Trinity Biotech Plc Q2 FY2023 earnings call

• Revenue: Total revenue $13.9M, excluding certain items was $13.7M. Core diabetes consumables up 10% QoQ.
• Diabetes franchise: Core diabetes consumables revenue up 10% QoQ; recurring diabetes consumables revenue in Asia up ~70% over Q1 led by China; diabetes revenue up over 10% in direct distribution markets (US, Brazil).
• Premier Resolution System: Received U.S. FDA 510(k) clearance in August; intended to retake market leadership in haemoglobin variants.
• Premier 9210: Redevelopment on track for phased roll-out in 2024; improved column and reagent formulation with increased injection capacity, reduced calibration frequency, etc.
• Reference Lab: Efforts to reposition and scale 50-state certified lab in Buffalo; proprietary Sjogrens bio-marker lab tests had 20% average annual growth since 2020, approaching $4M in annual revenues; entered strategic revenue-sharing partnership with Trusted Health Advisors for Sjogren’s commercialization.
• TrinScreen HIV: Completed field evaluation in June; addressing legal challenges in Kenya with hearings in early October; expecting significant orders in Q4 upon resolution.
• Operational transformation: Headcount optimization: Net 20% reduction in headcount by end of Q4 2023 vs Q1 2023, annualized cashflow saving over $4M. Manufacturing optimizations: Diabetes A1C testing column manufacturing process revised, projected to reduce COGS by over 30%; supply chain optimization for Haemoglobins instrument, targeting 40%-50% materials cost savings; rebuilding/repositioning Diabetes A1c reagent column system; HIV product manufacturing optimization to deliver several million annual cash flow savings.

Total revenue for fiscal Q2 2023 was $13.9 million. Excluding COVID focused PCR Viral Transport Media (VTM) products and Fitzgerald Industries (disposed in April 2023), revenue was $13.7 million, which was 3% lower than Q1 2023. Core franchise diabetes consumables revenues increased 10% over Q1 2023. Recurring diabetes consumables revenue in Asia rebounded strongly, up ~70% over Q1, led by demand recovery in China. Clinical Chemistry, Chromsystems and Syphilis product lines showed positive revenue momentum despite raw material backorders in some Clinical Chemistry lines, but this was offset by lower infectious disease revenue compared to Q1 2023 due to irregular order cycles.

• Revenue outlook for Q3 2023 is expected to be approximately $14 million to $15 million, with expectation of being closer to the upper end.
• Diabetes consumables are expected to increase over 20% in the second half of 2023 versus the first half.
• Diabetes instrument placements for the second half of 2023 are accelerating and are expected to be up to double those placed in the first half of 2023.

• Legal challenges in Kenya related to the HIV testing algorithm and process changes, with uncertainty around resolution.
• Regulatory hurdles in rolling out new products (e.g., Premier Resolution System in China) and redevelopment of Premier 9210.
• Impairment of investments, such as the full impairment of the $1.5 million investment in imaware, Inc. due to uncertainty over its performance.
• Balance sheet optimization risks and the need for continued work with lenders to secure appropriate liquidity.

Q: On an annual basis, how material was the lost transplant services testing business in Buffalo?

A: John Gillard said it was probably about $2 million of revenue, not hugely material, and it was a difficult business to scale.

Q: Should we take the second quarter as a low water mark with sequential revenue profile expected to climb?

A: Aris Kekedjian said they feel at an inflection point and confident about sequential revenue profile going forward.

Q: Is the Premier business down overall but consumables business continues to grow?

A: Aris Kekedjian said the core business is about consumables where they generate greater than 50% margins, and they're focused on strategic instrument placement with recurring revenue profiles.

Q: What are the legal challenges left in Kenya regarding TrinScreen HIV?

A: Aris Kekedjian said there are hearings in early October, and they believe matters should be resolved in favor of moving forward, expecting significant orders in Q4 upon resolution.

Q: Do you think the cash balance of about $14 million is sufficient?

A: Aris Kekedjian said it's not sufficient and working with lenders to ensure appropriate liquidity, expecting significant improvement in cash flow as initiatives take effect.