Physitrack PLC

Good morning, everybody. Welcome to Physitrack's third quarter results podcast. My name is Henrik Molin, and I'm the CEO and co-founder. I'll be your host today. And co-hosting with me is Charlotte Goodwin, our CFO. Let's kick it off. So we have a little introduction in the slide deck, which is available for download at physitrackgroup.com. Just in the interest of time, we're not going to walk through these slides. But if you want to deeper dive into the background of the business and where we came from, then I can recommend that you listen to the Q2 webcast, which is also found and it's entirely at physitrackgroup.com. And then you get a little bit more detail here. It is an updated timeline here, so that's new for this deck. But otherwise, listen to the Q2 one. Let's dig into this quarter and get some highlights. So it was a nice and strong quarter for us. So we made money in the SAS business and the virtual care business. And we had strong growth, both on a quarter on quarter and year on year basis with a nine months total revenue growth of 147%. And now I can actually hear our podcast hosts. So if they could mute their lines, that'd be great as well. We had a performer revenue growth for the same period of 31%. And so, the annual run rate is 7.5 million. So this is above what we communicated in terms of targets. So we were quite happy about that. A lot of acceleration in the business, a lot of nice activity on the sales side. And we, in particular, saw very nice growth in our custom app range, which we'll talk about a little bit later on. But it's a nice indicator that digital health investments continue to be very, very strong even in the post-lockdown era of the COVID-19 pandemic. On the M&A side of things, we will discuss a few more of those points, but in terms of historic M&A integrations of our companies, Physiotools and RehabPlus, following the acquisitions that we did at the end of November of 2020 and at the end of February of this year, they're continuing to progress very well with nice positive upside. synergies both on the revenue side and on the cost side. We did announce an acquisition outside of the reporting period. So at the end of September, we announced the acquisition of Physiotest, a Swedish company in the occupational health space. And we're very excited about that because it enables us to expand our virtual care offering further. So we'll have a few more soundbites on that later on. But those were the highlights. And let's dig into some more of the details here on the business side of things. So continued growth on the SAS side of things in the business in line with our objectives and communicate the targets. What we saw on the product side on the top left there. So we saw an addition of several interesting features that is increasing our competitiveness and are deepening the moats for our competitors and also accelerating growth obviously with our user base. And an example of that is multiple programs. Another example is an Android version of our healthcare provider system, which is a big thing that we see will have an impact on our emerging markets sales activities, so quite positive there. Notably, on the content side of things, which is at the heart of the SaaS business, we had a significant increase in the number of clinical home exercises in the library. As you can see there, we pretty much tripled that. so far since we acquired Physiotools. And that's very, very positive. And that makes it our library, the biggest clinical home exercise library for physiotherapy on the market. If you look at the middle box there, we had a 26% year-on-year growth in the user base from the Physiotrack side. And in terms of the license base, so Physiotools, they sell licenses for entities rather than individual user licenses. They had a 36% year-on-year growth there. which was nice and strong, a couple of shout-outs in terms of significant deals, Uniting Care in Australia, and Bupa, which is one of the biggest insurers in the world, became enterprise customers with us. So quite happy with the development there. Just a couple of soundbites. Custom Apps is one of our most important upsells for our ecosystem. It's a range of white-labeled Solutions that historically enterprises were quite keen on and that continues to be the case. But what we've seen now a trend is that medium-sized companies are also jumping on the personalization, the individualization bandwagon. And I think as consumers have gotten more used to digital products, this is also reflected in their pressure on healthcare providers to actually digitize more and to deepen their digital relationships. And so this is quite positive for that customer branch. And we're actually seeing record sales activity for that in this quarter. And it's something that we see is here to stay. So it's a nice indicator that the healthcare world continues to digitize. In terms of M&A activities, so this was announced after the reporting period, but it's nevertheless worth speaking about for a moment because it's the first time that we communicate widely with the market. So we acquired Physiotest, which is a Swedish company that covers the Scandinavian markets with occupational health products. And we were very, very happy to have them on board in terms of the financials around that acquisition. We find that this was a fair multiple in terms of price. The components of this is an upfront piece of consideration, and there's an earn-out consideration that gives the founders of Physiotest the ability to get more share consideration as they reach performance goals over time. So it's a perfect alignment of interest between us as the acquirer and Physiotest as the as the acquiree, and we are very, very happy to have them aboard, as I said. We have some forecasted performance numbers there, and we are of the firm belief that this is a very creative acquisition, both in terms of the standalone performance that we see from Physiotest. This is a hot space. Prevention, wellness, assessments, testing for the corporate health market is very much a fast-growing market. And not just in Scandinavia, but in large parts of the world. So we're very, very excited about the standalone opportunity that PhysioTest represents, but also what it can do in terms of enhancing the virtual care side of PhysiTrack. And we see that over time, they will, physical tests will support the transformation that we see happening of revenue in the care space to a more subscription-based model. Because at the end of the day, and this has been widely communicated previously, we are firm believers that it is very much possible. And in fact, likely that a lot of healthcare services will be consumed with subscription business models and especially in digital health. And now in terms of where Physiotest fits in strategically, so as we mentioned, assessments, prevention, wellness is what Physiotest does. They do it incredibly well, very strong growth expected there. In terms of our holistic care journey for virtual health, you can see that they fit in box number one and two. And we're very, again, very excited about the potential that this represents for us. So those were some of the soundbites and a business M&A update. I will now pass things over to Charlotte Goodwin, our CFO.

Yes, thank you very much, Henrik. I will start the finances here off with just an overview of the key financials. So year-to-date revenue for the nine months ending August 2021 was 5.3 million euros, up 147% compared to the prior year. Revenue for the quarter ended August was 2 million euros, up 104%. Now, some of this growth was due to the acquisitions of PhysioTools and RehabPlus, and on a pro forma basis with the revenue for these entities included in the prior year comparators, revenue increased 31%, in line with our medium-term organic growth target of 30%. For Q3, pro forma revenue growth was 22% against a very strong prior year comparator in the SaaS businesses. Year-to-date, the Physitrack Group has delivered a adjusted EBITDA of €1.8 million, up 44% from the prior year. And this results in year to date adjusted EBITDA margins of 34% down from 59% in the prior year. This fall is the result of the previously signalled impact of our recent acquisitions on the group's margins. Next slide. Moving through to a more detailed look at revenue. On the left here, you can see the year to date growth, both on an absolute and a pro forma basis. And on the right hand side, we can see revenue by quarter. As I explained in the Q2 results presentation, in a usual year without the impacts of COVID-19, we traditionally see sales cycles in the healthcare businesses being H2-weighted. And that's been demonstrated here by the strong Q3 versus Q2 SaaS revenue growth. Moving through to the next slide. On profit now. On the left-hand side here, we have the nine-month year-to-date EBITDA. Last year, we delivered EBITDA of 1.3 million euros. In the current year, this has fallen to €0.3 million. Within this, there were €1.5 million of non-recurring adjusting items, primarily relating to the IPO, but also to the M&A costs. With these amounts removed, adjusted EBITDA was €1.8 million, or an increase of 44% from last year. EBITDA margins have fallen from 59% last year to 34% in the current year due to the well-communicated impact of the recent acquisitions. Over the medium term, we expect these to rebound to our target EBITDA margins of 40% to 45%. On the right here, we have adjusted EBITDA shown by quarter, with all four quarters laid out in the prior year and quarters one to three shown in the current year. This shows the EBITDA expanding as revenue grows and cost synergies are implemented. We should note here that there was a drop in EBITDA in Q4 last year, as in preparation for the IPO, we built in the additional governance and compliance required to be a listed company. We are not expecting a similar drop in Q4 in the current year as these costs are now baked into our business. Next slide. Moving on to cash for the nine months, opening net debt was a debt position of 0.5 million euros. Adjusted EBITDA in the period generated 1.8 million euros, was offset by a small working capital movement of 0.1 million euros and a further 0.1 million euros of interest payments. Tangible asset additions was 0.9 million euros in the period, and predominantly consisted of development of the SaaS platform, plus some investment in the virtual care product. The largest item here is, of course, the cash generated by the IPO, shown here net of fees incurred, and a small part of this cash has been utilised to fund acquisition consideration payments and related M&A costs. This leaves the group with a strong cash position of 15.8 million euros to invest in future M&A activity. As this is a net debt wreck, it's not shown here, but we have now repaid all of the group's debt positions. Next slide. And here's a summarized position of the group's balance sheet. The first line here includes the internally developed technology platform, as well as goodwill arising on acquisitions, which is what has generated the large increase from the prior year. Cash, as we've already spoken about, has increased due to the IPO proceeds and borrowings have been repaid with these proceeds. Trade and other receivables have increased due to the recent acquisitions, as well as the relative increase of our enterprise customer base. And trade and other payables have increased from last year due to our acquisitions. Deferred revenue is primarily generated by physio tools who bill up front for 12 month contracts. And deferred consideration at the 31st of August relates to the rehab plus acquisition and further deferred consideration will be recognised after the quarter end for the acquisition of physio tests. And just a piece of housekeeping here. In order to align our financial year with our customers purchasing cycles, the board has made the decision to change our year end from November to December. The financial calendar on our website is updated with all of the key dates to reflect this change. That's all for me. Of course, feel free to ask any questions in the Q&A portion of the presentation.

But for now, I'll pass you back to Henrik.