ImpediMed Limited

Thank you for standing by and welcome to the ImpediMed Limited Investor Call Q3 FY25 results. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Ms. Palmjot Bain, CEO and Managing Director. Please go ahead.

Thank you. Good morning and thank you for joining us to discuss our Q3 FY25 results. I'm pleased to be here with McGregor Grant, our CFO and COO. We'll be referencing the 4C quarterly activity report and presentation we lodged this morning with the ASX. The presentation is a summary of the more detailed 4C. After our remarks, we'll take questions. It's been another busy year with more progress and more change as we continue to refine and execute on our strategy. This week, I'm in the U.S. to attend the American Society of Breast Cancer Surgeon Conference, which begins later this week. It's a great opportunity to meet with a large number of customers and potential customers. And it's also a fantastic time to get the entire U.S. sales team together under our new SVP of sales, Scott Long. It's also a great opportunity. I'm excited to be joining the team here again this year. Now let's move into the presentation, and we'll begin with page three with a quick overview of the agenda for today's call. Consistent with previous quarters, we'll start today with a brief strategy recap. Then we'll cover the key highlights for quarter three. We'll take you through an overview of the business. McGregor will go through the financials. And to finish, we'll cover the outlook for the next quarter before commencing with a Q&A session. Now turning to page four, I think it's always worthwhile to start with a reminder of what our immediate strategy is. That's to execute to a focus on profitability with a focus on sales, marketing and execution in BCRL. We continue to execute on our strategy and are making real progress on a number of fronts. And where that progress is not coming at a satisfactory rate, we are making changes. The work done on establishing the sales processes and systems has driven record lead generation. The conversion of these leads to sales in a faster timeframe is priority number one. As I mentioned last quarter, the business is not where we want it to be in terms of US sales, and we have challenged all aspects of the sales process. On the back of these reviews, we've made a number of changes, including to the team, and expect to see early evidence of improvement in unit sales this quarter and across the balance of the 2025 calendar year. We continue to see good financial results in a historical context. We saw record results in terms of revenue and an extremely pleasing record cash receipts result. Cost control remains a focus and with recent non-dilutive debt capital raise, we will have the runway to execute on the strategy. This quarter, there was smaller progress with reimbursement, but it's important to note we believe we have enough coverage to achieve the sales needed to meet the company's stated goals. Although BCRR remains the main focus, we are progressing with goals four and five, and the slide has been updated to reflect on those changes. The product roadmap was delivered to the board, and we are building the base in heart failure, initiated through the clinical research partnerships, utilizing a soft launch of SOZO Pro, a next-generation device. We have also embarked on a market assessment to form a more complete risk-divorce strategy to be delivered upon in FY26. We would continue to execute on our strategy as outlined above. We are focusing on the delivery and will make changes when necessary. When I look at the progress we're making, I continue to be very confident that we can execute on the opportunity. Turning to page five, we will touch base on the key highlights for Q2, Q3. As I mentioned upfront, there's a lot to like in the result. In the financials, we recorded record revenue and cash receipts. Operating cash flow was in line with our forecast. We have an even healthier cash balance after the drawdown of the first tranche of debt capital facility, increasing our runway quarter over quarter. On reimbursement, while coverage remains static, we have had small wins that continue to improve the position for providers. assisting them to provide patients with access to SOZO measurements to prevent breast cancer-related lymphedema. And despite lower reimbursement in some states, coverage is sufficient to achieve the sales that will meet our goals. Finally, to sales. Trends in revenue, average recurring revenue, TCV, and cash receipts are all positive. Newest unit sales are slightly better, and importantly, took us above the total of last year's, all of last year's sales, while still having a quarter to go. While that's positive, we still need to see more sales to meet our goals. But we are confident that we have the processes in place and together with the changes made, put us in a position to capitalize on the opportunity. We expect to see significant improvement in US sales this quarter and the balance of the calendar year. And now moving to page six. As we mentioned last quarter, we have a very strong foundation. The strength of the ARR business model that builds itself with every contract. The quality of our customers. The list of the new and reviewing customers this quarter is a who's who of world-renowned quality institutions. These renewing customers are validating the clinical value of our device. Not only are they renewing, but they're renewing with price increases. Overall, we saw just under a 20% rise in TCV for these renewals and churn remains at less than 3%. As well as seeing an increase in TCV, we are also seeing an expansion of units within our customers. Within our NCCN customers, we are now averaging just under four SOZOs per institution. That number continues to grow and should be the base model for all major hospitals and cancer centres. In today's environment where hospitals are still struggling, Sozo Sales are a new service line for our customers, which are both clinically validated and financially sustainable. Reimbursement is reaching the tipping point. It's important than ever to have high levels of reimbursement, not just financial sustainability, but to also reduce the administrative burden for reimbursement for our hospitals. Importantly, our coverage is considered sufficient to achieve our goals. Sozo will meet our company's goals. With that understanding, along with our cost discipline, gives us the confidence to further allocate resources into sales as we focus on accelerating the conversion of the opportunity pipeline towards profitability. Now to page seven. When we joined the business a year ago, it was clear we needed to invest in systems and processes to develop a robust sales pipeline. That investment has been successful. Implementing systems like AcuityMD and SeamlessAI Introducing Field Force productivity metrics and investing in measures has generated a record number of quality leads in the quarter. And it wasn't just a small step up. It was a meaningful lift in leads quarter over quarter. Credit goes to Tim Venkovich, our more recent SVP of sales, and Julie Culkin, our Senior Director of Marketing, for all of their work in implementing these systems and businesses and processes and trade shows and events for this business. We now have a sustainable lead generation system in place that will benefit the company for many years. The pipeline is in good shape, containing several multi-order opportunities. MSA's master service agreements with clients cover many hundreds of potential sites of service and more than sufficient opportunities to reach our initial goal of breaking even. But while lead generation having sufficient opportunity pipeline is crucial, executing and converting these leads is equally as important, and we just haven't been getting the results that we need to get to our goals. As I mentioned in the previous quarters, we've reviewed and challenged all aspects of our sales process. We've found some deficiencies that need to be addressed and a number of potential areas of improvement. One error identified was the overall lack of direct breast cancer device experience within the sales team, or particularly within the newer sales team members. To this extent, we are very, very pleased to announce the appointment of our new SVP of sales, Scott Long. Scott has over 30 years of experience in breast cancer medical device sales in the U.S., predominantly in startups. And over his 30 years, Scott has developed extensive relationships with breast surgeons. His in-depth experience working with smaller startup sales teams, normally from six to 12 reps, really brings a lot of experience to the organization. And through this, he has developed a wide range, a network of high potential sales candidates that we are looking towards as we expand our team. Scott started this month and has gotten quickly up to speed with the SOZO technology. He will have his team together for the first time this week at the ASPS conference and we will participate in in-depth training across the new site assessments and sales tools across all of the teams. After ASPS, Scott is excited to hit the road with the sales team, utilizing his contacts and assisting the team on their goals rapidly. In addition to Scott, we are recruiting two additional key account executives with breast cancer experience and the networks to support accelerating qualification and conversion of leads into sales. This will take us to a total of 11 reps across the United States. Now to page eight. Clearly the markets have been concerned about the potential impact of US tariffs on businesses. We continue to conduct ongoing assessments in what is a very rapidly changing environment. and note that the company does not expect any material impact. Impedimed manufactures SOZO within the United States, utilizing third-party manufacturers, and a substantial number of components are manufactured in the U.S. The majority of the value in a standard three-year contract is derived from the various software applications that are not subject to tariffs. Impedimed also maintains a high level of devices and component inventory to guard against potential supply disruptions. For our business, cost is less of an issue than continuity of supply. To this extent, in the current quarter, the company will purchase an additional $1.2 million of key electronic components at pre-tariff pricing to further reduce the risk of supply disruptions. As I mentioned earlier in the presentation, the company has embarked on implementation of stage four and five of our strategic plan. We are initially doing this alongside a soft launch of SOZO Pro for clinical research applications. This brings a number of benefits. Firstly, it's a low-cost way of building data sets and indications such as heart failure and creating that foundation for future growth with our technology. It also enables us to acquire valuable customer feedback on SOSA Pro ahead of a full-scale launch across multiple markets. In reimbursement, we continue to support initiatives that assist in broadening coverage. In this quarter, NCCN updated their breast cancer guidelines. Historically, they have just referenced the survivorship guideline, but this year's review included a reference to consider baseline lymphedema screening as per the NCCN guidelines for survivorship. Although this is a very small change, it has a very positive change that highlights the need directly with breast cancer surgeons. Now I'll turn the presentation over to our CFI McGregor grant to go through the financials.

Thanks very much, Pamjot. I'm starting on slide nine. As Pamjot mentioned, it was a positive quarter from a financial perspective. We achieved record quarterly cash receipts of $4.1 million. Operating cash outflow came in on forecast at $3.5 million. This was in line with last quarter's result after adjusting for the annual R&D tax credit received during that quarter. A few things to note in the cash flow report. Firstly, Product manufacturing operating costs increased with a planned inventory build. We are also forecasting an additional one-off $1.2 million payment in quarter four for key electronic components of pre-tariff pricing to ensure continuity of supply, just as Palmjot has mentioned. Secondly, you will note an increase in advertising costs reflecting investment in conferences. It's the first time we've attended the Oncology Nursing Society Conference, which was very successful. generating a substantial number of new leads. This figure also includes expenses for the ASBS conference, which starts later this week. This is Impedimed's largest conference investment. We have strong representation with the sales team and a number of Impedimed senior management team are also attending. As previously announced, we have drawn an initial US $10 million of the growth capital facility. As a result, cash and cash equivalents of 31 March 2025 were $27.4 million, which equates to over eight quarters of available operating cash flow. Turning to slide 10, another record revenue quarter at $3.4 million, which was up 28% year-on-year and up 2% versus quarter two. U.S. revenue was on trend, up 5% quarter-on-quarter, while rest of world revenue was slightly lower. The rest of the world was affected by the distributed restocking we experienced last quarter. Importantly, you can see in the revenue graph that the trend line remains positive as a result of upward trajectory in the core US business. Another positive was the continued improvement in cash receipts that came in at $4.1 million for the quarter. Over to slide 11. Firstly, to ARR. Again, a nice upward trajectory as TCV gains translate to increased annual recurring revenue. Contracts in place at 31 March 2025 are expected to generate core business annual recurring revenue, or ARR, of $13.7 million for the 12 months to 31 March 2026. This equates to a 27% increase year on year. up from $10 million as of 31 March 2024. The value of new contracts signed during the quarter, which we refer to as total contracted value or TCV, was $4.9 million compared with TCV of $2.2 million signed during Q3 FY24 and $3.2 million in the previous quarter. TCV reflects both new contracts written and contracts renewed. last quarter had less contracts up for renewal when compared with this quarter. We continue to be very pleased with the quality of accounts initiated or renewed in the quarter, together with the continued strong price increase on renewal, averaging 19% for the quarter. And as mentioned, churn remains low, below 3%. I'll now pass it back to Palmjot to talk through the remaining slides.