CEA Industries Inc.

Q4 2022 Earnings Conference Call

3/28/2023

spk_0: thanks we're holding we appreciate your time and patience please stay on the line and will be back and just a moment
spk_1: beg for holding we appreciate your time and patience with the on the line and we'll be back he just a moment
spk_2: good afternoon ladies and gentlemen and welcome to the seer industries que for and full year twenty twenty two earnings conference call joining us today or the company's chairman and ceo tony mcdonald as well as companies seattle's he had patel at the time all participants had been placed on listen only boat the floor for your questions at the end if you would like to ask a question via the phone lines you may press star one to enter the queue at any time should request to be answered and us to leave the queue please press start you at you have joined via the webcast please use the ask a question button on your webcast fuel window before we begin please be advised that this call may contain statements of a forward looking nature relating to future events these forward looking statements are subject to the inherent uncertainties and predicting a future results on conditions the statements reflect the industry's current belief and a number of important factors could cause actual results to differ materially from those expressed and the scope including the risk factor set forth and the companies for ten k which was files with the fcc please refer to their see filings for a more detailed discussion of the risks and uncertainties associated with their business please note that the company filed a ten k and issued a press release announcing fourth quarter was a full year results earlier today these documents can be found on the best relations section of the company's website at sea industries dot com if you'd like to be added to the company's email distribution list please send an email to info at sea industries backup it is now my pleasure to turn the floor over to tony mcdonnell chairman and ceo of see a industries sort of the floor is yours
spk_3: thank you and good afternoon everyone as we have seen across many industries volatility in the mackerel environment has persisted affecting both operators and consumers over the past year the market environment for cannabis specifically has also continued to feast headwinds as operators contend with pricing pressure and inflationary impacts on consumer wants as result capital expenditures in the sector has slowed significantly resulting in delayed reduced or eliminated cultivation facility construction projects which is negatively impacted our project bookings and revenue to navigate this environment we have continued to focus on diversifying or customer base outside of cannabis well proactively implementing cost saving initiatives to mitigate future supply chain and inflationary pressure on our business these initiatives included a reduction in force along with various up pretty expense savings no stone was left unturned as we evaluated every line item of a business to identify opportunities for savings in response to the challenging environment we did not take these acts as likely as they were a result of thorough review indulgent planning for the long term viability of our business early signs of begun to show positive trend as we as evidenced by are double digit sequential reduction operating expenses in queue for we expect to continue realizing opic savings and further improve both are working capital and liquidity positions the route twenty twenty three without compromising the high standard of service or custom sucks dec a great example of are higher standard was reflected by a new contract when that we announced in november in which we signed our third consecutive contract with the northeast cultivation silt really you're in the year we performed mechanical engineering services for this thirty thirty six thousand square foot cultivation and processing space followed by benching equipment and installation contract due to are exceptional works in the prior engagement we have now been contracted to provide h d c d equipment for their flower beds mother clone android dry curates as well as cannabis processes rooms these are the types of was that reflect or quality of serves as wills to potential growth opportunity within our existing customer base quickly reviewing a few other key developments in queue for earlier in two thousand twenty two we announced in partnership with meredith capital a cannabis focused private equity firm in which mirror to agree to use us as it's sole provider of certain products and services for its indoor cultivation facilities sign the agreement we assigned to engineering contracts and one equipment contract with one of marriages connecticut based clients to provide engineering and a suite of hvdc systems late in the year the size of the facility nearly doubled expanding the opportunity for equipment cells as highlighted in our last conference call in november we entered into a non equity strategic alliance with hide your builder holds a leading only channel platform with twenty two retail locations and ten warehouses survey the indoor and outdoor cia and hydroponics industry since entering the grim it hard to or has introduced us to several opportunities for services in addition we have been able to integrate their products and services into our offers a lovely sirna to offer a more complete design package for our customers looking at her sweet of products and services thank you for we announced a partnership with ever call water technologies to offer new innovative water treatment solutions these include sampling system design equipment supply and system integration well with providing the ability to treat and purify the water seem so i can be reduced is a pure water so it's that only does this offer a financial benefit to the company but it environmentally sustainable solution for water conservation which is top of mine for many organizations that monitor their impact on the environment consistent with our strategic plan we continue to pursue and when non cannabis cj opportunities in queue for we signed to engineering contracts for such facilities both growing leafy greens and herbs that success has conceded into this year as we signed to more contracts for engineering and equipment for non canvas facilities
spk_4: i elena headed over to into tell our chief financial officer to discuss financial highlights for the quarter before wrapping up with closing remarks in i've done a good afternoon everyone jumping right into our resolve to for revenue was one point five million dollars compared to three point one million dollars a year ago period the people with primarily attributed to supply chain and project delays as well as a reduction in size and number of sign contracts during twenty twenty two or that bookings in the fourth quarter were two hundred and six thousand dollars compared to four million dollars in the same period and twenty twenty one backlog a quarter and with by point six million dollars compared to ten point eight million dollars a year ago quarter didn't increase in that booking him backlog with primarily driven by fewer capital projects expenditures buy cannabis growers griff profit for the fourth quarter of twenty twenty two was two hundred thousand dollars or ten point three percent of revenue compared to six hundred thousand dollars or eighteen point one percent of revenue for the same period and twenty twenty one the decrease in gross margin was primarily driven by lower revenue and higher variable caught which includes because the equipment external engineering shipping and handling and travel and warranty card operating expenses in the fourth quarter decreased six percent to one point four million dollars compared to one point five million dollars a year ago quarter it's worth noting that are are back to the alpha down thirteen percent from que three twenty twenty two reflecting merely benefit of are various caught having initiative
spk_5: net loss for the fourth quarter of twenty twenty two was one point three million dollars or negative eighty cents per share compared to a net loss of four hundred thousand dollars or negative twenty five cents per share in the year that quarter the that loss pressure improved year over year due to the higher issued an outstanding shares count as the fourth quarter twenty
spk_4: when to as of december thirty one twenty twenty two cash and cash equivalents were eighteen point six nine dollars compared to two point two million dollars of december thirty one twenty twenty one while working capital increased by fifty point one million dollars during this period
spk_6: the actress is primarily driven by net proceeds from the sale of our common stock it warrants at approximately twenty two million dollars in february twenty two two at december thirty one twenty twenty two we remain get three different composed my prepared remarks for path about he tony
spk_3: thank you yeah looking ahead we will remain cautious with are spending and capital as we evaluate the lingering supply chain and inflationary environment or cost saving initiatives have already begun to produce benefits and between our efforts to further reduce expenses and diversify our customer base we're confident in our ability to navigate this challenge you period or strong kept obsession for i just both optionality and durability as we look to execute on our organic and inorganic growth initiatives
spk_2: operator this time we will open the floor for quests thank you ladies and gentlemen the floor as now open for questions if you have joined via the webcast please use the ask a question button on your lap player window to submit a question if you have dialed in today peace press star one on your phone at the time
spk_3: we are not while posing your question he please pick up your have that if listening on speakerphone to provide optimum sound quality please hold while people for questions it as we wait for people to enter the queue our field some questions received by email and web guess first one kid you provide more color on how pricing pressure and headwinds affecting can absorb breeders impacts are business at first thought there is a cat pics projects are often one of the first be delayed or canceled when businesses face headwinds as cannabis companies increasingly focused on their corporations and turning cash flow positive many have dial back there kept x plans which of course impacts our ability to book and for grass revenue in the you too that said we believe our decision diversified to diverse fire and markets with vertical eg providers will bring more revenue stability longer term the questions in february you announced to set of costs cut saving initiatives and a reduction in forced to help right side the business given the challenging macro environment how should we think about your objects run rate going forward i would responded dub we're pleased with the double digits quench a reduction in queue for operating expenses and east expert or savings have been carried into a twenty twenty three i am we aren't providing guidance on our our backs at this time but know that we do expect lower up extra current levels as we move through twenty twenty three a question what does your contingency plan of the macro environment deteriorates further how will you bells growth and profitability i would say the we are intently focused on maximizing profit billy and minimizing or casper as it stands day we have ample runway to see through the current market environment with approximately ninety million of cash and equivalence are on the balance sheet
spk_7: we intend to preserve cash or that we are well positioned to succeed as the industry improves and believe a strong cash position will allow us to take advantage of opportunities so such emma day that make him up in twenty twenty three as the cannabis industry consolidate
spk_3: that concludes the priest many questions operative there any questions from the light at this time
spk_2: there were no question from the lions at the time
spk_8: well i thank you this concludes today's conference call we look forward to presenting our first quarter results in the coming months
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-