Burcon NutraScience Corporation (BRCN) on Q3 2025 Results - Earnings Call Transcript
Operator: Good afternoon ladies and gentlemen and welcome to the Burcon NutraScience Corporation 2025 Investor Day Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions]. This call is being recorded today, February 18, 2025. I would now like to turn the conference over to Mr. Kip Underwood, Chief Executive Officer. Thank you. Please go ahead.
Kip Underwood: Thank you, Ina and good morning, good afternoon, and good evening to everyone around the world and thank you for joining us today. It certainly is a new day for Burcon and we are excited to get into today's discussion. I'll start with our Safe Harbor statement. I'm sure all have read and understand. There's two takeaways we hope everyone walks away with today. The first is, there is a tremendous opportunity in front of us. And the second is execution is the key to our success. To work through those two topics, we'll cover the following things. We'll talk about our achievements since early November, talk about the customer, the market opportunity. I'm sure all are interested about -- to learn more about the new production facility. We are working along with our partner, ProMan. The road to profitability, our path forward, and there will certainly be time at the end for closing remarks and Q&A. Before we look forward, I'd like to take a minute and look back. We last came to the market in early November and we communicated three things. First, that we were looking for a new route-to-market, a facility that could produce our entire product portfolio. We announced that we formed an alliance to identify and secure that facility. And we also announced on a parallel path, we were initiating a rights offering to build a balance sheet that allow us to fully execute our strategy. Over the last 90 days, I'm excited to report our achievements and grateful to our team members for all the hard work they have put in. First and foremost, as I think everyone on the phone -- or the call here knows today, we successfully completed our rights offering at $9.4 million last year. We've signed a binding turnkey with our alliance partner to purchase a facility. We've launched not one, but two new products, a new to the world sunflower isolated protein, which I personally believe will be disruptive to the plant protein market as well as a launch of our next-generation Peazazz Pea protein, that's generating tremendous interest in the marketplace today. And finally, we've collaborated with our partner, Puratos, on how do we bring our canola protein products to market inside the baking industry. A tremendous amount of work and achievement over the last 90 days. This is an example of strong execution performance. The type of performance that we will not only need for the future, but will need to improve as well. We always start with the opportunity and the opportunity starts with consumers. In short, protein is hot right now. Consumers are seeking protein. They're seeking more protein-dense products. Our customers are looking to meet those ever-changing consumer needs. How do they deliver a more protein-dense, better-tasting product so they can meet their consumers' ever-changing needs? Innovation is the key to delivering against those changing consumer needs and innovation is core to who we are as Burcon. We have our product portfolio. We've talked about it a lot. We have a portfolio of plant-based proteins from pea, canola, hemp, and sunflower. These help companies deliver the best eating experience to the end consumer. They do that by having unmatched purity. They deliver excellent taste and texture and superior functionality or color. We all know at times we do, in fact, eat with our eyes. For us, at Burcon, our objective, our goal is simply to have the best protein solution on the market today. The differentiation, the excitement I just mentioned, that does drive customer interest. It takes sales execution to convert that interest to revenue. I'm excited to report we have a robust customer pipeline. Over 100 product samples currently under evaluation. Inside of that, we have 17 specific expression of interest letters from customers. These are on their letterhead, their brand name, saying essentially, please bring your products to market, we would like to buy them. They are signed by decision-makers, CEO, Chief Scientist Officer, Director of Procurement. There's true buying intent here once we can bring our products to market. Another subset of this is former pea and canola customers from the Merit facility. These are people who bought our technology in the past, have been seeking alternatives for a couple of years now, and they haven't found anything that meets their need. They are excited for us to bring these products back to market so they can, in fact, buy them and use them in their food products. And as a reminder for everybody, two years ago, these customers alone drove a revenue run rate of over $10 million. In the end, our pipeline must deliver. What does it deliver? First, the supply agreements and second is recurring revenue. We get to that by sales execution. So, we have a growing market. We have highly differentiated, relevant technology. The missing piece for Burcon has always been a route-to-market. How do we get our products in the hands of companies in the food space, so they can then deliver great-tasting products to their end consumers? Thanks to our partner, ProMan, led by our Board member, Mr. John Vassallo, we are taking on this challenge. We are on the last few steps of our alliance partner taking control of the facility. It is located in the U.S. You'll see a picture of it here on the slides. Why is this so important? Again, our retail market, full control over production from Burcon. The ability to launch our entire product portfolio, pea, canola, sun, hemp. A long-term agreement that ensures we can continue to supply our customers on an ongoing basis. And really excited to be up and running quickly, really up and have full-scale commercial production inside the first half of 2025. In short, this is the first time in Burcon's history, we will have the full control of the production, the sales, and the delivery of our products to customers in a way that meets if not exceeds their expectations, a true unlock for us in the future. So, what does this mean financially? We see a path to being a highly profitable, exciting business. I talked about sales execution, prospective customers, letters of interest. We have a clear path to being cash flow positive in 2026 and in the out years, continual quarter-on-quarter margin expansion. So, we think about Phase 1. Phase 1 is about product launch, those new product offerings driving new sales. Phase 2 is about scaling those sales to deliver unit economics and overall revenue growth. Phase 3 is even more exciting. Phase 3 is where we start to get to situations where we leverage our technology through licensing or the sale of technology to clearly deliver explosive growth with Burcon in the future. I've said execution many times, I'm going to say it again. Near-term, inside of calendar 2025, it is all about execution. What does that look like for us here in 2025? So, Q1, as we mentioned, our partner to close on the facility. Q2, we will install our proprietary equipment, we will begin initial commercial production trials. Q3, we're looking at supply contracts, continuous production of our plant protein offerings into Q4. Now, we're talking about recurring revenue and really setting the stage for an unbelievable 2025, where, again, we expect to reach cash flow positive. All of this lays the foundation for what comes into the future. We earned the right to get to that future by execution in 2025. It is a great time to be involved with Burcon, be a Board member, a member of our team, an investor, or me as a CEO. We are excited about our future and I'm very appreciative of you all taking your time with us today. I would now like to open the line to questions.
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Dave Storms from Stonegate. Storms, please go ahead.
Dave Storms: Afternoon. Appreciate you taking the question.
Kip Underwood: Hi Dave. How are you today sir?
Dave Storms: Hi, I'm good. Hope you can say the same. I just want to start with, obviously, the ProMan facility. And maybe if you could just go into a little bit more about what early success will look like in calendar 2025 for that facility? Is it going to be based on recurring revenue? Is it going to be based on how many proteins you can get flowing through that facility? Maybe just a little more color there would be helpful.
Kip Underwood: Thanks Dave. Sure. So, I think there's three components, right? So, the first is that we successfully install our proprietary equipment, and we start the facility up successfully in a way we can produce our products, there's step one. Step two then is to go through and produce our entire portfolio at commercial scale so we can deliver those products to customers so they can complete that next phase or the final phase, really, the valuation before they purchase. Third step then is achieving a place where our sales drive recurring routine production that further fuels recurring sales. So, installation of our proprietary equipment, getting those -- the entire portfolio, commercial scale production samples, so customers can complete their last step in their evaluation process, and then really moving to a space of ongoing production and sales in the back half of 2025.
Dave Storms: Understood, that's very helpful. Thank you. And then just from a more modeling standpoint for the ProMan facility, are there any upgrades or CapEx expenses that we should be thinking about through the first half of this year and into the second half of this year?
Kip Underwood: I think one of the exciting things for our investors, and a thank you to our partner, ProMan, is the way this deal is structured, our partner, ProMan, will both purchase the facility, obviously with us in tow, and then install the -- pay for the equipment that we need to produce our products. So, from our perspective, we do not have capital required to launch our entire portfolio. And again, our -- the fund raise we just completed was around the -- to pay for the expenses to produce and launch our products through to cash flow positive. But the capital side is all handled by our partner, ProMan.
Dave Storms: That's great. Thank you. Kind of switching gears here to the portfolio. Just any early thoughts on Peazazz and sunflower? Any indications of early success there, kind of, what we could expect over the next couple of months from those new launches?
Kip Underwood: Sure. I think I'd offer a little bit of color. I would anticipate our first sales in 2025 to be Peazazz, right, that's going into more of an established market. Pea protein going to more of an established market, where we can come in and have those first initial sales. Longer term, I truly believe that the growth from year two and year three will be driven by sunflower. Again, we believe it is the most disruptive technology we have. It will -- it had the opportunity to redefine the plant protein space along three dimensions. Its performance is fantastic. I mean it's white in color, great taste, right, has excellent economics. And third, it's protein from the sun and who would not want that? So, really, pea protein near-term, sunflower protein mid to long-term.
Dave Storms: Understood, that's great color. One more for me, if I can. Congratulations on completing the rights offering, I'm sure that gives you a lot of breathing room. As we're looking into the next year or so, how do you feel about your current financial position? And is there any expectations that you'll need to do further financing in the near-term?
Kip Underwood: Hey, Dave, I'm going to turn that over to Rob Peets, our CFO. Rob?
Robert Peets: Hey Dave. Yes, so a couple of points, I guess, to address your two questions there. The first, you're absolutely right, the financing was very strong. We had a lot of good participation from both insiders as well as existing shareholders. And as a result, we've got -- like we got the cash on hand to support our burn for at least the next two years and likely further as we reach cash flow profitability, as Kip mentioned earlier, in calendar 2026. So, we're in a very, very strong position there. And then -- sorry, the second part of your question was?
Dave Storms: I think he answered it by mentioning that you feel good about the burn position for the next couple of years until you reach cash flow positive and it sounds like that in the case, no major financings in the near-term.
Robert Peets: Sorry, that was whether we were going to undertake any financings, yes. I mean, obviously, if a very opportunistic situation came along, we certainly would review it, but no, we don't have anything planned at this time.
Dave Storms: Understood, that’s great color. I appreciate that and I hope you all have a great rest of your day. Thank you for taking questions.
Kip Underwood: Thanks Dave.
Operator: Thank you. [Operator Instructions] Your next question comes from the line of [Indiscernible]. Please go ahead.
Unidentified Analyst: Just a question about the announcement of collaboration with Puratos, which sounds very positive. Is there anything that you can elaborate on with respect to that collaboration in terms of the amount of time? And is it with -- is Puratos Canada involved playing any role?
Kip Underwood: Thank you. And we're certainly excited about our relationship with Puratos. So, again, they are a global leader in supplying the baking industry with cutting-edge, leading ingredients. We've worked with them for several months now and we see opportunity both in cost in use benefit on their existing products as well as launching maybe some exciting, more plant-based food type products. It is global in nature, so we are doing work with products both in Europe and Canada, and we're really excited to move forward with them and help bring new solutions to the baking industry around the world.
Unidentified Analyst: Thank you.
Operator: Thank you. [Operator Instructions] And there are no further questions over the phone. Mr. Lam, please proceed.
Paul Lam: Hi, thanks Ina. We have a few questions over the webcast. First, this comes from a private investor. Is the Merit Functional Foods facility, which is currently in receivership, no longer an option for Burcon given the announcement with ProMan? Start with that first.
Kip Underwood: Thanks Paul and thank for the question. So, the Merit facility is, to the best of our knowledge, still for sale. And we still look at the overall Merit situation as an opportunity. So, we look -- there's three potential ways the Merit situation could be resolved. So, first, we are still in contact with them and maybe there's an opportunity for us to further grow in the future. Second, somebody else may buy the facility and choose to license technology from us to launch. We would love to refer somebody on that. Third, somebody could buy the -- somebody else can buy the facility, repurpose the facility for something else, give us the opportunity to go in, and remove proprietary assets and leverage those to grow our business with ProMan. So, we're still we're in contact and we know at some point in time, this situation will resolve itself. What was key for us is we were not in control of the timeline. We had to take control of our own destiny, hence, the announcement today, our route-to-market with ProMan. It was also true though, we're in constant contact. And as that Merit situation evolves or resolves itself, we see any of the potential landing points as being accretive to our overall financial plan.
Paul Lam: Thank you. And a follow-up to that and let me provide -- if I may, provide a bit of context. I believe this is a previous announcement on Burcon and Merit and Nestle's collaboration. This follow-up question comes from the same private investor, is there still an ongoing relationship between Bunge and Nestle?
Kip Underwood: I don't know. I don't have knowledge of what Bunge and/or Nestle are doing in the marketplace today. So, we are not in a position to comment on that.
Paul Lam: Okay. Following up, we have a question from Ralph [Indiscernible]. If tariffs are coming, how will this affect Burcon supply chain?
Kip Underwood: Hi, Ralph, thanks for the question. So, first, we can say that the facility is located in the United States. It's located in the State of Illinois. So, from a production and sales standpoint, since the primary customer base will be inside the United States, minimal impact there. Second, I can also share that from a raw material perspective, we have been working with raw material providers, both in Canada and in the U.S., both to ensure we have redundancy for execution and also to be sure if there are any tariff-type issues that we are -- we have a supply chain that's robust enough to handle that situation. So, we do not see the tariff situation, however, it evolves or unfolds, affecting our business today.
Paul Lam: Thanks for the question, Ralph. Next question comes from Joe Sawyer and I'm just going to summarize his question. And his first question actually revolves around the situation where China was dumping a lot of low-cost pea protein into the country. How would this affect Burcon? And what are the risks going forward in terms of future cheap product coming into the country, if at all?
Kip Underwood: Sure. So, let me speak to -- the China dumping piece was really around pea protein. So, that has been addressed with the substantial duties applied to incoming Chinese products in North America. They're in the 300% to 400%. And if you look at pea protein prices in the market today, they reflect that. So, that specific issue has been resolved and we see excellent pricing opportunity in the marketplace, specifically for pea protein. On a broader sense, our best defense against unforeseen market actions is the strength of our portfolio. One of the reasons it was critical for us to have a facility where we could market pea, canola, hemp, and sun is that, first of all, we're highly differentiated. We can ensure we can control the production, deliver that to customers, but also because each of these have unique strengths, they are all -- have the opportunity to be highly profitable for us. And we will listen to the market to understand how do we evolve that mix moving forward. And if there's a negative market influence on, let's say, pea protein or canola, then we will pivot and focus on hemp and sunflower. So, the China situation for North America, resolved. Moving forward, the diversity of our portfolio is our best strength to unanticipated market situations.
Paul Lam: Okay. And then the second question too from Joe Sawyer is, this is around the capacity of the new facility. He's wanting to understand the output capacity of the new facility and its ability to expand production at scale to meet this high consumer demand that it seems like we're getting a lot of demand from our customer funnel?
Kip Underwood: Thanks for that question. Let me start with why we picked this facility, right? So, we had choices. We were trying what was the best fit for Burcon today, what was the best fit for our partner, ProMan, on the buying and capital insulation side. We got our best choice, our first choice. And there's really a few reasons there. One is, it has an existing workforce. It has a plant manager. It is up and it is running. We are not starting from ground zero. Second is, it is the right scale from two points of view. First of all, for our target customer base. It's the right scale. We are relevant to our targeted customers, those entrepreneurs, those cutting-edge companies. We are very relevant to them. We could get to a place with 20, 30, 40 customers, be relevant to them and it fit very well within our own scale. Third, and maybe most importantly, is this facility is of a size and the scale for Burcon in -- on our own, just in this facility, to be financially strong, to move to a place we are highly, highly profitable. Relative to the future, there's also opportunity here at this facility to expand capacity in a relatively capital-efficient manner. So, we have certainly expansion opportunities there once we fill up this facility on its own. So, it's the right place because right scale, right size. Right place because it's up and running, there's an existing workforce there today. And right because there's pretty capital-efficient capacity improvement opportunities in the future once we sell this facility out.
Paul Lam: Okay, thanks for that. Next question comes from Bob Hodgkinson. What is the revenue share between ProMan and Burcon, considering the expected operational cost versus the cap costs and improvements to be borne by ProMan?
Kip Underwood: Thanks Bob. Let me go a little into -- a little bit about the relationship between Burcon and ProMan. So, the first key was finding a facility that could do all the things I just talked about and could be bought at the right price, right? It could be bought at the right price so that our partner could afford to purchase the facility and equip it, but then we could afford to lease it back from them essentially through a contract manufacturing relationship, so in a manner that we could afford and would drive a return on investment for them. So, in essence, we bought -- we -- together, we bought the facility at the right price, which gives us flexibility for them to get a return on their investment and with -- through our essentially -- through our lease payments, essentially, and then for us to drive a highly profitable business on our side.
Paul Lam: Okay. There are more -- more questions just came in, actually. And I apologize for jumping back and forth here. This actually was a follow-up to the tariff question. This question comes from Paul Brunette. What about suppliers for each product? Is tariff a problem? Are future tariffs going to be -- have an impact for Burcon?
Kip Underwood: We don't see it down -- I can't predict the future what various governments will do. What I can say is that, on the supply chain side, we have identified redundant raw material supply both in Canada and in the United States. So, I think we've done what we can to ensure that we'll have a reliable supply that's of a quality and a cost that fits our financial model.
Paul Lam: Next question comes from Chester [Indiscernible] from Lead Financial. With respect to the Puratos, are they paying some of the costs and developing possible products? And then when might we see something further regarding Puratos?
Kip Underwood: So, it is an R&D project together, right? So what we're both -- we are both putting in research and development assets to then create an opportunity for both companies, right? So, I think it's a cost share from that perspective. And then when we launch, right, then we both share in the rewards. They get to launch a more innovative product to market, be that in Canada or Europe, and then we get to supply a key enabling technological solution to the product they are launching. So, a lot of work to do there. I mean we'll see how that work goes. We're highly excited about it. And hopefully, in the near future, we'll be able to speak more to that.
Paul Lam: Thank you. We have one more question. This comes from Randall Lewis. Any thoughts on moving back on to the NASDAQ in the near future?
Kip Underwood: Thank you, Randall. Certainly, that is something that -- it's discussed. It's out there, right? Now, I think what I would go back to is what is our 2025 focus. Our 2025 focus is execution. It is our partner completing the facility transaction. It is us installing our proprietary equipment and producing those first commercial products, moving to ongoing continuous production, and then moving to the space of ongoing production and ongoing recurring sales. So, I think we need to do those to establish our foundation, prove our ability to execute, and then maybe we earn the right to have that conversation in the future.
Paul Lam: All right. Those are all great questions. Thank you to everyone who submitted questions. Some of the questions I didn't read out was because those -- it was already addressed already. Thank you to everybody. Ina, back to you.
Operator: Thank you. And that ends our question-and-answer session. I would now hand the call back to Mr. Kip Underwood for any closing remarks.
Kip Underwood: I guess a final thank you for your time today, your confidence in us. And maybe a parting thought that, again, it's a great time to be part of Burcon and we thank you all for going on this journey with us. Have a great day you all. Cheers.
Operator: And this concludes today's call. Thank you for participating. You may all disconnect.
