Techtronic Industries: Share Price Surge Driven By Earnings Beat (OTCMKTS:TTNDY)


Elevator Pitch

I maintain a Neutral rating on Hong Kong-listed Techtronic Industries Company Limited (OTCPK:TTNDY, OTCPK:TTNDF, 669:HK), a manufacturer of cordless power tools.

This is an update of my prior article on Techtronic Industries published on March 24, 2020. The share price has more than doubled since my last update, from HK$42.45 as of March 23, 2020 to HK$94.90 as of September 9, 2020. The company trades at 25.8 times consensus forward FY 2021 P/E, and it offers a consensus forward FY 2021 dividend yield of 1.6%.

Techtronic Industries’ revenue and net profit grew by +12.8% YoY and +16.2% YoY in 1H 2020, which was above market expectations. Market share gains, product innovation and profitability improvement will be the key earnings growth drivers for the company going forward, and will determine if its future earnings growth is sustainable. I retain my Neutral rating on Techtronic Industries, as expectations of strong YoY earnings growth in the high teens for the company in 2H 2020 have already been priced in.

Readers have the option of trading in Techtronic Industries shares listed either on the Over-The-Counter Bulletin Board/OTCBB as ADRs with the tickers TTNDY and TTNDF or on the Hong Kong Stock Exchange with the ticker 669:HK. For those shares listed as ADRs on the OTCBB, note that liquidity is low and bid/ask spreads are wide.

For those shares listed in Hong Kong, there are limited risks associated with buying or selling the shares in terms of trade execution, given that the Hong Kong Stock Exchange is one of the major stock exchanges that is internationally recognized, and there is sufficient trading liquidity. Average daily trading value for the past three months exceeds $30 million, and market capitalization is above $22 billion, which is comparable to the majority of stocks traded on the US stock exchanges.

Institutional investors which own Techtronic Industries shares listed in Hong Kong include First State Investments, Schroder Investment Management, The Vanguard Group, MFS Investment Management, and BlackRock, among others. Investors can invest in key Asian stock markets either using U.S. brokers with international coverage such as Interactive Brokers and Fidelity, or international brokers with Asian coverage like Hong Kong’s Monex Boom Securities and Singapore’s OCBC Securities.

1H 2020 Earnings Beat

Techtronic Industries announced 1H 2020 financial results on August 12, 2020, which were above expectations.

The company’s revenue increased by +12.8% YoY, from $3,728 million in 1H 2019 to $4,206 million in 1H 2020. Its net profit attributable to shareholders and earnings per share grew by +16.3% YoY and +16.2% YoY to $332 million and $0.1814, respectively in the first half of the year. Techtronic Industries’ gross profit margin expanded by +40 basis points from 37.6% in 1H 2019 to 38.0% in 1H 2020, while its EBIT increased by +15.6% YoY to $363 million over the same period.

It is noteworthy that the company’s +12.8% YoY revenue growth in 1H 2020 was way ahead of its earlier guidance of a high-single digit top line growth for full-year FY 2020 at its FY 2019 earnings call on March 4, 2020. This translated into strong high-teens earnings growth, which beat market expectations of bottom line expansion in the low teens for 1H 2020. Techtronic Industries attributed the robust top line growth to new products, e-commerce sales and expansion of its worldwide sales network at the company’s 1H 2020 earnings call on August 13, 2020.

The share price has been rising increasing in the past six months since its year-to-date share price trough of HK$42.45 on March 23, 2020. Initially, there were concerns that Techtronic Industries’ revenue concentration in North America (accounting for 77.1% of its FY 2019 revenue), where the COVID-19 situation was worrying in the early part of the year, could pose downside risks to the company’s financial performance this year.

But the easing of lockdown measures in North America (and other parts of the world as well) and Techtronic Industries’ better-than-expected earnings growth for 1H 2020 have put such concerns to rest. Notably, the company’s segment revenue for the North American market expanded by +14.3% YoY, from $2,845 million in 1H 2019 to $3,252 million in 1H 2020. This led to strong share price performance in the past six months.

Strong Earnings Growth Momentum Expected To Be Sustained In 2H 2020

Sell-side analysts see Techtronic Industries’ revenue and net profit growing by +12% and +17% YoY to $8.6 billion and $722 million respectively in FY 2020. This is on par with the company’s +12.8% YoY and +16.2% YoY growth in its top line and bottom line, respectively, in the first half of the year.

The company noted at its 1H 2020 results briefing on August 13, 2020 that “we are confident that the growth momentum will continue into the second half of the year and beyond,” and stressed that “we intend to outgrow the market not just in 2020 but over the next five years.”

Looking ahead, market share gains, product innovation and profitability improvement will be the key earnings growth drivers for Techtronic Industries, as detailed in the subsequent sections of this article.

Market Share Gains

Techtronic Industries highlighted at its recent 1H 2020 earnings call that it has outperformed its peers in the first half of the year. For example, Makita Corporation’s (MKTAY, OTC:MKEWF) top line declined by -0.1% YoY in 1H 2020, while Stanley Black & Decker’s (SWK, SWJ) Tools & Storage business segment saw a -13% YoY decrease in its segment revenue for 1H 2020. In other words, Techtronic Industries has gained market share at the expense of its competitors, which contributed to its better-than-expected revenue growth in the first half of the year.

At its 1H 2020 results briefing, Techtronic Industries emphasized that “there is an incredible opportunity for TTI (Techtronic Industries) to accelerate the pace in which we achieve global leadership” because of “competitors who continue to boast about taking costs out and firing people and reducing their overhead.” In contrast, the company has continued to invest in production capacity, new product development and new talent with an eye towards better serving its clients’ needs in a challenging environment like these, and this has paid off in the form of market share gains and top line growth.

Product Innovation And Profitability Improvement

Techtronic Industries’ gross profit margin increased +40 basis points YoY in 1H 2020, which was very decent, but this fell short of the company’s earlier guidance of a +50 basis points YoY expansion in gross profit margin for FY 2020. This was likely due to a slightly less favorable sales mix, where sales contribution of lower-margin products increased as compared to that of higher-margin products.

Nevertheless, Techtronic Industries stressed at its 1H 2020 earnings call on August 13, 2020 that “our new products that we are launching that have demonstrably better features and performance characteristics than our competition” and they “are commanding premium prices in the market.” This is evidenced by the fact that 2020 is the 12th consecutive year that the company has expanded its gross margin on a YoY basis in the first half of the year.

Also, it is noteworthy that Techtronic Industries’ selling, general & administrative or SG&A expenses as a percentage of total revenue increased only slightly from 29.3% in 1H 2019 to 29.5% in 1H 2020, despite the company continuing to invest to grow its businesses. This was because the company has derived some cost savings by cutting back on what it terms as non-strategic SG&A.

Valuation And Dividends

Techtronic Industries trades at consensus forward FY 2020 and FY 2021 P/E multiples of 31.0 times and 25.8 times, respectively, based on its share price of HK$94.90 as of September 9, 2020. In comparison, the stock’s five-year and 10-year mean consensus forward next twelve months’ P/E multiples were 18.7 times and 16.3 times, respectively. The company is also valued by the market at consensus forward next twelve months’ EV/EBITDA and EV/EBIT multiples of 18.9 times and 26.5 times, respectively.

Techtronic Industries offers consensus forward FY 2020 and FY 2021 dividend yields of 1.3% and 1.6%, respectively. Market consensus expects its dividends per share to increase from HK$1.03 in FY 2019 to HK$1.23 and HK$1.49 for FY 2020 and FY 2021, respectively.

The company declared an interim dividend of HK$0.53 per share of 1H 2020, which represents an +18% YoY growth in absolute terms (as compared to dividends per share of HK$0.45 for 1H 2019) and a slight increase in its dividend payout ratio from 37.1% in 1H 2019 to 37.6% in 1H 2020.

Risk Factors

The key risk factors for Techtronic Industries include a slowdown in the pace of new product innovation, market share loss to rivals and profit margin expansion falling short of market expectations.

Note that readers who choose to trade in Techtronic Industries shares listed as ADRs on the OTCBB (rather than shares listed in Hong Kong) could potentially suffer from lower liquidity and wider bid/ask spreads.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.





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Peloton produces profit for the first time amid pandemic-demand spike, stock pushes toward new record


Peloton Interactive Inc. reported fiscal fourth-quarter earnings Thursday afternoon.


MarketWatch photo illustration/iStockphoto

A year after its initial public offering, Peloton Interactive Inc. is pedaling toward new highs amid a pandemic that is forcing people into their homes and away from gyms, creating demand for at-home fitness equipment.

Peloton
PTON,
-3.75%

on Thursday wrapped up its fiscal year by reporting that sales and subscribers roughly doubled in the 12-month period, and revealed its first profitable quarter as a public company and record quarterly revenue a little less than a year after its September 2019 IPO. Shares fell 3.8% Thursday from Wednesday’s record closing price of $91.17 — more than three times the IPO price of $29 a share — but pushed back toward record highs in after-hours trading following the release of the report, with gains of more than 7%.

Peloton reported fiscal fourth-quarter profit of $89.1 million, or 27 cents a share, on sales of $607.1 million, up from $223 million a year ago. Peloton reported a net loss of $47 million in the fiscal fourth quarter a year ago, just ahead of its IPO. Analysts on average expected earnings of 10 cents a share on sales of $586 million, according to FactSet.

“It has been another staggering year of growth, and I know all parts of the organization have had to work together to do everything possible to meet the incredible demand for our products and services,” Chief Executive James Foley said in a conference call Thursday. “The strong tailwind we experienced in March as the COVID-19 pandemic took hold has continued to propel demand for our products into the fourth quarter and first couple of months of Q1 fiscal year 2021.”

While still attempting to catch up to a flood of orders amid the COVID-19 pandemic — Peloton said Thursday it does not expect order-to-delivery times to normalize until around the end of the calendar year — the company is also looking to expand its customer base. On Monday, Peloton announced that it will reduce the price of its standard exercise bike and introduce a lower-priced treadmill, which could clear a path for potential buyers who were not willing to pay the large upfront costs for its products. It will also introduce a premium bike for fans who want top-of-the-line equipment.

Wedbush analysts noted that in a previous survey of 1,200 people, they found that Peloton could “dramatically improve” sales at a lower price point, especially in treadmills.

“42% of non-Peloton owners that were interested in fitness and familiar with the brand showed some level of interest in a $2,500 Tread, compared to just 30% showing interest in the current Tread,” the analysts wrote in a Sept. 9 note, after Peloton announced its new lineup. “Among existing Peloton bike owners, the number of respondents saying they would be ‘very interested’ in owning a treadmill from Peloton doubles based on the lower price, from 14% based on the $4,295 price point to 28% assuming a theoretical (at the time) $2,500 price point.”

While lower sales prices could hurt hardware margins and average selling prices, much of Peloton’s long-term prognosis focuses on the subscriptions for interactive workout media that owners continue to pay after they have received the equipment. Peloton announced Thursday that it now has 1.09 million subscribers, nearly doubling the 511 million that it reported at the end of its last fiscal year, topping its forecast of 1.04 million to 1.05 million.

In total for the fiscal year, Peloton collected revenue of $1.46 billion from the sale of equipment and $363.7 million from subscription services, up from $719 million and $181 million, respectively, in the previous fiscal year. Combined with other revenue from merchandise and other offerings, Peloton ended the year with $1.83 billion in sales, up from $915 million.

“By the end of FY 2020 our Peloton membership base grew to approximately 3.1 million, compared to 1.4 million members in the prior year,” Peloton detailed in a letter to shareholders Thursday. “Fueled in part by the challenges associated with COVID-19, member engagement reached new highs with 164 million Connected Fitness Subscription workouts completed in FY 2020.”

For the current fiscal year, which began in August, Peloton predicted htat subscribers and revenue would roughly double yet again. The company guided for revenue of $3.5 billion to $3.65 billion, with connected subscribers swelling to 2.05 million to 2.1 million. Analysts on average were predicting revenue of $2.74 billion and subscribers of 1.78 million ahead of the report, according to FactSet.

Peloton stock has gained more than 260% since its IPO; the S&P 500 index
SPX,
-1.75%

has returned 17.7% in that time. In after-hours trading Thursday, shares topped $94 following the release of the report.



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Midatech Pharma plc (MTP) CEO Craig Cook on Q2 2020 Results – Earnings Call Transcript


Midatech Pharma plc (NASDAQ:MTP) Q2 2020 Earnings Conference Call September 10, 2020 9:00 AM ET

Company Participants

Tim Sparey – Chief Business Officer

Stephen Stamp – COO & CFO

Conference Call Participants

Tim Sparey

Good afternoon from Cardiff and welcome to the Midatech Pharma 2020 Interim Results Presentation.

With me is Stephen Stamp; COO and CFO of the company who will run through the presentation. At the end of the presentation there will be a question-and-answer session. We’ve already received some questions, but if you would like to submit a question, please do click on the bottom link at the bottom of your screen at any time and those questions will be fed through to us. We’ll endeavor to get through as many as we can, but apologies in advance if we do run out of time.

And with that, I’ll now hand over to Stephen, who will take you through the presentation. Stephen?

Stephen Stamp

Thank you, Tim and good afternoon, everybody in the UK and good morning to those joining from the US. I am Stephen Stamp, CEO and CFO of Midatech and if you want to put a face to a name, I am in the middle of slide two surrounded by the brains of the organization.

I have a dozen or so of slide today up which as Tim said would be happy any questions you may have submitted. Moving on to slide three, I should like to take this slide as read if I may, but I would encourage you to refer to our public findings both on the London Stock Exchange RNS in the UK and on SECs Edgar in the United States.

So starting the presentation really on slide four, I would say that the first half of this year and year-to-date has been quite busy for the company and if I had to probably describe it as transitional a somewhat overused word, but I think actually appropriate for this company at this time. We’ve achieved some critical milestones which I’ll review when we get on to the R&D [ph] slides, but most noticeable in the first half was the initiation by the board of a strategic review. That strategic review was triggered by a couple of things; one being the collapse in the capital markets in mid-February and alongside of that, the withdrawal of a perspective licensee that we had lined up for our project MTD201.

Those two things as I said over the strategic review and that review immediately resulted in a couple of things. First of all the termination of further in-house of MTD201, there was no way we could see ourselves raising the $30 million or so in where we needed to complete that program. Alongside of that we closed our operations in Bilbao. That actually was pretty must dedicate to the manufacture of MTD201 and we made 47 of our 66 employees redundant. That’s over two thirds of the company.

The cost of that program was a onetime £1.8 million in cash, but it did result in a monthly reduction in cash outflow of about £0.5 million. So a payback in less than four months.

At the same time since strategic review, we appointed a boutique investment bank called Noble, to look at all the company’s options including possibly a sale of assets, the sale of technologies and even a sale of the whole company and we tested that with something called a formal sale process under the takeover code to see if there was anybody out there who was willing to pay a quick premium for the company and return value to shareholders.

As it turned out and I think possibly because of COVID and the inability to due diligence and the like, we didn’t receive any credible offers for the company and in fact, the formal sale process ended up becoming quite some hindrance to the company because we couldn’t sell assets and we couldn’t raise money because under the takeover code, those were deemed to be frustrating actions.

So in the absence of any formal office, we terminated the formal sale process in July, although we are still considering expressions of interest in certain individual assets of the company. However, while all that process was going on, we managed to pretty much half the burn rate and we realigned our strategy and we landed two industry collaborations and as a result of that, we were able to raise £5.75 million in a UK placing in July and from my perspective, that was the first fund raised of some time on which the company’s been able to raise money and what I’d call normal terms, that being a sensible discount with zero warrants and bringing in institutional investors. So overall I think it was a good outcome of that whole process.

Moving on to slide five and let’s talk a little bit here about our realigned strategy. The core of the realigned strategy is focused on Q-Sphera. Q-Sphera is our PLGA-based technology, which prints using print heads, normal print heads, encapsulated drugs in a biocompatible and biodegradable micro state here and the ejection of a Q-Sphera product then forms a depot inside the body, which releases drug with predictable kinetics over an extended period and we can tune that product to perhaps really store up to six months.

So the strategy of the Q-Sphera comprises two complementary elements with a common goal and that common goal is to license Q-Sphera products to Pharma in return for multimillion dollar milestones and royalties in due course that being after proof of concept. So how are we going about it, well we’re developing a balanced portfolio of internal programs and formulation development collaborations with Pharma. So why are we doing it in a balanced way?

Well for internal programs, we’re in charge of the timelines but we need to find potential licensees and create an option to generate some milestones and royalties we’re looking for. With external programs, clearly we’re working on the customer’s API, so we had already made licensee, it’s clearly obviously bought into the program. However, he’s in charge of the timelines rather than us and to trying to keep a balance risk and reward.

So how are we going about this? We take our internal candidates to formation developments and something called in vitro solutions and these are laboratory tests to estimate the rate at which the drug releases — would release in the body and then having established that and optimize the candidness, we’ll then take the product through something called IND enabling animal toxic studies. So these are just to demonstrate that the products are safe enough to be tested in humans.

And we’ve been doing [ph] before we could seek a licensee so that we have pretty much full proof of concept for the licensee then to take the product on into human clinical trials. And since the beginning of April, which is the start of the strategic review and mid-July when we signed our second collaboration, we signed two collaborations in that period in only 3.5 months and I have to tell you I was astounded and pleased by that. That is lightning speed for a biotech company.

So the first of our collaborations is with a very large Indian company called Dr. Reddy’s and the second is with an EU affiliate of a global pharma company who name we can’t release just yet. In both cases, we’re being paid to develop Q-Sphera formulations of their proprietary compounds. The partners will then undertake the pre-IND enabling studies and will have an option to enter into licenses to access our Q-Sphera IP.

A key component and frankly change to the strategy is that Midatech itself will no longer undertake human clinical studies, unless they are paid for in full either by the collaborator or by [indiscernible]. Together with the collaborations covering the direct costs and contributing to overhead, it means our realigned strategy requires less cash and is less resource intensive for Midatech and in my view more appropriate to company of our size and reach. It also means we can work on many more things at the same time more shots on goal, something I’ll come back to.

Moving on now if I may to slide six and the result of that realigned strategy is that we have a much different looking R&D looking portfolio and one of my favorite expressions with multiple shots on goal as illustrated here. Six months ago, I must tell you the company was pretty much exclusively working on MTD201. Now we have nine molecules covering 11 indications in the pipeline, much more diversification and in my opinion a better risk allocation.

So moving on to Slide 7, looking at the Q-Sphera pipeline in some detail, there are seven programs in all. Notice that one of the collaborate has already exercised his option on a second molecule. So the three of the seven are now partnered. One of the molecules we’re working on is MTD215, which is a monoclonal antibody. We are describing this as investigational and I just want to issue a word of caution around this monoclonal antibody.

Monoclonal antibodies are very large molecule proteins and many of the latest generation medicines all of those with a generic name ending in MAB, are monoclonal antibodies and as far as we know, there have been no approved long-acting formulations of monoclonal antibodies or large molecule proteins and the reason for that is because these molecules are extremely delicate and they’re easily denatured in manufacture.

Our process, the printing process is relatively benign process in terms of shear forces, heat consultants and we have some of the track record, particularly with MTD201, which is a peptide of developing Q-Sphera formulation of peptide and small proteins. We’re now taking it for the next level with large proteins and investigating the feasibility of encapsulating a monoclonal antibody.

If we are successful and emphasize if, this would be a world’s first, but I must caution you there are significant challenges ahead. The goal is to make Q-Sphera small molecules into a self-sustaining business through collaboration and licensing. Proteins would be upside or be it a lot of upside.

So lastly a word on MTD201 on to slide eight if I may. This program remains available for licensing, although we are not investing in it anymore. In January of this year, we announced the results of our second Phase I study of MTD201 and we were able to demonstrate similar blood plasma levels of intramuscular, which is the blue line on this chart compared with subcutaneous, the green line on this chart, administration of the product and why is that important?

Well subcutaneous administration means that at least in theory the product could be self-administered by a patient at home rather than having to visit outpatients or the doctor’s century and that takes cost out of the system and taking cost out of the system is very important to payers as you can imagine. So these get our product improved, not only have other clinical benefit, but you also have to be shown to be taking cost out of the system.

Across several in vitro studies and two Phase I studies of which this is the second, MTD201 has demonstrated that Q-Sphera products offer advantages as listed on the right here for patients, physicians and payers including as I list simpler reconstitution, improved injectability, minimal burst release, predictable kinetics, lower cost of goods and now with this latest study, subcutaneous administration.

So let’s move on to our second clinical program and that is MTX110 on slide nine please. MTX110 is a combination of a proven chemotherapeutic called Panobinostat and our solubilizing technology called MidaSolve. Now soluble Panobinostat, is delivered direct to tumor via a series of microcatheters as illustrated on the right here under slight pressure using a so-called convection enhanced delivery system or CED system.

So there is a port on the side of the child’s head. The drug is injected and is delivered to the tumor by the catheter. We’re developing MTX110 initially for DIPG, Diffuse Intrinsic Pontine Glioma, which is an intractable pediatric cancer with about nine months average survival and no effective product treatments.

We’re expecting the ongoing Phase I safety and tolerability study at UCSF to reported few weeks. And for that study to confirm those for Phase II. Our plans for Phase II at Kinderspital, Zurich are well advanced and the expected endpoints of that study will be the survival of 12 of 19 patients at 12 months because this is an orphan indication and because there are no other current treatments, we will approach the regulators assuming we get a successful signal at the end of the Phase II study to discuss potential early approval of this product.

But we’ll see, but as with Q-Sphera MTX110 also offers multiple shots on goal. So while DIPG is an often indication offers the fastest route to $100 million market, we’re also examining medulloblastoma which is another form of pediatric brain cancer with a similar sized market and we have some preclinical work going on in glioblastoma multiforme or GBM, which is an adult form of brain cancer, and a much larger $3 billion to $5 billion market.

Now, having said all of that, I must tell you, we are proceeding here with caution. You might recall that Secura Bio, the owner of panobinostat, the active ingredient here has in our view wrongly terminated our license to that product. So we would either need to resolve the situation with Secura Bio or delay the launch until the relevant patents have expired and that could be potentially two to three years.

More of that when we have some resolution to the Secura Bio. So moving now to Slide 10 in the financials, there was no material revenues booked from latest Q-Sphera collaborations in the first half of 2020. And the first half results were heavily impacted by the strategic review including a non-cash impairment charge you see here of £11.59 million as a result of the state of cessation of MTD201. So pulling out those sort of one-off numbers on Slide 11, please.

The first half included a number of one-time costs and charges including in R&D, redundancy costs, resulting from the closure of Spain and a few heads in the U.K. of £0.88 million. The write down of the Spanish assets, some of which returned to the U.K. but others will be sold in auction of £0.55 million offset by a credit because stock options were lapsed of £0.35 million and in R&D excuse me in administrative costs, we had one-time items of £350,000 associated with the repayments of Spanish government loans, including penalties, some U.K. redundancy costs of £70,000, and legal and professional costs of £510,000 some of which were due to the restructuring and some which were due to an aborted financing in February of this year as a result of this market crash, which in turn triggered the strategic view.

So stripping those one-time items out, actually the operating loss was not too dissimilar from the first half of last year, and in the second half will be lower again because of the closure of Spain.

So moving on one more Slide to 12 and looking a little bit at liquidity. At the half year, we had net cash of £3.59 million. We hadn’t at that point paid back all of the Spanish loans. So having done that, and there’s some Spain in cash, there will be a net outflow in cash of £0.6 million in the second half.

We have the proceeds from the July placing, which were net £5.28 million coming in. And then we have some warrant exercises of $1.25 million — and $1.02 million, £0.83 million in August, so we had a pro forma net cash position of £9.7 million the half year because we’ve burned a little bit of that two months of that since then. But our projection is that that cash runway takes us well into the fourth quarter of 2021.

So we are as well financed as we have been for quite some time now. So we have pretty good reasons given the traction we’re beginning to see with our Q-Sphera realigned strategy and a decent runway to look forward to the future with confidence.

So with that point, I’ll hand back to Tim for questions please.

Question-and-Answer Session

Q – Unidentified Analyst

Thank you very much, Stephen. We have received a number of questions from people who are participating in addition to the ones that I mentioned, we received ahead of the event. But if anybody does have any further questions, please do feel free to use the Submit question button. And those will be fed through to us. I will do my best to work through these. They’re obviously by definition, not in any particular order.

But we will look to try and answer everything that that has been submitted. There are a couple of common themes Stephen coming through. One of them is regard to timetables and do you have any expected or aspirational timelines to see either the existing collaborations come up, convert to formal development partnerships, and any idea that you can give listeners as to when they might be concluded their initial evaluation stages and moving on further?

Stephen Stamp

Right, thank you, Tim. So, as I don’t repeat myself, but one of the downsides maybe the only downside actually of a collaborative deal as opposed to the internal program is that the partner is more or less in charge of the timetable. It is the partner that will be doing the pre-IND enabling studies. And really, until you’ve done those and know that you have a product that is going to perform in the body as you would hope you will, according to target product profile, and there are no toxicology issues, which you wouldn’t expect but you have to prove it.

You haven’t really achieved proof of concept. And until you achieve proof of concept, you’re unlikely to get a multimillion dollar license fee out of a partner. So having said all of that, our target is to land our first licence fee in the first quarter of next year.

Unidentified Analyst

Okay, thank you. You’ve mentioned obviously the relationship and the situation with Secura Bio. Obviously, there’s very limited that we can say at this stage. But we have had a couple of questions. Is there any further update that you can give? Is there a formal process in train with them? Or is it just a wait and see?

Stephen Stamp

So one of the options available to the company is to go to court and seek a declaratory judgment and have the license reinstated, if we win. We’re advised that will take two possibly three years and cost $2 million, possibly $4 million. It seems like a heavy price to win something that already belongs to you. So we’re not persuaded that is the best use of the company’s funds. So we will prefer a negotiated settlement if possible. We have invited Secura Bio to reconsider, they have chosen not to do that. So our options are becoming more limited to be honest.

Having said all of that, the license agreement attaching to MTX110 by the panobinostat license is not particularly favorable to the company. And we could make an argument that actually the product is economically more valuable without the license, but it would mean delaying launch until the patents that expired. So, those are the sort of options that we’re weighing up now. In the meantime, we’re able to proceed with the program because we were using panobinostat for research purposes.

Unidentified Analyst

Thank you. Another theme that’s come through in a number of questions is regarding the future of MTD201. Really, you’ve mentioned that partnerships are very much something that’s being looked at. But is it an asset that the company will consider selling if the right offer was available?

Stephen Stamp

Absolutely. So, MTD201 whilst we felt to get a licensee for it, as of yet anyway, it hasn’t been a complete failure, because it has served a very useful purpose for demonstrating the characteristics and opportunities the Q-Sphera technology offers in humans, and that frankly is invaluable and without those data, I don’t believe we’d have a cat and hills chance of getting a licensee for any of these other molecules that are working on because it very much is a proof-of-concept, proof-of-principle.

So the short answer is yes, we would be very interested if somebody came forward with MTD201. But at this time, I don’t think it’s good use of the company’s energy and resources to focus on that, we’re better focusing on the newer opportunities, particularly the API’s that have come to us asking us to work on their programs.

Unidentified Analyst

Thank you. We’ve also had a couple of questions on strategy and what you’ve outlined in the presentation earlier. One, viewers made the comment that might take history of changing direction. Can you now confirm that this is the long-term strategy for the company? And if that is the case, why didn’t pursue this sort of collaboration early partnering type strategy before now?

Stephen Stamp

Yes, so I personally, I wasn’t part of some of those earlier forays that the company made. So I can’t talk exactly what the thinking behind that was, I think but potentially the company was looking to products that were closest to market which is an understandable aspiration and put all its efforts and energies and resources behind those products. The problem is that the closer you are to market in terms of Phase II, Phase III, the bigger the costs, and while these programs were going through the clinic, so the value of the company was declining and it became more and more difficult to raise the quantum of funds that you would need to get the product over the line.

And then the pulling out of the licensee of MTD201, frankly was the final straw. So in my view, given this current size of the company and the access to resources that it has, this is probably the only feasible strategy. By that I mean, not doing clinical trials and partnering early that the company could pursue at this time. Having said that, if we’re successful enough, when we get enough of these things over the line, and we get enough licenses and we get enough milestones, we could afford to start reaching further down the clinical path again and capturing more of the value. But as of today, this is the strategy and this is for the long-term, yes.

Unidentified Analyst

Thank you. And a related question obviously, with the closure of Bilbao, how does the company plan to manufacture Q-Sphera products going forward?

Stephen Stamp

That’s an extremely good question. So the listeners will understand that Q-Sphera is a unique manufacturing process, which is what makes it so valuable and so differentiated from the traditional methods of PLGA manufacturing. So you can’t go along to a CMO and say, print these tablet or make these tablets for me, all the technology, the knowhow is inside Midatech.

So we’re in the process of lining-up some partnership agreements with well, that’d be one in the end but we’re talking to several CMOs, whereby we can take the smallest scale equipment that we salvage from Bilbao, we need to add one or two pieces to it and install that inside a CMO which will have GMP capability such that we can manufacture at least clinical trial scale and then it will be the partner that will take on the scale up to commercial manufacturing.

Unidentified Analyst

Okay, thank you. One about the listings. Does the company intend to keep both the AIM and Nasdaq listings?

Stephen Stamp

Yes, we do.

Unidentified Analyst

Okay, thank you. It’s very clear. And we’ve had a few other questions coming that are not really don’t fall under the previous sort of headings, but I’ll just read them out in order. Emergex appears to be well funded and they’re making progress with the T-cell vaccine development program. What are the implications for the MidaCore platform of this?

Stephen Stamp

So Emergex is a private company, and as a private company, they don’t have to disclose exactly what they’re up to and what they’re doing. I understand that they’re making good progress and they have a license to some of our gold-nanoparticle patents. There are very smart people in Emergex, some of whom were inventors in that whole gold-nanoparticle technology. So in some senses, they are the best people to take that technology forward.

The license agreement that we have with them is a sort of traditional structure involves development milestones at certain stages and then back end royalties. So we’re hopeful that they will be successful in what they do.

Unidentified Analyst

Absolutely. Thank you. And one thing that has been mentioned in recent announcements is the situation with the EU regarding SME status, is there any update you can provide on that?

Stephen Stamp

So the last submission we made to the EU was on the 1 of July, and we haven’t heard back for them despite a number of prompts on our side. It is I have to tell you it’s quite frustrating Tim that Midatech isn’t an SME by European definition. So I think the SME rules were put in place to prevent giant companies say Pfizer setting up a company subsidiary calling itself an SME and getting a grant.

And that’s understandable. On a particular date in 2019, CMS as a result of a license agreement that was put in place in February 2019 owned more than 50%, 51% in fact of Midatech and because of that, the European Union by the way, they’re now down to 17%. But because of that the EU is choosing to regard CMS as a linked enterprise and therefore Midatech is part of the ex-CMS group. And therefore they’re looking at the whole of CMS, which has got 2,000 employees and billions of dollars of revenue as part of the Midatech Group which is frankly ridiculous.

And that that’s our frustration. So we’re trying to persuade them to look through the black and whites of the rules and see the substance over the form here, but we’re still waiting.

Unidentified Analyst

Thank you. One listeners has commented that Midatech is a complex vehicle to analyze. Maybe just wondering if any of the company’s advisors or any independent third-party had put together an assessment of the value of the group post the strategic review. And if not, are you anticipating anything maybe published in the coming months?

Stephen Stamp

Yes, I’m not sure I would agree with the complex, well so we’re certainly simpler than we were. As it happens, there have been two brokers today, one from each of our joint brokers, one of them pope has put together actually quite interesting valuation model. And they valued the company in three parts. One part is the Q-Sphera platform where they’ve sort of taken a shot at what a pro forma Q-Sphera product, and its revenues might look like. And then they’ve assumed I think there are going to be five of those over five years. And they’ve applied percentages of success to those various programs.

And then they’ve separately valued MTX110. And then they’ve also knocked-off the sort of present value of the overhead and SG&A costs and come out with a valuation of about £65 million. So I would commend your readers to take a look at that because that sort of breaks the company up into nice manageable chunks and is pretty transparent some of the valuation.

Unidentified Analyst

Thank you, very helpful. Well that concludes the questions that I’ve received to-date. If anybody does have a final question, you’ve got a few more seconds to submit it. And thank you very much, Stephen for that very insightful looking to the current situation of Midatech.

Stephen Stamp

Thanks, Tim and thanks everybody for joining.





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After U.S. tech gains, European stocks pause as ECB decision awaits


(FILES) This file photo taken on March 12, 2020 shows flags of the European Union fluttering in front of the headquarters of the European Central Bank (ECB) in Frankfurt am Main, western Germany.


daniel roland/Agence France-Presse/Getty Images

European stocks were steady on Thursday, ahead of a European Central Bank decision and press conference in which expectations are for the central bank to raise concerns about the rise of the euro.

Up 1.6% on Wednesday, the Stoxx Europe 600
SXXP,
+0.16%

was little moved at 369.70.

U.S. stocks, particularly in the tech sector, broke a losing run on Wednesday, as the Nasdaq Composite
COMP,
+2.70%

rallied 2.7%. U.S. stock futures
ES00,
+0.05%

were modestly higher Thursday.

The ECB decision is due at 1:45 p.m. Central European time (7:45 a.m. Eastern), though analysts are focusing on the press conference with President Christine Lagarde at 2:30 p.m.

Attention also is in London, where an emergency meeting is being called on the U.K. decision to unilaterally amend its withdrawal agreement. Bloomberg News reported the European Union was considering a lawsuit.

Wm Morrison Supermarkets
MRW,
-3.51%

slumped 3.7% after reporting a 25% slump in first-half adjusted pretax profits, with the company flagging higher costs and reduced consumer demand for fuel. “Some traders will be wondering if Morrisons can’t post a rise in profit when a pandemic has driven up demand, when will they register a rise in earnings,” said David Madden, market analyst at CMC Markets UK.

Chemicals group Akzo Nobel
AKZA,
+3.47%

rose 4% as the company said revenue for the third quarter will be close to last year’s levels. It reported strong decorative paint demand in Europe and South America.

Games Workshop
GAW,
+13.92%
,
which makes miniature wartime figures, jumped 13% after saying its performance for the quarter ending Aug. 30 was ahead of its expectation



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Yatra Online, Inc. (YTRA) CEO Dhruv Shringi on Q1 2021 Results – Earnings Call Transcript


Yatra Online, Inc. (NASDAQ:YTRA) Q1 2021 Earnings Conference Call September 9, 2020 8:30 AM ET

Corporate Participants

Manish Hemrajani – Head, Investor Relations

Dhruv Shringi – Co-Founder and Chief Executive Officer

Conference Call Participants

Operator

Good day, and welcome to the Yatra First Quarter 2021 Earnings Conference Call. Today’s conference is being recorded. As a reminder, we will not be taking any questions from the press today.

At this time, I would like to turn the conference over to Mr. Manish Hemrajani, please go ahead sir.

Manish Hemrajani

Thank you, Holly. Good morning, everyone. Welcome to Yatra’s fiscal first quarter 2021 financial results for the period ended June 30, 2020. I am pleased to be joined on the call today by Yatra’s CEO and Co-Founder, Dhruv Shringi.

The following discussion, including responses to your questions, reflects management’s views as of today, September 9, 2020. We do not undertake any obligation to update or revise the information.

Before we begin our formal remarks, allow me to remind you that certain statements made during the course of the discussion may constitute forward-looking statements which are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to materially differ, including factors that maybe beyond the company’s control. These include expectations and assumptions related to the impact of the COVID-19 pandemic, for a description of these risks please refer to our filings with the SEC and our press release.

Copies of this and other filings are available from the SEC and on the Investor Relations section of our Web site.

With that, let me turn the call over to Dhruv. Dhruv?

Dhruv Shringi

Thank you, Manish. Good morning everyone and thank you for joining us. I hope you and your families are all safe and in good health. This is the first earnings call that we are doing in a little over a year in that we were involved with the Ebix merger. In the meantime, the global COVID-19 pandemic situation requiring the cessation of all non-essential air travel in India, while the situation is not what we had expected, it is the situation that we face. During this time of extraordinary changes and challenges, I’m proud of the way our teams have responded to these and that included against factors which are not directly within our control.

This is also not the first time that we are facing a challenging situation of the company. From the financial crisis back in 2008, to the bankruptcy of Kingfisher Airlines and the subsequent collapse of domestic aviation in India in 2012, we’ve been through difficult periods before and each time we’ve come out stronger. And I feel confident that the same will be the case this time as well. We are starting to see a gradual recovery in travel after the reopening of domestic aviation towards the end of May post India’s nationwide lockdown in the month of March, April, earlier this year.

We believe the worst is behind us now. We’ve made all these essential changes to the operations to cut costs to the bare minimum, and after capital rise in June earlier this year, we believe we have the balance sheet to see us back to profitability. We now look forward to resuming the same growth and profitability trajectory we were on before all this unfolded.

We are excited about a multi-pronged approach to increase shareholder value. As you will recall, we are one of the leading OTAs in India and the largest corporate travel management business in the country as well.

First, with regards to the return of travel in India after the lockdown, on the consumer side, we started to see some early signs of recovery in travel in India since late May, when air travel was allowed to start back. Domestic flyers have now returned to about 25% of people with levels and that number continues to grow and we expect this to reach 40% plus by the end of the calendar year.

On the international air front, airlines are beginning to operate under the bubble agreement between countries. So far, we’ve seen approximately 10% capacity come back online. And this number continues to increase, literally on a weekly basis as new and new bubble agreements are entered into.

Domestic hotels were earlier taking bookings on a very limited basis. But since September 1, a number of states have allowed hotels to start operations without any quarantined restrictions. We expect to see gradual recovery here as well in the next quarter as people begin to undertake short haul and drive-in holidays.

On the corporate travel front, we are the leading corporate travel service provider in India, our easily scalable, fast technology platform enables us to serve customers of any size and industry. Currently, the online penetration in the corporate travel market in India we believe is just about 10%, a large percent of the market almost 60% is served by smaller offline players. As a result of the pandemic, we believe and they are already beginning to actually see signs of this, that there will be an accelerated shift towards online players, especially as the big contracts come up for renewal at the end of their life and go through the bidding process. We remain confident in our platforms credibility to serve any scale and types of customers.

Our other strategic growth driver is the expansion of our corporate digital platform as we essentially need to add non-travel related digital offerings to this corporate customer bases.

As the largest corporate travel service provider in the country, we have strong relationships with all of our corporate customers, which constitute very large and well-known enterprises in India. We continue to make inroads into these organizations with our non-travel options of expense management, EdTech and others. Our EdTech offering we have been in partnership with upGrad and has been well received by corporates even those it’s early days yet.

In a tough economic climate, we’re seeing corporates realize the importance of developing and rescaling the workforce to work on pressing challenges. Our platform allows our clients to offer these opportunities to their employees, especially as it remained underutilized during the pandemic. Corporates also view EdTech as an employee retention tool.

On our hotel networks front, we recently announced a partnership with Amazon India to provide our hospitality partners with a wide range of products catering to their various needs that’s the reason hospitality partners can leverage the Amazon business marketplace as a one-stop destination to access a wide range of products across categories to cater to their needs and to sell products in a safe and efficient manner.

Now a quick update on the litigation against Ebix as well. So while I’m not at liberty to give any details of the litigation, I would just like to point out here that a large part of our legal costs of this litigation is linked to the outcome of the case. And it’s not a direct cash outflow for us at the moment. Additionally, neither are we dependent, nor have we based our operations planning on a favorable outcome from the litigation.

Coming to our fiscal first quarter results, this quarter reflected the bulk of the impact of the nationwide COVID lockdown in India as travel was largely shut in the month of April and May and only gradually began to open up in June.

In the June quarter, our adjusted revenue decreased by 86% to INR 236.2 million or USD 3.1 million. Our adjusted EBITDA loss increased to INR 309.4 million, which is approximately $4.1 million in the three months ended 30 June from adjusted EBITDA loss of 205.8 million, or about $2.7 million in the three months ended June last year.

There was also an adverse impact of INR 168.4 million or USD 2.2 million on our operating performance in the current quarter due to legal and professional fees related to the merger transaction with Ebix. So these are one-time in nature and will be non-recurring. Excluding this, our adjusted EBITDA loss would have been INR 141 million or USD 1.9 million for the quarter versus an adjusted loss of INR 205.8 million or USD 2.7 million for the same quarter last year. So despite COVID, we’ve been able to on an ongoing basis drive improvement through cost control in our EBITDA loss.

Talking a bit more on the cost side, during the quarter we focused our efforts on restructuring our costs and significantly brought down our fixed costs run rate from approximately 2.7 million a month in the month of March 2020 to approximately 1.2 million a month for the month of May 2020, through a combination of companywide salary cuts ranging from 25% to 75% and renegotiation of contracts with our various service providers.

We believe our current liquidity position and optimized cost structure provides us with enough capital to withstand a prolonged slowdown if it were to transpiring the travel industry.

As of June 30, 2020, the balance of cash and cash equivalents and term deposits on our balance sheet was INR 3.675 billion, or approximately USD 48.7 million. Since then, however, we have settled our [Ebix] [ph] litigation and [indiscernible] same as part of that a final payment was made for the earn out of the acquisition of approximately 11 million. And our current cash balances as of 31 August 2020, is approximately $34 million. Given our reduced burn rate, we believe we have adequate liquidity on our balance sheet to return to profitability.

With our optimized cost structure and newly launched high margin initiatives, we believe we can now again breakeven at approximately 50% of our case over December 2019, quarter run rate of 22.2 million. We’re excited about our partnership with Zaggle on the expense management solutions; we view expense management as an integral part of our digital offering, as we continue to diversify beyond our core portfolio of travel to become an end-to-end business solution platform for our clients. Joining hands with Zaggle helps us guide efficiency for our clients by automating the expense management process. Our technology platforms complement each other and we look forward to going with Zaggle to drive lasting business impact for our clients.

A third-party report by MRFR put the Indian expense management software market as the fastest growing market globally at USD 593.3 million by the end of 2025, growing at a CAGR 14.1%.

Lastly, I would like to remind everyone that India’s travel market and topic travel market in particular, was the fastest growing travel market globally pre-pandemic growing at 12% CAGR and expected to reach 32 billion by 2020. A large part of the corporate travel market was offline pre-pandemic and we expect the shift from offline to online to accelerate as a result of the pandemic, benefiting online players like the Yatra in the longer term. This concludes our prepared remarks.

Let me now open the call for Q&A. Manish over to you.

Manish Hemrajani

Thanks, Dhruv. Holly, can you please open up the call for Q&A?

Question-and-Answer Session

Operator

Q – Unidentified Analyst

A – Unidentified Company Speaker

Operator

It appears there are currently no telephone questions. So I’d like to hand the call back to our host for any additional or closing remarks.

Manish Hemrajani

Thanks, Holly. Thank you, everyone for joining us today. We look forward to speak to you in the near future. Dhruv any closing remarks?

Dhruv Shringi

Just like to thank everyone again for taking out the time. I know it’s been a while since we’ve last been heard. And now going forward, we will end up probably interacting on a quarterly basis. And if there are any follow-up questions that any of you have, please feel free to reach out to Manish. Thank you so much and stay safe.

Operator

Ladies and gentlemen, this concludes today’s call. Thank you for your participation. You may now disconnect.





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