Q2 2025 TOMI Environmental Solutions Inc Earnings Call
Speaker #4: Life.
Speaker #5: That sounds bad.
Dr. Halden Shane: That sounds bad.
Speaker #2: Good afternoon. Welcome to the TOMI Environmental Solutions Incorporated, second quarter 2025, financial results conference call. At this time, all participants are in a listen-only mode, and the floor will be open for questions following the presentation.
John Nesbett: Good afternoon. Welcome to the TOMI Environmental Solutions Incorporated second quarter 2025 financial results conference call. At this time, all participants are in a listen-only mode, and the floor will be open for questions following the presentation. If anyone should require operator assistance during this conference, please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, John Nesbett of IMS Investor Relations. John, the floor is yours.
Speaker #2: If anyone should require operator assistance during this conference, please press * on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, John Nesbett of IMS Investor Relations.
Speaker #2: John, the floor is yours.
Speaker #6: Good afternoon, and thank you for joining us today for the TOMI Environmental Solutions Investor Update call. On today's call is TOMI's Chief Executive Officer and Chairman of the Board, Dr. Halden Shane.
John Nesbett: Good afternoon. Thank you for joining us today for the TOMI Environmental Solutions Investor Update call. On today's call is TOMI's Chief Executive Officer and Chairman of the Board, Dr. Halden Shane, E.J. Shane, TOMI's Chief Operating Officer, and David Vansten, TOMI's Chief Financial Officer. A telephone replay of today's call will be available through August 28th, and the details of which are included in the company's press release dated August 14th, 2025. A webcast replay will also be available on TOMI's website, www.sterimis.com. Certain written and oral statements made by management of TOMI may constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements should be evaluated in light of important risk factors that could cause actual results to differ materially from our anticipated results.
Speaker #6: E.J. Shane, TOMI's Chief Operating Officer, and David Vansten, TOMI's Chief Financial Officer. Telephone replay of today's call will be available through August 28th. And the details of which are included in the company's press release dated August 14th, 2025, a webcast replay will also be available in TOMI's website www.steramist.com.
Speaker #6: Certain written and oral statements made by management of TOMI may constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.
Speaker #6: These forward-looking statements should be evaluated in light of important risk factors that could cause actual results to differ materially from our anticipated results. The information provided in this conference call is based upon the facts and circumstances known at this time.
John Nesbett: The information provided in this conference call is based upon the facts and circumstances known at this time. The company undertakes no obligation to update these forward-looking statements after the date of this call. I will now turn the call over to TOMI's Chief Executive Officer and Chairman of the Board, Dr. Halden Shane. Please go ahead.
Speaker #6: The company undertakes no obligation to update these forward-looking statements after the date of this call. I will now turn the call over to TOMI's Chief Executive Officer and Chairman of the Board, Dr. Halden Shane.
Speaker #6: Please go ahead.
Speaker #7: Thank you, John. And good afternoon, everyone, and thank you for joining. TOMI Environmental Earning Call for the second quarter of 2025. We are making significant advances at TOMI and remain dedicated to achieving our goals for the year and beyond.
Dr. Halden Shane: Thank you, John, and good afternoon, everyone, and thank you for joining the TOMI Environmental Earning Call for the second quarter of 2025. We are making significant advances at TOMI and remain dedicated to achieving our goals for the year and beyond. With the second quarter behind us, we are encouraged by our recent momentum and believe it positions us well for the third quarter and the remainder of the year. At this time, we remain optimistic about maintaining this positive trajectory in the back half of 2025. During the second quarter, we completed several key projects that we believe will drive revenue growth. As of August 7th, the combined total recognized revenue, deferred revenue, and sales order backlog was approximately 4.6 million, with active projects on schedule for delivery in 2025.
Speaker #7: With the second quarter behind us, we are encouraged by our recent momentum and believe it positions us well for the third quarter and the remainder of the year.
Speaker #7: At this time, we remain optimistic about maintaining this positive trajectory in the back half of 2025. During the second quarter, we completed several key projects, that we believe will drive revenue growth.
Speaker #7: As of August 7th, the combined total recognized revenue (deferred revenue) and sales order backlog was approximately $4.6 million. With active projects on schedule for delivery in 2025, in addition, we are negotiating approximately $2 million in new custom and integrated contracts.
Dr. Halden Shane: In addition, we are negotiating approximately 2 million in new custom and integrated contracts, with bids expected to close prior to year-end. As of the date of this report, our open opportunities for our three product offerings, or the custom-engineered system, the CES, the hybrid solutions, and Sterimist SIS, total approximately $15 million, of which 7 million are designated as high priority. High priority opportunities are those with which we are actively engaged through ongoing discussions on specifications, submitted formal proposals, or pursuits via established contractor relationships. All of this, which E.J., our COO, will talk in more detail shortly. In the second quarter of 2025, our total recognized and deferred revenue reached approximately 1.8 million, with recognized revenue for the quarter exceeding 1 million.
Speaker #7: With bids expected to close prior to year-end, as of the date of this report, our open opportunities for our three product offerings for the custom engineered system, the CES, the hybrid solutions, and Steramist SIS, total approximately $15 million.
Speaker #7: Of which $7 million are designated as high priority. High priority opportunities are those with which we are actively engaged through ongoing discussions on specifications, submitted formal proposals, or pursuits via established contractor relationships.
Speaker #7: All of this, which E.J., our COO, will talk in more detail shortly. In the second quarter of 2025, our total recognized and deferred revenue reached approximately $1.8 million.
Speaker #7: With recognized revenue for the quarter exceeding $1 million, our service revenue from both the IHP service deployments and validation support services grew by an impressive 33% compared to the same period last year, and by 46% over the first six months.
Dr. Halden Shane: Our service revenue from both the IHP service deployments and validation support services grew by an impressive 33% compared to the same period last year and by 46% over the first six months. Our IHP corporate service revenue is primarily generated from our long-term customers for the second quarter, along with other clients that have now become a regular contributor, ordering from us almost quarterly. Additionally, we have a new customer with whom we have a pending contract following their upcoming job scheduled for this month, which will be their second order from us this year. Our select clients include many platinum clients. Most of these are ranked in the top 10 lists of companies within their specific industry and market. As the CEO of this company, I am very impressed by this list of platinum customers.
Speaker #7: Our IHP corporate service revenue is primarily generated from our long-term customers for the second quarter, along with other clients that has now become a regular contributor ordering from us almost quarterly.
Speaker #7: Additionally, we have a new customer with whom we have a pending contract following their upcoming job scheduled for this month, which will be their second order from us this year.
Speaker #7: Our select clients include many platinum clients, most of these are ranked in the top 10 lists of companies within their specific industry and market.
Speaker #7: As the CEO of this company, I am very impressed by this list of platinum customers. That is clearly why we won an award as being the best disinfection decontamination product in the world.
Dr. Halden Shane: That is clearly why we won an award as being the best disinfection decontamination product in the world. To maintain a momentum in BIF Solutions sales, we are committed to expanding our customer outreach through targeted marketing strategies and strategic partnerships. We are also focused on educating the market about the critical importance of proactive disinfection through our Sterimist Pro Certified program and enhancing our training materials within our learning management system. Year to date, we have seen a 40% increase in BIF Solutions sales, and we anticipate this growth will continue, especially as we expect repeat orders from customers during the latter half of the year. Years ago, we developed this model, and it is starting to bear its fruits as the solution is our razor blade in relationship to our razor razor blade model. Our solution is the key to our model and has the highest of margins.
Speaker #7: To maintain a momentum in bid solution sales, we are committed to expanding our customer outreach through targeted marketing strategies and strategic partnerships. We are also focused on educating the market about the critical, importance of proactive disinfection through our Steramist pro-certified program and enhancing our training materials within our learning management system.
Speaker #7: Year-to-date, we have seen a 40% increase in bid solution sales. We anticipate this growth will continue, especially as we expect repeat orders from customers during the latter half of the year.
Speaker #7: Years ago, we developed this model, and it is starting to bear its fruits as the solution is our razor blade in relationship to our razor blade model.
Speaker #7: Our solution is the key to our model, and has the highest of margins. In the second quarter, we successfully validated the NASA project, which is now operational.
Dr. Halden Shane: In the second quarter, we successfully validated the NASA project, which is now operational. We are collaborating with the Space Center on writing a publication, and early approval to do so is promising. We remain optimistic about the sales trends for the remainder of the year across our BIF Solutions, Sterimist Integrated Systems, SIS platform, and our offered services, both deployment and support, along with our custom-engineered system, or CES. The quarter began on a strong note, marked a significant win for our SIS platform, totaling over 180,000 for a university with delivery scheduled for September. Our egg white manufacturing customer from the food industry continued to make device purchases as we welcome new opportunities from a servicing franchise that began purchasing our equipment in the first quarter and continued with additional orders in the second quarter.
Speaker #7: We are collaborating with the Space Center on writing a publication and early approval to do so is promising. We remain optimistic about the sales trends for the remainder of the year across our bid solution, Steramist Integrated Systems, SIS platform, and our offered services, both deployment and support, along with our custom engineered system or CES.
Speaker #7: The quarter began on a strong note, marked a significant win for our SIS platform, totaling over $180,000 for a university with delivery scheduled for September.
Speaker #7: Our egg white manufacturing customer, from the food industry, continued to make device purchases as we welcome new opportunities from a servicing franchise that began purchasing our equipment in the first quarter and continued with additional orders in the second quarter.
Speaker #7: Notably, three of their servicing locations are now utilizing Sterapacks, and we are in ongoing discussions to expand to other locations across the United States.
Dr. Halden Shane: Notably, three of their servicing locations are now utilizing Steripacs, and we are in ongoing discussions to expand in other locations across the United States. Additionally, the USDA increased its usage of Sterimist in the second quarter, and we concluded the quarter with another SIS collaboration with a material handling equipment supplier in Illinois. The breadth of these orders demonstrates our success in developing strong and varied relationships in multiple industry verticals. And as of June 12th, Sterimist was recognized as the defection, disinfection, and decontamination product company of the year for 2025. I will now hand the call over to our new Chief Financial Officer, and please officially welcome David Vansten, who will provide a brief overview of our financial results for the second quarter of 2025 compared to the same period last year. David.
Speaker #7: Additionally, the USDA increased its usage of Steramist in the second quarter. And we concluded the quarter with another SIS collaboration with a material handling equipment supplier in Illinois.
Speaker #7: The breadth of these orders demonstrates our success in developing strong and varied relationships in multiple industry verticals. As of June 12th, Steramist was recognized as the Disinfection and Decontamination Product Company of the Year for 2025.
Speaker #7: I will now hand the call over to our new Chief Financial Officer, and please officially welcome David Vansten, who will provide a brief overview of our financial results for the second quarter of 2025 compared to the same period last year.
Speaker #7: David.
Speaker #8: Thank you, Dr. Shane. In the second quarter of 2025, our revenue was $1,031, a decline from $3 million in Q2 2024. Representing a 66% decrease in sales.
David Vansten: Thank you, Dr. Shane. In the second quarter of 2025, our revenue was 1,031,000, a decline from 3,000,000 in quarter 224, representing a 66% decrease in sales. This was primarily driven by customers deferring capital expenditure products projects in our product sales, mainly due to the uncertain economic environment with the impact of announced and implemented tariffs on their supply chains and long-term planning. This is illustrated, and this was not a factor in the second quarter of 2024, which had higher sales in mobile equipment of approximately 1,000,000 and our customer-engineered systems, or CES, of approximately half a million. As Dr. Shane referenced, the service-based revenue for the three months ended June 30th, 2025, was 378,000, an increase of 33% over the same period last year. The service-based revenue for the six months was 955,000, representing an increase of 299% or 46% compared to the same period last year.
Speaker #8: This was primarily driven by customers deferring capital expenditure products projects in our product sales. Mainly due to the uncertain economic environment with the impact of announced and implemented tariffs on their supply chains, and long-term planning.
Speaker #8: This is illustrated as this was not a factor in the second quarter of 2024. Which had higher sales in mobile equipment of approximately a million, and our customer engineered systems, or CES, of approximately half a million.
Speaker #8: As Dr. Shane referenced, the service-based revenue for the three months ended June 30th, 2025, was $378,000. An increase of 33% over the same period last year.
Speaker #8: The service-based revenue for the six months was $955,000. Representing an increase of $299% or 46% compared to the same period last year. This increase in service revenue was due to increased demand from our current and new life science customers, expansion of services, and additional industries being served by our products.
David Vansten: This increase in service revenue was due to increased demand from our current and new life science customers, expansion of services in additional industries being served by our products, and more stringent related procedures, resulting in quotes of 35% increase year over year, leading to expectations of continuing higher growth in the second half of the year. For the three months ended June 30th, '25, our gross margin, as a percentage of sales, improved to 66%, up from 62% in the same quarter last year. The improved gross margins were attributable to our product mixing sales, including higher sales of solution service offerings in the three months ended June '25, compared to the same period last year. For the three months ended June 30, '25, we experienced an operating loss of approximately 1.1 million compared to an operating income of 120,000 in the same period last year.
Speaker #8: And more stringent related procedures. Resulting in quotes of 35% increase year over year, leading to expectations of continuing higher growth in the second half of the year.
Speaker #8: For the three months ended June 30, 2025, our gross margin as a percentage of sales improved to 66%, up from 62% in the same quarter last year.
Speaker #8: The improved gross margins were attributable to our product mixing sales, including higher sales of solution service offerings, in the three months ended June 25.
Speaker #8: Compared to the same period last year, for the three months ended June 30, 2025, we experienced an operating loss of approximately $1.1 million, compared to an operating income of $120,000 in the same period last year.
Speaker #8: Our net loss for the three months ended June 30, 2025, was approximately $1.28 million or 6 cents per basic and diluted share. Compared to a net income of $30,000, or 0 cents per basic and diluted share.
David Vansten: Our net loss for the three months ended June 30, '25, was approximately 1.28 million or 6 cents per basic and diluted share, compared to a net income of 30,000 or 0 cents per basic and diluted share in the same period last year. As of June 30, '25, our financial position includes cash and cash equivalents of approximately 569,000, working capital of 2.8 million, and shareholders' equity of 2.7 million. I will now turn over the call to our Chief Operating Officer, E.J. Shane, to discuss upcoming business highlights. E.J.
Speaker #8: In the same period last year, as of June 30, 2025, our financial position includes cash and cash equivalents of approximately $569,000, working capital of $2.8 million, and shareholders' equity of $2.7 million.
Speaker #8: I will now turn over the call to our Chief Operating Officer, E.J. Shane, to discuss upcoming business highlights. E.J.
Speaker #2: Thank you, David. We have several active projects on schedule for delivery by the end of the year, and we are currently negotiating an additional $2 million in our custom and integrated contracts, with bids expected to close before the year-end.
E.J. Shane: Thank you, David. We have several active projects on schedule for delivery by the end of the year, and we are currently negotiating an additional $2 million in our custom and integrated contracts, with bids expected to close before the year end. In March this year, we announced our first formal OEM partnership with PBSC, a leading manufacturer specializing in high containment, material decontamination, and cleanroom solutions. This collaboration has proven to enhance our Sterimist Integrated System, or SIS, product offerings. Further, in our last call, I provided an in-depth explanation between the custom-engineered systems, or the CES, and the Sterimist Integrated System, or SIS. In summary, both offerings consist of custom and integrated solutions that are increasingly becoming more turnkey with each new success.
Speaker #2: In March this year, we announced our first formal OEM partnership with PBSC, a leading manufacturer specializing in high containment material decontamination and clean room solutions.
Speaker #2: This collaboration has proven to enhance our Steramist Integrated System, or SIS, product offerings. Further, in our last call, I provided an in-depth explanation between the custom engineered systems, or the CES, and the Steramist Integrated System, or SIS.
Speaker #2: In summary, both offerings consist of custom and integrated solutions that are increasingly becoming more turnkey with each new success. As we continue to collaborate with our established manufacturing partners, such as PBSC, for the many types of enclosures in this industry, I anticipate a smoother and faster delivery process in the years ahead.
E.J. Shane: As we continue to collaborate with our established manufacturing partners, such as PBSC, for the many types of enclosures in this industry, I anticipate a smoother and faster delivery process in the years ahead. We recently announced a new win for our SIS platform with a university located in Miami. This contract is not with PBSC; instead, it represents a second engagement with a different manufacturing partner that previously collaborated with us on a delivery to a university in Virginia earlier this year. This progression demonstrates our expanding partner network and continuing momentum across academic deployments with this strategy. Regarding our pipeline for these two product offerings and the hybrid, we continue to see growth.
Speaker #2: We recently announced a new win for our SIS platform with the university located in Miami. This contract is not with PBSC; instead, it represents a second engagement with a different manufacturing partner that previously collaborated with us on a delivery to a university in Virginia earlier this year.
Speaker #2: This progression demonstrates our expanding partner network and continuing momentum across academic deployments with this strategy. Regarding our pipeline for these two product offerings, and the hybrid, we continue to see growth.
Speaker #2: As of June 30th, 2025, bids range from approximately $105,000 to $1.8 million. An increase from the previous call at $800,000. With a total of $7 million in active opportunities for our hybrid, the SIS and S-CES.
E.J. Shane: As of June 30th, 2025, bids range from approximately $105,000 to $1.8 million, an increase from the previous call at $800,000, with a total of $7 million in active opportunities for our hybrid, the SIS, and CES. We have seen an increase in our service pipeline, with the number of quotes for services up approximately 35% year over year across both the life sciences and food safety divisions. This surge in demand will play a crucial role in supporting our future revenue growth. An example: we renewed a collaboration with the United States Army Medical Research Institute of Infectious Diseases, a premier DoD biomedical research and biodefense facility. This quarter, we have secured a pipeline of four weeks' worth of decontamination service engagements. Facing capital equipment constraints, we are jointly developing a scalable solution to fully replace their current archaic methods.
Speaker #2: We have seen an increase in our service pipeline, with the number of quotes for services up approximately 35% year over year across both the life sciences and food safety divisions.
Speaker #2: This surge in demand will play a crucial role in supporting our future revenue growth. An example, we renewed a collaboration with the United States Army Medical Research Institute of Infectious Diseases.
Speaker #2: A premier DoD biomedical research and biodefense facility. This quarter, we have secured a pipeline of four weeks' worth of decontamination service engagements. Facing capital equipment constraints, we are jointly developing a scalable solution to fully replace their current archaic methods.
Speaker #2: US Amrit operates BSL-3 and BSL-4 facilities and collaborates with military and civilian agencies. Their objective is to implement Steramist in newer spaces, expanding our addressable market, and validating our technology in high containment environments.
E.J. Shane: US Amrit operates BSL3 and BSL4 facilities and collaborates with military and civilian agencies. Their objective is to implement Sterimist in newer spaces, expanding our addressable market, and validating our technology in high containment environments. Furthermore, we have observed a shift in the clientele within our service provider network seeking to partner with us. These new partners are strategic and come with growth plans. The Sterimist Pro Certified program and our referral database have significantly contributed to this transformation in our client base. We expect to be onboarding a group with a strong remediation and government background that has already secured a bid in the healthcare sector. We are excited to provide support for the substantial project, which will require multiple systems and is set for September of this year.
Speaker #2: Furthermore, we have observed a shift in the clientele within our service provider network seeking to partner with us. These new partners are strategic and come with growth plans.
Speaker #2: The Steramist pro-certified program and our referral database have significantly contributed to this transformation in our client base. We expect to be onboarding a group with a strong remediation and government background.
Speaker #2: That has already secured a bid in the healthcare sector. We are excited to provide support for the substantial project, which will require multiple systems and is set for September of this year.
Speaker #2: We are also experiencing a surge in opportunities from our distributors, including Ares Distribution on the East Coast, Avantor Sciences in the United States, and various players in the agricultural sector.
E.J. Shane: We are also experiencing a surge in opportunities from our distributors, including Aeries Distribution on the East Coast, Avantor Sciences in the United States, and various players in the agricultural sector, all of whom are acquiring new clients that could significantly influence the industry that may have a positive impact on our business operations and sales. Additionally, our long-term international partners in Germany, the Netherlands, and Italy have developed strong pipelines. Pending our final EU and UK registration approvals over the past few months, the agencies in Europe have taken a more active approach in their reviewing of our submissions, so we have some confidence about the approvals being received very shortly. Our food safety division is expanding significantly in service jobs, and we are currently in discussions with recommendations from our Soly Organics customer to a new client in the leafy green sector.
Speaker #2: All of whom are acquiring new clients that could significantly influence the industry. That may have a positive impact on our business operations and sales.
Speaker #2: Additionally, our long-term international partners in Germany, the Netherlands, and Italy have developed strong pipelines, pending our final EU and UK registration approvals over the past few months, the agencies in Europe have taken a more active approach in their reviewing of our submissions.
Speaker #2: So, we have some confidence about the approvals being received very shortly. Our food safety division is expanding significantly in service jobs, and we are currently in discussions with recommendations from our solely organics customer to a new client in the leafy greens sector.
Speaker #2: This new customer is interested in installing similar equipment, and ideally our latest Steramist Integrated System, or the SIS-SA, as the solely project was one implementation that led to the development of the program behind this new system.
E.J. Shane: This new customer is interested in installing similar equipment and ideally our latest Sterimist Integrated System, or the SIS SA, as the Soly project was one implementation that led to the development of the program behind this new system. Additionally, we see an upcoming opportunity with a multinational food and drink processing empire that has previously made smaller purchases of Steripacs. They are now interested in expanding their order with an additional 25 units, and we will keep you updated on this progress. We're also in talks with an avocado produce wholesaler that expressed interest in partnering with us a few years ago, but regulatory hurdles held us back. We're now collaborating with them and the FDA to secure a food contact notification, or FCN, which may assist us in the food safety industry to utilize Sterimist IHP.
Speaker #2: Additionally, we see an upcoming opportunity with a multinational food and drink processing empire that has previously made smaller purchases of Sterapacks. They are now interested in expanding their order with an additional 25 units, and we will keep you updated on this progress.
Speaker #2: We're also in talks with an avocado produce wholesaler that expressed interest in partnering with us a few years ago. But regulatory hurdles held us back.
Speaker #2: We're now collaborating with them and the FDA to secure a food contact notification, or FCN, which may assist us in the food safety industry to utilize Steramist IHP.
Speaker #2: Once approved, we will be able to market our products for food contact applications to facilities that comply with this FDA regulation. Our existing customers are highly satisfied and actively using our equipment, and we're seeing increasing feedback and willingness to share their positive results.
E.J. Shane: Once approved, we will be able to market our products for food contact applications to facilities that comply with this FDA regulation. Our existing customers are highly satisfied and actively using our equipment, and we're seeing increasing feedback and willingness to share their positive results. This supports future sales across multiple industries, and we are adopting a more assertive approach within the current framework. Each new customer adds value. One of our key distributor opportunities for this year is a highly regarded company whose parent organization utilizes our IHP corporate service team. They offer a selection of supplies for laboratories, life sciences, safety, and facility management, including chemicals, consumables, equipment, instruments, diagnostics, and more. Mobile equipment remains our most challenging segment to forecast.
Speaker #2: This supports future sales across multiple industries. And we are adopting a more assertive approach within the current framework. Each new customer adds value. One of our key distributor opportunities for this year is a highly regarded company whose parent organization utilizes our IHP corporate service team.
Speaker #2: They offer a selection of supplies for laboratories, life sciences, safety, and facility management, including chemicals, consumables, equipment, instruments, diagnostics, and more. Mobile equipment remains our most challenging segment to forecast.
Speaker #2: That said, we just secured the second order from a globally recognized leader in eye health this quarter for our Steramist surface units. As I projected and noted on our last call, we also expect the universities to finalize deals this quarter due to year-end capital spending, with several opportunities still in the pipeline for our handheld spray delivery systems.
E.J. Shane: That said, we just secured the second order from a globally recognized leader, and I held this quarter for our Sterimist service unit, as I projected and noted on our last call. We also expect universities to finalize deals this quarter due to year-end capital spending, with several opportunities still in the pipeline for our handheld spray delivery systems. I thank you all and will return the call over to Dr. Shane.
Speaker #2: I thank you all, and I will return the call over to Dr. Shane.
Speaker #4: Thank you, E.J.
John Nesbett: Thank you, Richard.
Speaker #8: So, as we continue to focus on strengthening our infrastructure, by enhancing personnel, in our C-suite, management, and division leaders, sales and technical expertise, alongside expanding our network of global distributors.
Dr. Halden Shane: So, as we continue to focus on strengthening our infrastructure by enhancing personnel in our C-suite, management, and division leaders, sales and technical expertise, alongside expanding our network of global distributors, while the second quarter presented its challenges for TOMI, we are fully committed to driving growth and innovation with our dedicated team. We are focused on expanding all our divisions with many product and service offerings we now offer, and we are optimistic about the opportunities ahead. Our sales backlog is significant and encouraging, and the new sales strategy we implemented at the end of last year is demonstrating promising results. We are excited about the strategic partnerships and the increasing interest from our clients looking to enhance their operations with our solution. As we continue to navigate the regulatory landscape, we remain hopeful that upcoming registrations will make a significant impact on our growth path.
Speaker #8: While the second quarter presented its challenges for TOMI, we are fully committed to driving growth and innovation with our dedicated team. We are focused on expanding all our divisions, with many product and service offerings that we now provide.
Speaker #8: And we are optimistic about the opportunities ahead. Our sales backlog is significant and encouraging. And the new sales strategy we implemented at the end of last year is demonstrating promising results.
Speaker #8: We are excited about the strategic partnerships and the increasing interest from our clients looking to enhance their operations with our solution. As we continue to navigate the regulatory landscape, we remain hopeful that upcoming registrations will make a significant impact on our growth path.
Speaker #8: We thank our new CFO, David Vansten, for his role in helping us manage personnel, constraints, and laying the groundwork for further support. With our emphasis on building infrastructure, enhancing our technical expertise, and strengthening sales, we are confident that we are on the path to a successful second half of the year.
Dr. Halden Shane: We thank our new CFO, David Vansten, for his role in helping us manage personnel constraints and laying the groundwork for further support. With our emphasis on building infrastructure, enhancing our technical expertise, and strengthening sales, we are confident that we are on the path to a successful second half of the year. We are constantly adding new interested investors to our company, and I want to take a moment to welcome them all, and I want to thank them for joining our mission of making the world a safer place. Our IR firm is always available for any investor to send questions, and they will forward them off to management. My takeaways from this quarter are that the solution model is starting to work. Recognized revenue was a bit disappointing, but management is energized to make the second half of the year and beat our budget.
Speaker #8: We are constantly adding new interested investors to our company, and I want to take a moment to welcome them all, and I want to thank them for joining our mission.
Speaker #8: Of making the world a safer place. Our IR firm is always available for any investor to send questions, and they will forward them off to management.
Speaker #8: My takeaways from this quarter is that the solution model is starting to work. Recognized revenue was a bit disappointing, but management is energized to make the second half of the year and beat our budget.
Speaker #8: The product has been accepted by the largest companies in the world, and we are thrilled about that. Operator, let's open the call to questions.
Dr. Halden Shane: The product has been accepted by the largest companies in the world, and we are thrilled about that. Operator, let's open the call to questions.
Speaker #2: Thank you very much. We will now be conducting our question and answer session. If you would like to ask a question, please press *1 on your phone keypad now.
John Nesbett: Thank you very much. We will now be conducting our question and answer session. If you would like to ask a question, please press star one on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove your question from the queue. For anyone using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment whilst we poll for questions. Thank you. Our first question is coming from Zach Thompson of Liberty Management. Zach, your line is live.
Speaker #2: A confirmation message will indicate that your line is in the queue. You may press *2 if you would like to remove your question from the queue.
Speaker #2: For anyone using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment whilst we poll for questions.
Speaker #2: Thank you. Our first question is coming from Zach Thompson of Liberty Management. Zach, your line is live.
Speaker #9: Hey guys, thanks for taking the question. so I see the solution sales increased 40% in the first half. could you give us, you know, even at a high level, the margins that you realized in solution sales compared to the rest of the business?
Speaker 11: Hey, guys. Thanks for taking the question. so I see that solution sales increased 40% in the first half. could you give us, you know, even at a high level, the margins that you realize in solution sales compared to the rest of the business?
Speaker #3: Thank you, Zach. yeah, we were very excited about our solution sales and, and we are extremely excited about it going forward from what we can see.
Dr. Halden Shane: Thank you, Zach. you know, we were very excited about our solution sales, and we are extremely excited about it going forward from what we can see. that's our model. And, more equipment that we get out there, obviously, solution sales go up. It has high margins, solution sales. And, we're very happy about that, and it has shown by increasing our gross margins to 66% this quarter, in light of everything else. But, thank you so much for that question.
Speaker #3: That's our model. And, with more equipment that we get out there, obviously solution sales go up. It has high margins—solution sales—and we're very happy about that.
Speaker #3: And it has shown by increasing, our gross margins to 66% this quarter. in light of everything else. But, thank you so much for that question.
Speaker #9: Got it. Thank you. that's all from me.
Speaker 11: Got it. Thank you. that's all from me.
Speaker #2: Thank you very much. Our next question is coming from John Nelson, who's a private investor. John, your line is live.
John Nesbett: Thank you very much. Our next question is coming from John Nelson, who's a private investor. John, your line is live.
Speaker #10: Thank you. Hi. the, hi. that Trump, strategy, in bringing back pharma manufacturing to the United States, can you, talk a little bit about what that kind of opportunity might mean for your company?
Dr. Halden Shane: Thank you. Hi.
Speaker 11: Hey, John.
Dr. Halden Shane: The, hi, the, strategy, in bringing back pharma manufacturing to the United States. can you, talk a little bit about what that kind of opportunity might mean for your company? That's a great question, John. It's amazing, to tell you the truth. you know, first of all, the regulatory standards are very high, and we need them all. And, you know, with the new plants that they're building, the ones that have been closed as they're taking over, and with all the new opportunities for business in America, I think that it's going to open up a whole bunch of opportunities for us going forward. many of these large companies are aware of our product, and I think that over the next couple of years, we should be getting tremendous orders from them.
Speaker #10: That's a great question, John. It's amazing, to tell you the truth. You know, first of all, the regulatory standards are very high, and we meet them all.
Speaker #10: And, you know, with the new plants that they're building, the ones that they've been closed as they're taking over, and with all the new opportunities for business in America, I think that it's going to open up a whole bunch of opportunities for us going forward.
Speaker #10: many of these large companies are aware of our product. And I think that over the next couple of years, we should be getting tremendous orders from them.
Speaker #10: We're hoping that we're going to be able to get into the ground floor of a lot of these new facilities that they're starting to build and break ground on.
Dr. Halden Shane: We're hoping that we're going to be able to get into the ground floor of a lot of these new facilities that they're starting to build and break ground on. And, that's not the only industry. There's many other ones. I mean, the whole server industry, the microchip industry, and so much more that's going to need a successful decontamination process that's quick and doesn't create a lot of caustic, problems with their equipment and doesn't have to be wiped, et cetera. is just opening up a whole avenue of places for us. Okay. Thanks. and the second question is, are any of the specific customers that had deferred CAPEX projects in the second quarter, come back, and notified you that they're moving ahead with any of these projects? I believe so. Let me let me refer that to either David or E.J. and let them answer it.
Speaker #10: And that's not the only industry. There are many others. I mean, the whole server industry, the microchip industry, and so much more that are going to need a successful decontamination process.
Speaker #10: That's quick. And, doesn't create a lot of caustic problems with their equipment and doesn't have to be wiped etc. is just opening up a whole avenue of places for us.
Speaker #10: Okay. Thanks. and the second question is, are any of the specific customers that had deferred CapEx projects in the, second quarter, come back, and notified you that they're moving ahead with any of these projects?
Speaker #10: I believe so. Let me refer that to either David or E.J. and let them answer it.
Speaker #8: I'll answer part to help you there, John. if you looked at our customer deposits, you'll see that we've got a significant increase. As Dr. Shane pointed out, we have, you know, our deferred revenue is $700,000.
David Vansten: I'd answer part to help you there, John. if you looked at our customer deposits, you'll see that we've got a significant increase. As Dr. Shane pointed out, we have, you know, our deferred revenue is 700,000. if you 400, around the 400,000 range is where our customer deposits. There's at least two customers who are going to come back in the Q1 of 2026. I'll hand over to E.J. for more details.
Speaker #8: if you 400 around the $400,000 range is where our customer deposits. There's at least two customers who are going to come back in the Q1 of 2026.
Speaker #8: I'll hand over to E.J. for more details.
Speaker #2: Hi. I think that's covered, David. but yes, I mean, some of them were also, you know, just one-off of them based on terms and delivery.
E.J. Shane: I think that's covered, David. But yes, I mean, some of them were also, you know, just one-off of them based on terms and delivery. We're already delivered this quarter in the first month. And yes, we do have the one project that we did a PR on with the university in Boston, which is a custom build-in, will be delivered in the quarter two of next year. But that's the only large-scale project. The rest are due to set for either this quarter or the beginning of Q4.
Speaker #2: We're already delivered this quarter. in the first month. And, yes, we do have the, the one project that we did a PR on with the university in, in Boston, which is a custom build-in.
Speaker #2: We'll be delivered in the quarter two of next year. But that's the only large-scale project. The rest are, are due to set for either this quarter or the beginning of Q4.
Speaker #10: Okay. Great. and then, E.J., could you describe, a bit more with a bit more detail about how Steramist would be used if, you get the, FDA approvals that you've been, trying, attempting?
Dr. Halden Shane: Okay. Great. And then, E.J., could you describe a bit more, with a bit more detail, about how Sterimist would be used if you get the FDA approvals that you've been attempting?
Speaker #2: Sure, John. There are two FDA approvals I'm working with. One is still the 510(k) for medical devices, so that was a big part of last quarter's script.
E.J. Shane: Sure, John. There's two FDA approvals I'm working with. One is still the 510(k) for medical devices. So that was, you know, a big part of last quarter's script, and that's still an ongoing project with the decon chambers we're developing that are set for delivery in the beginning of Q4. So once we do that and process the data, the 510(k) should be an easier line through for receipt. The reference on today's call for the FCN is primarily based for an easier in to the many opportunities we're seeing in food safety alone. So primarily avocados, seeds, items that aren't necessarily a direct, you know, spray on food to eating, right? It's more still items that are protected by some barrier where we would be able to have approval from the facility to spray direct on.
Speaker #2: And that's still an ongoing project with, the, the decon chambers we're, we're developing, that are set for delivery in the beginning of Q4. So once we do that, and process the data, the 510K should be an easier, line through for, for receipt.
Speaker #2: The reference on today's call for the FCN is primarily based on an easier entry to the many opportunities we're seeing in food safety alone.
Speaker #2: so primarily avocados, seeds, items that aren't necessarily a direct, you know, spray on food to eating, right? It's more still items that are protected by some barrier, where we would be able to have approval from the facility to spray direct on.
Speaker #2: So in the avocado industry specifically, there's, you know, a mold issue, and of course what we sell Manila and Listeria in, in food areas.
E.J. Shane: So in the avocado industry specifically, there's, you know, a mold issue, and of course, it'll be salmonella and listeria in food areas, which we know we have the efficacy on. So all we need is a stamp from the FDA to also prove that based on the studies we already have. So I'm looking for that to help in those opportunities.
Speaker #10: Mm-hmm.
Speaker #2: Which we know we have the efficacy on. So all we need is, is a stamp, from the FDA to also prove that based on the studies we already have.
Speaker #2: So I'm, I'm looking for that to, help, in, in those opportunities.
Speaker #10: Okay. Good. and, then, any new uses that you've come across or developed for, Steramist?
Dr. Halden Shane: Okay. Good. And then any new uses that you've come across or developed for Sterimist?
Speaker #2: Yeah. I mean, we're always doing, you know, internal tests, and, you know, we have, a consultant in an individual that focuses on application of, of new processes, one is, is a spray on, on flowers.
E.J. Shane: Yeah, I mean, we're always doing, you know, internal tests, and you know, we have consultants and an individual that focuses on application of new processes. One is a spray on flowers to increase the length of time that, you know, florists can deliver, and we're seeing promising results there. But after, you know, we do our internal tests, there's always, you know, many other hurdles to overcome to make sure we can enter into those industries. But we do, always looking for additional applications.
Speaker #2: to increase the length of time that, you know, flowers can deliver and we're seeing promising results there. but after, you know, we do our internal test, there's always, you know, many, other hurdles to, to overcome to make sure we can enter into those industries.
Speaker #2: but we, we do, always looking for additional applications.
Speaker #10: Okay, that is all the questions that I have. Thank you.
Dr. Halden Shane: Okay. That is all the questions that I have. Thank you.
Speaker #2: Of course.
E.J. Shane: Of course.
Speaker #10: Thanks, John.
Speaker 11: Thanks, John.
Speaker #2: Thank you very much. Just a reminder there, if there are any remaining questions, you can still join the queue by pressing *1 on your phone keypad now.
John Nesbett: Thank you very much. Just a reminder that if there are any remaining questions, you can still join the queue by pressing star one on your phone keypad now. Okay. I'm not seeing anyone else in the queue at the moment, so I will hand back to the management team for closing comments.
Speaker #2: Okay. I'm not seeing anyone else in the queue at the moment. So I will hand back to the management team for closing comments.
Speaker #10: Well, again, I just want to thank everybody for listening to the earning call and for supporting the company like always. And I hope everybody has a, wherever they are, a splendid day or a splendid evening.
Dr. Halden Shane: Well, again, I just want to thank everybody for listening to the earning call and for supporting the company, like always. And I hope everybody has a, wherever they are, a splendid day or a splendid evening, and operating can disconnect. Thank you.
Speaker #10: And operating, you can disconnect. Thank you.
John Nesbett: Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.