Physitrack PLC

Good afternoon, everyone. And should I say, willkommen, bienvenue, welcome to PhysioTrack's Q3 2024 results webcast. I'm Henrik Molin, the CEO and co-founder of the PhysioTrack group. And I'm here with our immensely talented CFO, Charlie Corwin. Today, we're going to walk you through the highlights of the third quarter. We're going to touch on the key business updates from the two divisions. We'll discuss the details of our financial performance with Charlotte guiding us through the financial jungle as usual in depth and we will take a little outlook for the quarters ahead. Afterwards, we're going to revisit our strategy and give you a clear view of our focus areas as we approach year end. Following these updates, we open up the sessions for Q&A. So to ask questions, please use the chat function located at the bottom of your Zoom screen. So with that, let's dive in and get started. So to give you an overview of the group for the quarter as it stands, We're continuing to see contrasting performances in life care wellness. For the quarter, we recorded a negative cash flow of 400,000 euros operating at a loss of 200,000 euros on a group level. Our wellness segment, specifically Champion Health, the software provider, has been the primary contributor to this cash flow shortfall with sales not reaching the levels that we had anticipated for the quarter. I'll go into more details on this shortly, but let's start with a high level summary. So on a positive note, our subscription revenue has shown strong growth. It's up 19% compared to the same period in 2023. So this aligns well with our strategic focus on establishing repeatable high margin sticky revenue streams. As a result, subscriptions now account for 82% of our revenue in Q3 2024, a significant increase from 72% in Q3 2023. However, we are feeling the impact of delays in Champion Health's rollout in the international markets and the need for a stronger product that consistently delivers on user KPIs so that we can grow existing customers and close new ones faster is in the works because it's needed, as you can see in the numbers. Turning to the business updates, you can see the relative growth tilt between the two divisions here. 65% life care, where we put tools into the hands of healthcare providers around the world. 35% is Champion Health, where we put tools into the hands of employers around the world. In terms of life care, revenue generation from product-led growth has reached historic highs. This quarter's numbers are among our best ever for the Physitrack ecosystem, with September marking our third highest revenue month for product-led growth in Physitrack on record. So this success reflects the investments that we made in December 2023 in a new marketing team, in new tools and new methodologies for doing this. Last time we worked on this, was in 2014, 2015, and it was in the need for a little bit of an update. More on this a little bit later. There is a substantial upside in this product line, and we're really well positioned to build on this with the amazing team that we have in place. We've also intensified efforts in enterprise sales under our new head of sales, Henry Gilas, who started in the group in May. So this has already generated some significant opportunities, including a noteworthy contract with Alaris, which has received considerable press. Seeing this progress in enterprise sales over the last few months is really encouraging, and it underscores the systematic work we do to elevate both marketing and sales to new heights. On the product side, development is progressing really well. We're now operating under a product operating model where decisions are made on the back of data and customer feedback rather than intuition and top-down instructions from leaders. which is more common for startup type of environment. Our head of product, Patricia's leadership in reshaping our methodology, our communication and our tools has been remarkable. And I'm confident that we'll see continued progress over the next few quarters as we roll out features that will enhance the subscriber experience for patients. So that's the ultimate priority in building a sustainable ecosystem. Moving to wellness. So while we have faced challenges, there are some promising signs in Champion Health for the software and in other parts of the division. We are expecting a strong close to the quarter for Champion Health Plus. It's a care provider arm. And that's driven by cross-selling opportunities to the Champion Health software customers that need online and hands-on MSK services in complement to what they do with just the platform. Notably, and announced this morning, we recently closed our first contract for Nexa by AI-powered MSK tool. And we are integrating that into a major insurers platform. Jan-Willem Wasmann, wellness program so this contract is valid at 50,000 pounds involves about 1200 referrals and it really reinforces that this innovation and momentum in this wellness division beyond just the champion of software which supports a broader turnaround strategy for the division. Jan-Willem Wasmann, Now. I'd like to highlight an example of our marketing team's impact and on the back of these really strong ecosystem numbers for the quarter. So on the right hand side of the slide, you see three cell funnels and they describe the situation that we have for customers coming to our webpage, the journey that they go through in the conversion work that we do with automated tools and then eventually what the final conversion is. So what you can see here is that the October numbers have very significantly higher conversion numbers for just one month compared to the whole quarter as a whole in Q3. You can also see how this is developing very, very nicely for November as well. So we see a continuation, and we see a lot, a lot of great things coming out of the fantastic work that Michael Day, the head of marketing, has done with his team with reshaping the way that we do these things. Now, note for November, we have a 14-day free trial period, and the first conversions from November are still a few days away. But all in all, this data is a really strong indicator that our user engagement and conversion efforts are gaining real traction, and this achievement again, stems from a thorough overhaul of the self-signup methodology that we originally created in 2014, 2015. We've modernized the entire approach and we're exploring enhancements like a new paywall structure and additional payment options just to boost this further. So as we continue to push new product-led growth initiatives in wellness as well, We initiated those earlier this quarter. We will be applying this refined methodology to support that growth. And so it's an exciting trajectory. And I believe that the revenue potential from these efforts will be considerable. So that covers the key aspects of performance and capability for this quarter. Over to Charlotte for the financial update.

Thank you very much, Henrik. So here you'll see an overview of the key financial highlights for the nine months ending September 2024. In the nine months, we delivered a revenue of 12 million, up 5% from 11.3 million in the prior year. Within this, 9.8 million or 62% was subscription revenue, which is up from 8.2 million in the prior year, an increase of 19%. We're pleased to see this strong increase in our core subscription high margin revenue. For the nine months, adjusted EBITDA was 2.9 million in line with the prior year. This resulted in an adjusted EBITDA margin of 24%, compared to 26% in the prior year. EBITDA was 2.5 million, up 10%, and the 2.3 million in the prior year, as adjusting items fall away. The six months operating cash flow for the year was 1.9 million, up 28% from 1.4 million in the prior year. Moving to the next slide, we take a closer look at revenue. Nope.

And we lost Charlotte there temporarily. While she gets going, I can continue to speak here. And what you can see, it's a strong pattern of maintaining revenue growth. We are in a bit of a flatline situation, quarter on quarter. But you can see that historically, we have a tendency to outperform as... as our product lines mature. Let's just see what happened there to Charlotte. Hopefully it's not a power outage where she was because then we'll lose her indefinitely for this call. One second. All right, what I'll do is while we wait for Charlotte, I'm gonna skip ahead to the Just the end of this piece, just to revisit the value proposition. So our offering is holistic. Everything that users need is in one place. So it's just like when you buy a car, you want to buy the whole car at one dealership and not the steering wheel in one place, the seats in another place and the gear shifts somewhere else. So that's how we think around the platforms. We're really well positioned in the current macro environment with a balanced and diversified portfolio. And a product is designed to perform well regardless of market conditions. It's robust and it's all weather and nature. So if you give us some time, we'll prove that with Champion Health as well. And hopefully we can keep opening this webcast with some more Broadway show tunes. Now, we seem to have some challenges with Charlotte coming back into this webinar. So what we will do is I will open up for Q&A. But looking ahead, our financial goals are really clear. We are doubling the company in the medium term. We are achieving strong profit margins over time as well. And we... plan to become a highly cash alternative business over time as well. So that wraps up the presentation here. with Charlotte on the sidelines, let me just go to the Q&A. So we'll see. Could be that there's a power outage where she is, and so that's why she can't dial back in. First question here, how much does Alaris impact the Q3 report? It's a minor impact on the Q3 report. There was some upfront revenue there in terms of the... Modifications that they needed to the platform to fit into their, they have an EMR solution that they roll up across a number of hospitals. And we are the go-to solution inside of that EMR. And so as Alaris grows, we grow as well with them. So I think there are three or four hospitals that took this on as a start. But there's an upfront revenue component of that because we do some of the modifications that they need for it. The impact of that is on an ARR basis, so recurring revenue that's then spread over the life of the contract. So it's a three-year contract and we get that monthly revenue booked every single month when we have, when this, when, We have subscription revenue coming in. So it's monthly revenue. So we'll see that for the foreseeable future. It's very nice. And of course, I think Alaris, given the size and scope and what their plans are for their hospital system, I think Alaris has a shot at becoming one of our biggest customers. So at least the top five. What is causing wellness to stagnate sideways? Does the product need to improve? I'll start at the end there. I think a product always needs to improve with the changing needs of a user base. So in terms of the needs and the preferences of users in the world where technology changes almost on a daily basis, and here's Charlotte, when technology changes on an almost daily basis, it's very, very important to be in tune with your customers and make sure that you adjust your product accordingly. So if you have a product operating model that we have in place for PhysiTrack, then this is something that's done systematically in terms of our always modifying and always working on a product. So there's always an underlying need from that, and that's something that systematically is in place. Now, in terms of the causes of this, you see a domino effect in a software as a service business when you have software delays. you can only really in earnest stop commercial work in a software business as a product is launched. And where we are, we operate somewhere between say three and 18 months in terms of our sales cycles. And given we have really big customers, especially in Germany, that means that we're probably towards the later end of that. So if you do the maths, if you have a one-year delay, that means that revenue coming into the books is going to be somewhere between three and 18 months. And probably in the worst case scenario, you're going to be at the longer end of that. Now, what I'm happy to say that there's been a lot of traction with Champion on the Swedish side of things where customers are a little bit smaller, so shorter sales cycles. And there's a lot of work that was done early on in sort of on the prototype stage in Sweden. So that's progressing quite nicely. where we are on Germany is that we are launching a pilot. I think we have nine customers that are targeted for that. And over time, we will see that those will, like in Sweden, come into sales processes as well. But again, it is a domino effect. And if you have a one-year delay, well, that means that your time to revenue gets delayed as well. that is what's going on right charlotte uh we are going to go back to your part of the presentation here which uh which uh started with the maintaining revenue growth piece if you could turn your camera on and uh can yes apologies for my side i'm having some connection issues here i've got the camera off to see if that helps um and if it goes well i hope i can get the camera