Mr. Cameron Groome reports
MICROBIX REPORTS RESULTS FOR Q2 FISCAL 2020
Microbix Biosystems Inc. has released the results for its second quarter and first half of fiscal 2020 ended March 31, 2020, with the timing of product shipments to customers affecting Q2 results.
Q2 revenues were down 32% from 2019, which had achieved record results for a fiscal second quarter. The year-over-year decline was largely due to the timing of customer orders and delivery schedules. In 2020, deliveries to three major customers declined for the quarter -- not because of reduced demand, but due simply to the timing of orders. For those customers ordering regularly, Microbix sees sales to them resuming over coming quarters, while sales to those ordering periodically will recur in due course. Such order timing matters account for essentially all of the year-over-year reduction seen in Q2 revenues.
Gross margins for the quarter do not yet reflect the impact of the increasing utilization of Microbix's bioreactor production of its best-selling antigen product. That benefit will begin to be reflected in results for the third quarter ending June 30, 2020 (Q3), which will be reported in mid-August. Accordingly, margins were within expectations given an ongoing mix between roller-bottle and bioreactor production of Rubella antigen -- coming in at 48% for H1 versus the 51% of the prior year.
For the balance of fiscal 2020, further sales growth and continuing improvements to gross and net margins are targeted and expected -- driven by product mix and efficiency gains. Microbix remains committed to improving its operational and financial strength and thereby driving share price appreciation.
Second Quarter Financial Results
Q2 revenue was $2,874,496, a 32% decrease from Q2 2019 revenues of $4,253,629. Included were antigen revenues of $2,783,809 (Q2 2019 - $4,169,272), QAPs revenues were $425,837 (Q2 2019 - $433,328) and remained primarily to the white-label "PT" segment. Revenue from royalties was $90,687 (Q2 2019 - $84,357). Q2 sales declined largely due to timing of shipments to three key customers that benefited Q2 2019. Other revenues to North America, Europe and Asia were largely as expected.
Gross margin for this quarter was 46%, down from 51% last year. While revenues from bioreactor-produced antigen were up significantly from last year, we continued to ship Rubella antigen from conventional methods in Q2. In addition, a Q2 sales mix skewed to weaker margin products adversely affected gross margin compared to the same period last year, which had a higher margin sales mix.
Operating expenses decreased by 8% from Q2 2019, primarily a result of decreased general administrative costs and favourable foreign exchange gains in the current quarter.
Lower sales and fewer gross margin dollars in Q2 led to an operating loss & net loss of $219,030 versus an operating income of $482,037 & net profit of $391,352 (2019). Cash used in operations was $777,851, compared to cash used of $357,143 (2019), most of the difference from non-cash working capital changes.
During Q2 Microbix raised $2,150,159 (net of issue costs) in a private placement. These funds will be used primarily to pay down bank debt, invest in capital equipment and provide working capital to support key growth initiatives, including the new quality assessment products to support COVID-19 testing.
First Half Financial Results
H1 revenue was $4,920,844, a 27% decrease from 2019 first-half revenue of $6,714,441. Included were antigen and quality product revenues of $4,756,382, 27% lower than 2019. H1 sales were impacted by timing of orders as outlined above. Revenue from royalties were $164,462 (2019 - $178,379).Gross margin in H1 was 48%, down from 51% in fiscal 2019, due to higher margins on 2019 orders outlined above and fluctuations in the mix of products sold mix. Seasonally low PT-oriented QAPs sales in the first-quarter of each year also act to suppress margins in the first-half of each year.
H1 Operating expenses increased by 3% from 2019, primarily due to increased investment in sales, marketing, and new product development. Weaker H1 sales and gross margins led to a net loss of $804,295 versus a net profit of $272,056 in 2019. Cash used by operations was $540,059, compared to cash used of $328,419 in 2019, with the increased 2020 usage due mainly to non-cash working capital accounts.
At the end of Q2, Microbix's current ratio (current assets divided by current liabilities) was 1.87 and its debt to equity ratio (total debt over shareholders' equity) was 0.73.
For the balance of fiscal 2020, Microbix will work to continue improving the percentage gross margins from its critical ingredients (antigens) business and achieve strong growth in sales of its lines of innovative, proprietary and branded quality assessment products (QAPs). If Microbix achieves its budget targets, the company will generate meaningful net earnings for fiscal 2020. Additionally, work continues with regards to securing a partnership agreement to advance Microbix's Kinlytic urokinase project.
Adelaide Capital will host a live webinar with management today at 11 a.m. ET. The event will also be streamed live on YouTube.
About Microbix Biosystems
Microbix develops proprietary biological and technology solutions for human health and well-being, with approximately 80 skilled employees and sales now usually exceeding $1 million per month on average. It makes a wide range of critical biological materials for the global diagnostics industry, notably antigens for immunoassays and its laboratory quality assessment products (QAPs) that support clinical lab proficiency testing, enable assay development and validation, or help ensure quality control of clinical diagnostic tests. Microbix antigens and QAPs are sold to many customers worldwide, at present primarily to multinational diagnostics companies and laboratory accreditation organizations. Microbix is ISO 9001 and 13485 accredited, FDA and Health Canada establishment licensed, and provides CE marked products.
Microbix also applies its biological expertise and infrastructure to develop other proprietary products and technologies, most notably Kinlytic urokinase, a biologic thrombolytic drug used to treat blood clots.
We seek Safe Harbor.
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