TOMI Environmental Solutions, Inc. Price & Performance (TOMZ)

And thank you for joining us today for the TOMI Environmental Solutions Update Conference Call. On today's call, TOMI, CEO and Chairman of the Board, [indiscernible] TOMI COO, E. J. Shane Tomy's CFO, [indiscernible] Doctor. Shane will provide an overview of recent business highlights. E. J. Will report on future plans, Joe will provide the financials, and all will be available for the Q and A. A telephone replay of today's call will be available through November 6, 2024. The details of which are included in the company's press release dated October 24, 2024. A webcast replay will also be available at thomyswebsite www. Thermos [indiscernible] Please note that information contained within this presentation is relevant only to the day in which it was recorded. October 30, 2024, and you are therefore advised that that time sensitive information may no longer be accurate at the time of any replay. Certain written and all statements made by management of TOMI may constitute forward looking statements. As defined by the Private Securities Litigation Reform Act of 1995. These forward looking statements should be evaluated in light of important risk factors that could cause our actual 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 TOMI. The company undertakes no obligation to update these forward looking statements after the date of this call. In addition, TOMI will discuss certain non GAAP financial measures during this call. The company uses non GAAP measures because it believes they provide useful information about 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 [indiscernible] dated October 30, 2024. I will now turn the call over to TOMI Chairman and CEO, Doctor. Halzen Schein. Thank you, Raj, and good afternoon. [indiscernible] Thank you for joining us today to discuss TOMI Environmental Solutions 3rd quarter [indiscernible] With me today is our CFO, Joe Receptive who will provide a detailed financial overview followed by E. J. Shane, our COO, with the company's update on its strategic direction and growth [indiscernible] I am pleased to report that TOMI achieved another mile [indiscernible] Making our 2nd consecutive profitable quarter for the 2020 4 calendar year. This performance reflects higher revenue improved gross margins and carefully [indiscernible] In addition, we achieved positive cash flow this quarter driven by stronger accounts receivable turnover and tighter control of our outgoing cash through disciplined management of expenditures. Our momentum continues as we broaden our customer base and secure new strategic agreements and partnerships.

These achievements are a direct result of the resilience and commitment of our team the support of our long term partners and the strength of our business model. Our revenue for the quarter was approximately 2,500,000 representing a 73% increase compared to the Q3 of the prior year. This growth was primarily driven by strong demand for our mobile equipment which has increased by 90% in 2024 compared to 2023. And our IHP service revenue, which recognized revenues of a approximately $650,000 making a record for the division's quarterly performance surpassing historical averages of approximately $250,000 per quarter. Continue to see strong international sales for this year. The 1st 9 months of 2024 shows international sales growth at 82% when compared to 2023. And bit solution sales have also increased. By 13% year to date. While our partnership with EMAQ announced in the second quarter continues to grow effectively leveraging combined strengths and resources. To accelerate business development and expand opportunities. The 3rd quarter delivered support to key clients, such as Pfizer and Thermo Fisher Scientific while successfully onboarding new customers including Integra Life Sciences Curia and multiple smaller engagements within the food safety sector. These new relationships are through both capital equipment sales recurring service contracts.

The addition of these valued clients further reinforces IHP's leadership in advanced decontamination extending our presence across the life science industry and other markets. We remain on track with the times for our ongoing custom integrations. The California based company contracted in February is nearing acceptance and will soon be operational. Additionally, the system designed for the global leader in advanced laboratory services, contracted in June has been accepted and is now in the [indiscernible] TOMI is making significant strides into the consumer healthcare market through partnerships with industry leaders such as Edgewell Personal Care, [indiscernible] Group Plc. These collaborations highlight the versatility of STERMA's technology across multiple injuries. Industries, enabling us to unlock new markets while continuing to support our core segments. Looking ahead, we remain focused on accelerating international growth launching new products and programs, and carefully managing expenses. This disciplined approach has strengthened our performance this quarter and we remain committed to delivering sustainable organic growth and profitability moving forward.

I'll now turn the call over to Joe.

Thank you, Doctor. Shane, and good afternoon, everyone. I'll provide a brief overview of our financial results for the Q3 of 2024 compared to the same prior year period. Our consolidated net revenue was 2,542,000 compared to 1,470,000 increasing approximately 73%. Consolidated gross profit margin was 61.4% compared to 55% attributable to our product mix and sales, and the increased demand for our mobile equipment. The consolidated operating profit was 149,000 compared to a loss of 901,000 dollars representing an increase of $1,050,000 or 117%. The increase in our profit was attributable to higher sales and gross profit in the current year period.

Our consolidated net profit was 59,000 dollars or $0 per basic and diluted share compared to a net loss of 901,000 dollars or $0.05 a loss of $0.05 per basic share.

Moving on to the balance sheet.

As of September 30, 2024, our cash and cash equivalents were approximately 809,000 dollars Working capital was 6,900,000 dollars and our shareholders' equity was 7,400,000 dollars TOMI was cash flow positive for Q3 driven by increased revenue and the cost reduction efforts measured in the mentioned in the June 6 press release. Now I turn the call over to EJ to provide insight on current company activity.

Thank you, Joe, and good afternoon, everyone. As part of our budget optimization, we have scaled back on trade show activity and reallocated resources towards more effective lead generation strategies. Such as referrals and client references. While trade shows like the upcoming ALAS events offer valuable networking opportunities, our strong reputation has enabled us to effectively attract new business and expand the customer base. Recently, we launched a targeted outreach campaign focused on domestic manufacturers of cleanroom construction and general building companies to incorporate our decontamination builds into their project bids for awareness of our custom engineered system, and hybrid.

This campaign engages both existing partners and new prospects across sectors. Including prefabricated cleanrooms, construction design firms, and mobile healthcare pods.

Our current CES and hybrid projects are at various stages of manufacturing. In acceptance, we are optimistic about securing additional CES and hybrid contracts before the year end.

These new contracts are currently scheduled for installations beginning in Q2 and extending through Q4 of the year 2025. In parallel, we are collaborating with existing customers such as ITH Pharma in the United Kingdom and solely Organics a leading national grower of fresh and organic produce in the states. On expanding with TheraMed's IHP on additional automated systems While discussions are still in the early stages, these developments highlight the value our IHP technology provides to customers.

As our current channel of projects continue to reach maturity, waiting on customer and partner decisions and timelines for the [indiscernible] we remain focused on proactive strategies to build our installation pipeline. Efforts such as the mentioned targeted outreach to contractors and designers and maintaining close relationship with key contacts are instrumental in sustaining our momentum with these product lines. [indiscernible] As Doctor. Shane highlighted on today's call, a key achievement this year has been the strong performance of our IHP corporate service and international revenues, both of which we continue to demonstrate solid growth as we close out this year. Our IHP service revenue pipeline currently exceeds $1,000,000 and these opportunities typically display shorter sales cycle. Further, this amount does not include our contracted relationships which we have fulfilled for the 2024 year and will restart in 2025 with an initial value of $600,000 While some deployments in the pipeline are scheduled for early Q1, several opportunities remain on track to close by year end. As recently announced, Theram has successfully entered into India. A key focus of Tumi's growth strategy. Will be exhibiting our technology with our new partner, Craft come this November and already have a pipeline building via demonstrations and trials with end users in the region.

We also reached a major milestone with Fresenius CABBI. That expanded in the use of STERMA's IHP to a facility in South Africa. Marks their 4th location adopting our technology. Following successful deployments in Chile, Portugal and Brazil totaling over $1,000,000 in sales to date and STEREMIS IHP for Fresnius.

And they continue to increase awareness among many other locations. These global implementations reflect the growing trust in Sterimus and our ability to meet the diverse needs of clients across We anticipate further international growth by year end. Including a new partnership in South Africa with a company specializing in In Switzerland, we expect our full room fogging device to be integrated into the operations of an international firm with a presence across the Americas Asia Pacific and Europe. Organization's core business spans solutions for semiconductors, life sciences and data centers. Additionally, we are in early discussions to onboard a third partner in Australia second partner in South Korea focused on emergency services. We are also working with the occupational safety equipment distributor in Hungary and have in the United States territory of Puerto Rico and the neighboring Caribbean Islands for the pharmaceutical and food industries. As recently announced this quarter, we successfully deployed our new Sterimus Integrated System or SIS at the National Institute of Forensic Medicine in Malaysia approximately $133,000 currently have 4 pending proposals in the region with key partners and are optimistic about by the end of the year for a similar amount. The SIS product line now available for sale has generated strong interest and SIS standalone or SISSA aligns well with our STAIRBOX, which is also gaining market traction.

The standalone may become our highest rated product offering. The combination of this delivery system is valuable across the life sciences, but other sectors as well.

Including medical devices, sensors and commercial applications for refurbished items. The STERA box is customized in material and size to meet specific customer needs and budgets and the capabilities in Versed and versatility in the application alone of the standalone sets it up for success. We remain committed to our ongoing collaboration with enclosure manufacturers to support the full SIS product line. Anticipate receiving our first order by the end of the year.

TOMI manufacturing team is working closely with an Italian manufacturer deliver a streamlined IHP isolator to the Virginia Commonwealth University a longtime user of technology. We also want to highlight our awareness of the various challenges currently affecting the food market. In response, we have proactively partnered with industry players and researchers to provide tailored solutions and support ensuring we meet their evolving needs during critical times. And in order to prevent contamination. STRAMIS Pro Certified or SPC program is designed to ensure certified deliver disinfection and decontamination services with a focus on public health, safety and environmental sustainability. As part of this strategic shift, we will no longer maintain the TOMI service network or TSN in its current structure.

Instead, we have launched the SPC, a new and on demand program available to all customers across key sectors. Including life sciences, healthcare, food safety and commercial markets. This initiative reflects our proactive approach by harnessing the expand our global footprint. Together with industry experts, we continue to drive innovation and and validation practices.

With Theravis IHP, we now offer transformative technology that serves 4 critical industries, supporting everything from routine cleaning and complex cleanroom decontamination to patient healthcare environments biohazard management and border control operations. Along with an educational platform Our network of domestic and international service providers plays a crucial role in advancing this mission and broadening our impact worldwide across a diverse list of markets available for IHP.

Our expanded product offerings and scalable solutions position us very well for a sustained growth across all four of our divisions. Thank you, everyone. And I will turn the call back over to Doctor. Shane for closure.

Thank you, E. J. And Joe. TOMI performance continues to reflect the quality and diversity of our products that are all driven by our patented [indiscernible] platform We had good growth driving across all businesses with particular strength internationally, our IHP or in house service and our mobile products. And we see an opportunity to drive considerable operating leverage in the business as we grow. Looking ahead, we remain well positioned to execute on our next phase of growth going into 2025 and beyond. As TOMI continues to innovate for a safer world, I want to thank you for your continued support and confidence in TOMI Environmental Solutions, and also don't forget to go out and vote next Tuesday. Good luck to everybody. Operator, you can open the call to questions.

Thank you, sir. Thank you. Our first question is coming from Samir Joshi with H. C. Wainwright. Your line is live.

Great. Thanks.

Doctor. Yi Chen, congratulations on the positive cash flow and the positive net income quarter. Good to see the progress here.

Thanks, Sameer.

Yes. And, Vijay, thanks for providing a good, very good lay of the land and overview of the business. It was really helpful. Of course. Just Yes. Just having a little bit on that front, On the IHP, the recurring revenues, how do you see like what kind of visibility do you have? And you mentioned you have like 600,000 of in the pipeline starting for next year, but can you just let us know like how long these contracts are? Is the visibility and repeatability of this Certainly. So the 600,000 that is projected is a loan for our custom engineered systems. And now that the latest long term ones that we've been waiting for that will be using it 8, or so times a day would be the 2 installations at Merck. And that will be a real game changer in our solution model. And that will start fresh next year.

And then that, as we continue to build on the CES, will become much easier to continue projecting. In terms of solution use. I'd say that knowing that some facilities, it will depend upon their production lines. So for instance, [indiscernible] partner and ITH will use their system every time they change production on new drugs. So that varies based on their business model.

But that is on the solution Okay. So I think the bottom line is that probably your $650,000,000 during this quarter is repeatable and to grow over the next few quarters or how should we look at it?

On service, absolutely. That will continue to grow in the contracts that we do reoccurring.

Now those are ones that again get contracted for the twice a year shutdowns. Required for them. I was referring to a PR we did on the solution for this 600,000 on CES' that maintains as well.

So you got new answers.

Yes. No, this is good because as you increase your installed base, so to speak, you are likely to get higher and higher tenant contracts, which are more repeatable over the next few quarters? Correct. On the full safety, good to see that your efforts are ongoing on that. In terms of revenue potential during [indiscernible] how do you see that industry developing for you?

What was the last part Just like outlook for maybe a qualitative outlook for the food safety industry in 2025 as far as your products? Yes.

We're really excited about this industry. There's a significant increase in the ready to eat food market And we're continuing with many food safety organizations including the FDA and the USDA, Purdue University, And we're engaging with industry conferences to network our food industry professionals and I believe at the end this is going to be a huge industry for our product. As we move forward.

So we've increased it quite a bit since 2021. I think if I remember right, the percentage was like 288%, which is a lot but it's also not as much as in comparison to our other markets, but it looks very bright for us, Amir.

Understood. And then just for the near term sort of you're already in the 4th quarter.

Should we expect sequential revenues to increase from this 2.5 levels maybe get back to the June quarter level in the 4th quarter?

It's hard to tell, but I believe we should. We're hoping to do over $10,000,000 for the year.

Okay.

Okay. Sounds good. And then just a few questions from the balance sheet. The accounts receivables I saw, it's [indiscernible] $1,000 came in from that working capital How do you see the or let me rephrase, like what are the terms that you are looking at in terms of AR days on hand and how is the recovery process?

Joe?

The majority of our customers are Net30. For regular orders, equipment orders, The custom engineered systems have like 4 payments as the projects progress.

Okay.

Thanks for that color. And last one, the inventory levels, does this include mostly equipment or solution and also is it work in progress or is it finished goods mostly?

It's mostly equipment and bit solution in inventory.

And then, meaning, but it is mostly finished goods, right? Yes.

Okay, good to know. Great. Thanks a lot for taking my questions and good luck. Thanks Sameer. Thank you so much.

Thanks Sameer. Thank you. [indiscernible] Our next question is coming from John Nelson who is a Private Investor. Your line is live.

Hi, doc and team.

Congrats again on the excellent results and the wonderful progress that you've made over the last couple of quarters. Thanks, John. Questions Can you give me an idea as to what kind of Lag times, we're talking about from hardware sales to the [indiscernible] It's I'll ask Joe that question. I think we've had like a 13 [indiscernible] is good for our model going forward as far as the razor razor blade. Hardware sales, that includes service? I don't know, Joe, you want to give some color on that a little? Yes.

BIDS solution sales were up 13% as we reported. And mobile equipment was up 90% year over year.

Oh, no, they didn't And so I guess what I'm trying to get at is [indiscernible] amount of equipment sales Is there some percentage correlation I should use as far as my calculations as far as Your hardware sales resulting in X% increase in solution sales No. Those 2 percentage increases?

Yes.

It's hard to do that because sometimes we'll sell a piece of hardware and it will take like a year for them to integrate it into their systems. And be functional and operational. So I mean, it would be great and soon we'll probably have something like that that will give us a KPI that makes sense But at the moment, I think next year, we should have it in relation Okay, great. And [indiscernible] at least in my opinion, TOMI me has the best product on the market servicing various specialty markets. Any more details on how your increasing the moving to increase the awareness and educate potential customers on the products that you have. So I mean from a marketing standpoint, we're moving forward in many markets When you just close your eyes and think about the application of this technology, it it's so bright in relationship to what is available. And it can be applied almost in any industry the size of our company, we're working at the lower hanging fruit.

I personally believe the food market And it's going to be huge. There's a large need for it.

It's I want to say 52 to $70,000,000,000 [indiscernible] and we're focusing on that. We're advertising for that. We're doing many studies in relationship for that. So once these studies start coming in and the larger companies start using it, then we'll have some really good news on that.

Okay.

Would your product be useful for somebody like the McDonald's [indiscernible] Treehouse Foods and the Boar's Heads [indiscernible] It would. I mean, there are lots of recalls going on and we're working I'm working on a piece that's going to go out social media soon Yes, it would be. We've contact we reach out to all these companies and many of them are just shut their plants.

And it's a long process for them to go through and realize they need to or wipe it down properly and use SteriMist to reopen. So as soon as we hear about this news and we're involved with as many federal organizations getting response. We go out and try to service them and educate them. And it's a process, but we're doing it. Okay. Great.

And just as kind of a real world [indiscernible] There's an IV plant in North Carolina that was by the hurricane.

How would Steramist be used in the decontamination efforts? And I guess I'm what areas would it be applied to? I'm going to let E. J. Answer that because I think we have a little color on that maybe, Ejai.

We are in touch with 2 plants actually that were damaged due to the hurricane in North Carolina. They will be using and calling us in for our services. But they have to do some reconstruction on their own first before we can come in. We're kind of the last step to commission to get them back into production.

Okay. Great.

Thanks. And then I know that there's a number of [indiscernible] that are in the production phase. Is that an opportunity that you're working towards [indiscernible] [indiscernible] [indiscernible] It could be. It's the type of thing that we look into and all these hormone type plants and production plants It's a big phase going forward and definitely could use our product and should use our product Again, it's another market. It's another vertical in life sciences. That makes complete sense to go ahead with to use SteriMist, Okay.

And then on Using the social media, and things like Google and Perplexity and other AI searches. Are you Trying to position TOMI at the top of the queue for answers on disinfection issues.

Yes, absolutely. We do a lot of work on our Google on this SEO and certainly on social media. We routinely blast and even on the urgency of some of the contamination recalls you've seen to date, we stay on top of it and it is mostly via the social media platforms.

Okay.

Good.

And let's see.

Any additional color you can provide me with how the [indiscernible] is being received and is it [indiscernible] have you had much in the way of sales of the transport So the transport product line, we did sell our initial production of that unit and we're going into kind of a bit of a redesigner model too on it.

It received good feedback, but there's a third option in terms of powering it that we'd like to make sure the 2nd round incurs.

So we're working in tandem still with our Canadian distributors on providing that for their contracts that we see coming up in the near future.

Okay. I'm guessing that's a longer sales cycle than the other product line items.

The environment system which I decontaminates both air and surface And you have on your website safe and effective for air [indiscernible] I wondered if there were have you gotten any orders for that in dealing with some of the Airborne diseases like COVID and now the number one killer, which is Tubertsville [indiscernible] Yes, we use it I mean, our clients use it all the time for that. It's It's very effective against almost everything. There's some more more deadly pathogens that are starting to surface. And I don't know if it's just a timing issue, because of certain events happening in the U. S. Or if it's a real problem But Mollberg and Ebola type diseases are starting to show in different parts of the United States one specifically in the Midwest. And I think that if there is any serious problem, a lot of the people that have this for preventiveness will continue use the product and protect their states. So there's no question that they can throw a lot at us and we're very effective against everything. Great.

Okay. And kind of an area that may or may not progress but I wanted to just check if there's any progress on the ethylene oxide replacement market and certification.

We're We know that there are companies that have used ethylene oxide that are reaching out to us.

But it would be premature for me to discuss Got it. Okay. The website has your website has also an interesting Case study on [indiscernible] And it's a mold remediation case study. And I wondered if Just thinking about that, had an earlier [indiscernible] possibly a partnership with Servpro, Has that developed into anything significant or does that have the potential to move forward in a manner that's significant to the company? Yes. I mean, I not naming specific companies, I believe the old TSN, which is being modified into a much larger STERIMIST ProCertified program or our SPC program will include people from all of them. I mean, the top 5 remediators. So So it's a great product. It's the only product they should really have in their toolkit outside of [indiscernible] but yes, we see tremendous potential going forward. Especially with all these hurricanes and disasters. We know that there will be mold in most of these structures, whether they're commercial or residential. And our product is ideal.

Okay.

And then on I've been able to figure out a number of your customers and partnership members that you're not able to name I was wondering if it would be useful to give a [indiscernible] in order for them to in order to use let you use their name the customer?

John, we do our best. And that's why when I go through the report just now, I name I don't name people. But they just don't want us to. I mean, we don't want to spend more time trying to get a press release out using their name than we do selling the product, building the product, and delivering it. But ultimately, they will, when they start seeing it work like we have been doing with the big pharmaceutical companies, and some of the food safety companies. So probably it will get better. Again, a lot of them are large, large public companies and they don't want to endorse a product. This is just their nature.

Okay.

And finally, I am really [indiscernible] for the biological safety cabinets. I think that's going to be just a fabulous market. How would you come up with that?

Well, I'm going to let E. J. Answer that. I think it was demand, but go ahead.

It is demand. It is a very exciting product. That we just launched. And you are absolutely correct that it was ideal for BSCs and other enclosures, but there is a market for that system across all our industries.

So it's great with our spare box for our medical device initiative with 510. And even on the commercial end for refurbished items it's one applicator fogger. It does it all It's going to be as popular, if not more than our environment system. So it's been in the making and it does everything it says it does. We're very excited about it. Great work. Thank you. Thank you. Yes, that's all my questions. Good job.

Thanks, John. Thanks for everything.

Operator?

Apologies. My line was on mute. I do apologize. No, no, no problem.

Yes. We have no further questions in the line at this time, sir. So I'll hand it back to you for any closing remarks you may have.

Thank you all. Just Just once again, I want to thank our team for the great work. And our long term investors for continuing to believe in our company. And its beautiful high-tech disinfection decontamination products. And wherever you are, have a wonderful day and a great evening, and we'll be talking shortly. Thank you.

Thank you so much, ladies and gentlemen. This does conclude today's conference. You may disconnect your lines at this time. And we thank you for your participation.

Thank you all.