Business Overview and History
TOMI Environmental Solutions, Inc. (NASDAQ: TOMZ) is a global leader in disinfection and decontamination solutions, specializing in its patented Binary Ionization Technology (BIT) platform and the SteraMist brand of products. With a focus on delivering innovative and effective solutions to combat infectious diseases, TOMI has established a strong presence across diverse industries, from healthcare and life sciences to food safety and commercial applications.
TOMI Environmental Solutions, Inc. was founded in 1979 as a research and development company, with its headquarters in Frederick, Maryland. The company's breakthrough came in the early 2000s when it invented its proprietary BIT technology, which was initially developed in response to weaponized anthrax spore attacks. Detailed testing performed by the Defense Advanced Research Projects Agency (DARPA) demonstrated the success of the technology in neutralizing chemical warfare agents.
The BIT technology works by aerosolizing and activating a low concentration hydrogen peroxide solution, producing a fine aqueous mist that contains a high concentration of hydroxyl radicals. These radicals are capable of damaging pathogenic and resistant organisms, making the technology highly effective for disinfection and decontamination purposes.
A significant milestone for TOMI came in June 2015 when its SteraMist BIT was registered with the Environmental Protection Agency (EPA) as a hospital-healthcare and broad-spectrum surface disinfectant for misting/fogging applications. This registration made SteraMist BIT the first equipment solution combination hospital-healthcare disinfectant on the market, paving the way for its widespread adoption in various industries.
Since then, TOMI has continuously expanded its EPA registrations and approvals. The company now maintains registrations in all 50 states, Washington D.C., Canada, and approximately 40 other countries, solidifying its global presence and regulatory compliance across multiple markets.
Financial Performance and Ratios
Financials
TOMI's financial performance has been characterized by a mix of growth and profitability challenges in recent years. In the fiscal year 2020, the company reported annual revenue of $25.03 million and a net income of $4.39 million, reflecting the strong demand for its disinfection solutions during the COVID-19 pandemic.
However, the following two fiscal years saw a decline in revenue, with $8.34 million reported in 2021 and $7.35 million in 2022. This was accompanied by net losses of $2.88 million and $3.40 million, respectively, as the company navigated the post-pandemic market dynamics and made strategic investments to support its long-term growth.
Despite these challenges, TOMI has demonstrated resilience, with the third quarter of 2024 marking its second consecutive profitable quarter. The company reported revenue of $2.54 million for Q3 2024, a 73% increase compared to the same period in the previous year. Net income for the quarter was $58,962, a significant improvement from the net loss of $901,000 in Q3 2023.
TOMI's gross profit margin for Q3 2024 was 61.4%, up from 55.0% in the same prior-year period, due to the favorable product mix and increased demand for the mobile equipment. The company's operating profit for the quarter was $149,000, compared to a loss of $901,000 in the prior year period, representing an increase of $1.05 million or 117%.
For the first nine months of 2024, TOMI reported total revenue of $6.67 million, a 14.5% increase compared to the same period in 2023. This growth was driven by higher sales of SteraMist products, particularly the mobile equipment, and increased iHP service revenue.
TOMI has also made strides in reducing its operating expenses, with general and administrative expenses declining by 4.0% during the first nine months of 2024 compared to the same period in 2023. This was primarily due to cost-cutting measures, such as reduced executive compensation and consulting fees.
Liquidity
The company's key financial ratios, such as the current ratio of 4.13 and the quick ratio of 2.06, indicate a strong liquidity position, while the debt-to-equity ratio of 0.41 suggests a manageable leverage. As of September 30, 2024, TOMI had $809,000 in cash and cash equivalents, along with a $2.34 million convertible note payable outstanding.
Geographic Performance
TOMI's revenue is primarily generated within the United States. For the three months ended September 30, 2024, domestic revenue was $1.89 million compared to $1.27 million in the same prior year period, an increase of 48%. International revenue saw significant growth, reaching $656,000 compared to $199,000 in the same prior year period, an increase of 230%.
Operational Highlights and Expansion
TOMI's growth strategy has been centered around expanding its global footprint, diversifying its product offerings, and strengthening its partnerships with key industry players. Some of the notable operational highlights include:
1. International Expansion TOMI has been actively leveraging its network of international distributors and strategic partners to drive growth in various regions. The company's recent entry into the Indian market and the expansion of its presence in South Africa and South Korea are testament to its global ambitions.
2. Product Innovation The company has continuously enhanced its SteraMist technology, introducing new product variants, such as the SteraMist Integrated System (SIS) and the SteraMist Transport unit, to cater to the evolving needs of its customers across different industries.
3. Collaboration and Partnerships TOMI has forged strategic partnerships with industry leaders, including Pfizer, Thermo Fisher Scientific, and Integra LifeSciences, to integrate its disinfection solutions into their operations and expand its reach within the life sciences and healthcare sectors.
4. Sustainability and Environmental Stewardship TOMI's disinfection solutions, which use only a low percentage of hydrogen peroxide as the active ingredient, are known for their environmentally friendly nature, positioning the company as a sustainable choice in the market.
5. Custom Integrations TOMI is making progress on ongoing custom integrations, with a California-based company contract nearing acceptance and a system designed for a global leader in advanced laboratory services that has been accepted and is now in the manufacturing phase.
Product Segments
TOMI operates in four main product segments:
1. Life Sciences TOMI's SteraMist iHP technology provides a complete solution for disinfection and decontamination processes within the highly regulated life sciences industry. The company's success in overcoming traditional disinfection constraints has established credibility and trust, facilitating broader adoption across other facilities and industries.
2. Healthcare Focusing on critical healthcare environments such as operating rooms, pharmacies, and ambulances, TOMI aims to reduce healthcare-associated infections through its advanced disinfection solutions. The company is working to penetrate this market through strategic partnerships and advocacy for automated disinfection solutions.
3. Food Safety TOMI is expanding its presence in the food industry by demonstrating the effectiveness of SteraMist technology in sanitizing food processing areas, storage facilities, and transportation vehicles. The company is actively working to boost brand awareness and comply with strict FDA and USDA sanitation standards.
4. Commercial Serving industries such as aviation, manufacturing, retail, and education, TOMI's Commercial division focuses on proactive disinfection to prevent the spread of harmful pathogens. The company is educating the market on preventive disinfection through training programs, workshops, and case studies.
Competitive Landscape and Risks
TOMI operates in a competitive market, with various players offering disinfection and decontamination solutions. However, the company's proprietary BIT technology and its comprehensive product portfolio, which includes both equipment and consumables, have been instrumental in differentiating it from its competitors.
That said, the company faces several risks, including regulatory compliance, intellectual property protection, and the potential for increased competition as new disinfection technologies emerge. Additionally, TOMI's reliance on a limited number of large customers, as well as its exposure to global supply chain disruptions and economic fluctuations, could pose challenges to its long-term growth and profitability.
Outlook and Conclusion
TOMI's recent financial performance, marked by two consecutive profitable quarters, suggests that the company is navigating the post-pandemic landscape effectively and capitalizing on the growing demand for its disinfection solutions. The company's focus on international expansion, product innovation, and strategic partnerships positions it well to continue its growth trajectory, particularly in the life sciences, healthcare, and food safety sectors.
TOMI remains focused on accelerating international growth, launching new products and programs, and carefully managing expenses. The company sees opportunities to drive considerable operating leverage in the business as it grows and is well-positioned to execute on its next phase of growth going into 2025 and beyond.
The global disinfection and decontamination market is expected to grow at a CAGR of approximately 8-10% over the next 5 years, driven by increasing focus on public health, safety, and hygiene, as well as stringent regulatory requirements across various industries. This trend bodes well for TOMI's future prospects.
TOMI is hoping to achieve over $10 million in revenue for the full year 2024, which would represent a significant improvement over recent years. However, the company will need to remain vigilant in addressing the competitive and regulatory risks it faces, while also strengthening its financial position and operational efficiency to drive sustainable long-term growth.
With its proven track record, innovative technology, and dedicated management team, TOMI is well-positioned to solidify its position as a global leader in the disinfection and decontamination industry. The company's continued focus on expanding its international presence, developing new products, and forging strategic partnerships across various sectors provides a strong foundation for future growth and success.