Scientific Industries, Inc. (OTCQB:SCND) Q1 2023 Earnings Conference Call November 15, 2022 4:30 PM ET
Company Participants
Joe Dorame – Lytham Partners
Helena Santos – President, CEO, Compliance Officer, Treasurer & Director
Daniel Greunes – CEO, Bioprocessing Operations
John Moore – Chairman
Conference Call Participants
Operator
Good day, and welcome to the Scientific Industries Reports First Quarter of Fiscal 2023 Financial Results Conference Call. [Operator Instructions].
I would now like to turn the conference over to Mr. Joe Dorame. Please go ahead, sir.
Joe Dorame
Thanks, Chuck. Good afternoon, and thank you for joining us today to review the financial results of Scientific Industries, Inc. for the first quarter of fiscal year 2023 ended September 30, 2022. With us today on the call are Helena Santos, Chief Executive Officer; Daniel Greunes, CEO of Scientific Bioprocessing; and John Moore, Chairman.
After the conclusion of today’s prepared remarks, we will open the call for questions. Before we begin with prepared remarks, I would like to remind everyone, certain statements made by the management team of Scientific Industries during this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Except for the statements of historical fact, this conference call may contain forward-looking statements that involve risks and uncertainties, some of which are detailed under Risk Factors in documents filed by the company with the Securities and Exchange Commission, including the annual report on Form 10-K for the year ended June 30, 2022.
Forward-looking statements speak only as of the date the statements were made. The company can give no assurance that such forward-looking statements will prove to be correct. Scientific Industries does not undertake and specifically disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
Now I’d like to turn the call over to Helena Santos, CEO of Scientific Industries. Helena?
Helena Santos
Thank you, Joe. And welcome to our first quarter fiscal 2023 shareholder call. Our Benchtop Laboratory Equipment Operations generated $332,000 of EBITDA and that equated to nearly $500,000 after other noncash expenses, which are principally the stock-based compensation costs.
And this is despite an industry-wide slowdown related mostly to the cessation of COVID-related Vortex-Genie sales. Our Bioprocessing Systems Operations reflected a 10% lower operating loss as disclosed in our Form 10-K — 10-Q, I mean, this quarter compared to the prior year’s same quarter, primarily due to synergistic integration cost reductions as we continue to invest in the future of our company while being mindful of the bottom line.
We are progressing with the post-merger restructuring of the bioprocessing operations and further grew the team by over 55%, that’s 45 employees at the end of September versus 29 at the end of September of last year. And we did this while reducing the operative costs, which is what led to the 10% cut in the loss. As much as possible, we will continue to look for synergies amongst our operating segments.
We’re delighted that the Genie product line remained a solid contributor and provides reliable cash flow for our company as we transition to our digitally simplified pharmacy and bioprocessing growth engines. I’m happy to report a substantial 75% growth in revenues of the VIVID-1 automated pill counter product and the upcoming release of the VIVID Light. Supply chain challenges related to the components did delay the initial November launch to December, but the launch of the VIVID Light is forthcoming.
I am especially proud that we have made upgrades to the to the VIVID Light — to the VIVID-1 that has closed the gap in speed of counting pills versus our higher and competitive products that normally sell for 2x our list price. The VIVID-1 is built on a cloud architecture that has allowed us to upgrade about 80% of our eligible customers this as part of our already installed base.
The 48 sales reps at our distribution partner, Rx Systems in the United States are extremely excited by the upgraded product as well as our road map for further improvements and new product releases. The VIVID Light is a lower-price line extension of under $4,000 compared to the mid-5,000s for our VIVID-1.
The VIVID Light targets more price-sensitive customers. These customers, for the most part, are currently using manual or mechanical counting processes, but will also be required to comply in the coming year to federally mandated labeling and tracking requirements. This is referred to as GS1 codes.
But the good news is that our VIVID pill counter is GS1 ready and provides true track and trace, which is the whole premise of this new requirement. I would like to remind our shareholders that we have announced that we are changing our fiscal year from a June year-end to a calendar or December year-end. Therefore, we will report on a sub period for July 2022 through December of 2022.
This change is part of the evolution here at our company to align with our customers’ buying cycles to align with our competitors and to simplify internal planning as well. And with that, I would like to turn it over to Daniel Greunes, our CEO of Scientific Bioprocessing. Daniel?
Daniel Greunes
Thank you, Helena, and hi, everyone. This recent quarter marks an important — very important milestone for the Bioprocessing business as it saw the first product being launched as the joint organization. After more than 2 years of development, we will finally release our new DOTS software platform, which represents an important cornerstone on our road map towards digitally simplified bioprocessing.
The DOTS software is designed for ease of customer use regarding the handling of sensors, actuators and bioprocess data and enables the visualization, analysis and control of critical bioprocess parameters from calibration to data collection. In other words, it will help our customers connect the dots in their research, development and production.
In addition, we have also launched our new DOTS PH and [indiscernible] flow cells as well as unlock the new value proposition for our existing products, namely automated biomass-based feeding for feedback control in shake flasks. This feature will not only allow us to capture additional, previously untapped, potential from our legacy portfolio, but it’s also a major step forward in showcasing our commercial vision to close the gap between shake flasks and bioreactors.
I’m particularly happy about the first feedback that we received from the market and from our existing customers. From the 350 customers that we have and the 200 of these that have a hardware that enables them to switch to the new DOTS software right away, 33 customers have already transitioned to DOTS, 27 customers are currently in the process of transitioning, and another 46 customers are on the waiting list, so essentially almost half.
So the ones whose hardware is to also transition as it is, we have further launched a promotional campaign, which will allow these customers to trade in their old hardware for the most recent version and hence enter the DOTS universe as well. As you can imagine, such a launch, rollout and hand over from product management and R&D after 2 years to marketing and sales is very comprehensive and time consuming, even more so in a quarter that usually hosts the summer break.
In light of that, I’m very happy to see that we have managed to continue our commercial transition from a royalty-based business towards end user product sake. The quarter saw a 35% increase in product sales compared to the last fiscal quarter and a 50% growth in product sales compared to the same quarter last year. At the same time, we have added important names, new names, to our customer list, such as GSK, and managed to expand systems at existing customers where we are now established not only in research but also in tech transfer and manufacturing production.
With August, this quarter being the strongest sales month of our history so far at USD 170,000 in product sales, I’m confident that we are on a good path towards realizing our ambitious growth targets. And with that, I’d like to hand it back to Helena.
Helena Santos
Thank you, Daniel. Joe?
Joe Dorame
All right, Chuck, could you please provide the instructions for the listeners to ask questions?
Question-and-Answer Session
Operator
John Moore
Great. Well, thank you so much. This has been a building block quarter. We’re very excited about the future. We’re excited about the changes that are happening, transitioning Scientific Industries to a digitally simplified company that can provide single-use products and recurring revenues and ever greater value to our customers. So thank you so much to our shareholders for supporting us, and we’re very excited about the future. Thank you very much.
Operator
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
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