Greetings, and welcome to Biotricity's Fiscal Third Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I will now turn the call over to Debra Chen, Investor Relations.

Good afternoon, everyone, and welcome to Biotricity's fiscal 2023 third quarter earnings call. As a reminder, Biotricity's third fiscal 2023 quarter ended on December 31, 2022. So, all figures presented for this period will reflect that end date. Today, Biotricity issued its fiscal 2023 third quarter results press release, which highlighted financial results. A copy of the press release is available on the Investor Relations section of Biotricity's website and full financials will be filed with the SEC on Form 10-Q posted on EDGAR at sec.gov. Before we begin the company's 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's Founder and CEO, Dr. Waqaas Al-Siddiq. Please go ahead.

Thank you, Debra, and thank you everybody for joining us today. I welcome you to our third quarter fiscal 2023 teleconference. As I prepared for this call, I reviewed my teleconference notes from our fiscal year 2022 third quarter a year ago, and it reminds me how incredibly far we've come in just 12 months. It's natural to momentarily lose sight of this when focusing on day-to-day marketing initiatives and monitoring ROIs, building sales, interviewing for team expansion, evaluating distributors, and negotiating contracts, all while closely watching our cash flow. Just a year ago, we were still finishing and introducing our new products, building out our cloud-based Biosphere, raising capital, and training new team members. A year ago, we operated in 26 states. Today, we operate in 32 states. Over the past year, with our product launches and service introductions and upgrades, we have increased our total addressable market 35 times from $1 billion to $35 billion. Just our Bioflux and Biotres solutions alone address a market valued at $6 billion. We believe we are in the right place at the right time. Today, we are recognized as a leader in providing state-of-the-art remote cardiac monitoring devices combined with a sophisticated cloud ecosystem for data aggregation and AI capabilities that meet the needs of customers ranging from cardiologists to consumers, all of whom desire less expensive, more convenient, and deeper data on heart health and wellness. Today, our focus is largely on sales and marketing. We have achieved an enviable customer retention of about 98%, which reflects the excellence of our proprietary hardware and cloud-based services, as well as our customer service support, which is often overlooked compared with other players in our space. That high retention rate directly increases our growing recurring technology-as-a-service revenue. As heart disease is typically chronic and ultimately progressive, our customer retention rate is a valuable leading indicator for raising our customers' lifetime value. It simply summarizes our strong competitive advantages. What has not changed in the past year, nor since founding Biotricity, is the passion I, and everyone at Biotricity, has for this business: to win, to disrupt, to succeed, and to positively transform cardiac care, efficacy, and outcomes. Strategically, our long-term goal remains unchanged from that stated a year ago: to consolidate cardiac services within clinics and hospitals into one ecosystem, our Biosphere, so that doctors are using our ecosystem not just to deliver diagnostics, but also for disease management, remote management, and telemedicine all in one place. This is the future of medicine and the future of Biotricity. In short, Biotricity has grown immensely in the past 12 months, setting us up for increasing growth ahead. I'll now spend a few minutes covering our recent operational progress and our near- and long-term operational strategies. As before, we only pursue markets where we are confident reimbursement exists. Upselling our growing suite of services remains an important component of our sales strategy. Technologically, we are increasingly leaning into AI with its data and predictive capabilities to create better and faster analytics and data delivery, targeting more pervasive forms of patient monitoring and lifestyle management. Over the past three months, our most important strategic development has been the signing of three distribution agreements with two leading U.S. marketing and distribution partners and one group purchasing organization, also known as a GPO. All three are prominent leaders with high visibility and market coverage in our sector. In total, just in the U.S. alone, they cover over $20 billion in yearly purchasing. While I regret not being able to name them at this time, I can tell you they are names everyone in the industry knows. We are not naming them strictly for competitive reasons at this early launch stage of our distribution strategy. We are also actively evaluating and, in some cases, negotiating with other medical device distributors that have geographic or vertical coverage that complements our existing distribution networks to further expand our distribution strategy. Additionally, to drive sales, we are actively engaged in marketing initiatives that include highly targeted advertising, both in social and conventional media, in trade shows and industry conferences, and in direct marketing with our current engaged and prospective physicians, clinics, and hospitals. Furthermore, we are selectively adding sales professionals from the top of their field into our team to increase our market coverage and penetration. Our Biosphere products and services are best sold with an in-person demonstration. With COVID concerns largely faded, I now expect an increase in our sales team's number of in-person demonstration appointments with physicians, clinic, and hospital purchasing managers that will help drive continued growth. In fact, past sequentially flat sales, in part, reflect a reluctance by clinicians to schedule in-person sales demonstrations. To our advantage, this is now opening up. Further, I should add that our name recognition is infinitely higher than it was just one quarter ago, with Time Magazine naming our Bioheart device to its list of the Best Inventions of 2022, and with the prestigious NIH Grant awarded to Biotricity to further expand our technology.

Thank you, Waqaas. For the quarter just ended, revenue of $2.5 million was a healthy 27.4% higher than the corresponding quarter of the prior year, up 25% on a year-to-date basis. The flat fee component of our technology-as-a-service subscription recurring revenue from Biotres and Bioflux are continuing to ramp and grow both in gross terms and as a percentage of total revenue, as well as a percentage of our revenue that we collect immediately after we invoice. Our gross margin in the quarter was 57%, which is in line with our historical average and well above the prior year corresponding quarter of 42.7%, which was affected by a one-time business mix impact that quarter. Our business continues to scale well for revenue expansion. Reaching positive cash flow is a constant focus, and we worked hard to cut back on expenses and manage our spending. Unsurprisingly, we are data driven. So, as we gain more granular internal sales and marketing data, we continuously scrutinize and plan for the ROI on our R&D as well as our marketing initiatives. This includes the ROI of our individual sales professionals. With our suite of state-of-the-art products and services established, we balance our R&D spend with our drive to innovate and lead our industry. In our third fiscal quarter of 2023, we reduced our R&D expense by just under 3% from the year-ago quarter to $876,000, following higher R&D activity earlier in the fiscal year. We also improved efficiency and reduced G&A by 4% year-over-year at just under $4.4 million for the quarter, doing this while supporting a 27% larger base of sales, admin, and related marketing activity. At the bottom line, Biotricity narrowed its year-over-year net loss by about one-third from $7.36 million or $0.149 per share to $4.82 million or $0.091 per share. We continue to pursue a path towards profitability and believe the next few quarters will indicate an inflection in our already growing revenue growth trajectory. We are actively working on closing debt financing that will add the needed capital to our balance sheet to get us there. At this point, I will turn the call back over to Waqaas for his closing comments.

Thank you, John, for that report and for doing an excellent job managing our finances to reduce cash burn while we build the company and its sales to achieve positive cash flow. Our healthy gross margin is an important leading indicator of our future profitability, and we believe that our business scales well. Our far higher marketplace name recognition and brand value may be difficult to quantify, but we are seeing it anecdotally in our internal sales and distribution reports from the field. With our recently implemented U.S. distribution agreements covering large segments of the $35 billion market, I'm quite confident in our position and outlook ahead. With that, I would like to open up the call for questions.

Thank you. We will now be conducting a question-and-answer session. Thank you. Our first question is from Kevin Dede with H.C. Wainwright. Please proceed with your question.

Hi, Waqaas. How are you?

Hi, John.

You mentioned a high retention rate. I missed the number that you offered, and I was hoping you might have something that you can compare to and maybe offer a little insight on why you see it as a leading indicator?

Yeah, sure. So, the number that we said was 98%. The reason we say it's a leading indicator is that in our technology-as-a-service model, if our retention rate is high and we continue to close customers, forward-looking, it gives us an indication of maintaining that revenue for the 12 months ahead.

And do you have a comparison like maybe from a year ago or probably not, right, because it's...

Yes, we have not actually done a comparison. It's a good metric that we should start tracking, and we could probably go historically and do that. Our retention rate has always been high, but that's a very good point and we'll take it under consideration. I think that it would be useful for people to see. I think that the result is going to look very similar.

I know you're not comfortable releasing the names of your distribution partners, the new ones, Waqaas, that you spoke to, the three of them. Is there a chance though you can maybe offer a little more detail on the breadth of their business and how it might take you beyond 32 states? And maybe whether or not you think there's any cannibalization?

Yes, for sure. So, this is early days, and this is why we want to see the traction of the distribution partners first before we start providing more information and guidance on it. What I can say is that they are across the entire United States. So, it'll give us national exposure almost immediately. In terms of cannibalization, we've mapped it out, so they're aware of our customer list and it's a very organized, tightly integrated relationship. So, we're very excited about it. In terms of their business, these organizations are also switching over and looking for SaaS-like models. They have some commodity business distribution, often selling products that are either a commodity or consumable, which means they're inside these facilities on a regular basis. Partnering with distribution partners that have a wider scope and more resources to go after the different types of clinics becomes advantageous for us. Even though the cardiac volume is lower, they have the ability to push our products into markets that we weren't initially focused on.

Okay. That sounds great. Now, could you sort of address the same question though by product type that Biotricity is offering given the Holter and Bioflux?

Yes, for sure. So, looking at the Holter product and the Bioflux, I can give you a great example. The GP market, specifically the general practitioner market in smaller clinics, we don't typically focus on them because they don't have significant volume. If you scale that up and have hundreds of clinics, the volume becomes meaningful. With a company of our size, we focus on the higher volume, lower-hanging fruit, specifically cardiac centers, specialty groups where we can achieve greater volume. That is advantageous for our products like Bioflux and Biotres. With the hospital systems, we have to be under contract with them as they have multiple sites, outpatient centers, and they use these products across several locations. If we have a distributor that is already under contract, they understand the supply chain and support the ecosystem, it accelerates our sales cycle. We can focus on the areas where we have existing relationships while the distributor handles those opportunities where our relationships and sales cycle are longer.

Okay. All right. As you look forward, I know you're not comfortable offering guidance, but could you give us your insight on how you see overarching market growth, given this general trend towards outpatient monitoring? And how you see Biotricity products stacking up against competitors, especially considering that the market potential is attracting other technology providers?

Yes. The market is definitely growing. We know that post-COVID, everything is shifting toward outpatient care. It's more cost-effective for the health care system. We are seeing a clear trend in the marketplace. In terms of competition, while others are entering the space, we focus on delivering best-in-class technology. Our technology is award-winning, and we continue to innovate, upgrade, and expand our platform as an entire ecosystem. Our number of FDA clearances and filings is evidence of our commitment to maintaining technological superiority. Competitors may come in, but they need to meet our technical standards, which so far no one has. On the Bioflux side, others still rely on third-party phones for communication while we own our device's communication capabilities. Our Biotres device, which is seeing many one-channel monitors, provides better clinical quality and more data as we focus on three channels. If everything else is equal, physicians will prefer three-channel devices because they offer better diagnostic yield. We aim to remain technically and clinically superior while seeking more comprehensive engagement with our product portfolio. Thus far, we are the leaders in this field and will continue to strive to maintain our leadership.

Last question from me, Waqaas. You've mentioned AI several times. Now, I know it's a trending buzzword right now, but can you give us more insight into how you're using AI and how it differentiates your solution?

Yes. Part of this is proprietary, so I’ll provide a higher-level response. There are several ways we apply AI in our business. We employ deep learning to analyze our data insights and optimize our algorithms based on performance. From our initial device launch, our data sets incorporated clinical data and FDA-provided data. Now, we have our own data set from hundreds of thousands of patients, allowing us to understand our algorithms better. This increased focus makes it easier for physicians to utilize time efficiently by limiting the amount of data we deliver to them. Another area involves internal automation to streamline our processes, leading to operational efficiencies and requiring fewer personnel. This means that if a patient has a common question, we can use AI to automate responses rather than having a technician respond. Lastly, we focus on enhancing support for nursing staff. If a nurse is managing 25 cardiac study patients, how can we increase that support to 50 or even 75? By assessing workflows and automating as much as possible, we aim to create a digital assistant for physical nurses. Overall, these AI applications are centered around operational efficiency and specificity to our business.

Thank you, sir. I appreciate it.

Always.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Waqaas Al-Siddiq for any closing comments.

Thank you, everybody, for joining our call. We appreciate you attending and taking time out of your busy schedule. If there are any other questions that pop up or that we can help answer, please feel free to reach out to us. We are always available. You can reach out at [email protected] or through any of our social channels or LinkedIn channels. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.