Nanalysis Scientific Corp. (NSCI) Earnings Call Transcript & Summary

Good morning, everybody. I've put everybody on mute for the introduction here. Thank you for joining us. Sean and Randy will be with us momentarily. So good afternoon and good morning, depending where everybody is. What I'll have is -- thank you for coming on the analysis Q&A session. I will ask Randall to give a brief summary of the call yesterday. And for there, we'll open it up for questions. So everybody is on mute at the current time. [Operator Instructions] And just bear with us. Good morning, Randall.

That sound's working. That's what I wanted to. check.

Yes. It is a little quiet.

Well, that's because I've got kids upstairs still sleeping, so I'm going to be a little quiet today.

Okay.

Good afternoon everyone. Sorry, I just had difficulty in traveling. I just found a good spot to do the meeting.

Fantastic. So anybody else is on mute at this time. [Operator Instructions]

Randall, would you mind -- I'm not sure if everyone was able to listen to the call yesterday. But would you mind maybe giving a high-level financial overview of the quarter, and then we'll just dive right in. And then if so, Sean, if you wanted to give any color beyond that. But obviously, this call is being to give access and opportunity for investors to ask questions to both Randall and Sean. So that's really the purpose of this call. But we are happy to give as much color as we can, and I thought it might make sense, Randall, if you wanted to kind of...

Absolutely. So for the 3 months ended September 30, 2024, we did $10.6 million of revenue, which is a 50% increase of revenue over the prior year. That was made up of $4.2 million of product sales and $5.4 million of service revenue and about $1 million of flow-through inventory revenue. That is gross margins on product sales were 52%. So that's up from 41% in the 3 months ended September 30, 2024. Gross margin on services was 15%, which is up 18% over the negative 3% we had a year ago. So on product sales, we've done a lot of work to reduce our costs, and we've also had improved selling prices here. And that's allowed us to bring that margin up higher. In terms of service revenue, we've taken over all the airport accounts in January 2024, and that's allowed us to obviously deploy all of our technicians into servicing roles. And also, we're working on increasing revenue and managing our efficiency in that project to increase revenue -- increased margins there. We think there's still upward trajectory available to us in both cases.

And you hit revenue -- sorry, go ahead.

In terms of EBITDA -- we're trending in the right direction for EBITDA. We posted a second quarter of positive EBITDA, which is important for us, and we intend for that to continue. That's up $1.6 million over the negative 1.3 -- $1.4 million, excuse me, that we posted in Q3 2023. So again, trending in the right direction. And then finally, net loss has been continuously trending lower and towards -- eventually towards net income, so again, trending in the right direction.

Fantastic. Sean, I don't know if you wanted to give any other color at this point or we can open it up. It's up to you.

Let's just open it up.

Okay. Fantastic. Are there any questions to pull yourself off mute. [Operator Instructions]

I'm not in the right place to listen to the conference but I just managed to. Now I had only one question. What's the reason for the decline in the gross margin from the service. And I saw it was going down from 18% to 15%,

I think we were at -- we're up from 10%, Walter. We were at 10% in the second quarter and up to 15% here.

I mean the gross margin, it was -- the gross margin was that up -- I mean the percentage, o? Compared to...

I think no. Compared to what...

Walter, are you referring to sequential from Q2 to Q3? Or are you referring to year-over-year?...

I don't -- I saw something going down with from 18% to 5% the gross margin percentage.

It's the opposite.

Sorry, It's -- It was an 18% increase over last year -- Yes. No, we were at negative 15% -- or negative 3% last year because we were only servicing a handful of airports. And we -- we've got up 18% to positive 15% in -- it's just the bit of a -- It's tricky for that...

And I said I'm not in a nice place...

Yes, yes, no, for sure. We were -- like I said, it's tricky to fall because we're actually still negative last year because we were generating revenue, but we had so many undeployed workers that we're doing training and things like that last year, then we were eating all of those train costs as this year, everybody is working, a great amount of the training that we're still -- we still do training, but a lot of it, we actually build back to the customer now. So just because of the nature of the contract. So that helps us as well.

I just saw that 5 minutes ago that safe capital had the buy recommendation. So I think they must have been very pleased with the results.

Well, we certainly were -- Yes, we certainly were as well. Things are all trending in the right direction for us. All the key metrics in EBITDA is -- EBITDA is down a little bit admittedly from the second quarter, but that was expected because summer is always very slow in our product sales business. And we expect Q4 to be strong coming out of Q3.

Keep it going.

Yes. It's positive. That's what I was happy about. It's still positive EBITDA and like I said, it's trending the right way. I'll -- sorry, didn't hear that.

Randall, a couple of items we did point out is that because of the quarter because it is seasonally slow and part of it due to summer, then it gets accelerated, right, in September. We did mention obviously that some of the sales spilled into the Q4. And then again, Q4 is seasonally our strongest quarter. So we got -- so we're moving into mid into Q4. And as Sean has said on the call, things look very good.

I just popped up in the press release here on my screen, so everybody can see it. And I want to highlight the -- to Walter's question, I want to highlight the quarterly trend just to show those trends going in the right direction. So we've got total revenue from Q4 2023. I'm going to go from 2023 into Q3 of 2024, so $9.8 million to $11.2 million, $11.5 million and then to $10.6 million. Now -- Yes. Q3 2024, as I said, is lower, and that's expected due to seasonality. What I want to show here is things are moving very much in the right direction. And if I go back to the previous table, Q3 revenue was in the $7 million of 2023. So 50% increase in revenue year-over-year. But particularly, I want to show EBITDA moving from negative 774,000 to 2 consistent quarters of positive EBITDA and then our net loss for the period -- and very importantly, going from a $2 million net loss to a $6 million net loss. So moving again in the right direction and towards our target of positive -- continuous positive EBITDA and positive net income eventually. So in the right way. Q3 is tricky, always seasonality, as Matt said, but we've -- we're expecting a good Q4. And as -- and again, as Matt just mentioned, we had some rollover of sales into Q4 that came in at the very, very end of Q3 quite upward. And unfortunately, due to accounting rules, we weren't able to pull those sales into the quarter, so that will be a part of Q4. Walter, do you have any de side questions?

Anybody else have any other questions?

Sean, do we still have you? Or did you -- Sean's dealing with -- you're here. Your videos scrolls in, Sean, but we still have you.

Yes, I've got you on audio from my -- with my phone. So I haven't set some WiFi challenges here in the conference center lobby.

Do you have any other question, Sean? Did you -- sorry, I'm taking over your job, Matt.

Please, go ahead. Sean, did you want to provide any kind of overview remarks?

Yes. I'll just let you know that we're working very hard to increase our Benchtop NMR product revenue. We're really excited about the rest of the year and 2025, including new product launches. And we know that most investors got involved in the business because of that product family, and I just want to let every know that -- everyone knows that that's still the core of our business, and we're working very hard to make that successful.

Okay. Well, with that, if we don't have any other questions, we get end the call and let everybody carry on with their day or evening. Thank you.

Thanks very much. Have a great day -- great evening.

Thanks, everyone. Have a nice afternoon.

Bye-bye.

Thanks, Walter, and have a nice day.