Q1 2025 Zomedica Corp Earnings Call
Yeah.
Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the America first quarter 'twenty to 'twenty five earnings call.
Speaker Change: This time all lines are in a listen only mode.
Speaker Change: Following the presentation, we will conduct a question and answer session.
Speaker Change: At any time during this call you require immediate assistance. Please press star zero for the operator.
Speaker Change: This call is being recorded on Thursday may 15 2025.
Speaker Change: I would now like to turn the conference over to Jason Westfahl Senior Director F. BNA. Please go ahead.
Jason Westfahl: Thank you operator, and good afternoon, ladies and gentlemen.
Jason Westfahl: Welcome to the Americas first quarter 2025 earnings results and business update call.
Jason Westfahl: Joining me on today's call are somatic as Chief Executive Officer, where he and Mike <unk>, Our vice President of finance and corporate controller.
Jason Westfahl: Before we begin we would like to remind everyone that on this call, we will be making various remarks about future expectations.
Jason Westfahl: And prospects that constitute forward looking statements.
Jason Westfahl: These forward looking statements are based on assumptions and there are risks that results may differ materially from those statements as.
Jason Westfahl: As such so America cannot guarantee that any forward looking statements will materialize and you are cautioned not to place undue reliance on them.
Jason Westfahl: When we refer and potential investors to the forward looking information and risk factor sections of our public filings available on SEDAR plus.
Jason Westfahl: At Www Dot SEDAR plus Dot C H.
Jason Westfahl: And on the editor and FCC Duck Duck.
Jason Westfahl: Forward looking statements made on this conference call represents America's expectations as of today May 15 2025.
Larry: I will now pass the call over to the Americas, Chief Executive Officer, Larry <unk>.
Larry: Thanks, Jason.
Speaker Change: I'd like to start by thanking our shareholders for your support wishing prospective investors analysts and others are good afternoon, and welcoming all towards the medical first quarter 2025 earnings results and business update call.
Larry: I'll start today by providing an update on our recent operational performance followed by a financial update for Mike <unk>, Our Vice President of finance and corporate controller and.
Larry: And then we'll open the line for questions.
Larry: Mike is representing somatic of finance since as previously announced in an 8-K filing our chief Financial Officer resigned for personal reasons in late April.
Larry: And you are in good hands with Mike leading the finance team.
Larry: The first quarter marked yet another period of solid execution across our business, resulting in the 17th quarter in a row.
Larry: Of year over year record revenue for the quarter.
Larry: We delivered revenue of $6 5 million in the first quarter, reflecting 4% growth over the prior year quarter, primarily driven by the continued strength of our therapeutic devices segment as a result of our well established leadership position with our pulse that platform as well as strong performance within our two Florida and true view product lines.
Larry: We made continued progress within each of our key initiatives throughout the quarter to help drive growth and ultimately reach cash flow breakeven and GAAP profitability.
Larry: I'll start with our continued push into the equine market.
Larry: In the quarter, we bolstered our commercial organization with the addition of key roles capital equipment specialists, who will work with our full wide salespeople to accelerate the adoption of our pulse that platform along with our other capital equipment products and an additional equine professional services veterinarian.
Larry: In combination these roles will help drive both accelerated adoption of pulse vet therapy within the equine market, while also driving increasing utilization.
Larry: Our consumable pulse that drops.
Larry: To that end, we continue to increase the utility of our technologies within new equine focused indications, including the application of pulse fat to treat asthma for which we just launched the equine asthma clinical registry.
Larry: As well as a broader range of true form of assays, including our ACTH assay for the diagnosis of P. P. I D are equally cushings disease, which affects over 30% of horses over 15 years of age.
Larry: Our equine insulin assay for the diagnosis of equine metabolic disorder, which affects 15 per cent of horses over seven years old.
Larry: Our cortisol assay for distressed holes and coming soon our equine progesterone assay used in breathing.
Larry: We've already seen the positive impacts of these initiatives during the first quarter and expect to see continued growth within the equine market across our applicable product offerings.
Larry: Our next initiative has been expansion into key international markets and associated revenue growth.
Larry: With a significant work done by our clinical regulatory and commercial teams during 'twenty 'twenty four alright.
Larry: Our entire portfolio is eligible to be sold into markets in the EU as well as other countries that accept the CE Mark.
Larry: And we made significant headway in developing relationships with leading distributors in new international markets.
Larry: These efforts will allow us to tap into incremental revenue opportunities that we haven't had access to previously.
Larry: We're already seeing the benefits of these efforts as international revenue grew approximately 32% year over year.
Larry: Metric that we expect to remain strong as we move through the balance of 2025.
Larry: Another key component of our growth strategy is the expansion of our true form a platform.
Larry: In 'twenty 'twenty four we launched five new assays, all of which are performing well with the demand for these new assays alongside the broad menu of assays currently available on the platform, we were able to drive 41% year over year growth during the quarter.
Larry: We continue to bring new assays to market in 2025.
Larry: Following the launch of our initial E C. T H assay in September of last year, we leveraged data collected from its use in the field to expand its capabilities and potential utility.
Larry: During the first quarter of 2025, we launched an enhanced E C T H assay, which now exclusively.
Larry: <unk> distinct values for both full length ACTH and its derivative clip.
Larry: In addition to the combination of the two values.
Larry: That are offered by reference labs.
Larry: This advancement provides new insights that you can only get through the true form a platform that we believe will lead to a significant advance in the diagnosis of pituitary Power's intermediate dysfunction or P. P. I D. A common endocrine disorder, which as I mentioned affects 30 per cent of horses over 15 years of age.
Larry: And in case you were wondering of course is generally up to around 30.
Larry: Beyond innovation within our core product lines, we continue to look for ways to expand our portfolio of innovative products to help veterinarians provide the best care possible for your pets.
Larry: In January we announced a distribution agreement with Chris a lot of biotech company or it's better gel hemostatic gel product line.
Larry: The agreement granted us exclusive rights to distribute better gel hemostatic, Joe in the United States and a non exclusive right to distribute it and the rest of the world.
Larry: While revenue in the first quarter from better Joe was limited we're excited about the potential for it to contribute more meaningfully throughout 2025 as we now have our sales force fully trained on the product.
Larry: I'll turn now to an operational update over the last three years, we've invested in our infrastructure to be able to accommodate growing demand for our products. While at the same time, allowing us to improve efficiency and reduce costs as we continue to scale the business.
Larry: These investments and strategic decisions will support our growth and improve our overall cost structure are critical component of our strategy to drive towards cash flow breakeven and GAAP profitability as soon as possible.
Larry: Our expanded manufacturing and distribution facility in Roswell, Georgia, as well as the automated robotic manufacturing line in our Minnesota plant are already paying dividends.
Larry: In the first quarter. We also relocated our headquarters in Ann Arbor, Michigan to a smaller facility, which has allowed us to cut costs and improve efficiency efficiency, which will reduce overhead costs by over 200000 annually.
Larry: As we mentioned during our last call we're focused on reducing our operating expenses both in real cash terms as well as in its percentage of revenue.
Larry: During the quarter, we made progress in this area as we reduced actual cash operating expenses, which includes or excludes impairment.
Larry: By $1.2 million or 10% compared to the first quarter of last year, and 1 million or 9% compared to the last quarter of last year. So both year over year and sequentially our cash expenses are down.
Larry: This remains a major focus and we expect to continue to reduce our cash operating expenses throughout the year, both in real dollars and as a percentage of revenue.
Larry: The first quarter represented another solid period of execution for somatic out the groundwork laid in 2024 and early 2025 have set us up to deliver accelerating year over year growth throughout the balance of this year and position us well to drive increasing operational efficiencies as we move towards our path to profitability.
Mike: So with that I'd like to turn the call over to Mike for a financial update Mike.
Mike: Thanks, Larry.
Larry: Welcome to all of our all our call participants and thank you for your continued interest in America.
Larry: I'd also like to say, thank you to our shareholders, who continue to support the long term strategy of Zelle Medica.
Larry: Total revenue for the first quarter was a first quarter record of $6 $5 million, an increase of 4% driven by double digit growth of consumables as a result of the increasing utilization of true form of assays impulse that troops.
Larry: Capital revenues in the first quarter were $2 million as we continued to execute our pulse of that commercial strategy.
Larry: In the first quarter consumable revenue was $4 $5 million, an increase of approximately 13% over the first quarter of 2024.
Larry: Consumables revenue represented approximately 70% of total revenue in this quarter.
Larry: Which is largely a result of the growth in capital equipment sales throughout the past year.
Larry: Which once installed provide a new stream of consumables revenue after installation.
Larry: Therapeutic devices segment revenues from the pulse of that M. A C C products were $5 9 million.
Larry: In diagnostics segment revenues were approximately 600000, which was a decrease of 25%.
Larry: There was strong growth in both true format, and true view, which were offset by a tough comparable quarter for VAT Guardian.
Larry: Although we continue to see solid Guardian performance in the quarter, we had a very strong quarter in 2024.
Larry: First quarter of 2024 as a result of initial distributor orders placed during that quarter that did not recur during the first quarter of 2025.
Larry: In the quarter gross margin was 68% and in line with our previously communicated target range of gross margin.
Larry: And slightly up from 66% in the first quarter of 2024.
Larry: Total operating expenses net of impairment were $13 2 million a decrease of 9% over the prior year.
Larry: Research and development expenses were $1 9, million% to 5% increase over the prior year quarter, primarily due to the continued buildup of internal capabilities.
Larry: To test developed to develop test and manufacture our next generation of therapeutic and diagnostic products.
Larry: Sales and marketing spend was $5 million, a 22% increase over the prior quarter.
Larry: Primarily due to the increased head count of our sales department as we continued to build out our staff through recent hiring campaigns.
Larry: General and administrative expenses were $6 $3 million down approximately $2 $3 million or 27% compared to the prior year quarter.
Larry: Driven by the non recurrence of professional fees for specialized accounting services and development work associated with acquisitions in 2024.
Larry: The non recurrence of one time special meeting and proxy fees incurred in 2024 and lower stock based compensation.
Larry: Yeah.
Larry: Net loss for the quarter was $63 $8 million compared to a net loss of $9 2 million in the prior year.
Larry: This was primarily a result of a $55 $8 million noncash impairment expense realized during the first quarter of 2025.
Larry: Triggered by the decline in the company's market cap is a result of the company's share price performance during the first quarter.
Larry: non-GAAP EBITDA loss, which includes adjustments for stock compensation was $61 $7 million, which again includes the $55 8 million of noncash impairment charges just discussed.
Larry: When adjusting for noncash and nonrecurring items, our adjusted non-GAAP EBITDA loss was approximately $5 $7 million.
Larry: Compared to an adjusted non-GAAP EBITDA loss of $5 $3 million in the first quarter of last year.
Larry: Quickly turning to the balance sheet so.
Larry: So America ended the quarter with $64 $6 million in cash cash equivalents and available for sale securities.
Larry: Cash used in the first quarter, which is historically higher than subsequent quarters was approximately $6 $8 million.
Larry: We remain well positioned to fund our growth initiatives and as a reminder, we have essentially no debt.
Larry: With that I'd like to hand, the call back to Larry for closing remarks, Larry.
Larry: Thank you Mike.
Larry: We're very excited about the opportunity that exists for somatic it during the balance of 2025 during the year. We will continue to focus on a number of key revenue growth catalysts.
Larry: First our continued push into the equine market.
Larry: This includes driving the growth of equine true form of assays, such as the a C T H.
Larry: Increasing pulse.
Larry: Hope that trolled consumable sales.
Larry: The introduction of equine ultrasound technology and.
Larry: And the launch of our bed Guardian platform for install use.
Larry: Planned for late in the year.
Larry: Second continued international expansion and revenue growth.
Larry: With our significantly expanded international footprint, we expect to see increasing contribution from our international markets throughout the year.
Larry: Third.
Larry: Growing the adoption and utilization of our to form a platform and associated assays with our expanded menu of assays, along with new assay launches and the introduction of combination or multiplex assays in 2025, we expect to continue to see strong revenue growth.
Larry: Fourth.
Larry: We're planning on a full launch of the true view digital Cytost coffee and tell a pathology platform as we complete development of our AI reporting function, which has been coming along nicely and is nearing completion to enable an early third quarter launch.
Larry: We expect our vintage old distribution agreement to drive increasing revenue throughout the year as our sales force has additional quarters with this innovative technology in their bags.
Larry: And finally, the maturation of recently added commercial roles, including our corporate account leader in capital equipment specialists should pay dividends as we move through the year.
Larry: Along with accelerating topline growth, we expect to continue to see the benefits of our optimized infrastructure.
Larry: We've already begun to see operating leverage as a result of an expected as revenue grows we'll be able to deliver increased leverage to move us closer to our goal of being cash flow positive and GAAP profitable.
Larry: During the quarter as I mentioned earlier, we made progress in this area as we reduced actual cash expenses.
Larry: Which excludes impairment by $1 2 million versus last year and $1 million versus the fourth quarter of last year.
Larry: We expect to continue to reduce our cash operating expenses throughout the year, both in real dollars and as a percentage of revenue.
Larry: Turning to our communication strategy.
Larry: We've decided to focus on prioritizing communications with our existing shareholders.
Larry: To that end, we'll be kicking off our fourth Friday at four webinar series, which begins on May 23.
Larry: We mentioned this in our last quarter call and decided that rather than doing it on the third Thursday, which would have been today.
Larry: We decided to wait until after we had earnings.
Larry: So we will start with an in depth dive into a pulse of that product line on the first call on may 23rd the fourth Friday of May at four.
Larry: Followed by a monthly cadence covering each of our product platforms, along with the company's infrastructure capacity and opportunities for growth.
Larry: Each of these monthly sessions will include a Q&A session with management.
Larry: With this monthly series in place we will be discontinuing these quarterly calls.
Larry: Our term to analyst calls as they are generally for the purpose of allowing institutionally focused analysts to engage in a Q&A session with management.
Larry: Given where our shares are traded their share price and the fact that institutionally focused analysts are not participating will be suspending these calls for the foreseeable future.
Larry: We will of course continue to file all appropriate documents with regulatory bodies and issue timely quarterly press releases to announce earnings as in the past.
Larry: On the first monthly call post earnings release of each quarter, we will cover the topics on that call.
Larry: That we cover here quarterly.
Speaker Change: Of course, we welcome any analysts interested in the company to join our monthly shareholder calls, which will actually offer more frequent opportunities to interact with a deeper set of somatic as management team as they will include not just Mike and I, but also the team responsible for developing manufacturing marketing and selling our products.
Speaker Change: Finally, as a reminder, we continue to have a very supportive balance sheet with roughly 65 million in liquidity and no debt.
Speaker Change: We will remain opportunistic as we evaluate business development opportunities, which fit within our portfolio and would help drive both increased revenue and improved profitability.
Speaker Change: I once again want to thank our shareholders for your support our employees for their dedication and our customers who trust us to help provide the best possible veterinary care around the world.
Speaker Change: And with that I'd like to open the line for questions operator.
Speaker Change: Ladies and gentlemen to ask a question you will need to press star one on your Touchtone phone.
Speaker Change: Opening up for questions.
Speaker Change: Should you decline for the polling process. Please press star followed by get to if you are using a speaker phone please lift up.
Speaker Change: As I said before pricing.
Speaker Change: We'll just wait to compile the Q&A roster.
Speaker Change: I didn't see anyone.
Speaker Change: Using their hands off on kidney there are no questions. Please continue.
Speaker Change: Okay. Thank you operator are there are a number of questions that are with us on the web and so we'll just go to those.
Speaker Change: Let's start here's a multiple question question.
Speaker Change: Why are management options, not been repriced or new options issued.
Speaker Change: Instead of salary.
Speaker Change: So.
Speaker Change: You know shareholders don't get to go back in time and change the price that they paid for our shares.
Speaker Change: So it would not be in our view of appropriate for us to change the strike price of options. So we have not done that and we will not do that.
Speaker Change:
Speaker Change: We do periodically issue option grants to employees, it's a standard practice in hours in pretty much every public company business.
Speaker Change: And.
Speaker Change: Our employees look forward to building value in the company built into share price so that those options can be.
Speaker Change: Profitable for them in the future.
Speaker Change: Wire marketing costs much higher than the industry averages.
Speaker Change: So it's a fair question and it really depends on what you're comparing.
Speaker Change: So I think what Youre looking at there is marketing cost as a percentage of revenue and I agree ours are high sales and marketing costs overall.
Speaker Change: To answer this question.
Create a scenario right if you're starting a brand new business, we have a brand new product that you're introducing into the market.
Speaker Change: So you spend money on developing and now your manufacturing it.
Speaker Change: And now you start to market that you hire some salespeople to sell it but you haven't sold any yet and so your percentage of costs are Super high.
Speaker Change: The startup.
Speaker Change: The somatic as products.
Speaker Change: Our essentially startup products take that symbol single Company example, multiplied by five because that's what we have each of our products our innovative proprietary theyre new to the marketplace and.
Speaker Change: To that point somatic it was new to the marketplace. We had no no products on the market until until mid to late 'twenty. One and then it was a very small amount.
Speaker Change: Yes.
Speaker Change: When you compare us to other startups I think you'll see that the ratios are very similar when you compare us to somebody like IDEXX.
Speaker Change: So at S. Alanco I would say that comparison is a bit premature hopefully one day.
Speaker Change: We stand with them, but not now.
Speaker Change: Are you looking to expand into retail that stores are we currently sell one product line. The <unk> product line that is available for purchase by retail our retail buyers consumers, we sell that online through all the online.
Speaker Change: Channels.
Speaker Change: Petsmart at wishes, a Walmart and so on and I do believe we have actually a sushi products in a couple of a brick and mortar stores, but it's not a significant amount.
Speaker Change: We decided.
Speaker Change: We decided maybe a year or so ago that we would not drive into the retail market with its associated sort of really high advertising costs to reach consumers and instead are primarily focused on selling the vets and then through those online channels.
Speaker Change: Why is investor relations nonexistent.
Speaker Change: Well I wouldn't say it's nonexistent.
Speaker Change: But it's certainly not well staffed.
Speaker Change: Our director is one of the positions that we eliminated.
Speaker Change: In an effort to reduce costs and when you think about it the IR team are traditionally.
Speaker Change: It's focused on institutional investors because they have the the deep pockets to be able to make meaningful investments into the market in somatic stock we've cut back significantly on conference presentations and attending conferences that are geared towards these institutional investors because at this point in time, they simply can't consider.
Speaker Change: Our purchase of our stock in the open market.
Speaker Change: And so we don't see the need for that I personally take calls.
Mike: Mike takes calls from investors.
Mike: Sometimes the phone tree it can be a little daunting and you have to go dial the number or they go to corporate and they go to whatever so for those that are interested in my direct line is 734.
Mike: 4896485.
Mike: If I'm busy it'll take a message and I'll get back to you.
Speaker Change: <unk> talked to investors frequently.
Speaker Change: Is there a strategy for getting institutional coverage investment banking relations and so on.
Speaker Change: So with respect to institutional coverage by analysts they simply will not cover <unk>.
Speaker Change: That is below a dollar that's what I'm gonna have a higher threshold of stock that's on the OTC so any effort in that.
Speaker Change: Towards that regard at this point in time would be a waste of resources.
Speaker Change: With respect to investment bankers frankly, we get calls very frequently from a variety of investment bankers that all have a great suggestion.
Speaker Change: You know, what we should do to help increase our stock price and so on and it begins with the reverse split and the conversation generally ends just after I remind them that our shareholders are not in favor of going that route and so we do have a relationships with various investment banks.
Speaker Change: Especially when it comes to them, bringing in potential acquisitions to our attention.
Speaker Change: Let's see the CFO appointed in December set of buyback was in consideration. He recently resigned as it because larry as against the buyback and holds resentment toward investors for downloading the reverse splits if so why.
Speaker Change: So as I mentioned in my remarks, Scott left for personal reasons.
Speaker Change: They had.
Speaker Change: Their personal reasons. He is back now in Chicago living there full time.
Speaker Change: His reasons I will assure you had nothing to do with somatic huh.
Speaker Change: Our financials.
Speaker Change: Or are opportunities for growth.
Speaker Change: And I will leave it at that.
Speaker Change: I will say however that.
Speaker Change:
Speaker Change: I will say, however that he was not against the reverse split.
Speaker Change: And he was not pushing for a buyback.
Speaker Change: But that's really neither here nor there.
Speaker Change: He's back in his former business and you can feel free to reach out to them individually.
Speaker Change: Are you using or planning on using AI to expand the number and rate of discovery of new assays for two former.
Speaker Change: I don't think we are.
Speaker Change: I don't know for sure I know that we have a really good cadence of assays under consideration for development and we actually.
Speaker Change: We could be developing a lot more than we are now.
Speaker Change: There are costs associated with each new assay. So a lot less than we were paying before we acquired the corvo biotechnologies, but it's still a significant.
Speaker Change: Number and so to keep to.
Speaker Change: To keep cost in spend down were eliminated to about four assays this year.
Speaker Change: But please do attend our fourth Friday at four.
Speaker Change: Session onto former and.
Speaker Change: I'll have our head of R&D, Dr. Ashley Wood.
Speaker Change: Go into the potential use of AI in that area.
Speaker Change: Our profitable has the new better gel product ban and are there any other consumable product lines, you can add to leverage existing client base. So really good question.
Speaker Change: It's it's it's good from a profitability standpoint, we have a very good relationship with <unk>, we have a good margin.
Speaker Change: In pretty much any company it would be viewed as a very favorable margin here, we get higher margins on products that we manufacture ourselves and we're not going to manufacture this product ourselves. So it won't be as good as some of our products, but it's still it's still very desirable with respect to consumable product lines that can leverage our existing client base absolutely.
Speaker Change: That's the focus of our of our M&A.
Speaker Change: Activities are the thing is that we need to be able to bring them on board with a minimal upfront minimal or no upfront cost.
Speaker Change: And no ongoing operating expense costs, so that they can contribute.
Speaker Change: Getting to cash flow positive sooner.
Speaker Change: Why are you focusing so heavily on equine when it's only 5% the size of the domestic animal market is the adoption rate. So good that it merits the effort.
With respect to that actually equal, it's probably around 14%.
Speaker Change: You know the total number of clinics in the United States, but really the reason is of those accounts.
Speaker Change: We have really high penetration with pulse that probably over half of the total equine vets and certainly much higher number of equine sports and performance that's a pick up post that and use it on average three times a week.
Speaker Change: And potentially even more.
Speaker Change: And so we have products that.
Speaker Change: At are really custom designed for them. There are no other laboratory point of care devices for Cushings, an insulin and others of these.
Speaker Change: As a result, we have good relationship and we're able to penetrate that market and so that's why we're.
Speaker Change: We're doing it.
Speaker Change: What is the status of true view.
Speaker Change: And are you monetizing it would be appropriate premium subscription a per use basis as I mentioned, we're darn near done with the AI, we should have a full suite of AI reports.
Speaker Change: And either late this quarter.
Speaker Change: Some things fall our way, but certainly early next quarter, we'll be doing a full launch of the <unk> system.
Speaker Change: We charge a subscription a minimum monthly.
Speaker Change: Subscription that is paid.
Speaker Change: And then they pay extra for each AI report that they get from.
Speaker Change: From each slide that's entered into the machine.
Speaker Change: Just a few exceptions.
Speaker Change: And then for those that they want a pathology a pathologist to report back to them.
Speaker Change: Then they pay an extra amount for that as well.
Speaker Change: When you purchase Reno Square you got the Mic review, but also IP or Sony Vue ultrasound and so on and we haven't talked about those.
Speaker Change: And that's because initially we wanted our sales team to focus on those products that here its a medical we manufacturer and those that provide the biggest margins get them trained and really equipped to be able to sell those.
Speaker Change: As we have done that and as we added capital equipment specialists in the first quarter, we've begun now to sell some of the repo squared.
Speaker Change: Sound and X-ray devices, and expect for that to contribute to sales as we move through the year.
Speaker Change: Yeah.
Speaker Change: Do you plan on hiring a new CFO to replace Scott or will you cut expenses by not adding a new CFO.
Speaker Change: I personally think Mike is doing a really nice job. He did it before we brought Mike before we brought Scott on board and he is doing a nice job now and so while I think eventually the company will.
Speaker Change: Look to to fill that seat, it's not something that we're prioritizing now and it does represent a cost savings.
Speaker Change: For the company.
Speaker Change: Let's see.
Speaker Change: Are there any plans in place to try and increase the stock share price and Theres a number of questions in that vein, Mike do you want to take that.
Speaker Change: Sure.
Speaker Change: So I I.
Speaker Change: I would put that as an update to Q1, where we talked about plans around regaining compliance with listing standards for a major exchange.
Speaker Change: For which stock prices the most material hurdle.
Speaker Change: So as we talked about I would think about R. R.
Speaker Change: Our plans around regaining compliance and stock price depreciation on two fronts.
Speaker Change: The first would be the steps we've taken immediately.
Speaker Change: And already we've taken internally to deliver accelerating growth as well as bottom line results that result in cash flow and eventually get profitability as quickly as possible.
Speaker Change: As Larry stated in his prepared remarks, we are aggressively pursuing continued growth in our revenue through a number of channels, whether it's increased indications of use like equine asthma for cold sweat.
Speaker Change: New assays for our true form a platform international expansion or the full launch of an AI enabled trivia platform as examples.
Speaker Change: Noting that our current scale can support up to five times of the volume. It supports today this will lead to improved gross margins.
Speaker Change: While doing this we as we emphasized we are maintaining focus on the reduction of actual cash operating expenses.
Speaker Change: Which were again, 10% lower year over year and $1 million less than Q4.
Speaker Change: Last quarter.
Speaker Change: And we expect to continue to reduce our cash operating expenses throughout the year.
Speaker Change: We understand the importance of demonstrating progress towards entertainment of cash flow profitability and are confident steps. We are taking we have taken to date.
Speaker Change: In future steps, we may need to take we will fuel the achievement of that metric, which should drive stock price depreciation.
Speaker Change: Second as we mentioned in our last call beyond the operational steps we.
Speaker Change: We continue to evaluate all other options that could aid the stock price depreciating to an acceptable value for listing on a major exchange.
Speaker Change: Yeah.
Speaker Change: Thanks, Mike Theres, a number of questions here about a stock buyback can you comment on that please.
Speaker Change: Certainly one of the options that we consider and discuss I think it's important to know when it comes to a buyback that timing is important.
Speaker Change:
Speaker Change: Typically I think buybacks are best suited where it follows some kind of attainment of cash flow breakeven, but I'd leave it at its one of the options that we're considering and will continue to consider in the future.
Speaker Change: And then there are also.
Speaker Change: A number of questions around a reverse split.
Speaker Change: Okay.
Speaker Change: I think theres, one that talked about let's address the elephant in the room.
Speaker Change: And then there are a number of other ones that are.
Speaker Change: Ask about that as well.
Speaker Change: With respect to that.
Speaker Change: <unk>.
Speaker Change: We attempted to gain approval for our stock.
Speaker Change: We're split.
Speaker Change: Last year as you all know.
Speaker Change: No.
Speaker Change: We expanded a considerable amount of resources.
Speaker Change: We are.
Speaker Change: We contacted shareholders. Some of you got phone calls we reached out significantly to the shareholder base and attempted to get that passed.
Speaker Change: Not only failed, but it fell by a considerable margin.
Speaker Change: And so as responsible.
Stewards of your company.
Speaker Change: Hum.
Speaker Change: It's not something that we would expect would be approved.
Speaker Change: By shareholders one year later.
Speaker Change: And so you'll note as we have sent out the proxy.
Speaker Change: Documents for upcoming annual meeting on June 10th.
Speaker Change: We does not include any proposal for a reverse split.
Speaker Change: And we have no immediate plans.
Speaker Change: Two.
Speaker Change: To sequence.
Speaker Change: You surely can take from the fact that we spent so much time and effort last year seeking.
Speaker Change: Seeking a reverse split that we felt like it was the best thing to do for the company.
Speaker Change: So I'm not going to sit here and say that Oh golly, it's it's not a good idea.
Speaker Change: But I will say that we have no plans.
Speaker Change: To seek one at this point.
Speaker Change: And.
Speaker Change: It's just one of the options just as a share buyback that Mike just mentioned is one of the options and again, it's timing right.
Speaker Change: We get to cash flow positive.
Speaker Change: Then we are generating our own.
Speaker Change: Money our own cash.
We're not in a position where we would ever at that point once we're cash flow positive need to go out and raise funds through additional sale of shares or through debt, which would incur interest expenses, increasing our operating expenses and reducing our extending our timely timeline to profitability.
Speaker Change: So we will continue.
To examine all of these were where certainly we.
Speaker Change: We certainly hear about it from investment bankers and so on and so forth, but at this point, we have to balance the desires of our shareholders.
Speaker Change: With.
Speaker Change: With the.
Speaker Change: The sort of the technicalities or the.
Speaker Change: The theory of a reverse split.
Speaker Change: So what you should take from that is that while we're not seeking to do our cash buyback right. Now. We're also not seeking to do a reverse split right now.
Speaker Change: Let's see.
Speaker Change: Why doesn't the company leverage debt so that the company doesn't continue to spend cash on hand, specifically when expenses out spend revenue.
Speaker Change: Because we have the ability to not have to take on debt and not have to take on.
Speaker Change: For a company that's not yet profitable is relatively high interest debt and that would increase our operating expense and so that's not something that we're looking to do at this point.
Speaker Change: You said you would update each month in the last call.
Speaker Change: I think I explained that but maybe I went quickly on that.
Speaker Change: <unk>.
Speaker Change: The third Thursday of the <unk>.
Speaker Change: <unk> is today and so we decided that.
Speaker Change: Instead of trying to do two webinars or webinar Annick call that we would wait plus we just think it's beneficial to have the earnings behind us. So we switched it to the fourth Friday at four series and the first one begins on May 23.
Speaker Change: Which is.
Speaker Change: Just a day a week and a day from now we would encourage you to join US we'll be doing these monthly you can put them on your calendar and will have opportunities to interact and engage with.
Speaker Change: With our shareholders investors and and and whoever.
Speaker Change: A couple of asset questions here about the cancer assay.
Speaker Change: The cancer assay was.
Speaker Change: With our concept.
Speaker Change: <unk> one <unk>.
One patent.
Speaker Change: It was something that never.
Speaker Change: Before my time.
Speaker Change: Never came to fruition.
Speaker Change: And something that was determined by the company that was engaged in developing with us, but it wouldn't work so.
Yes, it's that's definitely.
Speaker Change: Off the.
Speaker Change: Off the table.
Speaker Change: I have the tariffs affected the international expansion at all.
Speaker Change: I think a little bit.
Speaker Change: So there.
Speaker Change: We've been in since we got everything done last year with respect to getting on the market from a regulatory standpoint, we've been in really robust conversations with a number of distributors, particularly in the EU.
Speaker Change: And.
Speaker Change: You know I will say that those slowed down a bit.
Speaker Change: As people just trying to figure out what what the tariff situation was going to mean, our existing customers have not really been affected.
Both for for two reasons, one a lot of the business remember, 70% of our revenue for pulse fat, which is what's primarily sold outside the U S. Now 70% of that revenue comes from the consumables, which means customers have the devices and they're using them and if they don't get that throwed refurbished.
Speaker Change: Then they can.
Speaker Change: They can't use the system, which they invested in.
Speaker Change: So that business, we think regardless will come through we haven't seen tariffs hit that.
Speaker Change: New capital sales I have to imagine.
Speaker Change: That people might be afraid of tariffs that could work both ways. If theres no tariffs yet maybe they bought one sooner than they would have maybe they bought one later so I don't think it really had much of a negative impact on us.
Speaker Change: However.
Speaker Change: I think with respect to tariffs.
Speaker Change: It's just not possible to predict what exactly is going to be the situation of months' six months.
Speaker Change: Or you know I think probably a year from now it my personal opinion is that probably gets sorted out by a year from now but don't know what will happen in between now and then.
Speaker Change: It hasnt affected us from a cost of goods standpoint, because we use very little material all of our products are made here in the USA and.
Speaker Change: And we use very little materials from from outside the country.
Speaker Change: So we do expect to continue.
Speaker Change: Selling and international markets.
Speaker Change: We do expect to increase the number of distributors that we have particularly in the EU.
Speaker Change: And.
Speaker Change: And expand the number of products that are sold outside the U S as well.
Speaker Change:
Speaker Change: As I understand you've only specifically outlined 200000 reduction in expenses for 2025 and can you lower expenses on an absolute basis.
Speaker Change: So the answer to that is is it is yes.
Speaker Change: As I mentioned earlier, we already have.
Speaker Change: Last quarter in the fourth quarter, we spent $1 million less than we did in the third quarter of last year and in the first quarter, we spent $1 million less than we did in the fourth quarter of last year, we spent $1 2 million less than the first quarter.
Speaker Change: That yes, and 200 peso $50000 of that would be our first quarter.
Speaker Change: Contribution of that 200000 reduction by moving into a smaller facility here in Ann Arbor.
Speaker Change: The remainder of that is from a variety of initiatives, we have reduced head count a bit.
Speaker Change: Not in sales and marketing because that's like sort of <unk>.
Speaker Change: Frankly in the Golden Goose, we need the sales and marketing, we built that sales and marketing team. So that we can have people come to us and say we want to sell.
Speaker Change: We want you to sell our product.
Speaker Change: <unk>.
Speaker Change: And to be able to sell our own products for that matter.
Speaker Change:
Speaker Change: So we're not looking to cut that.
Speaker Change: But various support positions throughout the company have been reduced or eliminated.
Speaker Change: And there are other things that we have done on and on.
Speaker Change: And and various departments to be able to reduce costs by that million dollars in the quarter. We're not done yet we expect to continue to reduce operating expenses in absolute cash terms and certainly as a percentage of.
Speaker Change: Of total revenue.
Speaker Change: Let's see somebody wants my direct number again, maybe give it to you it's 67344.
Speaker Change: 4896485.
Speaker Change: And my email is L. Keeton, H T O N at somatic dotcom.
Speaker Change: Yeah.
Speaker Change: Let's see what else we have here.
Speaker Change: There are a number of questions on providing guidance.
Speaker Change: And.
Speaker Change: It was our plan too.
Speaker Change: With Scott on board to be able to provide guidance.
Speaker Change: With his departure and Mike stepping into some additional responsibilities, we're going to defer guidance until a future date.
Speaker Change: Okay.
Speaker Change:
Speaker Change: Let's see.
Speaker Change: I think someone.
Speaker Change: Reinforces that reverse split will never be approved.
Speaker Change: Justin.
Speaker Change:
Speaker Change: I mean really most of these.
Speaker Change: Somebody said.
Speaker Change: How could I ask for a raise didn't ask arrays didn't receive a raise.
Speaker Change: People here I think are compensated fairly and appropriately generally they fall into the lower percentile in terms of comparable companies but.
Speaker Change: No one is complaining so.
We do we will continue to compensate people fairly.
Speaker Change: But me personally did not ask for nor did I received a raise.
And that question actually.
Speaker Change: Uh huh.
Speaker Change: Dave misunderstood our proxy statement, that's not my salary.
Speaker Change: Oh, let's see.
Speaker Change: Yeah.
Speaker Change: Well the new study with equine cost of volunteers for this study anything right. So that's the equine asthma clinical registry, that's a really that's a really.
Speaker Change: I mean as I said, it's a short name, but it's really big in terms of potential impact.
Speaker Change: So equine asthma is treated pretty much like human asthma is.
Speaker Change: With Lasix, which is bad news for horses that are competing.
Speaker Change: And also with Inhalers, which you could imagine the difficulty in getting a horse to to where that inhaler.
Speaker Change: For many many years somatic post that.
Speaker Change: The pulse that was.
Speaker Change: Out of an abundance of caution contra indicated for use on the lungs, which is what you need to treat to treat asthma.
Speaker Change: Yes, there were veterinarians equine veterinarians that understood the physics and the concept and the mechanism of action of pulse that and decided that they would go ahead and try it on the lungs of horses. They did it from a they did it on their own we didn't pay them to do it within sponsor that research. They did it responsibly with horses that were.
Okay.
Speaker Change: That weren't going to be living for a variety of reasons and a scientific way.
Speaker Change: Determined that it was safe.
Speaker Change: Did a pilot study on.
Speaker Change: On the E P H horses derma.
Speaker Change: Demonstrated absolute safety, but of the procedure and effectiveness understood the mechanism of action.
Speaker Change: Was the treatment of the underlying asthma of horses with E. P. H.
Speaker Change: And now have done a pilot study on asthma with really good results.
Speaker Change: When I and others within the company met with some luminaries in the field of equine medicine.
Speaker Change: We asked.
Speaker Change: What what guidance could they give us on introducing this into the market.
Speaker Change: And they said, we will keep doing what youre doing to get a bigger study and in a lot of data and we've done okay, well that's good that studies underway.
Speaker Change: But.
Speaker Change: Also this idea of a clinical registry and so.
Speaker Change: Veterinarians, who are treating horses with asthma.
Speaker Change: Are going to have a have the ability to enroll their patients in this registry. This will contribute to the body of data around this procedure. Eventually it will be once it gets to a certain power it will be publishable and will be a benefit to all equine veterinarians.
Speaker Change: They get a chance to these veterinarians get a chance to get in on the sort of the early front of being able to offer this therapy. It's good it provides really great results.
Speaker Change: At least six maybe nine months, maybe longer of relief from coughing and other symptoms associated with asthma.
Speaker Change: And it's being done in a responsible way as far as our contribution.
Speaker Change: We're not charging the veterinarians that veterinarians aren't charging us they're charging the horse owners for the asthma treatment, which is which they should and then as they do a number of horses.
Speaker Change: We're offering them on their next pulse on their next road refurbishment to give them.
Speaker Change: A relatively small number.
Speaker Change: Pulses. In addition to the pulses that theyre paying for as they get their drug refurbished. So that's a really good example, I think a partnership between equine veterinarians in the company where.
Speaker Change: Where is to the benefit of both parties.
Speaker Change: What do you see the company in 2027.
Speaker Change: Profitable.
Speaker Change: How 'bout assays for humans.
Speaker Change: We're probably well not right we're not in the in the human health business, we do own Corvo biotechnologies.
It did receive the the human version of our true form of device.
Speaker Change: Received FDA emergency use authorization for the treatment of Covid.
Speaker Change: And they also had it geared up for blue.
Speaker Change: Blue B, a and B and something else RSP, we because that represents a significant investment we stopped that program.
Speaker Change: Which they never finished and deployed.
Speaker Change: Preserves all of the assets, meaning not just the instruments and the cartridges that they had developed.
Speaker Change: But more importantly, the clinical data and the regulatory approvals, we've preserved that in a pristine fashion.
Speaker Change: And it's our expectation that as we.
As we build a track record of two former in the animal health space that at some point, we'll be able to monetize that asset for somebody thats interested in that for use in the human space than the human market.
Speaker Change: The other asset that we have for that is the to review device, which currently we are deploying in the animal health industry or an animal health market, but can also be.
Speaker Change: Put into the human market in.
Speaker Change: In the future if we decide to go that route it wont be somatic of doing it.
We would look to monetize that with <unk>.
Speaker Change: With either a partner or a whole different company or what have you.
Speaker Change:
Speaker Change: There's.
Speaker Change: Can you explain how you plan on entry and expansion into the small animal market.
Speaker Change: Yeah. So.
Speaker Change: In 2021.
Speaker Change: We launched our first assays.
Speaker Change: The company in October of 'twenty, One we acquired <unk>, we acquired Pulsar pulmonary technologies that was primarily in the equine market, but had a product, which we felt would be really good in the small animal market.
Speaker Change: When you look at pulse that post fed has grown too.
In my estimation over 50% penetration of the applicable equine vets now it took them 10 to 12 years to do that right.
Speaker Change: You are probably familiar with the concept of at an inflection point, where you you get out there and you build a new building at a certain point the market sort of takes over and starts polling.
Speaker Change: Pauline demanding the product as opposed to us pushing it.
Speaker Change: So we entered the small animal market and the reason why we did that is because we got to 50% penetration of the small animal market that would be 15000 installations.
Speaker Change:
Speaker Change: Really really big numbers, so the other corollary to this in the small animal market.
A similar type of a product would be therapy lasers, you know if you.
Speaker Change: You've taken your dog to the vet and had surgery or the cat you know they use the laser on the incision line following the surgery.
Speaker Change: If you've got some dermatological issues than they might lays the surface of it so therapy lasers.
Speaker Change: 15 years ago, there werent any in the in the animal health market.
Speaker Change: Today, probably I don't know three quarters of small animals vets have one of these and they cost around $20000 may be more early on there were probably 30, I think you'd probably by one inexpensively for maybe 20, but that's the range of pricing again. It took 10 years 12 years and importantly, they didn't have an equine.
Speaker Change: Base abuse, that's already demonstrated significant efficacy and cost effectiveness and good return on investment.
Speaker Change: But yet they still were able to penetrate that and they didn't have clinical data in animal health and yet they were able to penetrate that market. So you've got two good comparables, one with our exact product and a related market.
Speaker Change: A corollary market equine and one in the same market in a similar type of technology. So that's what why we wanted to get into that business into the small animal market business now.
Speaker Change: Now in order to do that we deployed our sales organization. Because this is not a product that you can sell over the phone.
Speaker Change: Or online with a picture if youre going to have small animal that had not heard of pulse said before or maybe just knew it as an equine product you've got to get in front of that and so we deployed our sales force.
Speaker Change: We hired the former head of sales from Heska, which are deployed our sales force across the country similar size to what we now have redeployed our sales force and then we invested.
Speaker Change: Some of you point out appropriately invested heavily in marketing the company and the products by attending trade shows or veterinarians.
Speaker Change: Its owner shows and dog owner shows pet parent shows to be able to introduce the technology at the pet parent level or the horse horse owner level.
Speaker Change: To be able to then influenced the veterinarian to be interested in the technology and be receptive to the sales reps that they walk in the door all of this.
Speaker Change: With a brand new product like this into its particular market. It takes time it takes resources we've deployed those resources.
Speaker Change: And.
Speaker Change: And I think we're seeing results frankly, we went from $4 million in 2021.
Speaker Change: $19 million 25 $27 million.
Speaker Change: From.
Speaker Change: With this variety of this basically bag of products.
Speaker Change:
Speaker Change: And then there's a question here that talks about have we been approached by other companies that want us to sell their products.
Speaker Change: And the answer that's yes.
Speaker Change: We have been.
Speaker Change: And sometimes those products.
Speaker Change: Are really out there.
Speaker Change: In terms of.
Speaker Change: <unk>.
Speaker Change: I, probably cant mentioned some of the specifics, but there are products that would be used rarely and procedures that would cost like 20 $30000.
For a heart condition or something like that so we're not into that business.
Speaker Change: It's easy to understand why companies why we're attractive to companies that have products that they want to get on the market and that is because we're bearing the cost of our sales and marketing organization now for the benefit of our products and they'd like to benefit from that as well.
Speaker Change:
Speaker Change: Some time in some cases it makes sense that a gel was a product that only will be able to generate revenue from that at a good margin.
Speaker Change: But in addition, that's a door opener for our sales team maybe the vet has unheard of.
Speaker Change: This product or that product.
Speaker Change: But if we can if they have an interest in better gel that requires a conversation not with a gatekeeper at the front desk, but with Tibet themselves and once they are in there with the vet then it's fair game to talk about our other products and so on so.
Speaker Change: So we expect to continue to.
Speaker Change: To look at these opportunities.
Speaker Change: And for those that don't cost us money upfront and will contribute to revenue at good margins.
Speaker Change: Then you can expect to see some of those in the future.
Speaker Change: And with that I mean, theres, a bunch more but they are they're kind of repeating I think we're kind of up on time, so with that.
Speaker Change:
Speaker Change: Let me just again, thank you for your.
Speaker Change: Your support.
Speaker Change: The company.
Speaker Change: Thank you for your interest and for your questions.
Speaker Change: Those that are really constructive and even those that arent because those are instructive to us is to have as to how you're feeling about about your company.
Speaker Change: We've come a long way in our in the last three and a half years, we have a ways to go.
Speaker Change: But here, we're dedicated to to being responsible stewards of the capital.
Speaker Change: And and growing this business for the benefit of your pets and hours and with that I will thank you have a wonderful evening.
Speaker Change: Operator, thank you.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.