Burcon NutraScience Corporation (BU) Earnings Call Transcript & Summary

Thank you. Thank you.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Berken NutriScience Corporation's fiscal 2026 results, year-ended March 31, 2026. Joining us today are Kip Underwood, Berken's Chief Executive Officer, and Alex Barty, the company's Chief Executive Officer. Chief Financial Officer. Following their presentation, we will open up the call for your questions. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. Then before we conclude today's call, I'll provide the company's safe harbor statement with the important questions regarding the forward-looking statement. made during this call. Now, I would like to turn the call over to the CEO of Brickin, Mr. Keith Underwood. Sir, please go ahead.

Thank you, operator, and good morning, good afternoon, good evening to those attending the call today. We very much appreciate you taking time out of your day to spend time with us. We want you all to have three takeaways from today's presentation. The first is that we are targeting a large growing market. The second, that our technology platform delivers highly differentiated products. I think three, maybe most importantly, is throughout fiscal 26, we are delivering on commercial success. our standard safe harbor statement before we get into fiscal 26 I want to take a step back and kind of go through a couple of key points as to why we are so excited about the opportunity in front of us the first is I think many of you can probably see protein is everywhere if you've been in a grocery store you read a newspaper you've seen a on television or streaming, protein is hot. Any... Consumer brand product that has a positioning on the front panel, 20 grams of protein, 30 grams of protein, 10 grams of protein per serving, those types of consumer products are bullseyes. for Berkans technology. That is where we are in fact the most relevant. So, tremendous exciting market. Protein is everywhere. And it's not just a fact, right? So there's some fundamental drivers at the consumer level that are driving protein demand and the opportunity for us. The first and foremost is people seeking better nutrition. What is accelerating the protein growth beyond better nutrition is GLP-1 or weight loss medication. When people are on this medication, which is growing rapidly, they need more protein on their diet. less calories that drives up protein demand is great for us what is also great for us in this market now is as demand drives up we're seeing constraints for other protein sources again driving up opportunity for plant-based proteins like ours and again long-term we see 8 to 10% CAGRs for this great opportunity for or protein in the marketplace today. And specifically for Bercon, right? We have a technology platform that has now proven that commercial scale, and fundamentally what this does, it delivers unmatched purity in the marketplace. And that unmatched purity helps brand owners solve problems, deliver great-tasting products that end consumers want to buy. and enjoy and meet their needs. We've applied the proven technology platform across our sunflower, our pea protein, our fiber-pro fiber protein, and our pure protein canola protein. So we have a technology platform that is proven across multiple products delivering the unmatched purity in the marketplace, which delivers great tasting, solutions to our customers, those brand owners that you saw on the previous slide delivering high-protein products to consumers. Throughout the fiscal year, we have taken specific actions to capture this opportunity, and that now is the focus of the balance of our discussion today. So, if we have a great market and protein is in demand, and we have a technology platform that is now proven at commercial scale, What are the steps we have taken as Bercon to turn that opportunity into financial performance and eventually a profitable company? So we'll go through it. We'll have a sales update, production update. We'll talk about why we believe this is a great investment opportunity, and we'll close with the path to profitability, reviewing what we've done in the years. year that then leads to trajectory into fiscal 27. We'll start with some FY26 annual highlights. A little over a year ago we had with our partner, Pro Man, we had a manufacturing facility at the technology platform and a plan. A little more than 12 months later, we have made significant progress. We've integrated the technology in the commercial scale facility. We've commissioned this technology and proven it at commercial scale. We have not just commercially produced our pea protein, canola protein, and fiber protein. We have garnered repeat customer sales. of all three of those. All along continually fueling our customer pipeline, our customer projects. In this business, customers changing products that we all buy at the grocery store or online, that's a nine to 18 month process. So we always must have a robust pipeline to be able to do that. to feed future growth. With that, I'll turn over to Alex for a few financial highlights.

Thank you, Kip. In respect of financial highlights, the big takeaway here is the translation of these operational achievements to Bercon's financial performance. In fiscal 2026, Bercon generated revenues of $2.3 million, which is a nearly six-fold increase over the prior year. In both Q3 and in Q4, we further posted double-digit quarter-over-quarter growth in revenues. Furthermore, in sales, we're seeing increases in repeat orders across our portfolio of plant proteins, demonstrating progress in customer adoption. Putting the sales to date in context, we've come a long way in one year from commissioning a production facility, integrating the technology, scaling production, attaining new customers, and getting customers through their ingredient adoption process to come to this repeat order stage. Looking forward into fiscal 2027, we expect to continue to do so. continue this momentum and growth and see significant quarter over quarter revenue growth. In respect of expenditures, our priority in fiscal 2026 was on commercial operations. As a result, we concentrated our resources on commissioning and scaling our production, which includes the reallocation of labor. This led to a year-on-year decrease of 23% in general and administrative expenditures and a 65% decrease in research and development. Lastly, in fiscal 2026, we announced a $6.9 million private placement of convertible notes and we closed $4 million of the offering in fiscal 2026 with the balance closed subsequent to year end. The private placement was further significantly supported through participation by insiders and from the owners of the manufacturing facility, underscoring their beliefs in Brocon's momentum and its future. I'll turn it back to Kip now to provide more color on our sales growth and production.

Thanks, Alex. So sales growth is the lifeblood of a company, right? So if we look across our sales growth, there's a couple of key points. So first is we mentioned a robust pipeline, more than 200 active projects, and that is always growing. That is an evergreen thing. Second, maybe more importantly, we've expanded our customer base. We now have 30 plus active buyers across our portfolio. Beyond those two bullet points, the other key takeaway is diversity. If you look at both the customer projects and the sales, we have good diversity across three dimensions. First is across food type. applications. So we have sales into beverages, into nutrition bars, into plant-based foods, all of these different food types that are really around positioning protein to the end consumer. We have... good diversity across company or brand. We have some well-known national brands that people would know, and we have a list of cutting edge entrepreneurial brands that has the potential to deliver explosive growth in the future. And lastly, we have diversity across the portfolio. So we have sales of canola and pea protein and fava protein across the portfolio. So diversity of food type, application, diversity of customer brand, and diversity of product. All of this both on one hand, de-risk the growth in the future, and on the other hand, other hand gives us the opportunity to grow even faster and as evidence we're delivering right so the last two quarters we've delivered double-digit quarter on quarter growth and we recently communicated substance of the quarter looks like our fiscal q1 will deliver 50 percent quarter on quarter growth compared to last quarter so stacking on customers stacking on growth, stacking on growth in a very diverse way, folds well for our future. Those who have heard me in the past have used the phrase, you cannot sell it until you can make it. Lots of work with our alliance partner, ProMan, on scaling our manufacturing facility, deriving both hourly, daily, weekly, monthly. improvement as evidence we recently announced achieving another production performance record sixty percent higher daily production in the previous quarter so we're ramping up production to meet those sales and it's high quality product. That is validated really two ways. First is third party. We are audited by BRC, we're kosher certified, we're allergen free, the facilities are canine certified. Second, and possibly the most important validation we can receive is in the repeat purchase from our customers. They have gone through their validation process. They've made a formulation choice. They have bought once. They've brought that product into the facility. They have made the products that we all go to the store, buy, and enjoy, and they've came back and they've done it again. And that really is the single biggest validation that we can produce that our technology platform produces high-quality products at scale and consistently. to meet, if not exceed, our customers' expectations. If we put the market, the technology platform, and our track record of saying what we do and doing what we say, delivering on commercial status over the past year, this is fundamentally There's a tremendous opportunity for Berkhan in the future and an opportunity for our investors to come along this journey with us. We're in phase one right now, leaning towards the towards the more the end of that phase as we establish product in the coming year, we'll move into phase two, which is more scaling. And then phase three, in the future is really around advancing the technology further beyond our current footprint. Exciting times ahead for Bercon. We hope and want and wish our investors to come along this ride with us. I started with saying a little over a year ago we were, we had a manufacturing facility technology platform and a plan. And over the past 12 plus months, we have laid down consistent markers that demonstrate our ability to turn innovation into commercial reality, into financial performance, going way back with our partner ProMan, with the facility, facility commissioning, launching products to the market based on our technology platform, achieving our initial revenue guidance for the calendar 25 back in December, robust pipeline, record production performance, and as we've mentioned, greater than 30 buying customers in less than 12 months. This track record, we believe, is a harbinger of things to come. With the market, our technology platform, and our team, our job now is to actually accelerate the trajectory of the business on to deliver against our commitment to the market of 10 million in sales in calendar 26. And a position of having positive operating cash flow. Thank you for your time today. With that, operator, I will turn it back to you for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press the star, then the number one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press the star, followed by the number two. One moment, please, for your first question. And your first question comes from the line of with Stonegate. Hey, Kevin. Thanks for taking my questions, Kevin.

Maybe just wanted to get started with what you're seeing in terms of an adoption curve. You guys had a really strong quarter, transformative year. You brought a lot of proteins online. Are you seeing the same adoption curve, irregardless of the protein type, or do they each have their own nuance that makes one more or less challenging, quicker, faster uptake?.

I think in general, you know, if you take your R1 percentage as an example, that is pretty consistent across product or food application type, right? Now, the time element does move a minute, and there's a couple reasons for that. So one is that you think about food. Part of a customer's decision process or different food type is they go through shelf life testing. Well, shelf life testing you do for a powder is less time than shelf life testing that is done on a liquid, as an example. So the food type – the length of time. And then I'll take our FiberPro, which is a little more new-to-the-world ingredient. Because it's new to the world, some of those products will take a little bit longer because it's even newer and more differentiated than maybe some other products. So wind percentage, pretty consistent. Length of time can be impacted by a variety of factors. One example, again, is length of time for shelf life, which is driven by food type by our customer, or the newness of the technology, the newer it is, maybe the more time it might take for a customer to become familiar with it and really take advantage of its strengths.

Understood. That's very helpful. Thank you. As we're looking into the future, you know, you mentioned Phase 2 is going to be more about scale. I guess, how should we be thinking about the drivers here? Is that going to be more use cases for current proteins? Is it going to be increasing capacity at the ProMan? I know you mentioned the ProMan. I know you You mentioned repeat orders are important. Is that going to be expanding order size, hopefully all of the above? I guess what do you see as some of the keys going into Phase 2?.

Well, the first and foremost is to be sure we take care of the existing customers. You know, as they grow, we grow with them. So we saw the protein market exploding. More and more consumers are seeking protein-positioned products. So the consumer products are growing. Therefore, we grow with our existing customer base. So first and foremost is take care of them. Second is driving new new customer adoption, which in general is new customer launches or change of existing products. We've got to drive on those. And then third really is, I think you mentioned the capacity side. We have to be sure that we can ramp with our partner production capability in line to stay ahead of the demand. We, there were certain capacity expansions that we had inside the footprint plan with our partner that we're continuing executing against those, and we're always evaluating what other potential investments might we do to stay ahead of the customer demand growth that we are.

seeing now and expect in the future as well. Maybe if I could hold on that production capacity for just a second. I know you mentioned, I believe, in your prepared remarks and the releases that as the quarter went on, utilization continued to increase. I guess, what does it take to get to 100% utilization? even possible? Is that a goal? Is it just a matter of increasing orders? Is it a financing constraint? I guess how should we think about capacity and utilization there?.

So the existing footprint, we have a few capital expenditures to go through funded by our partner ProMan, it was part of our original agreement. So we're finishing those up here in the coming months. At that point in time, we have the facility capability to deliver against any financial commitment we've made to the marketplace, and then we are always evaluating the how might we invest beyond that? How might we stay further ahead of that growth curve? And we're evaluating those things, and as things come to fruition, we'll bring those forward to the market.

That's all, Craig. I really appreciate you taking the time to answer my questions, and good luck in fiscal 27.

Thanks Dave, appreciate it. And I'm showing no further questions at this time. I would like to pass it over to Alex Vardy, interim CFO for questions from the webcast.

Thank you. We have a question from a private investor. Within the current cash position and growth trajectory, can you scale to your target using existing capital or will additional financing be required? Would we be looking at a dilution or institutional investors?.

So I think there's two answers to that question. So one is when we complete the investment with our partner ProMan that we just mentioned, the facility has the capability to get what we need to get. The second piece of the puzzle then is this, we see tremendous growth potential out there. How do we lean in and stay ahead of that curve? And those are things we're evaluating right now. Anything in the near term would most likely be debt in the near term. We'll evaluate those. Our commitment is we're not going to seek additional investment unless We see growth potential in front of us, and it clearly makes sense.

Okay, and we have one additional question also from a private investor. Given the company's low trading volume, how do we see that changing over time to increase share price and increase trading volume to get the market recognition for the company's achievements?.

Thank you for the question. Certainly something that is top of our mind as well. There's a couple phases to this. So one, we made a conscious choice over the last six months to really take all of our efforts, our time, our money, our attention to driving on production sales. That's the lifeboat of the company. We have to get that right. first. And we think we've talked tremendous progress by twenty six. We're now at a place where we believe it does make sense to be more proactive with capital markets. We are working on plans to do so. You'll see more from us. in the coming months. Certainly trading volume and liquidity is something that we know all investors desire and something that we want to be more proactive in, frankly, to get more awareness and the credit for the achievements that the company has made over the past year.

Great. Thank you, Kip. We have no more questions from the webcast.

All right, thank you everyone. That's all the time we have for questions today. At this time, this concludes our question and answer session. I would like to turn the call back to Mr. Underwood for closing remarks. Sir, please go ahead.

Thanks, operator, and really thank you to all here on the phone with us today. Really appreciate your time, your interest, and most, and probably your investment in Bercon. We do not take that responsibility lightly. I would also like to take a moment to thank the team. We have a team of individuals that wake up up every day, put two feet on the ground, and are dedicated to building the most innovative plant protein company in the world. And that is what we are here to do. That's what we're going to do. Thank you all. Have a great day.

Before we conclude today's call, I would like to take a moment to read the company's safe harbor statement. This call contains forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Dedication Reform Act of 1995 and applicable Canadian securities legislation. Forward-looking statements or forward-looking information involve risks, uncertainties, and other factors that would cause actual results, performances, prospects, and opportunities to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements or forward-looking information can be identified by words such as anticipate, intent, plan, goal, project, estimate, expect, believe, future, likely, can, may, should, could, will, potentially, and similar references to future periods. other than statements of historical fact included during this call or forward-looking statements. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements or information. Important factors that could cause actual results to differ materially from Burkitt and plans and expectations, include the actual results of business negotiations, marketing activities, adverse general economic, market or business conditions, regulatory changes and other risks and factors detailed herein, and from time to time in the filings made by Berken with securities regulators and stock exchanges. including in the section entitled Risk Factors in Berkens Animal Information Form, filed with the Canadian Securities Administrators on www.cedarplus.ca. Any forward-looking statements or information only speaks as of the date on which it was made and except as may be required by applicable securities laws. claims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. Although Berkin believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guaranteed a future performance, and accordingly, investors should not rely on such statement. Finally, I would like to remind everyone that this call is being recorded and the webcast will be available for replay on the company's website starting later this evening. Thank you ladies and gentlemen for joining us today for our presentation. You may now disconnect. [Call has ended.]