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spk00: Good afternoon, and welcome to the SNES Tech Incorporated fourth quarter and fiscal year 2022 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Robert Bloom with Litham Partners. Please go ahead.
spk04: Thank you very much, Gary, and thank you all for joining us today to discuss Synestec's fourth quarter and fiscal year 2022 financial results for the period ended December 31, 2022. With us on the call today are Joel Fruent, the company's Chief Executive Officer, and and Tom Chesterman, the company's chief financial officer. At the conclusion of today's prepared remarks, we will open the call for a question and answer session. Before we begin with prepared remarks, we submit for the record the following statement. Statements made by the management team of SNESDEC during the course of this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 is amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results, or strategies, and are generally preceded by words such as may, future, plan or planned, will or should, and expected, anticipates, draft, eventually, or projected. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risk that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in our filings with the Securities Exchange Commission. All forward-looking statements contained during this conference call speak only as the date in which they were made and are based on management's assumptions and estimates as of such date. The company does not undertake any obligation to publicly update any forward-looking statements, whether as the result of the receipt of new information, the occurrence of future events, or otherwise. With that said, let me turn the call over to Joel Fruent, Chief Executive Officer, Synestec. Joel, please proceed. Thank you.
spk05: Good afternoon, everyone. Thank you all for joining us today. While I was briefly introduced on the third quarter conference call, I am excited and honored to get a chance to speak with you all today for really the first time. Following my appointment as CEO just about four months ago now, I have taken quick and highlighted by breaking $1 million in product sales, up 77% from the year-ago period, as ContraPest was deployed in a number of key market verticals in the product line extension launch of the unique and innovative elevated bait system. We need to build off this momentum to take ContraPest to the next level. So how do we do that? First, my experience is anchored with extensive executive leadership in the vector and pest management industries, where I gained expertise in the development and manufacturing of EPA registered chemical control products, commercialization and sale of those products, and leading large sales and service organizations. Developing and commercializing ContraPest is a natural extension of that experience. Further, I have always had a passion and commitment to sustainable, effective solutions to vector and pest control challenges. Clearly, ContraPest fits right in with that passion. It was one of the key drivers that attracted me to Synestec as we look to provide an exciting, sustainable solution for management of animal pests in a standalone or integrated pest management program. As I said at the beginning, tremendous progress was made last year, but we need to accelerate and steepen the adoption curve. The first initiative we have undergone has been the redeployment and refocusing of the company's direct sales efforts to enhance our customer acquisition capabilities, while also putting reps closer to the customers to benefit from the surge and acceptance of ContraPest during the past year. We have named the Chief Revenue Officer as a key step in that process. We have expanded our field sales organization to seven reps, each deployed by geography with leadership in both the eastern and western half of the U.S. Last year's revenue was largely driven by growth within existing customers, which speaks to having an effective product that delivers value. Going forward, we are placing a strong regional focus on new customer acquisition through an expanded commercial team and new depths of vertical industry knowledge, get in front of decision makers, tightening the sales cycle, and ultimately driving revenue. We are also enhancing the customer experience by increasing product options, awareness, and education. Product options are extremely important. That's why we introduced the Elevate system last year to provide an option specifically targeted at roof rats. That's also why we have introduced different bait tank sizes so that a customer can choose the size that is most appropriate to their unique needs, whether it is starting a program, addressing a large infestation, or maintenance. We are also exploring delivery systems that work in different bait stations. We offer two bait station formats now, but others are well into the development stage. Choices to fit your needs is the marketing tagline, and in the coming weeks we will be announcing new choices for all customers. We are making improvements to our website as well, including the addition of chatbots on websites to accelerate customer education and acquisition, and have launched a dedicated website for professional test managers. We will also be launching a 12-month prepaid subscription for e-commerce customers in order to make it as convenient and cost-effective as we can for customers who seek better value. The early results are promising on all of these initiatives. For instance, in December 2022, we announced the City of Los Angeles had ordered and have now deployed ContraPress broadly at the Los Angeles Zoo as part of their IPM program. with a deployment plan that is expected to exceed 250 bait stations. Overall, 22 zoos, including two of the top 10 zoos in the United States, are now using ContraFest. We expect another two of the top 10 to close this quarter. Besides being a target market in their own right, zoos and sanctuaries are the ultimate influence in all things animals, so this continues to be a focus segment for us. We are also achieving initial success, having secured major contracts, with government agencies, most recently with the County of Santa Clara. After initial deployment, the County of Santa Clara announced that it intended to expand deployment broadly throughout the county, most recently to Los Gatos. I want to provide a little more detail here. In this instance, Santa Clara County started a deployment and included their own intensive monitoring program to assure efficacy, sustainability, and safety. After their review, they concluded that ContraPest was appropriate for deployment countywide, and they are recommending it to their peers. Overall, California continues to lead geographically with nearly a third of all product sales occurring in the state, driven by tailwinds from the recently implemented Ecosystems Protection Act of 2021, which bans the use of commonly used second-generation anticoagulant poisons under many circumstances. As mentioned briefly, the recent launch of the Elevate system is expected to drive growth in key market verticals, including with agricultural customers to better meet their needs of addressing roof rats that reside above ground, especially in the rafters of barns, granaries, and storage and manufacturing facilities. Similar to the third quarter, sales during the fourth quarter in poultry facilities continue to be hindered by the outbreak of the avian influenza, or bird flu, which has impacted poultry operators across the United States. As this subsides, we believe this will provide us with a tremendous addressable market opportunity. Another important development recently, in February 2023, New York State Department of Environmental Conservation approved ContraPest for general use, removing restricted-use pesticide from the label of ContraPest. This expands the market for ContraPest dramatically in New York as it no longer requires application by specially licensed pest control companies and eliminates restrictive handling and paperwork. New York now becomes the 49th state to remove the RUP label from ContraPest and joins Washington, D.C. and major U.S. territories using ContraPest under the general use label, validating years of effective and incidence-free experience. New York City is still evaluating tools for use in their overhaul of rat control strategies under the newly named RATSAR position. We are part of that evaluation and are confident that New York City will look to population control as a major part of their new IPM plan. And just this week, we confirmed the various news reports that Synestec has been working with the Danish company, Tryptobio, on the development of biosynthetic tryptolite, one of the active ingredients in ContraPest. The reality is we have been working with Tryptobio for quite some time on biosynthetic tryptolide and have a letter of intent in place for its development, and we'll be working collaboratively to have it approved by the EPA. Recent press in Europe about their advances has highlighted the efficacy and sustainability of contrapest as well as some of the benefits of a biosynthetic source of tryptolide. From our perspective, biosynthetic tryptolide brings two very distinct advantages to contrapest. One, biosynthetic production is typically more consistent in its quality and availability compared with botanically derived tryptolite from China, our current source. Two, biosynthetic production is typically much less expensive than botanical purification, allowing us to lower the price of contrapest and greatly expand our market domestically and internationally. We look forward to this continued partnership and will keep you apprised of our advancements. With that overview, let me turn it over to Tom to review the financials. Tom? Thank you, Joel.
spk03: Let me add my welcome and excitement to have you join the team here at Synestec. A reminder to our investors, the press release is available on our website in the investor relations section. Further, we expect to file our 10-K shortly, so I'll just touch on some of the high points right now. Revenue during 2022 was $1 million compared to $600,000 in 2021. Product sales, which exclude grant revenue, were up 77%. During the fourth quarter, 2022 revenue was approximately $297,000 compared to approximately $193,000 in the year-ago period, an increase of 54%. Again, product sales, which exclude grant revenue, were up 76%. And please note that the year-ago period had approximately $24,000 in grant revenue. That first million dollars is a milestone for any startup, and it is particularly gratifying. The growth rate has been excellent as well, but we see the current trajectory as the minimum performance and are acting to accelerate our growth to 2x, 3x, or even more. Sales growth during the year and the fourth quarter led to by strong performance in the company's e-commerce platform, which made up approximately 46% of 2022 product sales, as well as continued traction within zoos and animal sanctuaries and pest management professionals, which both increased more than 100% during the fourth quarter. The sales into agriculture was significantly slowed by the avian bird flu, as much of our initial efforts in this sector were focused on poultry, While still waiting for the poultry market to recover, we have now also moved many of our resources to grain and protein production. We have seen that begin to bear fruit in this quarter and we expect it to continue. Gross profit during 2022 was approximately $464,000 or 46% of total revenue compared to 42% of total revenue in 2021. Net loss during 2022 was $9.7 million compared with a net loss of 8.3 million for 2021. Adjusted EBITDA loss, which is a non-GAAP measure of operating performance for 2022 was 8.5 million compared to 7.8 million in 2021. Again, looking at the fourth quarter, adjusted EBITDA loss was 1.6 million compared to 2.2 in Q4 of 2021. And finally, cash at the end of December 2022 was approximately $4.8 million. Now we do expect to be accessing the capital markets in 2023. To do so, we have a shelf registration on file to allow opportunistic financing. We also have $5 million in warrants that will expire if not exercised this year. These tools, along with revenue growth and careful expense management, should be this year and beyond. With that, let me turn it back over to you, Joel, for any closing remarks, and then we'll take your questions.
spk01: Joel?
spk05: Thanks, Tom. Let me just say that every day there is more validation of Contrabest as effective, sustainable, and easy to use. Academic studies, field studies, and customer feedback all agree successful test management requires population control, And ContraPest works to control pest populations, making IPM more effective. We have taken swift actions to align the commercialization side of our efforts to significantly expand adoption and look forward to the future with tremendous optimism. With that, let me turn it back over to the operator for any questions.
spk00: 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 are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question is from Avi Fisher with Longcast Advisors. Please go ahead.
spk02: Yeah, hi, Joel. Thanks for taking my call. With the general use label in New York State, how is that going to change the way you're marketing, notably in New York City? And I ask because, you know, I could envision all these co-ops ringing Central Park, being amenable to and open to and wanting to use this product because it's safe for the birds in Central Park, et cetera. I wonder if you have any sense of targeting them.
spk05: Absolutely. We believe that the general use, as it has in other areas of the country, is really going to open the market up to us simply because now we don't have to rely on those that have the certifications and the credentials for restricted use. So we have a marketing campaign that is specifically directed at not only New York City, but the whole state of New York, because there's a lot of things in the agriculture business that we've not been able to tap into there. So that campaign has kicked off and we're already seeing some really good feedback from it.
spk02: So within New York, you're focusing at this point primarily on the ag space, not so much changing on the residential city space?
spk05: Oh, no, no, no. We're focusing on New York City and the residential and the HOAs. And I was just mentioning that in addition, people forget that there's There's ag business in New York that we haven't been able to do. And, of course, agriculture is one of our biggest markets out there. But, yeah, we're going full force forward with New York City and giving them everything that they need in order to make a decision on using our products.
spk02: And what about this evaluation with the New York City RATSR? Do you have any expectation on the timing of when you'll hear from them?
spk05: Nothing that we really can report on. We do know that they were inquiring about it in other areas of the country where ContraPest has been used for a longer period of time. So we are waiting to hear something from them on how to move forward.
spk02: Personally, I think there's a lot of flex and opportunity in marketing directly to co-ops that ring the park. They are the homes of many power brokers in the city, and I think you'll find an audience there. And just finally, on CryptoBio, it sounded like in your commentary this is not a 2023 event, but I just want to confirm. How soon can you start sourcing from them, and how much flexibility does it give you on price?
spk05: There's a lot of legwork to do. with, you know, EPA registration. But we look at it as a 24 product, and we're confident that we're going to be able to lower our cost of goods by using it.
spk02: You know, can you sort of estimate how much or too soon to say?
spk05: It's too soon to say right now. There's, you know, there's a number of things that are in play, but it will be substantial. We wouldn't want to do this if it were just a small percentage.
spk02: Okay. All right. Thanks for sharing. Appreciate it.
spk05: You bet. Thank you.
spk01: Again, if you have a question, please press star then one.
spk00: Showing no further questions, this concludes the question and answer session. I would like to turn the conference back over to Joel Frunt for any closing remarks.
spk05: Thank you all for being here today and for the questions and for listening. That's all I have right now. Tom, anything from you?
spk01: Nope, nothing from me. Thank you all very much. We'll talk to you next quarter.
spk00: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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