Greetings! Welcome to the Trinity Biotech’s Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. [Operator Instructions]. Please note that this conference is being recorded. At this time I’ll now turn the conference over to Eric Ribner, with Investor Relations. Eric, you may now begin.

Good morning everyone. And thank you for joining us on today call. Before we begin, please note that statements made during this presentation 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 events 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 statement in the company's annual report on Form 20-F filed with the Securities and Exchange Commission. Trinity Biotech undertakes no obligation to publicly advise, update or revise these forward-looking statements to reflect events or circumstances after today, or the occurrence of unanticipated events. And with that, I’ll turn the call over to John Gillard, CEO.

Thank you, Eric. Good morning everyone. And thank you for joining today's call. We really do appreciate you taking the time. This morning I will take you through some key business updates, including new financial guidance, our progress in our recently acquired biosensor business, and our comprehensive transformation plan, that I set out to investors in early March at the Emerging Growth Conference. I will then hand you over to Des to bring you through the financial results for Q4 and fiscal year 2023. Right now, Trinity Biotech is an experience diagnostic company that under new leadership and with fresh thinking plans to transform its existing business into a high-performing cash-generative enterprise. This morning we are pleased to introduce financial guidance which is predicated solely on growth from the existing businesses, including haemoglobin and HIV testing, and planned improvements to operating margins. This does not include any contribution from the newly acquired biosensor platform technology. We are targeting approximately $20 million of annualized run-rate EBITDASO, so earnings before interest, tax depreciation, amortization, impairment, and share-based compensation costs, by Q2, 2025. This is based upon targeted annualized run-rate revenues of approximately $75 million by Q2, 2025. We believe that this guidance is achievable, based on our comprehensive transformation plan for the business which we will review in more detail today. Additionally, 2024 is already off to a strong start, which increases our conviction in our outlook. In addition to strengthening the base business, we aim to scale the company by building a global business in wearable biosensors, initially with a focus on continuous glucose monitors or CGMs. We believe that this product can be a real game changer for the company. This represents the key growth driver for Trinity Biotech into the medium term. As many of you will know, just…

Thank you, John. I will now speak to our financial results for the four quarter of 2023. And following that, I will briefly discuss our full year 2023 financial results. Our revenues for the four quarter of 2023 were $13.4 million, compared to $15.7 million for the same quarter in 2022, a decline of $2.3 million. This movement was driven by, firstly, declines in our hemoglobins business of $1 million quarter-on-quarter, as we defer year-end shipments of products at suboptimal pricing as we renegotiate the contract terms, terms that are now agreed as of Q1, 2024. Secondly, a decline of $0.6 million, quarter-on-quarter in our autoimmune business, due to the already communicated ceasing of our transplant testing activity in our Buffalo Lab business, and thirdly, lower period-over-period revenue from our COVID-19 VTM products, leading to a decline of $0.2 million in that product segment. Additionally, in our point of care business, we experienced a decline of $0.5 million, driven by lower sales in our Uni-Gold test, due to regular ordering patterns in that business. That decline is partially offset by revenue from our TrinScreen test of $0.4 million. This quarter was the first quarter we recorded revenue from our sales of our TrinScreen product to Africa, and we expect this test to be a key growth driver for us going forward. Our gross profit for the quarter was $4.6 million, representing a gross margin percentage of 34%, which was broadly in line with Q4, 2022. Other operating income decreased from $0.3 million in Q4, 2022 to zero in Q4, 2023. Other operating income in Q4, 2022 comprised government grants in relation to R&D activities, and there was no equivalent in the fourth quarter of 2022. Research and development expenses were $1.1 million for the quarter in line with Q4, 2022.…

Thank you. [Operator Instructions]. Thank you. Thank you. Our first question is from the line of Jim Sidoti with Sidoti & Company. Please proceed with your questions.

Hi, good morning, and thanks for taking the questions. First one on the diabetes business, are all these -- the new products that you have, the new consumables, are those all approved and ready for market or are there approvals that you need to get before you can start to sell those devices?

There may be local registrations required, but they are effectively a variant on the existing approved product. So, we don't have to go for a new 510(k) or something like that, Jim. So they're available to roll out immediately in certain markets and other markets, there is just registration requirements. We've finished all the testing, all the trials, there's no regulatory risk at this point around that.

So, that applies to the fact that you've changed manufacturing locations for the consumable and the instruments that's all been worked out with the FDA?

Yeah, so they go through what's called a variation change process, and you need to show basically comparable performance. So, without boring everyone on the call with some of the regulatory issues, but effectively Jim, there are requirements that the various facilities need to have, and then they have to operate a specific type of quality system, and we need to carry out testing to show that the products that we manufactured in a particular place or in a particular way previous is comparable to the product that we manufacture now. And I suppose that's why it's very important for us to have an experienced and highly specialized team that can plan and execute on those types of initiatives. As they set out, there's very significant savings associated with this and that's one of the reasons that over the last two or three years we have been making these senior hires to give the company the capability to number one, identify these opportunities and then number two, to be able to execute on them and execute on them efficiently and quickly. I think that's something as a business we have developed very significantly over the last two to three years, and we're now seeing the benefits of having those people in place, and I suppose having the management focus and discipline around executing on it.

And so it sounds like by this current quarter you should be in the market with product that has similar results, but significantly lower manufacturing costs. So, I would assume you'd be able to compete on price more effectively starting the second quarter of 2024. Is that correct?

Yeah, exactly, Jim. So the reason that we push these changes are really twofold. Number one, to reduce down our cost in manufacture and that should give us higher revenue and higher cash flows from that business. And then secondly, to allow us to compete in different parts of the market especially, A1c testing that traditionally haven't been really that open to us. I would categorize that in two ways. So, by updating our Column System and now allowing a higher number of injections, that opens us up to labs that run a higher number of tests, and that wouldn't really have been practically available to us in many markets. So, that kind of increases our time across the number of labs that are potentially open to our type of solution. And then secondly, by reducing down our costs, it allows us to target maybe lower price markets, where we traditionally have either not sought to compete or have been able to effectively compete. And very much what goes hand in hand with that is the work that we've done to reduce down the cost of building the instrument, and now what we're doing around outsourcing more aspects of the manufacturing of that instrument. So, by reducing down the cost of the consumables and reducing down the cost of the instrument, you reduce down the total cost of ownership, either to the distributor or the lab themselves of our solution, and we think that would give us a more competitive offering in those other parts of the market that we haven't been able to aggressively attack in the past.

All right, and then if we switch over to TrinScreen, it sounds like you've made progress getting that manufacturing up and running. You've got the sales already in Kenya. Are there other markets in Africa where you can sell the product?

Yeah, because we have WHOPQ approval, there are many markets effectively open to us for a regulatory perspective. As you know, Jim, the way that this testing happens in Africa is through national algorithms. That's effective via a list of approved products or selective products, I should say, to be used in the national testing programs. You typically have a screening test, which what TrinScreen is for. You have a confirmatory test, which is Uni-Gold, and you maybe have a second line confirmatory test, which again could be Uni-Gold. So we cover off the screening and the confirmatory test markets with both products. Those algorithms come up for change every so often. That is both a positive and a negative. It is a negative when you're trying to get into new countries, but it's a positive when you're getting selected from that algorithm, because typically it doesn't change that terribly often, provided you continue to provide the quality products. So, it takes some time to build a business within that, but as we've seen with our Uni-Gold business for the last 20, 25 years, that can provide a very stable recurring business. So there are a number of countries that the team is working hard at getting the product into. It's a competitive market and we will not release the names of those countries until we have to for competitive reasons, but we have a senior team that are very experienced, both within Trinity and from other companies that are highly successful in this market, working for us on these initiatives, and we do expect to win further countries as we move through. And as I said, it doesn't happen overnight, but the flip side of that is that it does give you some recurring revenue and some predictability, and it's both an asset once you win some of those countries.

So, it sounds like nothing may happen in the near term, but by 2025 you do think that you'll be selling the product to other countries in Africa? Is that the ..

I think that’s -- exactly. I think that's a fair way to categorize it, Jim. I would agree with that.

Okay. All right. And then I just want to be clear, the guidance you gave for revenue and EBITDA for 2025, that includes no revenue from CGM, is that correct?

Yeah, exactly. So that's really built upon the existing business. We would expect continued growth from TrinScreen through Kenya and winning some of those other countries as we spoke about, and then also some growth within our hemoglobins business from those changes that we already spoke about, in terms of the lower costs and our ability to grow. Like we typically see year-on-year growth in our hemoglobins business, but we do expect these changes to really position us for stronger growth in the second part of this year and onwards. As we roll out the more efficient instrument from a cost perspective and our new Column System. So, I think we fairly expect additional growth there, and that's really where we expect to build over time to that $75 million run rate number that we talked about earlier.

And when do you think it’s reasonable to assume that you’ll start your underwriting revenue from CGM?

At this point we are not seeing a huge amount on that. We are very much looking at the data from the wave Waveform existing device. The Waveform device has been through a number of clinical trials over the years. So, there is a rich vein of data for us to work with there. We're also speaking with commercial partners, and that would inform what we will do in terms of commercial launch. What we've previously said is, with regards to the next generation device, we expect to be in clinical trials summer 2025, and we'd expect to be in the market, ideally within six months after that. Depending on the outcome of the various data analysis that we're doing right now and conversations with commercial partners, we may change that. We may take a different approach, but I don't want to say too much about that now until we decide what we're going to do based upon further data analysis and further discussions and feedback from the market. What I will say is, we have been very positively influenced and happy with the feedback from some commercial partners in terms of the desire to have a product on the market as quickly as possible. People recognize the unique benefits of the Waveform device, particularly in terms of cost of care and reducing down that daily cost of this critical technology and solution for people who have diabetes. So, we're confident the demand is there, and we just need to decide which way we can best meet that demand in a way that allows us to build a very successful business and brand for the future going forward.

All right. Then some general modeling questions. What should we use for an effective share account for 2024?

I think we're at about $9 million ADSs now. That's after our reverse share split a number of weeks ago. So, I think we're at $9 million.

Okay. And that includes the shares that were used to complete the divestures [ph].

Yeah, the Waveform acquisition, Jim.

I'm sorry, complete the acquisition. Right?

Yeah, yeah, exactly.

And do you think with the cash on hand and the $6 million cash available, do you think you have enough cash to make the changes in 2024 that you want to make?

We're running fast to do that. The benefit of improving the cost basis of the business is twofold, Jim, right. The quicker we do it, the less cash we need to get there. Then each initiative that we successfully execute on provides further positive cash flow to fund the other initiatives. That's, we're running very, very fast. We're being aggressive here. We think it's necessary and we think it's warranted, and so I would be hopeful that that would be enough to get us to where we need to get to within the changes around the existing business, and we'll obviously keep that under review. But like I said we're working hard to make sure that's the case.

Okay. All right. And then you mentioned a couple of times that 2024 is off to a strong start. Can you give us any guidance on that first quarter? Or would you rather wait a couple of weeks for that?

Well, only four days post-quarter in. So, what I will say is we do expect revenues to be stronger in Q1, 2024 than they were in Q4, 2023. So, certainly some positive momentum there, and yeah, so for us, look at the focus is on executing on these initiatives to change our cash generation profile and our cost profile, and then to build that revenue base. So, I think, we've been a strong start on both sides of the equation.

All right. Seems like there's quite a bit going on. Appreciate all the color. Thank you.

Thanks, Jim.

Thank you. Our next question is from the line of Paul Nouri with Noble. Please proceed with your questions.

Hey, good morning. Thanks for taking the questions.

Hi Paul.

So, do you have a target gross margin for 2025 that you could share, a range?

We hadn’t really planned on going that deep Paul. I think we'd expect it to be – 50% would be kind of where we would be hoping to get to, are targeting to get to, and that’s really from the procurement efficiencies that we're talking about, the outsourcing of some of the less complex aspects of our manufacturing right, and the consolidation of the manufacturing site. I mean they will have a significant impact on that gross margin. And then I suppose – so that we turn that into a higher degree of cash generation, that's the reason we are focused on our SG&A and very much focused on reducing down the cost of complexity that we have within the business. I know from speaking to shareholders that you know people have I think rightly to be concerned about the extent of SG&A. Some of the key drivers for that are, we have a broad breadth of products, we are operating in a highly regulated industry and we also sell to a large number of countries globally. And all of those drive complexity, and we have traditionally been managing that complexity across a number of different sites, usually typically co-locations with our manufacturing facilities and our manufacturing facilities are not in low-cost locations. Our manufacturing facilities in the whole are in Ireland and they are in the US. That leads to a situation where you have a high degree of complexity, you need to resource that complexity and do it in a distributed way, reduces down the efficiency, and do it in higher cost countries, increases the cost and amplifies the costs of that inefficiency. And that's really why we're focused on centralizing a lot of those functions into a lower cost country, where we can get those efficiencies and we can also reduce down the cost of servicing that compliance burden. So no, that's not a little bit longer than gross margin, but I think I want to make it clear, we're targeting all areas of the P&L really, to try and get back to that very positive EBITDASO number. So it's a comprehensive view we're trying to take it.

Okay, and in terms of the source of the growth, because it's pretty dramatic, the expected growth. Do you see it evenly between point-of-care and the lab business or should it be more weighted towards one or the other?

It's probably a bit more on point-of-care Paul, but not usually so. As I said, we normally see year-on-year growth with our hemoglobins business anyway. So within that, as I said, because of the changes in the product, we do expect to have a more competitive product to go to the market and we do be able to expect to have core market share over time. We also have the Premier Resolution within that. As you know that type of sales process and installation process is a slow burner and it's not a high volume type of play, but it’s very sticky when you get it into a lab. So I think both of them will drive some hemoglobin growth, but obviously the point of care especially with TrinScreen, because that is designed for the screening market, they are generally much, much higher volume than the HIV confirmatory testing markets that we've been in previously. So the example I always give is, if someone – if 10 people go for a screening test, maybe only one person goes and gets the confirmation test right, because you got a positive on the screening test, it might even be less. So in that example the screening market from a volume perspective is 10x the size of the confirmatory test market. So that's why a win, especially in a reasonable size country right, can have quite a big impact in terms of revenue for a company of our size, and that's why it's a little bit of a game changer for us to be into that space. So to take your point, there is growth within that, but I suppose you know we have built in wins in terms of Kenya and then just growth from a hemoglobin, from particularly that new product growth.

And I know in hemoglobin, you have a presence in China, you have a presence in Brazil, but going forward the next couple of years, do you see more of your growth in the U.S. or in some of those international markets?

No, I think it's more in the international markets. Like, the reality is HbA1c testing in the U.S. is typically now on the larger chemistry systems, where we continue to have a strong presence either in your research areas or some of the more high quality, lower volume type labs, right, that are very focused on – very, very focused on the quality of the test and very focused on accuracy. And we know our product delivers that very well, especially in populations where there is a significant amount of hemoglobin variance, right, so we continue to hold a position there. If you look where diabetes is going, it is growing – it's still growing in the U.S., but it's growing very much internationally, right, and a lot of the countries that have high degree of hemoglobin variant, where there's arguably a greater benefit from using our technology is in Asia, is in Africa, in those types of countries. So I expect a good chunk of our growth to come from those more, as you would call it, international markets, rather than the U.S. and probably rather than Western Europe. They are just using a different type of technology.

And then just two more quick ones. Did the Sjogren's test continue to grow?

Yes, that continues to grow and continued growth in terms – I think post-COVID we've all kind of forgotten about that, thankfully. But we're still seeing autoimmune issues arise from that, and so it's an area we are focusing on. And we think that the autoimmune space, particularly around kind of esoteric tests and our screening tests that have a prognostic value can be very, very beneficial. So look, that continues to be a good performing part of our business in terms of the Sjogren's test, and we think it is maybe a good model for growth going forward, without a huge amount of capital expenditure, which is helpful.

And then the last question, the EBITDA guidance, that includes the spending you are doing in the CGM segment?

No. So we capitalized that Paul under IFRS. We capitalize that expenditure as we typically would have with product development spend, and so look, what I would say about that is the CGM spend is optional, okay. We will only continue to spend on developing that product if it is developing results for us right, and we're confident with the technology direction and the market direction. I think we've no question over the market direction. We know that this market is exploding, and we know from speaking with market participants that there is a strong desire for a lower cost solution, right. The technology piece, I think we have substantially de-risked by acquiring a technology that's already proven and has European regulatory approval. What we're really doing is looking to tweak that, change the form factor, improve the manufacturing process as an experienced high-scale medical device manufacturer ourselves. You know we're confident we can do that. So that's not a built-in ongoing drain on cash resources. We will only continue to invest in that business Paul, while we are very confident that we will see returns in that. And my own personal view would be we'll see very, very significant returns on any investment in that area.

Okay. Thanks a lot.

Thank you. At this time, we've reached the end of our allotted time for question-and-answer sessions today, and that will also conclude today's conference. Thank you for your participation and have a wonderful day.

Thank you, everybody.