Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nanalysis Scientific Corp (NSCIF, Financial) reported a record revenue of $11.5 million for Q2 2024, a 65% increase from the same period in 2023.
- The company achieved a positive EBITDA of $414,000, a significant improvement from the $2.4 million EBITDA loss in Q2 2023.
- Gross margin percentage on product sales improved to 50%, driven by increased sales and reduced manufacturing costs.
- The security service gross margin improved to 10% from a negative 36% in the prior year, following the full transition of airport services to the company's control.
- Nanalysis Scientific Corp (NSCIF) has a strong sales pipeline and expects continued growth in the Benchtop NMR segment, with new product announcements anticipated before the end of the year.
Negative Points
- Despite the positive EBITDA, the company still reported a net loss of $2 million for Q2 2024.
- The medical imaging sales, while contributing to revenue, tend to have lower margins, impacting overall profitability.
- The company’s cash on hand was relatively low at $1.1 million, though it has an undrawn credit facility of $3.2 million.
- There is a noted seasonality in the Benchtop NMR business, with Q3 expected to be softer due to academic market slowdowns.
- The company continues to focus on cost reductions, indicating ongoing challenges in aligning resources and reducing fixed costs.
Q & A Highlights
Q: Can you discuss the persistence of being EBITDA positive over the next couple of quarters?
A: Randall McRae, CFO: We had a medical imaging sale this quarter, which tends to be lighter on margin. However, the Benchtop NMR and security services businesses are performing well. We believe we can maintain momentum in Benchtop NMR and continue to grow the top line in security services. Sean Krakiwsky, CEO: Our costs in Q3 and Q4 will be substantially lower than in Q1 and Q2. I feel confident that the second half of the year will be better than the first half.
Q: What level of revenue is needed to achieve true cash flow positive and net income positive?
A: Randall McRae, CFO: We have generated strong positive operating cash flow for the first six months. To cover costs, we need mid-six figures. For positive cash flow, we need several million more in top-line revenue. The revenue mix is crucial, as security services have a higher impact on cash flow. We are also focused on efficiency and cost management to achieve this goal.
Q: Can you provide more details on the Benchtop NMR business and upcoming product launches?
A: Sean Krakiwsky, CEO: We have strengthened our sales pipeline through lead generation, expanding our direct sales organization, and digital marketing. We expect the second half of the year to be stronger. We are also working on value-added partnerships and regulatory tailwinds. We will announce a new product targeting the mid-range market, which is expected to drive volumes and growth.
Q: What are your target gross margins for the services business?
A: Randall McRae, CFO: We are targeting 25%-plus EBITDA margins and 30%-plus gross margins for the services business. We are not done growing and optimizing efficiency to achieve these targets.
Q: Can you elaborate on the impact of the medical MRI sales and the outlook for Q3 and Q4?
A: Randall McRae, CFO: Medical imaging sales are lumpy and have a smaller contribution to EBITDA. However, Benchtop NMR and security services are performing well. Sean Krakiwsky, CEO: We have many ways to win, including revenue growth and margin expansion. I feel confident about Q3 and Q4, with proprietary MRI products and interesting partnering activities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
