Good morning, ladies and gentlemen, and welcome to the VOTI Detection financial results for second quarter fiscal 2022 conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on June 14, 2022. I would now like to turn the conference over to Rory Olson, CEO. Please go ahead. Thanks very much, operator. Good morning, everybody. Welcome to VOTI's fiscal 2022 second quarter results call. With me is Daniel Menard, our Chief Operating Officer and Interim CFO. I'd like to remind everyone to please refer to our website at votidetection.com under the investor relations section to view our notice regarding forward-looking statements. On today's call, I will highlight our performance in the quarter, update you on our outlook for the current fiscal year, and then Dan will take you through our second quarter numbers. When we spoke, we were hopeful that we were seeing some signs of improvement heading out of the first quarter weakness caused by the ongoing impact of the pandemic. Unfortunately, that has not been the case. As you are aware, we provided the market with an update on our performance on May twenty-fourth when it was clear to us that the environment in which we were operating and the industry, overall, in terms of fundamentals, were not going to allow our company to meet our initial projections for the year. The softness experienced in the first quarter of fiscal 2022, primarily related to the impact of the Omicron variant and the resulting slower than expected recovery from the pandemic's fifth wave extended into the second quarter. As such, the timing of a return to more normal markets remains uncertain at this time. The current softness in the market, coupled with a significant increase in supply and shipping costs, have resulted in continued uncertainty extending industry-wide. Given the current environment, we announced that we were removing our previously released guidance for fiscal 2022, including guidance pertaining to annual revenue, gross margin, and our initial expectation that we would exit fiscal 2022 EBITDA positive. As you've seen with the release of our second quarter results yesterday, the weakness in the company's performance year to date has had a negative impact on our cash position. Whether we can generate sufficient operating cash flows to pay our expenditures and settle our obligations as they fall due is uncertain. The company's ability to continue as a going concern is dependent on its ability to manage its costs, raise additional equity on reasonable terms, and benefit from an improving market. The existence of these conditions indicates that there are material uncertainties which may cast significant doubt on the company's ability to continue as a going concern. As a result, the current situation, we are reviewing all available alternatives, and we will keep you updated as developments unfold. With that, I would like to turn it over to Daniel Menard to review our first quarter results. Dan. Thanks, Rory. Here are the financial highlights for the second quarter ended April 30th, 2022, with a comparison to the same respective period in 2021. Revenue for the three months ended April 30th, CAD 4.6 million compared to CAD 5.9 million for the same period in fiscal 2021, a decrease of CAD 1.3 million or 22%. The company sold 126 security screening systems, compared to 178 during the same period in fiscal 2021. The revenue decrease is primarily attributed to the lower volume of systems sold, largely due to the industry impact caused by the Omicron variant and the product and geography mix of the systems sold. This was partially offset by a greater number of higher priced systems compared to the same period in fiscal 2021, and an increase in after-sales services and extended warranties revenue. Revenue for the six-month period ended April 30th, 2022 totaled CAD 8.9 million compared to CAD 12.2 million for the same period in fiscal 2021. A decrease of CAD 3.3 million or 27%. The decrease is primarily attributed to the lower volume of systems sold, largely due to the impact caused by Omicron variant and the product and geography mix of the system sold again. This was partially offset by a greater number of higher priced system compared to the same period in fiscal 2021, and again, an increase in after-sale services and extended warranties revenue. Gross profit in the second quarter decreased by CAD 1.2 million or 26% of revenue, compared to CAD 1.8 million or 31% of revenue for the same period in fiscal 2021. A decrease of CAD 614,780 or 5% of revenue. The five percent decrease in gross margin primarily related to lower number of systems sold, including their product and geography mix. A 3.5% increase in the average component cost per scanner, resulting mainly from an increase in freight costs allocated to the inventory sold due to the impact of COVID-19 on the global supply chain. The termination of funding from the Canadian federal government's Canada Emergency Wage Subsidy. These were partially offset by an increase in revenue from after-sales services and extended warranty as a percentage of overall revenue which carry higher margins. For six-month period, gross profit decreased to CAD 2.6 million or 30% of revenue compared to CAD 4.2 million or 34%. The 4% decrease in gross margin compared to the same period in fiscal 2021 is primarily related to a lower number of systems sold, including their product and geography mix, a 3.4% increase in the average component cost per scanner, resulting mainly to an increase in freight costs allocated to the inventory sold due to the impact of COVID and global supply chain and termination of funding of the Canadian federal government's Canada Emergency Wage Subsidy. These were again offset by an increase of revenue of after-sales services and extended warranties as a percentage of overall revenue which carried that higher margins. Net loss in the second quarter decreased to CAD 1.4 million compared to CAD 2.9 million for the same period in fiscal 2021. The decrease in net loss of CAD 1.5 million is primarily related to a decrease in net financial expenses, increase in non-cash gains from changes in fair value of embedded derivative, increase in non-cash gain from change in fair value of warrants, and a decrease in share-based payments, partially offset by the decrease in gross profit, the increase in general and administrative expenses, selling and distribution expenses, and R&D expenses. Net loss for the six-month period decreased to CAD 2.5 million compared to CAD 4 million for the same period in fiscal 2021. The decrease in net loss of CAD 1.5 million is primarily related to a decrease in net financial expenses, increase in non-cash gain from changes in fair value of embedded derivative, increase in non-cash gain from change in fair value of warrants, and decrease of share-based payments, partially offset by the decrease in gross profit, the increase in general and administrative expenses, selling and distribution expenses, R&D expenses. Adjusted EBITDA in the quarter decreased to a loss of CAD 1.6 million compared to a loss of CAD 711,752 for the same period in fiscal 2021. The decrease of CAD 840,392 is primarily related to the increase in net operating expenses. For the six months period, Adjusted EBITDA decreased to a loss of CAD 2.5 million compared to a loss of CAD 208,377 for the same period of fiscal 2021. The decrease of CAD 2.3 million is primarily related to the increase in net operating expenses. During the six months ended in 2022, the company had a balance of net cash used in operating activities of CAD -1.5 million compared to net cash from operating activities of CAD 1.5 million for the same period in fiscal 2021. The decrease of CAD 3 million is primarily due to the decreased cash-based operating results for the period and the negative impact from the change in the company's non-cash working capital compared to the same period in fiscal 2021. I refer you to our latest MD&A released yesterday to get the full details of our second quarter and six months results. In the MD&A, you will also be able to view our discussion of risks and remediative actions related to the COVID-19 pandemic. With that, I will turn back to Rory. Thanks, Dan. As you know, the pandemic took a very heavy toll on our operations, and unfortunately, as you've seen in our second quarter results, continues to impact our performance in a very meaningful way. We still believe that, through our aggressive mitigating strategies and initiatives, a sales pipeline that will eventually return to pre-pandemic levels, and the benefits of a targeted strategy to enter new verticals and increase opportunities within the existing verticals, that VOTI can emerge from this most difficult environment in which we find itself. As I said, we're exploring all our alternatives, and we will keep you posted on any developments that unfold. With that, I will ask the operator to open the line for questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touch tone phone. You will hear three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you are using a speaker phone, please lift the handset before pressing any keys. Again, if you do have a question, please press star one on your touch tone phone. There are no questions at this time. Please proceed. Well, thank you again for your interest in VOTI. Both Dan and myself are available at any time to answer any further questions you guys may have. Please stay healthy and safe. We look forward to speaking to you soon. Thanks very much. Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
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