Trinity Biotech plc

Good morning and welcome to the Trinity Biotech fourth quarter 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 Joe Diaz with Litham Partners. Please go ahead.

Thank you, Gary, and thanks to all of you for joining us today to review the financial results of Trinity Biotech for the fourth quarter and full year 2022, which ended on December 31, 2022. Joining us on today's call are Aris Kakajian, Chief Executive Officer, and John Gillard, Chief Financial Officer. At the conclusion of today's prepared remark, we will open the call for question and answer session. Before we begin, statements made in this conference 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 statement in the company's annual report on Form 20F filed with the Securities and Exchange Commission. Trinity Biotech undertakes no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after today or the occurrence of unanticipated events. With that, I will now turn the call over to CEO, Aris Kakajian, for opening remarks. He will be followed by CFO, John Gillard, for a review of the financial results. Mr. Kakajian will then provide some additional background, after which we will open the call for your questions. Aris, the floor is yours.

Thanks, Joe. Good morning, everyone. I'd like to start the call discussing key revenue commercial operating highlights. I will also give context to various strategic activities we have underway. John will follow with a deeper dive into our reported financials, and then we'll be happy to take your questions. First, let me discuss the revenue trends. Total revenue for fiscal 2022 and Q4 2022 were $74.8 million and $18 million, respectively. Excluding our COVID-focused PCR viral transfer media products, Full year 2022 revenues of $71.5 million were 1% lower than in 2021. And in Q4 2022, revenues were less than half a percent lower than in Q4 of 2021. Our performance in 2022 was focused on our core flagship hemoglobin business, where our diabetes product line experienced 27% overall revenue growth and over 60% higher instrument placements versus 2021. As highlighted by the 43% growth in sales of high-margin diabetes consumables in Q4 2022 versus Q4 2021, the increased instrument placements position the company for strong recurring revenues in contracted consumable sales over the next several years. We expect to expand on this strategy with the U.S. launch of our premier resolution hemoglobin variance instrument this year. as we continue to work closely with the FDA to gain clearance of our 510K submission. The company also continued to develop its next generation flagship diabetes HPA1C instrument, the Premier 9210. With an expected launch in Q3 2023, the instrument will feature an improved backward compatible reagent column system that will feature up to three times the injection capacity and stability, limited calibration, and improved user interface and lab system integration. This is the first step of a multi-generation product development plan aimed at expanding the target market, driving lower service downtime and cost, while significantly expanding operating margins. We're experiencing particularly strong demand for our diabetes products in South America and Asia Pacific, with 43% year-over-year revenue growth in South America and 36% year-over-year revenue growth in Asia Pacific. We continue to scale our commercial coverage in these markets, where the increase in diabetes and propensity for hemoglobin variants is at some of its highest rates. And our borne affinity technology has a particular competitive advantage. While our HIV business was down 14% in the year, this reflected significant non-recurring bulk orders from Nigeria in 2021. Our run rate core unigold business continues to perform steadily with 15% growth on the fourth quarter versus last year and 10% growth versus Q3 2022. Preliminary estimates for Q1 indicate that over 30% improvement versus Q1 2022 will be expected. I would now like to discuss an important milestone for the company that was achieved this week. The company is very much focused on executing beginning in Q2 2023 on the launch and distribution of our TrinScreen HIV test. Following the announcement by the Kenyan Ministry of Health of the adoption of this new HIV testing algorithm, it establishes Trinity Biotech's TrinScreen HIV as a standard screening test in Kenya under World Health Organization guidelines. The Kenyan HIV screening program is one of the largest in Africa, with an estimated seven to nine million screening tests annually. This announcement demonstrates trinity's ability to disrupt a well established incumbent with world class innovative high quality point of care solutions. We aimed at the Kenyan algorithm as a priority, as we believe it sets a key benchmark for the region. We are leveraging this milestone with significant focus in 2023 on two to three additional countries which represent a combined expected annual test volume of over 25 million. We expect to achieve at least 20% market share of the 150 million African HIV screening market over the next three years. Now moving on to a string of activities aimed at transforming our US-based lab platform. With a 13% CAGR over the last three years, the company continues to see significant growth in its proprietary Sjogren's biomarker lab-developed tests. This has been achieved despite limited to almost no commercialization activity. Plans are in development for distribution through ophthalmology, dental, and gynecological channels at scale. We'll talk to you more about this in the coming months. In January 2023, the company announced a strategic partnership with I'm Aware Inc. That combines I'm Aware's built-to-partner digital health platform with Trinity's advanced reference laboratory facilities. The aim is to power the digital health industry with private and white-label at-home and remote testing programs. We are working closely together to make this operational execution a reality in 2023. Finally, the company intends to introduce up to a dozen new lab-developed tests in 2023, targeted at the therapeutic drug monitoring, or TDM, market. This is aimed at high-growth recurring revenue opportunities in autoimmune diseases such as IBD, rheumatoid arthritis, and psoriatic arthritis, as well as rapidly expanding biological therapeutics tackling areas such as cancer and degenerative diseases such as Alzheimer's. Stay tuned for more discussion about this in the coming weeks. I would now like to give you context around significant portfolio transformation and M&A activity that we are working on. Obviously, we can't discuss activities that are subject to confidentiality agreements, are commercially sensitive, or not yet far enough along to be announced. However, I can be quite direct about the company's portfolio focus going forward. We are conducting a portfolio review of all activities that do not align with a strategic focus around three key priorities. Specifically, diabetes and hemoglobins, point of care and digital health disruption, and personalized therapeutic drug monitoring. The intention over the coming months is to simplify the portfolio around these three areas where the TAMs are enormous, the risk-return profiles are asymmetrically in our favor, where we have competitive advantage and where our shareholders are clear on Trinity Biotech's investment thesis. Management intends to exit or optimize for cash its portfolio of non-core products and platforms in order to maximize shareholder value and concentrate leadership's focus on where that value lies. Given the strong pipeline of attractive M&A opportunities in our areas of strategic focus, in February we secured a $20 million investment flexible term facilities specifically to provide the ability to move quickly when opportunistic transactions arise. This is a very opportune time to gain significant innovative product pipeline at fractions of where they were valued only a few months ago. Our portfolio optimization efforts and opportunistic M&A are key to our efforts to optimize our capital structure and reduce our debt costs in 2023. Now I'd like to take a moment to discuss some structural and operational initiatives we have underway. Cost optimization and pricing actions have resulted in a Q4 operating gross margin run rate of over 40%, excluding one-time inventory adjustments. This reflects over five points of improvement over the same quarter in 2021 and over Q3 2022. The company has reduced headcount by approximately 10% to Q4 2021 as we continue to focus on process simplification and automation. Our increased IT spend in the fourth quarter also reflects significant investments underway in CRM, ERP, and regulatory automation to drive speed and further efficiencies. Our emphasis on supply chain optimization is currently in our hemoglobin division, focused at reducing the cost of the Premier 9210 diabetes instrument by approximately 15%. in conjunction with our multi-generation product development plan. Significant margin of creative actions for Q2 2023 are the insourcing of key hemoglobin manufacturing processes and rapid transformation of our global logistics operations. One of my priorities over the last quarter has been restructuring and revitalization of our commercial sales organization on a global basis. We eliminated an effective leadership overhead, rebuilt commission plans, and continue to refresh our global distribution channels. I am personally managing this effort. Finally, I'd like to take a moment to emphasize our focus on the most important element of our transformation strategy, namely talent. A highly motivated shareholder-aligned leadership team is at the core of the company's strategy. We're in the process of rolling out a revised employee share-based compensation program aimed at driving significant shareholder value. The plan follows the same structure as the CEO share-based compensation plan whereby 60% of options are stock performance-based and only pay out when the stock reaches trading milestones at $3, $4, and $5 per ADS. This structure is designed to be fully aligned with shareholder interests to create exponential shareholder value. As you can tell from the structure of our performance options, moderate stock price improvements to $2 or $3 ADS is not where our interest lies. I think it's important to point out that we are on a multi-year transformation of Trinity Biotech. Our performance options vest over a three-year period, and that is the time frame the entire management is committed to. When I took this role, I underwrote the minimum value for which three years was worth my time. That value is $10 higher than where we are now. At 5 million options, you can do the math. I'll now turn things over to John and come back to answer any questions. Thank you.