Biolargo Inc

Good afternoon, everyone, and welcome to the BioLargo first quarter 2024 earnings results. At this time, all participants have been placed on a listen-only mode. It is now my pleasure to turn the floor over to your host, Brian Lauper. Sir, the floor is yours.

Great. Thank you, Operator. Good afternoon, everybody, and welcome to BioLargo's Q1 2024 Earnings Results Conference Call for the month ended March 31, 2024. By now, everyone should have had access to the earnings press release, which was issued earlier today. This call is being webcast and available for replay. In our remarks today, we will 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 that 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 10Q, Form 10K, and in other reports filed at the SEC. The company undertakes no obligation to update any forward-looking statements. On this call, we will refer to non-GAAP measures that, when used in combination with GAAP results, provide us with additional tools to understand operations. And with that, I'll now hand the call over to BioLargo's Chief Executive Officer, Dennis Kelman.

Hey, thank you, Brian. And thanks, everyone, for joining us. We've had a great quarter and a great year, and it's a wonderful time to regroup and take an inventory and talk a little bit about the future, for sure. I hope you saw the press release. BioLargo generates positive operating cash flow and record quarterly revenues for the first quarter of 2024. And not just a little bit, it's pretty meaningful. Of course, we still feel like we're just getting started in so many ways, but it is a significant milestone. And also, everyone probably saw the press release just a day ago about our upgrading to the OTCQX. Really nice move. Very much a natural next step as the company is really moving into the upper tiers of In the OTC, that represents about 12,000 companies. It probably puts us in the top 400 or 500. And, of course, it also is a good signal to the market for the company's opportunity to continue upward and potentially national exchange listing, which we've talked about for years, and it's coming closer and closer, which is awesome. And by and large, we make life better. It's a big calling, right? Sustainable solutions for some of the biggest problems that face the planet. really focused on good for people, good for the planet, good for commerce. That's a sustainable solution. And that's where we live, and we've lived there for almost over 15 years. And as a result, we're now witnessing some of these technical innovations finding a way to market, generate significant revenues, really proving out our investment thesis, and that is to invent it, prove it, and partner. Easy to say, really hard to do, okay? But meaningful, and we need to get it right It really works well, as it is now. We're going to talk about that a little bit more for sure. We covered the forward-looking statements, of course, and safe harbors. Always refer to the 10-K and the Q for complete disclosures, including substantive risk factors. You know, I always talk about risk, and really we pride ourselves on risk mitigation, risk management. But everything we do has risk. I mean, when you're trying to provide transformative technologies in competitive markets, You know, it's a jungle. It's a war out there. And so, you know, we pride ourselves on overcoming the hurdles. Sometimes it's taken us a while, but we do overcome. And, again, we're witnessing that now. But I always refer to those significant filings for a complete picture of the risk factors that impact our business. Yeah, science and engineers, passionate about health and sustainability and human health. driven by a passion to do something worthy, worthy of a career, worthy of a company, worthy of significant investment. Focus on best-in-class solutions, lots of engineering, tons of engineering and science, and focus on problems without a good solution. That's a big calling. This slide always has way too much for us to cover, but we like to print it so that you can look at it later and just highlight, you know, we've got the BioLargo engine, right? That's That's corporate office. That's finance. That's a lot of engineering support for all the operating units and R&D at our operation up in Edmonton, Canada, on campus at the University of Alberta. It's quite a collection of people. We said in our press release, highly qualified people doing something important and having the freedom to go out and stretch and really tackle some of the biggest problems, as we say, that face the planet and face industry. Anyway, Clear is doing great. We're anxious for it to push through on the the launch of products to the next stage. It's in the works. It's close. We're making significant investments in the infrastructure. We'll cover that in a minute. The energy company is the youngest, of course. We're producing battery cells. We'll talk about the detail on that in a minute. We'd hope to have those battery cells in our hands in Q1, so we're pushing a little late. There's a number of technical things going on there. I'll describe that in a deeper presentation, but we're on the cusp of being able to deliver a battery for our own testing and also for third-party testing. which is a pivotal moment to really open up the opportunity to the next step. O&M Environmental, of course, breaking records. With the poof in O&M, they're probably carrying at 90% of our revenue, or 85%. It's a big number. Just continuing to push forward and break records. An incredible year and an incredible first quarter. Really significant. And again, full story circle. Full circle story for the company. Full circle story. It goes back to the origin story of the company. And we're also watching some of these additional product designs come to market in our partnership with POOF. POOF has just done more above and beyond what we had ever really hoped for. It's just an incredible opportunity that's continued to expand, and we're proud of that. The PFAS, of course, is a super hot topic. These most recent regulatory shifts that came out in the last couple of weeks really pushed the market towards us. We're going to decipher some of those for you in here in just a second as well. It's really meaningful to the value proposition that we put forward in that marketplace. And again, it's just pushing customers to us every time the new rule comes out. People look at you and go, oh, now I get it. It's like, yeah, now you get it. You know, we're here with a solution that's years ahead, years ahead of those regs and the market. And as a result, we still are very optimistic, difficult, very hard, but optimistic about the future. for sure. Okay, this is a slide from the last quarter, so that's six years, right? Six years, look at that revenue growth. I always say we didn't forecast it, we just did it. It's really good. And then here's the quarter and what it looks like. And notice the significant increase in revenue, but not a significant increase in SG&A to correspond. And hence, positive cash flow. Q1, 481,000. an increase of $483,000 for minus $2,000 in Q4. Revenues over Q4 is up about $390,000, 9% quarter-to-quarter, 28% compared to Q1 2023. Net loss has reduced quite a bit, a 32% decrease and 57% increase, and net loss of the amount of the net loss, $623,000 non-cash, equity compensation expense. And, you know, the accounting treatment on that is just really incredible. So that vesting schedule impacts the PLL in that way. Of course, we do believe we'll overcome that as well as we continue to increase the top-line revenue. And, of course, that's highly subject to our partners' delivery, but we do believe that it's a bright future. We took the run rate that we're currently operating And we just multiply by four. It's really pretty simple. If we just do what we're doing and maintain this average threshold, then year-end 2024, we'll come in at around $19 million. That's pretty awesome. That'll be another 100% year-over-year growth. And while we're not projecting the positive cash flow from that, What we can say is we're always very capital conservative. We want to conserve that capital by leveraging partnerships, making incremental investment, breaking through the proof of claim, and then really relying on the tools and resources of partners to expand at a national and potentially global level, as we've done with proof. So that's the best example. And what it really shows is the power of that model. I'm going to just go back real quick. Let's just take a look at that SG&A again one more time. As the incremental revenues climb dramatically and the overhead SG&A stays relatively flat, the incremental cash flow can be substantial. We expect that trend to also continue to hold true. We are investing. So when we look at net loss, that includes all the R&D and the non-cash charges to the equity compensation arrangement. And as much as possible, we're focused on investing in capital assets for making money, as we are, like with CLIRA. We made a substantial commitment of almost $800,000 to beef up the infrastructure to support distribution of substance, big numbers. And we're excited about that. It's been a long time coming. And again, we would have expected it to really launch sooner. But in the throes of the battle, what we've learned, of course, is that the detail required to support the kind of significant expectations of our future really required that we invest and prepare and invest and prepare, and we've been doing that all along, and it's really quite exciting. The other is net shareholder equity. Again, big number because why? Well, because if you want to talk about national exchanges, that net shareholder equity number is a big number. We do expect that to continue to rise with rising revenue, rising cash flow, and incremental investment. And remember that part of our strategy that's so unique is we do have the ability to capitalize some of the ventures, the subsidiaries and their venture status with partners, investors who come in and purchase equity in those subsidiaries to give us some leverage, right? Leverage without relying on dilution at the parent level when a lot of people believe our valuation is still quite low. So we're really sensitive to that and we've executed that strategy successfully now for years.