Mr. Cameron Groome reports
MICROBIX REPORTS RESULTS FOR Q3 FISCAL 2019
Microbix Biosystems Inc. has release results for its third quarter and nine months of fiscal 2019, the three-month and nine-month periods ending June 30, 2019, with record year-to-date sales, strong YTD sales growth, improving percentage gross margin and progress on its strategic goals.
Sales of $3.1-million for the third quarter were down slightly versus Q3 2018 and were to antigen customers spread across all geographic regions. Sales by Microbix's distributor into the Asia-Pacific region were below target for Q3; however, sales to the company's broader customer base were stronger than Q3 2018. Microbix's sales outlook is satisfactory for its established-market customers; however, the distribution of product to new customers in Asia and an expanding line of quality assessment products (QAPs) are expected to increase quarter-to-quarter volatility of sales growth.
In Q3, Microbix continued its improvement in percentage gross margin, increasing versus the prior year for the fourth straight quarter. Those gains were achieved without the full benefits of its bioreactor program, which will only be realized across fiscal 2020. Increased operating expenses led to a loss of $191,322 during Q3, versus a nominal profit in Q3 2018. Microbix cash flow from operating activities was negative in Q3, due largely to the operating loss, a slight increase in inventory and a reduction in deferred revenue. Microbix is working continuously to improve gross margin, cash flow and net earnings.
Third quarter financial results
Total Q3 revenues were $3,110,615, a 4-per-cent decrease from Q3 2018 revenues of $3,235,224. Included were antigen and quality product revenues of $3,028,397, 4 per cent down from Q3 2018. Revenues from royalties were $82,218 (2018 -- $77,166).
Gross margin for Q3 was 49 per cent, up from 47 per cent in Q3 2018 even though margins in Q3 were unfavourably impacted by the mix of products sold versus Q3 2018, and this improvement in margins was largely independent of benefits from the continuing bioreactor program. Revenues from bioreactor-produced antigen were nominal in Q3 due in part to timing of order flows, while work toward conversion of all customers is continuing satisfactorily, as disclosed by Microbix in its news release update of Aug. 1.
Operating expenses were up 12 per cent during Q3 due to an increased investment in sales and marketing, costs of facilities expansion, and a stronger Canadian dollar. At the end of Q3, Microbix's current ratio (current assets divided by current liabilities) was 1.38 and its debt to equity ratio (total debt over shareholders' equity) was 0.93.
Nine-month financial results
Total YTD revenues were $9,825,056, an 8-per-cent increase from the first nine-month revenues of $9,120,984 in fiscal 2018. Included were antigen and quality product revenues of $9,564,459, 8 per cent greater than 2018, in spite of lower-than-targeted ordering from the company's Asia-Pacific distributor. Revenue from royalties were $260,597 (YTD 2018 -- $238,540).
Gross margin YTD was 51 per cent, up from 44 per cent in the first nine months of 2018, with this improvement largely being independent of benefits from the continuing bioreactor program. Resolution of yield control issues encountered in fiscal 2018 helped to improve YTD margins of a key conventionally produced product, with other process enhancements also contributing. The mix of products sold also varied versus YTD 2018 and had a favourable margin impact. YTD revenues from bioreactor-produced antigen were lower than expected; however, work toward converting all customers is continuing satisfactorily.
YTD operating expenses increased by 8 per cent from YTD 2018, reflective of an increased investment in sales and marketing activities, facilities expansion costs and debenture interest costs that had been capitalized to product development in previous years.
For the nine-month period, Microbix recorded a net income of $80,734, a $516,406 improvement over the same period in fiscal 2018.
Three months ended June 30 Nine months ended June 30
2019 2018 2019 2018
Revenue $3,110,615 $3,235,224 $9,825,056 $9,120,984
Gross margin 1,519,323 1,523,514 4,971,369 3,995,043
SG&A expenses 1,173,834 1,031,335 3,226,909 3,027,553
R&D expense 266,481 275,710 771,665 771,507
Financial expenses 270,330 215,511 801,376 631,654
Operating income (loss)for the period (191,322) 958 171,419 (435,672)
Net comprehensive income (loss) (191,322) 958 80,734 (435,672)
Net comprehensive income (loss) per share (0.002) 0.000 0.001 (0.005)
Cash provided (used) by operating activities (201,783) 82,226 (530,202) (886,788)
Microbix continues to target double-digit sales growth, with continuing efforts to improve gross margin and profitability. Its goal is to achieve successive quarterly improvements in financial results by increasing sales, improving yields, upgrading production technologies, optimizing product mix and introducing new products. Additionally, work continues with regard to securing a partnership agreement to advance Microbix's Kinlytic urokinase project and to derive value from LumiSort technology.
About Microbix Biosystems Inc.
Microbix specializes in developing proprietary biological and technology solutions for human health and well-being. It manufactures a wide range of critical biological materials for the global diagnostics industry, notably antigens used in immunoassays or quality assessment products (QAPs). Microbix's products are sold to more than 100 customers worldwide, primarily to multinational diagnostics companies and laboratory accreditation organizations.
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