ImmuCell Corporation (NASDAQ:ICCC) Q4 2023 Earnings Call Transcript
ImmuCell Corporation (NASDAQ:ICCC) Q4 2023 Earnings Call Transcript February 28, 2024
ImmuCell Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning and welcome to the ImmuCell Corporation reports Fourth Quarter and Year Ended December 31, 2023 Unaudited Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Joe Diaz with Lytham Partners. Please go ahead, sir.
Joe Diaz: Thank you, Chris. Good morning and welcome to all. As Chris indicated, my name is Joe Diaz. I am with Lytham Partners. We are the Investor Relations consulting firm for ImmuCell. I thank all of you for joining us today to discuss the unaudited financial results for the quarter and the year ended December 31, 2023. I would like to preface this discussion today with a caution regarding forward-looking statements. Listeners are reminded that statements made by management during the course of this call include forward-looking statements, which include any statement that refers to future events or expected future results or predictions about steps the company plans to take in the future. These statements are not guarantees of performance and are subject to risks and uncertainties that could cause actual results, outcomes or events to differ materially from those discussed today.
Additional information regarding forward-looking statements and the risks and uncertainties that could impact future results, outcomes or events is available under the cautionary note regarding forward-looking statements or the Safe Harbor statement provided in this press release that the company filed last night, along with the company’s other periodic filings with the SEC. Information discussed on today’s call speaks only as of today, Wednesday, February 28, 2024. The company undertakes no obligation to update any information discussed on today’s call. Please note that references to certain non-GAAP financial measures maybe made during today’s call. The company included definitions of these terms as well as reconciliations of these figures to the most comparable GAAP financial measures in last night’s press release, in order to better assist you in understanding its financial performance.
With that said, let me turn the call over to Michael Brigham, President and CEO of ImmuCell Corporation. After which, we will open the call for your questions. Michael?
Michael Brigham: Thanks, Joe and good morning everyone. Let me open by stating the hard truth straight up. 2023 was an extremely difficult year for us. The contamination events that plagued our production process were harsh and expensive. Growth is challenging and we are growing. Good news is that we believe we have moved into 2024 in a much improved state. The investigation into and the remediation of these contamination events taught us a lot. It is relatively simple to run our – to run at lower production rates for the 30 years between 1991, the original USDA approval date of First Defense and 2021. The contamination events we suffered during 2022 and 2023 were largely the result of our processing more milk than ever before in order to meet increasing customer demand.
As we enter 2024, we believe that we have much improved processes and controls in place from the farms through liquid processing. I’d like to speak about two financial disclosures that I think help them demonstrate this critical turning point of our business. First, with sales – excuse me, while sales were down 6% year-over-year, they were up 30% during the fourth quarter of 2023 compared to the fourth quarter of 2022. This improvement is largely the result of increased production output. The production level we reached during the final 2 months of the year would annualize to about $26.8 million in sales value, which equates to an average quarterly production of about $6.7 million. Our objective is to meet or exceed this level going forward.
Second, EBITDA, earnings before interest, taxes, depreciation and amortization, decreased by $2.9 million during 2023 compared to 2022. But EBITDA during the fourth quarter of 2023 improved by $657,000 in comparison to the fourth quarter of 2022. That’s a big picture. With regards to the other financial results, last night’s press release reports no change to our product sales results that were first reported on January 8. The press release also provides a full unaudited P&L results and some unaudited summary balance sheet data. I will now take our time on this call to review all those numbers in detail, but I would like to discuss a high level overview. When we compare the year ended December 31, ‘23 to the prior year, the $3.3 million increase in our net loss was largely caused by the $3.8 million decrease in gross margin.
The lower gross margin in 2023 was largely the result of contamination scrap and a lot of fixed costs being spread over lower total sales as we slowed down production output to remediate the production problems. As a result of all of this, cash is tight. In response, we have frozen certain capital expenditure investments for the time being and we recently secured an extension of our $1 million line of credit until September of 2025. We have been driven by data as we resolve this temporary production problem. All production batches are and always have been routinely tested by our quality control team at the beginning, middle and end of the production process to ensure that no added specification product ever gets to market. Improvements made throughout the production process are allowing us to come back into full production.
We believe that the operational improvements implemented will help us run more effectively at a higher output level going forward. We have worked incredibly hard to address these challenges. To be successful, we must avoid future significant contamination events and equipment breakdowns and operate with good production yields. Based on our responses and progress, I am optimistic about what we can do in the coming quarters. Despite this significant diversion of our resources, we made our third submission of the CMC Technical Section for Re-Tain to the FDA in August. This type of submission is typically subject to a 6-month review by the FDA. However, the FDA notified us in late October that they had refused to review our August submission because of a misunderstanding about where and by whom we intend to have our drug product aseptically formulated and filled.
Our understanding is that the FDA believes that our plan was to bring those services in-house, which we might do down the road post approval rather than to continue to have these services provided by our contract manufacturer, which is what we are doing currently. In response to this notification from the FDA, we’re forced to refile our submission in November. We are in communication with the FDA to resolve this unfortunate communication. But if we fail to recompromise the expected response date for their review could be delayed until May 2024, which is 6 months from the November resubmission date. Regardless, we remain poised and excited to revolutionize the way that subclinical mastitis is treated in today’s dairy market with a novel alternative to traditional antibiotics the zero-milk discard and zero meat withhold claims.
Lastly, I encourage you to review the press release that we filed last month. Also, please have a look at our corporate presentation slide deck. I believe it provides a very good summary of our business strategy and objectives as well as our current financial results, a February update was just posted to our website last night. See the Investors section on our website and click on Corporate Presentation or contact us for a copy. We plan to file our full annual report on Form 10-K for the year ended December 31, 2023 around the end of March. With that said, I’ll be happy to take your questions. Let’s have the operator open up the lines, please.
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