MedAdvisor Limited

Global Marketing, and I'll be your moderator today. Joining me are Rick Ratliff, our Chief Executive Officer and Managing Director. Hello, Rick.

Hi, Sarah.

Also with us today is Ansela Desai, MedAdvisor's Chief Financial Officer. This meeting is being recorded. Sarah. We recognize that today is a particularly busy day as it marks the final day of the AESX reporting period, so we intend to keep this briefing to 30 minutes and we'll aim to finish by 11 o'clock a.m. We appreciate your taking the time to join us. Rick and Angela will walk you through their first half FY25 results, which were released to the market this morning. This will take about 15 minutes, followed by Q&A of around 10 to 15 minutes. At the end of the presentation, if you would like to ask a question, please use the Q&A function at the bottom of your screen. We'll address as many questions as possible within that time. We're mindful of everyone's schedule and will aim to keep the session brief. If you have further questions following the briefing, Rick and Ansel are available for one-on-one meetings. Please contact George from the IR department to arrange. Now we ask you to please mute your audio. With that, I'll hand it over to you, Rick, to get us started. Thank you.

Okay. Thanks, Sarah. And good morning to everyone. I want to thank everyone for joining us today for our first half FY25 update. And so we'll go to the agenda slide, slide three, Garika. First, I just want to say that many of you will have seen our second quarter results that we released in late January. Today's result carries on from those themes discussed in those results. And importantly, I do want to focus today on how we're reshaping Medivisor for long-term value creation. So with that said, what we're going to do today is I'm going to provide a quick overview of our first half results. Ansel and I will walk through the financial and operational update. And then I want to provide some perspective on key industry market drivers and and how that is really accelerating our focus on reshaping our business in both the United States and Australia. And then we'll wrap up and take a quick look at our second half, 25 priorities. So if we'll go on to slide four, take a look at, and slide five, sorry, take a look at our first half overview. So first of all, we are pleased to report that we delivered a profitable impact that was in line with previous guidance in our quarterly reporting. We did finish the half of $57.1 million in revenue at the group level. Those who have been following along will know that our revenue has declined compared to the prior half. As we have indicated over the last couple of months, this was impacted primarily due to significant budget adjustments and vaccine-related health programs from two pharma clients in the United States. Nevertheless, our Throg-powered patient engagement programs continue to gain traction in the U.S. and represented nearly 35% of the quarterly revenue compared to 7% at the same time last year. In Australia, we've been very pleased with the migration of our pharmacy clients to our cloud-based MedAdvisor for Pharmacy platform, with 90% of our customers having transitioned so far. Our ANZ business continues to grow with launch of new services. in revenue streams, including telehealth and e-commerce. And at the group level, we've been redesigning the business. This significant and important program that we have named Transformation 360 was launched in October of 2024. And we'll talk more about that later. As you know, we've initiated a review of strategic options to evaluate and address valuation disconnects. The review is actually moving along extremely well. At this time, we expect to complete the review by June 30th. And then finally, as we look into the current half, we are prioritizing the work we're doing to reshape our U.S. and Australia businesses supported by Transformation 360 to address shifts in the markets. And again, we'll spend more time on that later in the presentation. So now I'd like to pass it over to our CFO, Ansla, to discuss our financial and operating performance at the group level. Ansla?

Thank you, Rick. And hello, everyone. It's a pleasure to be with you today. I will talk you through our group financial highlights starting now from slide seven. As Rick outlined, revenue for the half was impacted by lower than expected vaccination rates, leading to delays in farmer spend. Consequently, gross profit, EBITDA and NPAT were all impacted by this decline in revenue. Notably, we did manage to remain profitable across all metrics over the period. We are very proud to have delivered a third consecutive half-year profit result. Also pleasingly, gross margin did improve in the half. This was in part driven by higher margins that we can now access through Thrive programs. We implemented a number of cost savings initiatives through the period as part of our Transformation 360 program. which are expected to deliver annualized savings of approximately 5 million from FY26. Moving to slide eight. This slide would be familiar to most of you as it outlines the adjusted EBITDA bridge. As you can see, the majority of the EBITDA impact was revenue and gross margin related, which also includes some reallocation of costs, such as $500,000 for cloud-related expenses, which were previously reported as OPEX, and some additional marketing expenses of $400,000, which are now recorded as a discount to sales. We incurred some restructuring expenses in people and culture as a result of our planned Transformation 360 initiatives. And in relation to cloud-related benefits, half of that benefit does relate to efficiency gains, but the other half of 500,000 relates to the reallocation to COGS. And as you can see, transformation 360, OPEX-related expenses for the half were 300,000. Now let's move to slide nine. At the period end, the group's cash position stood, sorry, slide nine, please. One back. Perfect, thank you. The group's cash position stood at 12.4 million, which was down from our position of 15.6 million at the end of June. As we discussed, Our receipts were lower due to decline in revenue, and this was offset by timing of supplier payments. An additional 1 million was attributed to a pay run in the US. The US team is paid on a fortnightly basis. We invested 500,000 in Chirac at the start of the half. There were other payments related to income tax, interest payments, lease, and PP&E. It's important to note that we increased our debt position through the period with an additional drawdown of USD 3.5 million into Q, taking our gross debt to USD 3.5 million, sorry, 11.3 million as at December 24. I would like to now turn back to Rick.

Okay, thanks, Chancellor. If we'll go to slide 10, take a look at the U.S. very quickly. As we've been discussing, the decrease in revenue and gross profit in the United States is primarily due to the lower than expected vaccination rates and the implications on budgets in the late second quarter. New information here, as you'll see in the middle chart, the bar chart. The traditional in-pharmacy programs were down due to impact of the delayed vaccine programs and substantial shift actually to Thrive Power programs. So on that point, gross margin did increase, as Angela mentioned and I mentioned earlier, due to a higher mix of digital and Thrive Power programs in the half. On the right-hand side of the slide, we're giving you a little more information and insight into the revenue by category and what we call method. And we're going to dive into this a little bit more detail if we'll go on to slide 11. So on slide 11, the key point here, there are three key categories of pharma-sponsored programs that deliver revenue in the United States. First of all, general medications revenue, then vaccine revenue, and then specialty medications revenue. While vaccine programs are the primary driver of the revenue decline in the half, there are various market shifts that are contributing to the decline as well as you look across this chart. I think, Rika, if you click one more time, you might see the data under general medication category. There we go. Okay, so if you look at the general medications, general medications represented about 37% of our first half revenue. The revenue is down about 19%. This is primarily due to spending delays related to a patent issue with a brand in the heart category, antivirals also contributed to the revenue decline due to lower than expected COVID cases, which we'll dig into in a minute, early in the flu season. However, there were a few wins in the half with asthmatic medications growing at 99% and thyroid medications growing over 184% year over year. In the vaccine category, this represented over 50% of our first half revenue, which is a typical trend with our business. Revenue in this category was down 33%, due in large part to the decline in RSV and COVID programs, as we've been saying. which definitely aligns with industry trends and revenue impact on our pharmaceutical manufacturer clients. Non-RSV vaccine revenues were down modestly, and we actually had a significant increase in our non-seasonal vaccines, such as shingles, in the half. Specialty medications are a relatively small contributor to our overall revenue, represented about 8% today, but this is a category where we see longer-term significant upside opportunity. In this category, the revenue was down primarily due to a funding shift to new launch brands in the categories. There were some wins in this category as well with chronic kidney disease up 82% and anti-inflammatories up 19% year over year. So as we'll discuss later, I think what's important here is we remain extremely optimistic on the fundamentals of the U.S. business. And we are executing strategies that we'll talk more about later to address these market shifts and position our business for long-term success. So if we'll go to the next slide, I just want to spend a few more minutes on vaccines. This is very similar to something we reviewed in the second quarterly results, but I just want to reinforce some of the key points here. While this is a very busy slide, the key is it's intended to help visualize some of the trends in vaccinations from 2020 to late 2024. The lines on the chart show you the weekly vaccines delivered by brand that are highlighted at the top of the chart over time. So you can see that through 2020, 2021, vaccine spikes were primarily driven by COVID, which would definitely be expected. But as we look across 2022 to 2024, The COVID vaccines still remain important, but we do see an increase in types of vaccines available. For example, new vaccines were up by 25% from 2022 to 2023, primarily as a result of new RSV vaccines from Pfizer and GSK. This is an important point relative to the miss in the second quarter. At the same time, the trend around the volume of vaccines being delivered is declining in some categories. We know for a few reasons for this. The light green lines are related to flu shots, which are somewhat stable over time. And we're expecting COVID vaccinations, as they're declining, we expect them actually to flatten out and have a very similar characteristic to flu. As we mentioned in the December guidance, and I just mentioned a moment ago, we have seen over a 70% decrease in RSV vaccines from 2024, I'm sorry, 2023 when they were launched, which is our FY24 to FY25 in these results. This chart also shows definitive seasonal spikes in vaccinations. You can see in looking across onto the 2024 timeframe. This coincides with our seasonality of our business and our flu season. Through these spike periods, especially over the last year, 12 to 18 months, consumers are often inundated with information around vaccines, particularly as there are new vaccines coming onto the market. And this can be confusing and can add to what is termed vaccine hesitancy, which is one of the important factors that's been affecting the decrease in vaccination rates. So now that we've shed some light on the challenges, let's talk about where we see some of the potential solutions and opportunities. So we're starting to work with pharmacies and vaccine manufacturers to look at how we can spread vaccine programs more evenly throughout the year. We want to streamline the information flow to patients, making it easier for them to digest the information and more easily and more likely to get vaccinated, actually. So some of the strategies we're discussing with the pharmacies and pharma manufacturers, the brands in this category. delivering educational messaging, supporting a healthy vaccine journey across the course of the year, and not just a particular season. We're looking at programs to promote shingles, which we are doing as we speak, with other non-seasonal vaccines throughout peak times. during off-peak times, rather, during the year, and then promote the seasonal vaccines like flu during the peak times, as you would expect. So we expect that this should, in turn, lead to increased vaccine program volume and improved uptake of vaccines over time. So we'll turn from vaccines now just for a second to slide 13. I just want to make a quick comment here. This is a great case study. of the value in pharmacy communications programs that support objectives for specialty medications such as asthma biologics, which are characterized here. But in the interest of time, I won't go through the details just to say that this is a great example of where we believe significant opportunity as we move forward. So if we'll go on to slide 14 and take a look at A and Z for a moment. We are very pleased with the progress in our Australia business. Key callouts here are revenue was up modestly to $11.4 million. The gross profit was down slightly, as was gross margin. However, we're still at a healthy 81.6% on gross margin. The reductions in gross profit and gross margin, as Angela mentioned earlier, primarily due to some restructuring on marketing expenses and the shift of some cloud platform-related costs to cost of goods sold. Key point is to note that we are making very good progress with the migration of our, or we've made very good progress, I should say, of our cloud-based platform, Medivisor for Pharmacy, with 90% of the pharmacies migrated, and we expect this to be completed by the end of March. And we're rolling out a number of new services that will deliver incremental revenue streams over time. So we move to slide 15, take a quick look at the pharmacist intervention program. that we launched in the half. Following the launch of the weight loss medication in 2024, pharmacists commenced educating patients on administration and side effects while facilitating referrals to the A-patient support program. The program delivered some great results with 1,700 pharmacies participating in the program and delivering more than 31,000 services to patients via pharmacist. So if we'll go to the next slide, we did launch the Transformation 360 program in October of 2024. These programs are on time and on budget. You can note several of the key metrics. We've driven down the overall cost through our restructuring. We delivered some cost savings this year, as well as incremental 5 million in savings in FY26. And then we're about 35% completed with the platform development. And quickly on that, if you go to the next slide, while this is a busy slide at a very high level, I just want to say that our next generation platform that is being built through Transformation 360 is going to significantly enhance the capabilities that we're currently delivering through Thrive. And our new psychographic data segmentation engine utilizes a number of different data sources and artificial intelligence to identify the right patients for the right message and the right channel at the right time. So there's a significant amount of new technology and capability so we can lower the cost to deliver more advanced, more personalized data. functionality through a number of different partners. So I'll leave it at that in the interest of time. So if we'll go to the next slide and turn to industry drivers, there are a number of evolving market trends that are reshaping the pharmacy and pharma landscape across both the US and ANZ. So I'll hit these very quickly. Looking first at the US, our direct consumer models are reshaping patient engagement and through pharma. Pharmacy chains are facing a number of significant cost pressures through a number of restructurings and financial challenges. And of course, we've got to acknowledge the the U.S. governmental influence and the new administration and the potential impact as we look into the next four years. In Australia and New Zealand, government policies in the aging population are driving growth in the Australian pharmaceutical sector. Pharmacies are gaining ability, as we've been discussing, to provide expanded services, including diagnosing conditions and prescribing medications and this is being powered actually through a recent announcement of a women's health initiative from the Pharmacy Guild of Australia and the government. We'll touch a little bit more on that in a moment. So if we'll go to the next slide, I think it's important to note that we have been monitoring these trends and others over time as well as those that were driving the headwinds in the first half in executing a strategy to address these headwinds and future opportunities. So we're leveraging the Transformation 360 as a catalyst to reshape our U.S. business. And as mentioned in previous presentations, the Transformation 360 program actually does go beyond just transforming our platform, as we were discussing a minute ago, to also focusing on transforming our business processes and go-to-market strategy to keep pace with market trends. So at the heart of this initiative are our core pillars of the customer focus, operational excellence, and collaboration. These are extremely important as we look forward in how we plan to reshape the business in the United States. So currently we're refining our go-to-market strategy to align with the shifting market buying patterns from pharma and customer priorities and industry challenges. We're doubling down on operational excellence. And we're improving internal coordination across teams to ensure seamless access and proactive customer support. And by improving internal coordination, we believe that in focusing on the customer, staying laser-focused, we're going to see significant value creation in the U.S. business, and you can see the impact at the bottom of the slide. So we'll go to the next slide so that I can keep things moving. Now if we turn to A&Z and how we're leveraging the same framework to drive market alignment, expand pharmacist-led services, enhance digital engagement, and integrate AI to improve medication management, our customer focus, double down on operational excellence. And again, the focus on collaboration and teamwork across the business is reshaping the way that we can drive not only the current solid performance, but enhance and expand on the market drivers in the Australia-New Zealand market. One of those key drivers, if you go to the next slide, is the Women's Health Initiative that I alluded to earlier. This initiative was recently announced that there's going to be a funding opportunity for women's health programs through pharmacy engagement, and we're very proud to have been a partner in supportive delivery of women's health and other clinical services over the past few years. And so based on the pilot results today and our expectations for growth in Australia and talking to the key stakeholders, we do expect there to be significant opportunity, as you can see on this slide, over the next several years. So if we'll go towards the end, as we're going a little long, I apologize. In the second half of FY25, we'll focus on driving strategic changes across the business, enabled by Transformation 360 and aligned with ongoing market shifts. Our primary focus is going to be on redesigning the U.S. business, continued expansion on A&Z, and ongoing cost optimization and executing on our strategic options evaluation. So in the U.S., we are reshaping the sales team and customer success organization to optimize the sales cycle and drive faster pipeline conversion. We've already seen some early signs, the positive momentum in the half. We have a solid pipeline representing over 160% of the revenue needed to achieve our revised internal projections. In A and Z, we'll continue to focus on expansion of services to drive revenue. And we're focused on continued expansion of clinical services, as we've been discussing. And we have announced that we will be standardizing our SAS fee structure in the March timeframe. We've announced the restructuring in January associated with Transformation 360. and we'll continue to monitor for additional operating expense savings opportunities. We anticipate the completion of the MedEvisor rollout, as I mentioned, and we'll launch Thrive Next Generation Patient Program or platform at the end of FY25. And then finally, we are making progress on our strategic options, as I mentioned, on the front end and expect to complete that review by June 30th of this year. So I do apologize we've gone long, but I appreciate you spending the time with us this morning. And if we've got a few minutes for questions, I'll hand it back to Sarah to tee those up.

Yes, thank you, Rick. Thank you, Angela. We do have a couple of questions. I will start off with Elise from Canaccord. I think you had your hand up early in the presentation delivery.

Thanks. Can you hear me okay? Yeah, perfect. Thanks for taking the questions, Rick and Ansela. You know, looking at the pipeline, obviously, that looks like a pretty robust and varied pipeline. Are you able to quantify where that sits in terms of dollar amounts? And then kind of looking at the revenue per opportunity, how has kind of the revenue kind of per contractor, per product evolved with kind of maybe some tightness on the pharma marketing wallet. Are you needing to explore some lower touch or lower cost options for those customers? Thanks.

Yeah. Thanks, Elise. We have not provided any guidance in relation to the first half outlook from a revenue perspective. We are analyzing the speed of pipeline conversion. Like I said, we do have a robust pipeline in line with our revised projections uh internally and uh we are seeing through the conversions in the um in the half or first couple of months of the of the half that the contract values it actually very similar to the past it varies significantly we've signed a significant contract with a new mental health brand just recently. We've signed a large contract for shingles vaccines that will be delivered over the half just recently. And then there are a number of other new brands that have similar characteristics to what you're alluding to, Elise, where when we bring in a new brand, typically they're going to come in at a lower contract value. However, if we can land those, there are a couple of situations where we can actually burn the revenue quickly. And then because we already have the program in place, assuming that good results, we can actually help, we can actually extend those to run across the rest of the half. So I'll leave it at that, I think.

Yeah. Thanks. And then, you know, it looks like you're doing a good job with the cost out program. Is that, Is the current employee base and resource base still sufficient to manage the existing pipeline opportunities and to kind of service those customers?

So the cost takeout that we've done up to this point has been in line with our planning in relation to Transformation 360. So this initial cost out in the January timeframe was planned. So some of that is somewhat of a... rebadging, if you will. So there are some roles that have been eliminated. There are some roles that have been moved to offshore. So there's a little bit of a balance. So the answer to the question is, at this point, while we're continuing to look at costs and opportunities to optimize our costs, at this point, we believe that we have the right staffing to deliver on the business in both the U.S. and Australia.

That's helpful. Thanks so much.

I'll pop back in with you.

Mm-hmm.

Okay, thank you. We have a couple of questions in the Q and a, the 1st is the strategic review has been extended to June. Can you comment on why the delay on the previous update? You mentioned you expect an outcome by the end of March.

Right so we, we were making very good progress. on the strategic review. We are evaluating strategic, as we said, options in both the US and Australia and looking at various approaches to help maximize value to shareholders. As we've been doing that, we've found significant interest in a variety of different options. And so in order to get through those options and determine the appropriate direction, it's going to take a little bit longer than planned. At the same time, the analysis is going extremely well, and the interest in how we might evolve the actual business is very good.

Thank you, Rick. And I think we have time for one more. Sarah Mann from Mollis.

Hi, Rick Anseler. Thanks for taking my questions. Just a quick one from me, and sorry to be short-term, but just around the pipeline. So can you give us any colour around, I guess, what percent of the pipeline has been contracted relative to, say, the same time last year, and then specifically within that pipeline? You alluded to some of the larger programs in the first half potentially being deferred into the second half. Can you give us an update on, I guess, conversion of those programs in the second half and whether they've been downsized at all?

Okay, so there are a couple things there. Relative to programs being deferred into the second half, there are a few of those programs that have continued into the first half. There are some that have not been executed yet. However, we are in conversation with those customers on timing to deploy those programs. We're still optimistic that that will happen in the half. It might not happen as early in the half as was expected. So as you know, Sarah, some of this is timing. So the conversion of pipeline to contracting is key. And like I said, we are seeing some solid movement and pipeline conversion, particularly here in January and February. And it appears that will continue into March. And we're holding to ensure that that trend continues. And we don't see any changes before we start to provide any other detail at this point.

Oh, okay. Understood. Thank you. And then clearly you've alluded to the macro uncertainty just with everything that's happening in the US at the moment. And thanks for providing kind of the breakdowns across, you know, the different categories that you're operating in. Can you give us a feel for, you know, which of those revenue streams you kind of see as most stable in the current macro environment versus the ones that are most at risk now that RFK Jr. has kind of been appointed as human health secretary?

Thanks. Well, you just added a complexity there at the end. Given what we know at this point, and this is partially why we broke it down, because this is the way we look at the data, is that general medications, which are medications across the categories I showed, these are for COPD, diabetes, heart, migraine, et cetera, we don't see any impact on those areas relative to the promotion of the medication. You still need the medication to address that particular condition. The challenge will be, and this is not just RFK, this is in general, with things like the Inflation Reduction Act, there's a significant price pressure on pharma in And we've not seen any impact from that price pressure on what we do. What we do is much more targeted and cost effective than the kind of spending you might do on TV. And if RFK does go down the path of affecting the spend on TV in the United States, That's a multi-billion dollar expenditure by pharma on an annual basis. And we would expect to see some of that not necessarily go back just to cost reduction of medications, but to lower cost, highly targeted approaches to getting medications in the market. So we don't see general medications as an issue. We don't currently see vaccines as an issue. However, it is somewhat of a wait and see. We do expect and we're still seeing back interest in driving vaccine awareness, particularly in pharmacies, because 90 percent of adult vaccines are administered in the pharmacy. So we expect to see some, a little bit of pullback, but in some cases, we actually, in the pneumonia category, we expect to see the spending increase. So there's a little bit of give and take in some of these categories. The vaccine business is still about a $23, $25 billion business in the U.S., going at about 7% to 8%. So we do expect to continue to monitor it. But, you know, vaccine is a public health initiative in the United States. So we'll continue to monitor it. But that is one that we, as obviously we've seen, is going to fluctuate. On the other side with specialty, specialty medications is probably the highest growth opportunity. Because this is where probably 60% of the spend is on medications in the United States and most other countries. And it will continue to increase, particularly as these drugs get more and more personalized and targeted at certain types of disease. And that will be, you know, that's where the spend on R&D and getting into the market will The challenge for us is tying in, and that's what I was showing with the biologic example in the case study, is tying the fact that an individual on a specialty medication that might be filled in another venue, such as a specialty pharmacy or some other way of picking up the medication, those same individuals are on many other medications that are filled in the pharmacy. And this is where we're making the tie. So as we can continue to build the structure, which we're using new data sources to help show the return on investment, we expect there to be significant growth there. So I think hopefully that gives you a little bit of color on each one of the categories. But we're very focused across all three. And we hope to see significant growth in the specialty category.

Great. Thanks. Appreciate your comments.

Okay, thank you for the great question. In the interest of everyone's time, I think we're going to wrap it up. It's about seven or eight minutes after the hour. I do want to reiterate what I stated at the beginning of the presentation. If you have any questions at all or would like to dive deeper into specific topic areas, Rick, our CEO and managing director, as well as Ansela, our global CFO and company secretary, are available for one-on-one meetings. And we do encourage you to take advantage of the opportunity. Simply reach out to George from the IR department to schedule those meetings. Rick, I'll hand it back to you for any closing comments as we close our day, close our presentation.

Sure. Thanks, Sarah. So again, I just want to thank everyone for taking the time today. I also want to thank everyone for their support of MedAdvisor. And I want to emphasize that while we're not happy at all with the first half result, we do believe in the fundamentals of the U.S. business. And we believe that there's a solid foundation there. And we've been working on programs. We're going to continue to work on programs and reshaping the business for long-term value to our shareholders. So again, I want to thank everyone for spending the time with us and for your ongoing support. So Sarah, I think that's it. Thank you.

Thank you, everybody. Have a great day.