TOMI Environmental Solutions, Inc. (TOMZ) Earnings Call Transcript & Summary

We appreciate everyone being with us for the TOMI Environmental Solutions Investor Update Conference Call today. Joining us on this call are Dr. Halden Shane, TOMI's Chief Executive Officer and Chairman, EJ Shane, our Chief Operating Officer, and Niro Srirathan, our Chief Financial Officer. A telephone replay of today's call will be accessible through November 19, 2026, and the details are included in the company's press release. There will also be a webcast replay available on TOMI's website, www.steramist.com. Some written and oral statements made by TOMI management may constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. When considering these forward-looking statements, you should weigh significant risk factors that might make actual outcomes diverge substantially from what we anticipate. What we're sharing on this conference call reflects only the facts and circumstances we know as of right now. For a discussion of those risk factors, please consult the filings we've made with the SEC. The company assumes no duty to revise these forward-looking statements following today's call. At this point I'll hand things over to Dr. Halden Shane, TOMI's Chief Executive Officer and Chairman of the Board. Please proceed.

Thanks, John, and I'm glad everyone could join us today. What a day. We delivered another quarter of sequential revenue growth, carrying on the upward trend we've maintained throughout all of 2026. Revenue increased by about 36% going from the first quarter to the second, and then it rose an additional 11% between the second and third quarters. Third quarter revenue now stands roughly 51% above the first quarter — that's consistent sequential gains accumulated over the year, not something produced by one quarter alone. We achieved positive operating income for the first time since Q3 of 2024. The strategic initiatives we've implemented are delivering results. For Q3 2026, revenue was roughly $2.49 million, representing an increase of about 24% versus $2.01 million in Q3 2025. That's 11% higher than the $2.25 million posted last quarter, as I mentioned. As of September 30th, our sales order backlog stood at around $2.5 million, and it has since risen to roughly $2.8 million. Shareholder equity at September 30th, 2026, is expected by the company to land somewhere between $3 million and $4 million. The accounting treatment for the company's convertible notes — including the conversion of $2.5 million of notes in the third quarter — has not yet been finalized in the review by the company and its independent registered public accounting firm. Because of that, we won't go over the financial results that the review could touch — this covers any gain or loss connected to the conversion, net loss, net loss per share, and the associated liability and stockholders' equity balances. With what we know right now, we anticipate the effect of this accounting treatment will be non-cash, and the company doesn't anticipate that the review will change revenue, gross profit, operating expense, or income from operation figures. Even so, every result stays subject to change until the company files its quarterly report on Form 10-Q for the period ended September 30th, 2026. Demand for BIT Solution is also climbing steadily this year. So far this year, our BIT Solution sales plus the orders still open have already exceeded the BIT Solution sales we posted for the entire prior year. With two months left before we hit that point, service keeps moving upward. The biggest change versus recent years is mobile equipment. For mobile equipment, year-to-date sales combined with open orders sit almost 107% above last year's full-year total; over the past two years we've been saying that sustained growth requires every one of our departments to rise together, rather than one or two offerings carrying the year. We expect 2026 to close on that basis, which gives us solid visibility into near-term revenue. Our razor-and-blades approach remains in place, and the applicator has become central to that approach. iHP only works because of the applicator, regardless of whether it is used alongside a mobile system or set up in a permanent or semi-permanent installation. We started stressing this strategy under two years ago, building it out from our consumable-driven model. Sure, it takes longer to replace than BIT Solution, but it sells much faster and counts as full capital equipment. So it generates revenue and margin today, while at the same time laying the groundwork for recurring BIT Solution demand down the road. Right now, the sales opportunity pipeline we have in front of us is valued at approximately $35 million on a projected basis. That pipeline spans every phase of the sales cycle — from proposals, through negotiations, all the way to purchasing — and it's supported by ongoing expansion in Integrated System opportunities tied to our SteraMist Integrated System platform, or SIS, as well as Hybrid and Custom Engineered System, or CES, configurations. Let me be clear: this represents potential future revenue. At this stage, these aren't committed orders, and they don't guarantee how we'll perform going forward. We remain focused on our $12 million sales target for 2026. Our sales team may be small, but they're dedicated, and they're working hard to reach that benchmark. Regarding costs, tight control of our overhead continues to deliver results. Operating expenses were roughly $1.44 million for the quarter, a 7% decline versus the prior year, thanks to lower general and administrative spending. Working capital climbed to about $1.95 million, compared with $1.02 million at the close of 2025. I'd like to bring you up to speed on a few items from last quarter. To begin, that project of close to $1 million we discussed last quarter — installing applicators within proprietary machine lines at a large multinational healthcare manufacturer — is now in progress. That client is extending into more facilities, capitalizing on the European Union regulatory acceptances we obtained recently. TOMI also keeps growing its footprint in the defense sector. Once Korean defense contractors and Canadian defense agencies gave their approvals, we put together a highly detailed strategic plan for those accounts, and one of the two agencies has already received systems from us that are ready for deployment. TOMI iHP Corporate Service keeps expanding. We have now signed decontamination service contracts with customers such as Integra Pharma, Catalent, Cleveland Clinic, and LFB USA. Roughly four times per month, our team delivers on-site support, including at the Centers for Disease Control and Prevention in Atlanta. Our service revenue comparison to last year took a hit from a production change at one big customer that doesn't need decontamination services anymore. We've partly made up for that, though, and we're actively growing our service deployment business — that includes ways to bring corporate services straight to end users internationally. During Q3, we kept adding partners. SteraMist iHP activity picked up across the Americas in life sciences, food safety, and healthcare. We signed on more partners in Mexico plus a new one in Argentina, and we did additional business in India and the European Union. Along with our legacy partner in Mexico, we're still working on a cheese factory that was announced earlier. The cheese shelf-life extension effort is still producing solid results, and together with that partner we've moved into additional food categories and use cases. Existing accounts such as Thermo Fisher keep adding to their capital equipment orders. We've likewise widened our ties with a leading global vision care company. That customer first signed on in 2025 at two locations and placed an additional equipment order near the end of Q3. Combined revenue from those two sites is approximately $750,000, and they have a recurring BIT Solution contract with TOMI. Additional orders at both sites remain in the pipeline, along with more equipment systems and a Custom Engineered System for integrated automated decontamination. Our expectation is that a portion or possibly all of those opportunities will land prior to year-end, with an approximate range of $960,000 to $1.7 million. Resources are being channeled into the pipeline and into what customers require across our entire product and service line. That focus ought to sustain us through the close of the year, and we're eager to share how 2026 concludes. Right now, I'll pass the call along to our Chief Financial Officer, Niro Srirathan, who will go over TOMI's third quarter financial results.

Thank you, Dr. Shane. For TOMI, the third quarter represented a significant financial turning point. Year-over-year revenue rose 24% and was up 11% from the prior quarter, reaching roughly $2.49 million, versus approximately $2.01 million in Q3 2025 and $2.25 million in Q2 2026. We produced about $30,000 in positive operating income — our first quarterly operating profit since Q3 2024. Product sales drove the revenue increase, climbing roughly 30% year-over-year to about $2.08 million, up from approximately $1.6 million in Q3 2025. U.S. revenue grew 50% to approximately $1.92 million. Across the first nine months of 2026, total revenue was up 38% to roughly $6.39 million, with product revenue growing 61%. Gross profit rose 19% year-over-year to approximately $1.47 million, compared with approximately $1.23 million in Q3 2025. Meanwhile, operating expenses fell 7% to about $1.44 million from approximately $1.55 million, including a substantial year-over-year decrease in general and administrative expenses; together, higher revenue, greater gross profit, and disciplined expense management delivered approximately $30,000 of positive operating income, versus operating losses of roughly $321,000 in Q3 2025 and $244,000 in Q2 2026. Importantly, we accomplished this even with professional and consulting costs still elevated due to strategic and financing activities. All in all, Q3 showed meaningful progress throughout the business — double-digit revenue growth, positive operating income, and substantially improved operating income. In our view, these gains give us a stronger financial foundation as we head into Q4. I'll now hand the call to our Chief Operating Officer, E J Shane, who will cover our commercial priorities and the outlook for the rest of the year.

Thanks, Niro. It’s been a busy year, and what lies ahead for us involves both commercial and operational work. For most of this year, we’ve maintained a total pipeline of $35 million, plus an active pipeline — that means deals considered late-stage and expected to close shortly — ranging from $8.5 million to $10 million, while as a matter of course we’ve been filling and taking orders against the existing $9.3 million in revenue, along with open book sales for 2026; we anticipate receiving approximately $5 million in purchase orders before the year is out. Because the Hybrid and SIS platform form a more standardized product family, there's less call for completely custom enclosure builds, and putting iHP into equipment our customers already have has become simpler. As Dr. Shane noted, we're observing expansion in each of our main offerings. The company has likewise placed major emphasis on manufacturing improvements, in-house compliance, safety and quality controls, and regulatory affairs — with that final area prompted chiefly by interest in our food safety division; regarding regulatory matters, we continued to reinforce our registration portfolio and progressed further toward NSF certification for biosafety cabinet decontamination. During October's previous meeting, I offered to help with the rewrite of that standard's revision, giving TOMI a direct say in the way it develops. Revenue results are not yet driven by food safety, though regulators have been paying attention to it. To back our efforts in meat and ready-to-eat applications, we added Josh Hasty, PhD, who is CEO of FH Services. Dr. Hasty's prior roles included Director of Food Safety and Quality Assurance and Director of R&D at Tyson Foods Ingredient Solutions Group, along with a technical lead position on Cargill's McDonald's beef program. His industry knowledge is substantial and supports our food safety efforts. An independent lab study was announced by us on October 15 demonstrating that SteraMist iHP greatly decreased one particular strain of Listeria — a pathogen in food that can multiply while refrigerated. Treated samples on flat surfaces averaged a reduction beyond seven log, which is at or under the lab’s detection threshold. Within processing facilities, this Listeria strain frequently creates a biofilm — a shielding layer enabling it to clean surfaces and endure standard sanitization. For TOMI, food safety is a priority growth market, and this independent data supplies our sales team and partners with validated evidence for food processors. Regarding dairy and infant formula, we're still working with Nestlé and Danone on the relevant international registrations and food contact notifications with the FDA. Nestlé added more sites, so we've filed additional registrations around the world. We also carried on related efforts with a second nutrition company and got preliminary testing results during the last quarter. With that company we're operating at their U.S. plants, aiming to introduce iHP there, and their overseas sites would come next. Whether they can use it hinges on FDA acceptance. The submissions are done, and this customer is helping us collect the extra evidence that's needed. All three of these companies are committed for the long term. They know the rules, they’re asking for SteraMist iHP, and they’re collaborating with us to secure the authorizations that are needed. This is a very active effort. One particular Clostridium strain stands out as among the toughest contamination control problems in infant formula. The difficulty isn’t that this organism is especially hard to kill. What makes it hard is compatibility and the regulatory obstacles present in the manufacturing setting. To control it effectively you need sporicidal-level efficacy, along with approval for food contact surfaces, a no-rinse requirement, and compatibility with dry manufacturing environments. Meeting all of those together has historically been extremely difficult; that’s where we see the opportunity for SteraMist iHP. We’re collaborating worldwide with several of the largest infant formula brands to address this. Beyond infant formula, we see a broader opportunity in food processing. Microbial reduction at sterilization levels that stays compatible with food contact surfaces and with the requirements of food manufacturing, including ready-to-eat facilities, where contamination control is essential and disinfection happens every day as part of operations. This is a recurring opportunity. Food manufacturers carry out daily cleaning procedures rather than one-time disinfection. Integrating this technology into those procedures can lead to consistent high-volume product use; we’re already seeing that with multiple food manufacturers, where repeatable protocols support ongoing product consumption. While we go through the regulatory steps needed to expand those applications, we think food safety has the potential to be one of the biggest growth verticals for SteraMist iHP. Once that pathway exists, we believe the addressable opportunity in food processing and food safety could surpass anything we have chased in other industries. This is not merely one more disinfection product. It answers a substantial need that remains largely unmet, drawing on technology that can become part of everyday disinfection. In summary, within food safety we have narrowed our focus inside the broad market, all of it within the market of food processing, meat and ready-to-eat, general nutritional products, dairy and infant formula, and poultry. When it comes to poultry and other food-contact applications, hydrogen peroxide could potentially be covered by a particular section of 21 CFR, though only when certain conditions are met. That particular rule doesn't determine the regulatory status of the full SteraMist formulation, however. Every single component, along with each intended use, must still have its own valid FDA basis — be that a regulation that applies, a food contact notification, or some other accepted route. At this point we don't have residue data for poultry use that would be adequate to back a non-detectable residue claim. We're in the process of generating those data and working out which regulatory pathway applies. FSIS is the USDA agency responsible for inspecting meat and poultry facilities. So near term, as the technology supplier we've submitted a notification under FSIS's new technology framework, asking for a no objection letter. Regrettably, that letter wouldn't prove antimicrobial efficacy, nor on its own would it permit iHP to be used. What it would do is let each establishment validate iHP within its own process and HACCP system — that's hazard analysis and critical control point, the food safety system an inspected plant has to use to spot hazards and keep them under control in its own process. Healthcare remains a major focus area for us, especially special pathogen units. Such units deal with high-consequence infectious diseases, and they require decontamination of rooms, equipment, and personal protective equipment that is fast, validated, and thorough. Adoption continued to rise through the first half of 2026, and the first NV+ went to one of those units. In October we also verified we were prepared to meet increased demand for preparedness planning, equipment, and decontamination services, supported by deployable systems, our on-site service team, and our global partner network. At present, the Democratic Republic of the Congo is experiencing its 17th Ebola outbreak. Per the CDC, it is spreading much more quickly than prior Ebola outbreaks and is the second-largest ever recorded. It passed 1,000 confirmed cases within 40 days of responsive activation. In 2018, the DRC outbreak took about 235 days to exceed 1,000 cases. Uganda, Kenya, and Nigeria have reported cases as well. Thanks to contacts within our customer base and a longstanding partner in Angola, which is still seeing high rates of mpox, we are holding discussions with the Africa Centres for Disease Control and Prevention regarding potential support for response efforts. The interest in front of us is substantial enough that we expect it to help drive sales over the years ahead. Turning to the rest of 2026, life sciences is still our biggest division at the moment. It covers pharmaceutical manufacturers, universities, research laboratories, and healthcare product manufacturers too. Delivered sales plus open orders for 2026 total $9.3 million. Beyond that number, we anticipate roughly $5 million in further purchase orders before the year ends. Inside that $5 million, and as Dr. Shane mentioned earlier, we expect one customer to order over $1 million combining mobile capital equipment and a Custom Engineered System. The rest of this project consists of expansion orders from six additional customers, either for mobile capital equipment or for iHP deployment service work, along with a second large-scale Custom Engineered System. Installation of those two systems is set for February and April 2027. We are ahead of last year, since revenue has risen each quarter. Mobile capital equipment demand is running significantly ahead of 2025, our remaining product lines continue to expand at a stable pace, and our current customer base keeps increasing its usage of SteraMist iHP. Life sciences remains the business's foundation. Food safety is still moving through the regulatory process, and I'll update you as that effort advances. The pipeline is unchanged. We anticipate finishing the year in line with analyst reports, and installations are already scheduled for early 2027. Thanks to everyone for joining us this afternoon. I'll now return the call to our CEO, Dr. Halden Shane.

Thank you, EJ, for a solid report. TOMI was constructed with modest funding and a compact team much like Apple’s early days, steered by an unambiguous mission—to be number one—and SteraMist is the firm that brought into the modern era the 40 to 50-year-old technology employed for disinfection and decontamination. SteraMist has definitely come of age. Today many of the biggest corporations on earth are embracing it as a substitute for those 40 to 50-year-old legacy technologies, and its use is expanding among major food groups, both domestically and abroad. As EJ mentioned, there are regulatory steps that must be finished, and we are diligently working our way through them. Should we succeed—and we are confident that we will—SteraMist might emerge as a leading technology across food safety, food packaging, food security, and food transportation; we further believe it could assist in prolonging the shelf life of numerous foods. SteraMist carries a pipeline worth $35 million that expands each week, since we know demand for our product is extremely strong. Uses for this product are limitless, whether that means solving a global problem by killing the mite that harms honeybees or a biodefense weapon deployed in drones; we know we have placed ourselves to be part of the fight against pathogens of every kind across the globe and in outer space. Going forward, we believe our aim is to build toward steadier and more predictable performance. In my view, the unevenness and lumpiness this company has shown are finished. A few hurdles remain for us to get through, but we are getting through them, and we are advancing the company so that profitability continues on an ongoing basis into the near future. I want to thank the majority of my staff for the excellent work they have done in reaching these goals. This is a small company with a big heart, yet a great product. Thanks to our investors, bankers, partners, and customers, ranging from Fortune 500 companies to smaller organizations, for your ongoing support. We stay focused on delivering mission-critical results as we strive to strengthen our position in the disinfection and decontamination market and to help make the world a safer place in which to live and work. We look forward to bringing you updates on our progress. Thank you, and have a good morning, afternoon, or evening, wherever you happen to be listening from. Operator, please open the call to questions.

Thank you. Congratulations on the quarter, everyone. It seems like the execution is beginning to show results. I have just one question about the purchase order—the one for $5 million. Should we expect that to be delivered over the coming six months, or sooner? How should we think about revenue recognition from that purchase order?

Sure. That $5 million spans a few different accounts. It isn't a single purchase order. Two of them are Custom Engineered Systems, so two within that $5 million will be delivered in the first quarter, and some in the second quarter of next year. But a good amount of them are mobile pieces of equipment, Environment Systems.

Thanks. Regarding that $35 million in the pipeline, are those the kinds of high-probability conversations you're having with customers? I just want a sense of how that might turn into purchase orders and real revenue.

Sure. I mean, the high-probability ones sit inside that $12 million figure, correct? That's basically how we've reported it throughout the year, and those are active accounts with deadlines in place for when purchase orders come in. The $35 million represents our whole database, which continues to sustain itself in that way even as orders get delivered. The probability across that $35 million differs from account to account, but with food safety gaining momentum and customers engaging with us on these regulatory matters, I expect it to keep rising substantially.

Got it. Regarding service revenue, we saw 1% growth there. Should we think of that as connected to the product sales currently underway, or do you see a way for service revenues to pick up somewhat as we move ahead?

I think with iHP deployment service revenue, you'll begin to see growth as we move ahead, particularly once we start working with partners and deploying internationally, since we're receiving quite a few of those requests. Our service financial reports also include our support services, which amount to about 10 different offerings through which we can assist customers. So it will certainly keep increasing as our built-ins, our integration, and standalone items get implemented in these facilities.

Got it. Just one final question from my side. Where working capital is concerned, are we somewhat limited in carrying out the growth mandate because of how the working capital setup looks? How do you plan to sort of manage your way through that?

Having enough working capital for the growth we see has always been an issue for the company. Right now we are in discussions with multiple facilities about expanding our credit in these areas or doing a PIPE type offering going forward; we believe that with the deposits coming in on these large accounts, which at times run about 50%, we can handle the capital moving forward.

Got it. Thanks to all of you. That's everything from my side.

Thank you, Amit.

Thanks.

Hey, Doc, congratulations to you and your team on getting to positive operating income. I know you put in a lot of effort for that. I just had a-

Thank you, Todd.

I have a couple of questions about some things EJ mentioned. The first one is the Tyson Cargill study with the independent result, which basically said SteraMist was the best option. Since that study, have either of those companies reached out to you, and are you currently in negotiations with them?

Yes, we are. We've been in touch with them through our new partner, Josh, who knows them extremely well. It's simply a question of setting up cleaning protocols with companies like Tyson and others of that kind.

I realize you likely can't do this, but could you put any kind of number on what orders from those sorts of companies might look like?

It's a bit too soon for that. We only finished the study in October, but as our evidence base for iHP keeps growing within the food industry, along with the regulating affairs work we're pursuing, then it will be very large. It's just that I can't put a number on it right at this moment. Still, there is interest, and we're talking with quite a few. It isn't only one or two facilities. They're viewing it as a standard across all their locations; so, I can report on that.

All right, regarding those food safety studies—if SteraMist could be applied right onto the food products themselves, would SteraMist have been capable of preventing the lettuce Cyclospora recalls that we all saw covered in the news?

Exactly

During the past few months?

Absolutely, yes.

Yeah.

Okay. One other-

Thanks

there's a news item I hoped you might address. A big article came out about an FDA warning letter issued to Baxter on September 29. They found quite a bit of contamination across their production facilities. Has Baxter contacted you about any work together?

We know the FDA warning well and understand the problems Baxter is currently aiming to resolve in a week.

All right, I wasn't trying to catch you off guard there.

Appreciate it, Todd.

Thank you, Todd.

So, one final straightforward question to wrap up. Considering the projected substantial revenue growth and now that we've posted positive operating income this quarter, do you anticipate—given your razor-razor blade approach—that earnings per share and operating income will be positive consistently in the quarters ahead?

I think that's right.

Yeah.

I think—oh, go ahead, Niro. Do you want to handle that? Yeah.

Yes, Todd. I believe, given the direction we're heading at present, particularly through a two-pronged approach, we are certainly making our revenue better, so we expect gross profit to rise in the periods ahead. Yes, we are reining in operating expenses, and with the conversion of certain note holders now taking place, our interest expense is going to fall too. So, we look for greater profitability going forward.

All right. For every quarter ahead, I can count on EPS being positive. At least that's my hope, right?

That's what we're all hoping for.

All right. Thanks so much. I appreciate you taking the time and asking those questions.

Thank you, Todd.

Thanks, Todd.

Hello there. Nice work on the quarter, and I appreciate the really detailed update.