in the mid thirties right on annual sales number at $35 36 $37 million, while we are not.
Not in a position to give formal guidance for next year I think you can extrapolate how we're doing growth rate rise with the addition of new products and see that we're on a flight path to be profitable on a cash flow basis second half of next year and then on a GAAP basis thereafter.
Alright that was a better answer than mine.
Not only works, but said the same thing yes.
Here's a quick question can you ever use true view.
The human market.
And the answer for that is.
Again easy one yes, the true view.
We own the <unk> technology and intellectual property outright.
Our plan is that as we establish.
Our foothold in the veterinarian market and establish.
Some data around it and get the AI built out and so on.
That we would.
In some way monetize the human application for the <unk> device.
It would be licensing to one or two many scope manufacturers.
Or two.
Not not nearly as likely we would also have an opportunity to consider whether we would want to do it ourselves, but more than likely it would be a licensing opportunity.
Yeah.
Let's see.
There's another question in sort of a common which is a reverse split and I'll just repeat what we've what we've said on each conference call before this which is we have no plans to effect a reverse split we understand that that's a very.
A very important question for people and while there are reasons on both sides. At this point, we have no plans to do it and even if we had plans to do it let.
Let me just remind everyone that that requires two thirds approval from our shareholders that would vote in that kind of a.
The decision and so it won't.
We ever do decided it won't be us deciding to do it it would be us in conjunction with two thirds of our shareholders, saying that it was a good idea.
Things that would've happened just now so again.
<unk>.
No.
Not in our plans right now.
Someone else asked a question about where we expect to be in five years.
And I would just say that.
As a company I would expect that we are.
Have much higher revenue.
We continue to maintain a really solid margins.
Beyond that I would say that our technology all of it is on the cutting edge.
Of technology in animal health.
And we intend to continue to refresh that technology either with.
Extensions of our product line or additional features for example, the <unk> we've launched it.
Now working rapidly developing.
On AI component to the device and we'll roll that out.
As soon as it's ready.
We expect to continue to be at the cutting edge of technology. So we think we'll always be relevant to veterinarians frankly, our goal is for when veterinarians kitchen, a major trade show that our booths, they make a beeline for it.
Because every time.
They come and see us we have something for them.
He is helping them not only improve the quality of care for their pets and the satisfaction of the pet parents, but also is increasing their cash flow workflow and profitability.
I recently visited in the field with some veterinarians and the sales rep. It went into an account.
They had all of our existing products.
And what are the thought was that what was next and before we left there. They had ordered the true view and they just got it installed yesterday and they are thrilled with it so.
We want every veterinarian to have that same.
Experience.
Here's what how are the shows go and our new customers being added on a regular basis.
Yes, I think we.
We invested in the infrastructure necessary to be able to do these these tradeshows because it's an important part of the purchasing that veterinarians do.
So there was an expense at first it was only.
Sort of shouldered by true pharma, and then true format and pulse said and now all of the other products are seamlessly added into our trade show.
Our trade show Booth at our speaking events and so on and so forth and so we're starting to get some considerable leveraging their leverage there on the marketing side.
Syed.
Question here most of the quarterly revenue comes from therapeutic products. When do you expect diagnostic products to generate significant revenue growth.
Well Theres certainly generating.
Significant growth in terms of a percentage as they are taking off nicely.
But the revenue growth.
The growth today to spin off of us of a small base.
So November and diagnostics in animal health, that's industry standard to place the instrument at no charge.
And then the charge for the consumables that are used.
And so with our two formula that is what we do and then with the true view that is also what we're doing a little bit differently with a true view, but with two pharma I would just say that.
We've had very nice uptake in.
The two former instruments being brought into vet practices and the.
The growth of the revenue speaks for itself and yet I will also say that true forma we established true forma as really solid incredible technology market, leading technology in terms of the accuracy of the test we established that with some tests that are like really difficult to do in the clinic.
None of the none of the all but one of the tests that we do with reform you can't do it at any other device to the point of care, having established that now with our index assay.
Our assays I should say with non infectious Gi, which we expect to launch in the fourth quarter.
These products are.
We are not only not available at the point of care, which is.
A big deal.
But they're also some of the most commonly run tests.
Veterinarians because these the three assays Kabbalah mean CPL folate.
These assays are what needs to run when you bring your dog or cat to the vet because it is diarrhea or vomiting.
And Thats one of the top three reasons why people bring their pet to the vet on an emergent basis.
So we expect a couple of things one we expect all of our existing installed base to quickly bring those assays in.
And we expect that that will actually accelerate or are the growth of our installed base.
On the companion animal side, when you get to equine side, we're super excited because the next assay, which we'll be launching which we.
Currently our in clinic with as we as we sit here today.
Currently in the clinic having.
Having them.
The very first.
Having a very first experience with it.
Part of our process.
This assay is for horses.
And it is for the diagnosis of the disease called <unk>.
Equine cushings disease or <unk>.
Cushings disease for horse is not a good thing right horses that are over 12 or 13 years old they're susceptible highly susceptible to Cushing.
They get it.
And it's quickly diagnosed.
It could be easily at straightforwardly treated with medicine.
On the other hand, it is hard to diagnose and if they miss It then the horse could develop laminitis, which in many cases means they get put down.
Even if they survive it's a very rough experience for the horse and will never never be the same.
Well the screen for equine Cushings disease is endogenous ACTH.
Now today, if you wanted to do a screen for endogenous ACTH you would have to capture that you'd have to get the sample freeze it as soon as it comes out of the horse keep it frozen and send it to only one facility in the country and Thats Cornell whether you send it to IDEXX are a lab and then they send it to Cornell or you sent it directly to Cornell.
It's a week or so before youre going to get it back and it's not really widely used on the other hand.
Our EAC th for horses.
Is something that they can do stall side will provide the equipment at no charge, we will charge them.
Fair price for the assay, they'll double that and charge a fair price to the horse owner.
And when you think about it.
I can't imagine a horse sonar, saying no to a reasonable rights for an assay once a year to help them keep their horse from getting Cushings I can't imagine a vet not offering it to all of their equine customers because there'll be able to make a nice amount of money with no capital outlay.
And so when we think about the market size.
There are 2500 equine vets.
In the country.
And about 1200, and 50 of those equine vets.
150 times, a year because thats the average usage pickup currently pickup pulse that device and provide shockwave therapy to a horse. So they know pulse that they know somatic hub.
And.
You know there is such a large pool of forces. There are 5 million horses over the age of 12 13 years of age or older in the United States.
Q <unk> opportunity for us to grow that business now with true view.
We charge a monthly fee for them to have the instrument that covers their first hundreds slides that will be automatically processed by the device and then thereafter, we charge a certain amount per slide.
And then each time, they get a pathology report recharge the industry sort of standard fee for that pathology report.
So what all that means is that when we put for example, we put some devices out in June we won't see revenue for those because we bill in arrears, we won't see revenue from those until July and then the ones in July and August and so on and so forth. So it's going to take a little bit of time for that revenue to build as we build the installed base, but as we look to the future.
Sure.
It's going to be interesting to see.
Whether pulse continues its.
Historical dominance of our revenue or whether or not we're able to surpass that with diagnostics and I didn't even get into the majority of it I think probably that's enough on that question.
I'm not seeing here.
Are you done any sales in Canada.
As I spoke to in Canada haven't heard MISO medica, even in Alberta, where were incorporated.
So we do have sales of pulse fat and Cc in Canada.
And also to perform it in Canada, but not a lot we don't have.
Representative there we don't have a salesperson there and we don't have a national distributor.
But I will tell you that.
I met at a conference.
Gentlemen, who is.
Consolidating equine practices. They have 10 or 12 of them were so in Canada and he's planning on doing that same thing in the U S.
I was really impressed with them because.
On the slides that they were showing at this conference they were showing one of their technicians using pulse that upfront.
The horses and so I've made his acquaintance he is the CEO I've made his acquaintance and we talked a little bit and I told them about the equine cushy.
Cushings disease screen.
We have coming up and they are now participating in the early <unk>.
Clinical experience gathering so I expect that we'll see.
More of an increase in business in Canada as we move forward.
One question here is do you have financing options available to help that's acquired a product and he answered that yes, absolutely.
We don't finance directly ourselves.
But we haven't had a need to so.
With true forma no capital outlay required with with true view, it's a certain amount a month, that's a very reasonable amount.
With the Cc Theres no need to finance it with its all set which we sell the generator for 32000.
And even with the Guardian, which we sold 4500.
We do have a third party.
Arms linked to Us Finance company.
So and it's a really good deal for the vet so for the for the pulse debt.
There is no money down there is no payments for six months and then for the next six months, it's $100 a month literally 99, but $100 a month, so the first year they're out $600.
Now our experience with the sizable market has been.
They are picking up the full set on average 100 times a year.
They're going through to <unk> or to hand pieces.
That each have 50 treatments in them so as they buy those trades, we know how many treatments they've done.
And.
So we are seeing.
We're seeing that in that first year, they could do 100.
Procedures at 300 Bucks a pop that's $30000.
So really within a year, while they've only paid $600 and cash out they have generated almost enough cash to pay for the whole thing lock stock and barrel and that financing program doesn't have an early prepayment penalty.
With the Guardian typically they are buying the machine.
It's only 4500, but there isn't an annual subscription beginning in the second year. So they're bundling three years of subscription in the machine and financing it over three years.
So that's been working out really nicely.
Let's see what why are the assay is taking so long to come out.
That's a that's a question that.
That myself asked when I first got here and.
Sure.
<unk>.
While I won't really belabor all the reasons up until now I will tell you that we have not had the ability until this year to develop our own assays at our own pace.
And that's.
The reason why in January we renegotiated our deal with Corvo Korbel biotech to where we have the ability now to to develop our own assays to manufacture those cartridges that include the assays and to also manufacture the instruments now as I previously announced we.
In January we began a process, which will go through.
<unk> next year.
During which they are continuing to manufacture at the same time, we've ordered the equipment.
The equipment will be installed in GA later this year Theyre training our people on the manufacturing process.
We're training our people on the R&D process, we've hired people to do the R&D.
We've begun working on the next wave of assays theyre, finishing up the assays that theyre doing all of that means that our opex is higher this year our margins are lower this year.
Because of the transition, where we're basically paying them to do things.
Hiring people for ourselves and then paying them to train our people.
All mean higher cost this year.
Very early into next year, but well worth it.
Once we get beyond that we'll spend a 3rd% to 50% developing an assay and what we were developing before more importantly.
Unlike our partner company, which also had a human health business and was kind of getting the <unk>.
<unk> share of that focus.
Our focus will be completely on assays for the vet market and so.
Not so much why it took so long, but rather what can we expect going forward, we will be launching an assay. This this quarter.
For the equine market and next quarter for the the human market.
Let's see here.
We all know.
Market manipulation is a real thing as the company worried that short sellers are keeping the stock at a flat rate.
Peter that was for you.
Yes, no I don't.
Now we were focused on executing the business here folks will let the market determine what the share price should be in.
Go from there clearly we're going to put.
Things out there that makes sense to explain steps to shareholders, but as Larry and you can tell by our prepared remarks the level of focus we are on driving topline growth at that profitability. So that's what we're focused on as a longtime finance professional I think the markets generally handle themselves if you execute.
Alright.
So there are several questions on new acquisitions.
And.
Without trying to give away the.
The.
Whatever I would say that as this year right now we are.
As you know completing the diligence on structured monitoring products, that's a big.
Product for us.
And we anticipate moving forward with that and so that would be one that we would finalize.
And I think I mentioned earlier, you know when we did our first wave of acquisitions. We are building the infrastructure and we're also getting a bunch of products that were compelling events and putting them in our bags. So at this point, having done that right I think we're all.
Should be on the same page when it comes to we have built quite an organization at this point.
We now are setting our sights a little bit higher in terms of what.
What's the impact on the company will be right. So we're looking for things that have.
<unk> revenue currently.
Margins that are reasonable or attractive.
Things that will of course meet our five pillars, but also things that will be accretive to earnings. So that we can sort of accelerate our our attainment of our profitability.
Not to say that we won't look at things that require some development because we've I think we've demonstrated that we're pretty good at that.
But our focus right now is on those things that will be accretive to earnings and I really can't say.
Really much more than that at this point.
And let's see.
Okay.
Let's see if there's anything else what are some of the countries that you may consider for international markets.
Really any any country that that.
Those population sort of shares the same.
Appreciation for pets that we do here in the United States.
Pets.
Dogs cats or horses, Theres, certainly countries, where resources are so scarce that they're not looking to spend a lot of time or a lot of our resources on on their pets.
But.
But theres lots of countries, where theyre very avid in horse racing.
And also in their consideration of animals, and so there's plenty of them out there, where it's a very target rich environment for us as we consider new new companies as we move forward.
Someone said.
Sure.
Do have a question in the dial in Q a.
Question comes from James <unk>, who is a private investor. Please go ahead.
Yes.
Okay.
Excuse me Mr. Braga.
You May proceed with your question.
Okay.
Okay.
Hello, Hi, I'm, sorry, I was having trouble with the phone.
Larry I was just wondering is there going to be more updates more frequently we've only seen.
I think one piece of news in the last couple of months is there anything else to report on as we go along.
But anytime that there is there is news that.
That's a significant we'll certainly share that with you we issued press releases.
Whenever we do anything thats material.
So.
I would say.
As we do things as we do things that would be appropriate to issue a release for we will.
Also we also speak frequently at investment conferences to attract new investors to the company and provide education. All of those are are announced I think we have one coming up here in a week or so the Sidoti conference.
Theres, a webinar that our IR firm is going to be hosting they did another one recently, we've done two or three conferences within the last three months or so.
We expect to continue to do those as appropriate.
So.
I would say at any point, we have news I'm not we're not looking to just put something out just because we haven't put something out in a week or two.
Got it.
Very good Larry I think you're doing a good job I'm looking forward to the future.
Thank you very much.
Did I hear someone that might not think the same thing as Larry said all these good things, but why don't we see insiders buy any shares.
So.
I would say that.
Over the last.
First of all insiders here, so medica are not allowed to buy shares.
During certain periods of time, so 48 hours after earnings are released.
Through two weeks before the end of the quarter were allowed to buy shares.
Unless we have knowledge of something that's happening.
Not known to the public so if I know, even if it's in the window and I know that we're about to close an acquisition I can't buy shares.
The first time the window opened for me.
As individual.
Was back in May.
And.
I took the opportunity to purchase some stock on the open market.
As you probably know if you've followed our filings I have a boatload of options.
So it's not like I necessarily need the extra shares.
But I have three grandchildren, and one on the way and so I thought 100000 shares would split nicely into 25000 each.
So that they have some.
Money to buy a car go to college when they're when they are older. They are young right. So.
Yes, I think and I think Johnny powers on our board of directors. He actually beat me to it and bought some shares.
A similar amount the day before.
I can't speak for the rest of our insiders other than to say that one of the things that is important to me.
And I would hope it would be important to you all our shareholders as we have issued stock options to all of our employees.
That their incentives are totally aligned with our shareholders incentives.
If it's good for one of our employees. It's good for the company, it's good for our shareholder as well.
And so they do have the opportunity to.
To basically own those shares over time.
And.
So that might be a reason, but so limited windows being open is one of the primary reason.
And I'm.
I'm going to give Peter kick next time, the window opens and say hey.
But beyond that I think.
Right.
It's just the individual.
Individual discussion, but let me assure you everyone. Everyone. Here is looking for that stock price to appreciate it and I see a lot of questions about when will the stock price go up or when will it hit this level and so on so forth.
Honestly I mean I'm not.
I'm not.
Fortune Teller I can look into the future.
My answer would be not soon enough.
B when more people are buying that are so I mean, it would be some kind of.
Kind of a flip answer and I don't want to do that other than to say that everybody here is working very hard.
And we will be.
We experienced the same kind of reward that our loyal stockholders do.
That share price increases over time.
And there are some questions about social media.
Are you increasing your social media presence so animal owners what question. They are vets if they have your products.
And how much do.
How much does that play a role and I would tell you that we're very active in social media and it's one of the things.
When we acquired a cc that's one of the reasons yet.
We appreciated that acquisition because it brought over a marketing team that had a very strong social media presence. So we're very active on different.
Forums. So we do a lot of things on Instagram, we do things on Linkedin, we do things on Facebook.
They even have some stuff on Tictoc I can I had never seen those because I won't download ticked back up my phone, but other than that.
And we do see verse.
No.
We do see <unk> seen this and coming to us.
Through our through our web.
Channels, So I mean for me personally.
I have the emails when we get leads that come in from the web unsolicited right. So it's not leads from a trade show or at least from a webinar that we did but that's it.
Elicited leads that come in those come the number of people get them and they know how to act on them and get them to the salespeople and follow them up.
I haven't come into my email box as well because I just like to see what what's happening out there what's the what's the demand.
Im very pleased with what we see and I can call up my VP of marketing and sages do something.
Within the last few days, because we're seeing a lot of leads for <unk>. We're seeing a lot of leads for the Guardian, we're seeing a lot of leads for pulse width.
And so on so we're very active in social media of course, the different platforms are done.
Done differently right. So it linked in it's more trying to get to the vet, whereas on Facebook.
And Instagram, it's more trying to get to the consumer.
We have a significant presence.
With consumers right. So we are the official pulse that sponsor of a lot of equine societies.
Barrel racing quarter Horse U S Olympic team and so on that is all because we are appealing to head marketing to directly to the horse owner. So that they can then go to the vet and say I got to have this and we're doing the same thing now with them with <unk>.
<unk> owners I suppose we'll do it with cat owners too, but I know I know the things that we're doing with dog owners, especially agility dogs and things like that.
So.
It's very active and one thing I will say for those of you that are fans of horse racing in Las Vegas here shortly theres going to be a race called the run for $1 million.
And we are one of the sponsors of that and in fact, our VP of equine sales and client education will be speaking at that event, which is I guess, the toughest ticket to get in Vegas.
For that period of time.
So that would be that.
And I think.
I'm not sure that there is.
I'm not sure that there is well here's one that any concerns about delisting because of the stock is below a dollar and are you concerned about.
About being close to being out of compliance.
So let me say this that first of all the dollar is not related to <unk>.
Is that relevant to us because we are traded on the New York American Exchange, if we were on NASDAQ or on.
On the New York Exchange.
Then the dollar would be the threshold, but our threshold is 20.
So that brings us into the <unk>, so not concerned about being below a dollar with respect to being close to 20 <unk>. The way. It works is that you need to close.
You need to close below 20.
For 30 days.
Before you would get.
A notification from the exchange that you are out of compliance and we have not.
Then in that situation.
And.
While we're close to it I mean, we closed today close to 21.
<unk> 2021 threshold for quite a period of time.
Does it concern me, yes, it does.
It's one of those things that makes me come to work and look for ways. How can we accelerate revenue growth how can we accelerate getting to cash flow positive how can we better communicate to our shareholders. How can we do all of these things to build confidence.
So it.
It would be silly to say im not concerned ever about it.
But I haven't I.
I don't have any reason to believe haven't had any in a while to be.
To be acutely concerned about it I don't know if that answers the question but.
Yes.
Close to so I can get.
To an answer.
And.
And I think thats pretty much covers what we're looking for.
I think there is a number of questions and I appreciate all that I. Appreciate your interest I appreciate you being on the web.
And I appreciate your concern and also your support of <unk> medical.
If you.
If you didn't if you have a question you didn't get it answered please feel free to reach out to me directly.
We have <unk>.
The mailbox called investors at <unk> Dot com and I get those emails too and so it is Peter who will give you a better answers on some of this stuff.
So with that I would thank you very much for your participation in the call today and your support as a medica and I look forward to.
Could you again next quarter or two someone's point sooner. If we have news that we think is important for us to share. Thank you very much.
Thank you. This concludes your conference call for today, you may now disconnect your lines.
Okay.
Hum.
Hum.
Okay.
[music].