News

Applied UV Announces Third Quarter 2023 Financial Results, Revenue Increases to $11.4 Million, Adjusted EBITDA (non-GAAP) Improves 30.8% Year over Year

SmallCaps Daily November 17, 2023

200 9 minutes read

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NEW YORK, NY – (NewMediaWire) – November 17, 2023 – Applied UV, Inc. (NASDAQ: AUVI), a leader in global food security, air quality, and specialty building solutions today announced financial results for the third quarter and nine months ended September 30, 2023.

“With continued strong revenue momentum and sustained progress on the path to profitability, we are delivering against the key milestones we laid out earlier this year. I’m proud of how our teams are executing our growth strategy,” said Max Munn, CEO of Applied UV. “Our innovation and commercial capabilities continue to enhance the value proposition of our brands and we have made meaningful progress on our transformation initiatives to improve our operational execution. We remain confident that these efforts will position us to deliver significant value over the long-term.”

Financial Highlights – Third Quarter

Total revenues for the third quarter of 2023 of $11.4 million, representing a 94.8% increase over the third quarter of 2022
Gross profit grew to $2.7 million in the third quarter of 2023, up 216.6% from $0.8 million in the third quarter of 2022.
11.2% improvement in operating loss for the third quarter year over year
30.8% improvement in adjusted EBITDA (non-GAAP) for the third quarter year over year
Reaffirms its previous guidance of approximately $45 million in revenue for 2023

Business Highlights – Third Quarter and Recent Highlights

Initiated an organizational restructuring plan intended to improve operational performance and to position the business for long-term growth while establishing a clear path to consistent profitability and sustainable free cash flow.
Collaborating and transitioning all next generation and future R&D to Canon Virginia to leverage its vast engineering, software applications and new product launch expertise.
Introduced Airocide® Pro+ air food preservation solution designed to control ethylene levels and extend shelf life at the Global Produce & Floral Show, together with Canon Virginia, a subsidiary of Canon U.S.A.
United States Patent and Trademark Office issued a patent US 2023/0059472 A1 for the Company’s Airo™ Vortex, encompassing advanced disinfection capabilities and Photocatalytic Oxidation. Concurrently, the Company also received publication notice on its Fighter Flex™ LED. This next-generation Fighter Flex™ LED technology is designed to enhance the Company’s advanced HVAC and Smart Buildings technology, marking another significant step in Applied UV Inc.’s journey towards creating innovative solutions for indoor air quality and building efficiency.
Received approval of patent US 11,788,265 B2 for its “INTERCHANGEABLE DRAIN DISINFECTING DEVICE” designed to optimize UV source irradiation to effectively disinfect drain systems to enhance hygiene and safety.

Q3 2023 Summary Financial Results

Net Sales

Net sales of $11.4 million represented an increase of 94.8% for the three months ended September 30, 2023, as compared to net sales of $5.9 million for the three months ended September 30, 2022. The Disinfection/Healthy Building Technologies segment increased $4.1 million, primarily due to the acquisition of Puro Lighting and LED Supply Co. on January 26, 2023. Additionally, the Hospitality segment increased $1.4 million as that market continues to improve and our operations have been streamlined to meet the increased demand.

Gross Profit

Gross profit increased $2.7 million, or 216.6%, for the three months ended September 30, 2023, as compared to $0.8 million for the three months ended September 30, 2022, driven by increased sales in the Disinfection/Healthy Building Technologies segment and improved margins in the Hospitality segment.

Selling, General, and Administrative (SG&A) Expense

SG&A costs for the three months ended September 30, 2023, increased to $4.7 million as compared to $3.3 million for the three months ended September 30, 2022. The increase of approximately $1.4 million was driven primarily by the acquisitions of Puro Lighting and LED Supply Co., which accounted for an increase of approximately $1.9 million of the increase, but was offset by a reduction in other SG&A of approximately $0.5 million.

Other Expense

Other expense was $0.1 million for the three months ended September 30, 2023, which includes $0.5 million in interest expense, offset by a $0.4 million gain on the change in fair market value of contingent consideration.

Net Loss

The Company recorded a net loss of $2.6 million for the three months ended September 30, 2023, compared to a net loss of $2.7 million for the three months ended September 30, 2022.

Adjusted EBITDA, a non-GAAP financial measure, is defined as Operating Profit (Loss), excluding Depreciation and Amortization, and excluding Stock Based Compensation and Loss on Impairment of Goodwill/Intangible Assets. Adjusted EBITDA was a loss of $1.5 million for the third quarter of 2023, compared to a loss of $2.1 million for the third quarter of 2022.

Adjusted EBITDA Non-GAAP Financial Measure
	2023 Q3	2022 Q3

Operating (Loss)	($2.4 million)	($2.8 million)
Exclude: Depreciation and Amortization	$0.7 million	$0.5 million
Exclude: Stock Based Compensation	$0.2 million	$0.2 million
Adjusted EBITDA	($1.5 million)	($2.1 million)

We believe Adjusted EBITDA provides investors with useful information on period-to-period performance as evaluated by management and comparison with our past financial performance. We believe Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry, as this measure generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.

Net cash and cash equivalents as of September 30, 2023, are approximately $1.5 million. The Company’s secured revolving credit facility with Pinnacle Bank has approximately $1.2 million available as of September 30, 2023. Total cash and borrowing availability is approximately $2.7 million as of September 30, 2023. Net cash used in operating activities was approximately $7.8 million for the nine months ended September 30, 2023. Net cash used in operating activities improved in the third quarter when compared to the net cash used of $6.6 million for the six months ended June 30, 2023.

On November 16, 2023, the Company closed on an underwritten public offering with gross proceeds to the Company of approximately $6.4 million, before deducting underwriting discounts and other estimated expenses payable by the Company. The Company intends to use the net proceeds from this offering for the repayment of notes, and for general corporate purposes, including working capital.

The Company believes by implementing its strategic plan for 2024, including the continued realization of cost savings from the synergies of its acquisitions completed in 2023, that it expects to be cash flow neutral in the latter half of 2024.

About Applied UV

Applied UV, Inc. engages in the pursuit of technologies focused on global food security, air quality, and specialty building solutions tailored for the commercial and hospitality sectors. More details about Applied UV, Inc., and its subsidiaries can be found at https://www.applieduvinc.com.

Forward-Looking Statements

The information contained herein may contain “forward‐looking statements.” Forward‐looking statements reflect the current view about future events. When used in this press release, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions, as they relate to us or our management, identify forward‐looking statements. Such statements include, but are not limited to, statements contained in this press release relating to the view of management of Applied UV concerning the Company’s preliminary third quarter 2023 financial results, its business strategy, future operating results and liquidity and capital resources outlook. Forward‐looking statements are based on the Company’s current expectations and assumptions regarding its business, the economy and other future conditions. Because forward–looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. The Company’s actual results may differ materially from those contemplated by the forward‐looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying on any of these forward‐looking statements. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward‐looking statements. References and links to websites have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release.

Applied UV, Inc. and Subsidiaries Unaudited Condensed Interim Consolidated Statements of Operations For the Three and Nine Months Ended September 30, 2023 and 2022

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2023			2022			2023			2022
Net Sales	$	11,446,048		$	5,875,611		$	32,944,217		$	15,139,347
Cost of Goods Sold		8,790,764			5,036,997			25,956,853			11,847,842
Gross Profit		2,655,284			838,614			6,987,364			3,291,505

Operating Expenses
Research and development		91,085			93,522			460,588			234,885
Selling General and Administrative Expenses		5,013,988			3,505,097			15,200,486			10,637,538
Loss on impairment of goodwill and intangibles		—			—			—			1,138,203
Total Operating Expenses		5,105,073			3,598,619			15,661,074			12,010,626
Operating Loss		(2,449,789	)		(2,760,005	)		(8,673,710	)		(8,719,121	)

Other Income (Expense)

Change in Fair Market Value of Warrant Liability		1,206			34,804			2,124			46,521
Interest expense		(558,268	)		(43,037	)		(1,434,329	)		(96,113	)
Gain (Loss) on change in Fair Market Value of Contingent Consideration		434,000			—			1			(240,000	)
Gain on Settlement of Contingent Consideration (Note 2)		—			—			—			1,700,000
Other Income		—			67,765			—			69,713
Total Other Income (Expense)		(123,062	)		59,532			(1,432,204	)		1,480,121

Loss Before Provision for Income Taxes		(2,572,851	)		(2,700,473	)		(10,105,914	)		(7,239,000	)
Benefit from Income Taxes		—			—			—			—
Net Loss	$	(2,572,851	)	$	(2,700,473	)	$	(10,105,914	)	$	(7,239,000	)

Net Loss attributable to common stockholders:
Dividends to preferred shareholders		(424,750	)		(362,250	)		(1,194,231	)		(1,086,750	)
Net Loss attributable to common stockholders		(2,997,601	)		(3,062,723	)		(11,300,145	)		(8,325,750	)

Basic and Diluted Loss Per Common Share	$	(0.32	)	$	(1.21	)	$	(1.95	)	$	(3.26	)
Weighted Average Shares Outstanding – basic and diluted		9,351,478			2,531,219			5,794,689			2,550,272

Applied UV, Inc. and Subsidiaries Unaudited Condensed Consolidated Balance Sheets As of September 30, 2023 and December 31, 2022

	September 30,			December 31.
	2023			2022
Assets
Current Assets
Cash and cash equivalents	$	1,546,911		$	2,734,485
Accounts receivable, net of allowance for doubtful accounts		6,126,692			1,508,239
Costs and estimated earnings in excess of billings		2,883,057			1,306,762
Inventory, net		7,570,331			5,508,086
Vendor deposits		1,176,065			75,548
Prepaid expense and other current assets		2,064,870			1,187,223
Total Current Assets		21,367,926			12,320,343

Property and equipment, net of accumulated depreciation		1,250,350			1,133,468
Other assets		431,500			153,000
Goodwill		17,809,235			3,722,077
Other intangible assets, net of accumulated amortization		27,334,870			11,354,430
Right of use assets		3,396,751			4,044,109
Total Assets	$	71,590,632		$	32,727,427
Liabilities, Redeemable Preferred Stock and Stockholders’ Equity
Current Liabilities
Accounts payable and accrued expenses	$	10,278,076		$	2,982,760
Contingent consideration		18,375,672			—
Deferred revenue		6,113,192			4,730,299
Due to landlord (Note 2)		281,123			229,234
Warrant liability		7,863			9,987
Financing lease obligations		42,445			33,712
Operating lease liability		1,739,092			1,437,308
Notes payable, net		5,136,610			2,098,685
Total Current Liabilities		41,974,073			11,521,985
Long-Term Liabilities
Due to landlord – less current portion (Note 2)		174,938			393,230
Notes payable, net – less current portion		4,810,922			765,144
Financing lease obligations – less current portion		143,575			158,070
Operating lease liability – less current portion		1,731,923			2,655,103
Total Long-Term Liabilities		6,861,358			3,971,547
Total Liabilities		48,835,431			15,493,532

Redeemable Preferred Stock
Preferred Stock, Series B Cumulative Perpetual, $0.0001 par value, 1,250,000 shares authorized, 1,250,000 shares issued and outstanding as of September 30, 2023 and no shares issued and outstanding as of December 31, 2022		3,712,500			—
Preferred Stock, Series C Cumulative Perpetual, $0.0001 par value, 2,500,000 shares authorized, 399,996 shares issued and outstanding as of September 30, 2023 and no shares issued and outstanding as of December 31, 2022		1,063,989			—
Total Redeemable Preferred Stock		4,776,489			—
Equity
Preferred Stock, Series A Cumulative Perpetual, $0.0001 par value, 1,250,000 shares authorized, 552,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022		55			55
Preferred Stock, Series X, $0.0001 par value, 10,000 shares authorized, 10,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		1			1
Common Stock $0.0001 par value, 150,000,000 shares authorized 9,872,228 shares issued and 9,849,531 outstanding as of September 30, 2023 and 2,735,290 shares issued and 2,712,593 outstanding as of December 31, 2022, respectively		987			274
Additional paid-in capital		57,665,013			45,620,764
Treasury stock at cost, 22,697, respectively		(149,686	)		(149,686	)
Accumulated deficit		(39,537,658	)		(28,237,513	)
Total Equity		17,978,712			17,233,895
Total Liabilities, Redeemable Preferred Stock and Stockholders’ Equity	$	71,590,632		$	32,727,427

Applied UV, Inc. and Subsidiaries Condensed Interim Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2023 and 2022

	2023			2022
Cash flows from Operating Activities
Net Loss	$	(10,105,914	)	$	(7,239,000	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities
Stock based compensation		616,660			559,980
Bad debt (recovery) expense		(59,839	)		94,714
Change in fair market value of warrant liability		(2,124	)		(46,521	)
Change in fair market value of contingent consideration		(1	)		240,000
Gain on settlement of contingent consideration		—			(1,700,000	)
Loss on impairment of goodwill and intangible assets		—			1,138,203
Amortization of right-of-use asset		647,358			834,889
Depreciation and amortization		2,187,321			1,484,968
Amortization of debt discount		617,664			53,646
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(2,822,579	)		(103,343	)
Cost and estimated earnings excess of billings		(1,042,657	)		(234,869	)
Inventory		1,948,852			(2,612,773	)
Vendor deposits		(724,845	)		697,558
Prepaid expenses and other current assets		(146,197	)		(161,797	)
Accounts payable and accrued expenses		3,112,862			582,297
Other assets		(253,681	)
Billings in excess of costs and earnings on uncompleted contracts		—			(1,254,496	)
Deferred revenue		(915,205	)		1,151,496
Due to landlord		(279,515	)		(138,724	)
Operating lease payments		(621,396	)		(819,828	)
Net Cash Used in Operating Activities		(7,843,235	)		(7,473,600	)

Cash Flows From Investing Activities
Cash paid for patent costs		(66,023	)		(682	)
Purchase of machinery and equipment		(248,319	)		(46,196	)
Acquisitions, net of cash acquired (Note 2)		(4,115,709	)		(10	)
Payments on notes payable		(166,262	)		(41,730	)
Net Cash Used in Investing Activities		(4,596,313	)		(88,618	)

Cash Flows From Financing Activities
Payments on financing leases		(30,994	)		(5,269	)
Shares repurchased		—			(149,686	)
Dividends to preferred shareholders		(769,481	)		(1,086,750	)
Proceeds from equity raises, net		6,630,799			1,092,000
Proceeds from note payable, net		5,421,650			—
Net Cash Provided by (Used in) Financing Activities		11,251,974			(149,705	)

Net Decrease in Cash and equivalents		(1,187,574	)		(7,711,923	)
Cash and cash equivalents at January 1,		2,734,485			8,768,156
Cash and cash equivalents at September 30,	$	1,546,911		$	1,056,233

Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest	$	642,877		$	101,365
Supplemental Non-Cash Disclosures of Investing and Financing Activities
Conversion of debt into common stock	$	767,500		$	—
Recognition of right of use asset and corresponding lease liability	$	563,315		$	1,380,658
Accrued dividends	$	424,750		$	—
Issuance of note payable for payment of prepaid expense	$	279,347		$	318,833