"We had a good third quarter with continued strength in Security Services and we are encouraged by the results we are seeing in Benchtop Sales NMR with a 61% improvement sequentially over Q2, 2023," said Sean Krakiwsky Founder and CEO of
"Security Services, mainly led by the CATSA project, showed significant improvement in margins during the quarter and I expect the project to start generating positive EBITDA1 in Q4 as the roll-out continues successfully. We still have some more work to do with Benchtop NMR sales, but we like the current trajectory, and we are seeing see that momentum carrying into the current quarter as we pursue our stated objective of generating positive EBITDA from the business," stated
Financial and Operational Highlights2
Financial highlights for the three months ended
- For the three months ended September 30, 2023, the Company reported consolidated revenue of $7,036K, an increase of $158K from the comparative period in 2022. This includes
$3,941K in product sales and$3,095K of service revenue, predominantly related to security equipment services. - Gross profit margins on product sales were 43% for the three months ended
September 30, 2023 . Benchtop NMR margins continue to be compressed in the quarter due to downward pressure on selling prices as a result of a slow scientific instrumentation market and higher costs related to post-COVID supply chain issues as well as ongoing inflation. Starting in the second, and into the third quarter, the Company began cost-cutting measures including the reduction of its manufacturing labour force to better align with its current manufacturing requirements. This is expected to have a positive effect on margins going forward. Additionally, the Company continues to analyze its supply chain to manage its material costs. - Service gross profit margins were (2.6%) in Q3 as the successful rollout of the project continued. Revenue is expected to continue to grow as the project ramps to full capacity. As at the release date, the Company has completed approximately 76% of its rollout of the project. With this increased roll out in Q4 2024, it is expected the project will begin generating positive EBITDA.
- There was continued training for the CATSA project that began in the first quarter of 2023, resulting in net training expenses of
$689K for the three months endingSeptember 30, 2023 , and$2,580K for the nine months endingSeptember 30, 2023 . As stated previously, while training will be an ongoing part of the Company's security service group, expected training costs are coming down, and are not expected to continue at this pace once the CATSA project ramp-up is complete. The Company now has a presence in all airports, however, wages related to airports not yet being fully serviced by the Company continued to be deferred as prepaid expenses, with the Company capitalizing$912K of wages during the quarter. - Loss before other items for the three months ended September 30, 2023, was (
$1,354K ) versus ($618K) compared to the same period last year. - Net loss for the three-month period ended
September 30, 2023 , was ($6,287K ) as compared to the three-month loss for September 30, 2022, of ($2,599K ). Included in this net loss is a$2 .8MM loss related to the deconsolidation of QUAD and associated revaluation of the Company's investment, and as well as an additional$256K loss from associate in Q3 2023. - During the quarter, the Company continued its cost reduction plan, including layoffs, in some of its segments to better align its resources and reduce its fixed costs. To date, the cost savings program will generate annualized fixed cost savings in excess of
$2.5 million . The Company continues to explore other fixed cost reductions, not related to labour reductions, to further increase annualized cost savings. In conjunction with this initiative, the Company recognized total restructuring expenses of$437K in Q2 and Q3 2023. - The Company had cash on hand of
$1.3 million , an undrawn available credit facility of up to$5 million , working capital of$5.6 million , and undrawn government contribution funding of$1.1 million as ofSeptember 30, 2023 .
Recent strategic and operational highlights during and after the third quarter of 2023 include:
- Benchtop NMR: The Company has promoted
Nick MacKenzie to VP Sales to lead the sales teams for the Benchtop NMR, High Field, MRI, and the 3rd Party Equipment service lines. The previously implemented restructuring changes are starting to deliver an improved sales pipeline, which we expect to yield sales growth going forward. - Security Service:
Sime Buric , former VP Sales, is being made an officer of the public company with the title Executive Vice President – Services and will head up our Services business unit. As part of this transition, effectiveJanuary 1, 2014 , Sime will also become President of the K'Prime subsidiary. The CATSA Project made significant progress in Q3 and is expected to generate positive gross profit in the fourth quarter. As of today, the Company has completed approximately 76% of its roll-out of the project. - MRI: The Company continues to make progress on its large pre-clinical MRI project and expects to recognize significant revenue related to the project in the fourth quarter. We continue to incubate the medium-term opportunity with niche product sales and services.
- High Field NMR: The Company sold two of its proprietary High Field NMR consoles to its associate, Quad Systems, during the quarter, and has had other recent successful customer installations of consoles in
Europe . - 3rd Party Equipment: Slower sales in the scientific equipment market continue to hamper 3rd Party Equipment and results in Q3 were not as strong as those in Q2, however they remain above Q1 2023.
Financial highlights for the nine months ended
For the nine months ended
Gross profit for the nine months ended September 30, 2023, was $2,252K (a margin of 12%) compared to gross profit of $9,258K (a margin of 53%) for the nine months ended September 30, 2022, driven mostly by the fact that the
The Company's net loss for the nine months ended was $(14,661K), as compared to the nine-month loss for
Comments and Outlook
"We are encouraged by sequential growth of our benchtop sales from Q2 to Q3, and we are seeing that continue into Q4," said Sean Krakiwsky, Founder and CEO of Nanalysis. "On an operational level we feel we are better aligned with our recent leadership changes Security Services and our sales organization.
"Regarding our High Field NMR partnership with
"With the changes implemented right-sizing our R&D and manufacturing capacity, particularly as it relates to Benchtop NMR, we believe we are poised to return to growth in 2024, and to begin our era of profitability. We continue to hold our place as a leader in Benchtop NMR and plan to retain that position through continued innovation and cross pollination of technologies used in our product lines," continued
"Finally, I would like to make a very important announcement, regarding the current President of K'Prime, Mr.
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/r3VaMyOQbg1 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 # 964847.
Additionally, the Company will be hosting a Q&A session for its European investors that is at
About
In 2022 the Company acquired K'(
Additionally in 2022, the Company acquired a 43% ownership in
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
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1 Please refer to the Company's Q2 2023 Management Discussion and Analysis for a discussion of non-IFRS measures. |
2 Financial Highlights should be read in conjunction with the Company's Q3 2023 Management Discussion and Analysis as well as the Q3 2023 Interim Condensed Consolidated Financial Statements. |
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