Applied UV, Inc. (AUVI) on Q2 2021 Results - Earnings Call Transcript
Operator: Good day, ladies and gentlemen, my name is Kat 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.
Kevin McGrath: Thank you, Kat, and good morning everyone. Speaking on our call today we'll be Keyo Saeed, Chief Executive Officer; Mike Riccio, 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 based these statements and certain assumptions and expectations on future events that are subject to risks and uncertainties. And with that, I will now like to turn the call over to Keyo Saeed, our Chief Executive Officer. Keyo?
Keyo Saeed: 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 second quarter performance. Second quarter net sales increased by 11% to 1.9 million from 1.7 million in the second quarter of 2020. The net sales and financial results for the current period reflect the impact of asset acquisition of the manufacturer Airocide Systems, Akida Holding, the transaction closed on February 28, 2021. Materially, our net sales in 2020 presented were generated entirely from our MunnWorks subsidiary. During the second quarter, we experienced an improvement in demand from the hospitality industry as the economy rebounded from the COVID-19 pandemic. And as a result, MunnWorks revenues are slowly but surely returning to what seems like normal operating levels. This normal they can start with vaccination progress followed with setbacks at the end of the quarter, given the new variants and the drop off or plateauing the vaccination rates. We also experienced some delays in fulfilling orders from one of our SteriLumen' product lines due to the current constraints 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 2021. Net loss for the second quarter of 2021 was $2.1 million or $0.23 per share compared to a net loss of 6,000 or $0.00 cents per share in the second quarter of 2020. And net loss in the second quarter of 2021 was primarily due to an increase in SG&A costs to improve future operational expenses, this infection segment of our business and planning for additional inventory for second half. Our liquidity remained strong, with a cash balance of approximately $7 million on June 30, 2021. At the end of the second quarter, we announced the closing of an underwritten registered public offering of a Series A cumulative perpetual preferred stock, raising gross proceeds of $13.8 million 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 and investing in innovation testing and growing through complimentary 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 broadly including domestically and globally given variants and vaccinations. The increasing need of vaccination at the start of the second quarter, along with the easing of social restrictions provided further support for the global economic recovery. While 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 a MunnWorks subsidiary for the balance of this year. Our global commercial expansion initiatives for SteriLumen business leveraging both partnerships and distribution is beginning to gain measurable traction, particularly for Airocide portfolio air purification systems. During the second quarter and continuing through the first two 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 the efficacy of the science and technology, balancing 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 our unintended downstream 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 reached new levels. Our differentiated value proposition, as a leader in surface infection prevention technologies positions us 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 size of killing SARS-CoV-2 and all other passages leaving no byproducts. We continue to partner with like-minded organizations for innovation and speed to market and revenue, supporting testing of our portfolio of products against the most dangerous pathogens and other volatile organic compounds or VOCs. In addition, we expanded safe safety testing of all -- 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 or the virus. But now, we've successfully tested Lumicide surface products actually against the SARS-CoV-2 and we'll be finishing testing of the Airocide line 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 support our sales teams and partners worldwide. Moving to some of our highlights of the second quarter, we're very pleased to see that the sales momentum in Airocide business continue, 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 lockdown and COVID variant. Airocide has been a tremendous addition to our product portfolio, and there, people are already a great asset to our team. We believe it or other complementary adjacent technologies are 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 of synergies we're seeing some of the potential acquisition candidates we've engaged with. During the second quarter, we continue to make progress with our SteriLumen's disinfection system product lines, which today includes Lumicide for persistent and automatic disinfection of hard surfaces. Above vanities and restrooms above desks and countertops plus the Lumicide drain which we believe is the only device that automatically disinfect inside the pipe in the high contamination risk, drain trap. As I mentioned earlier, both safety and independent scientific testing remain our top priority, and during Q2, we confidently announced independent lab tests confirming that our Lumicide Ribbon kills CoV-2 or COVID-19, the actual COVID-19 virus. The study was designed to determine the Lumicide Ribbon's effectiveness against the actual SARS-CoV-2 virus, as opposed to the COVID surrogate tested in last year's pre-IPO tests. At the time, this was the best available data for testing on hard surfaces. We are and will continue to support additional testing of pathogens and validation and the variants in the air and on surfaces to provide added scientific validation and claims of viral activation. In conclusion, we're excited about the opportunities underway in development for us our SteriLumen business. We've made important advancements in the technical and safety attributes of our SteriLumen product portfolio that we believe differentiate us from the competition. We continue to see positive sales trends and increasing inquiries for both our Airocide and Lumicide products for SteriLumen from a broad set of customers effective 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. Kat would you please give any instructions for participants and we'll get started on Q&A. Please?
Operator: Certainly, thank you. The floor is now open for questions. And our first question comes from Jeffrey Cohen from Ladenburg Thalmann. Go ahead.
Jeffrey Cohen: Firstly, talking about the virus a little bit and some of the places there I think it was Greece and Hungary and then talk about average number of units and an average winery where you think the market look like?
Keyo Saeed: I didn't catch the first part of the talk about which part the…
Jeffrey Cohen: Yes, some of the recent placements in some of other wineries.
Keyo Saeed: Okay, the wineries. 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 book here. Jim, can you expand on that please?
Jim Doyle: Yes, absolutely. One of the announcements, I think you saw in Greece. That was about a $300,000 project, so some of these wineries can be quite large. They tend to use our larger units or HD series out of Airocide for their task rooms and are starting to move out of just the task rooms or mold removal into the front, which is the tasting room with some of our APS series and GC series. So wineries, as you probably know, have been a foundational area pre-pandemic for Airocide and continued 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.
Keyo Saeed: Thanks. Yes, I think the big finding that we're -- previous to COVID, a big part of the business model for these wineries has been the visiting rooms and the ability with social distancing to previously, if you had something there, people were wary of the air. But having the 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.
Jeffrey Cohen: Okay, got it. Can you give us some -- for the quarter two, can you give us any revenue compositions as far as contribution from MunnWorks or SteriLumen?
Keyo Saeed: I would say that, there's probably a relatively even. We were probably down towards the end and shutdown started happening at the end of the quarter. July was a slower month around the world, a lot of holders, orders rather that were coming in were held either for re-tasking for vaccinations, so delayed for later, but not lost. And also in the MunnWorks sites, same thing with the hotel, there has been from opening and closing. But mostly openings in general, outside of some of those specific areas here in the U.S. and then South Africa, when it got hit, we had a lot of momentum slowdown toward the end of the quarter. But that is starting to pick up as people are addressing sort of spot fires on instance-by-instance episodic basis. Did that answer your question?
Jeffrey Cohen: 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 unroll?
Keyo Saeed: Yes, the access is actually designing their product, on much more elegant and sort of hospital specific product for patient rooms, and they expect that and I don't believe it has a name yet that product to be rolled out, which is going to be sort of the rate product to the hospitals in Q1 of next year.
Jeffrey Cohen: Okay, and then I guess lastly for us, can you talk a little bit about your recent announcements out of Vietnam, in Africa and give us a sense of what quarter those commitments may start?
Keyo Saeed: The Vietnam has already I believe received the unit, it's for some hospitals in Vietnam. Those specific orders are distributed there is very much focused on the healthcare vertical. South Africa is a pharma company. In general, as a distributor, we will serve the hospitality and healthcare and pharmaceutical space. They 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 obviously jumped on me incorrect me, but a total of almost about under a million dollars 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, the 800,000 plus is probably going to be going to going to hit our books anyway, in the third quarter. Is that right?
Mike Riccio: Correct. Correct.
Jeffrey Cohen: Okay, can you clarify that for the country with this deal with 360? Or is it for South Africa the country specifically?
Keyo Saeed: Jim, that was I think directed to you.
Jim Doyle: Oh, I am 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 condo.
Operator: At this time, I would like to turn it back to management for any closing remarks. Go ahead, Keyo.
Keyo Saeed: Actually, there are no closing remarks I'd like to say. Again, thank everyone for joining us this morning. We look forward to closing out. We're halfway through the third quarter 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 again.
Operator: Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time and have a wonderful day.
