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spk05: Good day, everyone, and welcome to today's TOME Environmental Solutions, Inc. Second Quarter 2022 Financials Results Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and 1 on your touch-tone phone. Please note that this call may be recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn today's conference over to John Nesbitt with IMS Investor Relations. Please go ahead.
spk00: Thank you for joining us today for the TOME Environmental Solutions Investor Update Conference Call. On today's call are TOME's Chief Executive Officer and Chairman of the Board, Dr. Halden Shane, and Nick Jennings, TOME's Chief Financial Officer. Dr. Shane will provide an overview of recent business highlights and financial performance for the most recent quarter and six months, Both will be available to address any questions you may have. A telephone replay of today's call will be available through August 29, 2022, the details of which are included in the company's press release today. A webcast replay will also be available on Tomi's website, www.tomimist.com. Please note that information contained within this presentation is relevant only to the day of which it was recorded, August 15, 2022. and you are therefore advised that time-sensitive information may no longer be accurate at the time of any replay. Certain written and oral statements made by management of TOME may constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements should be evaluated in light of important risk factors that could cause actual results to differ materially from our anticipated results. The information provided in this conference call is based upon the facts and circumstances known at this time. The company undertakes no obligation to update these forward-looking statements after the date of this call. In addition, Tomi will discuss certain non-GAAP financial measures during this call. The company uses non-GAAP measures because it believes they provide useful information about operating performance that should be considered by investors in conjunction with the GAAP measures. Reconciliation of these non-GAAP measures The comparable gap measures is included in the earnings release dated August 15, 2022. Okay, I want now to turn the call over to TOMI's Chairman and CEO, Dr. Halden Shane. Go ahead.
spk02: Thank you, John. Good afternoon, everyone, and thank you for joining the TOMI Environmental Earnings Call. Today, we'll provide operating and financial results for the second quarter of 2022 and and an update on our IHP Ceramus product lines and competitive advantages. Before we begin, I wanted to let everybody know that today's presentation will be accompanied by slides which are available on the webcast. Please refer to the press release dated August 11, 2022 for details of how to join today's meeting through the webcast feature. I'll be presenting, and both Nick Jennings, our CFO, and myself will be available for questions and answers after the update. This slide is a disclosure slide. Quarter and year-to-date highlights. In the second quarter, we continued to see increased demand for our custom engineered system and mobile equipment which have led to improved financial results, some of which are not measured in today's filing. Throughout 2022, a strong interest in our technology continues, and we received orders for delivery in 2022. We continue to win opportunities for these larger sales for our CES, as the product is one of our primary drivers for growth in our current pipeline. During the first six months of 2022, we closed $5,600,000 in orders, of which we anticipate 2.3 to be recognized in revenue in our third and fourth quarter for the year. This represents a 35% growth in sales orders received for the six months when compared to the same prior year accounting period. We anticipate further growth in sales and the continued build of our pipeline for the remainder of 2022. Interest in Surrey Mist IHP is robust. Based on our current orders, as well as the pipeline and strengths of our referral base in the life science sector, we are targeting over $12 million in revenue for 2022. Through June 30th of this year, revenue grew by 6%. The increase was attributable to higher demand for our mobile equipment where we saw a growth of 11% and 13% for the three and six months ended June 30th, 2022. While our quarter over quarter revenue was flat with last year, our sales pipeline continued to grow in the second quarter with the addition of 900,000 in orders that will be recognized later this year. We drove reduced operating expenses and losses for both periods. We reduced operating expenses by 16% and 21% for the three and six months ended June 30th, 2022, respectively, when compared to the same prior year period. We reduced our loss from operations by 28% and 44% for the three and six months ended June 30th, 2022 when compared to the same prior year period. We also improved liquidity with lower cash used in operations of 82% for the first six months of this year when compared to the same prior year period. Inclusion is still remiss on EPA's List Q. The rare or novel viruses such as monkeypox virus, SARS-CoV-2, and its variants that causes COVID-19 have been one of the many reasons the sales pipeline is strong. During the first half of the year, orders or bookings increased 35% when compared to the first half of 2021. 4.9 million of the overall orders is attributable to our Sturimus product revenues, which represent our mobile equipment, CES, and BIT solution. There are some substantial global market trends and drivers in the decontamination industry. Global disinfectant spray market size is expected to reach US$18.6 billion by 2030 and is expected to expand at a CAGR of 8.2% from 2022 to 2030. Sales of disinfectant sprays have risen drastically over the past few years with rising consumer awareness towards the benefits of disinfection. As hospitals are trying to decrease the rate of HAIs, disinfection held more than 65% revenue share in 2021, and demand for HAI-controlled products is predicted to rise in ambulatory surgical care centers at the highest CAGR in the upcoming years. As we continue to market our technology and its competitive advantages provided in our EPA-registered label and develop new products and applications, we are closer than ever before having these industry markets select our eco-friendly disinfection decontamination. Our patented atmospheric coal plasma arc, which is the DARPA technology that we inherited closes hydrogen peroxide in a way that's never been seen, converts the H2O2 compound into hydroxyl radicals. This is the most powerful natural oxidizing mechanism known. Competitively, we blow every competitor away. It destroys proteins and carbohydrates on contact. and it only leaves oxygen and water in the form of humidity. IHP reacts with chemical agents, breaking their double bond, producing hydrogen, oxygen, and water in the form of humidity. Truly an eco-friendly disinfectant. Tomi expects to have a prominent role in the food safety industry, a multi-billion dollar market. After attending their most recent annual food production meeting earlier this month, It was confirmed we are not only solving contamination problems in a more efficient way, but we are solving ongoing issues in the industry that have no been solved before. Of course, further trials and studies are being asked of us, but the industry is proving to show extreme interest in how our low 7.8% hydrogen peroxide bit solution is converted to hydroxyl radicals using our cold plasma science. Like the life science industries, the food industry is impressed with the dispersion of our submicron droplet, this very, very small droplet, and the way it disperses as a fog. Speed to the technology as it kills on contact by cellular oxidation bursts and the element of this no residue or harmful byproducts left behind. In addition, to the advantages just stated, we achieve a six log kill or higher. It's a very, very quick validation time on the most challenged of all pathogens. Most of the market, in fact, 400 plus disinfectants registered with the EPA only have a three to four log kill, which is 99.9 or 99.99. where we're able to kill all challenge pathogens at 6 log versus 6-9. In addition, validated time, and again, against these most challenging pathogens, we were able to receive many EPA registrations for various upcoming pathogens that the world made. All our products use the same superior technology. Each is designed and manufactured for certain application solutions. The Sturimus surface unit, the original five-second per square foot spray, perfect for high-touch, hard surface areas in almost any industry. The Sturimus environment system, our three applicator full-room fogger, the easiest sold unit in terms of its capabilities for complete air and surface decontamination, Price tag limits the device to pharmaceutical, government, research universities, and larger restoration and cleaning. The total disinfection cart was launched specific for the healthcare industry, making ceramics even easier and faster for the quick turnaround time needed on patient rooms. The only system that can complete a turnover in an ICU room in under 55 minutes, including changing the bed linens. Our Steripack, which was launched earlier in the year, is a sleek, battery-operated, high-touch, hard-surface spray developed for those who need an even quicker disinfection without the hassle of an AC power outlet. The Steribox, our decontamination chamber, is passed through depending on customer requirements and used a 90-degree stainless steel applicator, and the environment system provides a cycle time in just 40 minutes. Industries requiring smaller-sized sensitive or medical equipment tools, injectables, devices, may have these made to order. The custom environment developed for Sloan Kettering in New York and used in radioactive cells as a device like the standard full-room fogger, but in an enclosure made of stainless steel provided with modified applicators for permanency. Ceramus Custom Engineered System, we call CES, is a fully automatic product engineered and programmed to fit all facility specifications. Available features include remote start, HVAC utilization, downloadable data, security features, visual and audible alarms, and is multi-room scalable. Every new installation includes the latest software and hardware components. NOMI tech team has installed six of these systems by 2021. This year alone, we've completed one installation, five currently being designed or manufactured, three waiting on purchase orders, and an additional eight in the final stages of customer approval. With the trend of automated disinfection and decontamination continuing to rise, As we have seen, the interest in our CES line has risen. With the production of our Sturimus Transport and the Sturimus Select Plus, they will provide the solutions and answers needs that some markets face in their decontamination requirements, but until now have not been able to meet. The transportation industry will utilize the Sturimus Transport. This permanently-mounted, ready-to-use, non-corrosive technology and solution, which you see on the left, will provide a quick remote-controlled disinfection fog for vehicles and industries, such as emergency response, healthcare, education, and public transportation. The Sterimus Select Plus provides healthcare facilities, smaller clean rooms, and research labs, classrooms, and many others an easy-to-use product that delivers all desired applications using our superior IHP Sturimus technology at a reasonable cost, and that you see on the right. The Select Plus is a one applicator remote start, full room stainless steel fogging device. It sits on an open stand with wheels and adjustable height setting, making it versatile enough for a space with high ceilings. This system is projected to be one of our highest sellers, and it will not only meet facility requirements, providing the necessary reporting features that have met many of their budgets, thus outperforming the current available competition that is in this market. There is a demand for every Sturimus product line in the life sciences, from the utilization of Tomi's mobile Sturipack to the intelligent, permanently mounted custom engineered system, to having our IHP corporate service deployed to their facility. Our recent focus is mainly in life science areas, which is a marketplace that tends to be less volatile in the times of a recession due to the constant need to continue the research, make statistical products, and meet mandatory FDA documentation and decontamination standards. To date, our IHP corporate service team has delivered approximately $850,000 this year in revenue for service. IHP technology adheres to the pharmaceutical FDA requirements for decontamination. Cerimus has been validated and verified and will continue to be the game changer in the industry with its innovative and versatile products, applications, and services. It's important to understand how our product performs against the competition. We are simply the best and better than all the rest. Whether you compare us to other hydrogen peroxide solutions who rely on the chemicals for their efficacy, manual wiping, which leaves a residue, requires mixing and still has a risk of cross-contamination, or UV light, which is just as a low-efficacy kill rate as impeded by obstructions. And finally, the much less expensive electrostatic sprayers, which produces large particles and utilizes extremely harsh chemicals At the end of the day, Sturimus outperforms the competition. Konomi's IHP technology is the only perfect pen, with the market trends provided at the beginning of the call to the applications of our original current and upcoming devices we'll offer. Serumis customers, representatives, and partners continue to grow throughout the world, currently now in 38 countries. And our portfolio of customers, just to list a few, continues to be some of the most profitable and successful companies in the world, many of which have become huge supporters of the technology, and promote not only our technology and equipment, but also our support team to their associates. With all that has happened in the world over the last few years, I would also like to take some time on today's call to look at some of the key areas of our business that compare where we are at today in 2022 versus where we were pre-COVID in 2019. We have grown substantially over the last three years as we've expanded our customer base and total cumulative machines sold. In 2022, we have approximately 709 customers compared to 308 in 2019. Through June of 2022, our cumulative machine sold is now at 1,548 compared to 582 in 2019. Since 2019, we've added over 10 new Sterimus products and expanded our IP portfolio with 28 new patents and 115 trademarks. providing protection of the superior game-changing technology to Tomi until the year 2038. From a revenue generation and growth profit margin perspective, our orders of bookings have grown 94% over the level pre-pandemic for 2019, and our gross profit margins have improved by 2.21% to 62.2% compared to 59.99% through June 2019. We have strengthened our balance sheets since 2019 as our cash working capital and inventory has improved over the last three years as follows. Our cash balance as of June 30th, 2022 was 4.8 million compared to 1.6 million as of June 30th, 2019. Our current working capital as of June 30th, 2022 was 9.9 million compared to a $775,000 deficit on June 30th, 2019. We feel our company is in a far better position now than compared to 2019 and before COVID-19. Also, our inventory has was 4.8 million compared to 2.5 million in June of 2019. From a balance sheet perspective, our cash used in operations during the first half of 2022 has declined by 2,061,000 when compared to the same prior year, primarily due to lower reported loss and the customer deposits of 607,000 received on sales generated in 2010.2. Slide 20, profiles, the income statement. I'll now go through this line by line. But what is important to point out is that revenue were up slightly in the first half of the year, and we have a robust backlog. We have kept a keen eye on expenses and saw reduced losses for each period. Looking forward, we're able to drive revenue, manage expenses, and drive the razor razor blade model with continued increases in solution sales This should bode well for future profitability. Operator, let's open the call to questions.
spk05: Absolutely. At this time, if you would like to ask a question, please press the star and 1 on your touch-tone phone. You may remove yourself from the queue at any time by pressing the star and 2. Once again, that is star and 1 to ask a question. We'll take our first question from Samir Josi with HC Waidwright. Please go ahead.
spk01: Hey, thanks for taking my questions, Doc, Nick. So the first question is actually good to see that your annual outlook remains about 12 million. What gives you the confidence in terms of achieving that? Do you have visibility in the pipeline where there are pending orders which you can announce within the next few months. Can you just give us some insight into that?
spk02: Yeah, I believe I went over that a little bit. We're waiting for POs on three, and we have eight others that we're just waiting for approval on. Okay. So I think that the unfortunate part is these are such high-profile clients that they usually don't let us do any type of press release. We try our best so we can announce it to the public, but as I showed you in our tombstones, these are very, very large companies.
spk01: Yeah, yeah, it's really impressive. In terms of delivering against the three purchase orders and the eight that are in final stages, those timelines are within the next two quarters, or is it a longer-term outlook for those?
spk02: No, we're hoping that, I mean, a majority of them are in the next two quarters. Delivery on some of the larger ones that we have in our pipeline, you know, again, depending upon product availability, which I think we've improved on, you know, maybe in the first quarter, but we're still anticipating... You know, meeting and beating this $12 million by the end of the year because of our other products, the Steripack, the Surface Unit, the Environment Unit, and all these other pieces of equipment that we've been spending, you know, all this time on developing, which has been proven to be very fruitful for the company going forward.
spk01: Yeah, yeah. Actually, that was going to be my next question. When you mention CES and mobile equipment, are you, the mobile equipment refers to the Steripack or some other products as well?
spk02: It's all of it. The service units, Steripack, they're all mobile equipment versus the fixed, which is the CES equipment and the transport will be fixed in vehicles, things like that.
spk01: Got it. Understood. And then moving on to expenses, nice to see expenses lower. Should we expect this trend for the next six months or do you expect to have additional resources to meet the top line growth that you're expecting?
spk02: You know, we're trying our best. You know, our team is working very hard, and we're very small. We're going to have to, you know, we're expanding. You know, again, we're looking for employees, I think, like most companies are, that are really good and qualified and dedicated. So it could increase, but, again, the direction we're taking in making these employees work, is in the customer service end and helping assist with bringing in revenue. So we think one will outweigh the other tremendously.
spk01: Yeah, yeah. No, I understand. So as sales increase, there could be some additional expenses, but the leverage will just outweigh, as you just said. Okay. Just a curious question on the orders that you are getting. and pending, are these repeat customers who are ordering additional equipment for different locations or are these new customers altogether?
spk02: Many of them are customers, repeat large Fortune 500 or the top 10 pharmaceutical companies that are ordering for various other facilities. And because of the word and the standardization that we're creating, there are new pharmaceutical life science customers, universities that are hearing about our product and are ordering also. So it's a blend, but we're most impressed with the repeat business from these large pharmaceutical customers.
spk01: Yeah, no, that's good to know. It's a blend of good, both sources. So just one last one. You mentioned the competitive landscape and your superiority in various respects. But when you are looking at the bids that are out there and your conversion rate from bids to orders in terms of some of the competitors taking some business away from you, can you just give us some insight into that?
spk02: I don't really see the competitors winning any projects. That's why we have such a huge pipeline from these CEOs that are coming in and ones that are just waiting for approval from their various departments. As you know, it's a complicated process. But we see us winning these bids, and we see this technology growing. moving in the direction that I've always anticipated it should and would in relationship to becoming a standard in these markets. And with the new added types of equipment and new products that we've introduced, we're covering everything from laboratory equipment to complete whole rooms to large facility decontamination. So we have the broad market covered going forward.
spk01: Hey, Doc, I just said it was going to be my last question, but I have one more. You mentioned food safety. Have you already made any inroads into that, or are you making outreach into that sector? If you can just give us some high-level insight into that.
spk02: Sure. We just presented at a food safety conference, and they were very excited. And, of course, whenever you think things that happened with Corteva and, you know, You know, Dow and DuPont at the beginning, they always wanted more testing and to go ahead and do their independent testing. And we are assisting and moving forward with that. We're also going forward with the EPA as far as the registration. We received the 0.35% registration. Now we're going forward with the 1% registration for direct food application. These things unfortunately frustrating to me and I'm sure the team takes time. but we'll get there, and the interest is high. We used to have maybe two food safety clients, and now we have somewhere between eight or nine, and we have another half dozen that we're working proposals to introduce it into their facilities. So we are slowly and frustratingly advancing in that market.
spk01: Okay, good to hear that, and good to see the comparison between pre-COVID and now. That is helpful. Thanks a lot, Doc, and good luck.
spk02: Thank you. Thank you so much.
spk05: Thank you. We will take our next question from Pamela Carter with Carter Management. Please go ahead.
spk04: Hi, hi. Thank you for your update. One of the more interesting aspects of your business is the ability to sell higher margin solution across your installed base. I see solution sales were up a bit in the quarter, but could you provide any additional color as to how we should think about the revenue composition going forward?
spk02: Sure. I mean, from a percentage standpoint, if we want to use the 2019 to today, we're probably up somewhere between 40% to 50% in solution uses. Going forward, the more pieces of equipment we get out there, especially these larger CES units that use 55 gallon drums of solution, will create consistent use of our solution on a daily, weekly, bimonthly basis. In the past, we've always depended on it being used in healthcare or being used in service you know, our service providers, which is still being used, and in many of them, the only tool they have in their toolbox. So as pandemics come and go and the extreme paranoia the country has or the world has in relationship to them, of course, solution sales will increase in those verticals. But, you know, the key is to get more pieces of equipment out there and for our customer service to be on top of them in reordering, which we're seeing. And we're hoping that you'll see more data pertaining to the solution usage going forward.
spk04: Wonderful. Thank you, Doc. Appreciate it.
spk02: My pleasure, Pamela.
spk05: Thank you. Thank you. And once again, if you'd like to ask questions, that is star and one on your touch-tone phone. We'll take our next question from John Nelson. Please go ahead.
spk03: Hi, Halden. I have several questions. First, any comments you can make on timetable to potential profitability?
spk02: Okay. Well, if things go the way they're supposed to, it's going to happen this year.
spk03: Okay. That would be terrific. Three or four months. And any update that you can provide us with on the SHIELD study? And maybe you should maybe make a brief comment on what the SHIELD study is and what but the potential is if it turns out favorable.
spk02: Yes, John. The SHIELD study was a study that was a government-granted study comparing manual cleaning to using our technology or mechanical cleaning, and we were the only technology. It was a five-year study, and we completed the three years of the... data development. Then there was another year of various researchers, independent, that went over the data. The paper has been written or is being written. I'm waiting to get updates. Unfortunately, these authors are directors of a lot of the public health venues in LA County. They've been quite busy with the variants and pandemic and now with monkeypox. So, you know, I don't want to push them, but, you know, I'm sure that it should come out relatively soon, John. You know, I'm open and, you know, I've been asking. Okay.
spk03: Thanks. The... You had mentioned, I think... And also in the slides, there was an identification of one of your customers being a service master. And has that service master relationship expanded over the last quarter to include more? I believe service masters are franchised operation to more sites. Any color on that?
spk02: That I would have to personally get back to you on. I know that there are a number of these large service providers that are all merging, and among our 208 service providers, a lot of them have sold or merged with the you know, these types of operations like ServiceMaster represents. So we're finding that we're trying to work with them to – there would be no reason in my mind why they wouldn't utilize our technology as the only tool in their toolbox. They certainly would be throwing out a lot of other items and saving a lot of money long-term and delivering the best to their clients. Give me some time to research the numbers, and I'll try to include that in my next call.
spk03: Okay, thanks. And last, I believe last call, you mentioned a, and it was, it might have even been in the press release about one of the healthcare organizations orders for ambulance installs. My question is, has there been any additional orders from any other customers on ambulance installs?
spk02: We've just recently developed, in fact, I want to say I just got the first video of the first install of this ceramics transport device. And it was made and developed with them in mind. And I know they've budgeted next year for this. It could be a very big order for the company. Once we get this validated and in their hands and tested, I think at that point we'll start marketing if we haven't really marketed it outside of work and develop it for this one large order.
spk03: Okay. And then just kind of a general comment. The superiority of your product has always struck me as being so powerful that what kind of plans do you have to get the word out even more than you have in the past? Because, at least in my opinion, the products use would be so compelling for so many different kinds of organizations. And I think the lack of... knowledge about your product to a lot of potential customers is kind of a limiting factor.
spk02: Go ahead, John.
spk03: Go ahead. Oh, so how do you get the word out even more than you've been doing, or should we just, you know... I know you've made significant efforts to do so, but is there anything else in the game plan to get the word out that this product exists and how powerful and compelling it is for using it?
spk02: So the answer is yes. There are plans in the game plan, and I've been telling other executives within the company that we must start bringing on a lot more customer service, a lot more salespeople, and we are negotiating with large companies to take the product on, but it's a time-consuming process. Being as small as we are with the funds that we have with developing new products, with going ahead with all the patents and everything, you know, we're really stretched. And, you know, we see what's happening in the pipeline and how large these orders are, so that's why I'm comfortable with talking about what we could anticipate for the year and beating. However, you know, the knowledge and creating a standard when companies have to throw out their old standards is a very frustrating, time-consuming process. And fortunately, we're on the bright side of it being over where we can see the future and their learning. And we're hoping as they learn, we'll pick up very knowledgeable salespeople that understand the technology in the various industries and be able to make it apply to those verticals. And this will be one really huge happy family that goes forward with the process, you know. good earnings, etc.
spk03: Got it. Thank you. Onwards and upwards.
spk02: Thank you for the call. Operator, are there any other calls or questions?
spk05: Thank you. It appears that we have no further questions at this time. I will now turn the program back over to management for any additional or closing remarks.
spk02: Thank you all that joined us and for listening. Stay tuned. We will speak next quarter. Have a good evening or day, wherever you might be. Thank you.
spk05: This does conclude today's program. Thank you for your participation. You may disconnect at any time.
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