Nebius Group Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 1, 2024

There are 5 speakers on the call.

Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Zomedica's Q4 and full year 2023 earnings results and business update call. I would like to remind everyone that this call is being recorded today, Monday, April 1 at 4:30 pm Eastern Time, and all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. I will now turn the call over to Elif McDonald, Investor Relations.

Operator

Please go ahead, Ms. McDonald.

Speaker 1

Thank you, Paul, and good afternoon, ladies and gentlemen. Welcome to Zomedica's 4th quarter and full year 2023 earnings results and business update call. On today's call, you will hear from Zomedica's Chief Executive Officer, Larry Theven and Chief Financial Officer, Peter Donato. Before we begin, we'd like to remind everyone that on this call, we will be making various remarks about future expectations, plans and prospects that constitute forward looking statements. These forward looking statements are based on assumptions and there are risks that results may differ materially from those statements.

Speaker 1

As such, Zomedica cannot guarantee that any forward looking statements will materialize and you are cautioned not to place undue reliance on them. We refer current and potential investors to the forward looking information and risk factors sections of our public filings available on SEDAR at www.sedarplus. Ca and on edgarsec.gov. Forward looking statements made on this conference call represent like to remind everyone that all figures discussed on this call are in United States dollars. I will now pass the call over to Zomedica's Chief Executive Officer, Larry Heaton.

Speaker 1

Larry? Thanks, Aleve.

Speaker 2

I'd like to start by thanking our shareholders for your support, wishing our prospective investors and analysts and others a good afternoon and welcome all to the Zomedica 4th quarter and full year 2023 earnings results and business update call. I'll start by providing an update on the overall business, then our Chief Financial Officer, Peter Donato, will walk you through our financial results and provide a corporate update. After our prepared remarks, we'll open the line and the web to your questions. Earlier today, the Vactor released its financial results for the quarter and full year ended December 31, 2023. Overall, this was another great quarter, topping off a remarkable year, the best year so far in Zomedica's history.

Speaker 2

Once again, we delivered record revenues, beating last year's record Q4 while maintaining high margins and reducing operating cash burn. Let me highlight that revenue for the quarter was $7,300,000 reflecting 19% growth over the Q4 of 2022. Almost all of which was produced from the sale of products from previous acquisitions that have been fully integrated, validating that our strategic plan to acquire, integrate and grow is working. Our $25,200,000 in revenue for the year was up 33% over 2022 and 65% of that was from recurring consumable sales, reflecting a solid foundation of recurring revenue that grows with each addition to the installed base of our various product platforms. Earlier this year, we provided forward revenue guidance as we have reached a certain level of maturity in our business that lets us say that we expect revenues to grow to $31,000,000 to $35,000,000 this year, reflecting up to 40% growth year over year at the high end.

Speaker 2

As you're aware, we conducted a special meeting in February to seek approval for a reverse split. Since 60% of the shares that were voted, representing 35% of our outstanding shares, were voted against the proposal, it failed. This was a very clear message to us that our shareholders want to see us regain compliance with the NYSE American price thresholds through organic growth of the share price driven by the performance of the company. We heard you loud and clear and have no plans to reintroduce a reverse split at our upcoming annual meeting. We are committed to continuing to grow revenue, maintain high margins and achieve cash flow and GAAP profitability as rapidly as possible.

Speaker 2

We've shared our plans with the NYSE American and they have indicated that they will allow us to remain listed while monitoring our market driven share price without giving us a date certain deadline for reaching the $0.20 price threshold over a 30 day trailing average. Now to that performance. We've been building a business and delivering record quarterly results that have exceeded our expectations. In the Q4, we announced the expansion of the market opportunity for Truforma with 3 new assays for the most commonly performed diagnostic tests for canine gastrointestinal disease. 1 of the top three reasons a dog is brought to the vet is vomiting and diarrhea.

Speaker 2

Knowing there is a high need for a quick diagnosis, we were pleased to offer 3 of the most common assays used to diagnose these cases. Canine pancreatic lipase, cobalamin and folate with the latter 2 being combined in a single cartridge. We believe through these assays we can help veterinarians produce better outcomes for pets and pet parents by providing faster diagnostic solutions while also streamlining their workflow and increasing practice cash flow and profitability. Early in the quarter, we announced the acquisition of Structured Monitoring Products, earning our prior investment into full ownership of the Vectarian product line. We are pleased with the early indicators and see significant future upside.

Speaker 2

In October, we acquired Ormo Biotechnologies, QBT focused on the development of point of care diagnostic solutions, leveraging their innovative bulk acoustic wave sensor technology in the development of the Omnia point of care diagnostic platform designed to perform assays for human patients, along with the Truforma point of care diagnostic platform to perform assays for companion animals, which we had marketed previously under license prior to the acquisition. A primary focus with this acquisition will be on capturing margin improvements by assuming QBT's manufacturing systems as well as accelerating assay development for the Truforma platform. This acquisition will also allow us to avoid future operating and capital expenses incurred by building R and D and manufacturing staff internally as well as eliminating remaining payments, including license fees, transition fees and future royalties, which would be due to QBT under the previous agreement. Regarding additional M and A opportunities, we've had quite a busy past couple of years as we made 5 acquisitions to build the 5 product platforms we are commercializing today. As we look forward, we will remain opportunistically acquisitive, but with a focus on those acquisitions that not only include products that meet our 5 pillars, helping veterinarians improve the quality of care for the pets, the satisfaction of the pet parents, along with improving the workflow, cash flow and profitability of their practice, but also focusing on those that would be accretive to earnings, shortening our timeline to profitability.

Speaker 2

With a strong liquidity position of over $100,000,000 coming into the year and a manageable operating cash burn rate, we remain well funded for the foreseeable future. Before I hand the call to Peter, I want to reiterate that we're happy with what we achieved during the Q4 and the full year of 2023. We look forward to building on this momentum as we continue to be confident of even stronger results in 2024. With that, I'll hand it over to Peter for the financial review and corporate update. After his remarks, I'll come back to provide some closing comments.

Speaker 2

Thank you, Larry, and good afternoon, everyone. Let me start by reviewing the Q4 and full year 2023 financial results, providing updates and greater detail on information that we pre released early in the Q1. I reported back in January that I expected revenues at around $7,000,000 for the Q4 of 2023. Today, I am pleased to report that the final audited numbers exceeded that figure and came in at just over $7,300,000 for the quarter, an increase of nearly $1,100,000 and approximately 19% over 20 22's Q4 of $6,200,000 The increase was primarily driven by a 16% increase from our therapeutic devices segment led by Polstat and a 144% increase in diagnostics led by Truforma and other newly launched products. Revenues for the full year 2023 were expected to be around $25,000,000 and again pleased to report came in at a record $25,200,000 an increase of nearly $6,300,000 and over 33% growth year over year.

Speaker 2

This growth was driven by a strong 28% increase in our therapeutic devices segment, including a full year of Assisi products. In addition, we generated a 252% increase in diagnostics revenue with a record performance from Truforma. In the Q4, consumable revenue grew to over $4,000,000 an increase of approximately 26% over Q4 2022 revenues of $3,200,000 The $4,000,000 in consumable revenue represented 55% of total quarterly revenue, up from 52% during 2022. Consumables revenue is a good indicator of our ability to sell capital equipment, while increasing utilization from our expanding installed base. Full year consumable revenues were $16,400,000 an increase of approximately 41% over full year 2022 consumable revenues of $11,600,000 with consumables representing nearly 2 thirds or 65 percent of total revenue, up from 61% of total revenue during 2022.

Speaker 2

4th quarter 2023 capital revenues were $3,300,000 up 12% from the previous record Q4 in 2022 of nearly $3,000,000 Full year capital revenues were $8,800,000 an increase of approximately 20% over full year 2022 capital revenue of $7,300,000 We continue to be pleased with the number of devices being put in service in the field, particularly in small animal and mixed vet practices that continue to be a focus area of our company. Again, keep in mind that capital sales are a good leading indicator of future high margin consumables business. 4th quarter therapeutic devices segment revenues from PulseSpan and Assisi products grew to $7,000,000 an increase of approximately 16% over the 4th quarter 2022 record revenues at the time of $6,000,000 4th quarter Diagnostics segment revenues were about $363,000 an increase of 144% over the Q4 of 2022 revenues. This was driven by significant year over year growth in TRUFORMA sales, including newly launched assays and revenue from the VetGuardian and TruView products launched during 2023. We believe the growth from our Truforma products will continue as we invest in the development of additional assays and market recently launched assays including the first assay from horses that were launched in September and 3 assays for non infectious GI disease, including our first combination or multiplex cartridge, including 2 assays that launched at the end of 2023.

Speaker 2

As Larry noted earlier, our acquisition of Chlorvo Biotechnologies LLC should improve margins and accelerate development to deliver on our commitment to bring new assays to market during this year of 2024. Gross profit for the Q4 of 2023 was $5,100,000 compared to $4,200,000 in the Q4 of 2022 and gross profit for the full year 2023 up $17,000,000 at $17,300,000 compared to about $13,500,000 in 2022. Gross profit margin for the Q4 was 69%, that's up slightly from last year's 68%, while full year 2023 gross profit margin was also 69%, down slightly from last year's full year 71%, last year meaning full year 2022. The variance was primarily due to the integration and launch of several new products, product mix impacts associated with sales of these new offerings and price increases of certain component parts. Operating expenses for the Q4 of 2023 were $16,500,000 compared to $9,300,000 in the same period of 2022.

Speaker 2

That's an increase of $7,200,000 However, nearly half or approximately $3,500,000 were non recurring charges directly attributable to acquisitions and related integration. Operating expenses for the full year 2023 were $48,900,000 compared to $35,400,000 during full year 2022. Approximately $5,400,000 represented non recurring charges, again primarily related to acquisitions and related integration. These included professional and legal services, acquisition related travel and separation costs as well as many other expenses that are not expected to reoccur during this year 2024. Deducting these non recurring one time items, total OpEx rose by about 23%, while our sales as mentioned grew 33%.

Speaker 2

This reflects an increase in operating leverage and we expect this to continue during 2024. In the Q4, R and D expense was just over $3,000,000 at $3,100,000 compared to about $700,000 in the Q4 of 2022. That's up $2,400,000 but once again included non recurring charges of about $1,500,000 most of them related to the acquisition of QBT. Research and development expense for the full year 2023 was $5,700,000 compared to $2,600,000 during 2022. That's an increase of just over $3,000,000 but nearly 3 quarters of that increase consisted once again of non recurring one time charges totaling $2,300,000 associated with the acquisition and integration of QBT.

Speaker 2

The remaining $800,000 or so were primarily related to accelerating the development of new assays. In the Q4, sales and marketing spend was $4,300,000 compared to $3,400,000 during the same period of 2022 with most of the increase being driven by increases in sales personnel and increases in marketing activities like trade shows that were expanded during 2023 to include several new product offerings, especially those launched during 2023. Selling and marketing expense was $14,100,000 for the full year 2023. This compares to just under $10,000,000 or $9,900,000 for the full year 2022, an increase of $4,200,000 or 43%. The increase in selling and marketing expenses were primarily driven by salaries associated with increased hiring related to the sales territory expansion and increases in marketing campaigns and attendance at trade shows.

Speaker 2

These continue to build brand awareness and recognition for our expanding suite of products. There's more products in 2023. For the Q4 of 2023, G and A expense topped $9,000,000 at $9,100,000 as compared $5,200,000 during the Q4 of 2022. Within the $3,900,000 increase or about 1,900,000 dollars of non recurring charges. One time charges such as expenses related to the QVT acquisition and integration, that's included layoff and severance charges.

Speaker 2

In addition, we incurred professional services charges increases such as technical accounting and project management fees, legal fees, tax expenses and management transition fees. The remaining $2,000,000 of the increase was primarily driven by administrative and software costs and depreciation and amortization for the newly acquired and expanded facilities, increase in staffing in the administrative area to meet the growing demand in specialized areas, plus ad hoc consulting fees. G and A expense for the full year 2023 was $29,000,000 reflecting 115 percent of sales. That's down from 121 percent of sales that the G and A expense of $22,900,000 represented back in 2022. When adjusting for one time items, G and A falls to less than 103 percent of sales, demonstrating the early stages of leverage on the G and A line.

Speaker 2

Net loss for the Q4 was $22,400,000 and net loss for the full year 2023 was $34,500,000 or roughly $0.035 per share compared to a net loss of $17,000,000 or about $0.017 per share back in 2022. The difference of $17,500,000 is nearly all attributable to one time charges with the largest charge of $11,700,000 relating to a one time impairment charge related to the acquisition of the Assisi product line with the remaining $5,400,000 and other one time items including executive management transitions, professional service fees and other acquisition and integration related costs. As you can see, our net loss when adjusted for one timers is relatively flat with the full fiscal year 2022. That's a good accomplishment given all the investment and activities that were required to grow our business so rapidly. Let me pause for a moment and give you some additional insight into the impairment charge we took in the Q4 related to the Assisi product line.

Speaker 2

While we've been very pleased with the revenue contribution to date from our current customer base, with only one product offering for the retail consumer base, we made a decision to forego a sizable future new investment in widespread direct to consumer marketing like TV ads necessary to attract new retail customers. In making this decision, we are able to reallocate those investment dollars to higher growth opportunities in our Diagnostics segment without further delaying profitability by making these investments. We will revisit this decision and other opportunities in the future as we get closer to profitability or add products that have future appeal for retail markets. Turning to the balance sheet, Zomedica ended the 4th quarter and full year with $100,500,000 in cash, cash equivalents and available for sale securities. Cash used in the quarter was about $17,500,000 and included nearly $15,000,000 for acquisitions, investments and one time items, with the remaining $2,600,000 used for operating expenses, which was lower than our recent operating closer to $3,000,000 per quarter.

Speaker 2

After adjusting for non recurring one time expenses, we used approximately $10,800,000 of cash for the full year. That averages to about $2,700,000 per quarter during 2023. This number is a good number and well below our historical averages, which tended to be $3,000,000 or even as high as $4,000,000 per quarter. As a reminder, we have 0 debt. Now turning to guidance, Larry already mentioned some of it and we announced it back at our January 17 business update call that we were introducing formal forward looking revenue guidance for the first time in company history.

Speaker 2

I will reiterate that guidance for 2024 as we expect revenue in the range of $31,000,000 to $35,000,000 for full year 2024 and as Larry said that could be an increase of up to 40% over 2023 at the high end of the range. As stated at our February Investor Day, we expect 90% to 95% or more of the $31,000,000 to $35,000,000 in annual revenue guidance to be derived from the products in our therapeutic devices segment, with the balance and any potential upside coming from our newer products in the diagnostics segment. Please remember, our business is impacted by seasonality with the Q1 being the lowest and the majority of revenues coming in the back half of the year. We expect similar trends in 2024 and we expect sequential increases in revenue as we progress throughout the year. Our operating expenses were approximately 194% of sales on a GAAP basis during 2023 and approximately 173 percent of sales when adjusted for one time items.

Speaker 2

We do expect to improve on these figures during 2024. With all of that said, we expect to burn $12,000,000 to $18,000,000 of cash from operations. This includes potential CapEx during 2024 and $25,000,000 to $35,000,000 total cash burn before turning cash flow positive. As you can see, our cash flow balances will remain very strong with no immediate need to raise or borrow capital in the current market. As Larry mentioned earlier, following our special meeting vote held back in February, we had discussions with the New York Stock Exchange American related to our ongoing listing on that exchange.

Speaker 2

It was agreed that Somedica will remain listed, but at the discretion of the exchange as it continues to monitor our share price. The company will continue to evaluate curative measures with our primary focus that will be on driving continued performance of the business, so we can regain compliance with share price requirements organically. To that point, we respect our shareholders collective decision to reject the proposal for a reverse split And as such, as Larry indicated, we'll not be including a reverse split proposal at the upcoming Annual Shareholder Meeting. As we look beyond 2024, in addition to growing the scale of our business, we'll continue to focus on profitability. We have previously commented that we expect to be cash flow profitable or breakeven when we reach annual revenue run rates at or slightly above $40,000,000 in revenue.

Speaker 2

However, as we work through the integrations of the acquisitions that I mentioned made during 2023, in particular the acquisition of Corvo Biotechnologies, we evaluated that we needed what we needed to achieve our long term targets and saw what we saw was that were incremental investments needed to support our long term success. Given these investments, we now expect to achieve cash flow breakeven or profitability at an annual run rate of approximately $50,000,000 which we expect to achieve at some point during late 2025. For some additional context, when we acquired QBT, we not only acquired skilled personnel, a new facility and manufacturing capabilities that will allow us to reduce the cost of goods from what we had been paying QBT, we also acquired valuable finished goods, component parts in both laboratory and manufacturing equipment. This will reduce future product and operating as well as capital expenditures. We also eliminated a 5% perpetual royalty on future sales of TRUVORMA cartridges that were due to kick in right about now.

Speaker 2

The flip side of these positive impacts on margins and capital requirements over the coming years is that we had significant one time expenses in the 4th quarter as we right sized and integrated this business and we have somewhat higher operating expenses in the short term relative to current true form of revenue. So when looking at the business as a whole, this was the right decision, the right thing to do, especially since we also gained control over the pace at which we can develop and launch new assays. While we understand the importance of achieving profitability, we also understand that by allocating resources to drive sustainable industry leading growth, we can create a business capable of sustainably generating over $100,000,000 in revenue that is also profitable and in the long term more valuable to our shareholders. It is important to note that our investment in growth does not imply that we will need to raise capital, Our significant liquidity gives us the ability to continue to invest without the need for further dilution or any dilution. I'll now hand the call back over to Larry for final remarks before the Q and A session.

Speaker 2

Thanks, Peter. So that's a lot of review of how we got where we are. From less than 30 employees in 2020 to around 150 today, From no products on the market in 2020 to 5 product platforms ramping sales today. From no internal manufacturing in 2020 to manufacturing all of our own products today and from 0 in revenue in 2020 to $4,000,000 in 'twenty one to $19,000,000 in 'twenty two $25,000,000 last year. Now let's talk about where we're headed.

Speaker 2

Of course, as Peter just mentioned, an important and our nearest term goal to scale the company well beyond current revenue levels and the $50,000,000 revenue run rate needed to achieve profitability. Becoming a profitable company with $50,000,000 in revenue is an important milestone and unfold would put us in the top 50 animal healthcare companies in the country. But to truly drive value for our shareholders, our sites are set on first $50,000,000 then $100,000,000 and beyond. As we build to these levels with our industry leading margins, we expect that the market will recognize the tremendous value represented by Zomedica shares. This is why we not only acquire the rights to sell new products, we buy the technology and our companies outright, continue product development and manufacture the products ourselves and invest in the infrastructure needed to scale the business to well over $100,000,000 in annual sales.

Speaker 2

We're incredibly excited about the future of Zomedica and its prospects as we have a strategic plan to reach these levels with our current product portfolio, with any additional acquisitions accelerating our timelines. We expect to achieve a $50,000,000 annual run rate by the end of next year and a $100,000,000 run rate 2 years after that. But for now, let's focus on 2024, which we entered from a position of strength coming as a result of the great work our team has done to position us for success. We have a number of initiatives in process to help drive growth in 2024 and beyond, which include: 1st, expanding our maturing sales organization. As you may have heard, we recruited a new Head of Sales, very experienced at building high performing sales teams in the animal health industry.

Speaker 2

His leadership combined with expanding the number of sales territories in the United States and benefiting from the extended tenure of our sales team all contribute to our high confidence in sales growth in the U. S. From our direct sales efforts. 2nd, gaining leverage from distribution partners. In conjunction with our direct sales force, we have been expanding our relationships with U.

Speaker 2

S.-based animal health distributors, including Covetrus, Patterson, NWI, Midwest and others, which now carry our Assisi and VetGuardian products and in select cases, our PulseVet products as well. With their hundreds of sales representatives across the country who have long standing deep relationships with veterinary practices, We expect significant growth from this channel both directly and in collaboration with our direct salespeople. 3rd, international expansion. We currently generate about 20% of our revenue by selling only RSCC and PulseVet products in certain international markets. This year, we are both expanding the number of countries in which these first two products are sold and also preparing our Truforma, VetGuardian and TruVue products for international launch.

Speaker 2

Now this requires complying with some fairly straightforward labeling requirements country by country, which we are finalizing now and expect to begin the first of these launches in the first half of this year. With respect to our specific products, we're executing plans to drive their growth through a variety of initiatives. From Halstead, we have multiple future growth drivers including increasing the installed base and increasing our consumable prone utilization by expanding clinical indications for use. As our mature and sales representatives gain experience in the field, their rate of selling new pulse wet systems increases and collaboration with animal health distributors opens new doors for them to gain entree into new practices. Our investment in marketing activities from trade shows to Zimeta University to social media and web based initiatives is paying off as we are seeing an increasing number of inbound leads from small animal veterinarians.

Speaker 2

All these factors help drive increases in our PULSVET installed base. Additionally, we support clinical research focused on expanding the ways in which veterinarians use the PULSVET system. For example, recent published peer reviewed reports of clinical studies have reinforced pulse vet shockwave therapy as being an optimal solution for working dogs suffering from the virtually impossible to successfully treat fibrotic myopathy that they encounter by extending their working life an average of 32 months. And for horses afflicted with bleeders and more recently equine asthma, which affects approximately 14% of adult horses. Our marketing team will now execute market development plans to translate this clinical data into increased deployment of FULSET systems along with increased usage for these new indications.

Speaker 2

While these 2 are significant themselves, we're also awaiting study results from a university in the United States and one in Germany, both studying the potential for pulse met shockwave therapy to delay or even prevent the onset of osteoarthritis in dogs. While Shockwave is a great treatment option for canine OA, it would be even better to see it used prophylactically for the prevention of the condition in the first place. For TruVue, in 2024, we expect to steadily increase the installed base through the combined efforts of our marketing and sales teams. We also expect to launch in international markets and later in the year to introduce AI interpretations of scanned images, providing a new source of recurring revenue to add to the monthly subscriptions and pathology interpretations currently offered. For Truforma, every time we launch a new assay, we not only provide a seamless way for our current installed base to begin to use it with no additional customer acquisition costs on our part, but we also facilitate expansion of the installed base by providing it to accounts that have a particular need for it, which in turn provides opportunities to cross sell all of our previously available assays.

Speaker 2

We'll be launching several new assays in 2024, at least 4 during the course of the year for both small animals and horses. Our acquisition of QBT gives us the ability to develop them at our own pace and we intend to accelerate new assay development in the coming quarters. For VetGuardian, we're seeing increased traction in the animal health market and see an opportunity to place not one but multiple monitors in a single practice. As accounts gain comfort with their first monitor, many have come back for more and we're seeing customers purchase multiple monitors from the outset. Further fueling growth will be the activities of the U.

Speaker 2

S. Animal health distributors and our upcoming launch into international markets and following completion of our development projects into the equine market as well toward the end of this year. With a total addressable market for recurring annual sales of our existing products in the U. S. Of well over $2,000,000,000 Currently, we have barely scratched the surface.

Speaker 2

We have lots of opportunity for growth across our product lines and are currently about the business of seizing and pet parents worldwide and the many shareholders of Zomedica. And pet parents worldwide and the many shareholders of Zomedica. With that, I'd be happy to open the line for questions.

Operator

Thank you. We will now be conducting a question and answer Our first question is from Obiano Alquadrille with Bayonora. Please proceed with your question.

Speaker 3

Hi, everyone. Hi, Larry. You guys made it. I mean, we were so surprised with all you guys said. So my question is, so from our understanding, so there's no reverse split, no munching of reverse split for the next year, right?

Speaker 2

That's correct.

Speaker 3

And if for any reason, if the American Stock Exchange asks for any paperwork or any extension, did they mention anything like that in the near future?

Speaker 2

So the stock exchange has various standards to remain listed. And one of them is the one we've been focusing on, which is our share price. But there are also other requirements. For example, you have to file certain filings on time and you have to maintain certain equity capital requirements. And so depending on the situation, what I've seen the exchange do is in some cases, they'll give people additional additional time to get their filing done and they give them a deadline or they give them additional time to get additional equity into the business and they give them a deadline.

Speaker 2

In our case, when we spoke with the exchange, I should say senior regulatory personnel from the exchange, they indicated that our stock would remain listed, but that they would continue to monitor it. If it all of a sudden fell to unacceptable levels, then they would revisit it. But they did not give us any date upon which by which we needed to regain compliance. There's a little bit of a misconception that there might be some kind of a form that you submit and you request an extension or something like that. That's not really the way that it works.

Speaker 2

We had a conversation with the exchange. They told us we'd remain listed. They didn't tell us they didn't give us a deadline. And we're very pleased with that outcome. We're going to work very hard to regain compliance organically as we move forward.

Speaker 2

While we're waiting for questions over the phone line, I think we can take some. We have several questions that have come in over the web. And so we'll start with those. One of the questions is when will we expand Zomedica's products to Portugal? And so the answer to that will be, we currently do sell our PulseVet products for equine use in Portugal through our master distributor GroVet that handles sales of equine products across Europe.

Speaker 2

And we are as I mentioned earlier, we're working on getting the CE marking for Truforma, TruVue and VetGuardian. We've actually seen interest from many countries in Europe. And as soon as we get the labeling requirements settled, we're in conversations with multiple distributors and we expect to begin selling internationally some of our other products in the first half. Certainly by the end of the year, we expect to have all of them on the market throughout, maybe not in every single country, obviously, but in those distributors that we currently have and we'll be adding some new ones as well. Let's see, which assay do you expect to be the most used for Truforma this year?

Speaker 2

I think it's going to be a I was going to say a horse race, but maybe it's a horse and dog race, right? So on the equine side, we launched last September equine EACTH assay, which is used to help diagnose horses or I should say is the definitive diagnostic test for horses suspected of equine Cushing's disease or pituitary parsintermediate dysfunction. This affects a lot of horses prevalence on horses over the age of 15 is about 25%. And it's not just a one off test. So in other words, you do the test of the horse that shows signs.

Speaker 2

If they're positive for it, now you have a baseline, you begin titrating them, you put them on a drug, you begin titrating that drug that requires many more tests over the 1st couple of months and then a test every quarter or 6 months depending upon how the vet views it for the rest of that horse's life and the horse's lived to about 30. If they are on the bubble, they're not quite sure if they have it or not, then they do a couple more EACTH and what's called a TRH stim in between. So lots and lots of opportunity for EACTH. We're coming into the spring season, which is when they do a lot of that testing. We expect very strong sales from that segment.

Operator

On the

Speaker 2

other hand, that's the horse race, now dog race. CBL, canine pancreatic lipase, if you have a dog and diarrhea, vomiting, you bring it to the vet. The first thing that the vet wants to do, needs to do is to rule out pancreatitis. And the way you do that is a test of CPL. And there is no point of care diagnostic available today.

Speaker 2

And so as a result, they have to send that out to the reference lab. This is a product that we have already seen good traction with and we expect this is really going to not only drive utilization in our existing installed base, but it's going to be the reason why many accounts actually bring it in, in the first place. So I would say CPO, equine E ACTH right behind that cortisol, maybe then phlevalamine or folate, but we'll see as we move throughout the year. When do we expect VetGuardian to be used in horses? As I mentioned, it'll be by the end of the year.

Speaker 2

We're working on that now. Currently, the Vet Guardian is outside of the cage that the animal is in and is pointed at the animal. When you instead are looking at a horse, they're in a much bigger stall, they're moving around. So it's not the exact same product, but our team is working on that right now. And just as soon as we can, we'll get that out because there is substantial interest by not only equine but also potentially horse owners who might want to have it just for safety sake.

Speaker 2

And generally horse owners tend to be in a demographic that they can afford the technology. So we're definitely bullish on that particular product in that application as well. How many assays do you expect to launch this year? We have at least 4, a couple for equine. In fact, as it turns out, about 30% of horses that have PPID also have insulin dysfunction.

Speaker 2

And so oftentimes, what we're hearing from equine vets is they want to test both EACTH and insulin at the same time. And so we have a program underway right now to bring equine insulin testing to the Truforma device in the near term. And then we have a couple of products. We have insulin and cortisol for horses and then Pro BNP and one other one both for small animals for cardiac issues, heart trouble and also for reproduction. So we expect those to be popular and those should be out.

Speaker 2

The other thing that we'll be doing this year is working on more of our multiplex cartridges. So you could imagine we have not only EACTH but also insulin individually and then we have one with both. Reason we like the multiplex cartridges is because from a cost of goods standpoint, it's only slightly more expensive to put 2 assays on 1 cartridge than it is to put a single assay on the cartridge. And yet we're able to charge substantially more because the value is there. They're getting 2 assays in 1 cartridge and doing it at the same time.

Speaker 2

So we're super excited about that. And then we frankly expect to accelerate assay development moving into 2025 as we get our arms around the whole process and streamline it as we move forward. Is buyback still an option for gaining compliance? Pete, you want to take that one? Yes.

Speaker 2

So we've been very clear and very consistent. There's no buyback planned, 1st off. And the reasons being, 1st off, buying back the shares won't get us in compliance, right? There's not a number out there that would likely drive us to $0.20 and keep us above the $0.20 And we've also stated very publicly and the message remains consistent that we believe the better use of the cash is to fund all the great things we talked about today on the call, whether it's accelerating integration, bringing products to market faster, going internationally, all those things. Or if Greg and company find something for us to buy, we want to be prepared to do that.

Speaker 2

So there's no buyback planned at this time. Thanks, Peter. And operator, I think you have another question on the phone. I want to switch back to that for a moment.

Operator

Our next question is from Oviedo Alcadari with Biannoura. Please proceed with your question. Thank you so much. They already asked that question. Thank you so much about the buyback.

Operator

I really appreciate it. Okay. Excellent. Our next question Our next question is from Shane Wilson with Zomedica. Please proceed with your question.

Speaker 2

Can you guys hear me? Yes.

Speaker 4

Okay. Sorry. I've been in here for almost 4 years retail here. I was wondering, have you guys considered in getting into reptilians of like bearded dragons, iguanas, boa constrictors, just pet owners and all that, they expand beyond having dogs as I have 2 of my own. I just didn't know if you guys were ever considering and doubling into that area at some point?

Speaker 2

Into exotic animals, is that the question? Sorry. Yes.

Speaker 4

Yes. It's like bearded dragon, like boas, yes, iguanas, stuff like that.

Speaker 2

Yes. So, I will tell you that from a market standpoint, that's probably not going to be a major focus of the company at this point because there's so much opportunity with small animals and horses and so on. I will tell you though that from time to time we do help people, right? We've treated with post vet elephants the other day, elephant foot. We treated at the San Diego Zoo I'm sorry, the San Diego, what do you call the water park aquarium or what have you, SeaWorld?

Speaker 2

SeaWorld. We treated a sea lion or we treated 2 or 3 animals there. VetGuardian has been used with exotic animals for transport where they're closely confined in a cage. I'm actually told by an exotic vet that Guardian is perfect because unlike a cat or a dog that you can keep checking on manually or with human hands after they've had surgery with a tiger, They have a 1st swallow rule, meaning the first swallow they observe, it's no more hands on because they want to keep their hands. So we do from time to time, we definitely engage with the vets that have some questions or a special interest, we'll send a professional service vet over.

Speaker 2

But honestly, it's not a large enough market for us to allocate resources to at this time.

Speaker 1

I think we have time for

Operator

a couple more questions online.

Speaker 2

Okay. So let's see here. Any plans to use our technology in humans? There are a number of questions around that that are here online. So let me just kind of aggregate them together and say that when we acquired the Qorvo Biotech Company, we acquired the whole thing and that includes a program for human use.

Speaker 2

Now the human use program we had was focused on COVID. And I think we probably all are pretty comfortable with the fact that there's plenty of testing options for COVID out there. So but it doesn't eliminate the fact that the technology is incredibly good. And we do suspect that as we gain traction in the veterinary market and we demonstrate the myriad of assays that we could do uniquely that can't be done by other point of care diagnostics for vets that we will see interest in that in human application for that. We have no plans ourselves to pivot to becoming a human company certainly anytime in the near future and certainly not before we build to a significant animal health company.

Speaker 2

But there may be opportunities for us to monetize that technology and that program, which is complete with clinical data and all sorts of the regulatory documents and so on and so forth. It's all pristine, ready for buyer should they choose to have an interest in it. And I'll also say that along with that, our TruVue microscope, which we are pioneering as the first microscope ever that has the ability to prep the slide for the technician. We've actually had a few human clinics that have asked if it's applicable. It is not today.

Speaker 2

There would need to be a lot of regulatory things that are done, But we do see that as a potential opportunity in the future for further monetization of that technology. The other products we have are pretty much limited to the animal health applications for them. So we wouldn't see we wouldn't expect to see them applied to human use by us. There will be other companies that do that. Okay, here's one.

Speaker 2

Hello, is your formal 2024 revenue guidance of $31,000,000 to $35,000,000 this year factoring in revenue from opportunities that we hope to close in 2024, and that's a very straightforward, no, it does not. That guidance is just based on our existing products as is our strategic plan, which takes us to $50,000,000 run rate, right, which means $12,500,000 in a quarter by the end of next year, dollars 25,000,000 and $100,000,000 2 years after that in run rate in 2027. So any additional acquisitions would be would help us get to profitability sooner. There have been some questions here on G and A and its relative size or its size relative to our revenue. Pete, do you want to handle that one?

Speaker 2

Yes. We're in line with our peers. And if you go back, I had spoke very at length at the Investor Day that if you go back and look at some of the more successful publicly traded ones with high valuations, if you look back at their startups were actually lower than them, it's inflated right now, right? I can see if you were just looking at a GAAP basis. That's why I tried in my prepared remarks to highlight the non recurring charges.

Speaker 2

That's it, right? When you add new businesses and you're growing it up to 40% a year, you're all going to have to add back office people. Keep in mind that this when I joined the company, I think I was employed 45 or 46 and that was like 13 months ago. We have 150 people today and most of those, almost all of them have been added outside of admin. So I would say that there's always work to be done.

Speaker 2

If you listened in my prepared remarks that we are starting to see leverage on that line and as we grow the top line, it's going to grow at a much more rapid pace than the G and A line. Excellent. Now here's one that I think is a little interesting. It is it has to do with concerns about meeting profitability year over year and I think we've addressed that. What is the vision and will you post your milestones?

Speaker 2

Absolutely. And then also, and here's one that's interesting, why does the company delete posts from investors from voicing concerns on social media platforms? Isn't all advertisements good or free advertisement? And I will tell you that when we were pursuing a reverse stock split, we noticed that on social media platforms that were designed to market our products to veterinarians and to individuals that we noticed that some of the remarks that were coming up had to do with the company itself, the leadership of the company and they were all about the reverse split. And we certainly solicited input during that process from various message boards, including Webull and say Robinhood, we had an IR firm reaching out to investors to make sure that we understood and heard what they were saying.

Speaker 2

We just figured we had enough input from investors on those platforms that we could potentially cut off comments on Instagram where you have a veterinarian that just got our technology and was happy about it and was singing its praises. We just felt that was probably not the best platform for getting input from investors. If that was aggravating to folks, then I would apologize for that. But that was a decision that we made. So there's lots and lots of questions here about the stock price.

Speaker 2

And I would just say that we understand that that's a concern for everyone. We welcome any suggestions or input that you may have. Our email is available. We ask questions on the various platforms all the time. Please feel free to provide your input there.

Speaker 2

We look forward to it. But at the end of the day, we're committed to building our shareholder value by building the value of the company by increasing revenue, maintaining high margins, reducing expenses as a percentage of sales. As I mentioned earlier, we've scaled the company, the infrastructure of the company to be a public company that is rapidly growing and will grow to beyond well beyond our $25,000,000 last year to $31,000,000 to $35,000,000 this year, a run rate of $50,000,000 by the end of next year, a run rate of $100,000,000 by 2 years after that. And we expect that as we do that, the stock price will be driven by the market to whatever level the market feels appropriate. And with that, I think we're pretty darn out of time.

Speaker 2

Pete, any closing remarks? No, I think we said it best and I appreciate everybody participating today. It's always great to have shareholder involvement. I thought the questions were really good and challenged this management team and we look forward to speaking to everyone at the end of the Q1. Paul, back to you.

Speaker 2

Well, actually I just have one more. I got to stick this one more question in.

Speaker 1

Okay.

Speaker 2

Will TruPharma eventually have assays for woodchucks? And if so, how much wood Would a woodchuck good chuck wood? I don't know the answer to that one, but I one time asked Alexa and she gave me an answer. So I would suggest you go to Alexa. She has an answer and with that lighthearted remark, Paul, I'll turn it back to you to bring us on.

Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker 1

Thank you.

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Earnings Conference Call
Nebius Group Q4 2023
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