Transcript
Good day, and welcome to the ProPhase Labs Second Quarter 2023 Financial Results and Corporate Update. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the call over to Ted Karkus, CEO and Chairman of ProPhase Labs. Please go ahead, sir.
Thank you very much, and thank you all for joining us today for our second quarter conference call. I'd like to talk a lot, but I also explained a lot in our press release this morning. I really don't want to read the press release. I'm going to presume that you've all read it. That said, let me start by reading the forward-looking statement. I would like to remind you of the company's safe harbor language. During this presentation, we will make forward-looking statements, including statements regarding our strategies, plans, objectives and initiatives, and underlying assumptions. While we believe that these forward-looking statements are reasonable as and when made, they are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include, but are not limited to, our ability to obtain and maintain necessary regulatory approval, general economic conditions, consumer demand for our products and services, challenges related to entering into and growing new business lines, the competitive environment, and the risk factors listed from time to time in our filings with the SEC. This call will present non-GAAP financial measures such as adjusted EBITDA. Reconciliation of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC prior to this call and available on our website. Regarding our retail investor updates, we do a virtual non-deal road show or presentation. We're currently doing them about once a month. Any shareholders on this call that want an update about what's going on with the company can attend these sessions. I do not provide material nonpublic information, but I do give overviews about our company. As the largest shareholder in the company, I am here for all the shareholders, and I really want to continue to build value in the company. Mark my words, my expectations for the future are immensely greater than anything we've accomplished in the past. We have strong support from various analysts and investment bankers. ThinkEquity did a phenomenal job in raising capital for us a couple of years ago and in showing us potential acquisition opportunities. We recently reviewed a couple of hundred acquisition targets and have cherry-picked the absolute best. Our management team has been incredibly successful in building value in our company over the last decade, and even with the stock going back a little today, we still see significant multiples over the last few years while also providing substantial stock dividends. The returns for anyone who has been with us over the last three to four years have been phenomenal, and even more so for those who have been with us for the last 10 years. Interestingly, we're at a point in time right now where my expectations and believe that the future constitutes a growth industry. We are now in the genetic testing space, which is akin to where we were with COVID testing a few years ago. We just built a state-of-the-art laboratory for genetic testing, offering whole genome sequencing at a lower cost than anyone else in the country. We're in the first inning of this business, which is projected as a huge growth industry for years to come. Our current focus is on building a world-class genomics lab, leading the market in providing sequencing not only to consumers but also to businesses. We see significant interest levels from companies, and we're just in the infancy of our B2B business. Regarding our accounts receivable, I want to clarify that we are not concerned about our accounts receivable. As of the end of June, we had $38 million in accounts receivable. We have already collected $19 million of the $37 million at year-end. Understand that the highest quality payers with insurance companies are with whom we have accounts receivable. We're making progress and are not worried about collections. About our Pharmaloz manufacturing facility, the potential is enormous, and we are now working on building out that capacity. Moving forward, we will see substantial multi-million dollar revenue generation from our two main subsidiaries, Nebula Genomics and Pharmaloz. We're building lab capacity to meet demand and are also exploring creative ways to finance without doing dilutive rounds of financing for ProPhase Labs.
We will now begin the question-and-answer session. Our first question comes from Adam Waldo with Lismore Partners. Please go ahead.
Yes, good day too. Thanks very much for taking our questions. You have a lot of attractive shots on goal here over the next year or two, but in the next several quarters, there isn't a lot of visibility for investors into the cash trajectory of the company. Can you lay out what you see the cash progression and liquidity trajectory looking like over the next three to four quarters?
That's a great question. I’d like to focus more on our adjusted EBITDA than anything else—our adjusted EBITDA was negative $2.2 million in the second quarter and much better than in the first quarter. We may burn cash to buy equipment, and we have the ability to finance that equipment. We are not looking to raise money for ProPhase Labs at these prices. I think Nebula Genomics could be worth more than the entire market cap of our company right now. The accounts receivable is flowing in, and cash flow is actually pretty good. We have plenty of opportunities if we want to finance Pharmaloz.
Thanks for clarifying on your cash position. You've got just at your burned run rate about $14 million or $15 million annualized based on the first half results. This is not specific to the loans and the financing but the bottom line is, can you lay out for people how you're thinking about bridge financing opportunities?
We don't want to do a dilutive round of financing at ProPhase Labs. I'm looking at creative ways to take advantage of the value in our company without any dilution. We're managing the company for the long-term value for all shareholders.
I appreciate you clarifying that. On the other end, I read about your unsolicited all-cash offer for a business unit of NAVB Navidea Biopharma. Can you say anything publicly about where that stands?
It's still in a state of discussion. I'm really focused on our assets right now. We have many opportunities that can lead us to strong revenue generation and cash flow in 2024 without necessarily relying on other acquisitions unless they significantly accelerate our growth.
Thank you. This concludes our Q&A session and the call as well. Thank you for participating today.