Earnings Call: Q2 2021

Aug 17, 2021

Quarterly report

Good day, ladies and gentlemen. My name is Cat, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Q2 2021 Applied UV Financial Results 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, Mr. Kevin McGrath, Investor Relations for Applied UV. Thank you. You may begin. Thank you, Kat, and good morning, everyone. Speaking on our call today will be Q Saiyee, Chief Executive Officer Mike Riccchio, CFO and Jim Doyle, COO of Applied UV. During today's call, we will make certain predictive statements that reflect our current views about future performance and financial results. We base these statements and certain assumptions and expectations on future events that are subject to risks and uncertainties. And with that, I would now like to turn the call over to Qiyu Syed, our Chief Executive Officer. Qiyu? Thank you, Kevin. Good morning and thanks to everyone for joining us. It's once again my pleasure together with my team to be with you this morning to review the highlights of our Q2 performance. Q2 net sales increased by 11% to $1,900,000 from $1,700,000 in the Q2 of 2020. The net sales and financial results for the current period reflect the impact of the asset acquisition of the manufacturer of Zakeda Holdings, the transaction closed on February 28 February 8, I'm sorry, 2021. Materially, all net sales in 2020 presented generated entirely from our OneWorks subsidiary. During the Q2, we experienced an improvement and demand from the hospitality industry as the economy rebounded from the COVID-nineteen pandemic. And as a result, MunWorks revenues are slowly but surely returning to what seems like normal operating levels. This normal deal albeit is cast in some fits and starts with vaccination progress followed with progress followed with setbacks at the end of the quarter, given the new variants and the drop off or plateauing of vaccination rates. We also experienced some delays in fulfilling orders from 1 of our Sterilumin product lines due to the current strength in the supply chain and logistics environment, mostly in shipping delays and container cost and availability. We expect that these orders will be fulfilled in the second half of twenty twenty one. Net loss for the Q2 of 2021 was $2,100,000 or 0.2 $0.03 per share compared to a net loss of $0.06000 or $0.00 per share in the Q2 of 2020. The net loss and the Q2 of 2021 was primarily due to an increase in SG and A cost to improve future operation expands at the concession segment of our business and planning for additional inventory for second half. Our liquidity remains strong with a cash balance of approximately $7,000,000 on June 30, 2021. At the end of the second quarter, we announced the closing of an underwritten public offering of a Series A cumulative perpetual preferred stock raising gross proceeds of $13,800,000 before deducting underwriting, discounts and other offering expenses. As a result of this offering, We continue to strengthen our balance sheet and cash position, which is expected to support our strategy in investing in innovation, testing and growing through complementary acquisitions. Now I'd like to talk about the growth trends we see developing our markets and some of the sales and operational highlights for the quarter. Our access to markets were broadly improving domestically and globally given variance in vaccinations. The increasing rate of vaccination at the start of the Q2 along with the easing of social restrictions provided further support for the global economic recovery. But we've seen minor delays and setbacks with the emergence of the variance globally and in pockets in North America, we expect to see steady improvement for Leveraging both partnerships and distribution is beginning to gain measurable traction, particularly for our Aeroside portfolio of air purification systems. During the Q2 and continuing through the 1st 2 months of Q3, we announced significant installations at museums, school systems, hospitals, wineries and most recently at a U. S. Military base. We expect this momentum to continue as tested proven infection control protocols become standard practice and our distribution capabilities continue to grow. We're also continuing to invest in our growth initiatives and our global capabilities on innovation, Self deployment, education about efficacy of the science and technology, balanced with safety, continuous product testing and investment in our distribution infrastructure to leverage our position as the most innovative leader in this new and growing space. Across the globe, customers are increasingly learning about solutions with no byproducts or unintended down consequences to better control pathogens spread in the air and on surfaces while not compromising people's health with solutions causing new health risks. Looking beyond the pandemic, our long term position remains very solid in the world where air quality and infection risk awareness has reach new levels. Our differentiated value proposition as a leader in air and surface infection prevention technologies positions us as unique as uniquely to capture these accelerating growth trends. We will continue to be a leader in infection control and air purification and a step ahead of the competition by advancing our superior science of killing SARS, CoV-two and all other pathogens leaving no byproducts. We continue to partner with like minded organizations for innovation and speed to market and revenue. Supporting testing of our Sterile Loom portfolio products against the most dangerous pathogens and our volatile and other volatile organic compounds of VOCs. In addition, we have expanded safety training and safety testing of all sterile aluminum products with UL, ETL and MRI labs across all relevant standards, while also continuously adding and maintaining all relevant regulatory certifications from entities such as the FDA and EPA. The testing and safety initiatives initially began with surrogates of COVID due to lack of access to qualified labs and we'll be finishing testing of the ARO sidelines with MRI labs among others as we are regaining access to the top labs in the U. S. Allowing us to invest in efficacy without any byproducts. We stay true to being science based to validate efficacy of our products and provide important information to our customers and The sales momentum in AeroCyte business continued and we remain excited about the prospects for growth through the remainder of 2021 based on our current pipeline of commercial opportunities. Progress is slowed by new lockdowns and COVID variants. Aeroscience has been a tremendous addition to our product portfolio and their people are already a great asset to our team. We believe there are other complementary adjacent technologies or companies that would enrich and expand our portfolio of disinfectant solutions and open new markets for us. Our thesis remains to focus on technologies and innovations that work and remove harmful Pathogens from the environment without leaving behind byproducts. Inorganic growth remains high priority for the management team, and we're encouraged by the quality and synergies we've seen in some of the potential acquisition candidates we've engaged with. During the Q2, we continued to make progress with our Sterilumin disinfecting system product lines, which today includes Lumicite for persistent and automatic disinfection of hard surfaces above vanities and restrooms, above desks Countertops plus the Lumicide drain, which we believe is the only device that automatically disinfects inside the pipe and the high contamination risk drain trap. As I mentioned earlier, both safety and independent scientific testing grain are top priority. And during Q2, we confidently announced independent lab tests confirming that our Lumicide ribbon killed COV-two or COVID-nineteen, the actual COVID-nineteen virus. The study was designed to determine dolumacydribbons effectiveness against the actual SARS CoV-two virus as opposed to the COVID surrogate tested in last year's pre IPO tests. Of viral inactivation. In conclusion, we're excited about the opportunities underway in development for our Sterilumin business. We've made important advancements in the technical and safety attributes of our Sterilumin product portfolio that we believe differentiate us from the competition. We continue to see positive sales trends and increasing inquiries for both our ERA side and Lumicide products for Sterilumin from a broad set of customers and sectors on a global basis. We believe that Applied UV has a clear strategy and is well positioned to drive revenue, improve our margins and deliver sustainable value for our shareholders. This concludes my prepared remarks this morning. Cat, would you please give any instructions for participants and we'll get started on Q and A, please? Certainly, thank you. The floor is now open for And our first question comes from Jeffrey Cohen from Ladenburg Thalmann. Go ahead. Hi, Kim. How are you? Good morning, Jeff. How are you? Good. Thanks. I'm good. I kind of have 4 or 5, I'll just draw through briefly. Firstly, talk about the wineries a little bit and some of the placements there. I think it was Greece and Hungary and then talk about Average number of units and an average winery and what you think that market looks like? I didn't catch The first part of it, you talk about which part the Yes, some of the recent placements in some of the wineries. Okay. Of the wineries. Got you. So we have actually Jim has been closest to it since we just got Somebody returned from Napa with some direct feedback. But essentially, there is a, We believe a great vertical for us in the wineries, both in Europe and here. Jim, can you expand on that, please? Yes. Yes, absolutely. Yes. The one of the announcements I think you saw in Greece, that was about $300,000 project. So some of these wineries can be quite large. They tend to use our larger units, our HD series on the Veracyte for their cask rooms and are starting to move out of just the cask rooms and mold removal into the front, which is the tasting rooms with some of our APS series and GCS series. So wineries, as you probably know, Have been a foundational area pre pandemic for Aracyte and continue to grow through and into the future for us across the world. Lots of growth in Europe. We're seeing growth in South Africa and then obviously good growth in France and in the West Coast of the United States. Thanks, Jim. Yes, I think the big finding that were previous to COVID, A big part of the business model for these wineries has been the visiting rooms and the ability with social distancing Previously, if you had something there, people were wary of the air, but having visiting rooms clean of any smell or pathogens as well, both makes the tasting experience and visiting feel better and less anxious As well in terms of spread. Okay, got it. Can you give us some for the quarter Q, can you give us any revenue compositions As far as contribution from LumWorks or Sterilumin? I would say that, yes, it's probably relatively even. We were probably down towards the end as shutdown started happening at the end of the quarter. July was a slower month at Delta. It was around the world, a lot of holders orders rather that were coming in were held either for retasking for vaccinations, delayed for later, but not lost. And also on the MunWorks side, same thing with the hotel, there's been some openings and then closings. So but mostly openings in general outside of some of the specific areas here in the U. S. And then South Africa, when it got hit, we had a lot of momentum slowdown towards the end of the quarter, but that is starting to pick up as people are Addressing sort of spot fires on a instance by instance episodic basis. Does that answer your question? Yes. Can you give us an update on access, any update from the quarter as far as how the back half of the year might The Access is actually designing their product on much more elegant and sort of hospital specific product for patient rooms and They expect that I don't believe it has a name yet, that product to be rolled out, which is going to be sort of the run rate product to hospitals in Q1 of next year. Got it. Okay. And then I guess lastly for us, could you talk a little bit about your recent announcements out of both Vietnam in Africa and give us a sense of what quarter those commitments may start. This is for some hospitals in Vietnam, those specific orders. So distributor there is very much focused on the healthcare vertical. South Africa is a pharma company in general as a distributor will serve the Hospitality and Healthcare and Pharmaceutical space. Their order their initial orders have totaled The first one was $100,000 I believe and the second one was for almost Mike, our CFO, can Well, obviously, jump on me and correct me, but a total of almost just about under $1,000,000 is being or has already been delivered or on its way to South Africa. And the majority of that second order, which is close to, I think, Mike, check me, dollars 800,000 plus Yes. Probably going to hit our books anyway in this Q3. Is that right? Correct. Okay. And Chip, can you clarify, is that for the continent, this deal with 360? Or is it for South Africa, the country specifically? Jim, that was I think directed. Oh, I'm sorry. I'm sorry. Yes, it is for all of Africa. A lot of their focus obviously is going to be in South Africa as a South African company, but they do have exclusivity across the continent. Got it. Okay. I think that does it for us. Thanks for taking the questions. You're welcome, always. At this time, I would like to turn it back to management for any closing remarks. Go ahead, Kew. Actually, there are No closing remarks. I'd like to again thank everyone for joining us this morning. We look forward to closing out. We're halfway through the Q3 and closing out this quarter and very positive heading towards the end of the year. Thank you very much for coming in and listening to us and for your time. Thanks, Kat. Thank you. This does conclude today's conference. We thank you for patient. You may disconnect your lines at this time and have a wonderful day.