Biolargo Inc

Greetings. Welcome to the BioLargo first quarter 2023 earnings results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Brian Loeber. You may begin.

Thank you, operator. Good afternoon, everyone, and welcome to BioLargo's Q1 2023 quarterly results conference call. By now, everyone should have had access to the earnings press release, which was issued yesterday prior to market open, and the 10Q report filed with the FCC. This call is being webcast and is available for replay. In our remarks today, we may include statements that are considered forward-looking within the meanings of securities laws, including forward-looking statements about future results of operations, business strategies and plans, our relationships with our customers, market and potential growth opportunities. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today and are subject to certain risks and uncertainties and may cause the actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties are contained in our most recent Form 10-K, Form 10-Q, and other reports filed at the SEC. The company undertakes no obligation to update any forward-looking statements. And just a correction, the 10K was filed at the SEC. All right, and with that, I'll now hand the call over to BioLargo's Chief Executive Officer, Dennis Calvert.

Hey, Brian, thank you, and thank you, everyone, for joining us. I appreciate it, and we've got a lot to cover, so we're going to dive right in. So, May 18th, BioLargo, we make life better. We've been inventing for well over a decade. multiple technology platforms, a number of commercial initiatives, and what we call catalysts for driving revenue and growth that we're very excited about. We're going to talk about each of those briefly. Remember, in the company, we really have two groups. We have the environmental group and Clear Medical. And don't count Clear Medical out. In fact, it's coming alive. It's a very nice way with its 510K clearance just before COVID-19. And now it's for sales, building distribution with reps and channel partners. It's got three channel partnerships in negotiation. It actually has a really significant future. And remember, in that asset, BioLargo owns about 58% of the equity. And so it's coming on strong in the near future. We think we're going to start seeing results soon. We'll talk about what soon means in a bit. Environmental. The environmental group, of course, we have engineering, water, mostly R&D, O&M, formerly known as Odor No More, really concentrates on industrial and supporting the supply chain for our retail product called POOF, P-O-O-F, P-O-O-P-H.com, POOF.com. POOF, of course, is driving significant revenue for the company. Oh, we're going to talk about PFAS real quick. On the PFAS solution, we have our first customer engaged. We've scoped and priced phase two. We are literally waiting for the go-ahead from the customer. We've gotten a verbal. We're waiting for a signed contract to begin phase two. We've built a significant distribution channel here. Remember PFAS is per and polyfluoroalkyl substances, which are the contaminants called forever chemicals, often called now the contaminant of the century. The EPA has just published its testing limits down to four parts per trillion. and literally just about every industry that uses water in any way is going to be impacted by PFAS, including food, food production, food processing, water, drinking water, industrial wastewater, leachate from landfills. There is a significant buzz, and we have really positioned ourselves as an expert in this space. We're anxious to get to a full-scale implementation. In the images that you see right now, this is a portable unit, There's the design on the left. There's the actual unit on the right. There's the electrode panels on the bottom right. And this system is actually being configured to go into the field as we speak. We've got a number of clients that want to move forward as an early adopter. We do believe that the key to breaking open wide-scale adoption is getting our first full-scale implementation done. I want to remind everybody, full-scale implementation in this field can be $5 to $20 million. It's a big number. And so we're on the march. I wish it was faster, but our positioning as the solution of choice for economics, for ease of use, for a reduction in the waste stream. And as far as we know, we're the only technology in the market that can actually achieve a non-detect status. That's a level at which science can't detect any residual. For the layman, that means complete elimination. That claim is substantial. It's getting its attention all over the world. And now, of course, we're working on the scaled version to deploy to the marketplace. Still very excited about it. Slow, hard work, a grind. Very exciting, though. So we're going to talk about that as well. POOF. Of course, POOF has led the company in its revenue growth. It is a wonderful product based on our technology. Remember that we're the supply chain partner. We make a small margin on manufacturing. We get a royalty on sales. Our partner buys from us. We sell to them. and we bargained for 20% of the brand equity upon exit, brand equity upon exit. Their stated mission is to get to 100 million, consider selling somewhere between 3 to 7X. That would put that in exit somewhere around 350, upwards of 700 million. The key there is that the product has the capacity, the ability, the wherewithal to support an international brand that can go to a billion in sales, and we certainly believe that's the case. POOP is doing great. Remember that they recently launched nationwide in Walmart. We do have some clarity there. It looks like it's targeted to go into about 3,000 stores. That's the main Walmart stores. And that has been achieved in the last, to our knowledge, and our partners informed us, that that's been achieved in the last 30 days. And so now we're watching the sell-through. The sell-through historically has been three times the minimum expectation. It was adopted then by Walmart for a national rollout. And I think the most critical thing to note for everyone is not only is that marching forward and being successful, but there's also a number of other major retail accounts coming on board. Chewy is very excited. That's the number one online retailer of pet products in the world. I understand they do more revenue than the specialty pet like PetSmart, Petco combined. So this is a major force in the retail buying of pet products. Relative to POOF, I do want to point out that as the model was built and successfully proven on a direct-to-consumer model, and now there's a migration, right? So the migration means that now it's becoming a wholesale product into a retail channel with major retailers. And so the advertising campaign is intended to drive attention and steer customers into retail outlets to buy the product. And so that is a shift that means a couple of things to us. The first it means is that, uh, often as they launch into these national retailer accounts, there's a stocking up of inventory. And of course we witnessed an extraordinary Q1, which we're gonna talk about the revenue in just a minute, uh, you know, massive 78%, you know, quarter over quarter growth. And that is what we believe the representation of the stocking up of inventory that then leads to the sell-through and With the new large retail accounts coming on, we will likely see some lumpiness in that. I think maintaining a 70-plus percent quarter-over-quarter growth rate is an extraordinarily difficult challenge. But we know that in the long run, when we look at this every six months to nine months to a year, we think our growth rate will continue in a very positive way. Everyone's very excited about the product. So revenues are expected to grow. Our partners tell us that they would generally forecast at something like 20% quarter-over-quarter growth for the next year. That's a loose estimate target. Historically, they've exceeded those numbers, and so we're optimistic about the future of POOF. And, of course, it's a game-changer for the company. It's taken us to near profitability, and you're certainly close to positive cash flow, near profitability, and I think the numbers are going to continue to expand over time.