Release Date: August 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Evome Medical Technologies Inc (LNDZF, Financial) posted a positive EBITDA for three out of the last four quarters.
- The company generated $10.5 million in revenue for Q2 2024, with $6.1 million coming from the core Biodex Rehab business.
- Gross profits for Q2 2024 were $3.3 million, with $2.3 million from the core business, showing a 104% growth over the prior quarter.
- Evome reduced its debt by $2.7 million in Q2 2024, with an additional $900,000 reduction in July 2024.
- The company has a strong international and domestic distribution network, covering over 70 countries with 52 distributors.
Negative Points
- Evome Medical Technologies Inc (LNDZF) had no revenue growth for five consecutive quarters prior to the current CEO's tenure.
- The company faced accelerated losses and dwindling cash before the turnaround efforts.
- There is a significant debt obligation that needs to be managed, with acquisition debt of $15.1 million.
- The current product lineup is capital intensive, requiring borrowing to produce and carry receivables.
- The sale of DaMar Plastics and South Dakota Partners is necessary to reduce debt, indicating reliance on asset sales for financial stability.
Q & A Highlights
Q: Can you expand on the licensing strategy for these products?
A: Sure. We're targeting products adjacent to our core therapeutic and clinical modalities, such as orthopedics, neurology, and cardiopulmonary. We're focusing on companies that lack our strong international and domestic distribution network. This strategy doesn't require capital expenditures, leveraging our name and distribution network.
Q: Can you comment on the timing for extinguishing outstanding debt and the DaMar transaction?
A: We're exploring opportunities now, and deals like this typically take six to nine months. We sold Simbex in three months, but we're not suggesting the same for DaMar. We're looking for the right opportunity and not rushing the process to ensure we get the best possible price.
Q: Can you expand on your philosophy around the white labeling strategy?
A: Similar to brands like Gucci, we aim to make Biodex products more accessible and affordable while maintaining high quality. We plan to leverage the Biodex brand to introduce new products to private physical therapy clinics, which is where our business can grow significantly.
Q: Outside of DaMar, are there any other dispositions you would be exploring?
A: Yes, we are also looking to sell South Dakota Partners (SDP). SDP is a contract manufacturer not closely aligned with our core business. We've reduced its debt to make it more palatable for sale, allowing us to focus on our core business, Biodex Rehab, and related product lines.
Q: What are the financial highlights for Q2 2024?
A: Evome generated $10.5 million in revenue, with $6.1 million from the core Biodex business, marking a 59% increase over Q1 2024. Gross profits were $3.3 million, with $2.3 million from the core business, showing a 104% growth over Q1 2024. We also posted a positive adjusted EBITDA of $421,000, a $1.7 million improvement over Q1 2024.
Q: What are the plans for the proceeds from the sale of DaMar Plastics?
A: The proceeds are earmarked to pay off our acquisition debt, which stands at $15.1 million. We are confident that the sale will eliminate this debt, and we are targeting the end of the year to start this process.
Q: How is the Biodex brand perceived in the market?
A: The Biodex brand is highly regarded and trusted, with over 15,000 customers globally. Our products are seen as the gold standard in isokinetic devices for physical medicine, and this strong brand equity is central to our revenue growth plan.
Q: What are the future growth plans for Evome?
A: We plan to introduce new products quarterly through white labeling, leveraging the Biodex brand and our distribution network. This strategy will generate incremental revenue with minimal marginal cost, driving profits without additional capital needs.
Q: How has the financial stability of the company improved?
A: We've stabilized the business, posting positive EBITDA for three out of the last four quarters. We finished Q2 with over $1 million in cash and reduced our debt by $2.7 million. We also plan to continue using cash from operations and asset sales to further reduce debt.
Q: What is the expected financial performance of the core Biodex business?
A: The core Biodex business is expected to generate annual revenues of $27.5 million and a gross profit of $10.9 million, with an adjusted EBITDA of just over $2 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
