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

Thank you for standing by, and welcome to our quarterly investor call. [Operator Instructions] An audio recording of this call will be made available on the company's website later today. I would now like to hand the conference over to Ray Ridge, Chief Financial Officer.

Thank you, Jeff. The usual formality before we commence, I would like to remind those on today's call that the update may contain forward-looking statements, which involve inherent risks and uncertainties. Those risks and uncertainties include those disclosed in our ASX lodgments, which we do recommend that you review. There are 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 of course, actual results may differ materially from those forward-looking statements. We're now ready to go. I'll hand the call to our CEO and Managing Director, Brent Barnes.

Great. Thank you, Ray, and welcome, everyone. Thanks for joining today's investor call. Also joining 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. Look, I'm really pleased to report the achievement of several significant milestones this quarter that demonstrate strong commercial momentum with pharmaceutical manufacturing customers. For me, this quarterly is starting to showcase the positive financial impact of our commercialization efforts as we start delivering sales to customers. Since launching APAS into the pharmaceutical market in March of this year, we have achieved 8 sales to customers and have a growing pipeline of sales opportunities that include some of the largest pharmaceutical manufacturers globally. These sales commitments are expected to generate positive operating and investing cash flows in the coming 2 quarters, representing a significant financial milestone for the company and establishes an encouraging outlook to potential full year cash flow breakeven. In August, we announced the signing of a sale and service contract with AstraZeneca, who have placed an initial order of 5 APAS Independence instruments. The total contract value is over $3.4 million, including the provision of annual support and maintenance services for the next 7 years. We have now received deposits of 4 of the 5 instruments ordered and are on track to progressively deliver and commission all 5 by the end of 2024 calendar year. The majority of the contract value is received as instruments are delivered with initial revenues being received during the September quarter, although this is expected to substantially grow in the coming quarters following instrument delivery and standard payment terms. The company has consistently outlined a commercialization strategy that targets large multinational companies like AstraZeneca that have the potential to purchase multiple APAS instruments across their global manufacturing networks. During the quarter, we disclosed Bristol-Myers Squibb, or BMS, one of the top 10 largest pharma companies by revenue, had purchased an APAS Independence instrument. We have signed an evaluation agreement with BMS during the quarter, and it was pleasing that within the 3-month evaluation commencement, a purchasing decision was made. Their evaluation is ongoing where they will assess the suitability of APAS for potential deployment to additional manufacturing sites across their network. The final update on sales relates to our clinical business, where our distribution partner, Thermo Fisher, completed the sale of APAS to Quest Diagnostics. Quest are a leading provider of diagnostic services with an extensive network of clinical laboratories across the United States. It's the first sale to Quest, where once implemented, has the potential for further sales throughout the Quest network. I'd like to call out the significant positive shift in sales performance. We have achieved record sales during calendar year 2024 and are experiencing increased sales velocity that is expected to continue. It provides shareholders with confidence in our sales strategy that we've described over the past 12 months. From a marketing perspective, we delivered new performance data and attended conferences aimed at building awareness and establishing thought leadership in pharmaceutical microbiology. In September, the company held its inaugural APAS Technology Showcase event in Germany and early this month, presented the APAS Independence at the PDA Annual Pharmaceutical Microbiology Conference in the United States. This is particularly significant as it's focused on microbiology specifically and attracts key decision-makers from major pharmaceutical companies globally. This year, we launched new scientific data focusing on the validation of APAS for routine use in pharmaceutical environmental monitoring workflows that included data presented by AstraZeneca. I'd encourage listeners to visit our website, Scientific Library, if you're interested to read a little bit more on those presentations. From an R&D perspective, we announced the commencement of a new development project that automates another type of environmental monitoring test. This test uses a smaller culture plate called a Contact Plate that is typically used for monitoring air, surface and personnel within that clean room environment. The additional Contact Plate analysis module will be another software module available for sale to customers, which is expected to increase both the total number of instruments sold and the annual reoccurring revenue opportunity associated with each instrument. Last week, we announced the first installation of APAS for Contact Plates, and that was completed at an AstraZeneca location, and it really establishes early voice of customer feedback during our developmental process. The enhancement is a key feature of the APAS technology, and we've received overwhelming positive feedback from demonstrations of the AI technology at recent conferences. The financial component of this quarterly is a really important one, and I'll hand it over now to Ray, our CFO, 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 October. All figures will be in Australian dollars and are in accordance with ASX listing rules, they are not audited. For the quarter ended 30 September 2024, LBT reported net cash inflows of $0.1 million. The net cash outflows from operating investing activities were $0.8 million, which did include $600,000 in receipts comprising the deposits received on 4 of 5 instruments ordered by AstraZeneca and other income for consulting, maintenance, software renewals and installation fees. Net cash inflows from financing activities were $900,000, largely being the proceeds from the exercise of options ahead of the expiry of the LBTO Series Options on the 15th of September. These cash flow movements for the quarter resulted in a reported cash balance of $2.5 million at 30 September 2024. As mentioned by Brent, the company expects total net operating and investing cash flows to be positive over the next 2 quarters. This is underpinned by over $4.5 million or $4.4 million, I should say, in committed sources of cash inflows. This expectation is taking into account higher cash outflows of nearly $1 million in the next quarter as the company replenishes inventory. As noted in the quarterly report, expected inflows include receipts of $2.7 million for the remaining proceeds from existing sales with AstraZeneca and Bristol-Myers Squibb and $900,000 for the R&D tax incentive, which has now been received. Known and potential near-term financing cash flows include 2 items. One is the outflow of $700,000 for part repayment of the loan from the South Australian government. That was actually made mid-October. This now leaves a remaining balance of just $1 million on that loan. The second item is we had approximately $409 million listed options, ASX Series LBTOA. These are well in the money with an exercise price of $0.008 per option. These options expire 15 November 2025 and would raise $3.3 million if fully exercised with $1 million of those proceeds committed to the final repayment of the loan. In short, I believe we have a solid cash runway together with additional potential sales that allows us to focus on executing on expanding sales into the pharmaceutical sector. Back to you, Brent.

Fantastic. Thank you, Ray. Look, in terms of the outlook, I'm going to kind of keep it into 3 areas like I did last quarter. So looking at customer experience, sales execution and market expansion. So thinking about customer experience, we are expected to complete the delivery, installation and qualification of the 5 APAS instruments ordered by AstraZeneca. These deliveries are across multiple global locations and establishes a broader global footprint for our APAS technology. The secondary validation that is currently being performed by AstraZeneca is also likely to be finalized during the quarter, and that's really significant because it allows those instruments to move into routine operation. We expect to receive the performance data from Bristol-Myers Squibb and their evaluation of APAS and support them in their consideration of broader placements within their network. From a sales execution perspective, we're focused on working with prospective customers. Having converted Bristol-Myers Squibb from an evaluation to a sale, we still have another active evaluation with another large pharmaceutical company that we'll be supporting to advance through that kind of evaluation and sales process. We do have a number of other advanced opportunities in the pipeline that have the potential to convert, and we probably expect those evaluations to commence sometime in the early part of 2025. Finally, from a market expansion perspective, we are showcasing APAS at key conferences in Europe. In fact, this week, AstraZeneca presented at a conference in Vienna, all about their kind of validation approach and their implementation of APAS. Developing the new Contact Plate application will be our primary priority from a product development perspective, and that really strengthens our sales efforts by offering a comprehensive solution, enhancing our market appeal for prospective customers. We anticipate completing the development of this Contact Plate work by mid-2025 calendar year. In closing, I wanted to highlight again that the company expects total net operating and investing cash flows to be positive over the next 2 quarters, and that's underpinned by $4.4 million in committed sources of cash inflows. This is an extremely positive financial signal that is largely driven by product sales resulting really in an enthusiastic and optimistic outlook for the company. I look forward to answering questions, and we'll hand it now over to Jack to facilitate any of the Q&A process.

[Operator Instructions] So we do have one question from [ Peter Linus ]. Is all your manufacturing in-house in Adelaide?

Thanks, Peter, for the question. No. So the hardware is manufactured in Melbourne. So it's an outsourced manufacturing agreement that we have with a company called Planet Innovation. Planet Innovation are quite well known and respected and did all the design engineering work for us. So they manufacture the instrument for us. From the software side, we do all of the software manufacturing, if you like, and all the software R&D and development and support with internally, and that is all managed in-house in Adelaide.

[Operator Instructions] We have another question from Robert Williams. Are the conversations with the likes of AstraZeneca taking place on a global scale? Or are they individual regional conversations?

A little bit of both. So certainly, we've said before, from an AstraZeneca perspective, they've got a centralized kind of center of excellence, and they're principally the ones that we talk with, and they're the ones who are doing the evaluation and now kind of made the business case of standardizing through the global network. Once that kind of process is finished, we're absolutely talking with the local sites. So there's, like I said, multiple sites that we are installing APAS into. And of course, as part of that process, we're interacting directly with those local sites. I would say for Bristol-Myers Squibb is another example that we said, they have got as well a global center of excellence for microbiology. And so we're working with that central site. So what we typically see when we talk about big pharma or these large customers is that they have a central group that look to evaluate new technologies that look to kind of do data trending across their global organization, and that's where we kind of principally work with them. So it's a global centralized group. But in addition to that, it is important that we are talking with the regional sites and regional facilities as well, but very much kind of a hub-and-spoke type of model. And that's kind of quite relevant from a sales perspective, whereby we don't believe we need to invest in a large and expanded sales organization globally. We certainly need global sales presence. But given this kind of centralized approach initially at least, it means we can be very targeted and nimble from a cost and a sales execution perspective.

So we've got no further questions at this time. So I'll just provide another 30 seconds in case anyone wants to raise their hand or provide another question.