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spk00: Thank you for joining us today. I'd like to introduce Solana Global Medical Device Corporation's Vice President of Capital Markets and Financial Communications, Jethro Roth-Kuschel.
spk02: Thank you, Chloe, and welcome to the second quarter earnings call for Solana Global Medical Device Corporation, listed on the TSX-V under the ticker SGMD. I'd like to remind everyone that today's discussion will include forward-looking information and forward-looking statements, future-oriented financial information, and non-IFRS measures regarding future events and our future financial performance. These statements reflect our views as of today only and should not be considered as representing our views for any subsequent date and, except as required by law, We do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after today, many of which are beyond our control. These statements are also subject to material risks and uncertainties that could cause actual results to differ materially from expectations reflected in the forward-looking statements. A discussion of these risk factors is fully discussed or referenced to in Solana Global's disclosure documents filed on EDGAR and CDAR. Unless otherwise specified, all dollar amounts in this call are expressed in Canadian dollars. During this call, we may also refer to certain non-GAAP financial measures. For information regarding our non-GAAP financials and a reconciliation of GAAP to non-GAAP measures, please also refer to our EDGAR and CDAR filings. Ladies and gentlemen, allow me to introduce Solana Global Medical Device Corporation's CEO, Luke Ballstick. Luke.
spk01: Thank you, Jethro. First, I would like to welcome the Daymar Plastics team into the Solana Global family. We announced the closure of this acquisition on September 23, 2022. We are very excited to have them on our team and look forward to including them in our future quarterly results. Today we posted our reviewed second fiscal quarter financials ending August 31st, 2022. This was a strong quarter, and I want to jump right to the highlights before handing it over to Les Cross, our executive chairman, to describe our market, our business model, and our team. This was our first full quarter we can use as a year-over-year comparison. We generated 153% year-over-year growth in revenues, with a 300% year-over-year increase in total cash receipts for the second quarter, taking in approximately $13.6 million, including $4.2 million from the US $7.5 million sales order. We built a record order book backlog to over $18.5 million during the quarter, as a result of increasing our focus on organic sales. We generated 152% year-over-year gross margin growth and $1,427,000 in positive adjusted EBITDA for the six months ended August 31st, 2022. We continue to build a strong pipeline of cash flow positive acquisition targets for future acquisitions in the coming quarters. We are now negotiating acquisition agreements, including a contract manufacturing agreement and transition services agreement for a 26 million annual revenue potential acquisition. It's LOI announced August 15th of 2022. We are pursuing an optimized debt structure for closing. All in all, a very busy and successful quarter both in terms of generating cash and building a platform for the future. I'll now turn the call over to Les Cross, Celana Global Medical Device Corporation's Executive Chairman. Les?
spk04: Thank you, Luke. As a reminder, we are focused on serving a $30 billion global market for products that help people recover from injuries, surgeries, physical disabilities, and we call this market Recovery Science. We penetrate this market through a proven approach, the same approach we took at DJO Global, a previous company we led from the early days, took public on the New York Stock Exchange, and later sold to Blackstone for $1.6 billion US. We grew that company by first creating a fully integrated device company, and then picking superior products we knew would sell in the international and niche U.S. markets. We also pick products positioned to grow with the aging population and other favorable demographics. Solana Global is no different. Our primary strategy is acquiring companies that have not fully realized their revenue potential and marketing their products through established sales channels that's taken us years and decades to develop. While we are just six quarters into the plan, our execution has been extremely solid since we launched Salona Global. We have made on average one acquisitions per quarter, and we saw organic growth post-acquisitions in sales and profit on each deal we have done. Because we were strategic in our early acquisitions, we have purposely created a fully integrated medical device company with five engines of growth, to drive revenue and profit growth. The first engine of revenue and profit is merger and acquisitions. We have proven we have a deep pipeline of deal flow where we can be picky about the companies we acquire. We target deals based upon their strategic fit and our overall strategy to build upon our existing fully integrated platform. Our second engine of growth comes from product development. Because we have executed on our strategy to be able to innovate, produce, and sell medical device products into the market, we now have this second prong of growth. We are working on several products that we can bring to the market in short order that can be developed, approved, and produced with a strong return of equity to our shareholders. The foundation of this growth is a combination of the businesses we acquired in the last year, We have a world-class innovation team at Simbanks, a state-of-the-art US-based FDA-approved manufacturing facility, SDP, and several sales channels we have acquired or developed. Our third engine of growth is IP acquisitions. We acquired a portfolio of medical device product intellectual property recently. which has given us the ability to expand our product offering in our channels within weeks of the acquisition, providing another important engine for growth of revenue and profits. As an example, in April, we acquired the IP for an electrode portfolio. By June, we'd already designed, manufactured, and sold our first electrodes into the market. We are optimistic that we will have the opportunity to find more deals like this in the upcoming quarters. Our fourth engine of growth is executing product distribution deals through our sales channel. In May, we executed a distribution agreement with a laser company in Europe, enabling our current sales channel to offer additional large ticket items into their product offering. We are actively negotiating several more of these types of deals. Our fifth and final growth engine is organic growth post acquisition. We have already started to experience the benefits of the potential to grow revenues and profits upon closing our acquisitions. Since selling our previous company to Blackstone, we've seen this market change. It has become even more fragmented through product innovation. Additionally, the large companies that serve this market, such as our prior company, can no longer achieve meaningful growth by acquiring dozens of small companies. Understandably, they are trying to move into the higher risk-reward opportunities involving research, invention, and requiring large capital investments. These two forces have created a terrific opportunity for us to recreate our previous success. To take advantage of our opportunity, we have a very talented and experienced team of executives and advisors that we targeted as part of our acquisitions or recruited from people with similar experiences to ours. Luke Fosdick, who was our chief operating officer and our chief executive officer and our formal chief operating officer, as well as the founder of SDP, our first acquisition, helped build our previous company alongside me. We recently added Dennis Nelson as our CFO, who will be on the call later. He worked with me at Alpha Tech Spine, a NASDAQ-listed company where I was chairman and CEO after my time at DJO. We are fortunate to have Rick Greenwald from Simbex, who also worked to develop products for us in the past, as well as Kenny Zisholtz and Scott Rogo, both sales executives with significant experience in this market and worked with us previously. We have a well-known and talented M&A and capital markets team. led by the former chairman and vice chairman for patient home monitoring, PHM, as it was known. It's now two companies listed on the NASDAQ, Biomed and Quip. Those companies grew out of an acquisition jaguar led by our M&A team. The entire team is engaged with great urgency to take advantage of the opportunities in front of us. Now that we've completed acquiring the building blocks of a fully integrated company, we are positioned to make additional acquisitions in numerous markets, develop and sell our own products, acquire IP, and execute distribution deals. We do want to remind our shareholders that we've been able to accomplish all this in just one year of operation. In this short period of time, we have developed five solid methods to increase revenue and profit for our company. In terms of our goals for the future, we expect to continue our rapid revenue growth now that we have more pathways for growth and a strong leadership team that can scale and steer the enterprise. I would now like to turn the call back to Luke to provide more details on the quarter and our plans for growth in the next quarter and beyond. Luke?
spk01: Thank you, Les. As mentioned earlier, we are very pleased with our performance this quarter. Our results this quarter center around four main initiatives for growth. The first was to capture the cash flow from the US $7.5 million sales order we announced in the summer. The second was to prepare our larger potential acquisition we also announced this summer. The third was to invest in our portfolio of branded products. And the fourth was to build our order book backlog, which now stands at almost six months of revenue. I want to provide more detail about the operational initiatives we have prepared for the pending large acquisition. We hired a new CFO and supplemented the accounting team. We invested in preparing our back office, customer service, and sales team for the integration of the upcoming large acquisition, which has a short-term and temporary impact on our operational profit this quarter. although it is important to note that we maintained operational profit during the quarter. Having spent my career integrating companies, it is always better to spend up front than to experience delays on the back end. Investing pre-acquisition can often create a slingshot effect on growth post-acquisition. This was no small feat, and I applaud our team for their hard work. This means that when we close acquisitions, we can quickly integrate them and get moving on our plan to increase sales post-acquisition. I also want to talk about our large and growing order book backlog. First, I want to thank our VP of Sales and his growing team for increasing our order book to a record size of over 18.5 million. Second, it is also important to note that revenues and margins were constrained this quarter from summertime back bottlenecks and component supply chains. Thankfully, we have seen improvements with these issues during the current quarter, and we are on track to the long-run significant organic growth targets we have come to expect. What all this preparation means is that we are fully prepared to integrate the new and forthcoming acquisitions and the accompanying revenues that we expect as a result. Ladies and gentlemen, I'd like to now introduce Dennis Nelson, our new CFO. Dennis joined Solana Global this past quarter and brings a strong background as a CFO in public and private companies. We are very excited and pleased to have Dennis on our team. Dennis will now highlight a few items in the financial statements. Dennis?
spk03: Thank you, Luke. As Luke mentioned earlier, we had strong year-over-year revenue growth of 153%, building quarterly revenues to $10,044,000 as compared to $3,974,000 for the same quarter in the prior year. We are prepared to continue that growth with the upcoming potential acquisition, which is slated to add another $26 million in revenues. We anticipate revenue growth in the back half of the year as a result of the initiatives we have underway, including product development, sales channel expansion, and the Daymar acquisition. For example, we expanded our product line with an agreement to distribute the Hyperice suite of products this summer and have secured and shipped our first orders for the recently launched Myogard Premium Reusable Electrode, which is based on the acquisition of intellectual property earlier this year. In terms of gross margin, we continue to see fluctuation between 30 and 35% per quarter with our long-term goal of reaching 40% as we scale our business. We had a year-over-year gross margin growth of 152%, building gross margin to 3,029,000 as compared to 1,204,000 for the same period in the prior year. This quarter, we generated 30% gross margin in the face of reduced supply chain constraints that we experienced during the quarter. These issues have improved in the third quarter. In terms of profitability, we generated a positive adjusted EBITDA of $1,427,000 through the first half of our fiscal year. Even as we invested in pre-acquisition activities, including the increased staffing and implementation planning necessary to scale accounting and IT systems for integrating the acquisitions and building sales and customer support systems for post-acquisitions. We also prioritize spending on product development to increase our high margin branded product portfolio. We ended the quarter with $6,938,000 in cash and cash equivalents, which we plan to use on current and future acquisitions, as well as earn outs for completed acquisitions. We have options available through various lending opportunities that will allow us to take advantage of our expanding asset base as our revenues grow. In summary, we have a strong financial base from which to grow our business and plan to take down additional debt for acquisitions of need. Our growth plan does not envision a need for equity financing. With that, I turn it back to Luke.
spk01: Thank you, Dennis. We know the capital markets are under pressure, and we look to be one of those companies that is a must-have stock. While we are still small and under the radar, with a couple more quarters of this type of growth, We think we will be more and more noticeable to investors in Canada. We are confident we will have continued growth and we can soon meet our internal goal of a U.S. listing. Thank you to those who were able to join us on this call. We look forward to working to close the large acquisition under LOI, our continuous improvements in operations, and we look forward to updating you on our revenue and profit growth for the third quarter in 90 days. Operator, this is the end of the call.
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