Biosyent Inc

XTSX:RX

Earnings Call Analysis

BioSyent Posts Record Earnings in Q3 2023

BioSyent Inc. saw a remarkable third quarter with corporate sales soaring by 31% from the previous year. EBITDA climbed by a striking 49% to $2.9 million, and net income after tax surged by 62%, just shy of $2.4 million. Investors should note this growth is underpinned by a robust cash balance which partially contributes to the difference between EBITDA and net income. The EBITDA margin expanded to 33% and net income after tax margin to 27%, both showing significant improvements. Per share basis earnings reached $0.20, setting a new record and indicating a resilient 53rd straight profitable quarter since Q2 2010.

Strong Performance with a Vision for Growth

BioSyent Inc., under the leadership of President and CEO Rene Goehrum, presented its results for Q3 and the first 9 months of 2023 with encouraging figures. The company witnessed a remarkable increase in sales, with Canadian pharmaceutical sales rising by 17% from the previous year, contributing to the company achieving nearly $8.9 million in total sales, a jump of 31% compared to the year-ago period. They also achieved 14% growth in 9-month revenue reaching just over $23 million, highlighting robust performance in their Canadian and International Pharmaceutical businesses.

Investment in Growth While Maintaining Profitability

BioSyent Inc. has managed to balance growth investments with profitability, evidenced by strong EBITDA margins of 33% in Q3, up from 29% the previous year, and net income after tax (NIAT) margins at 27%, significantly higher than a year ago. Year-to-date figures echoed similar success, with EBITDA increasing by 7% despite a slower start. The company has been particularly successful in maintaining a steady track record of profitability since Q2 of 2010, with their 53rd consecutive profitable quarter in Q3 2023, netting a fully diluted earnings per share of $0.20 - their best performance yet.

Returning Value to Shareholders

BioSyent combines a strategic approach to growing shareholder value through dividends and share buybacks. The company paid its fourth consecutive quarterly dividend and bought back 80,000 shares in Q3, and has declared a fifth dividend to be paid in December. BioSyent's commitment to delivering shareholder returns is further reinforced by their track record; for nearly 5 years, they've repurchased 2.5 million shares deploying about $16.5 million, resulting in an increase of earnings per share by 21% since the buyback program began in December 2018.

Fostering Resilient Consumer Relationships: The FeraMAX Success Story

The flagship FeraMAX brand remains a cornerstone of BioSyent's business, enjoying the status of being the top-recommended oral iron supplement by Canadian healthcare professionals for the past 8 years. The company's strategy to deepen their market penetration involves life-cycle management of the FeraMAX brand, including the reformulation of existing products and the development of new offerings, such as FeraMAX 45, a once-a-day oral iron health product. BioSyent's enterprise value is substantiated by a portfolio that is expected to deliver a peak performance of over $50 million in annual revenue.

Expanding the Product Portfolio with Strategic Launches

The launch of Inofolic and Gelclair illustrates BioSyent's ongoing focus to address unmet needs in Women's Health and Oncology Supportive Care. These products are expected to reinforce the company's presence in these sectors while aligning with its life cycle strategy for existing brands. The company also undertook initiatives like the menopauseinformation.ca platform to inform and guide women through perimenopause and menopause, reflecting a commitment to consumer engagement and education.

Proactive Capital Management Fuels Future Growth

BioSyent's strategy of allocating capital in synchrony with their growth vision has yielded a robust return on equity of 18% and a cash position growth to just over $29 million, despite investments in sales and marketing to support product launches. The excess cash above their strategic requirement points to potential acquisitions or in-licensing opportunities as BioSyent continues to explore avenues for sustainable growth. The company's conservative yet effective capital allocation is rooted in a capital-light business model, driving a consistent and profitable operation for 13 years.

Forward-Looking Statements Reveal Cautious Optimism

Looking ahead to the remainder of the year, BioSyent's management expresses cautious optimism, forecasting a revenue growth ranging from 5% to 10%, positioning the company on a continued upward trajectory into the future.

Earnings Call Transcript 2023-Q3

[René Goehrum, executive]

Hello and welcome to the BioSyent Inc. Q3 and 9-month results presentation to September 30, 2023. My name is Rene Goehrum, and I'm the President and CEO of the company. I want to bring your attention to the disclaimer on forward-looking statements. And of course, you can pause this video and read the detail. So we'll start the presentation by taking a look at sales on a by brand and segment basis for the quarter. You can see here that Canadian pharmaceutical sales exceeded $7.4 million, which was up 17% to the year ago. And across the Canadian business strong performance, we told you when we reported out on Q2 results that we had some pending international pharmaceutical orders that we expected to go out in the third quarter, they indeed did ship and you can see here a strong quarter for international pharmaceutical sales and a good result for the Canadian or rather, I should say, for the legacy business. So in total, sales were just under $8.9 million, up 31% to the year ago.

Through 9 months, you can see strong performance again in the Canadian pharmaceutical business. We had no other revenue other than the Q3 revenue for International Pharma, so the same number there. And we've had some softness in our legacy business, and that is all really driven by inventory carry in to some of our Canadian distributor. So inventory that they had carried into the year, but essentially doesn't become visible to us until they start shipping and it affected their ordering on a YTD basis. So how does that all roll through to revenue, EBITDA and net income after tax.

So as I said, for the quarter, our corporate sales were 31% ahead of the year ago. Our EBITDA was up 49%, reaching $2.9 million, and our net income after tax was just under $2.4 million, up 62%. You may be wondering why there's such a delta between EBITDA and net income, in this case. We have a strong balance sheet with cash, which we do invest in short term and midterm deposit instruments. And of course, we have to deduct that from our EBITDA calculation.

For the quarter itself, our EBITDA margin was strong, certainly against a strong year ago of 29%, we were 33% EBITDA margin. The net income after tax margin also strong at 27%, up significantly from a year ago.

Looking at the results on a 9-month basis, Canadian Pharma is strong, the International Pharmaceutical business strong leading to a 14% growth, just over $23 million through 9 months. We had a slower start in profitability to the year, and you can see this in EBITDA growth on a YTD basis of 7%. So we've made up for the slow start, and we have been investing in launch products. We'll be speaking about that in a couple of moments.

Despite the significant investment, more investment in selling and marketing expenses that we've been applying against the business, good strong profit performance. Net income after tax of over $5 million, up 18% to the year ago and our YTD NIAT margin equals the year-ago margin where we were relatively not investing quite as much as we have been this year in launch products.

On a per share basis, we earned $0.20 fully diluted in the quarter, that was our best performance ever, I believe. I don't think we ever got much above $0.15 you see here in Q4 of 2021. Historically on a trailing 12 months at $0.50 versus $0.49 in the year ago. So this was our 53rd consecutive profitable quarter. We became profitable at the second quarter of 2010 and have been profitable since then. So this chart just illustrates a few kind of what, 13 years of profitability look like. We started to earn a profit in 2010. We had the bottom of the slide in the bottom left corner, you can see 14.33 million shares outstanding fully diluted. We essentially had 2 products. We had our legacy business, and we had FeraMAX and now you can see a portfolio that's growing that we think is going to be a growth driver going into the future into several years into the future and a fully diluted share count of just under 12.2 million shares.

So I have a couple of highlights for the quarter, I want to draw your attention to. So we announced Gelclair, a new product for oncology supportive care and we announced promotion of that commencing in July. We launched Inofolic, a new women's health product for polycystic ovary syndrome. We've got more comments on both Gelclair and Inofolic in a couple of slides. We paid our fourth consecutive quarterly dividend and we continued buying back shares, 80,000 of them in the third quarter.

Subsequent to the end of the quarter, we launched menopauseinformation.ca. So this is a platform to share key information and content to help women -- Canadian women navigate perimenopause and menopause. It's a really important time, key phase in the life of a woman and with the assistance of healthcare professionals, we have put information that they can use to better educate themselves on menopause and prepare themselves for a meaningful discussion with their healthcare professional.

We are just about to start shipping Gelclair. So stay tuned for that information that will happen in the fourth quarter. And of course, we've declared our fifth quarterly dividend to be paid in December. A key growth driver for us has been the FeraMAX brand. It's been the #1 recommended oral iron supplement by both pharmacists and physicians across Canada now for 8 years running. We don't see that changing based on the feedback that we're getting from our customers. It's become a very trusted brand in the Canadian marketplace, both by the health care professionals that I just referenced, but also consumers. Iron is consumed more than 80% by women in Canada. That's 80% of iron that is sold in Canada is consumed by women. So we have a kind of a trusted position with both the healthcare professionals and the consumers of FeraMAX.

This has provided us a great platform for us to drive a FeraMAX life cycle strategy and expand our leadership in the Canadian marketplace. We have been providing tools to healthcare professionals and to Canadian consumers around how to manage their iron health. And we also reformulated the FeraMAX product line that was initiated back in October of 2020. The 2 existing products were reformulated. We launched a new product this year, FeraMAX 45 and that we are, in fact, developing well, at least one additional product, and there may be more in the pipeline coming after that, it's probably still a couple of years away. So FeraMAX 45 is designed to maintain iron health. It's not a therapeutic product. It's meant as a once a day and was essentially designed with feedback from healthcare professionals and engagement with iron consuming patients and women that have experience with what I would describe as iron deficiency or iron deficient anemia relapse, happens quite often.

Women that are diagnosed as aren't efficient are typically not diagnosed as such for the first time. So this product was developed by BioSyent. It uses our new formulation of the base FeraMAX. It's a chewable really pleasant tasting iron product if you've ever had to taste iron supplements that are on the market. Then you would know that not surprisingly, they taste like metal. This product is a wonderful way to deliver 45 milligrams of elemental iron in a really great tasting format, and the product is now available in over 2,000 pharmacies across Canada, that's data as of at the end of September. And we do know that, that has been growing by the month.

In August, we launched Inofolic, and this is a product we in-licensed originally in October 2020. We had some work to do to get the label right with Health Canada, and we started shipping it in August this year. This is a product for polycystic ovary syndrome and endocrine disorder that affects approximately 1.4 million women. Some of whom know they have PCOS and many of whom do not know. And this fits well with our product portfolio and kind of our focus on women's health. We've had strong feedback, although it's early days, and we have just really started with the product by the time we got to the end of the quarter we're reporting out on here.

Also new this year is Gelclair, an oncology supportive care product for relief of oral mucositis. So think of mouth sores and mouth ulcers that are caused by radiation and chemotherapy treatments for various types of cancer. The sores, oral mucositis, have become quite debilitating. They've got a dramatic impact on quality of life, the ability of the patient to eat and to drink, swallow and even to speak and in many cases, these patients end up having to discontinue their cancer therapy or they end up in a hospital to get feeding tubes and the like. So Gelclair is a product that's been marketed in other countries around the world for quite some period of time, and it is a gel coating that provides fast relief from pain, so it minimizes or assist with minimizing the amount of analgesic or opioids that are used to manage the pain caused by oral mucositis and also then allows healing of the mouth mucosa to occur.

So we expect to start distributing this product here within the next 4 weeks. Stay tuned for that. So these products that I've just mentioned Inofolic, Gelclair, FeraMAX 45, but also our entire FeraMAX lineup and then also Tibella our menopause hormone therapy product, which has experienced strong growth over the last 1.5 years in Canada, make up the growth drivers for our business, along with the rest of our portfolio, we're on record as saying that our portfolio has a peak penetration value of over $50 million in annual revenue. But of course, when you're not an R&D company, the lifeblood of the future growth of the company is really acquisition and in-licensing. So that's an ongoing process and it never ends. But we feel that with these assets in our portfolio now that for the next several years, we've got strong growth coming out of our portfolio.

So how did operations then kind of translate to our cash position. We generated $6.5 million of cash from operations in the 12 months ending September 30. We deployed $2.7 million in buying back shares, and we have paid dividends now for quarterly dividends of about $1.9 million. And despite that deployment of capital and investment in increased selling and marketing capacity to launch products, so more sales reps in the field, sales management, tools for sales representatives, samples and communication elements for our existing portfolio and for the new products to drive growth, not just this year, but into the future.

With all of that said, we still grow our cash position to just over $29 million on September 30. And our execution of that strategy has resulted in our return on equity of 18%, just down slightly from last year. So we do get asked what our intention is with the cash on hand on the balance sheet. We have a capital-light business model.

As I say, we've been profitable for 13 years, and we are investing in growth. We tie our capital allocation to our strategy. So growing our revenue out of the portfolio that we have in existence, deploying additional capital in diversifying our portfolio, whether that be acquisitions or in-licensing. And yet we find ourselves in a position where cash exceeds requirement to drive our strategy. And so about 5 years ago in December of 2018, we initiated a normal course issuer bid. We have been consistent in deploying that approach, and we've been buying back shares now for just short of 5 years.

During that period of time, we've repurchased 2.5 million shares and deployed about $16.5 million. Our dividend, including the one that's coming up it's been declared for payment in December. In aggregate, we've returned just shy of $19 million to shareholders. And our buyback program has increased our earnings on a per share basis by 21% since we started in 2018.

I'd like to finish on this slide just to point out that we have made some changes several years ago in terms of equity incentive compensation for leaders and managers in our business. And we haven't issued any new share options, I believe, in about 4.5 years. And we switched to an RSU program, and you might think, well, RSUs could be dilutive. And what we're doing is using our strong balance sheet to buy back shares and hold them in trust. And that kind of underscores our commitment to nondilutive approach to how we manage our cap table. And so we hold those shares in trust, and that will take care of our obligation for the RSUs. So we've been doing that now for a number of years. And as we've grown our business, our fully diluted share count has actually been declining and not budging up because of share options.

We're quite excited about the growth potential of our portfolio. We've got new brands in the market. We've got a strong team in the field, and they're getting good feedback from their customers on our products both our existing and our new and we look forward to reporting our continued progress to you in the quarters to come. Thank you.