TOMI Environmental Solutions, Inc. (NASDAQ:TOMZ) Q3 2023 Earnings Call Transcript

TOMI Environmental Solutions, Inc. (NASDAQ:TOMZ) Q3 2023 Earnings Call Transcript November 14, 2023

Operator: Greetings. Welcome to the TOMI Environmental Solutions, Inc. Third Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to your host, John Nesbett of IMS Investor Relations. You may begin.

John Nesbett: Good afternoon, and thank you for joining us today for the TOMI Environmental Solutions investor update conference call. On today’s call is TOMI’s Chief Executive Officer and Chairman of the Board, Dr. Halden Shane, TOMI’s Chief Operating Officer, E.J. Shane; and TOMI’s Chief Financial Officer, Nick Jennings. Dr. Shane will provide an overview of recent business highlights, E.J. will report the company’s growth and latest trends, and Nick will review the financial performance for the most recent quarter before addressing any questions you may have. The telephone replay of today’s call will be available through November 28, 2023, the details of which are included in the company’s press release dated November 14.

A webcast replay will also be available at TOMI’s website, www.tomimist.com. Please note that information contained within this presentation is relevant only to the date of which it was recorded, November 14, 2023. You are therefore revised that time-sensitive information may no longer be accurate at the time of any replay. Certain written and oral statements made by management of TOMI may constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements should be evaluated in light of important risk factors that may results to differ materially from our anticipated results. The information provided in this conference call is based upon the facts and circumstances known at this time.

The company undertakes no obligation to update these forward-looking statements after the call – after the date of this call. In addition, TOMI will discuss certain non-GAAP financial measures during this call. The company’s use of non-GAAP measures – uses non-GAAP measures because it believes they provide useful information about the operating performance that should be considered by investors in conjunction with the GAAP measures. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release dated November 14, 2023. I will now turn the call over to TOMI’s Chairman and Chief Executive Officer, Dr. Halden Shane. Please go ahead.

Halden Shane: Thank you, John, and good afternoon from the West Coast of the United States. Thank you all for joining to discuss some key achievements of our third quarter 2023 performance. During the third quarter of 2023, our strategic focus on expanding our sales channels and business development persisted worldwide, along with collaborative efforts from key current and new customers. Simultaneously, we diversified our product line to accommodate to the evolving needs of our market segments, leveraging the advanced capabilities of our SteraMist technology. Finally, our launch of our SteraMist Transport System and the SteraMist Integration System, known as the SIS, seems to be the answer to the automation requests that many industries are looking for to replace their old VHP decontamination technology.

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Q&A Session

We are now sure SteraMist is in the right place at the right time, and E.J. will discuss this in some detail shortly. Revenue declined during the quarter due to the timing of customer orders and the related revenue recognition. That said, our revenue was up 5% for the 9-month period, and we are optimistic about our high-margin business model and its ability to drive future sustained profitability as we scale the business. Subsequent to the close of the third quarter of 2023, we agreed to sell and issue convertible notes in a private placement in one or more closings up to an aggregate principal amount of $5 million. As of November 7, 2023, we sold and issued an aggregate of 2.6 million to a group of institutional and accredited investors, most of whom are new investors in the company’s securities.

The note contains no restrictive covenants or restrictions that may impose burdens or limitations on our operations. We intend to use the net proceeds from this offering for working capital, expansion of our existing Frederick facility and other general corporate purposes, including expanding our sales channel through the addition of distributors, outside sales representatives, internal sales staff and external consultants. Throughout this year, our strategic emphasis has been significantly geared towards the expansion of additional sales channels. Distinguishing itself from previous years, our approach has evolved to encompass not only domestic but also international partnerships with larger groups. This strategic shift in focus involves collaboration with prominent entities to enhance our distribution network and simplify our market presence.

As we continue recruitment of additional independent sales representatives, we have also added consultants possessing key expertise in our targeted market segments. Thus far, in 2023, we have brought on 8 distributors, expanding our presence worldwide. Our team has grown to include 11 independent manufacturing representatives, and we were recently onboarded by a GPO, group purchasing organization, Vizient, last week. This collaboration marks a significant milestone in our efforts to broaden our reach and strengthen our position in the health care market. Some of the notable additions in Q3 are as follows. We partnered with Colcom Inc. to offer SteraMist iHP products as part of Colcom’s life science and health care portfolio of products. With a combined 50 years of technical sales expertise, Colcom Inc.

joined forces with us under the leadership of Bridget Collins. Colcom Inc. is a trusted supplier of high-quality clinical and laboratory equipment. Given its established customer base and extensive expertise in the decontamination industry, this partnership will be mutually advantageous. In August, we entered into a business development consulting agreement with DAR Inc., a company specializing in food safety and food processing spaces. We anticipate the agreement will better position us in providing education to the food safety markets through the education of the advantages of the SteraMist platform of products and expand our sales channels as well as our customer bases on the food safety markets. In September, we entered into a sales representative agreement with Universal Disinfection to better facilitate growth in the European region in the commercial, aviation and life science markets.

The 2 partners of Universal Disinfection are the most knowledgeable about our technology in all of Central Western Europe and the Baltic states. Most recently in November, we entered into an agreement with Patty Olinger, the Founder of BEAMS, LLC who specializes in Public Health Preparedness. Patty is also a Director of Frontline Foundation dedicated to protecting American citizens from bioterror threats. In the past, she was Assistant Vice President of the Office of Research Administration and Executive Director of Environmental Health and Safety Office of Emory University Hospital System, and most recently, the Executive Director Global Biorisk Advisory Council, a division of ISSA. Patty will assist, strengthen and expand the TOMI SteraMist network and increased business development in the commercial markets.

She brings over 20 years’ experience, establishing executive strategic vision and direction of large institutions and companies, spanning multiple industries, including higher education, non-for-profit, healthcare, consultancy, hospitality and pharmaceutical sectors. We continue to remain active in our marketing initiatives and attended and presented our SteraMist brand of products at 6 different trade shows during the second quarter alone. The expansion of our sales infrastructure in 2023 has been substantial, and we will maintain a strong sense of optimism as we approach the conclusion of 2023. Looking ahead to 2024, we anticipate a significant acceleration in the momentum of our sales network. We continue to see positive signs with our SteraMist iHP service team as we saw quarter-over-quarter revenue growth of 59% and year-over-year growth of 16% through September.