Physitrack PLC

Good morning, everybody. Welcome to Physitrack's Q4 earnings webcast. I'm Henrik Molin, and I'm the CEO and co-founder of Physitrack. I'm joined by Charlotte Goodwin, our CFO. We're going to start by just briefly mentioning that we won't be providing a background to the company on this call, but if you're interested in a deeper dive, we recommend that you take a look at our Q2 webcast, which is available on physitrackgroup.com. Here is a little reminder of where we are time-wise in our company life cycle. So some updates there on 2022. So happy to leave that for you to peruse after this call. I'm going to jump into the little summary of Q4 in short. For those of you who are short on time, I want to get back to your cup of coffee. Now, the 12-month revenue growth was 153%. and the performer revenue growth was 36%. So nice organic growth in combination with M&A driven growth. The size of the company is now over 10 million euros in terms of annualized revenue for the first time, which is really nice to see. And in terms of key events that we saw there, obviously we've seen the merger or the acquisition from this morning of PT courses in the US. This is something that we are very excited about because moving into e-learning for physiotherapy, something that we had as part of our playbook since 2017. And this is a key component for strengthening our presence in the US. Very nice to see that. And we're going to give some deeper comments on that later on in this call. In terms of other highlights, we've had a really nice time integrating physio tools, and now we have aligned their operations completely with Fisitracks. And we've been able to draw on the firepower of this team of exceptionally talented individuals in building a one culture and one team. And that's been very, very favorable to us. And in terms of acceleration and the way that we run the business, and on a note we are upgrading some of the plumbing or the the the underlying framework for the systems uh underpinning physio tractors to support this continued growth among other things a new accounting system that can support us up to triple digit million if and when that we reach that level and obviously some of the other things in terms of development infrastructure and ways for us to be more efficient and effective when we look at new features and develop them for continued commercial success. Digging a little bit deeper into the quarter in terms of the business, just looking at the underlying growth numbers, so very, very strong. On the user side of things, we had a nice growth of the user base, but something that's very important to point out here, we're not a one-trick pony in terms of revenue generation. We don't only have to rely on a growing user base to grow revenue. We have a lot of interesting products in our portfolio, and something that is continuing to generate some very nice revenue is our custom app range, where we can work closely with healthcare providers and personalize the journey for their patients. And this is something that we indicated already in Q3, that is something that is accelerating and the acceleration has been even more rapid in Q4 around this. So it's an effect of this increased sophistication when it comes to digital products in our space that has led to this and notably patients and consumers have become more savvy when it comes to digital and they're putting pressure on their healthcare providers to expand into that. So we're more than happy to offer a top of the line range of custom apps and other services to just make, to meet those expectations that are now upon us. Very, very interesting in terms of notable wins. Well, obviously the big win is the very wide variety of small to medium size exposure to custom apps that we've had. But if we are to name something that stands out on the enterprise size, Mercy Children's Hospital, very notable American healthcare system, which was part of a big RFP that we won in Q4. But acceleration continues, and we're more than happy to be in this space because it is something that's expected to continue growth going forward. Few comments on the PT courses acquisition that was announced early this morning. And as I indicated in my introduction, this is a space that we have been very keen on moving into ever since 2017. In the US market, the home access prescription systems are usually bought in tandem with e-learning for physios. It's something that's part of the mandatory education for physiotherapists is to be part of something like this. and it's something that's usually sold in bundles. Not having access to those type of bundles in the US market is something that has held us back a little bit, which is why it's been on the strategic agenda for several years, and it's something that we've indicated that we were keen on expanding into via M&A for the last few quarters. So I'm very, very happy to have gotten this on board. This is a very healthy, intelligent company. It's one of the older companies in the space. They've done quite well in building this from nothing similar to Physitrack with their entrepreneurial spirit. and this is a nice company. The acquisition premium was 1.8 million. There's no earn-out, so that was a one-off payment. It's the equivalent of about three times revenue. We expect some really interesting revenue effects off of this. both in terms of the PT courses effect of having PhysiTrack customers come in and purchase continuing education, but most notably when we penetrate the US market with home exercise prescription and related products, we see that these bundles with e-learning are going to be very significant for us in terms of gaining market share. so we couldn't be happier with that and we will see revenue effects both with pt courses on a standalone basis from this but most notably on the fizzy track sas side i'm going to hand over now to charlotte goodwin our cefo to talk through the financials more in detail over to you charlotte thank you very much enric i'll start the finances off here with an overview of the key financials

Year-to-date revenue for the 12 months ending November 2021 has more than doubled to 7.7 million euros from 3.1 million euros in the prior year. Some of this growth is due to the acquisitions of physio tools, rehab plus and physio test and on a pro forma basis with the revenue from these entities included in the prior year comparators, revenue increased 36% in excess of our medium-term organic growth target of 30%. Revenue for the quarter ended November was 2.4 million euros, up 165% from the last year. Proforma revenue growth in the quarter was 47%, which is in line with our previous messaging that now the impacts of COVID-19 have smoothed out. We expect revenue growth to be weighted towards the end of the calendar year, driven by our large customers' purchasing cycles. In the year, the Physitrack Group has delivered adjusted EBITDA of 2.6 million euros, up 58% from the prior year. And this results in year-to-date adjusted EBITDA margins of 33%, down from 53% in the prior year. This fall is the result of the well-signaled impact of the recent acquisitions on the group's margins. We move through to the next slide. Looking now at a more detailed view of revenue, on the left here, you can see the year-to-date growth, both on an absolute and pro forma basis. And on the right-hand side, we see revenue by quarter, with strong growth delivered in both the SaaS and virtual care parts of the business. Moving through to the next slide. Looking now at profit, on the left hand side we have the 12 month EBITDA. Last year we delivered EBITDA of 1.6 million euros and in the current year this has fallen to 1 million euros. Within this there was 1.6 million euros of non-recurring adjusting items primarily relating to the IPO but also some M&A costs. With these amounts stripped out adjusted EBITDA was 2.6 million euros or an increase of 58% from last year. Adjusted EBITDA margins have fallen from 53% last year to 33% in the current year, as discussed earlier, due to the impact of acquisitions. And 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. This shows EBITDA expanding as revenue grows and cost synergies are implemented. 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. These costs are now built into the business's run rate and consequently there was no similar drop in Q4 of the current year. Through to the next slide. Now looking at cash, we opened the year with a net debt position of half a million euros. Adjusted EBITDA in the period generated 2.6 million euros and was offset by a working capital movement of 0.5 million euros and a further 0.1 million euros of interest payments. The working capital movement was driven by calendar year renewals for enterprise customers, which are often billed one month in advance of renewal, particularly in physio tools, and we expect this to unwind early next year. Intangible asset additions were 1.6 million euros in the period and predominantly consisted of development of the SaaS platform, plus initial investment in a new access virtual care product, which Henrik will speak about later. In order to ensure PhysicTrack can effectively scale, we reviewed our internal operating systems and made the decision to implement ChargeBee, a subscription management and billing system, and NetSuite as our group-wide ERP system. There were some upfront capitalised bill feeds in the year related to these, which will continue into the first half of next year. The largest item here on cash is of course the cash generated by the IPO, shown here net of the fees incurred. At the year end, €2.7 million of this cash has been utilised to fund acquisition consideration payments and M&A related costs. This leaves the Group with a strong cash position of €14.3 million to invest in future M&A activity. This is a summarised position of the Group's balance sheet. The first line here includes the internally developed technology platform, as well as the intangible assets and goodwill arising on acquisitions. This figure now includes the accounting for our physio test acquisition. Accounting for our most recent acquisition announced this morning will be included in the Q1 2022 numbers. 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 high levels of billings towards the end of the year. Deferred revenue is primarily generated by physio tools who bill upfront for 12 month contracts. Deferred consideration relates to the rehab plus and physio test acquisitions. And then just a quick piece of housekeeping here, as we've previously announced in order to align our financial year and with our customers purchasing cycles, the board has made the decision to change our year end from November to December. So we'll be shortly releasing an interim report for the three months ended December, 2021. to align with the new year end alongside a 13 month annual report. All key dates related to this have been updated in the financial calendar on our website. And that's all for me on the financials. Of course, feel free to ask any questions in the Q&A portion. But for now, I'll pass you back to Henrik.

Thank you, Charlotte. And just a few slides here in terms of the strategy and outlook. We will reiterate here, on the left side there, market growth dynamics continue to be favorable. We are in the middle of really nice macro tailwinds. We spoke about the trends for small to midsize providers to invest in technology as well and becoming more advanced following pressure from consumers to step things up. And that's a trend that we see continuing across our market space. And obviously on the enterprise side, we see a lot of RFP activity. We see a lot of investments into the space, and this will continue to be quite favorable. Now in the middle there, organic growth levers. We are just in the beginning of digitization of emerging markets, for example, and we have nice presence there. We had some notable wins in places like Indonesia in the quarter. And that's an indication that this is something that is about to take off. So we're quite happy there with the exposure that we have to these markets and we can expect more activity there in the future as we move forward. On the M&A side, we continue to see some very interesting opportunities with some great entrepreneurs that can come in with healthy, fast-growing standalone businesses that can also fertilize what we do with the rest of the business and we are happy to continue this activity and we feel that the targeted on average one m&a transaction quarter this is continues to be achievable and this is a very very exciting time to be in the space because there are some really really nice opportunities out there Just a quick view ahead in terms of what we're doing product development-wise. We are introducing new SaaS-based products for our care, providing subsidiaries RehabPlus, and Physiotest, RehabPlus in the UK, Physiotest in Sweden. And this is based on existing PhysiTrack technology that has been enhanced to be a holistic care product on a subscription model that gives employers access to health and wellness and rehabilitation products for emotional wellbeing and for physical wellbeing. And it's a product that we are slowly releasing here in Q1, starting in the Nordics. And this is something that allows providers to tailor a digital journey for employers in a preventative way for emotional well-being and physical well-being. We come in and assess a company with employee questionnaires and also blood testing, with IP from physio test, which has been very, very successful with great growth. And we calibrate our offering for the individual companies and the employees. You launch widely, and then you reassess based on the actual results that come in. For the individual employee, it is a personalized journey that is underpinned by great technology and great humans that work with the technology to make sure that you have a journey that fits for you under that access umbrella. If something happens, you have access to rehab professionals that can come in and do virtual care and also hands-on care because we have a physical network in the UK and we also have a partnership with some of the biggest care providers in the UK for that part of it. Very, very interesting journey to have been on for the last few months. In terms of narrative and in terms of visuals, we are very human-centric in the way that we are communicating this, because we are dealing with something that's set to prevent injuries and things like that to happen, but also to increase overall well-being. And we have worked with some excellent branding consultants that have helped us develop this very human-centric, culture-building, habit-forming narrative, which has been a pure pleasure to market test over the last few weeks. A lot of exciting things coming based on the Axis ecosystem, starting in the Nordics and later in the UK. Final slide here, just reiterating our financial goals. Top line growth is 30% in the medium term. This is not something we plan to abandon anytime soon. In terms of profit margins, same thing there, 40 to 45% in the medium term, very achievable. However, keep in mind that as we acquire businesses and we work through them to enhance them, to accelerate them, we have to accept a little bit of pressure on our margins. But in the medium term, we expect that we can clock in at the similar type of margins that Physitrack historically have been in, which is in the 40 to 45% range and higher. Lastly, no dividend distribution is expected. But those of you who know us, we have communicated that we think that healthy, profitable companies should have a dividend agenda. And we do have that, just not in the medium term, because we will use our funds mainly for acquisitions. That concludes the presentation, and we are now happy to take questions.