Biotricity Inc. Q3 FY2021 Earnings Call

Good day and welcome to the Biotricity Fiscal Third Quarter 2021 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mark Forney. Please go ahead.

Thank you. Good afternoon everyone and welcome to Biotricity's fiscal 2021 Q3 earnings conference call. As a reminder Biotricity's quarter ended on December 31, 2020, so all figures presented for this period will reflect that end date. Earlier today, we issued our fiscal 2021, Q3 financial results press release, which highlighted a number of financial results. It should be noted that these are preliminary figures that could change when the final filing is complete. A copy of the press release is available on the Investor Relations section of our website and the completed financials will be posted on EDGAR on February 16, 2021. Before beginning our formal remarks, I'd like to remind listeners that today's discussion may contain forward-looking statements that reflect management's current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. Biotricity does not undertake to update any forward-looking statements except as required. At this point, I'm pleased to turn the call over to Biotricity Founder and CEO, Waqaas Al-Siddiq. Please go ahead.

Thank you, Mark, and thank you everybody for joining us on this call today and hearing a little bit about our story, and what we've been up to over the last quarter. One of the exciting things that I think is an important milestone for us is we have done our first $1 million quarter and that is on the back of doing seven quarters of consecutive growth, barring one quarter with the original COVID outbreak back in 2020. What's more interesting and valuable than that is if you count the original release of our product, which was our first FDA clearance at the end of 2017. So 2018 was when we were figuring out reimbursement and really trying out. We didn't really have a sales force, but it was an exercise in understanding the market and ensuring that reimbursement was available for our product and our business model worked. Through that year we also had consecutive quarterly growth. If you included that before the one-year pre-commercialization, we are now at a point in time where we had 11 quarters of consecutive growth, barring that one quarter because of COVID-19. And that has really resulted in triple-digit year-over-year growth and approximately 20% to 40% growth sequentially. And that growth is not only in terms of revenue, but also in terms of physicians' access to patients and all of the other aspects that drive our business. To speak to that, we now have over 700 cardiologists across 20 states that use our product. That's a 150% year-over-year increase in the number of physicians that we had approximately. Those physicians service about 1.4 million patients. We've also seen geographic expansion. We are now in 20 states in terms of our network, which is up from 12 states last year. I think the exciting part I sort of alluded to in the last call, and I think that trend is continuing, is that we have a product roadmap and we are really trying to focus on increasing our current addressable market. As everyone knows, we are in the cardiac diagnostic space, and that current addressable market for us is about $1.2 billion market. With this new product that we recently filed at the end of December, which is the Biotres, if that product is approved, that addressable market is going to grow from $1.2 billion to $4 billion approximately. That’s exciting to us for a number of reasons: one is because, unlike our flagship product with the Bioflux where we were really stitching together a network, bringing the product and developing our footprint across the country. Every subsequent product and a product like the Biotres, if approved, is going into that ecosystem. Not only does it allow us to touch more of those patients, but it also goes in and increases our touch points within the account, allows us to go deeper and develop an even stickier relationship with our physicians. As we provide more technology and services with those physicians, those relationships get stronger and also expand our addressable market while also increasing our revenue. One of the big milestones for this year is obviously we are confident that we will get the approval. But until that happens, we are working with our existing customers and focusing on the Bioflux product. We have a track record of getting FDA approvals. I am confident with our internal team, our management team that we know what we are doing. We have a track record of showing that we know what we are doing. It is a process that we are very engaged in, but also very excited about. I think another important aspect of last quarter that really facilitates growth is about resources, what are your resources on hand? We recently finished the financing, bringing in about $11.7 million in capital. This capital will be used to facilitate our growth, continue that growth and execute on our product roadmap. With those highlights, I'm going to turn it over to our CFO, John Ayanoglou, he will talk a little bit more about the numbers and the details before handing it back to me. I can take you a little bit deeper into our vision for the company and some of the things that we have on our plate that is going to come to fruition in the near future. John?

Thank you, Waqaas. And thank you to everyone who has joined us this afternoon. Let me start by saying that my comments will focus on our unaudited preliminary financial results for Biotricity's third fiscal quarter of 2021, which is the quarter ended December 31. Final post of financial results will be filed on EDGAR on February 16. This was a particularly strong quarter for Biotricity. I want to begin by highlighting our revenue, which increased from $0.4 million in fiscal Q3, 2020 to just over $1 million in Q3, 2021. This represents a 162% year-over-year increase, but just as importantly marks a sequential 34.5% increase over the $0.745 million we posted in Q2 of this fiscal year. Our year-over-year growth showed considerable strength this quarter. Revenue acceleration we feel is a true measure of sales growth. We are really pleased with the improvement in this category. Last quarter Q2, 2021 we posted year-over-year quarterly growth of 115%. So putting up a 162% increase in Q3 is a particularly positive change in our growth trajectory, that hockey stick that we like to see. We see this acceleration as a hallmark of the results to come in 2021 and 2022. Someday we know that we will run into a lot of large numbers in terms of year-over-year and sequential revenue growth as we anniversary these smaller starter quarters. But for the foreseeable future, we believe that the dual trends of triple-digit annual growth and double-digit sequential revenue growth will be consistent characteristics of our coming quarterly results. Cardiac patients typically need some kind of monitoring for the rest of their lives, particularly in the high-risk category where our core product lines are sold. We talked in the past about how our technology as a service model is similar to Software-as-a-Service models, but with a technology and physical product component. Now there is a real stickiness in terms of our customer base that has two levels. The cardiologist and the patient who forge a lifelong relationship that varies based on the patient's health. We want to be part of that relationship. Our high customer retention or simply put, repeat business speaks for itself. We have products that work well, state-of-the-art products. They work well in the cardiologist office. We're currently working to create a complete suite of products that bracket the entire span of the cardiologist-patient relationship. During the three months ended December 31, 2020, Biotricity incurred a net loss of approximately $4.1 million and a comprehensive loss of approximately $3.75 million compared to $2.4 million and $2.6 million in the comparative periods of the prior fiscal year. We had a big push to get our Biotres product ready for the FDA filing that occurred in December 2020 and are pushing just as hard to complete additional R&D and infrastructure development that we think will result in significant growth in the second half of this year. Just as important, we are completing these foundational R&D projects. We're simultaneously ramping up our sales team and the supporting infrastructure of the company. Operating expenses increased approximately 66.3% year-over-year to $4.4 million. This reflects the requirement for infrastructure and particularly to increase the growth of our sales team. These expenses are comprised of general and admin expenses and R&D expenses. Our G&A of $3.7 million was higher than the corresponding prior year period by 69.2%. Our R&D spend came in at just under $0.7 million this quarter, that's a 52% year-over-year increase and an acceleration from the prior quarter. This high R&D spend is because we realize that it provides benefits and R&D dividends, translating into important new revenue sources. Subsequent to year-end, the company completed an $11.7 million issue of convertible notes. This gives us the requisite funding to support significant growth. We have a solid track record in technology development and are building Biotricity into a trusted brand, giving us a ready-made audience for each new product offering. Since fiscal Q4 2020, our revenue has essentially doubled every two quarters, but it is important to note that most of this has been from organic growth, from our flagship product Bioflux. We expect 2021 to be the year when we layer on additional meaningful revenue streams, adding to the quality of our revenue and embedding our brand more fully in cardiologists' offices. Our recurring revenue model and new growth initiatives give us great confidence that we can achieve triple-digit growth again for fiscal 2021 and fiscal 2022. We haven't even started monetizing our data or nearly monetizing that relationship with the end patient and that growing group that we are seeing. More from that from Waqaas. Waqaas, back to you.

Thanks, John. I appreciate that. As I promised, let's go a little bit deeper in terms of what are our plans? What are we trying to do here at Biotricity? We've talked a little bit about expansion and growth that has been a characteristic of the company for the last few quarters and we plan on continuing that. Part of that expansion is really focused on driving consistent growth and revenue increase by expanding our sales force. Part of that sales force expansion is also about driving footprint. Right now, if you look at us in the United States, we are primarily focused on the northeast and the southeast of the United States and we want to go more westward and expand so that we are across the United States. The capital that we brought in puts us in a position where we can expand our sales force and drive a larger footprint. While we are driving that larger footprint, simultaneously, the product pipeline is about going deeper in existing accounts. I touched on this earlier; John certainly touched on it as well. We have the 700 physicians today and growing, but they are overseeing 1.4 million patients and we want to grow that to 2 million by opening up additional accounts and growing our footprint. The way we do that is by creating a product suite and expanding our product suite so that we can go deeper. At our core, as a company, we are a technology company. It’s been one of our key focuses since inception to ensure and focus on best-in-class technology. And we've been seeing the fruits of that: we have a 100% reorder rate across our customers and a fantastic retention rate. As a result of that, we have a trust factor and stickiness where these physicians are listening to us, and we're understanding what they need and we are building those features into our technology. Technology is a very important aspect in remote monitoring. COVID has certainly focused on the idea of monitoring. Self-isolation has become a norm and monitoring is the future. It was already a direction, but COVID has accelerated that awareness. The problem is that there are very few organizations that are really focused on technology; people get wrapped up in the clinical side. Biotricity has maintained that technology, and this model of technology as a service is the way to go from our perspective. We've developed our technology in-house. We’ve taken the time to build our own IoT infrastructure. This gives us the ability to stay attuned to what's going on with the market, when 5G comes out and when 6G comes out. Because we have complete control of the technology, we're able to improve that. Another aspect of that is focusing on collecting more and richer data. Our device is a three-channel device and typically more channels mean richer data and richer data means better accuracy and better diagnostics. When we look at other players in the cardiac diagnostic space, you're looking at FDA clearances from back in 2009, 2012, 2014 and so on. Biotricity's latest technology is synonymous with our brand, which is important when talking to cardiology and physicians, as they want to use the best technology for the best diagnosis for their patients. So, we focus on R&D and constant improvement. I talked a little bit about the Biotres product and how we've submitted it. This is a big focus for us this year to try to get this cleared and launched pending the clearance. We submitted it as on schedule as we had indicated, but what's unique about this product is, when you talk about patch monitors or Holter monitors, our competitors' devices have a one-channel monitoring system. We've built the Biotres to have three channels, and we've added connectivity, so you can actually offload the data; you don’t have to mail it back and wait two weeks for a report. We've ensured the reimbursement model works, so we look at the reimbursement codes and understand the framework helping physicians in doing the diagnostics within their practice. It’s all about a continuation of what we've been doing, which is to expand our sales force, expand our technology pipeline, and continue to grow our revenues. So we need to replicate our model and expand, while expanding our company awareness. We are today at an excellent position with the recent capital raise, where we have excellent visibility into our growth potential with our existing products as well as any future products. We can confidently say that we see the trend of triple-digit year-over-year growth continuing for this year and next year. This confidence comes from our recurring revenue model and technology as a service. This is why we have delivered 21 months of sequential monthly growth, minus one month for COVID. Hence we expect this growth of triple digits to continue for this year and next year. The important aspect is expanding our total addressable market. As we execute our product pipeline, we understand that real-time monitoring is a subset of diagnostics; it’s a $1.2 billion market. We are looking to make it bigger and that essentially is through our product pipeline and going deeper into the account. So with that, I'll summarize where we are as a company and what we are on track for this year. We've done very well this last quarter, and we already know we're going to do better next quarter. This success comes from our technology as a service model, ensuring that all our products are designed with clarity on how reimbursement is going to work for the physician, enabling them to carry out their diagnostics tasks. This stickiness leads to adoption, and that adoption is in a recurring revenue model, meaning we can confidently and consistently show growth. With that, I'm going to turn it over to questions. I know you guys have listened to us for quite some time, so I’m happy to take any questions.

Operator, if you could queue up the questions. And at this time, we will take Q&A so we've got 30 seconds to get that organized, starting our Q&A.

And we'll take our first question from Kyle Bauser from Colliers Securities. Please go ahead.

Good afternoon and thanks for all the updates here. Maybe just on the sales force side, I know what you're focusing on is ramping the headcount. Can you remind me what the current headcount is and where you see that going in kind of the trend?

Yes, so we're focusing on doubling our sales force right now. We're trying to focus, more than the headcount, on how many states we have exposure in. So we have 20 states that we are active in right now, and our focus is to grow that by 50% and get into 30 states by the end of the year.

Got it. And so as you expand, do you think you'll just add support to those existing states? Also, as a follow-up, what's your expectations for kind of unlocking the remaining states over the coming quarters?

Yes, that's exactly right. We will do a combination of adding to our headcount in states where we think that the population and opportunity is big enough. In smaller states, the population can be serviced with a rep that is covering a couple of states. Our goal is to expand our network by three to four states every quarter, so if we're trying to get to a 30-state exposure, the expectation is to add three states every quarter. If we see a huge market opportunity in a state, we may choose to expand within that state.

Got it, appreciate that. Lastly, it's nice to see the opportunistic raise and so you've got a nice balance sheet? How far does that get you and how do you expect the quarterly burn to trend as well?

I'll answer that a bit differently. This is not as binary as that because we are obviously growing. The characteristic of this raise is that we have existing shareholders participating and investors supporting the company in subsequent rounds. We are well-capitalized alongside our growth, running the business and continuing this growth trajectory for a 12 to 18-month program. So we are very happy not only with the capitalization but also with the investors showing commitment for subsequent capital needs. We are fine for the next 12 months to 18 months, maybe even longer depending on how we can focus on accelerating our growth.

We'll take our next question from Chet White, Helios Alpha. Please proceed.

Congratulations Waqaas and John, very nice quarter. I have a couple of quick questions. Can you add some color to what you've seen in the marketplace? We've noticed some pricing pressure for some of the peers like iRhythm. How is that affecting Bioflux and the upcoming Biotres?

No problem, thanks Chet. iRhythm is in the extended Holter market; our Bioflux is in the mobile cardiac telemetry market. So, the Bioflux is really unaffected by anything that's going on with iRhythm. Their issues are focused only on extended Holters. The Biotres product can be used as an extended Holter, but because our model is technology as a service, the product is already designed to be profitable and generate revenue from our perspective. We are not tied to clinical reimbursement but use technology usage fees. We've built it to work within the reimbursement framework that is currently the issue with iRhythm.

Can you talk about some of the risks you see? The growth is exceptional both sequentially and year-over-year in triple digits. But what do you worry about, making sure that execution happens? What are the big primary risks you're trying to manage?

That's an excellent question, thank you for recognizing that. Our model is designed for growth and by design we didn't want to get into the clinical operational stuff that directly ties with Medicare/Medicaid. Our focus is confidence in growth trajectory. I want to grow faster. We want to accelerate that growth through executing on the product pipeline and going deeper.

Could you give us some guidance for the next few quarters as you see, say for example, Biotres kicking in and some of other product pipeline kicking in?

We believe if Biotres gets approved, it’s going to have a 20% to 30% impact across the board for us. Outside of Biotres, we expect to maintain our quarter-over-quarter growth in line with the last seven quarters between 25% to 40% irrespective of Biotres.

It seems like you've done a great job delivering fundamentally very well. Now that you're scaling up, how do you envision broadening your investor base and getting into mainstream venues like NASDAQ and of course one day the S&P-500 like Tesla?

We are focused on growth and the capitalization we just received will facilitate that. We want to build the company awareness. Being on the OTC market limits our audience. We are committed to a national exchange because we believe that will expand our name recognition and audience. It’s on our radar and we plan to do that; it is a priority for this year.

We'll go ahead and take our next question from Chris Jarrous from Dunlap Equity. Please go ahead.

Waqaas, thanks for taking my questions. Regarding the macro in the space and the competitive landscape, what are your thoughts on the recent acquisitions? What does that mean for the market, and what you're seeing?

There is a lot of activity in the space. The recent acquisitions happening at substantial values; organizations more operationally focused that have clinician billing are being bought not as technology players. This paves the way for us, as we are a technology player, to achieve better multiples in terms of value. The consolidation shows validation that building technology is not easy. Remote patient monitoring has a high barrier to entry. Companies being acquired indicate that tech-heavy organizations like Biotricity could receive better investor interest.

Is the pace you are expecting to scale different from what we've seen from long-established firms?

We have one of the richest product portfolios that allows for layering and accelerated growth as a technology company. So, for investors, it's about watching us and seeing how we execute.

We'll go ahead and take our next question from Jeff Porter from Porter Capital Management. Please go ahead.

How do you prioritize getting a lift in utilization from physicians versus driving revenue growth by acquiring new physicians?

Utilization is about providing more data and getting it to physicians quickly to improve diagnostics. We've improved utilization over the last year with a focus on remote patient hookups, accelerated by COVID. We are working on product utilization, accessibility, and going deeper into our accounts.

We'll go ahead and take our next question from Liam Sherif from Platinum Point Capital. Please go ahead.

Congratulations on your phenomenal quarter. Can you speak about how cardiologists are paid for using Biotricity devices versus competitors, and the out-of-pocket costs for customers?

We are a technology provider; doctors buy our technology, handle the clinical and face the billing for services. They receive reimbursements that center on our device use, which allows for faster response times and oversight. For competitors that use clinical reporting, physicians face difficulties also collecting on procedures as they may bill higher than reimbursement rates. With us, patient relationships mean they often overlook smaller cost discrepancies versus managers of third-party providers who are more rigid.

Can you provide a breakdown of utilization revenues versus sales revenues this quarter? What growth are you seeing in utilizations?

Utilization revenues have become a larger percentage every quarter, while device sales are becoming a smaller fraction. Device sales last quarter might have been around 15-20% while a year ago it was possibly over 40%. We see our recurring technology model as critical and expect it to continue growing.

We'll go ahead and take a follow-up from Chet White. Please go ahead.

My question has already been answered. Thank you.

Thanks, Thomas.

Thank you. We'll go ahead and take another question from Chet White. Please go ahead.

No further questions.

Thank you everybody for listening today, hearing a little bit about our story, asking some very powerful questions. This ongoing connection is very important for us. Please feel free to join our mailing list and visit our website. It’s a part of our goal this year. Thank you.

Thank you so much.

With that, that does conclude today's call. Thank you for your participation. You may now disconnect.