ImmuCell Corporation

Good morning, and welcome to the MU-Cell Corporation Reports first quarter ended March 31, 2024, Unaudited Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference call over to Joe Diaz of Lithum Partners. Please go ahead.

Thank you, Nick. Good morning and welcome to all. As Nick indicated, my name is Joe Diaz and I'm with Lithum Partners. We're the investor relations consulting firm for Emucell. I thank all of you for joining us today to discuss the unaudited financial results for the quarter ended March 31, 2024. Listeners are reminded and cautioned that statements made by management during the course of this call include forward-looking statements which include any statement that refers to future events or expected future results or predictions about steps the company plans to take in the future. These statements are not guarantees of performance and are subject to risks and uncertainties that could cause actual results, outcomes, or events to differ materially from those discussed today. Additional information regarding forward-looking statements and the risks and uncertainties that could impact future results, outcomes, or events is available under the cautionary note regarding forward-looking statements or the safe harbor statement provided with the press release and the Form 10-K that the company filed last night, along with the company's other periodic filings with the SEC. Information discussed on today's call speaks only as of today, Wednesday, May 15th, The company undertakes no obligation to update any information discussed on today's call. Please note that references to certain non-GAAP financial measures may be made during today's call. The company included definitions of these terms as well as reconciliations of these figures to the most comparable GAAP financial measures in last night's press release in order to better assist you in understanding its financial performance. With that said, let me turn the call over to Michael Brigham, President and CEO of Emicell Corporation, after which we will open the call for your questions. Michael.

Thanks, Joe. And good morning, everyone. This is the story of the really good and a bit of the frustrating. With regards to the first quarter, I would like to speak about two financial disclosures that I think help demonstrate what we believe could be a critical turning point for our business. First, product sales were up 111% during the first quarter of 2024 compared to the first quarter of 2023. And sales were up 33% during the trailing 12-month period ended March 31, 2024 compared to the year the trailing 12-month period ended March 31, 2023. So, again, 111% quarter over quarter, 33% trailing 12 over trailing 12. This improvement is largely the result of increased production output. By implementing and optimizing a multi-year investment to increase our production capacity, we achieved $7.2 million worth of production during the first quarter of 2024, which annualizes to $28.7 million, or about 96% of our $30 million full capacity estimates. This level of production remains our aspirational goal, but we do not expect that it can be repeated or exceeded on a regular basis. The 7.3 million in sales recorded during the first quarter of 2024 represents an all-time quarterly sales record for us. The next highest quarter was 6 million recorded during the first quarter of 2022. Second, with those strong sales, we were able to turn earnings before interest, taxes, depreciation, and amortization, or EBITDA, of negative $1.6 million during the quarter ended March 31, 2023, to positive EBITDA of $377,000 during the quarter ended March 31, 2024. Our gross margin as percentage of product sales improved from 9%, during the quarter end of March 31-23 to 32% during the quarter end of March 31-24, but this is still well short of our 45% target. Cash is tight. In response, we have frozen certain capital expenditure investments for the time being, but we have no draw outstanding on our $1 million line of credit that is available to us until September of 2025. So that is the big picture. With regards to the other financial results, the press release provides the full unaudited P&L results and some unaudited summary balance sheet data. Further, our Form 10-Q provides all the unaudited financial details and management discussion and analysis. I will not take our time on this call to review all that in detail. I would like to add that we have been driven by data as we remediate the contamination events that have plagued us recently. Improvements made throughout our production process are allowing us to come back into full production. We believe that the operational improvements implemented are allowing us to run more effectively at a higher output level going forward. To be successful, we must avoid future significant contamination events and equipment breakdowns and operate with good production yields. So, we will remain focused on the commercial opportunity we have with First Defense, but as is often the case in a regulatory approval process, we are frustrated by yet another regulatory delay in our effort to bring Retain to market. The FDA recently issued a CNC technical section incomplete letter in response to our third submission of the CNC technical section for Retain. Pursuant to the incomplete letter, the FDA has provided some minor questions about our submission requiring a fourth submission of the CMC technical section, which is typically subject to a six-month review. However, the FDA has indicated that this resubmission potentially could be handled through a shortened review period because the open items are not complex. Most critical to the timeline, however, is that the FDA has also required that we not resubmit the CMC technical section until the inspectional observations at the facilities of our drug product contract manufacturer are resolved. Given the unique facts and circumstances, we are working with the FDA and our drug product contract manufacturer to obtain an expedited review. This is part of the process, and we are continuing to move forward. Regardless, we remain poised and excited to revolutionize the way that subclinical mastitis is treated in today's dairy market with a novel alternative to traditional antibiotics without FDA-required milk discard or meat withhold claims. So lastly, I encourage you to review the press release and the quarterly report on Form 10-Q that we filed last night. Also, please have a look at our corporate presentation slide deck. I believe it provides a very good summary of our business strategy and objectives, as well as our current financial results. A May update was just posted to our website last night. See the Investors section of our website and click on Corporate Presentation or contact us for a copy. With that said, I'll be happy to take your questions. Let's have the operator open up the lines, please.