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spk01: Good morning. My name is Holly, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Q3 2021 Applied UV Financial Results Conference Call. At this time, all participants are in the listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Kevin McGrath, Investor Relations for Applied UV. Thank you. You may begin.
spk04: Thank you, Holly, and good morning, everyone. Welcome to our third quarter 2021 earnings conference call. I'd like to remind you that our earnings call press release is available in the Investor Relations section of our website at www.applieduv.com. Before we begin, please take a moment to read the forward statements in our earnings press release. During today's call, we make certain predictive statements that reflect our current views about future performance and financial results. We base these statements and certain assumptions and expectations on future events that are subject to risks and uncertainties. Our most recent form, 10-K and 10-Q, lists some of the most important risk factors that could cause actual results to differ from our predictions. Speaking on our call today will be Q Saeed, Chief Executive Officer, and Mike Riccio, CFO of Applied UB. With that, I'll turn the call over to Q. Thank you, Kevin, and good morning, everyone.
spk03: Once again, it's my pleasure to be with you this morning to review the highlights of our third quarter performance. Third quarter net sales increased by over 127% to approximately $3.5 million from approximately $1.5 million in the third quarter in 2020. Like so many companies globally, we've experienced continuing logistics and transportation challenges in many regions, which resulted in delays in fulfilling customer orders in the second quarter. As we shared with you in the last call, we anticipate that many of those orders will be shipped to customers in the third quarter, while others are expected to ship in the fourth quarter. Net loss for the third quarter of 2021 with approximately $1 million compared to a net loss of approximately $900,000 last year in the third quarter of 2020. The net loss in 2021 was due primarily to an increase in SG&A costs to improve future operation and expand the disinfection segment of our business. Reviewing our Q3 2021 results against our Q2 2021 results, we reported more than an 88% percent increase in revenue and improvement in gross profit. Our net loss for the third quarter of 2021 improved more than 49 percent. Our net loss per share improved to negative 14 cents inclusive of preferred dividends of $241,500. This compares to a negative 23 cents net loss per share in Q2 of this year as we continue to drive sales and our momentum towards achieving profitable growth. We ended the quarter with approximately $11.7 million of cash available on our balance sheet. We're optimistic about closing this year on a high note with a good momentum heading into 2022. The strong volume momentum is expected to result in Q4, showing better year-over-year sales growth than what we've seen in Q3. We expect continued improvement in some of the logistics issues, and most importantly, we continue to benefit from a growing demand for air purification technology and solutions across a wide range of commercial healthcare and other large public facilities. At the end of Q3 and very early in Q4, we announced two significant strategic acquisitions as a part of our plan to significantly grow our air purification product portfolio and expand our customer base. On September 28th, we closed the acquisition of KISS Science and Technology. The KISS acquisition gave us the opportunity to consolidate all of our air site technologies under the Sterilumin brand and enhance our presence. in some major markets, including food distribution, wineries, and the retail sector. The KISS aerosite systems are purpose-built for perishable food processing and storage, post-harvest, and transportation industries. These industries face the challenge of finding effective ways to reduce spoilage due to ethylene gas, which is often a major issue in wine, beer, and other beverage and food processing facilities. Holly, can you mute the other lines, please?
spk01: All lines are muted. I'm showing that it's coming from Hugh's line.
spk03: Bacteria and microbes also cause mold, which aeroside destroys. The CES product portfolio is well-suited to address these issues, while also reducing the threat of pulmonary problems and respiratory infections and other diseases for employees. As was previously stated, CES is expected to contribute approximately $5 to $7 million in annualized revenues and be immediately accretive to our earnings per share. Following CES, which closed on September 28th, on October 13th of this quarter, we announced the closing of the acquisition of Scientific Air Management. We believe this acquisition is transformative for a number of reasons. First, it establishes us as a recognized leader in one of the largest verticals of being healthcare. Scientific Air product was established exclusively developed for healthcare facilities to address the growing need for effective, safe airborne disinfection, particularly the persistent health challenges caused by hospital-acquired infections, or HAIs. We're seeing the growing need and the key demand drives are for effective and safe airborne disinfection with no harmful byproducts. Second, Scientific Air's flagship product, the S-400, is a mobile disinfection control unit like All of our AeroSight products can run 24-7 and deliver what we look for in target acquisition products capabilities. Top items are it is independently tested, disinfection with no harmful byproducts. Then this unit, while mobile, is simple to anchor or move while delivering the best whole room clean air solution safely by just plugging into the wall outlet. And finally, it works independently. while the room is occupied with humans. Third, Scientific Air has been in the market for more than five years and has developed an enviable customer and fan base among experts. This excellent performance data helps explain why the S-400 will complement our airside product portfolio and give us the potential to expand our presence in some of the most prestigious healthcare institutions across the country by extending our clean air solution to the frontline personnel and delivering better patient experiences and outcomes in medical communities. Finally, the acquisition of Scientific Care comes with a strong relationship with one of the largest distributors of healthcare supplies in North America. This relationship provides a well-established distribution channel to the large hospitals and healthcare facilities throughout the nation. We expect to further leverage that successful relationship as we look to further expand our penetration into the healthcare verticals. From a financial perspective, as we've previously said, Scientific Air is expected to contribute approximately $5 to $7 million in annualized revenues and will be immediately accretive to our earnings per share. As such, when considering the combined revenue from these two acquisitions, we expect them to contribute approximately $10 to $14 million in our current annualized revenue run rate. Although early in the process, we're making excellent progress on the integration of both Kez and Scientific Air and aligning each functional domain with our subsidiary, Sarah Lumen, to better serve our customers. This positions us for growth going forward, contributing to cost synergies, and more importantly, providing a much more elegant customer journey and a more complete solution set. Collectively, these acquisitions create a broad portfolio of patented air disinfection purification technologies under the Sterilumin brand, capable of addressing virtually every major commercial market, including energy. hospitals and assisted living facilities, schools, food processing, post-harvest facilities, and as always, other large public spaces. We believe there are complementary technologies or companies that would enrich and expand our portfolio of disinfecting solutions and open new markets to us. We continue to carefully evaluate how to accelerate our growth strategy through a targeted and scalable M&A approach to build an existing capabilities and potential growth areas. All this provides us with confidence about our expected performance in the fourth quarter and that 2022 will be another strong year for Applied UV. We look forward to continuing to update all of you on our progress And with this concludes my remarks this morning. Holly, we're ready to get going with any questions that are up.
spk01: Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Your first question for today is coming from Jeffrey Cohen with Lattenburg. Jeffrey, your line is live.
spk02: Hi, Q. How are you?
spk03: Good morning, Jeff. Good to hear from you.
spk02: Yeah, so, sorry, I only caught most of the call. Can you give us any indication of revenues for the quarter as far as composition of revenues for the quarter? And congratulations on the strong top line.
spk03: Thank you. Mike, do you want to answer that?
spk05: Yeah, for the third quarter, roughly 50-50, our traditional hospitality business. A little bit higher than 50, maybe 51-49, 51 being our star lumen or disinfection segment of the business.
spk03: Okay, got it. We're segmenting. Oh, I'm sorry. Just to expand on that, a team that we, in the queue, we started segment reporting since their lumen is growing substantially. And so it's broken out a little bit better now. And they'll be passing the hospitality segment, the disinfection, since that's our growth engine.
spk02: Okay, and was there any update on the hospital markets, or was there any update specifically on Erisod as far as placements and information regarding SKUs being the commercial units or the consumer units?
spk03: You mean the breakout? It's still more than almost 100% commercial. So we're just wading into the consumer portion of the business. If that's answering your question. Does that answer your question?
spk02: Yes, that's helpful. Did you say anything about fourth quarter? Did you say anything about pull-through or any order backlog for the balance of the year?
spk03: Yeah. So we did experience a little bit, obviously, of the logistics and getting goods out in the second quarter. That slowed us down both with the Delta variant spiking and the – kind of the crumbling of the supply chain infrastructure. Most of our problems in the second quarter were shipping, and so we're realizing some of that backlog, and it'll start smoothing out going into this, I guess we saw some of it in third quarter, and we'll continue to see some of that pull through, we think, in the fourth quarter, and also the beginning of the first quarter in 2022.
spk05: Okay, perfect. Jeff, can I just add one? Sorry, Jeff, can I just add one thing? This is Mike. In Q4-2, you're going to see not only a continued improvement in hospitality and disinfection, as it is today, but also you're going to see the impact of our Kess and Sam acquisition. So we're expecting, you know, obviously our largest quarter, and you'll start to see the return on those investments that Q had mentioned in his presentation.
spk02: I got it, Mike. So you're implying sequential growth by your statement in the largest quarter over QT, correct? Correct. Okay. Perfect. Those are for me. Thank you very much. Thank you, Jeff.
spk01: Once again, if there are any questions or comments, please press star 1. There are no questions in queue. I would now like to turn the floor back over to queue.
spk03: Thank you very much, Holly. I'd like to thank everybody on my team, especially for a terrific third quarter, and especially our finance team for helping with the acquisitions and getting our queue out, which was a heavy lift. And I wish everyone a happy Thanksgiving. Thank you.
spk01: Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day.
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