Physitrack PLC

Hello, everybody, and welcome to the Physitrack Q3 results webcast. I'm Henrik Molin, the CEO of Physitrack, and I'm joined by Charlotte Goodwin, our CFO. And let's get started. Let me just get the presentation up. Here we go. So we will give you some... Quick highlights from Q3, followed by a business update. And then Charlotte will walk you through some of the details of the financial results. And I'll look a little bit at strategy and outlook after that. And then we'll open up for Q&A. Q&A, we are doing now via the Zoom platform. Use the Q&A function on your screen, please, and so you can start writing your questions now, copy-paste them in as the time comes. Okay, let's kick this off. Q3 in short. We're seeing some very, very nice numbers. Year-to-date, 65% growth in top-line revenue. Of this, 30% was organic revenue growth. So getting that combination in with both achieving growth by acquisitions and organic growth, very, very important. We'll talk more about that as the call goes on. And EBITDA increased 46% to 2.6 million euros. Some very, very nice results. The financial APIs here is part of the report, so we'll get you some more of those. A couple of highlights in terms of the business, and we'll have more details on this later, but if you want to just ditch us and grab a cup of coffee after this, these are the things that you need to keep in mind. We have invested in the access ecosystem to be able to broaden Champion's offering. And so an example of that you saw with the launch video of mental health therapy, which is a milestone for Champion. And it is a milestone for the wellness division and the strategy that we actually started about 2020. Two years ago, when we launched the M&A program, so we'll revisit that a little bit later here in the presentation. So more added to that care escalation to complement what is already physiotherapy as part of Champion's very, very strongly growing platform. And also we have undertaken the rebrand of Champion Health in several geos. And as you know, from now on, the wellness division and what we do there is all gathered under the brand name Champion Health. On life care, some interesting things going on there, obviously KPI-wise, but notable. We have been able to access some real rock stars in terms of development and in terms of the firepower behind our technology there. And we have gotten some fresh perspectives, some new interesting initiatives. And what's notable there is what we call easy as one, two, three. We have easy link, easy print, and easy assign, which are three features that will really help us accelerate with healthcare providers that actually don't want to be super tech savvy with their patients just to make things very, very easy for them. A lot of busy healthcare providers out there in public healthcare are For example, they actually don't want to do tracking. They don't want their patients to be logging into apps or downloading things off the app store. They just want something very, very easy. Well, we've solved that with the easy series of features. More to come on that. And excitingly, on the PT courses side of things, paving the way for these bundles that we see will help us accelerate into the American enterprise marketplace. further there. And so to complement the platform and to actually take that to all other levels, we have invested in a new learning management backbone to that platform, which will launch in the next few weeks. And that will add some fuel to the fire with the subscription-based there, which is accelerating nicely. Almost 1,000 new customers on the PT Courses platform over the last few months, which is great, but there's a lot more to come, and those bundles will be very, very for the American market. Now, let me get you some of the business updates. But just as a reminder, we have two divisions here at PhysiTrack. There's life care technology there on the left, which is the heart of our offering to health care providers, predominantly physiotherapy customers. But it's a wide range of customers that provide care to their patients, that care for their lives, and hence the name life care there. Today is 72% of the platform. And on the right side there, virtual wellness, which is gathered under the Champion Health brand. And this is also accelerating nicely with some great growth numbers, as we will see. Now, current state of play, we are now at a 13 million run rate across the business. And so the strong growth continues. Wellness has passed 4 million euros and life care 9 million. And more to come here. That is the continuation of the trend that we have seen. And notably, we are doing this with a nice profitability as well, which is part of our DNA. Now, The newest division with PhysiTrack is the wellness division. And that came about because we founded our M&A program. And this is actually two years old now. And so I thought we'd take the time to just revisit that and just to revisit that strategy a little bit, because I think it's quite unique in terms of what we actually do do there on the M&A side of things. We are not a buy and hold strategy. We are not a company that will just buy assets and sit and just hope that they will develop without our working with them. We're actually a very active owner. And we have a buy-and-build strategy as part of that. And the build means that we go for organic growth and we go for profitability once companies are on board. And so this is now a couple of years old. We have made six acquisitions. And as we can see just from this year, year-to-date pro forma, almost a million euros of new revenue, organic revenue, and 56% growth, which is a sign that companies The strategy is working quite well. And the work that we undertake is really, really geared towards finding interesting assets with great entrepreneurs, running those companies, making those entrepreneurs work with each other which is a great thing to do because entrepreneurs are usually a bit of a lonely breed when it comes to building their businesses and figuring out the great ideas. And to put them in together to figure out where to go next and to accelerate a very exciting part of our business, that's really rocket fuel. what we have done there has really paved the way for us to emerge as a leader in virtual wellness. And the numbers, they have been very, very good in that way. And so just some KPIs and some key things there. Now, Going back to the very start here with the acquisitions of physio tools, that's been incredibly successful. We found some great synergies both on the cost side and the revenue side. And as we can see there, the EBITDA marginal on an adjusted basis is now 48%. Now, that's a really strong number for what is quite a big division compared to what PhysioTools used to be before we IPO'd the company. And so we keep expanding revenue and we keep expanding margins there. And the PhysioTools has really, really helped us with that, and it's a sign that the – The strategy behind that was very, very favorable. PT courses, we spoke about that and with investments that we're doing there, but that enhancement and acceleration of our customer base is moving ahead of plan, which is very, very positive, and we will see more effects on that on the revenue and also on the margin side of things next year in the life care division. Now, we spoke a lot already about the wellness division, but what I'd like to point out at the bottom there, over a 500% top-line revenue growth for two of these entities. And this is Champion Health Germany, which was called WellNow when we acquired them, and obviously the mothership champion there with the software platform. These are exceptional numbers, and these are numbers that are being achieved in collaboration with companies the leaders from the PhysiTrack group and also the very, very smart entrepreneurs from the other entities there inside of the wellness division. So very, very active acquirers and a team that's really going for the organic growth. And it's two years into this. I'm very, very proud of what we have achieved and what these entrepreneurs have achieved under our umbrella. Now, just very, very briefly, I will walk you through some of the developments here on the life care side, and then I'll do the same on the wellness side. Just as a reminder, the life care side, nicely diversified in terms of the product, and we have a world-leading platform that works. provides tech for healthcare providers so they can help their patients, notably as the ecosystem. And we have several revenue enhancers inside of that mix of products that make this a very, very interesting play, not just because of the growth of the ecosystem in terms of the number of users, but also what we can do with that ecosystem as people become customers. So a lot of pages in our playbook here. Now, if you look at the development here of life care over the last quarter. So on the top right, 9% growth in licensed numbers, which is nice. We have an ecosystem that is growing. If you look at below that, you can see that the churn keeps coming down. And for those of you who remember coming into 2021's fourth quarter, we were about twice the size of that churn. And this is a natural effect of the pandemic era and a lot of the a lot of the noise in our data goes away. But it's also a sign that our platform is that sticky, that very, very important day-to-day tool that our customers have to be able to enhance the life journey of their patients. But that's a downward-moving trend, and it's expected to continue thanks to a lot of the initiatives that we have there, specifically targeting the customer value experiences and the – the need for our product as an everyday tool. Now on the left there, some nice return on investment. We spoke about the development of the in-house or the recruitment of an in-house development team for some top firms like Zendesk that's performed better than planned. There are almost 20 people now on board in that team, and we're very, very proud of the achievements that they've had so far. We've spoken about Easy 1, 2, 3, which is going to see the light of day here, starting with Easy Link. over the next few weeks. And as we go through the next few months here, you will see more tools that are going to be more palatable to healthcare providers that might not have the same appetite for very, very advanced tech in the day-to-day with exercise prescriptions. That will be a game changer in a lot of ways for new customers and also for existing customers. And, of course, security, stability, very, very important, especially with enterprise sales, a lot of increased pressure there. We are able to invest time and effort and money into that in a way that our competitors can't. It's getting increasingly competitive out there. And one of the things that you compete on is the security and the stability. And this is quite hard to cater to as a smaller competitor and now size-wise competitive. We are the biggest player in the world for exercise prescription, eclipsing MedBridge quite dramatically with what we have, which is our biggest competitor in the U.S. market. And, of course, some work here on the product-led growth side. We have introduced a free version, which is a very simple version, which allows for print-only products. This is a nice new gateway into the ecosystem that is expected to drive product-led growth further. and more on that to come in the coming quarter, but we are doing a lot there on product-led growth. It's a very exciting part of running a business because that growth is actually quite inexpensive. The customer acquisition cost is quite low, and so that's a rocket tool both for the top-line revenue numbers and for the margins, and that's some of the secret sauce and what we're what we're achieving here over the period going forward. Now, we spoke about the LMS and PT courses, and we will be seeing more things there in terms of the bundles, especially in the U.S. market, cross-marketing with some things happening on screen and the Physiotrack platform to introduce PT courses and the ability to get your licenses as a physiotherapist or an occupational health professional renewed and managed with the PT courses platform. On the Champion side of things, same idea here. It's the core ecosystem, which is the simple version. It's a plug-and-play situation with Champion where you set that up for an employer, and you get their employees to partake in that using algorithmic analysis. You come up with the content of the Netflix of well-being, which is the staple part of the champion product. Now, for more advanced customers, we have an enhanced data analysis offering, and we have the coaching of the leadership teams. Of those companies, we have the ability to do live webinars and live hand-holding and some of these things that make this introduction of a wellness strategy to a company much easier and much more effective. And as we can see here, there's a lot more in that category. in that Champion Health bag of goodies, and we keep expanding on that. And as we saw with the introduction clip there, we're featuring Harry Bliss, the CEO of Champion, a lot more of these enhancers coming in. It's really, really good for our customers, but it's also great for the group in terms of having diversified, stable revenue flows that have an all-weather type of characteristics. Looking at the wellness segment, so fantastic growth there, over 50% for former revenue. So year on year, this is organic growth. This is hard work from the members of these teams. And I think this is really, really nice to see. It was a bet for Physitrack to diversify into wellness. We are very passionate about elevating the world's well-being and This move here with what it's achieving is very, very satisfying to see. Bottom right there, look at this recurring revenue. This is subscription revenue. And so the plan for this division was always to make sure that as much of this revenue as possible was put on a SAS model. And this is happening in a very, very big way. And we can continue to see this trend in this allocation between subscription and non-subscription revenue. So more to come. And I should say the other half of that 50%, they are made up of very sticky long-time contracts that we provide to employers. And they are recurring customers. So it's quite sticky. It's not one-off revenue in that sense. But we will see more of the subscription piece come in. Now, looking at bottom, sorry, top left there, some great things here. We're boarding the offerings, so we want that all over the strategy. We want the widely diversified strategy with the revenue enhancers. And so mental health therapy, we saw that launch today. We've had a first few successful quarter here with the physiotherapy enhancement that we had with the care escalation. And, of course, the rebrand, which could be fun for our Nordic and Swedish participants. We have now also set up a sales office in Stockholm to work with some of the Swedish multinationals, which have a great appetite for products like this. It's also a beachhead into the rest of the Nordic markets. And then lastly, Champion Health Germany with some great traction there with big, big multinationals. And we expect to see some further results on that going forward. Now, I'm just going to finish off this slide with mentioning the great achievement for getting Curry's on board. Curry's is a 10 billion pound electronics retailer with eight geographical locations around the globe. And they have over 800 stores, 35,000 employees. And if you're in Sweden, El Gigante is part of the Curry's group. But we had a first really, really substantial contract with Curry's, 15,000 employees that came on board. in a long-term relationship with Curry's, and it's a very, very significant customer. We'll see more of this. Curry's was the first customer that really allowed us to speak about them publicly. We're very grateful for that. We have other customers of notoriety in the book of business there with Champion, but a lot of them, they want to be discreet. But Curry's, that was a great thing to be able to talk about. And, of course, seek that self-advocacy. A lot, a lot of things going on there with Champ and explaining that 500% growth that we've seen there over the last year. So that was the update for wellness. And this is just a little summary slide of what we saw in the beginning with Harry Bliss talking about it. This is exciting. We are creating a – a more holistic product there. It's great to have preventative components of a wellness product like that, but to be able to escalate things into actual care provision provided by actual humans, that is a very, very important part of that story and why employees will be very, very happy to work with this. And it's also, of course, if you look at it from a revenue perspective, helping people decide, this is something that creates revenue enhancement, it creates more stickiness, and it's something that will really help us further accelerate the growth and the profitability of Champion Health for the rest of 2022 and in 2023. That concludes my initial remarks there on the business update, and I'm going to hand you over to Charlotte Goodwin, our CFO.

Thank you very much, Henrik. So I'll start off here with a brief overview of the key financials for the nine months ended September 2022. Year-to-date, revenue has increased 65% to €9 million from €5.4 million in the prior year. Some of this growth is, of course, due to the acquisitions of physio tests, PT courses, WellNow and Champion Health. On a pro forma basis, with the revenue from these entities included in the prior year comparisons, revenue increased 30% in line with our medium-term targets. Year-to-date, the PhysiTrack group has delivered adjusted EBITDA of €2.6 million, up 46% from the prior year. And this results in adjusted EBITDA margins of 29% for the nine-month period, down slightly from 32% in the prior year. This fall represents the well-signaled impact of the virtual wellness acquisitions on the group's margins. Total EBITDA has increased 340% from the prior period to 1.2 million euros as we incur less costs relating to M&A and integration work. And it's pleasing to see that as these costs fall away, we've returned to a bottom line profitability for the quarter. Operating cash flow has doubled to 0.6 million euros. Through to the next slide. Now on to a closer look at revenue. On the left here, you can see group revenue by quarter, both on an absolute and a pro forma basis. On the right-hand side, we can see revenue split by life care technology and virtual wellness. In life care tech, which currently makes up just under three quarters of our revenue, quarter on quarter, an increase in underlying subscription revenue has been offset by a fall in one-off custom app setup fees. Year-to-date, the revenue increase has been driven by increasing user numbers and price rises. The virtual wellness division, which currently makes up slightly more than a quarter of the group's revenue, has experienced strong pro forma revenue growth in the quarter of 57%. It's also pleasing to note that an increasingly large portion of this division is now made up of subscription revenue, currently half, offering a more stable revenue growth profile and a move towards increasing margins. Through to the next slide. Moving to profit. On the left-hand side here, we see the prior year figures. Last year, EBITDA was €0.3 million, with adjusting items of €1.5 million stripped out. Adjusted EBITDA was €1.8 million. In the current year, EBITDA has risen to €1.2 million, an increase of over three times. Within this, there is €1.3 million of non-recurring adjusting items, primarily relating to the acquisition of PT courses, WellNow and Champion Health, and associated integration costs, as well as the unwinding of discounts on deferred considerations. With these amounts stripped out, adjusted EBITDA has increased by 46% to €2.6 million. Adjusted EBITDA margins have fallen slightly from 32% last year to 29% in the current, due to the well-signalled impact of acquisitions, as well as the continued shift of the group towards virtual wellness revenues, which currently operate at a lower margin, plus investments into future growth. Over the medium term, we expect these to rebound to our target EBITDA margins of 40% to 45%. On the left, sorry, through to the next slide. On the left here, we have adjusted EBITDA shown by quarter for the prior year and in the current year so far, highlighting the strong growth in this area. On the right, we have EBITDA by division, which is the first time this information has been presented. In Life Care Technology, which is the longest established division, EBITDA margins are at 48%, an increase from the prior year of 44%, driven by increased revenue and the efficiencies implemented in the acquisitions in this division. In the virtual wellness divisions, margins are currently at 3%. While we're starting to see margin expansion in some businesses which have been part of the group for longer, namely Rehab Plus, which was a loss-making entity at the time of the IPO and now delivers 10% profit margins, we're also investing in these businesses in the short term to drive future growth. The grey bar represents group costs such as board fees, listing fees and associated advisory fees. As would be expected as revenue increases, these have reduced as a percentage of revenue as the costs remain relatively stable. To the next slide. Now looking at cash, we opened the year with a cash position of 13.3 million euros. Adjusted EBITDA on the period generated €2.6 million and was offset by a working capital movement of €0.8 million. Intangible assets and fixed asset additions were €3.2 million in the nine months and consist of development of a live care tech platform and investment in the virtual wellness ecosystem, plus the previously signalled spend on build fees for internal systems such as Charge, Rupendo and NetSuite. There was an acquisition spend in the period of €6.9 million in relation to PT courses, WellNow and Champion Health. plus the first consideration payments of 3.4 million euros and related M&A and integration costs of 1.2 million euros. On the 27th of July, 2022, we entered into a 5 million sterling revolving credit facility with a three-year term. In the quarter, we drew down 0.9 million sterling this facility to fund parts of a deferred consideration payment. Net of arrangement fees, this resulted in a cash inflow of 0.8 million euros. There was also a 0.1 million euro movement on foreign exchange on our cash balances. This leaves the group exiting the quarter with cash of 1.1 million euros, plus remaining undrawn facility of 4.7 million euros, giving total available liquidity of 5.8 million euros. Through to the next slide. Now moving through to the group's balance sheet. The first line here includes the internally developed technology platform, as well as entitled assets and goodwill arising on acquisitions. Cash and borrowings we've already covered. Trade and other receivables have increased due to the recent acquisitions, particularly Champion Health, which builds up front for one- to three-year contracts and is expanding rapidly, as well as the relative increase of our enterprise customer base in the life care tech division and the sales of custom apps in the quarter. Additionally, accrued revenue related primarily to Rehab Plus has increased as this business grows rapidly. We are pleased to have seen the trade receivables balance start to reduce in Q4 as these impacts equalise. Deferred revenue is primarily generated by physio tools and Champion Health, who bill up front for 12-month or longer contracts. Deferred tax arises on the intangible asset balance that is recognised on acquisitions and will unwind over the period of the amortisation of these assets. Deferred consideration relates to the Rehab Plus physio test well now and Champion Health acquisitions. That's all from me, so I'll pass you back to Henrik.

Thank you, Charlotte. And we can obviously have the opportunity to ask some questions in the Q&A. Don't forget to put your questions in the Q&A section here. Just briefly, we're visiting the strategy where we find ourselves. And on the left side there, the market growth dynamics are very, very favorable for us, which we see in the top line growth. And, of course, we also see that in the margins with markets. some high-margin products driving that growth, and also with pricing power that we've seen on the life care side of things with the price adjustment that we did sort of mid-year. So we can see that continuing. And, of course, in this microclimate, things are stressful. Things are a little bit difficult for companies and for employees. In that scenario, investments in wellness technology is something that's seen as a quick growth. Solution or a quick help to that problem. So the building of a long-term wellness priority is something that has been triggered by what's going on in the macro environment. So that's giving us a lot of wind in our sails, and we can see that continuing on the champion side of things. I can mention there that what we are looking at on the champion side of things is to start the focus on product-led growth in order to attract business from small to mid-sized customers. We have very significant interest from small to mid-sized customers on the champion side of things. And this is, you know, over 10,000 opportunities that they have seen over the past year or so. But the focus there has remained on enterprise sales. which has focused on 500 companies, 500 employee companies and up. And so what we will be seeing here in the fourth quarter and in 2023 is an increased focus on that, which would be very, very interesting for the middle part of this, the organic growth levers. So the product-led growth piece with Champion, enhancing that on the busy track side. Remember, we spoke about the easiest one, two, three. There are a lot of other things involved there in the market expansion. On the Product Lab growth sites, we'll be seeing a lot of initiatives there in terms of getting more leads in through our automated channels, higher conversion through the automated channels, and some nice tools in there in terms of our customers to get up and running with them faster, easier, and in a way that their patients would love with what they need. And so it is a very favorable environment. for organic growth for us and this is something that's expected to continue on the right side there m a initiative now we are very very focused on organic growth at the moment we are focused on letting these fantastic entrepreneurs work together to achieve some more spectacular numbers and we're talking about you know the 500 each for uh well now uh known as champion health germany these days and champion the mothership but also not to forget Champion Health Plus, formerly known as Re-Health Plus, which has clocked in at over 180% growth in the last year. So we're very, very focused on that work, and that's likely to continue. We do see a lot of interesting opportunities. We are keeping our powder dry at the moment, though, but the M&A program, as we've seen, has been very, very successful, and it's not something that we plan to discontinue anytime soon. And just as a final note here, we are seeing that we have a balanced portfolio of business. We have something that's achieving both organic growth and profitability. It's very deeply rooted in our DNA. This is in this environment, even when a lot of companies are struggling with growth and, of course, with profitability, which is even harder, we have something that is more or less an all-weather product. the way that the world looks and the way that the world will look as we're out of these stressful times. And we have true product market fit. I think Champion Health is a home-run product in terms of what it's achieving, and it's being very much supported by the macro environment. And we believe that we have a great formula here to achieve some amazing growth in the following quarter and in 2023. Therefore, we are reiterating our financial goals. As a group, we will be achieving 30% or more growth, organic growth. We are expanding margins. We have the tools in the toolbox. We have the history of it, even looking at the life care division today with 48% growth. Sorry, this is something that's that's very much part of what we do every day. And it's something that we are doing in the wellness division as well with these really, really hungry, smart entrepreneurs. So all the time we don't have any we don't have any expectation of lowering our our goals with the EBITDA margin. You can expect us to hover around where we are now, around 30%. Over time, it's a very, very buoyant climate as an investor in that, in people, processes, technology, et cetera, and we want to be really, really good at that. So we have no reason to believe that we will expand significantly that around 30% margin in 2024. But over time, definitely you can see that in our KPIs. That's very much part of the playbook. Lastly, dividends, love them, not just right now. Cash is better spent on investing in tech teams and really smart companies. But sooner or later, it will be part of what we do as well. It's a natural effect of running a successful business that spits out a good level of cash. And that concludes our presentation of this morning. Now we will look at our screen and we will answer some of the questions that have come in here on the Q&A. So let's get to it. First question here is for Charlotte. Is there a reason you put your midterm financial targets on pause in this noisy environment?