Nanalysis Announces Fourth Quarter and Full Year 2023 Results
Nanalysis Scientific Corp. announces fourth quarter and full year 2023 results with optimistic outlook for 2024. The Company reported revenue growth, improved gross margins, and reduced losses. Financial highlights show increased sales and service revenue, with positive trends in product sales and security services. The Company is focused on innovation, cost-cutting measures, and strategic partnerships to drive profitability. Notable achievements include new revenue records, completion of the Airport Security Project phase-in, and funding for AI software development.
Revenue growth in Q4 2023 driven by security services and Benchtop NMR sales recovery
Improved gross margins due to cost-cutting measures and increased sales markets
Focus on innovation and strategic partnerships to drive profitability
New revenue records and successful completion of the Airport Security Project phase-in
Funding secured for AI software development to enhance product offerings
EBITDA and net loss reported for Q4 and full year 2023
Gross margin challenges due to slow market conditions and high up-front training costs
Losses related to the deconsolidation of Quad impacting net loss for the year
Inflation and supply chain issues affecting Benchtop NMR margins in the first half of the year
Depressed services gross margin due to training costs related to the Airport Security Project
"As noted in our previous release dated February 6, 2024, we are very pleased with how our businesses ramped up in second half of 2023 and we closed out the year with good momentum which has carried into the current year," said Sean Krakiwsky, Founder and CEO of Nanalysis. "Our benchtop sales have regained stride and the personnel changes that we made earlier in the year are producing good results that we expect to continue going forward. Our security services segment completed taking over all basic services on the Company's Airport Security Project early in 2024, and this project will continue its expansion and roll-out, building towards full revenue run rate through the year. Additionally, in 2023 we had significant up-front training costs which contracted our margins. In 2024, we expect that to be significantly reduced and look for security services margins to improve throughout the year."
Financial highlights for the three months ended December 31, 2023:
Three months ended | ||||
( | 2023 | 2022 | ($) | |
Product sales | 5,450 | 5,893 | (443) | |
Service revenue | 4,350 | 1,310 | 3,040 | |
Total sales and revenue | 9,800 | 7,203 | 2,597 | |
Gross margin - product sales | 48 % | 32 % | 16 % | |
Gross margin - service revenue | -21 % | -50 % | 29 % | |
EBITDA | (774) | (2,532) | 1,758 | |
Net loss | (2,123) | (3,292) | 1,169 | |
- For the three months ended December 31, 2023, the Company reported consolidated revenue of
$9,800 , an increase of$2,597 K or36% from the comparative period in 2022. This includes$5,450 K in product sales and$4,350 K of service revenue related to security services. - Gross margin percentage on product sales was
48% for the three months ended December 31, 2023. Improvement in gross margin percentage for Benchtop NMR is materializing as sales have improved in the second half of the year and reductions in the manufacturing labour force in late Q2 have begun to positively affect margins. - Service gross margin percentage in the quarter was (
21% ) as the Company accelerated its training schedule for the Airport Security Project and began expensing wages related to airports that were in service. Management expects service gross margin percentage to improve significantly as the Airport Security Project is phased-in to full capacity and revenue scale up continues in 2024. - EBITDA loss for the three months ended December 31, 2023, was
$774 K versus a$2,532 K EBITDA loss in the same period last year. - Net loss for the three months ended was
$2,123 K as compared to the three-month loss for December 31, 2022, of$3,292 K.
Financial highlights for the twelve months ended December 31, 2023:
Twelve months ended | ||||
( | 2023 | 2022 | ($) Change | |
Product sales | 16,342 | 21,588 | (5,246) | |
Service revenue | 12,124 | 3,233 | 8,891 | |
Total sales and revenue | 28,466 | 24,821 | 3,645 | |
Gross margin percentage - product sales | 41 % | 49 % | -8 % | |
Gross margin percentage - service revenue | -23 % | -1 % | -22 % | |
EBITDA | (8,074) | (3,935) | (4,139) | |
Net loss | (16,784) | (9,915) | (6,869) | |
- The Company reported consolidated revenue of
$28,466 K$3,645 K15% from the comparative period in 2022. This includes$16,342 K$12,124 - Gross margin percentage on product sales was
41% for the twelve months ended December 31, 2023, down from49% in the prior year. Benchtop NMR margins were depressed in the year due to a slow scientific instrumentation market in the first half of the year as well as higher costs related to post-COVID supply chain issues and 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. Because of these cost-cutting measures, as well as improved sales markets, gross margin percentage on product sales rose to48% in the fourth quarter. The Company continues to analyze its supply chain to manage its material costs. - Services gross margin percentage was (
23% ) for the twelve months ended December 31, 2023. This was the result of high up-front training costs related to the roll-out of the Airport Security Project as the Company's labour force was hired and trained through 2023. - EBITDA loss for the twelve months ended December 31, 2023, was
$8,074 K$3,935 K - Net loss for the twelve months ended was
$16,784 K$9,915 K$2,901 $2,810 $1,071 - The Company had cash on hand of
$759 K$1.9 million $3.3 million
Quarterly Trend:
- The Company has showed continuous growth in revenue, quarter over quarter, driven both by expansion of the Airport Security Project as the Company took over more airports from the incumbent service provider, as well as recovery of product sales revenue in the second half of the year.
- Net loss improved from Q1 to Q2 as security services revenue expanded but reached a low in Q3 2023 as the Company recognized a non-cash
$2.8 million
Recent strategic and operational highlights during and after the fourth quarter of 2023 include:
- New Quarterly Revenue Record: Q4 2023 revenue of
$9.8 million - Completed Phase-In of the Company's Airport Security Maintenance Project: On January 11, 2024, the Company completed the phase-in period related to its airport security maintenance project, resulting in the Company's Security Services business now performing maintenance of passenger screening imaging and detection equipment across all of Canada and beginning a scale up phase to increase revenue to its expected run rate. The Company is confident that the highly capable team built during this project will provide significant growth opportunities for this business with new customers and partners.
- 100 MHz Benchtop NMR Product: In Q4, the Company sold and shipped 14 100MHz Benchtop NMR units, the highest number of shipments for 100 MHz units in a quarter since the Company cleared its backlog in 2022. This drove continued recovery in Benchtop NMR revenue.
- Closed Exempt offering and concurrent Private Placement: Gross proceeds of offering were
$5 million - Granted Funding Supporting AI Software Development for Detection of Illicit Substances: The Company is receiving advisory services and up to
$1.45 million in non-repayable, non-dilutive funding from the National Research Council of Canada Industrial Research Assistance Program (NRC IRAP), to develop Artificial Intelligence based software tools to detect illicit substances on top of the Company's portable Nuclear Magnetic Resonance (NMR) spectrometers.
Outlook
"We are very encouraged by the continued sequential growth of our benchtop sales quarterly last year and we believe we can maintain strength in our product sales into 2024," said Sean Krakiwsky, Founder and CEO of Nanalysis. "The operational changes and leadership changes that we put in place in both our sales organisation and Security Services are paying off and we believe we will continue to foster growth in the current year. We continue to demonstrate that we are a leader in Benchtop NMR and plan to retain that position through continued innovation and advancement of technologies used in our product line. Lastly, the changes implemented by right sizing our R&D and manufacturing capacity, particularly as it relates to Benchtop NMR, positions us to grow both our topline and margins in 2024, as we move towards profitability.
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/9xEage3Q0PB 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 # 093791.
Additionally, the Company will be hosting a Q&A session for it's European investors at 8:30am ET tomorrow, Tuesday, April 30th which can be accessed by the following link: Join the meeting now
Non-IFRS and Supplementary Financial Measures
The Company prepares and reports its consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, as adopted by the Canadian Accounting Standards Board ("IFRS"). However, this press release may make reference to certain non-IFRS measures including key performance indicators used by management. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company's results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS.
The Company uses Earnings Before Interest, Tax, Depreciation and Amortization ("EBITDA") as a non-IFRS measure, which may be calculated differently by other companies. This non-IFRS measure is used to provide investors with a supplemental measure of the Company's operating performance and liquidity and thus highlight trends in the Company's business that may not otherwise be apparent when relying solely on IFRS measures. The Company also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of companies in similar industries.
Three months ended December 31 | Twelve months ended December 31 | ||||||
( | 2023 | 2022 | ($) Change | 2023 | 2022 | ($) Change | |
Net loss | (2,123) | (3,292) | 1,169 | (16,784) | (9,915) | (6,869) | |
Business acquisition costs and contingent consideration (gain) loss | (1,106) | (106) | (1,000) | (967) | 104 | (1,071) | |
Depreciation and amortization expense | 1,052 | 1,233 | (181) | 4,413 | 4,564 | (151) | |
Finance expense (income) | 43 | (124) | 167 | 284 | 76 | 208 | |
Stock-based compensation | 187 | 454 | (267) | 1,048 | 1,556 | (508) | |
Foreign exchange (gain) loss | (84) | 5 | (89) | 165 | 164 | 1 | |
Loss on loss of control of subsidiary | - | - | - | 2,810 | - | 2,810 | |
Loss from associate | 271 | - | 271 | 527 | - | 527 | |
Restructuring costs | 4 | - | 4 | 441 | - | 441 | |
Current income tax (recovery) expense | (3) | 53 | (56) | 13 | 250 | (237) | |
Deferred income tax expense (recovery) | 985 | (755) | 1,740 | (24) | (734) | 710 | |
EBITDA | (774) | (2,532) | 1,758 | (8,074) | (3,935) | (4,139) | |
Supplementary Financial Measures
The Company may also use supplementary financial measures which are intended to be disclosed on a periodic basis to depict the historical or expected future financial performance, cash position, or cash flow of the Company, are not a non-IFRS measure, and are not presented in the financial statements. The measures as discussed in this press release include:
- Up-front training costs, representing the required training costs to initially certify the Company's Airport Security Project labour force as well as associated travel costs related to training
- Gross margin percentage, which is defined as either (Product sales less Cost of product sold) divided by Product sales or (Service revenue less Cost of services) divided by Service revenue
About Nanalysis Scientific Corp. (TSXV: NSCI, OTCQX: NSCIF, FRA:1N1)
Nanalysis Scientific Corp. in operates two primary business segments: Scientific Equipment and Security Services. Within its Scientific Equipment business is what the Company terms "MRI and NMR for industry". The Company develops and manufactures portable Nuclear Magnetic Resonance (NMR) spectrometers or analyzers for laboratory and industrial markets. The NMReady-60™ was the first full-feature portable NMR spectrometer in a single compact enclosure requiring no liquid helium or any other cryogens. The Company has followed-up that initial offering with new products and continues to have a strong innovation pipeline. In 2020, the Company announced the launch of its 100MHz device, the most powerful and most advanced compact NMR device ever brought to market.
The Company's devices are used in many industries (oil and gas, chemical, mining, pharma, biotech, flavor and fragrances, agrochemicals, law enforcement, and more) as well as numerous government and university research labs around the world. The Company continues to exploit new global market opportunities independently and with partners. With its partners, the Company provides scientific equipment sales and maintenance services globally.
In 2022 the Company was awarded a five-year,
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 TSX Venture Exchange nor its Regulation Services Provider accepts responsibility for the adequacy or accuracy of this release.
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SOURCE Nanalysis Scientific Corp.
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