Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong top-line sales growth during the 3, 6, and 12 month periods ended June 30, 2024, compared to the same periods in 2023.
- Finished goods production reached approximately $12.7 million for the six-month period, annualizing to about $25.4 million, which is 85% of the estimated $30 million annual full capacity target.
- Gross margin as a percentage of product sales improved from 19% to 28% year-over-year for the six-month period ended June 30, 2024.
- Implemented successful remediation steps for contamination events, with no contamination since April 2024.
- Improved EBITDA from negative $2.2 million to negative $340,000 year-over-year for the six-month period ended June 30, 2024.
Negative Points
- Gross margin is still well short of the 40% target, despite improvements.
- Significant product contamination events from late 2022 through early 2024 impacted production and sales.
- Facing challenging inflationary pressures on the cost of labor and components.
- Production yield losses have contributed to gross margin deterioration.
- Cash is tight, leading to frozen nonessential capital expenditure investments.
Q & A Highlights
Q: What is the potential bottleneck in sourcing colostrum for First Defense, and can you expand on your relationship with farms?
A: We source colostrum from donor cows immediately after they give birth. We have successfully grown our supply and improved quality control. We don't see this as a limit to our production growth. (Michael Brigham, President, CEO)
Q: Do you have plans to replace your recently retired Chief Scientist?
A: Dr. Joe Crab has retired but remains a consultant. His responsibilities have been transitioned to other team members, and we do not plan to replace him at the VP level. (Michael Brigham, President, CEO)
Q: Can you clarify the impact of contamination and yield issues on gross margins?
A: The first quarter was more impacted by previous contamination events, while the second quarter faced yield issues. Both contamination and yield need improvement for better margins. (Michael Brigham, President, CEO)
Q: What do the 17% and 5% yield improvements mentioned in the 10-Q represent?
A: These percentages represent potential improvements in specific production steps, not direct margin points. For example, a 17% improvement means increasing output from 100 to 117 units at a specific step. (Michael Brigham, President, CEO)
Q: Do you still aim for a 40% gross margin, and do you have a plan to achieve it?
A: Yes, we aim for a 40% gross margin. We have identified specific yield improvements and are working on implementing them. While some are still in development, we believe they are achievable. (Michael Brigham, President, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
