Release Date: September 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Itaconix PLC (ITXXF, Financial) achieved a gross profit margin improvement to 39%, maintaining absolute gross profits despite a revenue decline.
- The company is diversifying its revenue streams, reducing dependency on high-volume, low-margin deals.
- Significant investments in marketing and product development are expected to drive future growth.
- Itaconix PLC (ITXXF) has expanded its regulatory footprint, gaining approvals in China, Australia, New Zealand, and South Korea.
- The company has launched a new website to enhance digital marketing and reduce the need for intensive personal interactions.
Negative Points
- Revenues for the first half of 2024 were $2.8 million, a 30% decline from the first half of 2023.
- The company reported an adjusted EBITDA loss of $1 million, reflecting increased operating expenses.
- Loss of a major customer resulted in a significant revenue drop, impacting overall financial performance.
- Despite improvements, the company still faces challenges in achieving high-margin revenues consistently.
- There are ongoing issues with product development, such as the shelf life stability of the BR 300 hair care polymer.
Q & A Highlights
Q: For long-term investors, it's been a long waiting period. Can you provide a timeline for high-margin revenues to materialize?
A: John Shaw, CEO: We are seeing higher margins materializing with our efforts and focus on market approaches. It was a difficult but important step in the first half, and we are pleased with our current position.
Q: Can you provide more detail about when the superabsorbent product is expected to be ready for market and the levels of early customer interest?
A: John Shaw, CEO: We hope to have new IP available either later this year or in the first quarter of next year. We are investing heavily in superabsorbent, but we do not expect significant revenues until much later next year.
Q: In September 2022, you announced a renewed agreement with Croda. Why is the new formulated product not available yet?
A: John Shaw, CEO: We made a new product available with added zinc for evaluation. However, the economics and alignment with Croda's core message have led to more opportunities in scale and efficiency.
Q: Has the hair care polymer BR 300 been discontinued?
A: John Shaw, CEO: We developed BR 300 successfully from an application performance standpoint but found issues with shelf life stability. We are working on improving this.
Q: How is the project with a major paper company for odor control and hygiene products proceeding?
A: John Shaw, CEO: The project reached the implementation stage but stopped due to new issues, particularly around intellectual property. We are now focusing on having better control over our own destiny for breakthrough products.
Q: Are the advertised positions for laboratory technicians and chemical production operators being actively sought to be filled?
A: John Shaw, CEO: Yes, we are actively seeking to fill these positions. We have recently hired a chemical production operator and are continuing our search for other roles.
Q: Why is there no mention of superabsorbents or leather applications on the new website?
A: John Shaw, CEO: We have good customers in the leather tanning process and are making progress with superabsorbents. When we have a product we are happy with, we will push it out to the market.
Q: Does the increase in raw material shipments indicate a busier year than anticipated? Will this reflect in raised revenue expectations for 2024?
A: John Shaw, CEO: We expect a strong second half, particularly in Europe. We have increased production levels to meet demand and are well-positioned to deliver.
Q: Can we expect an Investor Relations-dedicated person and email address going forward?
A: John Shaw, CEO: We have added staffing in this area and expanded our marketing capabilities to better meet communication demands.
Q: What will come first, expansion of the US facility or a new facility in Europe?
A: John Shaw, CEO: Expansion in the US will come first to keep development close to our central R&D capabilities. Shipping to Europe is not cost-prohibitive.
Q: How successful has the strategy been to diversify the customer base and reduce dependency on high-volume, low-margin deals?
A: John Shaw, CEO: The strategy has been very successful. We are picking up smaller specialty retail brands and seeing success with less labor-intensive efforts.
Q: Can you provide further color on SAP elements and why this is significant?
A: John Shaw, CEO: We have new process developments extending our polymerization capabilities, improving superabsorbent performance, and opening new application areas. We expect tangible progress either late in the fourth quarter or early next year.
Q: How is the sales cycle developing in H2 2024? Is it accelerating?
A: John Shaw, CEO: We are targeting customers to reduce the sales cycle and avoid long projects that can fail at the end. We have had important launches in the first half that will continue to grow.
Q: Do you have enough cash to see you through to a profitable future?
A: John Shaw, CEO: We believe we are in good shape and do not see any issues.
Q: Can we expect adjusted EBITDA to come in at the same levels as 2023, given the strong improvement in gross profit margin?
A: John Shaw, CEO: We expect to increase adjusted EBITDA losses due to maintaining operating expenses for important investments. We are focusing on rapid payback investments.
Q: Can we expect a trading update in October based on the first three months of the second half of 2024?
A: John Shaw, CEO: We will have a trading update before the end of the year, though it may not be in October.
Q: Are you still in negotiations with the former largest customer to overcome the impasse?
A: John Shaw, CEO: We continue to have sales to that customer and active projects. We remain in communication and are always looking for new opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
