Earnings Call Transcript - BTCY Q4 2021

Operator, Operator

Good day and welcome to the Biotricity Fourth Quarter and Fiscal 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 of MRK Investor Relations. Please go ahead.

Mark Forney, Investor Relations

Good afternoon, everyone, and welcome to Biotricity’s 2021 Q4 and fiscal year earnings conference call. As a reminder, Biotricity’s quarter and fiscal year ended on March 31, 2021, so all figures presented for this period will reflect that end date. Earlier today, we issued our fiscal 2021, Q4 and annual results press release, which highlighted a number of financial results. It should be noted that these figures may be subject to 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 by June 30, 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’s Founder and CEO, Waqaas Al-Siddiq. Please go ahead.

Waqaas Al-Siddiq, CEO

Thank you, Mark, and thank you, everybody, who took the time to join us today. And thank you to our shareholders who are joining on this call as well. By and large, the quarterly details will be covered by John. I think, obviously, my esteemed colleagues are more astute in delivering those details. The bulk of my remarks will focus on the areas that I think are important to the quarter from a business perspective, as well as laying out the vision for the Company and what I believe can help lead us in realizing our goal of becoming a $1 billion company. In terms of the quarter, we had a record quarter, and of course, John is going to go into those details. But what I’m more excited about is how that quarter and that year has set us up for the rest of this year and for our next fiscal year. I believe we will easily beat what we gave in our March 31st quarter in the quarter ending June 30th. I think we are on track for one of our biggest sequential quarter-over-quarter growths we have ever had, beating the projections that were put out by Maxim. This is occurring because we have gone through this pandemic and the country’s reopening. We suffered along with all other businesses due to the limitations in terms of freedom of movement. What became a point of importance during the pandemic is the need for monitoring. We’re seeing that trend continue as we come out of the pandemic, and that’s what I’m excited about in terms of the quarter for June 30th, as well as the rest of the year. The other important aspect of what I have seen transpire since our first quarter and our March 31st quarter is that, based on our expectations for the quarter ending June 30th, we believe we are on track for what was the target set earlier, which was $8 million to $10 million for this fiscal year ending March 31, 2022. To summarize my quarterly comments, we expect a great year ahead post-COVID; our core focus on the Bioflux business is accelerating. Biotricity has established itself as a remote patient monitoring company focused on the complex cardiac space. We believe the future is in connected healthcare devices. As things get increasingly connected, we see that the future of healthcare is where smart, intelligent devices are provided to patients to monitor themselves while collecting important information for doctors. Should an emergency arise, real-time data will be transmitted to the physician. Biotricity’s approach to realizing our vision of a $1 billion company is about expanding our total addressable market. Currently, we are in the real-time, high-end cardiac diagnostics. We have a product pipeline that allows us to engage with our existing customers and touch more patients more often. To put that into context, we now have 1,300 cardiologists using our product compared to 375 last year, representing a huge increase. We service 2.6 million patients through these 1,300 cardiologists. This aligns with our goal of reaching more patients by expanding our product portfolio. It’s important to understand that our product portfolio is very focused and aligned with our core business, Bioflux. Everything in our business begins and ends with Bioflux. Once diagnosed, the patient needs continuous management to ensure proper care. That's how we aim to grow and realize our $1 billion vision – by touching more patients regularly and leveraging the growth drivers of our business. Expansion involves deepening our existing customer relationships, expanding our sales force, and increasing our geographic reach in 23 states. Our Technology-as-a-Service model is critical for us, as it leads to better margins and lower overhead. Our revenue run rate is close to an $8 million run rate, and while we recognize that we're small, we're functioning on a business model that may undervalue our true size compared to industry averages. I'll hand the call over to John Ayanoglou to discuss the details of our quarter and important financial numbers.

John Ayanoglou, CFO

Thank you, Waqaas. Thank you to everyone who has joined us this afternoon. This was another strong growth quarter for Biotricity. I want to begin by highlighting our revenue, which increased from $362,920 in fiscal Q4 2020 to $1.2 million in fiscal Q4 2021. This represents a 227% year-over-year quarterly increase and is a sequential increase of 19% over the $1 million we posted just last quarter. We have the pipeline to back triple-digit revenue growth far into the future, and our confidence in this kind of growth is backed with high visibility. Most of our growth is organic at this stage as we expand our sales team and introduce new products over the next 12 months. Our quarterly growth trends were pronounced, with a year-over-year quarterly growth of 115.3% in Q2, rising to 162% in Q3, and now 227% in Q4. Our upcoming Q1 should again set a new growth record, suggesting it will be in the neighborhood of 250%. Our sales team is becoming more seasoned, resulting in higher sales from each additional department member. Currently, we are in 23 states, with many large markets still to penetrate including California and Illinois. Entering those markets will be a multi-year process. High-risk cardiac patients are unchanged worldwide, and our global Technology-as-a-Service model works identically across different geographies. As we increase our presence, we'll infill accounts with new products like our upcoming Biotres holter. This approach gives us a multi-layered growth strategy over the next few years, especially as we explore international markets. Lower margin products, such as the holter, open opportunities for larger market sizes and scale across our product lines. Our business model is different from a typical SaaS model due to the need for devices in cardiac offices, where equipment costs are particularly variable. During the quarter, we reclassified some costs related to cardiac studies, resulting in an improved quarterly gross margin of 69%, significantly up from our prior adjusted gross margin of 22%. As our network grows, so will our margins and economies of scale. The technology we use insulates us from billing issues that have affected similar businesses. We are proud of our high customer retention rates; as our network expands, our customers receive top-of-the-line technology that improves their own revenues. During the quarter ended March 31, 2021, Biotricity recorded a net loss of $5.5 million and a comprehensive loss of $5.2 million, compared to $4.8 million and $5.1 million in the prior fiscal year. We remain in R&D and infrastructure development, preparing for our holter product launch and chronic care transition. Our goal is to build sustainable products, increasing our total addressable market from $1 billion with Bioflux to at least $3 billion in the next growth phase. Operating expenses declined by 12% compared to the same period last year, largely due to a one-time impact of a $1.2 million PPP loan forgiveness. We are layering growth while gaining cost efficiency. Our G&A decreased to $3.3 million, approximately 3% lower than last quarter, and R&D spending was $551,000, about 90% lower than a quarter ago. We ended Q4 with $2.2 million in cash and over $4 million in current assets, allowing us to manage growth objectives effectively.

Waqaas Al-Siddiq, CEO

Thank you, John. I’d like to add a couple of things as they are important. As mentioned, we manage our cash prudently. When raising equity, general costs can affect our balance sheets, making our financials appear in a certain light. When you focus on cash burn, we find we are more efficient than it seems. A big part of this efficiency is due to our financial team at Biotricity. Our focus is not just on immediate revenue but on how our growth accelerates future valuation. We are growing faster and more efficiently compared to competitors who’ve been in the market for several years. This translates to great shareholder opportunities as we execute our plan. We also want to highlight how we are insulated from reimbursement cuts on the horizon. The pandemic has highlighted the importance of real-time monitoring for high-risk patients, and our model supports this need effectively. As physicians aim to deliver the best care with minimized risk for patients, they increasingly want to utilize smart, connected devices. This trend is exciting and aligns perfectly with our vision for Biotricity. We foresee becoming the largest virtual specialty care provider in two years due to our extensive cardiologist network. Additionally, we aim to partner with physicians to enhance patient management and deliver optimized care. Our goal is to expand opportunities for disease management, mirroring the success seen with solutions for conditions like diabetes. This represents a significant growth prospect for Biotricity.

Operator, Operator

Thank you. We’ll take our first question from Allen Klee with Maxim Group.

Allen Klee, Analyst

Hello. Congratulations on a very strong quarter. Your revenues were up 227% year-over-year, ahead of my guidance and the pre-announced growth rate of 203%. For the June quarter, I was guiding for 177% year-over-year growth, but I thought I heard you say it might be close to 250%. Can you discuss the key factors driving this increased revenue?

Waqaas Al-Siddiq, CEO

Absolutely. There are a couple of factors. COVID slowed growth, and the reopening of the country is putting us back on track to previously expected growth rates. Our expanded sales force and the capital being deployed have allowed us to recruit the right talent, which is driving this acceleration. Most crucially, the increased awareness of monitoring's importance is positively influencing sales cycles. We find that what we thought might take longer turns out to have consistent traction, which is helping us grow.

Allen Klee, Analyst

Great! Could you provide insight into the utilization rates of Bioflux devices? How much growth is due to the increase in devices versus cardiologists realizing their value?

Waqaas Al-Siddiq, CEO

That's an excellent question. Both utilization of existing devices and market growth are contributing factors. However, most of it is focused on opening new accounts as we continue to establish presence. Device utilization is there but has not been optimized yet. For clarity, I would say approximately 70% of growth comes from new accounts, with the remaining 30% being from optimizing utilization. However, certain practices naturally optimize more efficiently than others.

Allen Klee, Analyst

Thank you, I thought I heard that following some adjustments, your gross margins were around 63.9% for the quarter. I think that as more devices are used, that margin could improve further. How do you view that?

John Ayanoglou, CFO

John Ayanoglou here. Yes, we optimized our cost of revenue accounting for monitoring costs and have seen improved margins. The efficiencies achieved will help further enhance our margins as we scale. As we acquire more devices at a lower cost and leverage new technologies, our operational costs will decrease, enhancing our gross margins over time.

Allen Klee, Analyst

I’d also like to inquire about Biotres, which is under FDA review now. I understand it is not possible to comment much, but any insights would be appreciated. How will you implement growth strategies upon approval?

Waqaas Al-Siddiq, CEO

Great question! Though we can’t discuss specific timelines due to the dynamics of the FDA process, we are optimistic regarding our potential clearance this year. Biotres serves as an additional product to our existing accounts where it will fill our portfolio. Our growth strategy will involve implementing Biotres within the existing network and expanding to new accounts as well, complementing our Bioflux offering significantly.

Allen Klee, Analyst

Thank you! Your tech-driven approach positions you well in this space. Can you share where you are focusing your R&D investments now?

Waqaas Al-Siddiq, CEO

Certainly! Our R&D budget is concentrated on enhancing the patient journey post-diagnosis, covering aspects from diagnostics to procedural work to disease management and follow-up. We aim to invest in technologies that allow us to continue this journey without expanding outside our remote monitoring model.

Allen Klee, Analyst

Thanks! That’s all from me! Congratulations on a stellar quarter!

Waqaas Al-Siddiq, CEO

Thank you!

Operator, Operator

Thank you. We’ll take our next question from Chet White with Helios Alpha Fund.

Unidentified Analyst, Analyst

Thank you very much, and congrats on a great quarter. I wanted to ask a couple of questions. Could you share your insights on the uplisting? There’s been great retail demand, and the uplisting on the National Exchange can bring institutional interest. What fundamentals are attracting them?

Waqaas Al-Siddiq, CEO

Great question! Uplisting certainly broadens our investor base, both retail and institutional. For institutions, growth stories that demonstrate rapid expansion and a scalable product portfolio, particularly in sectors like healthcare, pique interest. Our accelerated growth and the potential for continued expansion are critical attractors. We believe that our technology-driven approach aligns with future healthcare trends, further establishing investor confidence in our company.

Unidentified Analyst, Analyst

As a follow-up, given your current growth trajectory, do you see an uptick in competitive pressures from both larger companies and start-ups?

Waqaas Al-Siddiq, CEO

We constantly monitor the competition. Currently, we see resistance in the real-time cardiac space, with significant investment needed to maintain performance. While there are challenges, we don’t see many competitors in this specific sector. We've acknowledged the conveniences of consumer tech and aim to incorporate those to remain competitive. Larger firms may also struggle to adapt alongside novel technology without proper integration and patient care focus. We believe our position is strong.

Operator, Operator

Thank you. This concludes our Q&A. I’ll pass it back to management for their closing remarks.

Waqaas Al-Siddiq, CEO

Thank you. We are excited about the upcoming quarters, particularly the one ending June 30th. I predict we will exceed analyst expectations in this next quarter. Our vision of developing Biotricity into a $1 billion company drives our objectives. We're making strides in growth, executing product roadmaps successfully while aligning with critical milestones like our planned uplisting. Biotricity is positioned in a way that allows incredible growth potential over the next few years, and I invite all shareholders to stay engaged as we work relentlessly. Thank you for joining us today.

Operator, Operator

This concludes today’s call. Thank you for your participation. You may now disconnect.