Q4 2023 Zomedica Corp Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by welcome.
Welcome to <unk> Medical's third fourth quarter and full year 2023 earnings results and business update call I would like to remind everyone that this call is being recorded today Monday April 1st at 430 P. M. Eastern time, and all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Now I'll turn the call over to at least Mcdonald Investor Relations. Please go ahead Mr. Macdonald.
Elise McDonald: Thank you Paul and good afternoon, ladies and gentlemen.
Macdonald: Tuesday, Medical's fourth quarter, and full year 'twenty twenty-three earnings results and business update call on.
Elise McDonald: On today's call you will hear from for Medical's, Chief Executive Officer Mary.
Elise McDonald: And Chief Financial Officer, Peter Donato.
Before we begin we'd like to remind everyone that on this call, we will be making various remarks about future expectations plans and prospects that constitute forward looking statements.
Elise McDonald: These forward looking statements are based on assumptions and there are risks that results may differ materially from those statements.
Elise McDonald: So medical cannot guarantee that any forward looking statement will materialize and you are cautioned not to place undue reliance on them.
Elise McDonald: We just really for current and potential investors to the forward looking information and risk factor sections of our public filings available on SEDAR at Www, SEDAR Com dossier and on Edgar at SEC Gov.
Elise McDonald: Looking statements made on this conference call represents America's expectations as of today Monday April 1st 2024.
Elise McDonald: Finally, we would like to remind everyone that all figures discussed on this call are in United States dollars.
Elise McDonald: I'll now pass the call over to the medical Chief Executive Officer, Larry heating Larry.
Larry: Thanks Leif.
Larry: I'd like to start by thanking our shareholders for your support.
Larry: Which in our prospective investors and analysts and others are good afternoon, and welcome all to the medical fourth quarter and full year 2023 earnings results.
None: Business update call.
Larry: I'll start by providing an update on the overall business then our Chief Financial Officer, Peter Donato, who will walk you through our financial results and provide a corporate update.
None: After our prepared remarks, we'll open the line and the web to your questions.
None: Earlier today <unk> released its financial results for the quarter and full year ended December 31st 2023.
None: Overall this was another great quarter topping off a remarkable year the best year. So far is dramatic as history.
None: Once again, we delivered record revenues, beating last year's record fourth quarter, while maintaining high margins and reducing operating cash burn.
None: Let me highlight that revenue for the quarter was $7 3 million, reflecting 19% growth over the fourth quarter of 2022.
Almost all of which was produced from the sale of products from previous acquisitions that had been fully integrated.
None: Validating that our strategic plan to acquire integrate and grow is working.
None: Our $25 2 million in revenue for the year was up 33% over 2022.
And 65% of that was from recurring consumable sales, reflecting a solid foundation of recurring revenue that grows with each addition to the install base of our various product platforms.
None: Earlier this year, we provided the forward revenue Guy who says we had reached a certain level of maturity of our business that let's just say that we expect revenues to grow to $31 million to $35 million this year, reflecting up to 40% growth year over year at the high end.
None: As Youre aware, we conducted a special meeting in February to seek approval for a reverse split.
None: Since 60% of the shares that were voted representing 35% of our outstanding shares were voted against the proposal itself.
This was a very clear message to us that our shareholders want to see us regained compliance with the NYSE American price thresholds through organic growth or the share price driven by the performance of the company.
None: We heard you loud and clear and have no plans to reintroduce a reverse split at our upcoming annual meeting.
None: We are committed to continuing to grow revenue maintain high margins and achieve cash flow and profitability as rapidly as possible.
None: We've shared our plans with the NYSE American and they have indicated that they will allow us to remain listed while monitoring our market driven share price with.
None: That would give me and US a date certain deadline for reaching the 20 cent price threshold over a 30 day trailing average.
None: Now to that performance.
None: We've been building our business and delivering record quarterly results that have exceeded our expectations.
None: In the fourth quarter, we announced the expansion of the market opportunity for two former with three new assays for the most commonly performed diagnostic test for canine gastrointestinal disease.
None: One of the top three reasons a dog has brought to the vet is vomiting and diarrhea.
None: Knowing there is a high need for a quick diagnosis. We were pleased to offer three of the most common assays used to diagnose. These cases canine pancreatic lipase cobalamin fall late with the latter two being combined in a single cartridge.
None: We believe through these assays, we could help veterinarians produce better outcomes for pets and pet parents by providing faster diagnostic solutions, while also streamlining their workflow and increasing practice cash flow and profitability.
None: Early in the fourth quarter, we announced the acquisition of structured monitoring products.
[noise] watershed that Guardian.
None: We are pleased with the early indicators and see significant future upside.
None: In October we acquired horrible biotechnologies.
B T focused on the development of point of care diagnostic solutions leveraging their innovative bulk acoustic wave sensor technology and the development of the army at point of care diagnostic platform designed to perform assays for human patients along with the true form up.
None: Point of care diagnostic platform to perform assays for companion animals, which we had marketed previously under license prior to the acquisition.
None: Our primary focus with this acquisition will be on capturing margin improvements by assuming QB Ts manufacturing systems as well as accelerating assay development for the true form a platform.
This acquisition will also allow us to avoid future operating and capital expenses incurred by building, the R&D and manufacturing staff entirely as well as eliminating remaining payments, including license fees transaction fees and future royalties, which would be due to Q V T under the previous agreement.
None: Regarding additional M&A opportunities, we've had quite a busy past couple of years since we've made five acquisitions to build the five product platforms. We are commercializing today as.
None: As we look forward, we will remain opportunistically acquisitive, but with a focus on those acquisitions that not only include products that meet our five pillars.
None: Veterinarians improve the quality of care for their pets dissatisfaction with pet parents, along with improving the workflow cash flow and profitability of their practice.
None: But also focusing on those that would be accretive to earnings shortening our timeline to profitability.
With a strong liquidity position of over $100 million coming into the year and a manageable operating cash burn rate, we remain well funded for the foreseeable future.
None: Before I hand, the call to Peter I want to reiterate that we're happy with what we achieved during the fourth quarter and full year 2023, we look forward to building on this momentum as we continue to be confident of even stronger results in 2024.
None: With that I'll hand, it over to Peter for the financial review and corporate update after his remarks I'll come back to provide some closing comments.
Peter L. Donato: Thank you Larry and good afternoon, everyone.
Peter L. Donato: We start by reviewing the fourth quarter and full year 2023 financial results, providing updates in greater detail on the information that we pre released early in the first quarter.
Peter L. Donato: I reported back in January that I expected revenues.
Peter L. Donato: Around $7 million for the fourth quarter of 2023.
Peter L. Donato: I am pleased to report that the final audited numbers exceeded that figure and came in at just over $7.3 million for the quarter, an increase of nearly $1.1 million and approximately 19% over 2020 twos fourth quarter of $6 $2 million.
Peter L. Donato: The increase was primarily driven by a 16% increase from our therapeutic devices segment led by Paul Stat, and a 144% increase in diagnostics led by true pharma and other newly launched products.
Peter L. Donato: Revenues for the full year 2023 were expected to be around $25 million and again pleased to report came in at a record $25 $2 million, an increase of nearly $6 $3 million and 33% growth year over year.
Peter L. Donato: This growth was driven by a strong 20.
Peter L. Donato: 8% increase in our therapeutic devices segment, including a full year I bet seafood products. In addition, we generated at 252% increase in diagnostics revenue was a record performance from coupons and.
Peter L. Donato: In the fourth quarter consumable revenue grew to over $4 million, an increase of approximately 26% over fourth quarter 2022 revenues of $3 $2 million.
Peter L. Donato: The $4 million in consumable revenue represented 55% of total quarterly revenue up from 52% during 2022.
Consumables revenue going indicator of our ability to sell capital equipment, while increasing utilization from our expanding install base.
Peter L. Donato: Full year consumable revenues were $16 $4 million, an increase of approximately 41% over full year 2022, consumable revenues of $11 $6 million with consumables, representing nearly two thirds or 65% of total revenue up from 61% of total.
Peter L. Donato: Revenue during 2022.
Peter L. Donato: Fourth quarter 2023 capital revenues were $3.3 million up 12% from the previous record fourth quarter, and 2022 of nearly $3 million.
Peter L. Donato: Full year capital revenues were $8 $8 million, an increase of approximately 20% over full year.
Peter L. Donato: In 2022 capital revenue.
Peter L. Donato: $3 million.
We continue to be pleased with the number of devices being put in service in the field, particularly in small animal and mixed debt practices that continue to be a focus area of our company again keep in mind that capital sales are a good leading indicator of future high margin consumables business.
Fourth quarter therapeutic devices segment revenues from pulse spending a C. C products grew to $7 million, an increase of approximately 16% over the fourth quarter 2022 record revenues at the time of $6 million.
Peter L. Donato: Fourth quarter Diagnostics segment revenues were about $363000, an increase of 144% over the fourth quarter of 2022 revenues.
Peter L. Donato: This was driven by significant year over year growth in true pharma sales, including newly launched assays and revenue from the VAT Guardian and tribute products launched during 2023.
Peter L. Donato: We believe the growth you've seen from our true former products will continue as we invest in the development of additional assays and market recently launched assays, including the first assay from horses that were launched in September and three assays for non infectious Gi disease, including our first combination or multiplex cards.
Peter L. Donato: Including two assays that launched at the end of 2023 as Larry noted earlier, our acquisition of <unk> Biotechnologies L. L. C should improve margins and accelerate development to deliver on our commitment to bring new assays to market. During this year of 2024.
Peter L. Donato: Yeah.
Peter L. Donato: Gross profit for the fourth quarter of 2023 was $5 $1 million compared to $4 $2 million in the fourth quarter of 2022 and gross profit for the full year 2023.
Peter L. Donato: Top 17 million at $17 $3 million compared to about 13, and a half million dollars in 2022.
Peter L. Donato: Gross profit margin for the fourth quarter was 69% that's up slightly from last year's 60%.
Peter L. Donato: While full year 2023 gross profit margin was also 69% down slightly from last year's full year, 71%.
Peter L. Donato: Last year, meaning full year 'twenty to 'twenty two.
Peter L. Donato: Marriott's was primarily due to the integration and launch of several new products product mix impacts associated with sales of these new offerings and price increase it's a certain component parts.
Peter L. Donato: Operating expenses for the fourth quarter of 2023 or $16 $5 million compared to $9 $3 million in the same period of 2022.
Peter L. Donato: It's an increase of $7 $2 million, however, nearly half for approximately three and a half million dollars or nonrecurring charges directly attributable to acquisitions and related integration.
Peter L. Donato: Operating expenses for the full year 2023 were $48 $9 million compared with $35 4 million during full year 2022.
Peter L. Donato: Approximately $5 $4 million represented non recurring charges again, primarily related to acquisitions and related integration.
Peter L. Donato: These included professional and legal services acquisition related travel and separation costs as well as many other expenses that are not expected to reoccur during this year in 2024.
Peter L. Donato: The staffing nonrecurring one time items total opex rose by about 23%, while our sales as mentioned grew 33%. This reflects an increase in operating leverage and we expect this to continue during 2024.
Peter L. Donato: In the fourth quarter R&D expense was just over $3 million at $3 $1 million compared to about $700000 in the fourth quarter of 2022.
Peter L. Donato: Oh $2.4 million, but once again included nonrecurring charges of about a million and a half dollars most of them related to the acquisition of Q P. T.
Peter L. Donato: Research and development expense for the full year, 2023 was $5 $7 million compared to $2 $6 million. During 'twenty 'twenty. Two that's an increase of just over $3 million, but nearly three quarters of that increase consisted once again of nonrecurring onetime charges totaling two.
Peter L. Donato: Point $3 million associated with the acquisition and integration of Q V. T. The remaining $800000 yourselves were primarily related to accelerating the development of new assays.
Peter L. Donato: In the fourth quarter sales and marketing spend was $4 $3 million compared to $3 $4 million. During the same period of 2022 with most of the increase being driven by increases in sales personnel and increases in marketing activities like trade shows that were expanded.
Peter L. Donato: 2023 to include several new product offerings, especially that was launched during 2023.
Peter L. Donato: Selling and marketing expense was $14 $1 million for the full year 2022. Three this compares to just under 10 million or nine $9 million for the full year 2022, an increase of $4 $2 million or 43% the increase in selling and marketing expenses.
Peter L. Donato: We're primarily driven by salaries associated with increased hiring related to the territory sales territory expansion.
Peter L. Donato: Increases in marketing campaigns and attendance at trade shows.
These continue to build brand awareness and recognition for our expanding suite of products, there's more products in 2023.
Peter L. Donato: For the fourth quarter of 2023, G&A expense top $9 million at $9 $1 million as compared to $5 $2 million during the fourth quarter of 2022.
Peter L. Donato: Within the $3 $9 million increase or about one $9 million nonrecurring charges, one time charges such as expenses related to the Q V T acquisition and integration.
Peter L. Donato: Included in lay offs and severance charges. In addition, we incurred professional services charges increases such as technical accounting and project management fees legal fees tax expenses and management transition fees.
Peter L. Donato: The remaining $2 million of the increase was primarily driven by administrative and software costs and depreciation and amortization expenses related to our recent acquisition. Additionally, the increases reflected added cost for rent for the newly acquired and expanded facilities increase in staffing and the.
Peter L. Donato: Area to meet the growing demand in specialized areas plus ad hoc consulting fees.
G&A expense for the full year 2023 was $29 million, reflecting 115% of sales that's down from 121% of sales that the G&A expense of $22 $9 million represented back in 2022.
Peter L. Donato: When adjusting for onetime items G&A falls to less than 103% of sales demonstrating the early stages of leverage on the G&A line.
Peter L. Donato: Net loss for the fourth quarter was $22 $4 million and net loss for the full year 2023 was 34 and a half million dollars, a roughly three and a half cents per share compared to a net loss of $17 million or about 1.7 cents per share back in 2022.
Peter L. Donato: The difference of 17 and a half million dollars is nearly all attributable to one time charges with the largest charge of $11 $7 million relating to a one time impairment charge related to the acquisition of the a C. C product line with the remaining $5 $4 million and other one.
Peter L. Donato: One time items, including executive management transitions professional service fees and other acquisition and integration related costs.
Peter L. Donato: As you can see our net loss when adjusted for one timers is relatively flat with the full fiscal year 2022, that's a good accomplishment given all the investment and activities that were required to grow our business so rapidly.
Let me pause for a moment and give you some additional insight into the impairment charge, we took in the fourth quarter related to these PC product line.
Peter L. Donato: While we've been very pleased with the revenue contribution to date from our current customer base with only one product offering for the retail consumer base, we made a decision to forgo a sizable future new investment and widespread direct to consumer marketing like TV ads necessary to attract.
New retail.
Peter L. Donato: Retail customers.
Peter L. Donato: In making this decision we're able to reallocate those investment dollars to higher growth opportunity in our diagnostics segment without further delaying profitability by making these investments.
Peter L. Donato: We will revisit this decision and other opportunities in the future as we get closer to profitability or add products that have future appeal for retail markets.
Peter L. Donato: Turning to the balance sheet. So America ended the fourth quarter and full year with $105 million in cash cash equivalents and available for sale securities.
Peter L. Donato: Cash used in the fourth quarter was about $17 $5 million.
Peter L. Donato: Nearly $15 million for acquisitions investments and one time items with the remaining $2 $6 million used for operating expenses.
Peter L. Donato: It was lower than our recent operating barn, which is usually closer to $3 million per quarter.
Peter L. Donato: After adjusting for nonrecurring onetime expenses, we used approximately $10 $8 million of cash for the full year averages to about $2 $7 million per quarter. During 2023. This number is a good number and well below our historical averages, which tended to be $3 million or even.
Peter L. Donato: Even as high as $4 million per quarter.
Peter L. Donato: As a reminder, we have zero debt.
None: Now turning to guidance, Larry already mentioned some of it.
None: And we announced it back at our January 17th business update call that we were in introducing formal forward looking revenue guidance for the first time in company history, I will reiterate that guidance for 'twenty 'twenty four as we expect revenue in the range of $31 million and $35 million for full year 'twenty 'twenty four.
None: And as Larry said that could be an increase about 40% over 2023 at the high end of the range.
None: As stated at our February Investor Day, we expect 90% to 95% or more of the $31 million to $35 million in annual revenue guidance to be derived from the products in our therapeutic devices segment with the balance and any potential upside coming from our newer products and the diagnose.
None: Second place.
None: Please remember our business is impacted by seasonality, but the first quarter being the lowest and the majority of revenues coming in the back half of the year.
We expect similar trends in 2024, and we expect sequential increases in revenue as we progress throughout the year.
None: Our operating expenses were approximately 194% of sales on a GAAP basis during 2023 and approximately 173% of sales when adjusted for one time items, we do expect to improve on these figures during 2024.
None: With all of that said, we expect to burn $12 million to $18 million of cash from operations. This includes the potential capex during 2024.
None: And $25 million to $35 million total cash burn before turning cash flow positive.
None: As you can see our cash flow balances will remain very strong with no immediate need to raise or borrow capital in the current market.
None: And as Larry mentioned earlier following our special meeting vote held back in February we have discussions with the New York Stock Exchange American related to our ongoing listing on that exchange.
None: It was agreed that somatic, but will remain listed but at the discretion of the exchange as it continues to monitor our share price.
None: The company will continue to evaluate curative measures with our primary focus there won't be on the will be on driving continued performance of the business. So we can regain compliance with share price requirements organically too.
None: That point, we respect our shareholders collective decision to reject it.
None: Proposal for a reverse split.
None: And as such as Larry indicated, we will not be including a reverse split proposal at the upcoming annual shareholder meeting.
None: As we look beyond 2024 in addition to growing the scale of our business. We will continue to focus on profitability. We had previously commented that we expect to be cash flow profitable or breakeven when we reach annual revenue run rates at or slightly above $40 million in revenue.
None: However, as we work through the integrations of the acquisitions that I mentioned made during 2023 in particular the acquisition of <unk> Biotechnologies.
We evaluated that we needed what we needed to achieve our long term targets and saw what we saw was that were incremental investments needed to support our long term success. Given these investments we now expect to achieve cash flow breakeven or profitability and an annual run rate of approximately $50 million.
None: Which we expect to achieve at some point during late 2025.
None: For some additional context, when we acquired to be T. We not only acquired skilled personnel, a new facility and manufacturing capabilities that will allow us to reduce the cost of goods from what we had been paying to be T. We also acquired valuable finished goods component parts and both laboratory and manufacturing equipment.
This will reduce future product and operating as well as capital expenditures. We also eliminated a 5% perpetual royalty on future sales of true form of cartridges, and where do they kick in right about now.
None: The flip side of these positive impacts on margins and capital requirements over the coming years.
None: We had significant one time expenses in the fourth quarter as we rightsize and integrated this business and we have somewhat higher operating expenses in the short term relative to current true form of revenue. So when looking at the business as a whole. This was the right decision the right thing to do especially since we also gained control over the pace.
None: At which we can develop and launch new assays.
None: While we understand the importance of achieving profitability. We also understand that by allocating resources to drive sustainable industry, leading brands, we can create a business capable of sustainably generating over $100 million in revenue that is also profitable and in the long term more valuable to our share.
None: It is important to note that our investment in growth does not imply that we will need to raise capital our significant liquidity gives us the ability to continue to invest without the need for further dilution or any dilution.
None: I'll hand, the call back over to Larry for final remarks, before the Q&A session.
Larry: Thanks Peter.
Larry: So that's a lot of review.
Larry: That's how we got where we are.
But less than 30 employees in 2022 around 150 today.
Larry: From no products on the market in 2022, five product platforms ramping sales today from.
Larry: No internal manufacturing in 2020 to manufacturing all of our own products today and from zero in revenue in 2000 $20 million to $4 million in 'twenty $1 million to $19 million and 22 and $25 million last year.
None: Now, let's talk about where we're headed.
None: Of course, as Peter just mentioned an important and our nearest term goal is to reach cash flow breakeven positive EBITDA and GAAP profitability.
Haven't reconfirmed that it's also important to note that we have built our infrastructure to scale the company well beyond current revenue levels, and a $50 million revenue run rate needed to achieve profitability.
None: Becoming a profitable company with 50 million in revenue is an important milestone and I'm told it would put us in the top 50 animal health care companies in the country.
None: But to truly drive value for our shareholders. Our sights are set on first $50 million, then $100 million and beyond.
As we build to these levels with our industry, leading margins, we expect that the market will recognize the tremendous value represented by somatic of shares.
None: This is why are we not only acquire the rights to sell new products, we buy the technology and our companies outright.
None: New product development and manufacture the products ourselves.
None: And invest in the infrastructure needed to scale the business to well over 100 million in annual sales.
None: We're incredibly excited about the future of America and its prospects as we have a strategic plan to reach these levels with our current product portfolio.
None: With any additional acquisitions and accelerating our timelines.
We expect to achieve a $50 million annual run rate by the end of next year and $100 million run rate two years after that.
None: But for now let's focus on 2024, which we entered from a position of strength come in as a result of the great work. Our team has done to position us for success.
None: We have a number of initiatives in process to help drive growth in 2024, it would be odd which include first expanding our maturing sales organization.
None: As you May have heard we recruited a new head of sales very experienced at building high performing sales teams and the animal health industry.
None: His leadership combined with expanding the number of sales territories in the United States and benefiting from the extended the tenure of our sales team all contribute to our high confidence in sales growth in the U S from our direct sales efforts.
None: Second it gaining leverage from distribution partners.
None: In conjunction with our direct sales force, we have been expanding our relationships with U S based animal health distributors, including co veteran Patterson and Wi Midwest and others, which now carry our FCC advert Guardian products and in select cases are pools that products as well with their 100.
None: A sales representatives across the country, who have long standing deep relationships with veterinary practices, we expect significant growth from this channel both directly and in collaboration with our direct salespeople.
Third.
None: International expansion.
None: We currently generate about 20% of our revenue by selling only our FCC and pulse that products in certain international markets.
None: This year, we are both expanding the number of countries in which these first few products are sold.
And also preparing our true pharma that Guardian, and <unk> products for international launch now.
None: Now this requires complying with some fairly straightforward labeling requirements country by country, which we are finalizing now and expect to begin the first of these launches in the first half of this year.
None: With respect to specific products, we're executing plans to drive their growth through a variety of initiatives.
None: All said, we have multiple future growth drivers, including increasing installed base.
None: And increasing our consumable crowed utilization by expanding clinical indications for use.
None: As our mature sales representatives gain experience in the field there rate of selling new pulse that systems increases and collaboration with animal health distributors opens new doors for them to gain entree into new practices.
None: Our investment in marketing activities and trade shows to survive the university to social media and web based initiatives is paying off as we are seeing increasing number.
None: These are small animal veterinarians.
None: All of these factors helped drive increases in our pulse that installed base.
None: Additionally, we support clinical research focused on expanding the ways in which veterinarians use the pulse of that system.
For example, recent published peer reviewed reports of clinical studies I've read for reinforced pulse that Shockwave therapy has been an optimal solution for working dogs suffering from the quote virtually impossible to successfully treat unquote fibrotic myopathy that they encounter by <unk>.
None: Sending their working life on average up 32 months.
None: And for horses afflicted with bleeder, and more recently equine asthma, which affects approximately 14% of adult horses.
None: Our marketing team will now execute market development plans to translate this clinical data into increased deployment of pulse that systems, along with increased usage for these new indications.
None: While these two a significant themselves. We're also awaiting study results from a university in the United States and one in Germany, both studying the potential for power pulse <unk>.
None: <unk> therapy to delay or even prevent the onset of osteoarthritis in dogs.
None: Shockwave has a great treatment option for canine OA it would be even better to see it used prophylactically for the prevention of the condition in the first place.
None: For <unk> and 'twenty 'twenty four we expect to steadily increase the installed base through the combined efforts of our marketing and sales teams.
None: We also expect to launch it in international markets and later in the year to introduce AI interpretations of scanned images, providing a new source of recurring revenue to add to that monthly subscriptions and pathology interpretations currently offered.
None: For true pharma every time, we launch a new assay, we not only provide a seamless way for our current installed base to begin to use it with no additional customer acquisition costs on our part.
None: But we also facilitate expansion of the installed base by providing it to accounts that have a particular need for it which in turn provides opportunities to cross sell all of our previously available assays.
None: We will be launching several new assays in 2020 for at least four during the course of the year for both small animals and horses, our acquisition of <unk> gives us the ability to develop them at our own pace and we intend to accelerate new assay development in the coming quarters.
None: Well that Guardian, we're seeing increased traction in the animal health market and see an opportunity to place not one but multiple monitors and a single practice.
None: As accounts gained comfort with their first monitor many have come back for more and we're seeing customers purchase multiple monitors from the outset.
None: Further fueling growth will be the activities of the U S animal health distributors at our upcoming launch into international markets.
None: Following completion of our development projects into the equine market as well towards the end of this year.
None: With a total addressable market for recurring annual sales of our existing products in the U S of well over $2 billion. Currently we have barely scratched the surface, we have lots of opportunity for growth across our product lines and are currently about the business of seizing that opportunity.
None: So let me end our prepared remarks by again thanking those that have been supportive of America, including animal health professionals and pet parents worldwide and the many shareholders Zee medical.
None: With that I'd be happy to open the line for questions.
None: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your questions in the queue.
None: In the interest of time, we ask the participants limit themselves to one question and one follow up and re queue for any additional questions.
None: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
None: One moment, please while we poll for questions.
Thank you. Our first question is from will be out of Cordero with iron ore. Please proceed with your question.
None: Yeah.
Cordero: Hi, everyone.
Cordero: Got it got.
Cordero: It made it I mean, we were so surprised.
Cordero: You got that.
Cordero: My question is so from my understanding there's no numbers.
Cordero: No mentioning of reverse split over the next year right.
None: That's correct.
None: And if for any reason.
None: The stock exchange asks for any.
None: Any.
None: Paperwork or idea.
None: Did they mentioned anything like that in the near future.
Yeah.
None: So.
None: Stock exchange.
None: Yes.
None: Various standards to remain listed and one of them is the one we've been focusing on which is our share price, but there are also other.
None: Requirements. For example, you have to file certain filings on time, and you have to maintain certain equity capital requirements and so depending on the situation.
None: But I've seen the exchange do is in some cases they'll give people additional time to get there finally done and they give them a deadline or they give them additional time to get additional equity into the business that they give them a deadline in our case when we spoke with the exchange of I should say senior regulatory personnel from the exchange.
None: He indicated that our stock would remain listed but that they would continue to monitor it.
None: You know all of a sudden fell to unacceptable levels, then they would revisit it but they did not give us any data upon which by which we needed to regain compliance. So there's a little bit of a misconception that there might be some kind of a form that you submitted to the reorder request, an extension or something like that that's not really the way that it works.
None: We had a conversation with the exchange.
All of US would remain listed they didn't tell us they didn't give us a deadline and we're very pleased with that outcome and we're going to work very hard to regain compliance organically as we move forward.
None: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
None: Okay.
None: While we're waiting for questions over the phone line I think we can take some we have several questions that have come in over the web.
None: And so we'll start.
None: I'll start with us.
None: One of the questions is when will we expand <unk> products to Portugal.
None:
None: And so the answer to that will be we currently do so our pulse that products for equine use.
None: In Portugal through our master distributor grow that.
None: That handle sales of equine products across Europe.
None: And we are as I mentioned earlier, we're working on getting the CE marking for <unk>.
True form a true view and bad Guardian, we've actually seen interest.
None: From many countries in Europe and as soon as we get the labeling requirements are settled we're in conversations with multiple distributors and we expect to begin selling internationally. Some of our other products in the first half and certainly by the end of the year, we expect to have all of them on the market throughout maybe not in every single country.
None: But in those distributors that we currently have and well be adding some new ones as well.
None: [laughter], let's see which assets do you expect to be the most used for true form of this year.
None: Oh, I think it's gonna be a I was going to say a horse race, but maybe it's a horse and dog race right. So on the equine side, we launched last September I E Y E ACTH assay, which is used to.
None: Help diagnose horses or I should say is the definitive diagnostic test for horses suspected of equine cushings disease are two or three parts intermedia dysfunction.
This affects a lot of horses prevalence on horses over the age of 15 is about 25% and it's not just a one off test. So in other words you do the test of the horse that show signs if they're positive for it.
None: Now you have a baseline you began.
None: Ty trading them you put them on a drug you began tight trading that drug that requires many more tests over the over the first couple of months and then attached to every quarter or every six months, depending upon how the best abuse. It for the rest of that horses life.
None: And the horses lifts to about 30.
If they are on the bubble there not quite sure if they have it or not.
None: They do a couple more E S E T H and and whats called the trh stem in between so lots and lots of opportunity for ACTH, we're coming into the spring season, which is when they do a lot of that testing, we expect very strong sales.
None: From that segment.
None: And the other half that starts right now offerings.
None: <unk> canine pancreatic lipase.
None: If you have a dog in that diarrhea, vomiting, and you bring it to the vet. The first thing that the vet wants to do needs to do is to rule out of pancreatitis.
None: And the way you do that is the test of CPO and there is no point of care diagnostic available today and so as a result, they have to say that out to the reference lab. This is a product that we have already seen good traction with and we expect this is really going to not only drive our utilization in our existing install base.
None: But it's going to be the reason why many accounts to actually bring it in in the first place.
None: So I would say C. P O equate ACTH right behind that cortisol, maybe then kibali being a folate, but we'll see as we move throughout the year.
None: When do we expect that guardian to be used in horses as I mentioned it'll be by the end of the year. We're working on that now you know currently the vet Guardian is is outside of the cage that the animals in and it's pointed at the animal when you instead are looking at a horse here in a much bigger stall they're moving around.
So it's not the exact same product, but our team is working on that right now and just as soon as we can we'll get that out because there is substantial interest by not only equine vets that also potentially horse owners.
None: He might want to have it just for safety sake, and generally a horse owners tend to be.
None: In a demographic that they can afford the technology. So we're definitely bullish on that particular product in that application as well.
None: Many have asked geoscience launch this year, we have used for a couple for for equine and in fact.
None: Now as it turns out about 30% of horses that have P. P. I D also have epsilon dysfunction.
None: And so oftentimes what we're hearing from equine vets is they want to test both ACTH and insulin at the same time.
None: So we have a program underway right now to bring equally insolent testing to the true form a device in the near term.
None: And then we have a couple of products, we have an insulin and cortisol for horses, and then probing P and one other one both for for small animals for cardiac issues heart trouble and also for for reproduction. So we expect those to be popular and there should be out of the other.
None: That would be doing this year is it's working on more of our multiplexed cartridges. So you can imagine we have not only a ACTH, but also insulin individually and then we have one with both reasonably like multiplex cartridges is because from a cost of goods standpoint, it's only slightly more expensive to put two assays.
None: On one cartridge than it is to build a single assay on the cartridge and yet we're able to charge substantially more because the value is there theyre getting two assays.
None: In one partridge and doing it at the same time. So we're super excited about that and then we frankly expect to accelerate assay development moving into 2025, as we get our arms around.
None: The whole process and streamline it as we move forward.
None: Is buyback still an option for gaining compliance.
None: Did you want to take that one yeah. So we've been very clear and very consistent there was no buyback planned first half and the reasons being first off buying back the shares won't get us into compliance right, where there's not a number out there that would likely drive us.
None: 20, and keep us above the 20th.
None: And we've also stated very publicly in the message remains consistent.
None: We believe the better use of cash is to fund all the great things, we talked about today on the call whether it's.
Accelerating integration, bringing products to market faster going internationally, all all of those things or if Greg and company find something for us to buy we want to be prepared to do that so so theres no buyback Larry planned at this time.
None: Thanks, Peter and operator, I think you have another.
None: Question on the phone on a switched back to that for a moment.
None: Our next question is from Ob other OCA dairy with Pandora. Please proceed with your question.
None: Yeah.
OCA dairy: Thank you so much that they already asked that question. Thank you so much about the buyback I really appreciate it.
None: Okay excellent.
None: Our next question, Okay, Shane Wilson.
None: Yeah.
None: Our next question is from Shane Wilson with no medical. Please proceed with your question.
Shane Wilson: Got it and can you guys hear me.
Shane Wilson: Yes.
Shane Wilson: Okay. So I've been in here for almost about four years retail here I was wondering have you guys considered in getting into rep opinions of like bearded Dragons iguana Boa constrictors, because you know a pet owner and then all of that they expand beyond having dogs, there, but I have to my own I just didn't know if you guys forever considering in that.
Shane Wilson: Into that area at some point.
Shane Wilson: Into exotic animals is that the question sorry, yes, yes.
Dragging I don't think Bose, yes, iguanas stuff like that.
Shane Wilson: So I will tell you that.
Shane Wilson: From a market standpoint.
Shane Wilson: That's probably not going to be a major focus of the company at this point because theres, so much opportunity with small animals and horses and so on I will tell you though that.
Shane Wilson: From time to time, we do help people right, we've treated with post that elephants. The other day I was on foot.
Shane Wilson: We treat it at the San Diego Sue I'm, sorry, the San Diego.
Shane Wilson: What do you call a water park aquarium or what have you Seaworld seaworld.
Shane Wilson: We we treated a ceiling and we treat it two or three animals there.
Shane Wilson: The Guardian has been used with exotic animals for poor transport, where they're closely confined in a cage.
Shane Wilson: I've actually told by an exotic that did that.
Shane Wilson: That's perfect because unlike a cat or a dog that you can keep you know.
You are checking on manually or.
Shane Wilson: With human hands after they've had surgery, where the Tigers are they have a first swallow rule, meaning the first swap first swallow they observed but it's no more hands on because they want to keep keep their hands. So you.
Shane Wilson: We do from time to time, we Oh, we definitely.
Shane Wilson: Engage with the vets that are have some.
Questions or a special interests, we'll send out professional services that over.
None: Honestly, it's not a large enough market for us to allocate resources to at this time.
None: Cool.
Right.
None: I think we have time for couple more questions online.
None: Okay.
None: So let's see here.
None: Any plans to use our technology in humans, there are a number of questions around bad.
None: That are here online. So let me just kind of aggregate that together and say that when we acquired the.
None: Cornwell biotech company.
None: We acquired the whole thing and that includes a program for human use.
None: News programming.
None: Focus on Poland.
None: And you know I think we probably all are pretty comfortable with the fact that theres plenty of testing options for COVID-19 out there so.
None: But it doesn't it doesn't.
None: It doesn't eliminate the fact that the technology is incredibly good.
None: And we do suspect that as we gain traction in the veterinary market and we demonstrate the myriad of <expletive> of assays that we can do uniquely that can't be done by other point of care diagnostics for vets that we will see interest in that and the human application for that we have no plans ourselves to pivot to be coming to humans.
Company as certainly anytime in the near future and certainly not before we build it to a to a significant of animal health company, but there may be opportunities for us to monetize that AR technology of that program, which is complete with clinical data and all sorts of.
None: You know the the regulatory.
None: Occupancy and so on and so forth, it's all pristine ready for a buyer should they choose to to have an interest in it and I'll also say that along with that are true view microscope, which we are pioneering as first microscope ever that has the ability to to prep the slide for the technician.
None: We've actually had a few a few human clinics that have asked if it's applicable it is not today.
None: There would need to be a lot of regulatory things that are done.
But we do see that as a potential opportunity in the future.
None: For further further monetization of that technology.
None: Other products, we have are pretty much limited to the animal health applications for them.
None: So we wouldn't see we wouldn't expect to see them.
None: You know applied to human use by us.
None: It'll be other companies that are that do that.
None: Okay. Here's one how long is your formal 2020 for revenue guidance of 31 to 35 million. This year factoring in revenue from new M&A opportunities that we hope to close in 2024, and that's a very straightforward no. It does not that guidance is just based on our existing products.
None: As is our strategic plan, which takes us to $50 million run rate.
None: Right, which means 12, and a half million in a quarter by the end of next year 25.
None: 100 million two years after that in 'twenty run rate.
None: In 2027.
None: So any additional acquisitions would be.
None: Would help us get to profitability sooner.
None: There've been some questions here on G&A.
None: And it's it's relative.
None: The size of its size relative to our revenue did you want to handle that one yeah.
None: Yeah, we're in line with our peers.
None: Go back I had spoke very at length at the Investor Day that if you go back and look at some of the more successful publicly traded ones with high valuations. If you look back at their startups were actually lower.
None: No ma'am.
None: It's inflated right now right I can see if you were just looking at a GAAP basis. That's why I tried in my prepared remarks to highlight.
None: The nonrecurring charges that set right you know when you add new businesses and you're growing it up to 40% a year.
We're gonna have to add back office people keep in mind that this that you know when I joined the company I think I was employee 45, or 46 and that was like 13 months ago. We have 150 people today and most of that was almost all of them have been adding added outside of admin. So I wouldn't say that there's always work to be done if you listened in my prepared remarks.
None: We are starting to see leverage on that line and as we grow the top line you know, it's going to grow at a much more rapid pace than the G&A line.
None: Excellent here's wasn't it.
None: It's a little interesting.
It is.
None: It has to do with.
None: Concerns about meeting profitability year over year, and I think we've addressed that what is the vision and will you post your milestones absolutely.
None: And then also and here's why it's interesting why does the company delete.
None: Posts.
None: From investors of <unk>.
None: <unk> from voicing concerns on social media platforms isn't all advertisement is good or free advertisement and I will tell you that you know when we were.
None: Pursuing a reverse stock split we noticed that our social media platforms that were designed to market our products to veterinarians and to individuals.
None: We noticed that some of the remarks that were coming up.
None: It had to do with.
None: The company itself the leadership of the company and they were all about the reverse split.
None: And we just felt like that while we certainly solicited input during that process from various message boards, including we ball and say Robin Hood.
None: We had a an IR firm, reaching out to to investors to make sure that we understood or heard what they were saying.
None: We just figured we had enough input from investors on those platforms that we could potentially.
None: Cutoff comments on Instagram.
None: Instagram, where you have a.
None: Hey.
None: That's an area that just got our technology and was happy about it and we're singing its praises we just felt that was he was probably not the best platform for getting input from investors are if that.
None: It was aggravating to folks then I would apologize for that but.
None: That was a decision that we made.
None: Oh, there's lots and lots of questions.
None: Questions here about.
None:
None: You know the stock price and I would just say that you know, we we understand that that's a concern for everyone.
None: We welcome any suggestions or input that you may have a R. E mail is available we ask questions on the various platforms. All the time, please feel free to provide your input there we look forward to it.
None: But at the end of the day, we're committed to building our shareholder value by building the value of the company by increasing revenue maintaining high margins, reducing expenses as a percentage of sales as I mentioned earlier, we've scaled the company the infrastructure of the company.
None: To be a public company that is rapidly growing and will grow to beyond well beyond our $25 million last year to $31 million to $35 million. This year, our run rate of $50 million by the end of next year, our run rate of $100 million by two years after that and we expect that as we do that the stock price will will be.
Given by the market to whatever level of the market feels appropriate.
None: And with that I think we're.
None: Pretty darn out in time, Pete any closing remarks, no I think we said it best and I appreciate everybody.
Pete: Participating today, it's always great to have shareholder involvement I thought the questions were really good at and challenge. This management team and we look forward to speaking to everyone at the end of the first quarter.
Pete: Paul back to you well actually I just have one more I think I got to stick. This one more question.
Paul Stat: Well true pharma eventually have assays for woodchucks and if so how much would would've would China Chuck could check with I don't know the answer that one but I won't time ask Alexa and she gave me an answer so I would suggest you go to Alexa.
None: She has an answering with that fight harder without lighthearted remark I'll turn it back to you to bring us all.
None: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
None: Thank you.
None: Okay.
None: Yeah.