ImmuCell Corporation (ICCC) Earnings Call Transcript & Summary

Thank you, Vicki. Good morning, everyone, and welcome. My name is Joe Diaz, with Lytham Partners, as the operator just mentioned. Our firm serves as the Investor Relations consultant for ImmuCell. I appreciate each of you taking the time to join this discussion of the unaudited financial results covering the first quarter, which closed on March 31, 2025. A reminder and a caution for those listening: remarks delivered by management on this call contain forward-looking statements. That category covers anything referencing events yet to come, anticipated future results, or predictions regarding actions the company intends to take going forward. Such statements should not be viewed as guarantees of performance, and they carry risks and uncertainties that might cause actual results, outcomes, or events to diverge materially from what is discussed today. For further detail on forward-looking statements and the risks and uncertainties that may affect future results, outcomes, or events, you can consult the cautionary note on forward-looking statements, or the safe harbor statement, included with Form 10-Q, the press release the company filed last night, and the company's other periodic filings with the SEC. Anything discussed during today's call reflects information only as of today, Thursday, May 15, 2025. The company assumes no duty to update any information discussed on today's call. Please be aware that certain non-GAAP financial measures may be referenced during today's call. To help you better understand its financial performance, the company provided definitions of those terms, along with reconciliations of those figures to the most comparable GAAP financial measures, in last night's press release. Having said that, I'll hand the call over to Michael Brigham, President and CEO of ImmuCell Corporation, for his opening remarks. After that, we'll hear from Tim Fiori, the company's newly appointed CFO, who will review some first quarter financial highlights, and following that, we'll open the call for your questions. Michael?

Thank you, Joe, and hello everybody. In a moment, as Joe mentioned, I want to make everyone acquainted with our incoming CFO, Tim Fiori. To begin, I'd like to share several remarks from a strategic, big-picture standpoint. Put plainly, the scale of our operations keeps expanding, our mix keeps widening, and the intricacy keeps rising — all of which is wonderful. Our attention is squarely on the commercial potential that First Defense presents to us. The sales gains First Defense has posted lately are quite encouraging for our company. The capital we put toward lifting output capability beyond $30 million each year has now been finished; growing our manufacturing sites and getting the new machinery up and running amounted to an enormous undertaking. We carried out key enhancements to our processes and dealt with a number of contamination incidents. Worth noting: no further contamination incident has happened to us in more than 12 months. Across the quarter that just ended, we delivered gross margin improvement together with higher revenue, and our cash balance grew to roughly $4.6 million on March 31, 2025. Beyond that, we're delighted by the uptake of the various formats we rolled out for First Defense — to the degree that these ought now to be viewed as a family of connected offerings, with broader applications and greater appeal. Meanwhile, we are beginning investigational product use of Re-Tain so we can gather market input regarding how the product performs in the field, while simultaneously lowering product development costs and looking into possible strategic alternatives for our novel technology. Evidence of our financial turnaround and progress appears in the strong adjusted EBITDA figures Tim will discuss; yet before that, let me stress that enlarging both the volume and scope of what we sell, plus overseeing other corporate goals, has turned into a steadily more intricate duty. Throughout the years, we've taken pride in holding administrative costs down relative to what public companies typically spend. Bringing more people onto our senior management team creates extra cost, though it likewise delivers fresh possibilities and advantages. Having collaborated with Tim for a little more than one month, I've already felt a number of those advantages. We feel good about how we'll navigate the remainder of 2025. Having said that, allow me to bring in Tim Fiori. Tim, could you kindly share a little about your history and walk us through a few of the first quarter's financial highlights?

Thanks, Michael. Just like Michael said, I've only been at ImmuCell for a bit more than 1 month now. Prior to joining ImmuCell, I spent 24 years at IDEXX Laboratories in a range of finance positions — a highly regarded publicly traded business whose headquarters are in Westbrook, Maine, close by. My most recent role there was Senior Director of Finance and Commercial operations covering their livestock, poultry and dairy business, referred to as LPD, along with water testing and IDEXX's OPTI Medical Human Health line of business. Now let's go over ImmuCell's first quarter financial results. Product sales in the first quarter of 2025 rose 11%, or $810,000, versus the first quarter of 2024, reaching a record $8.1 million; that quarterly sales record beat the prior record, which had been set in the fourth quarter of 2024. Thanks to these robust sales, we brought our order backlog down from $4.4 million at December 31, 2024, to $4 million at March 31, 2025. I'm happy to report that we've kept chipping away at that backlog, and by May 6, 2025, it had fallen to $3.4 million. We said previously that our objective was to raise annual production capacity to $30 million or more per year. Hitting $15.8 million in sales across the 6-month period that ended March 31, 2025, indicates we are on track to reach that goal. Over the 12-month period that ended March 31, 2025, product sales grew by 28%, or $6 million, to $27.3 million, compared with the 12-month period that ended March 31, 2024. To keep succeeding, we have to keep steering clear of major contamination events and equipment breakdowns while running with solid production yields; the gross margin dollars are what let us pay our bills and generate our cash flows; in earlier periods we saw some low gross margin percentages while we were dealing with low output and scrap costs tied mostly to the contamination events I mentioned before. The 42% gross margin in the first quarter of 2025 is better than the 37% in the fourth quarter of 2024, yet additional work remains before we hit our target of 45% or more. Higher sales and improved gross margin matter. I don't want to diminish those achievements, but I'd like to spend a moment on adjusted EBITDA, since noncash depreciation expense weighs heavily on our bottom line. As a reminder, adjusted EBITDA, unlike plain EBITDA, adds back stock-based compensation expense, another noncash expense that is part of net income as determined under GAAP. We generated adjusted EBITDA of $2.3 million, $3.7 million and $3.3 million during the 3-month, 6-month and 12-month periods that ended March 31, 2025. Those solid figures compare quite favorably with adjusted EBITDA of only $458,000, $247,000 and negative $280,000 during the 3-month, 6-month and 12-month periods that ended March 31, 2024. As for the remaining financial results, the press release and the Form 10-Q we filed last night lay out the full unaudited P&L and balance sheet results. Finally, I'd suggest you take a look at the slide deck for our corporate presentation. In my view, it offers a strong overview of the strategy and goals for our business, along with where our financial results currently stand. An update for May was posted just last night on our website. You can find it by going to the Investors section of our site and clicking corporate presentation, or you can reach out to us if you'd like a copy; that said, we're ready to take your questions. Please let the operator open up the lines.

Regarding what products we sell, let me start by saying I appreciate the way you disclose revenue before reporting results and then submit your Q before this call; that makes it easier for us to prepare and follow along. Looking at the mix, Tri-Shield did very well this quarter — I believe it accounted for 71% of sales, up from 55% the prior quarter. So I have two things to ask. The first concerns the new bulk powder offering. What contribution do you anticipate from it by the end of '25, and possibly during '26? Also, it appears that how much Tri-Shield versus bivalent we sell has fairly minimal effect on gross margin. Could you address that as well?

Yes. Thank you, George. If we look at the Q, indeed you noted that the first quarter came in at 70% Tri-Shield and 30% other, which covers 3 months; across 12 months, the split is 64% Tri-Shield and 36% other. Ever since we introduced Tri-Shield only a few years back, it has sold extremely well. Its wider claim set truly allows that product to stand out in the marketplace — thanks to efficacy, thanks to resembling a vaccine, and thanks to the pathogen coverage it provides. That is the compelling engine behind our growth. We continuously explore what more we can accomplish, how we might broaden the product line, and how we can increase sales; so regarding your bulk powder question, that item remains under development. We expect to bring it to market sometime across the second, third and fourth quarter, though we have not made any sales from it yet. As you noted, George, the format differs — once again it is bulk rather than inside a capsule or a tube. It will serve as a feed additive and will be sold to large calf ranches, operations that aren't used to giving individual calves a dose via capsule or tube. So there will be more updates later. I'm pleased that our VP of Sales and Marketing, Bobbi Jo Brockmann, is heading up development, but there are no sales to report at this point; so that represents a new development, a new source of upside across the final 9 months of the year. Did that cover it, George.

That answers it completely; and perhaps how gross margin ties to the product mix at this moment; it appears that no matter what — it appears that you delivered very robust gross margin whether Tri-Shield sits at 70% or 55%. I am merely attempting to determine whether you perceive — whether the mix has some effect on gross margin.

Yes; we set prices based on our projected costs for each format. So Tri-Shield costs noticeably more than the bolus, or put differently, the bolus is considerably more economical than the Tri-Shield; yet I would say — you receive what you pay for; and customers are ready to pay for that Tri-Shield and obtain that wider coverage; and we do carry quite a lot — a sizable share of fixed costs; thus we gain, and that gain showed up both in the fourth quarter at 37% and even more in the first quarter here at 42%, simply from shifting our labor, which is mostly fixed, and all our equipment and facility costs, which are fixed, toward higher volumes. So every product format gains from that volume increase, and that is what brought us to 42%. And as Tim mentioned, we are not — still work to be done. We still have room to improve.

Great job, everyone. Those results are amazing. Tim, we're glad to have you joining us, and it's terrific that you're now part of the group.

I appreciate that, George.

We'd welcome some additional granularity on how the expense lines break out now that the new CFO is in place. So that's already something we're glad to see; and I think the emphasis in the deck is simply on adjusted EBITDA for the trailing 12 months. I suppose, when you look at the company, there was a final contamination incident 12 months back, around April. And what I want to know is, during Q2 of last year, how much, say, EBITDA was eaten away by that incident — what I'm really getting at is that Q2 and Q3 of last year probably showed weaker EBITDA than what the underlying business should deliver in Q2 and Q3 of this year. So could you assist us in setting some expectations for EBITDA in Q2 and Q3 this year.

Correct; excellent question, Russ. That was something we addressed on a yearly basis. I don't have it split out by quarter. I'm looking at roughly Page 26 in the Q where the scrap per year gets discussed; and so one piece of my response would be that for '22, total scrap cost came to $589,000, and for the year ended '23 it was $527,000. Then '24 came in at $407,000; so roughly $0.5 million each year throughout that expansion period when those contaminations are happening. Regarding 2Q, yes, there will be — that contamination, your recollection is correct, April '24 was the final one. So it impacted that entire year at just $407,000, though the bulk of it would have fallen in the first quarter since there was only one contamination in April and nothing afterward for the remaining months; so I'm not giving you a precise figure, but rather a sense of direction.

Understood. Perhaps a clearer way to put it is whether Q2 and Q3 of last year still carried any revenue effects? Or how should we view...

Yes, yes. The upturn in revenue actually started in Q4 of '24. We had been lower — we posted back-to-back records in Q4 of '24, then surpassed that mark in Q1 of '25. So that's being measured against those weaker stretches. Even so, those stand as our strongest 2 quarters ever.

Yeah, for sure. Congrats. What I'm getting at is sort of what we might anticipate for revenue across the coming 2 quarters. I suppose the truth is, once those next 2 quarters pass, we ought to see higher EBITDA out of the enterprise, since the year-earlier comparisons were possibly below what the business can currently deliver.

Yeah, I'd say that's reasonable. What I mean is, we truly want to make that crystal clear. Q4 and Q1 are solid. Compared with the diminished quarters — the diminished initial 9 months of '24 — they appear solid; yet another factor, and Tim and I were just reviewing our notes right here, is to also take the backlog into account; so Q2 stands to gain. Tim brought it up — what was your figure, Tim, 3-point.

4, I believe. $3.4 million on May 6.

As of May 6, two dynamics are in play: we're adding more capacity, and we're working through that built-up backlog, with progress expected across the second quarter. And right, so I don't have — we don't provide public revenue projections, but I suppose what I'm getting at is — we're attempting to make clear what — putting the strong stretch side by side with the weak stretch; and we'll see what the sales team is capable of since they can now — are permitted to get out there and genuinely generate new business, whereas during that stretch in '24, they were truly hamstrung. They were handling frustrated customers and doling out limited product, and onboarding new customers genuinely didn't do us much good; now with that shift, we'll be in a position to — I mean the sales team has executed a fantastic pivot away from that period of tight product rationing toward the business growth period ahead. So that's not a numeric response to what you asked, but in terms of direction, I believe that's where we're headed, working off the backlog and winning back customers we lost and uncovering new business, both with the current product line and the product line expansion we discussed with George into the bulk powder.

Basically, I suppose the point I'm getting at is that the run rate for EBITDA in the core business is significantly above $3.3 million across 12 months.

Correct. Indeed; perhaps I was a bit slow in grasping what you were asking. Right, I certainly focus on the 3 — that's the reason we presented those 3 periods. The 3 gives a better indication than the 6 of the company as recovered, and the 12 contains a 6-month lag within it. Yes.

Alright, so I guess the second half of what I'm asking might really be more of a comment — that's the core business, but roughly $800,000 every quarter goes toward product development, and most of that is directed at getting the new product approved. So had you not been putting money into additional product development, the First Defense core business would be valued considerably higher than the enterprise's EBITDA.

Yes. There's a great deal — what we have to keep an eye on is how much sales and gross margin bounce around. What I believe we can rely on is that admin expense, given the modest increase we've agreed to fund and — yet the remaining expenses tend to be more linear. So the key thing in responding to what you asked is that we — that's among the reasons we assembled that segment footnote. And I'd genuinely — yes, I think that's what you're up to, Russ, or if that isn't the case, I'd urge you to simply review that note. I was just attempting to pull the figure up in front of me, it sits near the end of the footnote, #16; and I think that truly is the best way I can answer you, which is that we might split the business into the scours, the mastitis and the other. The other is quite tiny. The mastitis is the Re-Tain, and that's the one where we are actively pursuing strategic options to cover that big expense. And then the scours on its own is simply what the business would look like minus the other 2 categories, purely the Scours business.

Well, my point is that there's substantial worth in this, and you've been putting a good deal of capital into product development, which reduces EBITDA for the existing core business, and shareholders are fine with all of that. And I believe everyone is eager to see the new mastitis product reach the market. So is there any news on that? I assume it's covered in the press release.

Russ, I'm pleased you brought that up, since yes, I did mention that segment footnote. That's correct. Beyond that, we consistently report depreciation in full because it's enormous; it won't have an impact on that EBITDA, and it represents a significant portion of the product development spending. But we addressed it more thoroughly in the press release compared with our script, yet the investigational product use is genuinely a new and very significant development. All of us feel frustrated that we still haven't obtained that FDA license; and some things are within our control while others are not. And we're frustrated by what we can't control. At this moment it's truly stalled because our contract manufacturer needs to pass inspection. And it would be terrible if that were where things ended. But the new part of the story is this investigational use — although it won't bring in revenue, getting the product to market immediately, right over the next few months and through the rest of the year, the sales team will do a really strong job of delivering product and gathering customer feedback. And that's the nature of investigational product use; it's a mechanism through which the FDA provides a bit of flexibility. We aren't giving you the license at this point, but we are allowing you to obtain market feedback; so that's a major step. And I wish we had the larger step, which is simply full commercial sales and FDA approval; we just don't have it, and this lets us proceed to test this product that hasn't been tested in cows since efficacy trials years ago; so we'll look forward to reporting those results. It will begin late in the second quarter and continue into the third quarter, with some results near year-end regarding how the product performed outside the lab and on the commercial dairy.