Zomedica Corp.

fourth quarter 2024 financial results conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, March 13th, 2025. I would now like to turn the conference over to Mr. Mike Valli from ICR. Please go ahead.

Thank you, Operator, and good afternoon, ladies and gentlemen. Welcome to Zamedica's fourth quarter 2024 earnings results and business update call. Joining me on today's call are Zamedica's Chief Executive Officer, Larry Heaton, Scott Jordan, the company's new Executive Vice President and Chief Financial Officer, and Mike Zelke, Vice President and Corporate Controller. Before we begin, we would like to remind everyone that on this call, we will be making various remarks about future expectations plans and prospects that constitute forward-looking statements. These forward-looking statements are based on assumptions, and there are risks that the results may differ materially from those statements. As such, Zomedica cannot guarantee that any forward-looking statements will materialize, and you are cautioned not to place undue reliance on them. We refer current and potential investors to the forward-looking information and risk factors sections of our public filings available on CDARplus at www.cdarplus.ca and on EDGAR at sec.gov. Forward-looking statements made on this conference call represents Zomedica's expectations as of today, March 13, 2025. I will now pass the call over to Zomedica's Chief Executive Officer, Larry Heaton. Larry? Thanks, Mike.

I'd like to start by thanking our shareholders for your support. Wishing prospective investors, analysts, and others a good afternoon. And welcome all to the Zometica fourth quarter and full year 2024 earnings results and business update call. Now today, instead of following our normal order, I'm going to start by addressing our recent delisting and our current market cap. Jeff Bezos coined the phrase, the company is not the stock and the stock is not the company. when Amazon shares fell 80% as the market adjusted in 2001, even while Amazon's operations were performing very well. I believe that our situation today reflects that. Our share price is under significant pressure, yet the company is performing well. As in each of the last 15 quarters, we're announcing today another record fourth quarter year over year. Markets are up, and we have over $70 million in liquidity. Your company is sound and is under no stress. So what's up with the share price? Well, as you know, in September of 2023, our share price fell below the 20 cent threshold for listing established by the New York Stock Exchange American. We were told then that we had until March 2024 to regain compliance, unless in the interim, the share price fell to an unacceptable level, in which case we would be immediately delisted. When we didn't rise above 20 cents by March 12, 2024, we discussed the situation with the exchange, and they told us that we could remain listed, essentially indefinitely, unless our share price fell to an unacceptable level. When the market fell over the last few weeks, our share price fell with it, ended up closing on March 3rd, at a level that the NYC American Exchange regulators determined was unacceptable. When it failed to open higher or climb the following morning, they halted trading and announced via a letter to us and a press release on March 4th, the suspension of trading and the commencement of delisting. Both Semetica and the NYC American Exchange issued press releases to inform shareholders on that day. A copy of the exchange's letter to us is included as an attachment to our annual report on Form 10-K filed this afternoon. Now, prior to our delisting, we identified the OTCQB Venture Market as the most appropriate option for our investors and ensured that trading would continue essentially uninterrupted as we transitioned to the new platform on March 5th with the new ticker symbol ZOMDF. We recognize that the share price fell considerably since we moved to the OTC QB market. While we can't pinpoint the exact reason for the decline, there was likely some selling from institutional investors who were unable or unwilling to hold OTC quoted stocks. In addition, we suspect that there were shareholders who moved out of their position due to speculation that the company is under distress. However, this couldn't be further from the truth. We are incredibly excited about the future at Zomedica. With the quality of our product portfolio, our commercial organization, and our manufacturing and distribution capabilities combined with the strength of our balance sheet, we believe we're very well positioned to deliver accelerating growth in the coming years as we move towards profitability. Investors who are currently buying or considering investment see the dislocation in value between our market cap and the values of Medicaid can create. They recognize what we've built over the past three and a half years and where we're headed. To that end, Zomedica investors, I'm sorry, Zomedica insiders who are heavily invested in the company have been restricted from trading since December 16th of last year. The window for some Medicaid insiders to trade will be open this coming Monday, March 17th, but we'll close again on March 18th due to the various insider trading rules. Now, I'll take questions on this topic after our prepared remarks, but for now, let me shift gears. and turn to an update on our recent operational performance, followed by a financial update from our Vice President of Finance and Corporate Controller, Mike Zelke, and comments from Scott Jordan, our new Executive Vice President of Finance and Chief Financial Officer, before opening the line for questions. The fourth quarter marked yet another period of solid execution across our business. We delivered revenue of $7.9 million for the fourth quarter, reflecting 8% growth over the prior year quarter. driven by year-over-year growth at both our therapeutic devices and diagnostic segments. This was the 15th quarter in a row that revenue set new quarterly highs, a trend that we expect to continue. The strong performance in the fourth quarter led to a full year 2024 revenue of $27.3 million, a record year for the company. Continued solid performance in our therapeutic devices segment, driven largely by our well-established leadership position with PulseVet, was bolstered by 76% growth year-over-year within our diagnostic segment, coming as a result of growing adoption of our novel diagnostic products, in particular, through FORMA and VetGuardian, which grew 65% and 95% year-over-year, respectively. 2024 was a significant year for Zematica, and the tremendous efforts across the organization set us up for success in 2025 and beyond. We made great progress within each of our key initiatives throughout the year to help drive growth and ultimately reach profitability. To review these, I'll start with a focus on commercial expansion. One of the most exciting commercial efforts we undertook during 2024 was international expansion. To take advantage of this opportunity, we focused on a two-pronged approach. First, increasing our regulatory approvals and key geographies. And second, growing our distribution network outside the U.S. With the receipt of CE marking for multiple products, including Trueforma, TrueView, and VetGuardian during 2024, our entire portfolio is now eligible to be sold into markets in the EU, as well as other countries that accept the CE mark. In addition, we materially expanded our global reach through the execution of multiple strategic partnerships with leading distributors in new international markets. In 2024, for example, we signed agreements to add distribution in Europe and the Middle East, as well as select other OUS markets. Having our entire product portfolio available for sale across the EU and other key geographies, as well as an expanded commercial footprint across key global markets, represents incremental revenue opportunities that we haven't had access to previously, and this should help drive top-line growth in the business. Beyond making our products more widely available on a global scale, we continue to aggressively grow our portfolio to expand the applicability of our novel technologies, as well as offer additional benefits to pets and the veterinarians that care for them. Now, PulseSight remains our leading product, but we believe its benefits can be even more widely utilized across a variety of indications and pets. We continue to focus on developing clinical data related to new indications for use, paving the way for new opportunities beyond the technology's historic applications and customer base. Turning to Assisi, while there was some choppiness in the performance of this product line during 2024, We are excited that many of the one-time headwinds experienced have been resolved, and we are now well positioned for solid performance in 2025. We've continued to develop new product offerings, including the new Equilobe device for horses, which we launched in December, and our next generation Loop Lounge that we expect to launch yet this quarter.

Next up is Trueforma.

We saw a significant evolution during 2024. In the fourth quarter of 2023, we acquired Corvo Biotechnologies, the developer and manufacturer of the Truforma platform and its assays. Now, one of the primary drivers of this acquisition was to allow us to accelerate the development and launch of novel assays, which we delivered on during 2024. We launched five new assays during the year, including equine cortisol, canine antiviral chromium P, and progesterone, enhanced equine ACTH, and a quantitative equine insulin assay. We continue to see the growing adoption and utilization of these new assays along with our broader portfolio, which validates our decision to acquire 4Wheel Biotechnologies. Moving forward, we'll continue to develop new high volume assays to support the ongoing growth of this rapidly growing product line. Turning to TrueView, our digital microscope and pathology platform. During the year, we launched upgrades to the functionality of the system, including the introduction of hardware enhancements, which delivered dramatic improvement in the speed of imaging. We also continue the development of artificial intelligence, or AI, interpretations to the system, which will offer an AI-generated diagnostic report along with each hematology slide processed. We're in the process of finalizing our in-field testing, and we'll launch the upgraded system a little later this year. Beyond the functionality of the program, of the platform, I should say, we added a new protocol for ear cytology cases, a high-volume protocol performed daily at pet clinics. The effect of the various enhancements to both hardware and software of the TrueView system is to allow it to lay claim to being the fastest digital microscope available, the digital microscope with the highest quality image, and the only digital microscope that automatically prepares the slides. In addition, as I've just mentioned, shortly the system will also offer AI-generated diagnostic reports for each slide processed. Turning to VetGuardian, we continue to be very excited about the performance of VetGuardian and its growing adoption by veterinarians. Leveraging feedback from customers during the year, we work to make the system even more beneficial. In August of 2024, we launched advanced audio capabilities for the platform, which build on the existing features of the product and further enable veterinarians to detect subtle nuances in animal behavior and health, facilitating enhanced monitoring. As a result of growing demand from multi-system customers, we expanded the capability of our Myzometica portal to be able to accommodate more than the previous eight vet guardian monitors at one time on one screen. I think we have an account that has 11 currently installed. While still early in the launch cycle for our VetGuardian system, we're pleased with its adoption in the small animal market and expect significant growth in 2025 and beyond. We also remain excited about bringing VetGuardian to the equine market. We're now planning to develop and launch the equine version in 2025, which we believe will be very well received by the equine veterinary community and set the stage for potential expansion of the market opportunity for horse trainers, breeders, and owners. As you can tell, we're very excited about the progress we've made in expanding the applicability of our portfolio. We made another exciting announcement in early 2025. In January, we announced a distribution agreement with Cresselon, a biotech company, for its Betagel hemostatic gel product line. The agreement grants us exclusive right to distribute Betagel hemostatic gel in the United States and a non-exclusive right to distribute it in the rest of the world. This is a significant agreement as it adds an additional novel technology to the backs of our commercial organization, but also expands Zomedica's portfolio into new care areas within veterinary practices. Vet-HL is a groundbreaking plant-based formula designed to stop bleeding rapidly within five seconds when applied directly to the source. It's been clinically proven to save time during surgical procedures and significantly reduce blood loss in patients. Importantly, Betagel is widely applicable across a variety of high volume veterinary use cases, including surgical procedures, routine and surgical dental procedures, emergency care, and liver biopsies. Fetagel is an invaluable tool for vets, and this partnership with Crestalon allows us to expand the reach of the revolutionary product and be yet another cutting-edge solution under the Zomedica umbrella. We expect this agreement to help drive accelerated revenue growth in 2025, alongside all of the other portfolio expansion initiatives put into place last year. Now turning 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. We hit several key milestones during 2024 and earlier this year. In June of last year, we completed the expansion of our global manufacturing and distribution facility in Roswell, Georgia. The expansion enhanced warehousing and sales order fulfillment efficiencies and resulted in our ability to support a five-fold increase in demand for our products without any need for expansion of the facility. During the third quarter of last year, we installed a new automated robotic manufacturing line in our Minnesota manufacturing facility that automated steps that previously required high levels of manual labor. This line is currently live, producing all of our Truforma assays. This new line improves manufacturing efficiencies, allowing us to realize cost benefits to further improve our gross margins in the future. After the end of the fourth quarter, we announced that we moved our Ann Arbor headquarters to a new facility. This relocation, which is where we are speaking to you from today, will improve our overall efficiency and cut costs, allowing the company to reduce overhead costs by over $200,000 a year. Collectively, these recent milestones are important as they support our growth initiatives while reducing our overall cost structure, which will be critical as we work towards cash flow breakeven and gap profitability in the future. As you've just heard, 2024 was a transformative year for Zometic. Our efforts across R&D, regulatory, commercial, and operations allowed us to deliver a strong year while setting ourselves up for success as we move into 2025. So before turning to a financial update, I wanted to introduce Scott Jordan, who joined the company at the start of 2025 as our Executive Vice President of Finance and CFO. Scott brings over 30 years of experience in financial leadership within the life sciences and diagnostic industries to Zomedica, with extensive expertise in organizational management, strategic finance, business development, and product commercialization. His background and skill set will be invaluable as we continue our growth trajectory in the animal health space. We're excited to have them on board. We'll hear from Scott in just a minute. But first, I'd like to turn the call over to our Vice President of Finance and Corporate Controller, Mike Selke, for our financial update. Mike?

Thanks, Larry, and good afternoon. I would like to quickly echo Larry's gratitude for our shareholders and their support, while also welcoming prospective investors, analysts, and others to the call. With that, let's begin our financial update with an overview of the fourth quarter. Total revenue for the fourth quarter was a record at $7.9 million, an increase of 8% driven by growth across the portfolio, highlighted by a 109% year-over-year increase in our diagnostic segment. Capital revenues in the fourth quarter were $3.3 million as we continued to execute our PulseVet commercial strategy. In the fourth quarter, consumable revenue was $4.6 million, an increase of approximately 13% over the prior year quarter. That represented approximately 58% of total revenue in this quarter, largely a result of the growth in capital equipment sales throughout the year, which again provide a new stream of consumables revenue after installation. Therapeutic devices segment revenues from PulseVet and Assisi products were $7.1 million, and diagnostics segment revenues were approximately $800,000. Again, an increase of 109% over the prior year quarter. driven by the growing adoption of recently launched Trueforma assays and solid contributions from both our TrueView and VetGuardian product lines. In the quarter, gross margin was 70.3%, which exceeded our previously stated target range of 65 to 70% for a third consecutive quarter. Total operating expenses were $13.7 million, a decrease of 17% over the prior year quarter. Research and development expenses were $2.1 million, a decrease of approximately $1 million over the prior year quarter, driven by integration costs of our Coral Biotechnologies acquisition in 2023 that did not recur in 2024, along with reduced expenses in relation to TrueView development. Sales and marketing spend was $5.3 million, a 23% increase over the prior year quarter, primarily due to increased Salesforce headcount and the commission expenses associated with a record revenue quarter. General and administrative expenses were $6.3 million, down approximately $2.8 million compared to the prior year quarter, driven by integration costs of our QVT acquisition and professional support fees incurred in 2023 that did not recur in 2024. Net loss for the quarter was $7.2 million, or one cent per share. compared to a net loss of 22.4 million or two cents per share in the prior year. Non-GAAP EBITDA loss, which includes adjustments for stock compensation, was 6.1 million dollars. When adjusting for non-cash and non-recurring items, our adjusted non-GAAP EBITDA loss was approximately 5.4 million. Cash used in this quarter was approximately 6.5 million and included $2.3 million of non-recurring items, most notably the initial licensing fee for our recently announced Betagel product offering. Our adjusted operating burn of $4.2 million is consistent with our Q3 burn and a continuation of the positive trend in cash we highlighted last quarter. During the first half of 2024, our adjusted operating cash burn was $12.1 million, compared with $8.2 million in the second half. Again, reflective of positive trends in operating efficiency and revenue growth. Turning to a brief overview of the full year. Total revenue for the year was a record at $27.3 million, an increase of 8% driven by growth across the portfolio. Gross margin for the year was 70%, which was up over gross margin of 68.8% in 2023, and it meets the top end of our previously stated target range of 65 to 70%. total operating expenses exclusive of impairment charges taking in the fourth quarter of 2023 and the second quarter of 2024 were $54.5 million up from $48.9 million in 2023, an increase of 11%. This increase was primarily the result of increases in R&D relating to our QVT acquisition and continued development of new assays and ongoing development of existing and new products. as well as increases in our Salesforce headcount, both of which contributed to full-year record revenue performance. Net loss for the year was $47 million, or 5 cents per share, compared to a net loss of $34.5 million, or 4 cents per share, in the prior year. Non-GAAP EBITDA loss, which includes adjustments for stock compensation, was $40.7 million. When adjusting for non-cash and non-recurring items, our adjusted non-GAAP EBITDA loss was approximately $20.2 million. Turning to the balance sheet, Zomedica maintained its strong liquidity position, ending the year with $71.4 million in cash, cash equivalents, and available for sale securities. Cash used in the year was approximately $29.1 million. And when adjusted for non-recurring one-time items, non-GAAP operating cash burn was approximately $20.4 million. With that, I would like to now turn the call over to Scott Jordan, our new Chief Financial Officer.

Thanks, Mike. It's a pleasure to be part of Zomedica, and I look forward to working closely with team, investors, and strategic partners as we seek to grow the widespread adoption of the company's extraordinary portfolio of innovative animal health products and deliver value to shareholders. As a seasoned C-level executive in the healthcare industry and former investment banker, I was impressed with the company's successful track record of acquiring five leading company technologies in the therapeutic devices and diagnostics markets over the past four years, in addition to a recent licensing agreement signed with Cressilon. Leveraging Zomedica's experience management, operations, and sales and marketing teams, the company is ideally positioned to translate our global leadership position in shockwave therapy, PulseVet, into the point-of-care diagnostics, digital cytology, and wireless remote monitoring animal health markets. I am dedicated to assisting our Zomedica team with achieving the company's strategic goals, including driving strong top-line growth, executing on a variety of growth initiatives targeting equine, mixed small animal veterinarians, hosting continued sell gross margins and reducing our operating expenses while stabilizing operating cash burn. Recently, it was announced Zomedica was delisted for the NYSE American Exchange, given the company was not in compliance with the exchange's minimum listing standards. While disappointing, the transition to the OTCQB market continues to allow liquidity to our shareholders and permits SoMedica to continue focusing on driving growth and advancing our pipeline of veterinary products. While our common shares will now be trading on an OTCQV market, the value of the company's assets and our opportunities for growth remain the same. Rest assured, we are aggressively evaluating all potential pathways available to us to remedy the share price and move back onto a major exchange. First and foremost, We remain committed to continuing our top-line growth while taking advantage of our growing scale to deliver operating leverage and ultimately profitability. Beyond continued strong execution, we, alongside our team of advisors, are currently conducting an extensive process to review all strategic business development and capital markets opportunities available to us. The goal of this process is to identify what action or actions we can take that would allow us to bring our share price up to a level which would not only satisfy the requirements needed to uplist back to a major exchange, but also put us in the best position to unlock as much value as possible once there. We look forward to sharing what actions we will be pursuing once they have been fully vetted and agreed upon by our management team and our board of directors. We remain committed to delivering value to our shareholders and the veterinary community as we continue to innovate in the animal health sector. I look forward to building relationships with you as Zomedica works diligently towards supporting our stock price through the launch of novel investor forums, including a webinar series designed to highlight our innovative product portfolio, introduce key personnel, showcase manufacturing capabilities, and educate investors and strategic partners on the company's long-term growth strategy. This informative webinar series will be offered on the third Thursday of every month, beginning in April, to provide a front row seat to Zomedica's game-changing technologies and strategic vision, providing veterinarians, investors, and industry leaders with an unparalleled opportunity to stay ahead of the curve in animal health care. With that, I'd like to turn the call back to Larry for a look forward. Larry? Thanks, Scott.

We're very excited about the opportunity that exists for Zamedica in 2025. With the work done in 2024 and some of the compelling developments announced early this year, we believe that we are very well positioned to deliver accelerated revenue growth and demonstrate operating leverage. During the year, we'll be focused on a number of key revenue growth catalysts. First, our continued push into the equine market. We've established ourselves as a leader in the care of horses with PulseVet. and now plan to leverage that to drive the adoption of incremental, purpose-built equine solutions. These include accelerating adoption in the equine market through the addition of a second equine professional services veterinarian and an additional equine sales director, increasing utilization of full-set troads by equine veterinarians as they apply it to the treatment of equine asthma, which affects 15% of horses over seven years of age, supported by positive clinical data in ongoing clinical studies, and a launch shortly of an equine asthma clinical registry. Driving the growth of new equine trueforma assays, such as EACTH, for Cushing's diagnoses, which affects over 20% of horses over 15 years of age, insulin for diagnosis of equine metabolic disorder, cortisol for distressed foals, and progesterone for breeding. and the launch of BedGuardian for stall site use. Second, continued international expansion and revenue capture. As I outlined earlier, we significantly grew our international footprint in 2024 and expect those efforts to pay dividends throughout the year. Building on strong relationships created for marketing full-set internationally, we've entered an agreement with our EU equine distributor to begin shortly to carry the true form of product line. In addition, we continue to work towards the introduction of our diagnostic products into Japan during the year, which will join the equine pulse vet systems already on the market in Japan and will be directed at the 12,600 companion animal veterinary practices in that country, which is about one-third the size of the U.S. market. Third, growing the adoption and utilization of our true form of platform and associated assays. With our expanded catalog of assays, along with new assay launches and the introduction of multiplex or combination assays in 2025, we expect to continue to see strong revenue growth in this product line. Fourth, with the recent agreement to distribute Vetigel, we'll be able to tap into a new revenue stream. We've trained our sales force on the technology and expect to see increasing contribution from Vetigel as we move throughout the year. the addition of dedicated capital equipment specialists who will work with our full-line salespeople to accelerate the adoption of our pulse vet, bed guardian, and ultrasound products. And last, to capture share from large veterinarian groups, we've added a corporate accounts director entirely focused on multi-practice groups who have the potential to adopt and utilize our entire product portfolio on a large scale. While we focused on selling into these types of accounts on an individual basis in the past, now that we've reached critical mass with respect to being able to significantly impact not only the quality of care and pet-parent-client satisfaction at their clinics, but significantly also to positively impact their clinic's workflow, cash flow, and profitability, we're ready to address them now on a corporate level. Along with accelerating top-line growth, we expect to see the benefits of our optimized infrastructure. As we continue to scale the business, we plan to reduce operating expenses in 2025 relative to 2024 and see these expenses continue to decline in the future as a percentage of revenue, but an absolute reduction in 2025 versus 2024. This will produce operating leverage and move us closer to our goal of being cash flow positive at a run rate of $50 million. As a reminder, we continue to have a very supportive balance sheet with over $71 million in liquidity and no debt. We will remain opportunistic as we evaluate business development opportunities which fit within our portfolio and would help drive both increased revenue and and improve profitability get us to cash flow break even sooner from a company perspective we're in great shape so what about the share price as scott mentioned beyond driving company performance we'll be reviewing all options for us to support our share price and we'll share our thoughts and plans with you as they are developed and deployed I'd like to thank our employees for their dedication and our customers who trust us to help provide the best possible veterinary care around the world, and most of all, our shareholders, for your support.

With that, I'd be happy to open the line for questions.

Operator? Ladies and gentlemen, we will now begin the question and answer portion. Should you have a question, please press star followed by the number one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you're using a speakerphone, please make sure you lift your handset before pressing any keys. Your first question comes from the line of Robert Levire from Noble Capital Markets. Please go ahead.

Congratulations on all of the progress you've made with the product introductions and everything else on the company fundamentals, despite the share price. and the delisting. My question has to do with the product and the rollout for 2025. You had mentioned the five assays that were introduced in 2024. Do you have any particular numbers or goals for product introductions in 2025?

First of all, nice to hear from you, Robert. Thanks for the call and the question. Yes, we do have a number of products that we expect to launch this year. So, with respect to Truforma, we expect to launch another five to six assays over the course of the year. These will be a mix of canine, feline, and equine assays. And those will help us penetrate, you know, each of those customer markets based on their specialty. In addition, as I mentioned during the call, we expect to adapt that guardian to be able to be used to monitor horses in their stalls. Of course, it's a little different than, you know, monitoring a dog or a cat in a confined cage. So we need to have a little adaptation to do to that vet guardian. We launched EquiLoop. This is an Assisi loop that is focused on horses. We launched that in December, so not actually a 2025 launch, but all but. It's a new product for this year. Betagel, of course, we launched this year. Also, for Assisi, we have a new version of our Loop Lounge. which will be rolling out a little bit later this quarter. So I guess actually in the next couple of weeks, that product will be released to market. And I think that pretty much covers it. So we have a number of new products and product extensions and so on to move out the door.

Okay, great. And one of the things that had come up in previous quarters was the realignment of the sales force and the restructuring for the future products. You kind of implied that it was going well, but didn't really say it directly. Any additional comments that you can make about the sales force or the restructuring and the increase in headcount from the previous months?

Yeah, so I'm happy to comment on that. So our overall headcount is essentially flat year over year. But having said that, we've increased the headcount in the commercial organization and sales, not in marketing, but in sales with some positions. But we've reduced headcount in other areas of the company for various reasons. The Salesforce, in addition to the 38 sales territories that are filled by account managers, we also have a capital equipment specialist now in each of those regions to assist with the capital sales, which can have a significant impact on revenue one way or another. In addition, we augmented our equine force. We had only a couple of people focused on equine, and we've added another professional services vet. It was net neutral in terms of head count as we reduced the small animal PSV force by one. We've added an additional resource for equine vets. And this is because we have new products to put in front of equine vets, right? So we've traditionally sold ImpulseVet, didn't really need additional people for that. But as we now have a couple, actually four assays for Truforma, we have the Assisi EquiLube, and we'll have the VetGuardian. We intend to continue to leverage the strong relationships that we already have with these equine customers. And so while certainly there are more small animal veterinarians out there, that's what our full-line sales force is really going after. For equine, we now have a couple of extra experts to be able to help penetrate this specialized market. While a smaller market, it's easier to target because fewer people, fewer customers, more concentrated business. Great. Thank you. I'll mention one other thing, and that's the head of corporate accounts. This individual who we brought on board just a few weeks ago was the head of corporate accounts at a major animal health company here in the United States. And so she comes to us with years of experience and years of relationships with these large groups. and will be able to get us the access to be able to tell us a better story. You know, large groups that own many, many vet hospitals, they are looking for the same thing that individual vets are looking for. They're looking for revenue growth. They're looking for growth in income. They're challenged by staffing issues. They're challenged by cash flow and are seeking even higher profitability. They're businesses after all. And so it's tough when we first started out three and a half years ago and all we had were three assays for Truforma, it was tough to get their attention. But now, we have products that address their challenges. VetGuardian provides a new revenue stream for monitoring. PulseVet, a new revenue stream for treatment of a variety of conditions. And the other products that provide a more efficient and less costly way of doing things that they have to do anyway, along with a significant improvement in the workflow that addresses staffing issues. With the right person on board now, we expect that we'll be able to start penetrating these and create the scenario where, you know, one customer can actually end up giving us 100 customers' worth of business. So I think that's probably an important add. She just started this week, so we expect to really accelerate those efforts throughout the year.

Wow, great. That sounds very significant. Do you have any financial guidance for 2025?

We are developing our thoughts around the magnitude of our sales growth this year. And once we have that sort of buttoned up and we have a little more time under Scott's belt, then we'll provide that later in the year.

Okay, great. Thank you very much. You're very welcome.

Your next question comes from the line of Robert Sassoon from Water Tower Research. Please go ahead.

Hi, thank you. I was interested, you were focusing on the international strategy. Do you have any comparative statistics in terms of the breakdown of the 8% growth of revenue and how that works, how that compares internationally and domestically?

I think we saw similar growth internationally and within the U.S. It was within narrow bandwidth. We saw good growth both outside the U.S. and inside the U.S. I think we saw similar – I'd say we really saw more aggressive growth outside North America than we did in Canada for no particular reason that – That we can tell other than timing of orders and stuff. So, but apart from Canada, we saw higher growth than in the US. But that's because we were introducing products into new distributors and whatnot, but between the US, Canada. And then sort of overall blended international growth pretty, pretty close. which is pretty close to what we saw from, you know, other domestic animal healthcare companies. I mean, we look at how they're doing and, you know, 8%, even though some of them are getting a substantial portion of that from a price increase, you know, most of our sales are to new customers. And so, you know, we don't have that year over year benefit, but, you know, if you look at the other animal companies, pretty similar.

So what is the actual mix now between the revenues domestic and revenues internationally. I mean, what's the – is it – it's presumed it's predominantly U.S., but do you have a breakdown?

It's about 80 percent U.S.

and about 20 percent outside the U.S. And do you think that that ratio is going to shift internationally towards the international?

So it depends, of course, on the rate of growth. If we looked at just outside of North America and the growth rate continued as it did last year, then, you know, we might see a little bit higher percentage. But the base of business in international is a little, you know, obviously is less. So same percentage might not, you know, might be less absolute revenue growth. And the other thing, of course, that we're watching with great interest is tariffs and what impact they may have on sales of new systems, right? So most of our international sales, well, they're essentially all at this point, either PulseVet, Assisi, or most recently, VetGuardian, which we launched successfully in international markets last year. A big chunk of our business, of our PulseVet business, about About 65% of that total revenue is consumables. The reorder of the troves that we sell with the system and need to be replaced after every 50 or 60 treatments. That refurbishment we don't think will be affected by any kind of tariff situation because this is what they need to be able to use the technology they have, to use the product. So we expect those will continue. We're watching the tariff situation with great interest because that might affect sales of new systems. Way too early to tell, and certainly it hasn't affected us in the first quarter thus far.

Right. I think you answered my third question that I was going to ask about tariffs. If you look at your financials, you had a non-GAAP adjusted EBITDA loss of $5 million in the fourth quarter. Do you think that you'll get to break even sometime during this current year?

I think it's probably a bit aggressive to think that we'll get to a run rate of $50 million a year, which would be just shy of double last year's revenue. Nothing's impossible, but I'd say that's probably a little – I wouldn't put a stake in the ground for that at this point.

All right. Okay. All right. Well, thanks. You seem to have most of the stars aligned in your favor, so good luck.

Thank you for that. I'll just make one other comment on tariffs if I can, and that is on the flip side, that is tariffs on products that we buy from outside the United States. We've done a pretty good in-depth analysis, and we get very few components from outside the U.S., specifically China or Europe. And we figure our exposure, if they did 100% tariffs on China and 25% tariffs on the EU products, our exposure, if that all happened, that would increase our costs of producing our products by only around $20,000 for the year. So, we're watching tariffs on the outbound side. On the inbound side, it's going to have a nominal immaterial impact on our COGS.

Okay, thank you.

Your last question comes from the line of Andrew Rem from Odinson Partners. Please go ahead.

Hi, gentlemen. Could you provide what your growth rate was on PulseVet for the year?

So we have, we break out growth rates by diagnostics and therapeutics. That's included in therapeutics, which grew year over year 4%.

That includes the PulseVet products and the OCC products.

So, was PulseVet flat to likely and OCC down on a year-over-year basis? Is that more likely how those two products interplay there?

Well, as I mentioned earlier in the remarks, Assisi had a little bit of a choppy year during the year last year. There was a point in time where the Assisi, the major product of Assisi, which is the 20 centimeter loop, was not being sold on Amazon for some reasons that had to do with paperwork. That took some time to resolve. That was resolved. So that was a little choppy. I think overall, capital sales last year were somewhat affected by the macroeconomic environment. If a veterinarian I mean, our strategy is to really rely on the revenue we're producing with our current capital sale products, which is PulseVet and VetGuardian to an extent, Assisi. We're relying on that revenue to fund our commercial operations in the near term while we build our diagnostic portfolio of products. And we build that. We increase the installed base. Because in a year like last year, when you've got veterinarians that are a little uncertain about the economy, they hesitate to make a capital purchase. That's $32,000 at $32,000. That's one of the top three most costly things they have in their practice. And so we saw a bit of reluctance, frankly, throughout the year to go ahead and invest in that. On the other hand, You know, they're still going to consume all the consumables from our diagnostic portfolio, regardless of how they feel about the economy. You know, they're not going to not do blood tests and test animals. And so, you know, overall, that's our longer-term sort of approach to the business. Rely on the capital sales products. Get those out there. Until we get the diagnostic products to overtake them in terms of revenue, because then that the diagnostic revenue will provide a very solid and consistent stable foundation of revenue and the capital will be icing on the cake as opposed to this year. Um, currently. where the diagnostic, the capital products like PulseVet provide the foundation. And when that gets a little choppy because of the economic environment, then that makes everything a little choppy. Probably more than you asked for, but that's the view.

Yeah, no, I think PulseVet is kind of in the near term because of just the sheer size. So if that grows, then the total business grows. If it doesn't, it's a pretty stiff headwind for the rest of the business. So that's where I was going with that. Vitagel, can you comment on what, like, the annualized sales were for that product last year?

Annualized sales for PulseVet?

Vitagel.

Oh, for Betagel. Yeah, they haven't disclosed that publicly. And so I probably, let me talk with them and see if there's any issue. But Cresselon is a company that developed this gel. And they really had their focus, especially going forward for, or on, I should say, the human market. And they recently received, FDA approval for this to be used for trauma. And so now they've launched it onto the market for human use. And they turned over the veterinary business to us. And I would characterize their sales of the product before as limited because they had only a few people selling it and so on. we picked it up because we think it's a fantastic product. I mean, I was 30 years in human health. I've seen a lot of hemostatic agents. This is better than anything I ever saw. And I understand why there's human interest in the human market. For us, it's not only a good way to generate revenue as we move forward, but it also gives us, gives access to our sales reps, it's synergistic, right? Our reps can walk in and pretty much any kind of any day, there's going to be some kind of a procedure where the Betagel could come in handy. And as they're getting access with that product, talking to the veterinarian, then they're able to segue into sales for other products.

And so will you be able to get a 70% gross margin on that product as well?

I, we haven't broken out margins, but I think you probably could figure that if it's a product that we're not manufacturing ourselves, that we probably won't do as well on margin with that product as we would with products that we do manufacture ourselves.

Okay.

So, to the extent that it's successful, it would have a lower gross margin and similar selling expense?

Well, no real incremental selling expense. This is going in the bags of our existing salespeople. We've hired zero people dedicated to Betagel. We haven't added any heads in marketing to focus on Betagel. It's not necessary for us. We just put it right into our bag, and we put it into our booth at the convention and so on, and it's working out pretty well. Well, with very, I mean, nominal incremental costs, like none that I can really speak to.

All right. And then just I want to get a clarification. You said on the capital equipment, you mentioned in your prepared comments, 38 sales territories. And then you said you have is that you have an objective. Do you have a capital equipment sale or a sales rep in each region? And so far you have one. I just want to just clarify that comment.

Yeah, sorry, I wasn't clear before. Sorry, I wasn't clear. Each region has, as of now, a capital equipment specialist in addition to, so that's five capital equipment specialists around the country, and they support 38 account manager territories.

Okay, perfect. I guess my my confusion there's 38 territories but there's only five regions so yeah that's perfect um on your on the operating expense uh you said you're looking for that to come down over the year or yeah over the year on an absolute basis uh so just take that I don't know if we can, as a rough proxy, can we use the, I think you said 4 million in cash burn, so that should go down on a quarterly basis?

Yeah, I think that's a reasonable takeaway from that. We will spend less cash in 2025 than we did in 2024. I will say that first quarter is always a little cash heavy as we have certain end-of-year payments that we make and so on. But throughout the course of the year, we will see a decrease in the use of cash.

So, were there a lot of one-time expenses that's going away? Is that what's driving it in 25? Or are there operational changes that you're making?

So it's both, really. There were certain one-off expenses in 2024 associated with certain measures that we took to try and address the stock price. So those will not repeat. And there were a number of initiatives that were undertaken with respect to R&D that are now complete, don't need to be repeated. There was quite a bit of expense associated with integrating the Corvo Biotechnologies acquisition, which is now fully integrated. But in addition to those things, which we're just not repeating, we also, as I mentioned earlier, have reduced headcount in certain areas. And, you know, there are things that we have done and are planning to do to bring costs down. And we'll certainly share those with you all as they are rolled out.

All right.

And then maybe just lastly, Kevin Klaas has kind of been in the seat for just over a year, I guess coming up on maybe a year and a half. A lot was going on last year, so I'm just kind of trying to get a sense for how he's feeling about the different systems processes he's put in place because as I look at things, the numbers don't look particularly good, right? Second half, I know you had issues in the first half, but even the second half, you know, 10%-ish growth, which was well off what you guys were thinking for the And when you initially gave guidance, and I know you pulled that in the second quarter, but still.

Yeah, I think Kevin is pleased with where the sales force is today. He's pleased with the progress that's been made. He's highly confident in our growth opportunities to go forward. You may have noticed if you follow insider purchases of shares, he's done that a couple of times. The second quarter was a quarter in which, as you know, we had some issues. Those we addressed and then buckled down in the third and fourth quarters. He's hired, he's deployed new salespeople around the country. And I would just say, you know, one of the things he mentioned to me yesterday, Was that as we sit here today, 7 of the top 10 reps in terms of revenue performance during the quarter so far are people that have come on board in the last year. So, and the rest of reps are doing okay. So. I think he's pretty pleased with where we are now, and I know I'm pretty pleased with his performance and expect that this year we accelerate. Last year, frankly, was a tough year. It was a tough year for all of us in a lot of different areas, and it was a year in which 10% growth was not what we wanted. It's not what we want to accept this year, but it was in line with other animal health companies' growth.

Of the 38 REFs that you ended the year with, how many were new in 24?

So we have 38 sales territories and that's not a question probably, I'm not ready to answer that question now because I'd have to go and look and see. I'd have to look and see. We expanded territories last year, expanded the number of territories last year. We also promoted account managers that, I mean, we have account managers that sold, you know, four or five full-spec systems a quarter. And we promoted them to capital equipment specialists. We promoted, we promoted people, and so we had to fill those positions. So let me get back to you on that. In fact, Andrew, I'm happy to take a call with you, you know, tomorrow or next week if you want to dig a little bit deeper. Still will be only public information, but happy to do it.

All right. Well, thanks a lot, you guys. Appreciate it.

All right. Thanks very much. Let's shift gears to the web now. And let's take the first question. I think maybe people might be interested in it. NYSE reported that you, this is from Justin Robbins. NYSE reported that you had the option to file an extension for compliance and chose not to. This looks like a revenge tactic for investors voting down the reverse split. How does this help investors' value when this move lost 75% of investors' stock value? Okay, so first let me challenge the assumption here. We did not have the option to file an extension with the NYSE American Exchange regulators. Rather, they gave us the option to file an appeal to their decision to delist us. In conversation via email, the night that this all went down, I was requesting that they give us an extension of time. And they were very clear back to say, no, we've set the bar. You've fallen to an unacceptable price. And this is the determination that we've made. It applies to all companies. We have to treat all companies the same. And so at that point, the offer for an appeal, when we looked into that, we could have chosen to appeal. It would have cost us $10,000. But more importantly, trading would have been halted during the appeal process. So shares wouldn't have been able to be traded for a week. And then on top of that, we didn't have a basis for an appeal because it was very clear cut. that our price was unacceptable, our share price was unacceptable. They did let it open that following morning after it closed below 10, that, I mean, maybe they were gonna do it anyway, but we certainly requested that they let it open at that point. And then when they came back and said, we let it open, we let it run for 20 minutes, it didn't rise. And so we've halted trading and you'll be delisted. A copy of their letter to us, by the way, is in the 10K. We encourage you to take a look at it. If there had been any opportunity for us to avoid being delisted, we would have. As far as the other implication in the question, I won't respond to that. Next question. What are the options you're exploring to allow you to get back onto a major exchange? Scott, you want to take that one?

Yeah, thanks, Larry. We currently meet all the requirements to be listed on a major exchange, except for share price. Therefore, we're ultra-focused on getting the share price up. And we believe the most sustainable driver of price appreciation is continued strong performance with respect to our revenues, margins, operating expenses, all which are within our control. So currently, we're working with our advisors to identify alternatives that can help impact the stock price. We're undetermined how long it will take, but we are fully committed to doing so as quickly as possible.

all right thank you scott um you have cash on the balance sheet why not execute a share buyback and there's about 20 variations of that thanks larry yeah this this is definitely uh one of the alternatives we are considering so thanks thanks for the question okay um quite a few people are maybe a bit either concerned or maybe not understanding and are concerned about bankruptcy or closing down the company or something like that. And I would just say, you know, the stock is not the company and the company is not the stock. We're in very solid shape from a business standpoint, plenty of liquidity, no debt, and a plan to get to profitability. So we're solid there. But having said that, there's a related question, which what happens to my stock now that you're OTC quoted? Scott, you want to take that one?

Yeah, Larry, thank you. Yeah, on the face of it, nothing. It still represents a share in Zometica, regardless of where we are listed or quoted. But depending on your brokerage account, you may be asked to move your stock to a brokerage that facilitates OTC quoted stocks. Some will allow you to buy and sell, some may not. So please check with your brokerage to understand your options.

Okay. Let's see what else. You mentioned that you're increasing focus on the equine market.

It's significantly smaller, doesn't seem like a good signal or a good sign, small animal. Maybe small animals lacking or there's a longer question, but that's the gist of it. Why focus on the equine? So we're all in on the small animal market. I mean, all those account managers, they've been doing nothing but calling on small animal vets. And, you know, the bulk of our growth has been in a small animal market for sure. And when all we had was PulseVet for the equine market, we left that alone and supported that with just a few people in that organization. Because, frankly, most of the equine PulseVets are purchased in the fourth quarter at a big trade show that they have. But as we have developed products for the equine market, now those account managers, instead of driving by the equine vet on their way from small animal to small animal practice, now they can stop by the equine vet and say, hi there, I'm your PulseVet rep. Oh, great. What else you got? And now we have something to sell them in addition. And the thing is, we have a good, solid relationship with our equine vets. Remember, an equine vet uses our pulse vet on average three times a week. And they go through three to four trodes a year. That's 150 to 200 treatments that they're delivering with PulseVet every year. And every time they go through 50 treatments, they send that trode back to us. We refurbish it and then send it back to them. Well, we actually send them another one. We replace it. But same impact either way. And so they're in constant communication with us, or we're in constant communication with them. We're involved with them. We've developed a significant reputation with them. And so as many new products for Equine that we can deploy, we're going to deploy them because we've got good, strong customer relationships there. Again, equine sales and PulseFed drive the ability to deploy a sales force and support it with capital equipment specialists and marketing and convention presence and so on and so forth as we develop that diagnostic product market and, frankly, further develop the PulseFed market within the small animal area. Mike, how are we doing on time? Are we kind of close? Let's see. Is there – let's see. Okay. FDA approved the Assisi loop for human use. How come we haven't addressed that? We have the rights for the animal health market for the Assisi loop, but not for the human market. When does the blackout period end for insider buys? It ends on Sunday and then starts again on Tuesday. So the Medicaid insiders have an opportunity on Monday to purchase shares in the market. We've updated on Salesforce size and senior management changes.

So do you see any other ones, Mike, that are... Yeah, I mean, there's many of the same questions.

So at this point, I think that's covered and we're kind of out of time.

I will... I will then just end by saying, as you've heard, we're bullish on Somatica.

No one here is happy about the share price. Not me, not my grandchildren, not any of the people that work here who all have either shares in their name or options. It's not a good thing. Having said that, if I sound upbeat, it's because I am upbeat. We are upbeat about the company and its prospects. We're gonna build this company and we're gonna get it profitable. And eventually we'll uplift to a major exchange. And if all of the things come together as we think they will be, then we believe that the inevitable result of that would be an increase in the share price. But the market sets the price. So in closing, we're bullish. Remember, you don't realize any losses on a stock unless and until you sell it. It's a personal decision for everyone that all shares. So at the end, let me just thank you again. Let me thank the shareholders for your support and the other participants for your interest in Zomedica. As always, I'm happy to speak to any of you that have questions. Feel free to reach out to me at lheaton at zomedica.com.

And with that, thank you very much, operator and program.

This concludes today's conference call. Thank you very much for your participation. You may now disconnect.