ImmuCell Corporation

Morning and welcome to the INUSA Corporation Report 1st Quarter ended March 31st, 2025 Audited 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 Listen Partners. Please go ahead.

Thank you, Vicki. Good morning and welcome to all. As the operator indicated, my name is Joe Diaz with Lithum Partners. We are the investor relations consulting firm for EmuCell. I thank all of you for joining us today to discuss the unaudited financial results for the first quarter ended March 31, 2025. 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 advances available under the cautionary note regarding forward-looking statements or the safe harbor statement provided with Form 10-Q and the press release 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, Thursday, May 15, 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 named 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 IndyCell Corporation, for opening remarks. We will then hear from Tim Fiore, the company's newly appointed CFO, with a review of some first quarter financial highlights, after which we will open the call for your questions. Michael.

Thanks, Joe, and good morning, everyone. As Joe said in the moment, I'd like to introduce you all to our new CFO, Tim Fiore. First, I would like to offer a few comments from a high-level strategic perspective. Quite simply, our business is becoming larger, more diverse, and more complex, and that's a great thing. We are very focused on the commercial opportunity that we have with First Defense. The recent growth in First Defense sales is very positive for us. Our investments to increase production capacity above $30 million per year are now complete. Expanding our production facilities and implementing the new equipment was a huge project. We implemented important process improvements and worked through certain contamination events. It is important to note that we have not incurred another contamination event for over a year now. During the just-completed quarter, we achieved gross margin expansion along with the revenue growth. and we increased our cash balance to about $4.6 million as of March 31st, 2025. Moreover, we are pleased to see traction for the different product formats we introduced for first offense, to the point where these now should be seen as a suite of related products with expanded uses and appeal. At the same time, we are initiating investigational product use of Retain to collect market feedback about product performance in the field while reducing product development expenses and exploring potential strategic options for our novel technology. Our financial recovery and improvement shows up in the favorable adjusted EBITDA results that Tim will touch on, but first I want to underscore that expanding the size and breadth of our product sales and managing other corporate objectives has become an increasingly complex responsibility. Over the years, we have prided ourselves in keeping administrative expenses low by public company standards. Growing our senior management team brings added expense, but also offers new opportunities and benefits. I've already experienced some of those benefits working with Tim for just over a month now. We are optimistic as we work our way through the balance of 2025. With that said, let me introduce Tim Fiore. Tim, would you please tell us a bit about your background and talk about some of the first quarter financial highlights?

Thanks, Michael. As Michael mentioned, I've been here at Emusel for just over a month. Before coming to Emusel, I worked for 24 years in various financials for IDEX Laboratories, a well-respected public company headquartered in nearby Westbrook, Maine. Most recently, I was Senior Director of Finance and Commercial Operations for their livestock, poultry, and dairy, known as LPD, water testing, and IDEX's opti-medical human health line of business. Let's talk about the first quarter financial results for Intel. Product sales during the first quarter of 2025 increased 11%, or $810,000 over the first quarter of 2024, to a record $8.1 million. Those record quarterly sales equips the previous record set in the fourth quarter of 2024. These strong sales helped us reduce our order backlog from $4.4 million as of December 31, 2024, to $4 million as of March 31, 2025. I'm pleased to say that we've continued to eat away at that backlog which was down to 3.4 million as of May 6, 2025. We previously had announced our goal of increasing annual production capacity to 30 million or more per year. Our achievement of 15.8 million in sales during the six-month period ended March 31, 2025 suggests that we are achieving that target. Product sales during the 12-month period ended March 31, 2025 increased by 28% or 6 million to 27.3 million compared to the 12-month period ended March 31, 2024. To remain successful, we must continue to avoid significant contamination events and equipment breakdowns and operate with strong production yields. We pay our bills and drive our cash flows with the gross margin dollars. We experienced some low gross margin percentages in prior periods as we dealt with low output and scrap costs related largely to the contamination events mentioned previously. The 42% gross margin during the first quarter of 2025 is an improvement over 37% during the fourth quarter of 2024, but we still have more work to do to achieve our target of 45% or more. The increase in sales and the improvement in growth margin are important. I take nothing away from those accomplishments, but I would like to talk for a moment about adjusted EBITDA, because the impact of non-cash depreciation expense on our bottom line is significant. As a reminder, adjusted EBITDA, as opposed to just EBITDA, includes an add-back of stock-based compensation expense, which is another non-cash expense that is included in net income that's calculated in accordance with GAAP. We created adjusted EBITDA of $2.3, $3.7, and $3.3 million during the three-month, six-month, and 12-month periods ended March 31, 2025. These strong results compare very favorably to adjusted EBITDA of just $458,000, $247,000, and negative $280,000 during the three-month, six-month, and 12-month periods ended March 31, 2024. With regards to the other financial results, the press release and the form 10-Q that we filed last night provide the complete unaudited P&L and balance sheet results. 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 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, we would be happy to take your questions. Let's have the operator open up the line.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your headset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. Anyone who has a question may press star and 1 at this time.

Once again, for your questions, please press star and 1. We have a question from George Melas, NKH Management. Please go ahead.

Good morning, Michael and Jen.

Good morning.

How are you? Good. Very well. Question on the product mix. First of all, I have to say I really like how you report the revenue ahead of time and then file your queue before the call. So it helps us sort of get ready for understanding the call. On the product mix, this quarter was quite strong on TriShield, which I think was 71% of sales compared to 55% in the previous quarter. So I have two questions. One of them is on the new sort of bulk powder product. How do you expect that to contribute towards the end of 25 and maybe 26? And then it seems that The mix of tri-shield and bivalent has relatively little impact on the gross margin. And maybe could you comment on that?

Yeah, thanks, George. Looking at the Q, you pointed out the third quarter, 70% tri-shield and 30% other. You know, that's three months with 12 months. 64% Trishield, 36% other. Trishield has been a big seller since we launched it just a few years ago. The broader claims that really makes that product excel in the market based on efficacy, based on being similar to a vaccine in the coverage of the pathogens that it works on. So that's the exciting driver of our growth. And You know, we're always looking at what else can we do and how can we expand the product line and how can we grow sales. So when you mentioned your question on the bulk powder, that is still in development. We're on track to get that product out into the market over the second, third, and fourth quarter, but we have no sales yet. So it's a different format in that it's, again, bulk, as you mentioned, George, as opposed to in a capsule or a tube. It's going to be used as a seed additive, and it's going to go to big chaff ranches where they're not, you know, accustomed to dosing individual calves with a capsule or with a tube. So more to come on that. I like the development progress that's being led by our VP of Sales and Marketing, Bobby Joe Brockman, but no sales report yet. So that's a new event, a new upside for the last nine months of the year.

Does that answer you, George? That totally does. And maybe, you know, the correlation of gross margin to the product mix right now, it seems like regardless of It seems like you achieve really strong gross margin regardless of whether TriShield is 70% or 55%. We're just trying to see if there is a bit of an impact, the mix on the gross margin.

Yeah, you know, we do price according to our estimated costing by format. So TriShield is quite a bit more expensive than the BOLUS, or the BOLUS is quite a bit more, cost-effective than the tie show. But I would argue, you know, you get what you pay for, and people are willing to pay for that tie show and get that broader coverage. And we do have, you know, quite a large amount of fixed costs, so we do benefit, and we did see that benefit both in the fourth quarter at 37% and more so in the first quarter here at 42%. Just moving our labor is largely fixed. All our equipment and facility costs fixed. It's moving over higher volumes. So all products are going to benefit with that volume growth, and that got us to the 42. And as Tim said, we're still a work in progress. We've still got room for improvement.

Great. Congratulations. Fantastic results. And, Tim, welcome to your team, and I hope to have you on board.

Thank you, George. For any further questions, please press star and 1 on your telephone. We have a question from Russ Hollander, Capital Alliance.

Please go ahead.

Yeah, Greg, Michael, and Tim. Thank you. Hey, good morning. Appreciate the a little more detail in breakouts of expense categories under the new CFO here. So that's appreciated already. And the focus, I think, just in the presentation on the adjusted EBITDA in the children's 12 months. I guess looking at the business, there was one last contamination event a year ago April timeframe. And I'm curious, in Q2 of last year, how much EBITDA erosion was there from that event that, you know, I guess what I'm driving at is Q2 and Q3 of last year might have been lower EBITDA than we would expect from the core business in Q2 and Q3 of this year. So, can you help us kind of create expectations for Q2 and Q3 this year for EBITDA?

Right. Yeah, it's a great question, Russ. You know, we did answer that on an annual basis. I don't have that broken out on a quarterly basis. I'm referring to about page 26 in the queue where we talk about the scrap per year. And so part of my answer would be 22, that total scrap cost was $589,000. Year ended 23 was $527,000, $527,000. And then 24 was $507,000. So, you know, pretty... about half a million per year during that expansion phase where we're incurring those contaminations. As far as 2Q, yeah, there's going to be, you know, that contamination, you're remembering it right, April 24 was the last one, so that affected that full year of just 407,000, but Most of that would have been in the first quarter because that was just one contamination in April and then none for the rest of the year. So not anything with a specific number, but a direction.

I got it. Maybe a better way of asking is, were there revenue implications still in Q2 and Q3 of last year?

Or how do we look? Right. Right. No, the revenue rebound, you know, began in the fourth quarter of 24. So we were down, you know, we set those consecutive records, fourth quarter of 24, and then beat that record first quarter of 25. So, you know, that is comparing to those reduced periods. But nonetheless, those are our best two quarters in our history.

Oh, yeah, absolutely. Congratulations. I'm driving at kind of what could be expectations for revenues for the next couple of quarters. I guess the reality is we should expect greater EBITDA from the enterprise after the next couple of quarters because the comps from a year ago were maybe – lower than the level of the business you're able to conduct currently.

Yeah, I think that's fair. I mean, we definitely want to, you know, be real clear on that. You know, the fourth quarter and the first quarter are strong. They look strong relative to the reduced quarters, to the reduced first nine months of 24, but... I think the other thing, and Tim and I were just looking at our notes here, is also factor in the backlog. So that's, you know, the second quarter is going to benefit. Tim mentioned, what did you say, Tim, 3.4, I believe.

We got, you know, so it's... 3.4 million at May 6th.

At May 6th. So, you know, we are, so we have two things going on, increased capacity and then clearing out that. accumulated backlog, making progress on that through the second quarter. And, yeah, so, you know, we don't see the public projections of the revenue, but I guess we think we're trying to make it clear what's comparing the good period to the bad period, and let's see what the sales team can do because they're now allowed, you know, able to go out and actually bring in new business, where over the period of 24, they were really stuck. They were dealing with irritated customers and allocating scarce products, and bringing in new customers really didn't help us. Now, that transition will be able to, I mean, the sales team has just made a great pivot from that scarce product allocation period to the business growth period going forward. So, Not a numerical answer to your question, but directionally, I think that that's where we're going. Clear the backlog and bring back costumers who lost and find new business goals for the existing product line and the expansion of the product lines that we talked about with George to the bulk powder.

So, Lily, what you're saying, I guess what I'm driving at is the core business EBITDA kind of run rate is much greater than 3.3 million for 12 months. Yeah.

I guess, no, I think maybe I'll follow your question there. Yeah, definitely look at the three, that's why we did those three periods. The three is more indicative, and the six more indicative of the recovery company, and the 12 has a Yep.

Well, I think that's, you know, the next part of my question is maybe a statement. That's the core business, but you're spending $800,000 a quarter, roughly, on product development for most of it going to new product approval. And So if you wouldn't have been doing additional product development, your core business for First Defense is worth a lot more than the EBITDA of the enterprise.

Yeah, I think there's a lot of variability in the sales and in the gross margin of what we need to track. I think what we can count on is that admin expense, notings, The modest increase we agreed to fund, but the other expenses are more straight line. So I think what was important to answer your question there is that's one of the reasons we put together that segment footnote. And I would really, yeah, I think that's what you're doing, Russ, or if you're not, I would encourage you to just look at that note. I was just trying to get the number in front of me towards the end of the footnote. Number 16. And I think that really is my best answer to your question is when we break the business down to the scours, to the mastitis, and to the other. The other is very small. The mastitis is the retain, and that's the one that we are actively seeking, you know, strategic options to cover that big expense. And then the scours standalone is just what the business would be without the other two categories, just purely the scours business.

Well, I think there's a lot of value here is what I'm driving at, and that you've been investing quite a bit of product development capital here, which detracts from the EBITDA of the kind of existing core business, all of which shareholders approve. And I think we're all excited to see a, you know, the new product come to fruition for Mystitis. So any update on that? I guess you've got it in the press release.

Yes, I'm glad you touched on that because, yeah, I pointed to that segment footnote. That's fair. Also, we always fully disclose depreciation because it's huge, and it won't affect that EBITDA, and it is a big piece of that product development spend. But then, you know, we touched on it more in the press release than in our script, right? The investigational product use is really a new development, a really important development. You know, we're all frustrated by not being able to achieve that FDA license yet. And there are things that we can control and things that we can't. And we're frustrated that we can't control it. It really is hung up right now based on the need for our contract manufacturer to clear inspection. And it would be horrible if we – because that was the end of the story. But the new piece of the story is this investigational use. While it won't generate revenue, getting the product out to market right now, right in the next few months, through the balance of the year, the sales team is going to do a really good job of getting product and getting customer feedback. And that's what investigational product use is. It's a way that the FDA creates a little bit of flexibility We are not granting you the license yet, but we're giving you the ability to get market feedback. So that's a big step, and I wish we had the bigger step, which is just full commercial sales and FDA approval. We simply don't, and this allows us to move forward to test this product that, you know, hasn't been tested in cows since efficacy trials years ago. So we're looking forward to reporting on those results. You know, it'll start. late second quarter into third quarter and have some results around the year end as far as, you know, outside of the lab and on a commercial dairy. How did the product perform?

Well, congrats on the six months of performance, the opportunities it had, and the perseverance over many years, and good luck going forward.

Hey, Russ, Tim's got one point for you. It's a good one that I missed.

Yeah, I just wanted to mention, you know, when you were thinking about EBITDA in the full-year estimate, when you're thinking of that, I would consider that Q1 is a seasonal high. I'm not going to quantify exactly, you know, relative to other quarters, but there is seasonality.

You do have to watch that. Yeah. And I would add to Tim's right, but also that backlog, Maybe. Maybe it gets a little bit of that seasonal bump because right now we're just selling almost everything that we make. So, yeah, going forward, that Q1 is always going to be the high season. And going forward, we're not going to have a backlog. Okay. Thank you. Awesome.

The next question from Jane Lindemann, private investor. Please go ahead.

Hey, Mike. It's Bruce and Jane. First, we want to congratulate you and the company on a really, really nice quarter.

Thank you. Yeah, I appreciate that. Both of you, thanks.

You're welcome. And also, exactly, a few questions. What's the difference between that you could investigate and the product and approval? How come we can investigate it but it's not approved?

Well, the biggest difference is it's not commercial sales, so it's not a revenue initiative. It doesn't generate revenue, but it is very similar in that we're going to dose, we're going to deliver product to cows, whether on the investigational status without license or under commercial approval with a license, we're going to put retain in the cows and track data. So the real difference is because of the inspectional issues at our CMO, we don't have a license. We're not going through distribution, typical sales where you just move out a lot of products. We really wanted to do something like this anyway, even with license. We had previously referred to it as a control launch. We weren't going to just mass market. novel practice changing product like this through distribution and we're going to handhold and this just gives us the approval to start those studies to deliver that product to gather that data while the final stages of that FDA license and approval are still in process.

Thank you. With this quarter, the great results of this quarter, at this point, you would stop having to sell common shares because the company is profitable?

It's certainly a factor. It's certainly a factor, Bruce. We monitor that closely. I like to refer to the ATM as the opportunistic. So that means you sell... certain shares at certain prices, and you consider your long-term capital needs even beyond just our profitability, our debt obligations, our CapEx desires, slash almost obligations, obligations to grow. But you saw it's very active. You can see this both in the MD&A discussion and in the subsequent event. You can see that during 2024, when we needed to be, we were very active and more recently we've been less active. So, we just have a lot, it's a great tool to be, because of its correctability. And I think we just continue to watch that going forward and consider all those capital needs beyond just operating expenses, but as you said, debt and CapEx and growth and yeah, less recently and more back in 24 when we were in the deep of the contamination and really, really was very, very essential and productive for us.

So at this point, you would look at numbers that were, you know, higher than $5 or whatever.

Right. A lot of that 24 money went out in the $350 to $370 range, which is, you know, It was needed cash, but the trade-off was unwanted solution. But, yeah, look at that subsequent event note. You can see the activity is much, much, much smaller, as I think appropriate for where we stand today.

Right. It seems as the company gets more and more profitable, that the needs, other than really far out, unless the stock would really skyrocket, I definitely agree. And would you, you know, again, as Retain, you know, gets approval and your normal contamination, at some point would you look to maybe project into the future, you know, what the company expects to do? so that people have an idea of what's going on. You know, what you anticipate to go on.

Yeah, extremely difficult to do with retains. It's a practice changing. It moves the master's paradigm. It's a whole new thing. So very hard to do with retains. And I think the track record on First Offense is the better indicator. I mean, we're going to talk a lot about our production capacity. We talked about doubling from 15 or 16 million to 30 or 30 plus. We do talk a little bit about the desire to get capacity up to 40 million. So some of those projections come from just, you know, we have a hope and we have a projection, so we build capacity to meet that. But same time, we don't have the benefit of one or two or any financial analysts that could kind of help us on those projections and make those projections with us. So this small company has stepped, without an analyst, has stepped to timely, as one of the questioners said. Was that George? Yeah, anyway, that early, I think we will stick with that early announcement on the top line because we know that quick after the end of the quarter. And I'm a little hesitant to get more deeper into projections because it's just subject to change. And we know one thing about projections is they're always wrong, and it's just either high or low.

Right. No, no, listen, you guys are, you know, at this point, you're doing a wonderful job. Congratulations. I was just looking more into the future as opposed to, you know, not tomorrow, obviously. Yeah, okay. But as you get a handle on the attain, and look, you know, the companies come out and they do conservative projections. And usually, what you said was, you know, working with the analysts, usually it appears that the analysts look to the companies more than the companies look to the analysts.

Yeah, and I think it's something that's certainly been our objective for years. We haven't succeeded, but we'd love to have that interactive collaboration. That's missing for Intel right now, that third-party financial analyst. We're collaboratively, as you said.

Right, and as the company grows, it becomes more profitable, and more people follow you. Hopefully, one of the... One of the institutions will either follow you because they own it, or one of the other services, you know, Motley School or something, maybe somebody like that will start with you guys. All right. Well, listen, thank you very much. Congratulations to you.

No, that makes sense, Bruce. Thanks for your thoughts. I'm with you.

All right. Be safe and healthy and good luck to everybody.

All right. Thank you. Bye-bye. Again, if you have a question, please press star and 1. This concludes the Q&A session.

I would like to turn the conference back over to Mr. Diaz for any closing remarks. Thank you.

Thank you, Vicki, and thank all of you for participating on today's call. We look forward to talking with you again to review the results of the second quarter ending June 30, 2025, during the week of August 11, 2025. That concludes today's call. Thank you, and have a great day.