Earnings Call Transcript - BTCY Q2 2022

Operator, Operator

Good day, and welcome to Biotricity's Fiscal Second Quarter 2022 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, sir.

Mark Forney, Corporate Secretary

Good afternoon everyone and welcome to Biotricity's fiscal 2022 Q2 earnings conference call. As a reminder, Biotricity’s quarter ended on September 30, 2021, so all figures presented for this period will reflect that end date. Earlier today, we issued our fiscal 2022 Q2 results press release, which highlighted a number of financial results. 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. 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's Founder and CEO, Waqaas Al-Siddiq. Please go ahead.

Waqaas Al-Siddiq, CEO

Thank you, Mark, and thank you everybody for joining today. I welcome you to our second quarter fiscal 2022 phone call. The second quarter of our fiscal 2022 marks one of the most important milestones in the company’s history with our uplist to the NASDAQ in August. Those of you who listened to my commentary before the opening bell heard how we describe our company in terms of a product timeline and as a journey and our vision. So I’ll be echoing those themes throughout today's call. Only about 50 companies uplist to NASDAQ every year, so that alone is a major achievement. The positive ramifications for Biotricity from this event will resonate for years to come. Our journey to NASDAQ came after hard work as we built our operation from concept to commercialization, no small feat for a small company in one of the most complex diagnostic markets in healthcare. For those of you who are new to this space, it is important to remember that cardiac disease is the number one killer in healthcare in every country in the world, and patients at cardiologist offices are typically life-long in duration. We set out to build a complete solution that fills some of the current gaps in cardiac care and we are well on our way to achieve that with the upcoming product releases. We began with cardiac diagnostics. We are a Bioflux product, which generates the majority of our sales today, but our vision is to follow individuals throughout the cardiac journey. Understanding where we are at on that journey is central to understanding why we are so excited about our future. And I would like to begin by describing our robust product pipeline. In terms of Biotricity and what we started and our focus from the beginning, we felt that there was a gap in the marketplace in remote patient monitoring, where patients are coming into these chronic conditions like cardiac disease and they are dealing with services and technologies in silos, and there's really no holistic view of the patient. And so, at Biotricity, we built the platform and we applied that in the cardiac space. Our core product is Bioflux for diagnostics, which is where the entry point in the journey begins. In terms of our product, it’s being used by over 1,500 cardiologists across 23 states now. Our approach to delivering diagnostics is a recurring revenue model, where we provide the technology to the doctors as opposed to an outsourced service, which is what the traditional approach to diagnostics was before our entry into the marketplace. And to contextualize that a little bit for all the listeners, if a patient is walking into a cardiologist’s office and they’re having an issue or they have a problem, the cardiologist will give them a prescription and send them across the street. Then they get serviced by a service provider to perform the diagnostics and then they're returned back to the doctor who determines the next step in terms of their condition. In terms of our approach, we provide all the technology to the doctor, allowing them to prescribe and hook up the patient within the clinic. This cuts the number of steps for the patient. It also streamlines the workflow, but more importantly, it creates a revenue stream for the doctor and for Biotricity because we are delivering the technology as a service model. So the doctor pays when they utilize the technology instead of making $0 by outsourcing. When we take that model and apply it in diagnostics, we have seen great adoption. When you think of Biotricity today, it's no longer a proof of concept story. It’s about really execution. The question now is, how do we successfully do what we’ve been doing successfully up until this time? Our next year and next two years are about executing and continuing to successfully do what we’ve already done. In addition, we will layer on this idea of vertical growth to execute on our product roadmap and follow the patient through that cardiac journey. Let's dive a little deeper into that context. What happens to a patient? A patient walks in, complains of something, goes onto diagnostics with Bioflux. Once diagnosed, they return to the doctor who does a procedural intervention, like a pacemaker installation, ablation, or prescribes a therapeutic to help control their cardiac issues. Post-diagnosis, the patient goes into disease management, returning to the doctor’s office for follow-up and checkups. If something goes outside of range, they return to diagnostics. Diagnostics is used once or twice a year on a patient, not monthly. Once diagnosed, most care is around disease management. We have built a portfolio designed to track these patients through their entire cardiac journey. After diagnosis, management involves providing these patients with devices to track their blood pressure, medication, sleep, heart statistics, and engage with physicians remotely through telemedicine. All of this is reimbursable. Our business model at Biotricity, like with Bioflux, will be the same with all these solutions: delivering technology to doctors within one ecosystem, who then deliver it to patients, bill insurance, and we collect revenue based on usage. This creates vertical growth as we sell into existing cardiology customer ecosystems. Until now, we have been opening up new clinics and states successfully with one core product: our diagnostics. Moving forward, we will continue that approach with a suite of products to accelerate our growth and improve traction. With every product, we support our Bioflux business because it supplements and enhances our diagnostic business. We now have a better view of the patient, and if we see something in disease management, we can recommend diagnostic assessments. Furthermore, we are increasing our total addressable market. Today, with one product, Biotricity has a total addressable market of $1 billion. As we deliver disease management and telemedicine, that market could grow to $30 billion and later to $50 billion. Our goal is to create vertical growth through executing our product portfolio to track patients throughout their cardiac journey while selling directly into existing clinics and increasing this total addressable market. We are very excited about that, and that is our plan. Over the next 12 to 18 months, we will announce our execution on this product portfolio. We've already discussed our upcoming Biokit product launch expected early next year. This suite of medical devices will connect into our ecosystem, allowing tracking for patients and providing a personalized toolkit for daily monitoring. Everything we've developed is reimbursable. Over the next 12 to 18 months, investors should look for two things: continuing to achieve what we have done successfully across 50 states and executing our product portfolio for vertical growth. Investors can see this horizontal approach and expect vertical growth as we implement these products. We are excited about executing our vision and seeing all these elements come together into one ecosystem to drive a larger market opportunity and accelerate Biotricity's growth.

John Ayanoglou, CFO

Thanks, Waqaas. We also extend our welcome and thank you to both our newly interested stakeholders and our longtime supporters who joined us on our call today. As Waqaas mentioned, our crowning achievement during Q2 was our successful uplist to the NASDAQ capital market in late August and the concurrent recapitalization. I will discuss the positive ramifications of those moves and their impact as we consider our financials. As a reminder, during the quarter, we completed an underwritten public offering of approximately 5.4 million shares, generating total gross proceeds of around $16 million before deducting underwriting discounts, commissions, and other offering expenses. We are proud of the fundamental strength of our uplist offering, which was oversubscribed and priced at $3 per share, with no warrants. This is the kind of deal typically reserved for larger companies already listed on NASDAQ, and we were excited to welcome our new set of investors under such positive circumstances. Our dedication to creating and maintaining shareholder value is evident in our share count at this stage in our maturation as a company. We achieved our uplist without a reverse split and are now on NASDAQ with a modest 43 million shares outstanding. We have worked hard to maximize our capital resources to achieve growth without unnecessarily accessing public markets. That strategy will continue into the future. Our balance sheet is now at its strongest position in company history, giving us resources for more than a full year of growth. As of the quarter's end, we had a record cash level of $11.7 million, a much stronger position than the under $0.5 million we had a year ago. As we grow our revenue pipeline, our burn rate as a percentage of revenue decreases, enabling us to stretch our dollars further as we add additional revenue. To achieve this, we invest in a professional sales force, allowing us to manage geographic expansion while relentlessly pursuing a strong R&D pipeline to lay the groundwork for future growth. Every quarter, we discuss the built-in growth characteristics of our strategic model. Q2 2022 highlighted those growth attributes with a strong year-over-year revenue increase. However, this quarter also showcased our model's resilience against unusual circumstances, including those forecasted for Q2. As expected, we achieved solid triple-digit year-over-year revenue growth with $1.81 million in fiscal Q2 2022 revenue versus just under $750,000 in fiscal Q2 2021, representing a 143% year-over-year increase - a continuation of our streak of triple-digit year-over-year quarterly revenue growth since the inception of our revenue cycle. Given the circumstances, this quarter’s growth was not easily maintained. Q2 is often a period of seasonality wherein many cardiologists take summer vacations, particularly in August, leading to lower usage rates for our technology. What wasn’t expected was the surge in COVID. The quarter ran from July 1 to September 30, coinciding with the peak of the COVID delta variant. We experienced temporary COVID shutdowns in several Southern states, particularly Texas, Arizona, Oklahoma, and Florida, where cardiologists deferred procedures. Fortunately, patients needing diagnostic testing and treatment typically reschedule visits in the following weeks or months after clinic closures, resulting in temporary disruptions. Literal headwinds also affected us, as Hurricane Ida hit Louisiana on August 29, bracketed by tropical storms during the quarter, leading to busy storm seasons in our southern and eastern markets, including New England. Despite these headwinds, we still managed 2.5% sequential quarterly growth and commendable year-over-year growth. Historically, these speed bumps have generated pent-up demand for services as patients deferred visits to cardiologists. Our positive outlook rests on the strong investment in our sales force expansion since July. We've opened new territories and hired numerous new salespeople, which should bode well for revenue growth in the coming quarters. Our Q2 gross margin was 63%, with a cost of revenue just under $700,000 increasing only 10% from last year, against the backdrop of a 143% revenue increase. It's an area we will focus on as we scale amidst global supply chain challenges facing technology manufacturers. With our uplisting and equity deal in the quarter, we incurred numerous significant charges that muddied the results due to their one-time nature. Overall, our G&A expenses spiked 119% to $5.7 million compared to $2.6 million in Q2 fiscal 2021. R&D expenses totalled $626,000, up 55% from $402,000 in the same period last year. Consequently, our operating expenses rose 111% to $6.3 million compared to $3 million in Q2 fiscal 2021, resulting in a net loss of $10.7 million versus $3 million loss in the comparable period last year. However, this included a sizable non-cash accretion charge of $5.2 million, a 1410% increase over last year’s accretion expense. The company also incurred significant NASDAQ listing fees and related one-time charges as part of the uplist process. This combination of one-time line items increased our comprehensive loss to about $11 million, a 240% increase over Q2 fiscal 2021. We expect to return to more normal expense figures in the next quarter. In perspective, adjusted net losses would have been $5.2 million or $0.128 per share, normalizing for one-time uplisting expenditures. This compares favorably to the loss of $5.6 million and $0.156 per share in the immediately preceding quarter. We set new company records with total assets at $14 million and net assets of $7.75 million. Even with many one-time events this quarter, we were able to refuel our growth engine with a capital infusion that will support a highly predictable trajectory into fiscal 2023. Our R&D efforts are well planned with relatively few unknowns. While FDA approval timelines are a factor, these unknowns are few in number. Our strategy is well established and we now have sufficient funds to pursue geographic expansion aggressively. We expect to end this fiscal year at a $10 million annual run rate. However, true firepower is anticipated when we launch our bio tray and monthly carelines, which will run alongside our powerful Bioflux growth platform. As a result, we project triple-digit growth rates as far into fiscal 2024. We believe our technology pipeline will drive significant growth and results over the next few years, as Biotricity builds a multifaceted ecosystem designed to penetrate and monetize the patient population we've already reached with our cardiac technologies and provide superior chronic care. We believe our recurring revenue business model is something our investors will appreciate and value. At this point, I will turn the call over to Waqaas for his closing comments.

Waqaas Al-Siddiq, CEO

In Q2, we still managed to achieve triple-digit growth, and we believe that such growth is essentially unstoppable at this point, focused solely on our Bioflux product. Everything else discussed today is an add-on that will accelerate this approach. We are super excited about the next 12 to 18 months. I want to highlight a few key points: despite the challenges of COVID, we still managed to achieve a record quarter with our current trailing revenue at $5.75 million, on track for continued growth. Our Q2 revenue of $1.8 million represented the 10th consecutive quarter of triple-digit year-over-year growth, with quarterly revenue up 143% from last fiscal year. Currently, we have over 300 centers across 23 states, and we plan to increase this as we deploy the capital raised through our uplisting by expanding our sales force. Our balance sheet is the strongest it has ever been, as highlighted by John. We are well-positioned to execute our vision and growth plans, with no plans for near-term financing due to strong capitalization. Furthermore, we manage our burn rate efficiently, strengthening our financial picture. We are also prepared for unforeseen issues such as supply chain challenges. We foresaw these issues and increased our inventory, allowing us to fulfill orders and insulating our growth plans from shortages. Our ability to grow won’t be hampered by industry shortages since we've proactively addressed these concerns. This demonstrates solid management of the company. Overall, with our capital standing alongside our execution strategy and a strong track record, we are positioned to excel over the next year, inspiring investor confidence. As we take in the capital from our recent equity raise to expand our footprint and enhance the Bioflux diagnostic program, I want to clarify that our capital will not increase R&D budgets; instead, it will be judiciously allocated as our revenue grows. We've invested enough in technological development over the last 18 to 24 months, and our R&D budgets will now align with revenue growth since the technologies we are rolling out are not theoretical; they're ready for launch. In summary, with Biotricity's well-capitalized environment and an execution plan designed for success, we aim to consolidate cardiac services within our unique ecosystem. Doctors will be using our system not just for diagnostics, but for disease management, telemedicine, and all services within one place, simplifying workflow while creating multiple revenue streams for us and them. We aim to build lifelong patient relationships following our ecosystem model, much like Livongo did in diabetes care. We look forward to replicating that success in the cardiac landscape and are excited about bringing this vision to fruition. Thus, our strategy going forward focuses on sales acceleration through expansion and product portfolio execution, with sufficient capital backing our plans. We don't foresee capital needs for at least 12 months while we demonstrate our ability to execute. Being listed on NASDAQ enhances our capital strategy, allowing us to attract a broader investor base and actively observe our progress. In conclusion, Biotricity aims to execute and capitalize on our investments. We've already demonstrated the efficacy of our diagnostics products and a proven business model. Continuing to do what we do, we will augment success with our portfolio. We will deliver reimbursable, best-in-class products meeting the needs of every cardiology practice and all hospitals. We are transitioning from a single solution company to a provider of a diverse product line within a digital healthcare ecosystem. Our solutions connect doctors to a telehealth platform to establish the largest virtual cardiac clinic, seamlessly integrating diagnostics, disease management, and remote monitoring to truly enhance patient outcomes. At this point, I'd like to open the call for questions.

Operator, Operator

Thank you. We will now take our first question.

Allen Klee, Analyst

Hello. This is Allen Klee from Maxim. Congratulations on the quarter. On the chronic care business that you're rolling out, talk a little about how you think about what this opportunity is for yourself over time. And there are other companies that are pursuing chronic care. So why do you think you win? And then second on BioTrade, which the FDA is reviewing now, could you maybe provide any updates on that? Thank you.

Waqaas Al-Siddiq, CEO

Thank you, Allen. Absolutely. Regarding chronic care, our approach serves as a natural extension to what we do, starting with Bioflux for diagnosis. Patients diagnosed with cardiac issues are essentially chronic patients. Once diagnosed, they can utilize chronic care management on a monthly basis, which supplements our existing services. The opportunity is massive and appears complimentary, enhancing both Bioflux diagnostics and chronic care management growth prospects. While it’s difficult to predict precise penetration rates, we see potential for substantial revenue increases even at modest engagement levels. With access to approximately 3 million patient lives through 1,500 cardiologists, capturing even 5% or 10% of this base could yield substantial earnings over time. As for differentiation, chronic care in the cardiac space isn't prevalent—unlike Livongo's dominance in diabetes management, we stand alone in offering comprehensive solutions. Cardiac patients typically transition through multiple systems without the benefit of diagnostics integration or a holistic approach. Our competitive advantage is rooted in the seamless integration of diagnostics with chronic care, enabling clinicians to utilize one system instead of navigating multiple platforms. This drives efficiency and effectiveness in patient management. Regarding BioTrade, we have been in communication with the FDA and expect to talk to them again shortly. Everything is in order. There was a temporary reprioritization at the FDA due to the delta variant, but they are obligated to respond to us by the end of the year. We're confident and will provide updates.

Allen Klee, Analyst

Thank you. I'll jump back in the queue to follow up with questions. I'll let other people go now. Thank you.

Chet White, Analyst

Hi, this is Chet White, Helios Alpha. I just wanted to ask, can you provide some details about this new concept you've introduced regarding the ecosystem? How do you envision it attracting new patients to the doctors? It seems somewhat aligned with a D2C ecosystem, similar to telemedicine providers. Could you provide comparisons with peers in this space and how your approach differs?

Waqaas Al-Siddiq, CEO

Sure. I previously mentioned why Teladoc acquired Livongo, citing the need for patient retention. Telemedicine providers like Doximity and Doctor on Demand primarily handle urgent one-off visits, but chronic conditions require ongoing specialist care. This disconnect leads to patient dropout from the ecosystem when they need regular care. Where we come in is within the specialty centers, capturing existing patients using our products for diagnostics. Over time, we collect data to define patient needs and enhance our network of cardiologists. Ultimately, when a general practitioner refers someone for cardiac care, we can guide patients directly to practicing cardiologists using our system. This allows us to proactively manage and expand our ecosystem while establishing deep connections with specialists. Thus, our focus in the next 12 to 18 months is to build this ecosystem internally first. The subsequent stage aims to attract and engage patients through targeted marketing strategies designed to streamline their entry into our customer network.

Chet White, Analyst

It seems like you’re positioning for both linear growth now and a later acceleration that includes broader market strategies.

Waqaas Al-Siddiq, CEO

Exactly. We have undertaken meticulous market research to understand patient and specialist behaviors regarding cardiac healthcare. Importantly, our pathways align with measurable strategies we have assessed. Our job is to engage patients effectively, and we aim to execute this through expanding our sales team and deploying capital efficiently without being dilutive.

Chet White, Analyst

I appreciate the clarity. Can you also discuss your capital strategy moving forward with a focus on additional funding and leveraging potential?

Waqaas Al-Siddiq, CEO

Certainly. As previously mentioned, we're holding onto our strongest balance sheet in history. Our most recent financing felt favorable, and our burn management is a key to our focus. We have adequate capital for growth over the next year to year-and-a-half. For the foreseeable future, we do not plan to raise any capital unless it's strategically beneficial. We aim to avoid anything that might dilute our existing investors. Should opportunities for inventory financing arise or avenues to enhance our capital without impacting equity, we would explore those options. We've achieved a strong capital position and intend to capitalize on growth.

Chet White, Analyst

Thank you very much.

Operator, Operator

And moving on to our next caller.

Spencer Kirschman, Analyst

Hi, this is Spencer Kirschman in for Kevin Dede with H.C. Wainwright. Congrats on a good quarter, given all the headwinds you faced. I was just curious about your growth plans in terms of your sales force headcount and plans for expansions beyond the current 23 states.

Waqaas Al-Siddiq, CEO

Absolutely. We typically refrain from discussing specific sales force size due to its dynamic nature. That said, we have been actively hiring since securing our capital. Expanding our footprint to encompass 50 states is indeed our goal, yet we prioritize acquiring top talent over geographic reach. We prefer to employ an A+ team, even if it means not establishing a presence in every state. Thus, we plan to focus on nurturing talent to ensure competitive success.

Operator, Operator

Thank you. There are no further questions at this time. Gentlemen, we will turn the conference back over to you for any additional closing remarks.

Waqaas Al-Siddiq, CEO

Thank you. I want to thank everyone who joined us today. To summarize, we are very excited about the next 18 months and the transformation Biotricity is undertaking. I want to emphasize a few key points: Firstly, our capitalization is stronger than ever, which positions us to execute effectively on our plan. It's crucial for investors, both institutional and open-market, to track companies with solid capital structures. We have the capital and the proven strategy that works: a product that is currently utilized by 1,500 cardiologists across 23 states. Now we must continue to deliver that success as we expand to 50 states, utilizing the capital we've raised. Secondly, our product portfolio's implementation will be crucial, enhancing our growth strategy. Everything we've talked about in terms of triple-digit growth this year and into the following years is tied to our Bioflux. All else serves as an addition, contributing to accelerated growth. It is important to note that these developments aren't theoretical; they've already been realized. Expect to hear about our progress regularly over the next year and a half. Lastly, investors should monitor our capital deployment strategies and growth from existing operations while watching for how we bring our ecosystem to life. If we maintain our existing trajectory while enhancing our product offerings through current customers, we believe both our investors and the company will thrive. Thank you for your continued interest in our story; we hope to keep you well informed.

Operator, Operator

Thank you, sir. That does conclude today’s conference. We thank you for your participation. You may now disconnect.