Trinity Biotech(TRIB) - 2022 Q2 - Quarterly Report

Company Overview and Q1 2022 Highlights Trinity Biotech plc announced its Q1 2022 financial results, highlighting strategic refinancing and investment to strengthen capital structure and pursue growth opportunities Introduction and Announcement Trinity Biotech plc, a diagnostic product developer and manufacturer, released its Q1 2022 financial results - Trinity Biotech plc announced its Q1 2022 financial results[2] CEO Commentary and Strategic Outlook CEO Ronan O'Caoimh highlighted successful Q1 2022 refinancing with Perceptive Advisors and a strategic investment from MiCo Group, enhancing capital structure for future growth - The CEO highlighted successful Q1 2022 refinancing with Perceptive Advisors and a $45 million strategic investment from MiCo Group in May 2022[19] - These transactions are expected to strengthen Trinity Biotech's capital structure, facilitate refinancing of remaining Perceptive Advisor debt, and position the company to capture growth opportunities in the evolving diagnostics landscape[19] Q1 2022 Financial Results Analysis Q1 2022 saw a significant revenue decline, reduced profitability due to lower gross margins, increased financial expenses, and a substantial net loss Revenue Performance Total revenue in Q1 2022 significantly decreased by 26.6% year-over-year, primarily driven by a substantial decline in clinical laboratory revenue, partially offset by modest growth in point-of-care revenue Total Revenue Total revenue for Q1 2022 was $18.8 million, a 26.6% decrease from $25.6 million in Q1 2021 | Metric | Q1 2021 (US$'000) | Q1 2022 (US$'000) | Change (%) | | :---------------- | :--------------- | :--------------- | :--------- | | Total Revenues | 25,594 | 18,776 | (26.6)% | Segmental Revenue (Point-of-Care, Clinical Laboratory) Point-of-Care revenue increased by 14.6% to $2.2 million, driven by higher HIV test kit sales in Africa, while Clinical Laboratory revenue decreased by 29.9% to $16.6 million due to reduced COVID-19 PCR VTM product sales | Segment | Q1 2021 (US$'000) | Q1 2022 (US$'000) | Change (%) | | :---------------- | :--------------- | :--------------- | :--------- | | Point-of-Care | 1,888 | 2,164 | 14.6% | | Clinical Laboratory | 23,706 | 16,612 | (29.9)% | - Point-of-Care revenue growth was primarily attributed to increased sales of HIV test kits in Africa, a market characterized by irregular customer order patterns[3] - The decline in Clinical Laboratory revenue was mainly due to reduced revenue from COVID-19 related PCR VTM products, resulting from a significant reduction in COVID-19 PCR testing programs and lower unit selling prices for PCR VTM products due to increased global manufacturing capacity[4] Profitability Gross profit and margin declined due to sales mix changes and PCR VTM product price pressure, leading to a significant reduction in operating profit and a reported after-tax loss Gross Profit and Margin Gross profit decreased to $7.3 million in Q1 2022 from $10.9 million in Q1 2021, with gross margin declining by 3.9% to 38.7%, primarily due to changes in sales mix and downward price pressure on PCR VTM products | Metric | Q1 2021 (US$'000) | Q1 2022 (US$'000) | Change (US$'000) | Change (%) | | :---------------- | :--------------- | :--------------- | :--------------- | :--------- | | Gross profit | 10,913 | 7,270 | (3,643) | (33.4)% | | Gross margin % | 42.6% | 38.7% | - | (3.9)% | - The decline in gross margin was primarily due to changes in sales mix and downward price pressure on PCR VTM products[5] Operating Profit Operating profit significantly decreased to $0.2 million in Q1 2022 from $3.1 million in Q1 2021, mainly due to reduced revenue and gross profit, partially offset by lower overheads | Metric | Q1 2021 (US$'000) | Q1 2022 (US$'000) | Change (US$'000) | | :---------------- | :--------------- | :--------------- | :--------------- | | Operating profit | 3,078 | 173 | (2,905) | - The decrease in operating profit was attributed to reduced revenue and gross profit, partially offset by lower overheads[7] Net Loss and EPS The company reported a Q1 2022 after-tax loss of $12.3 million, a significant decline from a $1.6 million profit in Q1 2021, driven by reduced gross profit, increased financial expenses, and a substantial one-off accounting charge | Metric | Q1 2021 (US$'000) | Q1 2022 (US$'000) | Change (US$'000) | | :--------------------------------------- | :--------------- | :--------------- | :--------------- | | (Loss)/Profit after tax | 1,602 | (12,279) | (13,881) | | Basic (Loss)/Earnings per ADS (US cents) | 7.7 | (50.0) | (57.7) | | Diluted (Loss)/Earnings per ADS (US cents) | 7.1 | (50.0) | (57.1) | - The loss was primarily due to reduced gross profit, increased financial expenses, and a $10.3 million one-off accounting charge, including a $9.7 million loss on the disposal of exchangeable notes and $0.6 million in professional fees related to refinancing[9][10] Expenses R&D expenses decreased due to cost control, SG&A expenses remained stable, while financial expenses significantly increased due to higher interest rates from debt refinancing Research & Development Expenses R&D expenses decreased to $1.0 million in Q1 2022 from $1.4 million in Q1 2021, reflecting the company's focus on cost control measures | Metric | Q1 2021 (US$'000) | Q1 2022 (US$'000) | Change (US$'000) | Change (%) | | :-------------------------------- | :--------------- | :--------------- | :--------------- | :--------- | | Research & development expenses | 1,437 | 965 | (472) | (32.8)% | - The decrease in R&D expenses was due to a continued focus on cost control measures[6] Selling, General & Administrative Expenses Selling, General & Administrative (SG&A) expenses remained largely stable at $5.9 million in Q1 2022, a slight decrease of $0.1 million from Q1 2021 | Metric | Q1 2021 (US$'000) | Q1 2022 (US$'000) | Change (US$'000) | Change (%) | | :-------------------------------- | :--------------- | :--------------- | :--------------- | :--------- | | Selling, general and administrative expenses | 6,019 | 5,936 | (83) | (1.4)% | Financial Expenses Financial expenses significantly increased to $2.2 million in Q1 2022 from $1.2 million in Q1 2021, primarily due to debt refinancing in late January 2022, which replaced 4.0% exchangeable notes with a 12.25% senior secured term loan | Metric | Q1 2021 (US$'000) | Q1 2022 (US$'000) | Change (US$'000) | Change (%) | | :---------------- | :--------------- | :--------------- | :--------------- | :--------- | | Financial expenses | 1,210 | 2,244 | 1,034 | 85.5% | - The increase in financial expenses was due to debt refinancing, replacing 4.0% exchangeable notes with a 12.25% senior secured term loan[8] Non-IFRS Financial Measures Adjusted EBITDA was $0.9 million and Adjusted EBITDASO was $1.1 million in Q1 2022, serving as non-IFRS metrics for internal operational management and additional investor analysis | Metric | Q1 2022 (US$m) | | :-------------------- | :----------- | | Adjusted EBITDA | 0.9 | | Adjusted EBITDASO | 1.1 | - Non-IFRS measures (Adjusted EBITDA, Adjusted EBITDASO) are used for internal evaluation and management of company operations, and to assist investors with additional financial analysis[18] Capital Structure and Liquidity The company underwent significant debt refinancing in Q1 2022, redeeming exchangeable notes with a new senior secured term loan and equity issuance, impacting its cash balance and overall liquidity Debt Refinancing and Exchangeable Notes Retirement In Q1 2022, Trinity Biotech redeemed approximately $99.7 million of exchangeable notes, funded by a new term loan, existing cash, and the issuance of 5.3 million American Depositary Shares (ADS), resulting in a $9.7 million disposal loss - The company redeemed approximately $99.7 million of exchangeable notes in Q1 2022[10][11] - The redemption was funded by an $81.3 million senior secured term loan, existing cash, and the issuance of 5.3 million ADS[11] - A $9.7 million loss on the disposal of exchangeable notes was recorded as a one-off charge in Q1 2022 due to the consideration under IFRS measurement being higher than the carrying value[10][14] New Senior Secured Term Loan Details The company entered into an $81.3 million, 4-year senior secured term loan credit facility with Perceptive Advisors in Q1 2022, recorded on the balance sheet as a long-term liability and derivative financial balances - The company entered into an $81.3 million, 4-year senior secured term loan credit facility with Perceptive Advisors[16] - The term loan is reflected on the balance sheet as $76.2 million in long-term liabilities, a $0.2 million derivative financial asset, and a $1.7 million derivative financial liability, representing warrants issued to Perceptive for 2.5 million ADS at an exercise price of $1.30 per share[16] Liquidity Position The company's cash balance decreased by $15.9 million to $10.0 million as of March 31, 2022, primarily due to a $9.0 million net cash outflow from debt refinancing and $3.1 million in interest payments | Metric | Dec 31, 2021 (US$m) | Mar 31, 2022 (US$m) | Change (US$m) | | :-------------------- | :---------------- | :---------------- | :---------- | | Cash balance | 25.9 | 10.0 | (15.9) | - The cash decrease was primarily due to a $9.0 million net cash outflow from debt refinancing (including associated fees) and $3.1 million in interest payments[17] Consolidated Financial Statements The consolidated financial statements for Q1 2022 reveal a significant revenue decline, substantial net loss, and a shift in the debt structure following the exchangeable notes redemption and new term loan Consolidated Income Statements The consolidated income statement for Q1 2022 shows a substantial revenue decrease and a significant net loss, primarily impacted by reduced clinical laboratory sales, lower gross margins, increased financial expenses, and one-off refinancing charges | (US$'000) | Three Months Ended Mar 31, 2022 | Three Months Ended Mar 31, 2021 | | :--------------------------------------- | :------------------------------ | :------------------------------ | | Revenues | 18,776 | 25,594 | | Gross profit | 7,270 | 10,913 | | Operating profit | 173 | 3,078 | | Financial expenses | (2,244) | (1,210) | | (Loss)/Profit after tax before once-off & non-cash items | (1,921) | 1,764 | | Once-off items | (10,276) | - | | (Loss)/Profit after tax | (12,279) | 1,602 | | (Loss)/ Earnings per ADS (US cents) | (50.0) | 7.7 | Consolidated Balance Sheets The consolidated balance sheet as of March 31, 2022, reflects a decrease in total assets, a significant reduction in current liabilities due to exchangeable notes redemption, a substantial increase in non-current liabilities from the new senior secured term loan, and an equity deficit | (US$'000) | March 31, 2022 | December 31, 2021 | | :--------------------------------------- | :--------------- | :---------------- | | TOTAL ASSETS | 106,097 | 118,895 | | Total equity/(deficit) | (6,285) | (319) | | Total current liabilities | 15,937 | 100,491 | | Total non-current liabilities | 96,445 | 18,723 | | TOTAL LIABILITIES | 112,382 | 119,214 | - The balance sheet reflects the impact of debt refinancing, with a significant reduction in exchangeable senior notes within current liabilities and the new senior secured term loan appearing in non-current liabilities[26] Consolidated Statement of Cash Flows The consolidated cash flow statement for Q1 2022 shows negative free cash flow and a significant reduction in cash and cash equivalents, primarily due to net cash outflows from debt refinancing activities | (US$'000) | Three Months Ended Mar 31, 2022 | Three Months Ended Mar 31, 2021 | | :--------------------------------------- | :------------------------------ | :------------------------------ | | Cash and cash equivalents at beginning of period | 25,910 | 27,327 | | Cash generated from/(used in) operations | (1,302) | 5,893 | | Free Cash Flow | (3,798) | 3,186 | | Proceeds from term loan (net) | 80,015 | - | | Repayment of Exchangeable Notes | (86,730) | - | | Cash and cash equivalents at end of period | 10,012 | 32,277 | - Cash flows were significantly impacted by debt refinancing, with substantial cash outflows for repayment of exchangeable notes and refinancing fees, partially offset by proceeds from the term loan[28] Additional Information This section provides context on the use of non-IFRS financial measures, outlines the nature of forward-looking statements, and offers an overview of Trinity Biotech's business Use of Non-IFRS Financial Measures Trinity Biotech utilizes non-IFRS financial measures like Adjusted EBITDA and Adjusted EBITDASO to supplement IFRS consolidated financial statements for internal operational assessment and additional investor analysis - The company uses non-IFRS measures (Adjusted EBITDA, Adjusted EBITDASO) to supplement IFRS results[18] - These non-IFRS measures are not substitutes for IFRS but are used for internal operational assessment and to assist investors with analysis[18] Forward-Looking Statements This press release contains forward-looking statements, identified by terms such as "estimate," "project," and "expect," which are subject to known and unknown risks and uncertainties, with no obligation for the company to update or revise them - This press release contains forward-looking statements subject to known and unknown risks and uncertainties[20] - The company undertakes no obligation to update or revise any forward-looking statements for any reason[20] About Trinity Biotech Trinity Biotech is a leading developer, acquirer, manufacturer, and marketer of diagnostic systems for point-of-care and clinical laboratory markets, selling products globally through direct sales and international distributors - Trinity Biotech develops, acquires, manufactures, and markets diagnostic systems for point-of-care and clinical laboratory markets[21] - Products are used for detecting infectious diseases and quantifying hemoglobin A1c and other chemical parameters[21] - The company sells directly in the US, Germany, France, and the UK, and through international distributors and strategic partners in over 75 countries worldwide[21]