Clever Culture Systems Limited (CC5) Earnings Call Transcript & Summary

Thank you for standing by and welcome to our quarterly investor call. [Operator Instructions] So be rest assured that nobody else on the call will be able to see or hear you. There will be a presentation followed by a question-and-answer session that I will announce at the end of the presentation. [Operator Instructions] Those joining by telephone will not be able to raise a question. An audio recording of this call will be made available on the company's website later today. I'd now like to hand the conference over to Ray Ridge, Chief Financial Officer.

Thank you, Jack. A brief formality before we commence. I would like to remind those on the call that today's update may contain forward-looking statements, which do involve inherent risks and uncertainties. Those risks and uncertainties include those disclosed in our ASX lodgments, which we recommend that you review. There are, of course, reasonable grounds for any forward-looking statements made today. However, due to their inherent uncertainties, we recommend that you do not place undue reliance on those statements, and actual results may differ materially from those forward-looking statements. We are now ready to go, and I will hand the call over to our CEO and Managing Director, Brent Barnes.

Fantastic. Thanks, Ray. And look, welcome, everyone. It's great to host today's investor call. Also joining us on today's call is our Chair, Rebecca Wilson, who will be available for question and answers to be held at the end of today's call. Our sales strategy is building momentum with pharmaceutical customers globally. We are focused on engaging with large pharmaceutical manufacturing companies that have multiple manufacturing facilities globally. This focus has resulted in us engaging with 14 of the top 20 largest pharmaceutical companies by revenue. Recently, we have progressed our engagement with 2 of those top 20 pharmaceutical companies, placing instruments for evaluation in this current quarter. In addition, last week, we announced the sale of 5 instruments to AstraZeneca that we expect to install at global locations over the coming 6 months. In fact, when we consider the first half of fiscal year '25, so from July to December 2024, we expect to ship 8 APAS Independence instruments, 6 of which are sales and 2 for evaluation with leading pharmaceutical manufacturing companies. This is by far the largest number of instruments we've ever shipped in such a time frame. Importantly, we've been preparing for this in the background. Our teams are ready. Our supply chain and manufacturing is ready, and we will be successful to ship, install, train and embed APAS Independence with our customers over this time. A week ago, we announced the signing of a sale and service contract with AstraZeneca, who have placed an initial order of 5 APAS Independence instruments. The contract value is between AUD 3.4 million to AUD 4.1 million, which is a range because it will depend on the levels of annual maintenance and software support services taken up by AstraZeneca. The annual maintenance and support is over a 7-year time period, providing profitable and recurring revenue to the company. However, the majority of the contract value will be received as instruments are installed at AstraZeneca, which we expect to happen before the end of this calendar year. This represents material cash inflows for the company, which firms up our balance sheet and cash runway. The 5 instruments will be shipped across 3 AstraZeneca facilities in Europe and Asia as part of a Phase 1 rollout plan for APAS across their large manufacturing facilities globally. AstraZeneca continued to progress their internal validation of APAS and made the decision to progress with the initial order based on positive performance data observed during their internal validation program. There is potential for AstraZeneca to purchase additional APAS instruments following this Phase 1 rollout, whereby instruments will move into routine operation. AstraZeneca has been a valued partner, and I'd really like to recognize their team members who have been collaborating with us and our team over many months now. It was actually back in January of 2023 that we received $1 million of funding from AstraZeneca to develop a new analysis module for the reading of culture plates used for environmental monitoring purposes. That R&D work has been completed, and it was around 5 months ago back in March of this year that we finalized our validation of APAS and launched into the pharmaceutical market. The purchase and rollout plan for AstraZeneca provides evidence and confidence that APAS Independence is a validated technology that meets the stringent requirements for environmental monitoring during drug manufacturing. Importantly, this is an application to all customers globally, and we are seeing increased interest from new customers as we continue our sales, marketing and awareness efforts for the technology. I'll now hand it back over to Ray to talk through the financial results for the quarter.

Thanks, Brent. I will now provide an overview of the financial results we reported in our Appendix 4C lodged with the ASX in July. All figures are in Australian dollars and in accordance with ASX listing rules, they are not audited. So for the quarter ended 30 June 2024, LBT reported net cash outflows of $0.1 million, comprising $1.2 million outflows due to operating and investing activities, and this was net of receipts of about $0.2 million from customers for analysis module renewals and some development funding from AstraZeneca. Then there was $1.1 million in inflows from financing activities, largely being proceeds from the early exercise of options, which included strong support shown from some of the company's largest shareholders and approximately $0.4 million from Board and management. These cash flow movements in the quarter resulted in a reported cash balance of $2.4 million at 30 June 2024. Inflows expected in the next quarter also include $0.8 million in receipts from existing debtors plus now approximately $1 million we expect from the R&D tax incentive, which will be lodged shortly. And of course, we would also expect to see net cash inflows before the 31st of December for the recently announced AstraZeneca sale and services contract. On the current AstraZeneca rollout schedule, we expect the majority of the 5 instruments to be installed this calendar year, with terms being payment within 2 months of installation; under the agreement, standard pricing for the instrument supply, although there is no annual license fees given they've effectively paid all those upfront by providing the development funding. Finally, the company at 30 June had 191 million listed options outstanding, which are due to expire on the 15th of September 2024, with an exercise price of $0.005 that is well below the current market price. So if fully exercised, this would raise another $1 million in proceeds with $0.8 million of that being applied to repayment of the loan to the South Australian government. Back to you, Brent.

Thanks, Ray. Look, with respect to the outlook, there's going to be a clear focus for our customers, but I'll categorize kind of 3 areas being customer experience, sales execution and market expansion. Customer experience will be our primary focus as we execute the delivery of 8 APAS instruments to 6 global locations, majority of these obviously being AstraZeneca. In parallel, we will be supporting AstraZeneca and assisting them finalize their internal validation of APAS. This is important because it establishes a body of evidence that demonstrates the performance of APAS in situ within their manufacturing environment. They have designed their validation program to be completed at a single location that is representative of all of the global facilities they plan to implement APAS in. This means that the validation is done once and a straightforward installation program can occur following this. Another customer of ours is NovaCina, which is a Perth-based contract drug manufacturing organization that purchased an instrument early this year. They are now ready to receive the instrument, and we will deliver, install and perform training by the end of August. Following this, we'll support them in their validation process that assists them moving the instrument into routine manufacturing usage. Sales execution is focused on working with prospective customers to develop existing opportunities and advance them through the sales pipeline. We have only just delivered 2 instruments to 2 of the top 20 largest pharmaceutical companies, slightly ahead of our expectations. These evaluations are funded by each company and expect to last a few months. Over this time, APAS will be run in parallel with their routine environmental monitoring process, allowing for performance data to be generated. We expect to closely support these evaluations, assisting with data generation and statistical analysis. Market expansion will see a continued marketing push in increasing the product awareness and to create new customer leads and sales opportunities for APAS in the pharmaceutical market. The company will attend and demonstrate APAS at high-impact conferences in Europe and the United States in October and November as well as hosting a customer experience day in Europe during September. Recently, we co-authored a white paper that has been accepted for publication in the American Pharmaceutical Review. It takes a scientific and data-focused perspective on how APAS has been validated for use in routine environmental monitoring. In closing, we've had absolutely terrific start to fiscal year '25, where the company has progressed into a revenue-generating business. I look forward to answering any questions, and we'll now hand it back to Jack to manage that process.

Thank you, Brent. We will now commence the question-and-answer session. [Operator Instructions] And I'll start with a question that's come in through the Q&A function. Will you be providing BPAY details for us to exercise LBTO options in September?

Yes. We have an updated form. So if you contact the company, we can provide that. Also, if you contact the registry, they will be able to provide that. And following that, we are just about to send letters out with those details on -- to all remaining option holders. And that letter should go out by the start of next week, so you should receive them next week.

Thank you, Ray. So we have no further questions, so I'll just leave it for a moment. [Operator Instructions] So we have no further questions at this time. So that does conclude today's quarterly investor call. Thank you all for joining.