Trinity Biotech plc

Good day and welcome to the Trinity Biotech first quarter 2021 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. 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 Joe Diaz of Lithum Partners. Please go ahead.

Thank you, Betsy, and thanks to all of you for joining us today to review the financial results of Trinity Biotech for the first quarter of 2021, which ended on March 31, 2021. Joining us on today's call is Ronan O'Keefe, CEO of Trinity Biotech, and John Gillard, CFO. At the conclusion of today's prepared remarks, we will open the call for a question and answer session. Please be aware that statements made in the course of this earnings call may be deemed forward looking statements within the meaning of federal securities laws. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied in such statements. These risks include but are not limited to those set forth in the risk factor section of the company's annual report on Form 20F filed with the Securities and Exchange Commission. Management undertakes no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after today or the occurrences of unanticipated events. With that, I will now turn the call over to John Gillard, CFO of Kennedy Biotech, for a review of the results of the quarter, who will be followed by CEO Ronan O'Queen for an outline of the progress in sales and marketing and the impact on revenue. John, please proceed. Thank you, Joe.

As Joe mentioned, I will now take you to the results for Q1 2021. Starting with revenues, total revenues for the quarter were $25.6 million compared to $21.2 million in Q1 2020. As Joe pointed out, and is our typical approach, Ronan will discuss revenues in further detail later on the call. As such, I will move on to discuss other aspects of the income statement. Gross margin for the quarter was 42.6%, compared with 43.8% in Q1 2020. This change in margin has been contributed to by sales mix changes and downward pricing pressure on PCR viral transport media products and associated collection devices due to lower demand with some customers stockpiling supplies in Q4 2020, thus reducing market demand in Q1 2021. In addition, the increased rollout of vaccination programs as Q1 progressed reduced down the focus on COVID-19 testing with consequently reduced demand for PCR viral testing media and associated collection products. As ever, our gross margin remains susceptible to product mix changes, geographic spread, currency fluctuations, and product level variation. Other operating income decreased from $14,000 in Q1 2020 to $1,000 in Q1 2021 due to the suspension of small ancillary activities at our Irish site due to COVID-19 public health restrictions. Moving on to R&D expenditure. This remained relatively flat compared to Q1 2020 at $1.4 million. Meanwhile, SG&A has decreased slightly to $6 million. This reduction is primarily as a result of reduced selling and associated costs. These result in an operating profit for Q1 2021 of $3.1 million compared to $1.7 million reported in Q1 2020. an increase of over 81%. The $1.4 million increase in operating profit is primarily driven by increased revenues, partially offset by the lower gross margin and higher share-based compensation costs. Moving on to financial expenses, this includes the quarterly cash interest cost for exchangeable notes of $1 million and $200,000 relates to notional finance charges associated with leased facilities. These notional leased finance charges are required by the relevant accounting standard, IFRS 16. You will note that there are further non-cash financial expenses of $160,000, which consist of non-cash accretion in the accounting carrying value of the exchangeable notes as required by the relevant accounting standard. Profit after tax, before one-off items, and non-cash financial expense was $1.8 million compared to 0.4 million in quarter one 2020. As in prior periods and set out in the press release, we quote earnings per ADR, effectively our equivalent of EPS, on standard basis and also before the impact of one-off charges and non-cash financial measures. Using that modified measure, earnings per ADR have increased to 8.4 cent from 1.7 cent in Q1 2020, while diluted earnings per aviore have also increased, in this case to 10.1 cent from 5.3 cent in Q1 2020. I will now move on to address some of the main balance sheet movements we have seen since Q4 2020. Inventories have increased by 24% over the quarter, with most of this increase attributable to increases in inventory to support PCR viral transport media and associated sample collection devices. We increased inventory in Q1 in line with the increase in our production capacity and to respond to market feedback that indicated customers wanted near immediate delivery of these products. We did however reduce output from mid Q1 to manage inventory levels given the aforementioned reduction in demand. We have however retained our ability to rapidly scale up production if required. Meanwhile, our trade and other payables have increased by 17% this quarter, driven by a number of items, including the receipt of 1.76 million of Paycheck Protection Programme loans in Q1 2021, continued working capital efforts to optimise credit terms obtained from suppliers, and accrued interest on our convertible notes. These were partially offset by reduced deferred revenue. While we do expect that the vast majority of the Paycheck Protection loans will be forgiven in due course. Until they are forgiven, we will continue to account for them as repayable, as it has been our policy with prior Paycheck Protection Loans received. Trade and other receivables decreased by 34%, primarily driven by strong cash collection efforts and the quarter-on-quarter reduction in revenue which delivered an increase in net collections versus new credit billings. Finally, I will discuss our cash flows for the quarter. Cash generated from operations during the quarter was 5.9 million. As I mentioned, the company received just over 1.7 million of second-round Paycheck Protection Program loans in Q1, which was a non-operating cash inflow. Non-operating cash outflows during the quarter included capital expenditure of 2.2 million and payments for property leases of 0.7 million. Overall, this resulted in a cash balance of 32.3 million at the end of quarter one 2021, which is a net increase of almost 5 million in the quarter. Thank you. I will now hand over to Ronan.