Good day, and welcome to Trinity Biotech Announces Second Quarter Financial Results. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the call over to Mr. Joe Diaz of Lytham Partners. Please go ahead.

Thank you, operator. And thanks to all of you for joining us today to review the financial results of Trinity Biotech for the second quarter of 2023. Joining us on today's call are Aris Kekedjian, Chief Executive Officer, and John Gillard, Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. Before we begin, please note that statements made during this conference call may be deemed forward-looking statements within the meaning of federal securities laws. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied in such statements. These risks include, but are not limited to those set forth in the risk factor statements in the company’s annual report on Form 20-F filed with the Securities and Exchange Commission. Trinity Biotech undertakes no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after today or the occurrence of unanticipated events. With that said, I will now turn the call over to CEO, Aris Kekedjian for opening remarks. He will be followed by CFO, John Gillard for a review of the financial results. After which we will open the call your questions. Aris, the floor is yours.

Thank you. Good morning. As usual, I will discuss the summary highlights for the quarter and John Gillard will discuss the detailed financial results. In addition, we took the opportunity this quarter to take you through the in-depth details of our operational initiatives surrounding our core diabetes franchise. We think these are critical for our shareholders to understand as it’s critical to unpivot and transformation. Total revenue for fiscal Q2 2023 was $13.9 million, Fitzgerald Industries, which was disposed of in April 2023. Excluding our COVID focused PCR Viral Transport Media or VTM products and Fitzgerald, revenue for the quarter was $13.7, which is comparable -- properly comparable given the changes. This was 3% lower than in Q1 2023. Our core franchise diabetes consumables revenues increased 10% over Q1 2023. This is a critical financial growth metric that is key to the transformation of the company. Recurring diabetes consumables revenue rebounded strongly in Asia in the quarter, increasing approximately 70% over Q1. This was led by demand recovery in China. Our expectation is that, this level of demand will continue for the rest of 2023 in one of our most important markets. In addition, diabetes revenue grew by over 10% collectively over the quarters in our direct distribution markets, namely the U.S. and Brazil. In other product lines, Clinical Chemistry, Chromsystems and Syphilis product lines continue to show positive revenue momentum despite key raw material backorders in some Clinical Chemistry product lines. I'll reflect on that as we continue the dialogue. These revenues were gains -- sorry, these revenue gains were offset by lower infectious disease revenue compared to Q1 2023 and reflects the irregular order cycle in this business line. In addition, we phased out our non-core and difficult to scale transplant activity at our Buffalo, New York laboratory…

Thank you, Aris. Good morning, everyone. Now I’ll take you through the results for the second quarter of 2023. As you may be aware, we sold our Fitzgerald Industries business in April this year. So on our income statement for Q2 2023, the results of Fitzgerald have been reported separately within discontinued operations. As was the case in our Q1 earnings, the revenue, gross profit and operating loss numbers are stated without Fitzgerald for both Q2 2023 and the comparative period. Starting with revenues, total revenues for the quarter were $13.9 million compared with $15.4 million in Q2 2022. Gross margin for the quarter was 36.2%, which is the same as for Q2 2022. Here we are seeing the sales price and cost saving initiatives that we have implemented in the last year have been offset by lower revenue over a significantly fixed and semi-fixed cost base and by an unfavorable sales and exchanges. In particular, the loss of the transplant testing services at our Buffalo lab has had a negative gross margin impact. As I will speak to later and as Aris has already disclosed we are taking significant action to address our cost base. R&D expenditure increased from $1 million in Q2 2022 to $1.2 million in Q2 2023 mainly due to lower capitalization of payroll costs into the product development of intangible assets as key products came to the end of their development cycle. Meanwhile, SG&A expense in the quarter increased by $2 million compared to Q2 2022, mainly due to the effect of three different cost increases. Firstly, $0.9 million of the increase was due to higher share based payments expense. This is a non-cash accounting charge related to performance share based compensation awards, which are intended to closely align the goals of our team with…

Thank you, John. I appreciate the thorough update. I think you can all appreciate that we endeavor in this call to be a bit more in-depth and specific about our initiatives and efforts. As John mentioned, some of these things take time. We are in a regulated industry, but we felt both the combination of positive momentum from a commercial standpoint and improvements that have been -- had been implemented over the last 24 months from a COGS standpoint, we believe we're actually approaching an inflection point. Now, we don't want to get ahead of ourselves but we do feel very confident about the progress we're making and we wanted to share that with you. With that said, we'd like to hand it over to questions.

Thank you. We’ll now begin the question-and-answer session [Operator Instructions] First question is from Jim Sidoti of Sidoti & Company. Please go ahead.

Hi. Good morning. I'll have to go over this morning. But let's start with the business that you lost in Buffalo, the transplant services testing business. On an annual basis, how material is that for you?

Hi, Jim. It's John here. It's probably about $2 million of revenue. We had seen some declines in this, so it's not hugely material. It was a difficult business to scale. So the vast majority of our business at that lab is focused on autoimmune disease, in particular, our proprietary Sjogrens test. The transplant business required kind of 24/7 365 staffing. And so there was some additional costs associated with that. I'm not saying we were happy to lose that business, but it was not core to us and did add complexity as we set out in the press release, it was not easy to scale, because inherently the transplant business you have to be within a certain geographical distance, typically to where the transplant activity is happening. So you're limited in a geographic sense.

I think you have to be within 30 miles typically. So you're basically covering two hospitals. You can't scale. And as John mentioned, the standby requirements, and frankly, we had a chance to try to win that business or maintain that business, we actually bid it pretty low, but we felt at some level it didn't make any sense anymore, because long term, we couldn't scale it. And so at the level it went at, I think we felt confident we had better opportunities. To be honest with you, we have a chance -- if you look at the margins in Sjogrens compared to the margins of transplants, they're not even close. And we have a chance here to partner with the team that people know what they're doing to really scale the Sjogrens business. So that's the right focus right now.

Okay. All right. And you did give guidance for the third quarter, which is higher than the second quarter, despite the fact you bought this business. Should we take that as saying, maybe the second quarter is -- I know you don't want to give long term guidance, but do you think this second quarter was a low water mark to you and that you'll see revenues from your other businesses continue to grow to offset business and some of the other -- some of the COVID type businesses. So that revenue should sequentially be climbing for the next several quarters?

Again, I think, your premise here is actually pretty much why John and I wanted to spend the time on this call to baseline people, okay? We feel like we bottomed on all of the changes we had to make on the revenue run rate. We feel confident about our sequential revenue profile going forward, both -- and not only that, but we also feel confident about our COGS profile going forward. So I think we're at an inflection point. That's our view.

Okay. And now if we switch over to the Premier business, it was down overall in the quarter, but that was -- it sounds like that was all on instruments that consumables business continues to grow. Is that correct?

Yes, look, the thing you got to look at in this core business in the Premier business. And eventually, as we get into rolling out the resolution product in a more extensive way is really about consumables. That's where all the money is, right? We generate greater than 50% margins in the consumables, its recurring revenue, the instruments are there to largely drive that consumable profile, revenue profile. So we've been focused very much on being strategic about where we're placing instruments, making sure that -- and I can tell you, John -- a stickler for this, making sure that we've got recurring revenue profiles associated with those instrument placements around the world so that the payback makes sense. And that is a big change in terms of how we've been running the place historically versus where we are today. Okay? So this is where the franchise scales. And this is our number one focus.

And Jim, just to augment that, as we reduce down the cost of us manufacturing the instruments, right? That will allow us to be more competitive in terms of placing instruments, which should ultimately allow us to have a greater footprint, which again will drive revenue in the consumables, right? So really reducing down the cost of the instrument is reducing down a barrier to market entry in certain segments. And coupled with that is, we can reduce down the cost of goods of our consumables, in particular, our column, will allow us to be cost competitive while also maintaining margin. So there's a comprehensive strategy here to grow. We've had some market research done on the A1c testing business and that [indiscernible] cost is critical and that kind of validates the path we've been on for the last 12, 18, 24 months and trying to get these cost reductions through. To Aris’s point, we are going regulate the market. This is not stuff you can just flick the switch on. But the flip side of that is, once you've made those changes, those regulatory barriers that slowed you down can become somewhat of a competitive moat around your business.

Okay. And that's actually what I was going to ask next, the regulatory hurdles. Now you've overcome a big one, I think, when you got resolution approved, but it's a separate 510(k) for the new column and then for the 9210?

No. Well, let's put it this way. The changes we're anticipating at the end of the year into 2024 don't require any significant regulatory approval. They've been going -- they've been undergoing validations and testing, which are required, but we don't need any regulatory approval. Are there regulatory approvals planned in the updates later in 2024 and 2025? Yes. But for the initial launch of these improvements, the things John's talking about, the 3 times improvement in column performance, etcetera. That's all within the purview of what we've got going on right now. And look, one of the other things I think I want to expand on with respect to John's point. The cost competitiveness is a huge factor here in scaling the volume and volume is the game. But the other thing you got to keep in mind is, if we can actually increase throughput of our system, which is what we're working on with the column, we start getting to higher volume segments in general. That's not just price driven, but it's the fact that we can actually drive into higher volume segments. So we're trying to scale this thing by driving costs down and driving throughput up. That's how you make money in this business. It's not very complicated.

Okay. And so you don't need any -- you can launch the new column when you're ready. And then I do -- I would assume you would need some kind of 510(k) for the 9210 in 2024?

Well, we're looking at next generation changes, which would significantly potentially increase the [column] (ph) the number of column -- test for column. So like I said, John and I have been talking to you about increasing the column test numbers right now by 3 times in the current generation. We feel confident that's all within our purview. We are looking at strategies to increase that even more potentially to double that. That would probably require regulatory approval. And that's why we are concurrently, in addition to the changes we're about to roll out in the fourth quarter, concurrently working on that longer term process. And we think that'll be late 2024 before we get the kind of progress we need from a regulatory standpoint.

All right. And then can you just give us some kind of sense on what the legal challenges are left in Kenya? I mean, are you confident that you'll have this resolved in 2023 and that you'll be able to start shipping the units by the end of the year or test systems?

Look, I'm not going to -- I'm not going to opine on legal matters necessarily, but I will say, when you look at the actions being undertaken by the government, and the progress being made and our assessment of the situation, we believe that these matters should be resolved in early October. There are a couple of hearings coming up. And in principle, our view is, those hearings should all rule in the favor of the government and ourselves and should be able to move forward, okay? I am not -- I'm not going to give you a prediction on that other than to say we're confident that we feel that these matters should be resolved and that we will move forward at least with the expectation that the government has and ourselves. Our expectation in terms of all the activities is that, we're moving forward.

All right. And then lastly, you ended the quarter with about $14 million in cash. Do you think that's sufficient? I know you expect cash flow to improve in the -- over the next few quarters as some of your initiatives start to take effect. But do you think the cash –

I just want to be clear. I don't think it's sufficient. And John and I are working with our lenders to make sure we have plenty of liquidity going forward. It’s everyone’s best interest for us to have the appropriate runway and that what we're working on. Liquidity is a high priority for me in this kind of environment.

Right. Okay. But you -- I would think that when these initiatives such to kick in, you do expect to be cash flow positive over the next 18 to 24 months?

We expect significant improvement in both our HIV franchise as these orders for TrinScreen come in and the initiatives John kind of outlined, play through. And clearly, all these activities on the Haemoglobins business are aimed at making that a really kind of world class business. It should be running around 20% operating margins. That's where we're targeting that business. That's cash flow positive and it should be on a recurring basis.

All right. Thank you. That was it from me.

Thanks, Jim.

Thank you. [Operator Instructions] And we have no further questions. I'll turn the call back over to Mr. Aris Kekedjian for closing remarks.

Well, thanks everybody for attending our earnings call today. I think John and I specifically wanted to give you a bit of a deep dive and more insight and transparency in terms of what we're doing. We intend to continue this with you in the coming quarters as we make progress around these initiatives. And we look forward to following up with you as we have announcements to make in the coming month or two. With that said, thank you for the time. We'll see you again soon.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.