ImmuCell Corporation

Good morning and welcome to MU-Cell Corporation reports its fourth quarter and year-ended December 31st, 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 over to Joe Diaz of Lithum Partners. Please go ahead.

Thank you, Debbie. Good morning and welcome to all. As conference call operator indicated, my name is Joe Diaz. I'm with Lithum Partners. We're the investor relations consulting firm for Emucell. Thank all of you for joining us today to discuss the unaudited financial results for the fourth quarter and the year end of December 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 the 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 uncertainty that could impact future results, outcomes, or events is available under the cautionary note regarding forward-looking statements or better known as safe harbor statement provided with the press release 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, February 26, 2025. 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 gap 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 Emicel Corporation, after which we will open the call for your questions. Michael.

Thanks, Joe, and good morning, everyone. The sales growth of 52% during both the fourth quarter of 24 and during the full year of 2024 in comparison to the same periods of the prior year is huge for us. It should be noted that our performance during 2023 and the first nine months of 2024 was limited by production contamination events that led to a reduction in manufacturing output and delayed effective implementation of our investment in capital expenditures necessary to double our production capacity. This led to a period of short product supply to market as evidenced by our publicly reported backlog of orders. As a result, the 2024 results are compared to periods in 2023 when our production was limited. The absolute dollar value of the sales is more important to me than the period-to-period flux comparisons. To that end, the $7.8 million in sales recorded during the fourth quarter of 2024 suggests that we have achieved our goal of increasing annual production capacity to $30 million or more per year. The results for the fourth quarter of 2024 put us on a much stronger track as we enter 2025. We have not incurred another contamination event since April of 2024. This is critical. It suggests that we have effectively remediated the problem and are keeping the bio-burden within specification. When I look back, I see something that is now very understandable. After successfully running the same process for over 30 years, sudden growth is hard. We worked with a high bio-burden source material, that being farm milk. We needed to better control quality at the source of this growth. We are doing that now. Similar challenges were incurred in our downstream processing as we pushed our well-established process and equipment harder. 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. We pay our bills and drive our cash flows with gross margin dollars. To that end, gross margin increased by 125% or $1.6 million to $2.8 million during the fourth quarter of 24 in comparison to the fourth quarter of 2023. And it increased by 105% or $4.1 million to $7.9 million during the year ended December 31, 2024 in comparison to the year ended December 31, 2023. We experienced some low gross margin percentages in prior periods. as we dealt with low output and scrap costs related to the contaminations. The 36.5% gross margin as a percentage of sales that we recorded during the fourth quarter of 24 is a step in the right direction, but we still have some work to do to return to our target of over 40%. The increase in sales and the improvement in gross margin are important. I take nothing away from those accomplishments, but I would like to talk for a moment about EBITDA because the impact of non-cash depreciation expense on our bottom line is significant. We created EBITDA of $1.3 million during the fourth quarter of 2024, in contrast to negative EBITDA of $311,000 during the fourth quarter of 2023. The fourth quarter results were strong enough to create EBITDA of $1.1 million during the year ended December 31, 2024, in contrast to negative EBITDA of $2.6 million during the year ended December 31, 2023. That is a swing in the right direction of approximately $3.7 million between the years. In order to improve our cash position, we effectively utilized our at-the-market offering, raising net proceeds of almost 4.4 million during 2024. This helped us increase our cash position to approximately $3.8 million as of December 31, 24, from just 979,000 as of December 31, 2023. Switching topics a bit, I'd like to offer some comments about Retain. 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 label restrictions. We are eager to find out what the market thinks of our new product. We can see the potential of achieving FDA approval of Retain after all these years of investment. The initiation of our previously disclosed controlled launch is pending FDA clearance of inspectional observations at the facilities of our contract manufacturer and the FDA's review of our non-administrative NADA submission, which we submitted during early January of 2025. This submission includes all other information and product labeling, as well as our fourth submission of the CMC technical section, responding to the minor non-complex issues from the incomplete letter issued by the FDA in May of 2024. We have been in discussions with the FDA to seek an expedited review. After an investment of about 25 years and approximately $50 million in the development of this technology, we are committed to seeing Retain through regulatory approval and initiation of our limited distribution control launch strategy. But at the same time, we are reducing product development expenses as we await FDA approval of Retain. We are also in the very early stages of exploring potential strategic options that could offset some of the product development expenses and enhance a mass market launch of Retain. As we work through what we see as the final stages of the regulatory approval process and our effort to bring Retain to market, we will remain focused on the commercial opportunity that we have with First Defense. That is the big picture from my perspective. With regards to the other financial results, the press release provides the unaudited P&L results and some unaudited summary balance sheet data. We plan to file our Form 10-K around the end of March with all the audited financial details and management's discussion and analysis. Lastly, I encourage you to review 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 February 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.