Good day. I would like to welcome everyone to the Q4 and full year 2021 Applied UV earnings conference call. At this time, all participants are in a listen-only mode. A brief question- and- answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brett Maas, Investor Relations from Hayden IR. Thank you. You may begin.
Thank you. Once again, welcome to Applied UV's fourth quarter full year 2021 earnings call. With me on the call are Mike Riccio, Chief Financial Officer, and Max Munn, who has recently joined the company helping formulate business strategy. As a reminder, all materials for today's live presentation are available on the company's investors website at applieduv.com. Before we begin, please take a moment to read the forward-looking statements in our earnings press release.
During today's call, we'll make certain predictive statements that reflect our current views about future performance and financial results. We base these statements on certain assumptions and expectations on future events that are subject to risks and uncertainties. Our most recent Form 10-K and 10-Q list some of the most important risk factors that could cause actual results to differ from our predictions.
With that, I'll turn the call over to Max Munn. Max, the floor is yours.
Thank you, Brett, and good morning, everyone. It's a pleasure to be with you this morning to review the highlights of our most recent quarter and full year. 2021 was a year of significant accomplishments centered around the closing and integration of three strategic acquisitions that diversified our business to create an air and surface pathogen elimination platform that is well-positioned to capitalize on increasing market demand, safer environments born out of the devastating impact of the pandemic, as well as the most recently announced US government EPA and CMS policy initiatives, all aimed to improve indoor air quality.
We are well positioned to serve a global market that's expected to reach $24 billion by 2030 as a leading provider of pathogen elimination offerings that protect businesses, facilities, and the people who move through them.
Simply put, we're in the business of providing solutions that address the growing demand for purer, cleaner, safer air in any environment where people live, work, and play. Throughout the course of 2021, we invested nearly $15 million in three acquisitions to build out our portfolio of disinfection assets. Specifically, early in 2021, we acquired substantially all the assets of Akida Holdings, which folded its Airocide systems of air purification technologies into our mix of offerings for approximately $7.9 million in cash and equity transaction.
Akida's 2020 revenue was $4.7 million. Later in that same year in 2021, actually in September, we acquired substantially all the assets of KES Science & Technology for approximately $6.3 million in a cash and equity transaction. KES Science & Technology's revenue for the 12 months ended October 31, 2020 was approximately $4.5 million.
These two acquisitions provide us with all the rights, title, and interest to the Airocide system of air purification technologies. Finally, on the acquisition front in 2021, we acquired substantially all the assets of Scientific Air Management, which own the line of air purification technologies labeled and sold as Scientific Air in a cash and equity transaction at the time of that close, when the transaction was valued at approximately $11.5 million.
With these acquisitions completed and integrated, we have set the stage for organic growth driven by a large and targeted marketing program kicking off in the mid-Q2, that we expect to drive and expand market share in 2022 and beyond.
We begin to see positive and emerging shift, excuse me, an energizing shift in the air purification market as we exit 2021, displacing uncertainty that was an overhang for much of the last quarter of 2021 and into Q1 2022 as end users awaited key policy decisions and funding allocations. Globally, scientists and healthcare experts have been advocating for improving air quality to control the transmission of airborne pathogens for quite a while, and the pandemic that struck in 2020 further heightened the importance of clean air for our personal health and for the health of the global economy.
In the back half of 2021 and early 2022, there was much uncertainty as to how and when governments would respond to scientists' call to action for policy changes and if funding would be made available to comply with those changes.
Since then, government initiatives and commitments to funding by governmental agencies, including the Centers for Medicare and Medicaid Services and the Environmental Protection Agency, among others, have reignited market activity. We're increasingly encouraged by these developments and the advancement of new business opportunities toward contract awards. Where once strong market headwinds have shifted to market tailwinds that are propelling opportunities forward.
More specifically, the Centers for Medicare and Medicaid Services announced in a meeting to its stakeholders in February of this year that mobile air cleaners installed in long-term care facilities helped to ease visitation restrictions and are now reimbursable up to $3,000 per facility. We're already beginning to see interest and demand from our exclusive US distribution partner, Medline.
Likewise, as part of a president's clean air agenda recently announced, the EPA has recently launched a Clean Air in Buildings Challenge, which is a call to action and a concise set of guiding principles and actions to assist building owners and operators with reducing risk from airborne viruses and other contaminants indoors. We have two best-in-class tools available in what the government detailed and announced as potential tools in a consumer and business tool.
Together as part of the American Rescue Plan, the Emergency Assistance for Non-Public Schools program, better known as the EANS. The government has made available over $3.5 billion in funding to address the educational and business disruptions caused by COVID-19 pandemic, which includes improving ventilation systems, including mobile air and fixed air purification systems to ensure healthy air in non-public schools and workplaces.
Across the competitive landscape, the air purification market remains highly fragmented, and we are well-positioned to attack it head-on. As a note, iRobot's Q4 2021 acquisition of Swiss-based Aeris for a $72 million in a cash transaction effectively adds air purification capabilities to its suite of home cleaning products. This market transaction, in our opinion, affirms the opportunity in the space and further validates our business plan and model.
Over the course of the last year, we had a number of high-profile installations in large venues and facilities that serve as prime examples of our capability that we hold up as referenceable accounts. These wins included the Palace of Versailles, which holds up to 20,000 visitors and more than 700 rooms.
The Tennessee Department of Correction, which houses tens of thousands of inmates, the Armed Forces Research Institute, the US Army Proving Ground, and the list goes on. Clearly, our solutions are scalable, and the list of opportunities for further awards is seemingly endless when you consider all the venues globally of varying sizes that are seeking ways to keep patrons safe from contagion and return to pre-pandemic levels of operation.
Our sales pipeline is building as we continue to identify attractive opportunities for new businesses that we believe will provide a positive contribution to our financials and build on our 2021 accomplishments. Importantly, we've expanded our network of international distributors to increase sales channels and product throughput. Our distribution channels include global leaders such as 3Sixty Biopharmaceuticals in Africa, Plandent Division covering Scandinavia, and Lootah Medical for the Middle East, among others.
We close out 2021 with a global distribution base of 52 distributors and dealers and now have presence in more than 52 countries. Our domestic and international distributors and dealers are key to the company expanding our global market share and reach a clear differentiation between our company and our competition.
From a marketing perspective in 2022, we're preparing to launch a number of targeted initiatives that include digital, radio, and social media campaigns, all aimed at the following verticals, including cannabis, long-term care, schools, dental, and other healthcare facilities, and the hospitality sector.
Operationally, we are also analyzing each of the points in our supply chain to tighten integration, to optimize inventory, improve quality control, and mitigate against supply chain disruptions that are so prevalent in our world today, including exploring the use of large, globally recognized contract OEMs and leasing companies for our product end users.
From a strategic transaction perspective, we're also currently exploring joint venture and other aerosol product placement pilot programs with established leaders within the long-term care, floral, the Department of Veterans Affairs, and hospitality verticals to further increase market penetration and adoption of our air purification products. We will also continue to seek out low-cost opportunities to bolster our legacy hospitality business, such as the recent VisionMark acquisition that we completed in late March of this year.
This acquisition expands our reach into the luxury hospitality space of new construction remodeling of hotels beyond our core MunnWorks mirror business, which while also, excuse me, potentially contributing to our top-line business. Lastly, I'd like to provide you all with a brief update on our senior executive search.
We're pleased to state that an announcement regarding our permanent CEO is forthcoming, and we're also interviewing other senior executives who we expect to join the team, further strengthening the bench. Next, I'd like to turn the call over to Mike Riccio, our Chief Financial Officer, for a review of our financials. Mike.
Thanks, Max. Looking at the fourth quarter first, our fourth quarter net sales increased by $2.9 million to $3.9 million, up from $1 million in the fourth quarter of 2020. The majority of this growth was driven by the three strategic acquisitions that essentially established our disinfection segment during 2021. Our fourth quarter net sales increased by 10.3% sequentially when compared to $3.6 million in the third quarter of 2021.
This increase was the result of our efforts to continually integrate the operations of these three strategic acquisitions. Gross profit for the fourth quarter of 2021 was $1.6 million or 40.3% of revenue when compared to $106K in the year-ago quarter, primarily as a result of the addition of the disinfection segment.
Sequentially, gross profit was up over $529K as compared to the third quarter gross profit of $1.1 million, primarily due to improved product mix. Net loss for the fourth quarter of 2021 was $3.1 million, compared to a net loss of $2.4 million last year in the fourth quarter. This loss was primarily due to the build-out of our infrastructure to support the disinfection segment and the integration of the acquisitions. For the full year 2021, net sales increased by 103.5% to approximately $11.7 million, up from $5.7 million in 2020.
Again, the majority of this growth was driven through the addition of the Disinfection segment through the acquisitions mentioned previously. 2021 net sales for Disinfection, for the Disinfection segment were $5.7 million compared to $0 in 2020. The Hospitality segment began to rebound from the slowdown caused by the pandemic, reporting $5.9 million in net sales for 2021, an increase of nearly 4% when compared to $5.7 million in 2020. Net loss for 2021 was approximately $7.4 million compared to a net loss of $3.4 million in 2020.
The increase in net loss in 2021 was primarily due to the costs associated with the build-out of the disinfection segment, specifically related to personnel costs due to the increased headcount, consulting costs and legal expenses related to the three strategic acquisitions, additional amortization expenses, increased advertising, product certification and testing, and corporate governance and public listing expenses.
Almost half of the expense increase is related to what I'll call one-time expenses. Looking ahead, we expect efficiency gains in 2022 as we increase momentum with the three fully integrated acquisitions and leverage target synergies. On a non-GAAP basis, adjusted EBITDA was a loss of $4.8 million in 2021 compared to a loss of $2.6 million in 2020.
We use adjusted EBITDA to assist in analyzing our operating performance by segment by removing the impact of certain key items that we believe do not directly reflect our underlying operations. Adjusted EBITDA is defined as operating profit or loss, excluding depreciation and amortization and excluding stock-based compensation. In closing, we ended the year with $7.9 million of unrestricted cash available on our balance sheet.
Our balance sheet is strong with ample cash on hand to support our growth initiatives, and we just recently announced that our board of directors has approved a 1 million share repurchase program of our common stock in open market transactions that will remain in effect until September of this year. This concludes our prepared remarks. Operator, we can open the call for questions.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Your first question for today is coming from Jeffrey Cohen. Please announce your affiliation, then pose your question.
Hey, good morning. How are you?
Good morning, Jeff.
Good morning, Jeff.
Wanted to get a little more information as far as revenue composition by segment. If you could provide a little clarity from 2021 as far as MunnWorks/Airocide and anything from Lumicide, and then maybe, you know, give us some thoughts as far as 2022 and revenues and segmentation of those revenues.
As far as the revenues for 2021, as I mentioned, Hospitality, our MunnWorks approximately $5.9 million in 2021. Our Disinfection segment was $5.7 million for 2021, again, as opposed to 0 in the prior year. Our Disinfection segment, as you may know, is made up of our Airocide products and our Scientific Air products. Scientific Air was only. Well, both the KES acquisition, two of three acquisitions, KES and Scientific Air, occurred basically in Q4, very one late in Q3, one in Q4. There was some contribution from them.
You know, primarily the Disinfection segment is due to what we'll call the Akida acquisition or our Airocide product.
Okay. Got it. Could you talk a little bit about margins from current levels and how you're thinking about what they may look like going forward from their current, call it mid-30s%?
Yeah. Well, as I mentioned, you saw the Q4 margins, tremendous increase from the previous quarter, just as we start to sell the higher margin KES and Scientific Air products. From top to bottom, our Scientific Air products are the higher margin contribution products, followed by KES and then Akida. As we blend in these newer or later acquisitions based on some of the initiatives that Max had discussed earlier, you're gonna see improved margins going forward. The mix is much stronger now with those two, the two most recent acquisitions on the disinfection side.
Okay. That's perfect. As far as 22 on a sequential basis, any guidance or thoughts there as far as how the year may look, sequentially through the quarters?
Not prepared to give guidance today. However, I will tell you that as we continue to fully integrate the acquisitions, you will see improved sales. Obviously, but also you will see improved margins from the improved mix that I just discussed. You know, we're just finishing up Q1 now. Q1 was, I would say, still in the process of integrating these acquisitions and coupled with the initiatives that Max described earlier, you're going to see some improvement in Q2 and beyond. That's the anticipation. But again, not prepared to give guidance at this stage.
The framework or the foundation has been laid from which we're going to continue to grow.
Got it. One more, if I may. The the SG&A expense from Q4 should we think of that as the new baseline or were there some one-time charges in that?
There were one-time charges in there. Roughly half of that increase is related to one-time charges, so you can use that as a guide. So there is a baseline, but the baseline would be slightly below that because these one-time charges, you know, you know, I'm not counting them going forward.
Okay, perfect. That does it for us. Thanks for taking the questions.
Sure. Thanks, Jim.
Thanks, Jim.
Once again, if there are any questions or comments, please press star one on your phone at this time. Your next question is coming from Chip Moore. Please announce your affiliation, then pose your question.
Morning. Hey, thanks for taking the question, guys. Wanted to circle back to margins. It looked like, I think disinfection segment margins were, you know, about 50% in the quarter. Just wondering, you know, you talked about Scientific Air and KES coming on and being accretive to margin. Is that 50% margin a reasonable run rate on the disinfection segment or how should we think about that?
Yeah, the disinfection segment, I'd say, you know, again, it depends on the mix. It's definitely a larger margin, higher margin structure than hospitality, no question. As I said, Scientific Air being the larger contributor in terms of margin, and KES not far behind. If we continue with the same mix in sales, you'll see approximately the same margin in that segment. But again, it's all gonna depend on the mix of sales. But it is a healthier margin, without question.
We didn't talk about supply chain at all, but any impacts there or anything we should take into account on the other side of the portfolio?
Well, the one initiative we have the China tariff reduction coming, so that will help for products that are, you know, imported from China. We do qualify, so there'll be. I haven't done the calculations completely yet, but there are retroactive adjustments as well as on a go-forward basis. From a supply chain logistics perspective, you'll see some improvement there. Also, there are some synergies that are occurring with the integration of these acquisitions as we look at the landscape of manufacturing and distribution. We're gonna start to enjoy those somewhat in 2022 as well.
Got it. That's helpful. You know, in terms of the CEO search, it sounds like you've got something coming very soon. Just how should we think about timing on that? I know you had a search firm. Maybe just update us on the process there.
There'll be an announcement in the very short term.
Okay. We'll stay tuned for that. I know you're not giving guidance obviously for the year, but I think, you know, in the past we talked about Scientific Air and KES being, you know, a sort of $10 million-$14 million contribution this year. Is that still reasonable or how should we think about that?
I'm sorry, could you repeat that again, Chip?
I think in the past we talked about SAM and KES both contributing I think it was $5-7 million in 2022. Is that still a reasonable expectation?
Again, you know, I'm not in a position to give guidance. However, the overall contribution from those, you'll see. You will start. Obviously you're going to see that now in the coming quarters because you saw a bit of it in Q4 but it's gonna become more clear in Q1 and Q2 and onwards. Yeah, I mean, I'd say that's the floor and then, you know, the number that you see there and then we wanna build from that so. I'm
Yeah.
You know, I'm bullish but not numerically bullish today.
Fair enough. Understood. Okay, I will hop back in queue and let someone else on. Thanks.
Thank you.
There appear to be no further questions in queue. I would like to turn the floor back over to management for any closing remarks.
Thanks again everyone for joining our call today. Should anyone have any additional questions, everyone has our contact information. Please do not hesitate to contact either of us directly. Thanks again for your time.
Thank you.
Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.