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spk01: As always, even though we're not working off a presentation, this session will contain forward-looking statements. If you'd like to know more about those, you can find them on the presentation on the website, which was updated this morning, so feel free to check that out. And as I mentioned, there will be questions, so feel free to input your questions in the Q&A box, or you can email them to me. With all of that out of the way, I'd like to introduce Cameron Groom, CEO. Hi, Cameron.
spk02: Good morning, Deborah. Good morning, everyone. Thank you all for joining us. And I'll in turn introduce Jim Curry, our Chief Financial Officer, and Ken Hughes, our Chief Operating Officer, who are also on the call today with us. So, great. I guess, Deborah, I'll launch in. I mean... This is to discuss principally our results for Q4 and the full year of fiscal 2023. That's the quarter and year ended September 30th, 2023, which capped off what I would call a year that was both challenging and fulfilling. We successfully adapted to post-pandemic conditions. We added a number of important new customers and products. We signed a fully funded redevelopment deal for our biological drug, kinetic urokinase, and we maintained our financial strength. However, we did see a pause in our sales growth in 2023 due to to a lack of new orders for our DXTM viral transport medium, which we've been selling for about 5 million a year for the previous two years, and net of other new revenue and expenses led us to a small net loss for the full year of fiscal 2023. But again, in light of the changes that we've been under, we're taking and the investments we're making to support the longer-term growth of the business, I think we're satisfied with that result in light of the challenges that we face through the year. I might ask Jim now to speak a little bit about the top line, gross margins, net earnings, influences of the year, and just touch on Q4 and the full fiscal year, if you don't mind, Jim. Jim, we'll have to get you off mute. It'll be more compelling if we do.
spk04: I hadn't even noticed that. Thank you, Ken.
spk02: No worries.
spk04: Apologize. Yeah, I'll start off with fiscal 24, as Cameron indicated.
spk02: 2023, you mean.
spk04: 2023, yeah, I'm already into 2024, and I'm starting Q1, so I apologize. Yeah, 2023 was a challenging and interesting year, let's just say. I think from a top line perspective, we were down versus prior year, predominantly due to the fact that we had the lack of DXTM revenues. And that was about $5 million to our top line differential from fiscal 2022. So that had a large impact both on the top line and on our bottom line for the year. We also had some impact during the year and at year end related to our kinetic transaction, which concluded with SQL in May. So we saw some revenue recognized in the, I guess, third quarter related to that transaction. And at year end, we also saw the reversal of the impairment of the kinetic asset for just over $3 million Canadian occur. That impacted not our top line, but did impact our net earnings for the year. As far as the rest of our business, though, I think once you took out the impact of BTM and Kinlytic, the rest of our business actually grew 8% during fiscal 2023, which was a good sign. We saw growth from both the CAPS business as well as our antigens business, which is starting to recover from where it was back before the pandemic. And that was a good sign during the year. From a margin perspective, it was a weaker year for margins than it was in the prior year. And again, it more relates to product mix. We didn't have the VTM business, the DXTM business that had fairly strong margins. We also, the mix of products within the antigen business was different and affected our margins for the year. And also we had a write-off. Not only did we not have the revenues from DXTM and the margins, we also had to close to a million dollar write-off of inventory related to DXTM during the year. So all in all, when you look at our bottom line, the net income was pretty much break even. But that was impacted very strongly by the reversal of the impairment of the kinetic asset. And that offset some of the losses that we had from our core businesses during the year. And again, some of the write-downs that we had related to DXDM impacted that as well. For the fourth quarter, we saw a fairly level result in the top line year over year. We had what I would call, we have quarters where all the stars align in terms of what we actually sold from a product mix standpoint. And we've had a few of those over the years. This was not one of them in Q4. Unfortunately, the stars didn't align with the product mix. We had some fairly significant sales of one of our lower margin antigen products in the fourth quarter, and that had a significant impact. We have we've also got increased continued increased costs both from labor but also on materials and our supply chain costs that are impacting us. We also had some batch failures occur in the fourth quarter and an increased procurement level of supplies for our quality control and manufacturing team during the quarter. Now all of that was again offset by a the reversal of the impairment of the kinetic asset and actually produced a net income during the quarter. And again, brought us to fairly close to break even a year from a net income standpoint. So again, it was a very mixed bag during 2023, I would say. Our timing with kinetic was good and strong, and we continue to we will continue to see the impact from that that transaction in fiscal 24 and obviously beyond fiscal 24. So again challenging an interesting year in 2023 but we are looking forward to a stronger 2024 both from a top line and bottom line perspective.
spk02: Very good. Thanks, Jim. Did you want to touch on the ERP go-live, Jim? I just know that that's been a big push through closing out the year as well.
spk04: Yeah, thanks for that, Cameron. Talking about challenging, we went live with NetSuite on August 1st, and its timing was interesting from a year end and audit perspective, let's just say. So we were, but we were very, it was a very strong implementation. Uh, we had a good, good support from a consulting standpoint, the team internally worked hard to with the implementation and it went by my previous experiences with ERP implementations very well. And even from a, an audit perspective and having to audit both our existing previous systems and our current system. net suite, while it was challenging, I think I can see the light ahead for, again, the audit for 2024 being simpler and easier from a system standpoint than it was in 2023. So a lot of hard work put together by all areas, not just finance, but manufacturing, QA, QC as well.
spk02: Thanks, Jim. And maybe that's a good segue over, Ken, to you and starting with the EQMS that we've been implementing at the same time as the ERP. And maybe just remind everyone what that is.
spk03: Yeah, absolutely. And from an operational perspective, Mark, largely we really continue to execute and do what we said we're going to do, which is to build that capacity to support the growth going forward. On the ERP side, the IT department, the new IT department, was pretty functional in that regard too. And a comment on that would be going through the first year end with the new NetSuite ERP, Enterprise Resource Planning Software, we'll just facilitate the next one. And the truth of the matter is, by going digital, we're going to support the growth in the company going forward. which leads into a discussion with the Electronic Quality Management System, which went live at about the same time as the ERP Again, we're adding new functionalities and have added new functionalities as we move forward. It's operating very well right now. We're starting to integrate the ERP with functionality from the EQMS, the Electronic Quality Management System, to allow us to support efficiencies in growth of the business. So that's really been a very successful initiative in 2023. And in 2024, we're going to continue to add capabilities. Right now, as we're growing, we'll have an electronic system and a legacy paper system in parallel as we continue to evolve through and implement more and more, less paper, more electronics, more growth and more support and higher end activities for all staff and margins that go with that. So that's been a really successful implementation. Other stuff with regards to operations, we've had a very successful year in implementing quality systems with regards to the in vitro diagnostic regulations on our CAHPS products to allow us to sell medical devices in this area into Europe. We were audited by our notified body, the regulators in Europe in August, and the group will be unsurprised to learn we passed with flying colours. I mean we operate a very integrated quality management system already, ISO 1345, ISO 9001, we take the whole business very seriously and they were impressed with our use of our new EQMS in this regard as well. So we expect to be able to access the European markets fulsomely through 2024 and we have a lot of stuff already going on in the US and Canada as well and
spk02: previous legacy medical devices already being sold into europe so that's not going to preclude any growth in the next year and facilitate growth beyond that this is a little inside baseball for for people in the industry but there's a big heightening of requirements regulatory requirements in europe moving from the in vitro diagnostic directives which is a looser standard to the in vitro diagnostic regulations ivdr much tighter standard And Microbix is chinning up to that bar to make sure that we continue to have full access into European markets going forward. So very critical for all of our global customers, of course.
spk03: And because we have such an excellent QMS anyway, the stretch is not too far and well within the capabilities, as evidenced by the quality of the audit and how we're moving forward with our technical files, which are more involved than IVDD, the directives, but well within our capabilities.
spk02: Yeah. Now, Ken, you know, Jim spoke a little bit about DXTM and, you know, the fact we've not had recurring revenues from that in 2023. I think maybe it's worth touching on a little bit about where we're going with our capabilities on, you know, filling, capping, labeling, custom reagents, and so forth, and how that continues to advance.
spk03: Right. Everybody knows that we got a lot of funding from external sources, grant funding, and interest-free loan funding from FedDev to implement capabilities to do that. And as a result of that, we've built facilities and currently have a capacity of about 100,000 vials a week in this regard. That's a very flexible situation that we've been deploying into CAPS as well as creating other products in the DXTM-related space, elution buffers, sample buffers, things of that nature. In parallel, our Finally, a more fully automated system is going to be delivered and installed this very quarter at microbics, which will take away a lot of the drudgery of the semi-manual situation, make it highly automated, and will increase capacity further from there. There are a lot of opportunities in these types of Aleutian media, sample media going forward, and we're pursuing them with all sorts of vigor. Of course, it would be very nice if Ontario would Order another million units of VTM, but that's not required to build forward. We're already making sales in this regard and we're developing new products like sample elution buffer for different tests going forward. So that capability and capacity is flexible and is being expanded, as we said we would, and we're putting together the necessary quality control because the new product lines require development and quality control as well, which leads me, I guess, to my final operational point. again 66 funded by government we're building a new qc r d and manufacturing lab in building three which we acquired in the last couple of years to uh basically allow the testing and development capacity to fill this pipeline but also increase efficiencies in our antigen development business which i'm sure we're going to come on to soon and then move on from there so from a operational perspective, it's been a pretty good year. We've built capacity, we've successfully implemented ERP and EQMS, capabilities have expanded and there are new opportunities we're very well ready to address. And after that, I would say that's how I look at the operational component of 2023.
spk02: No, thanks, Ken. That's a great run through. I'll spend a few minutes now just speaking on some of the alliances that we've announced more recently. Since our Q3 webinar in mid-August, we've actually disclosed five new corporate alliances. The first one in October relates to the HPV screening program of the Republic of Ireland. People will recall that earlier in the year, we did global troubleshooting of the Becton-Dickinson system workflow, their core system in Prince Edward Island, first jurisdiction in Canada to go live with molecular testing for HPV for cervical cancer screening. And there's actually reference to the PEI go live in a National Post article on the 31st. No mention of microbics, but maybe we'll change that. And then we were baked into the national screening program in the Netherlands earlier in the year. But in Ireland in October is interesting because it's on the Roche Cobas system is what they're using. So again, another major international company system baking in microbics controls for its workflow. We then announced in November an alliance with Ulysse Biomed on another HPV extended genotyping assay client, so furthering our reach in that emerging segment, which is very large. Then we announced an alliance with U.S.-based BioGX in early December, supporting benchtop point-of-care testing, a syndromic test portfolio that that organization is advancing with, with C-Gene USA on the 14th of December. for lab-based multiplex PCR test support so again you know further alliances and uh of course in in September um we were able to make a dual disclosure both to reference a million dollar order of caps from a customer the Alliance customer we disclosed in August 2022 and with their consent we're able to reveal their identity that in fact it is the company quidel ortho that we were working with and continue to work with on their Savannah uh point of care testing PCR multiplex uh test instrument big mouthful there but bear with me um and Certainly, if you review Quidel Ortho's past disclosures, they were hoping to get that instrument and its initial assays approved in late 2022. And as with all things regulatory, timelines can get pushed back. But we're very pleased that on December 20th of 2023, White Ale Ortho was able to disclose that they have gotten 510K approvals of Savannah for the instrument itself and for the first assay on that instrument, a four-plex genital ulcers test panel, herpes simplex 1 and 2.
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