Zomedica Corp

AMEX:ZOM

Earnings Call Transcript 2023-Q3

[Operator]

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Zomedica's Third Quarter 2023 Earnings Results and Business Update Call. I would like to remind everyone that this conference call is being recorded today, Monday, November 13, 2023, at 4:30 p.m. ET. [Operator Instructions]I will now turn the call over to [ Elise McDonald ], Investor Relations. Please go ahead, Ms. McDonald.

[Unknown Executive]

Thank you, Andrew, and good afternoon, ladies and gentlemen. Welcome to Zomedica's Third Quarter 2023 Earnings Results and Business Update Call. On today's call, you will hear from Zomedica's CEO, Larry Heaton, and CFO, Peter Donato.Before we begin, we would like to remind everyone on this call that we will be making various remarks about future expectations, plans, and prospects that constitute forward-looking statements. These forward-looking statements are based on assumptions, and there are risks that results may differ materially from those statements. As such, Zomedica cannot guarantee that any forward-looking statements will materialize and you are cautioned not to place undue reliance on them.We refer firms and potential investors to the forward-looking information in Risk Factors sections of our public filings available on SEDAR at www.sedar.com and on [e-mail]. Forward-looking statements made on this conference call represents Zomedica's expectations as of today, November 13, 2023. Finally, we would like to remind everyone that all figures discussed on this call are in U.S. dollars.I will now pass the call over to Zomedica's Chief Executive Officer, Mr. Larry Heaton. Larry?

[Larry Heaton, executive]

Thank you, Elise. I'd like to start by thanking our shareholders for your support, wish our prospective investors and analysts and others a good afternoon, and welcome all of you to the Zomedica Third Quarter 2023 Earnings Results and Business Update call.I'll start the call by providing an update on the overall business, then Peter Donato, our Chief Financial Officer, will walk you through our financial results for the quarter and provide a corporate update. After our prepared remarks, we'll open the line and web to your questions.Earlier today, Zomedica released its financial results for the quarter ended September 30, 2023. Overall, this was a remarkable quarter. We delivered record revenues, our highest ever quarterly revenue, beating last year's record fourth quarter, all while maintaining high margins and reducing operating cash burn.Let me take a moment to highlight that revenues were $6.3 million, a growth of 31% over last year's same quarter, with almost all the growth derived organically from previous acquisitions that have been fully integrated over the past year, validating that our strategic plan to acquire, integrate, and grow is working.During the third quarter, we launched our equine eACTH assay for the TRUFORMA platform. This assay enables equine veterinarians in the clinic or stall side to diagnose equine Cushing's disease, known clinically as pituitary pars intermedia dysfunction, PPID, and to monitor positive patients as we titrate therapy initially and then for the rest of that horse's life. Accessing such a large and underserved equine market can make a significant contribution to our diagnostics segment.On September 5, we announced the acquisition of Structured Monitoring Products, SMP, converting our minority interest into full ownership, giving us exclusive commercial rights to VetGuardian products. The VetGuardian platform improves the quality of care for pets in the ICU, during recovery from surgery, and for overnight stays in the clinic by providing staff with real time alerts when vital signs deviate from a preset range and allows the staff to intervene in health issues more quickly, improving care. Its unique patented software technology allows the VetGuardian system to obtain vital signs in real time without wired lead, and so no harness on the pet, thus allowing the pet to rest comfortably during recovery. Much like the equine eACTH, we're pleased with the early indicators and see future upside.Subsequent to the end of the quarter, on October 5, we announced the acquisition of Qorvo Biotechnologies LLC, a wholly owned subsidiary of Qorvo U.S. Inc, focused on the development of point-of-care diagnostic solutions, leveraging their innovative Bulk Acoustic Wave sensor technology in the development of the Omnia point-of-care diagnostic platform designed to perform assays for human patients along with our TRUFORMA point-of-care diagnostic platform to perform assays for companion animals, which we have marketed under license prior to this acquisition.Our primary focus of this acquisition will be on capturing margin improvements by assuming QBT's manufacturing systems, as well as accelerating assay development for the TRUFORMA platform. This acquisition will also allow us to avoid future operating and capital expenses incurred by building R&D and manufacturing staff internally as we had planned to do, as well as eliminating remaining payments, including license fees, transition fees and future royalties, which would otherwise be due to the Qorvo Biotech under the prior agreement. While we also acquired the human health business, currently, we have no plans to commercialize it. However, we will continue to explore opportunities to realize value from this asset.Strategically, we continue to actively integrate and grow what we have already acquired, and we will continue to seek M&A opportunities that meet our rigorous internal financial and strategic hurdles, all while adhering to our 5 pillars, which are improving the quality of care for the pet and the satisfaction of the pet parent while also improving the workflow, cash flow, and profitability of our veterinarian partners.While we're pleased with the number and pace of acquisitions over only the last 2 years, we're not going to rest on our laurels. In fact, we have a robust pipeline of deals under consideration applying our 5 pillars. We're looking for even faster top line growth opportunities without delaying our pathway to profitability. In other words, we'll remain opportunistically acquisitive. Remembering that we have a strong liquidity position of $118 million in cash, cash equivalents, and available for sale securities, we remain well funded for the foreseeable future.Achieving our strategic priorities requires a combination of growing revenue, efficient manufacturing that produces substantial margins and investing in commercial and R&D capabilities to enable both organic growth as well as growth.On the R&D front, we plan to leverage our recent acquisition of Qorvo Biotechnologies with greater investment in new assays for our TRUFORMA platform. We'll also continue to expand the capabilities of our TRUVIEW digital microscope platform and the usability of our VetGuardian monitoring platform, while exploring new market opportunities.The launch of equine eACTH is one example of where we're seeing signs of early success. This is a growth driver for us going forward and an opportunity to expand product offerings within our already large equine customer base. On the heels of the equine eACTH launch, we will soon launch another set of assays for small animals. These for noninfectious GI conditions like diarrhea and vomiting, one of the top 3 reasons dogs are brought to the vet on an emergent basis, giving us another shot on goal in the Diagnostic segment.Similarly, as we continue to build the sales organization, I'm pleased to announce that subsequent to the quarter just ended, we welcomed the new Senior Vice President of Sales to the team, Kevin Klass, an accomplished executive from an outstanding animal health company.In addition, we continue to invest in sales and marketing programs, and while spending is down this quarter versus last year, we're seeing an increase in year-to-date spending versus levels seen in 2022 when we were first building our commercial infrastructure. We're also pleased to report that we're continuing to see leverage developing on the G&A line as we continue our journey towards cash flow and GAAP profitability.Before I hand the call to Peter, I want to reiterate that we're very happy with what we achieved during the third quarter and look forward to building on this momentum as we continue to be very optimistic about an even stronger fourth quarter.With that, I'll hand it over to Peter for the financial review and corporate update. After his remarks, I'll provide some closing comments.

[Peter Donato, executive]

Thank you, Larry, and good afternoon, everyone. Revenues for the third quarter of 2023 came in at over $6.3 million, an increase of over $1.5 million or 31% from the third quarter of 2022 of $4.8 million. The increase was primarily due to organic growth, products that we've now integrated and sold for over a year within our Assisi, PulseVet, Revo Squared and TRUFORMA product lines and the inclusion of our VetGuardian products, which were not part of the consolidated figures last year.Revenues year-to-date 2023 came in at $17.8 million, an increase of $5 million or 39% from the same period last year. This increase was primarily driven by growth in PulseVet and TRUFORMA product sales, the inclusion of full year revenues from our Assisi and Revo Squared products and once again, the inclusion of VetGuardian products, which were not part of the figures last year.Consumable revenues were $4.5 million, an increase of approximately 29% over the third quarter 2022 revenues of $3.5 million. These high-margin products represented recurring revenue that is generally around 70% of our sales. Capital revenues were $1.8 million, an increase of approximately 38% over the third quarter of 2022 revenues of $1.3 million.We continue to be pleased with the number of devices being put in service in the field. This is a leading indicator of future consumable revenue, particularly in the small animal and mixed vet practices, which continue to be a focus area of our company.Our therapeutic device segment revenues from PulseVet and Assisi product sales were $6 million, an increase of approximately 28% over the third quarter of last year. PulseVet product sales for the third quarter of 2023 were up 21% versus the third quarter of 2022, reflecting an acceleration in consumable growth in the high-margin Trode business. We believe PulseVet sales will remain strong through the end of 2023, and we're already seeing the seasonal step-up usually observed in the back half of our selling year and continued efforts around the development of our small animal market.We are also pleased to announce, this was the best quarter ever for our Assisi product sales. We are benefiting from strong demand from our retail channels, including our recently reestablished relationship with Chewy. We take this result as further validation of our marketing strategies.Diagnostic segment revenues from TRUFORMA, Revo Squared, and VetGuardian product sales were $367,000, more than tripling revenues of $94,000 reported in the same quarter last year. TRUFORMA nearly doubled revenues year-over-year, driven by organic growth. We believe the growth seen within the TRUFORMA product will continue as we continue our investment in the development of additional assays, including the first Assisi for horses, which was launched in September and a panel of assays for noninfectious GI disease, which plan launches later this year.As Larry noted earlier, our recent acquisition of Qorvo Biotechnologies LLC should improve margins and accelerate development. We completed the acquisition of Structured Monitoring Products, SMP, giving us complete control over commercial activities, and we are encouraged by the early results that included record revenue for VetGuardian products during the month of September.We are also seeing the early results from our new TRUVIEW digital microscopy platform that we launched at the end of the second quarter. Revenue from this product is service-based and trails the actual placement of the instrument. And as such, we expect recurring revenue from these placements to increase over the coming quarters. Overall, we saw the expected sequential step-up in revenue from the first half of the year, and we expect an additional step-up in the fourth quarter.Our gross profit for the third quarter of 2023 was $4.4 million, an increase of $0.9 million or 26% from the third quarter of 2022. Our margins remain strong at 69%, up from 67% in the second quarter. And as I've stated previously, we expect margins to be around 70% for the upcoming quarters and then going higher from there.Operating expenses were $10.3 million compared to $10.1 million for the 3 months ended September 30, 2022, an increase of just $0.2 million or 2%. That compares quite favorably to our growth in revenues checking in at 31%.Research and development expense was $0.9 million compared to $1.2 million for the 3 months ended September 30, 2022. That's a decrease of $0.3 million or 25%. The decrease was primarily driven by higher research fees for assay development in the same period a year ago.Selling and marketing expense was $3.3 million compared to $3.7 million last year. That's a decrease of $0.4 million or 11%. Although we are starting to see some leverage on the selling and marketing line, this year's comparison in the quarter benefited from onetime charges included in last year's quarterly number.General and administrative expense was $6.1 million compared to $5.2 million for the 3 months ended September 30 last year. That's an increase of $0.9 million or 17%. Net loss for the 3 months ended September 30, 2023, was only $0.3 million or $0.001 per share. That compares to a net loss of $5.8 million or $0.005 per share last year.Although we are starting to see many operating improvements, the overall improvement in this year's number included many onetime benefits, such as the gain from the acquisition of the SMP and the related tax benefits, and we also had higher interest income this year.Turning to the balance sheet. Zomedica ended the third quarter with $118 million in cash, cash equivalents and available-for-sale securities. Cash used in the third quarter was $24.4 million, but that included $21.5 million for acquisitions and investments and other onetime items, leaving $2.9 million used for operating expenses.The adjusted cash burn this quarter of $2.9 million shows that we continue to decrease and was lower than our historical burn, which is usually around $3 million to $4 million per quarter. As a reminder to everyone, we have 0 debt.Before turning the call back over to Larry, I would like to address questions from investors, particularly related to a potential delisting of our stock by the New York Stock Exchange American.First, let me give you a time line and actionable items mandated to our company. As disclosed in our current report on Form 8-K filed with the Securities and Exchange Commission on September 14, 2023, we received a deficiency letter from the New York Stock Exchange American on September 12, 2023, indicating that the company was not in compliance with the continued listing standards set forth in Section 1003(f)(v) of the Company Guide because our common shares were selling for a substantial period of time at a lower price per share, which the exchange determined to be a 30-day trading average of less than $0.20 per share.After confirming received of said notification, the company was required to do the following: #1, issue a press release within 2 days to satisfy Canadian regulatory requirements. We met this requirement by issuing a press release in both the U.S. and Canada on the 13th of September. #2, file a Form 8-K, Section 301 within 4 days, followed by the Canadian equivalent and forming of a material event, and we met this requirement, the 14th of September.#3, we then informed the exchange that we met these requirements. The exchange notated this on its website and on a ticker symbol accordingly. #4, the final requirement was to file a remediation plan of action with the New York Stock Exchange American by the 26th of September 2023. This report was filed confidentially on September 25, 2023, and is not a required public disclosure.However, let me share with you some of the plans. One, as Larry noted in his prepared remarks, we continue to have rapid top line growth both organically and through acquisition. Two, we continue to have industry-leading margins, leveraging our recent integrations to improve those margins and accelerate our pathway to profitability. Three, leverage our strong balance sheet and cash position to continue to invest in commercial and R&D activities as well as remaining opportunistically acquisitive.And 4, in addition to the operational plans we shared with the exchange, potential capital structure remediation that includes, but is not limited to, 1, a reverse stock split; 2, a share repurchase program; and 3, other potential capital table restructuring. We plan to execute on these measures as we believe that they are in the best interest of the company and its shareholders.Please keep in mind, we will not automatically be delisted and 6 months subsequent to receiving the notice, we can receive an extension or commercially the exchange to delist earlier should we fail to perform towards improving our position.While Larry and I are very optimistic about achieving our strategic and operational objectives, we are likely to recommend a reverse stock split. Not only would this action bring us back into compliance earlier, it would also allow for potential expansion of our institutional investor base by removing share price barriers that limit certain institutional participation in our stock and potential inclusion into various indexes. We will continue to provide updates as we progress on this plan and we may be asking our shareholders soliciting their support.I will now hand the call back over to Larry for closing remarks before the Q&A session.

[Larry Heaton, executive]

Thanks, Peter. Let me take a moment to further comment on Pete's remarks around a potential reverse stock split. Our management team and I am fully aware that many of you are opposed to such a plan given the stigma associated with reverse stock splits generally. Keep in mind that many reverse stock splits are done under extreme duress because the business is underperforming and/or needs desperately to raise capital to remain solvent.While we can't guarantee positive results of any potential reverse split, our company has a much different profile than most companies who explore a reverse split. Our operational performance remains excellent and we have a strong balance sheet.We also want to remind you of the practicalities of a reverse split. After such a split, while you would have less shares, your overall ownership percentage and investment dollars remain the same. And after a reverse split, the risk of delisting and the associated lack of liquidity goes away, which allows management to focus exclusively on executing the business and attracting additional investors, which could help increase our market cap over the long term.So why consider a reverse split now when I myself have said many times that we would not pursue one until we are cash flow positive, and we are not yet at that point? Simply put, the New York Exchange notice of potential delisting has changed the game. The uncertainty around a potential delisting looming over us, not to mention an actual delisting itself that would put us in the over-the-counter markets, tend to put downward pressure on stocks.Remember what Peter talked about earlier, there is nothing inherent in a reverse split that automatically results in a loss of market cap. The fundamentals of the business and other macroeconomic conditions are important factors. Fundamentally, we are stronger every quarter, which we believe would otherwise lead to broader interest from institutional investors that today simply cannot buy the shares since they are under their minimum price thresholds of $1 or $3 or even $5 a share.So the scales have changed before we balanced the potential risk of a reduction in market cap value following a reverse split against a delayed opportunity to attract institutional investors and indices and came down on the side of waiting until we were cash flow positive. But now we have to add the risk of being delisted and moving to OTC markets to that limited potential of attracting institutional investors and indices. It is because we believe that these factors would be more harmful to individual investors in Zomedica than a potential loss in market cap following a reverse split that can be mitigated by demonstrating the differences in company situations to potentially be one of the exceptions to the norm that we are actively considering this to be in the best interest of our shareholders.Now please note, a reverse split has not been formally approved by our Board and is still one of several options. So please keep an eye out for ongoing updates on the matter, and please keep an open mind that the company will always work for a solution in the best interest of our shareholders. Remember, there's nothing inherent in a reverse split that diminishes our loyal individual investors' abilities to hold on to their ownership of Zomedica. We appreciate each and every one of our shareholders and continue to make every effort to drive long-term value.Now let me close with why we're here, the good news of the business. We had a very strong record-breaking third quarter. We were able to grow revenue by 31% while maintaining near 70% gross margins. We expect to see incremental sales from our recently launched products, VetGuardian and TRUEVIEW and have new assays on the way for TRUFORMA.While we're pleased with the early success of the expanded sales organization, we expect even more performance from the concerned team with new leadership and as they become more seasoned. This, coupled with efficiencies gained through the Qorvo and SMP acquisitions and the centralization of manufacturing and distribution capabilities combined to make for a bright future for Zomedica.Looking into the remainder of 2023, we'll continue to work diligently to bring Zomedica's suite of world-leading products to an even greater number of veterinarians for their pet families while continuing to leverage our growing network of vet professionals using our products.So let me end our call by again thanking those that have been supportive of Zomedica, including animal health professionals and pet owners worldwide and the many shareholders of Zomedica.With that, I'd be happy to open the line for questions.

[Operator]

[Operator Instructions] The first question comes from the line of Jason Kolbert with Dawson James.

[Jason Kolbert, analyst]

Can you give me a little bit of more of a breakdown of the revenues and how they cut across the categories like TRUFORMA, PulseVet, VetGuard, Revo and maybe even the Assisi products?

[Peter Donato, executive]

Yes, generally, Jason, this is Peter. Generally, we don't break out publicly what those numbers are. But we are -- I try to be as precise as I could on the call. We had $6.347 million in overall revenue for the quarter, roughly 70…

[Jason Kolbert, analyst]

You don't need to repeat what you said. You don't want to provide the breakdown. I'm a little disappointed in that. The numbers were about $2 million below my expectation. So -- and they were only incrementally up from the prior quarter, although I saw your expenses were proportionately lower. At least cost of goods was, but SG&A was not. It was higher. So this was not a good quarter.Can I understand what you're trying to say about the stock split? When I wrote this down, you said the lack of liquidity goes away. When you reverse the stock, you directly cut your liquidity. So I'm a little confused as to the reverse stock split is upsetting for sure because you guys were very emphatic that that wasn't going to happen, and you do have the alternative of going to the OTC. So I'm trying to understand your positioning this as, it takes a lot more for an institution to buy a stock than just the price. And so you're cutting the liquidity as you're trading low stock price for liquidity. And I don't know that that's a good trade. I don't understand it.

[Peter Donato, executive]

This is Peter, Jason. We can talk about that. But essentially, OTC does limit liquidity and limits participation and pretty much excludes any institutional investors. Not to mention, it will preclude us from joining any of the indices, which would, over time, be a much better situation for the company. That's how I see it. Again, we're free to disagree on that point, but that's how I see.

[Jason Kolbert, analyst]

Well, I can understand that, but then why were you so emphatic that you weren't going to reverse the stock? I guess you were anticipating that quarterly progress would drive a higher stock price and that just didn't happen.

[Peter Donato, executive]

Yes. So I'll let Larry speak to that. I think since I've been here, which is 3 quarters now, the position has always been to consider the reverse stock split. But we, and I'll speak for Larry, I think, at this time, thought a more opportunistic time to do it when the company was indeed cash flow positive, and we could commit to that $40 million run rate or something that resembles that on the top line that would promote that cash flow profitability.So the thought, Jason, was the timing, if we had to do it, would be better if we could wait. But with the letter that arrived in September, I think that changed our -- at least my thinking on it.

[Larry Heaton, executive]

Yes. I think that's…

[Jason Kolbert, analyst]

Yes. I'm a bit surprised because this isn't a surprise, right? You knew this letter was coming. So that's why I'm just a little bit confounded.

[Larry Heaton, executive]

Actually, though, Jason, I think that I'll just challenge that, right? I mean, as we continue to post quarterly revenue growth, we continue to post significant revenue growth year-over-year, much, much higher than other animal health companies are as we continue to put forward margin ass…

[Jason Kolbert, analyst]

Well, but your sequential growth -- the sequential growth is really what matters and your sequential growth was incremental.

[Larry Heaton, executive]

So in the animal health industry, as I'm sure you're super familiar with, the first and third quarters are generally lower than second and fourth just because of the cyclical nature of visits to pets. But having said that, we still are presenting not only significant growth year-over-year, but also sequential growth, and our growth this quarter is all -- essentially all organic growth. So that's not revenue we bought. This is revenue that we grew over a year ago. We continue to put up margins of 70%, at or near 70%.And so we don't expect -- I mean, we expect that that's good news for investors. And frankly, I think if you look at what our expectation would be was not that the stock price would deteriorate, that as we increase revenues and maintain high margins, made acquisitions, brought -- 2 years ago, we had no products on the market. Now we have 5 product lines on the market. And as we did all of those things that the stock price would grow. So it was really -- it was, in fact, a surprise to us that it fell below $0.20 for more than 30 days. I mean, obviously, we saw it coming during that period of time when it was below that.As to why now, I mean, Peter said it, right? If we did not get the notice of delisting, we would balance frankly the fact that our shareholders have previously rejected a reverse split. Our shareholders have made it clear to us that they would rather not have one. I think that's based on the fact that the majority of companies lose market cap after a reverse split, not all of them do.

[Jason Kolbert, analyst]

So I can't think of one that gains market cap. They all lose market cap. Nothing…

[Larry Heaton, executive]

Well, I mean…

[Jason Kolbert, analyst]

-- reverse stock split. I cannot think of one example. If you have one, I would love it if you'd share it with me.

[Larry Heaton, executive]

I don't happen to have…

[Jason Kolbert, analyst]

Yes, some of our -- yes.

[Larry Heaton, executive]

-- but we've got…

[Jason Kolbert, analyst]

I mean you're absolutely right. The vast majority of -- there are some out there. I don't know. I don't want to…

[Larry Heaton, executive]

Well, I mean, yes, there's like a handful. If you look at 100 companies, you might have 5 or 6 that have not. And I'm talking about a particular point in time, 6 months later or 3 months later or whatever. But I think -- so there's a risk of that and a pretty good risk. And so why not mitigate that risk by waiting to a cash flow positive, that's what I've been saying all along. But now that's not the scale. There's the risk of a potential loss in market cap, which I do think we can mitigate by showing that we are a different company. We're not doing a reverse split so that we then can be authorized to issue more shares and raise more money. We have no intention of raising capital in that way.

[Jason Kolbert, analyst]

No, I understand this is you're being forced to, but I think this was something -- well, again, I don't need to go over the same ground. And I would also challenge the assumption -- well, I don't want to be too antagonistic. But in my opinion and based on my numbers and our previous conversations, this was not a good quarter. The plan for rising revenues look like it's delayed, it's a brutal market, agreed. It's a very tough market right now that you have a lot of cash to weather the storm. That's great news. You're making smart acquisitions. That's great news. But it would also be great, and we've discussed this in the past of having really a better, more granular breakdown of the top line revenues. And being really transparent with investors, putting positive spin on a reverse stock split, like saying the lack of liquidity goes away, which is, again, I wrote it down, that's what your guys said, that's just not true. So I think it's very, very important, given where you are to just be as transparent as possible with people.

[Larry Heaton, executive]

And let me just say one last thing is I think we're -- it's a semantics issue. When we're referring to lack of liquidity, we're talking about for our individual shareholders, not for the company. For the company, I agree with you. You reduced number of shares, liquidity, the flow goes down, liquidity goes -- but with 1 billion shares outstanding, I think we'll still have after reverse split, plenty of shares to be traded. What we were concerned about and what we were addressing was the lack of liquidity from our retail, individual retail shareholders. Today, if they need money, they can go and trade those shares pretty easily. But after if we go to the pink sheets or whatever, then it's going to take -- it's going to be a bigger process for them. And that's really where our concern was.Other questions?

[Unknown Executive]

Operator?

[Operator]

We will now be taking online questions. Please go ahead.

[Larry Heaton, executive]

Okay. What have we got online here? Okay. First one, what was the primary motivation to acquire Qorvo Biotechnology?That's a great question. Primarily, it was the ability to immediately realize improvements in margin and to do that with a very, very high probability of success from an execution standpoint. And secondly, to accelerate the ability to develop and launch new assays. So if you think about margin improvement, once we start manufacturing the products ourselves, then we're cutting out the middleman Qorvo Biotech. Instead of staffing up down in Georgia and equipping Georgia to be able to manufacture the products, instead of staffing up in Ann Arbor from an R&D standpoint to develop the new assays, by acquiring Qorvo Biotech, we just acquired the people and the team that have been doing it. And so that puts us in a quicker position to realize those efficiencies and that reduced price.Also by doing this, we eliminated substantive payments going forward, right? So we had transition service payments. We had payments due for the finalization of the new assays. And we also had a royalty that we were going to have to start paying once we started manufacturing them ourselves. All those go away. In fact, we think from an economic standpoint, it was a really good deal.The one thing I will say is that we've always been paying for the R&D expense and other associated expenses. It's just we've been paying those expenses in the form of a higher price to us for the assays. Now we'll pay those expenses directly as part of OpEx or wherever they fall, but our margins will be better. And when we look at the long term and the long haul, it's the desirability of high margins is really what's going to sustain the company and propel it to profitable growth in the future.Next, 2 questions. Do you still plan to release the GI assays this quarter? And two, what has been the reaction by horse vets on the equine assay?So we'll take the first one first. Yes, we do still plan to release the GI assays this quarter. We talked about that a little bit in the text of the initial comments, and we're very optimistic about those as those are absolutely assays that are not currently available at the point of care that veterinarians would really like to have available at the point of care because you bring your dog in for diarrhea and vomiting. They'd like to know write that in there, what's the issue so that they can start treatment right away.Horse vets have been very receptive in our early rollout of the equine eACTH assay the ability to -- there's a number of different ways that this assay has used. Today, when a vet see signs of potential Cushing's in a horse, then they need to test right away. So that's one, test those with signs. Second, once they come up positive, then there's one drug on the market that's manufactured by an animal health company, and it's sold and it works really well. But in order to figure out the dosage, you need to test eACTH frequently during that initial 2 or 3-week period. And so that's multiple tests. And then that horse either twice a year or 4 times a year, some vets do it quarterly, some every other quarter, they test again eACTH to titrate that therapy for the rest of the horse's life.And so all of that business is open to us now. And then what we really expect to do is to leverage the convenience and ease of use of the TRUFORMA, the ability to do the stall side to move from testing only when you see signs, at which point the disease has already progressed significantly. And in some cases, the horse is 30% of the time, never show signs we'd like to move to a screening opportunity because there's 5 million horses over the age of 15 in the United States. And the prevalence of this disease in that group of horses is 25%. So we see a screening opportunity, which would be very significant in terms of potential revenue for the company.Why do we feel a reverse split would be more beneficial than a buyback? Why not buy back now while the price is low?If you look at the data that we've been looking at, the performance of the stock after a buyback 30, 60 days later, it usually reverts right back to where it was. And in the case of ours, where we have such a huge float, no buyback is going to substantially reduce that float and we're going to have -- there's still going to be plenty of opportunity for day trading. And as a result, there's no assurance that we wouldn't find ourselves in the same position, except for we would not have that cash. And so we would not be able to take advantage of opportunities to acquire companies or product lines in the marketplace or fund organic growth.And so we believe that a reverse split because it's permanent, would be the better alternative for shareholders over the long haul. It's not -- listen, nothing gives me pleasure about this, especially the timing of it because we respect the investors in our company, but we also have a responsibility to do what's best for all the shareholders and for the company itself.Please discuss how the acquisition of Qorvo will affect the G&A line?Peter, do you want to take that?

[Peter Donato, executive]

Yes. Nominal on the G&A line.

[Larry Heaton, executive]

Yes. What is the Zomedica team looking forward to the most going into 2024, 2025?That's a good question. I think, yes, growth and profitability, but I think really, it should be a fun year, right? It's a year of execution. As we begin the year, we have a full slate of products, the TRUVIEW and the VetGuardian, we launched during the year. There's always a ramp up. Remember, we're not going in and selling the same thing as someone else. We're not trying to say this is a slightly better widget than that. We're going in and saying, for the first time ever, you have a product that will give you the ability to monitor a pet without having any wires or harnesses on that pet. It's a whole new category and certainly a new product. Many of our assays are new products not previously available.And so we've had the year to sort of ramp up into that. Now as we look into 2024, we have a full year. We have a full team, and I really look forward to realizing a return on the investments that we've made, right? So for example, during 2023 and you'll see it in the OpEx, we had a build and assembled a team to do remote pathology reads for our customers for TRUVIEW. Now in 2024, we get to see the revenue from TRUVIEW to overtake that expense. Same thing with the R&D expense, it cost us like $1.5 million to create the GI assays. In 2024 we're going to see revenue from those. So I mean, most of all, it's really driving for its cash flow positive and profitability.

[Peter Donato, executive]

Yes. As I see it, Larry, we grew 31% in the quarter, 39% or so percent year-to-date, right? That's essentially with our Assisi and PulseVet products, right? Those are predictable, right? We're not going to comment whether that's the right growth rate for next year. But if you assume, as we've disclosed, most of the $18 million year-to-date has been from those 2 products, and those are growing quarter-over-quarter.And to your point and to the question, what are we excited about? TRUFORMA, VetGuardian and TRUVIEW, right? We have almost no revenues for those are very little nominal and those are 3 bests. So it doesn't take 3 for 3, although that's the goal to have a very meaningful year next year, certainly well above where we finished last year, right, which is $19 million or just under $19 million.So to answer the question directly, I'm excited about the possibility of those 3 new products while continuing to grow the other business. And that should, as we've said repeatedly, get closer to that $40 million annualized run rate, we're approaching cash flow breakeven.

[Larry Heaton, executive]

Yes. There's a number of questions on the subject of international sales. And so let me just comment on that. Right now, about 20% of our revenue, depending on the quarter, about 20% of our revenue comes from the international sales of TRUVIEW -- I'm sorry, take that back, PulseVet and Assisi products, right? And of course, we expect to continue growing those products in Europe, in South America, in Australia, in Japan, in the Middle East.In addition, we expect to begin in the first quarter of next year launching VetGuardian and TRUVIEW products, both of which right now are undergoing the sort of final testing that needs to occur to get the CE mark so that they clear regulatory requirements in Europe primarily and generally, every country wants the kind of certification that they're safe in all that.So we expect to launch those beginning in the first quarter of next year. We should have a full year of those. TRUFORMA will lag a little bit, and that's because the TRUFORMA cartridges require refrigeration. And so our first priority is to rationalize the distribution network we already have in place, put new distributors in place where we don't currently have distribution, focus on the products that don't require refrigeration and then figure out logistics. And once everybody is up and running, then we would bring TRUFORMA into that mix.Here's one, has the company considered partnering with veterinary cage manufacturers to incorporate the VetGuardian technology and then it talks a little bit more about other opportunities?So let me just say the answer to that is yes. And we see the monitoring applying not only to the use cases in the vets practice, meaning ICU, post-surgery recovery and overnight stays, but also extending to boarding kennels, for example, or to, in some cases, places where they're selling animals or what have you, the ability to, in some way, to monitor pet vitals would be, I think, an advantage in a number of scenarios outside of the sort of classic vet practice. And now that we've finalized the acquisition of SMP and acquired VetGuardian in total, we're able to look into that, and that's actually pretty encouraging.Let's see what else we got here. That pretty much takes care of it.

[Peter Donato, executive]

Yes.

[Larry Heaton, executive]

Okay. All right. Well, then let me just say that I know that we're probably going to get a lot of commentary on some of our discussions today. I would ask you to keep an open mind there and remind you that no reverse split can be approved unilaterally by our Board or by the company that it requires a vote of shareholders. All of you will have an opportunity. Those of you who are shareholders, will have an opportunity to weigh in on this as you vote your shares.We would encourage you to vote regardless of which way you do because we appreciate the input and participation. And we will communicate often and early along the process, along with data so that you could see that there have been some examples of where it hasn't gone to ride and maybe you will also provide some data on what happens after you do a stock buyback.But with that, I would say, while everyone might not share the same perspective, I think we had a pretty good quarter, and we're looking forward to an even better one in the fourth quarter. And thank you for your participation today.

[Operator]

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.