Nanalysis Announces First Quarter 2024 Results
Company Achieves Record Revenue Quarter
CALGARY, AB, May 29, 2024 /PRNewswire/ - Nanalysis Scientific Corp. ("the Company", TSXV: NSCI, OTCQX: NSCIF, FRA: 1N1), a leader in portable NMR machines and MRI technology for industrial and research applications announces first quarter results for the period ending on March 31, 2024, achieving 139% year-over-year revenue growth to $11.2 million in Q1. Chief Executive Officer, Sean Krakiwsky and Chief Financial Officer, Randall McRae will host a conference call at 5 P.M. Eastern Time today to discuss the results. A second call will be held for European investors at 8:30am Eastern Time tomorrow, May 30. All interested parties are invited to join these calls.
"The momentum from the end of 2023 has carried into first quarter of 2024 and continues today," said Sean Krakiwsky, Founder and CEO of Nanalysis. "In terms of revenue, we had a strong quarter. We are also happy to report that our security service segment generated positive Adjusted EBITDA for the quarter, as previously announced, we foresee that continuing going forward. Our revenue growth, combined with ongoing cost reduction initiatives are moving us towards profitability.
"Benchtop NMR sales were up significantly year-over-year, and we are seeing continued strength in in our sales pipeline.
"While we are happy with our revenue results and improving margins, we are still laser focused on continuing revenue growth, improving gross margins, reducing costs further, and delivering profitability and value to shareholders."
Financial highlights for the three months ended March 31, 2024:
Three months ended March 31
($000's) 2024 2023 ($) Change Change
Product sales 4,216 3,034 1,182 39 %
Service revenue 4,723 1,340 3,383 252 %
Flow-through inventory 2,223 300 1,923 641 %
Total sales and revenue 11,162 4,674 6,488 139 %
Gross margin percentage - product sales 47 % 32 % 14 %
Gross margin percentage - service revenue 8 % -76 % 84 %
Adjusted EBITDA (362) (3,547) 3,185 90 %
Net loss (2,522) (4,320) 1,798 42 %
-- For the three months ended March 31, 2024, the Company reported
consolidated revenue of $11,162, an increase of $6,488 or 139% from the
comparative period in 2023. A significant part of the revenue number for
Q1 comes from flow-through inventory revenue associated with the
Company's airport security maintenance revenue, in which the Company
provides purchasing and resale to the customer at cost, with the Company
billing a fixed charge for the service. This revenue can vary widely
quarter over quarter and may be significantly lower in future quarters.
-- Gross margin percentage on product sales was 47% for the three months
ended March 31, 2024. Improvement in gross margin percentage for
Benchtop NMR is materializing as sales have improved in the second half
of last year. In addition, reductions in manufacturing labour in late
Q2 2023 have begun to positively affect margins.
-- Security service gross margin percentage in the quarter was 8% versus
(76)% in prior year comparative period as the Company completed the full
transition of 100% of airports serviced to its control from the
incumbent provider, and now expects to increase revenue and drive
efficiency on the project through 2024.
-- Adjusted EBITDA loss for the three months ended March 31, 2024, was $362
versus an Adjusted EBITDA loss of $3,547 in the same period last year.
This improvement was driven by increased product sales, full transition
of airports to the Company's control, and cost reduction initiatives.
-- Net loss, which includes non-cash items, for the three months ended, was
$2,522 as compared to the three-month loss for March 31, 2023, of
$4,320.
Quarterly Trend:
2024 2023
($000's) Q1 Q4 Q3 Q2
Product sales 4,216 5,450 3,941 3,917
Security service revenue 4,723 3,362 2,629 2,162
Flow-through parts revenue 2,223 988 466 877
Total revenue 11,162 9,800 7,036 6,956
Adjusted EBITDA (362) (774) (1,354) (2,399)
Net loss for the period (2,522) (2,123) (6,287) (4,054)
-- The Company has demonstrated continuous growth in Security service
revenue quarter over quarter, driven by the expansion of the Company's
airport security maintenance project as the Company took over more
airports from the incumbent service provider.
-- Product sales showed continuous recovery through the latter half of 2023
culminating in $5.5 million in sales during the fourth quarter, which is
seasonally the Company's strongest quarter of the year. This momentum
was carried into the first quarter of 2024 which remained strong.
-- Adjusted EBITDA losses have reduced with each subsequent quarter, driven
primarily by the successful roll out of the airport security maintenance
project.
-- Net loss reached a low in Q3 2023, as the Company recognized a non-cash
$2.8 million loss related to the deconsolidation of Quad Systems. In Q4
2023, product sales continued to recover and security service revenue
continued to grow, improving the Company's net loss. In Q1, net loss
increased primarily due to the absence of some non-cash gains that were
present in the fourth quarter of 2023, as well as increased interest
expense.
Recent strategic and operational highlights during and after the first quarter of 2024 include:
-- New Quarterly Revenue Record: Q1 2024 revenue of $11.2 million was
driven by continued expansion of security services related to the
airport security maintenance project, as well as continued strength in
Benchtop NMR sales. Excluding $2.2 million of revenue attributed to
flow-through inventory revenue, the remaining $8.9 million of revenue
was a quarterly record in itself.
-- Completed Phase-In of the Airport Security Maintenance Project: On
January 11, 2024, the Company completed the phase-in period related to
its airport security maintenance project, resulting in the Company's
Security Services business now performing maintenance of passenger
screening imaging and detection equipment across all of Canada, and
beginning a scale up phase to increase revenue to its expected run rate.
The Company is confident that the highly capable team built during this
project will provide significant growth opportunities for this business
with new customers and partners.
-- Continued Benchtop NMR Strength: In Q1, the Company generated $3 million
in Benchtop NMR sales. This represents a $1.3 million increase over Q1
2023 Benchtop NMR sales. The Company expects strength to continue in
this product line through 2024.
-- Closed Exempt offering and concurrent Private Placement: Gross proceeds
of offering were $5 million.
-- Granted Funding Supporting AI Software Development for Detection of
Illicit Substances: The Company is receiving advisory services and up to
$1.45 million in non-repayable, non-dilutive funding from the National
Research Council of Canada Industrial Research Assistance Program (NRC
IRAP), to develop Artificial Intelligence based software tools to detect
illicit substances on top of the Company's portable Nuclear Magnetic
Resonance (NMR) spectrometers.
Outlook
"We feel that our Benchtop sales are in a good position," said Sean Krakiwsky, Founder and CEO of Nanalysis. "We believe that our prospects will only improve as we continue to develop capability across our Benchtop NMR platforms. Additionally, we continue to engage in discussions and work toward larger goals to penetrate certain verticals. Our Security Services segment will continue to grow throughout the year as we work to layer on new projects and contracts. Margins will continue to improve as we have greatly reduced the upfront training that was required and are working towards increased operational efficiency with our highly skilled team. Lastly, we are seeing some medical imaging projects on the horizon and could see some of these close in the coming quarters."
Conference Call:
Investors interested in participating in the live full year call can dial 1-888-664-6392 or 416-764-8659 from abroad. Investors can also access the call online through a listen-only webcast here: https://app.webinar.net/MxmDjJq1gXA or on the investor relations section of the Company's website HERE.
The webcast will be archived on the Company's investor relations webpage for at least 90 days and a telephonic playback will be available for seven days after the conference call by calling 1-888-390-0541 or 416-764-8677, conference ID # 242821.
Additionally, the Company will be hosting a Q&A session for its European investors at 8:30am ET tomorrow, Thursday, May 30(th), which can be accessed by the following link: Join the meeting now
Non-IFRS and Supplementary Financial Measures
The Company prepares and reports its consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, as adopted by the Canadian Accounting Standards Board ("IFRS"). However, this press release may make reference to certain non-IFRS measures including key performance indicators used by management. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company's results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS.
The Company uses Flow-through parts revenue, Security service revenue, and Adjusted Earnings Before Interest, Tax, Depreciation and Amortization ("Adjusted EBITDA") as non-IFRS measures, which may be calculated differently by other companies. These non-IFRS measure are used to provide investors with a supplemental measure of the Company's operating performance and liquidity and thus highlight trends in the Company's business that may not otherwise be apparent when relying solely on IFRS measures. The Company also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of companies in similar industries.
Three months ended March 31
($000's) 2024 2023 ($) Change
Security services revenue 4,723 1,340 3,383
Flow-through inventory revenue 2,223 300 1,923
Service revenue 6,946 1,640 5,306
Three months ended March 31
($000's) 2024 2023 ($) Change
Security services costs 4,355 2,358 1,997
Flow-through inventory costs 2,223 300 1,923
Cost of services 6,578 2,658 3,920
Three months ended March 31
($000's) 2024 2023 ($) Change
Net loss (2,522) (4,320) 1,798
Business acquisition costs and contingent consideration loss (gain) 94 (19) 113
Depreciation and amortization expense 1,084 1,147 (63)
Finance expense (income) 354 (184) 538
Stock-based compensation 260 293 (33)
Foreign exchange loss 96 96
Loss from associate 200 200
Restructuring costs 64 64
Current income tax expense 32 70 (38)
Deferred income tax recovery (24) (630) 606
Adjusted EBITDA (362) (3,547) 3,185
Supplementary Financial Measures
The Company may also use supplementary financial measures which are intended to be disclosed on a periodic basis to depict the historical or expected future financial performance, cash position, or cash flow of the Company, are not a non-IFRS measure, and are not presented in the financial statements. The measures as discussed in this press release include:
-- Gross margin percentage, which is defined as either (Product sales less
Cost of product sold) divided by Product sales or (Security service
revenue less Cost of security services) divided by Security service
revenue
About Nanalysis Scientific Corp. (TSXV: NSCI, OTCQX: NSCIF, FRA:1N1)
Nanalysis Scientific Corp. in operates two primary business segments: Scientific Equipment and Security Services. Within its Scientific Equipment business is what the Company terms "MRI and NMR for industry". The Company develops and manufactures portable Nuclear Magnetic Resonance (NMR) spectrometers or analyzers for laboratory and industrial markets. The NMReady-60(TM) was the first full-feature portable NMR spectrometer in a single compact enclosure requiring no liquid helium or any other cryogens. The Company has followed-up that initial offering with new products and continues to have a strong innovation pipeline. In 2020, the Company announced the launch of its 100MHz device, the most powerful and most advanced compact NMR device ever brought to market.
The Company's devices are used in many industries (oil and gas, chemical, mining, pharma, biotech, flavor and fragrances, agrochemicals, law enforcement, and more) as well as numerous government and university research labs around the world. The Company continues to exploit new global market opportunities independently and with partners. With its partners, the Company provides scientific equipment sales and maintenance services globally.
In 2022 the Company was awarded a five-year, $160 million contract to provide maintenance services for passenger screening equipment in Canadian airports. This has resulted in expansion of the Company's Security Services business. The Company is providing airport security equipment maintenance services in each province and territory of Canada. In addition, the Company provides commercial security equipment installation and maintenance services to a variety of customers in North America.
Notice regarding Forward Looking Statements and Legal Disclaimer
This news release contains certain "forward-looking statements" within the meaning of such statements under applicable securities law. Forward-looking statements are frequently characterized by words such as "anticipates", "plan", "continue", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed", "positioned" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this news release. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. The Company is under no obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.
Neither TSX Venture Exchange nor its Regulation Services Provider accepts responsibility for the adequacy or accuracy of this release.
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SOURCE Nanalysis Scientific Corp.
