Earnings Call Transcript - BTCY Q4 2024

Operator, Operator

Greetings, and welcome to the Biotricity Fiscal Year 2024 Financial Results and Business Update 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. It is now my pleasure to introduce your host, Paul Kunst, Investor Relations. Thank you, Paul. You may begin.

Paul Kunst, Investor Relations

Thank you, and good afternoon, everyone. As a reminder, Biotricity's fourth quarter and fiscal year 2024 ended on March 31, 2024. So all figures presented for this period reflect that end date. Earlier today, Biotricity issued its earnings press release for the period, which highlighted financial and operational results. A copy of the press release is available on the Investor Relations section of the Biotricity website, and the full financials have been filed with the SEC on Form 10-K and posted on EDGAR, which you can find at www.sec.gov. Before beginning 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 am pleased to turn the call over to Biotricity's Founder and CEO, Dr. Waqaas Al-Siddiq. Please go ahead.

Waqaas Al-Siddiq, CEO

Thank you, and thank you everybody, for joining us today. Fiscal '24 has been a transformative year for Biotricity, marked by significant advancements and strategic initiatives that have positioned us on a clear path to profitability and positive EBITDA. We have increased revenue, significantly improved margins and reduced EBITDA losses by almost half. Our commitment to innovation, strategic partnerships and operational efficiency has allowed us to make remarkable progress across multiple fronts. One of our most significant achievements this year has been the expansion of our Cardiac AI Cloud platform. This initiative, powered by strategic partnerships with industry giants such as Amazon AWS and Google's TensorFlow, leverages over 500 billion heartbeats of anonymized data. Our AI-driven platform is designed to enhance diagnostic accuracy, improve patient outcomes, and increase clinic profitability. As we pursue FDA clearance for our groundbreaking AI clinical model, we are setting new standards in cardiac care, ensuring every patient receives the highest quality of care. Our recent strategic alliances with three of the top group purchasing organizations, otherwise known as GPOs, has been pivotal. These partnerships provide us access to approximately 90% of all hospitals in the U.S., significantly expanding our market reach. We have a robust pipeline that is growing and active, with active pilots at major groups around the country. This positions us to capitalize on expansive market channels and secure advantageous terms for medical devices and supplies, strengthening our presence in the healthcare technology sector. Moreover, the Health Canada approval for our Biocore device has opened new avenues for revenue growth outside of the U.S., in the $1.56 billion Canadian cardiology devices market. This approval aligns perfectly with our strategy to promote accessible, high-quality care and improved patient outcomes. During the fourth quarter, we also launched the Biocore Pro, a next-generation cardiac monitoring device, and entered into several key partnerships, including a collaboration with Health Aid Africa to provide complementary heart health screenings at high-profile events. These initiatives underscore our commitment to expanding our market footprint and delivering innovative solutions. Looking beyond fiscal 2024, our recent initiatives continue to build momentum. We have launched a major cardiac monitoring pilot program with a network of nine hospitals and ten clinics, and we are accelerating our path to breakeven with the rapid adoption of our Biocore Pro by both existing and new customers. Additionally, our strategic entry into the pulmonary and neurology fields through partnerships with leading home-based diagnostic companies marks a significant diversification of our market reach. Furthermore, we are extremely excited about the recent launch of HeartSecure, our direct-to-consumer heart health screening service. This service targets the $1.1 billion home heart health market and represents our commitment to making heart health services more accessible in response to the global challenge posed by cardiovascular disease. In summary, our strategic initiatives, technological advancements and operational efficiencies have positioned Biotricity for sustained growth and profitability. We remain focused on delivering innovative, high-quality cardiac care solutions and are confident in our ability to continue driving value for our shareholders and improving patient outcomes globally. With that, I will turn the call over to our CFO, John Ayanoglou, to provide more detailed financial insights.

John Ayanoglou, CFO

Thanks, Waqaas. Let's review the audited highlights of our fourth quarter and fiscal year 2024. Our recurring revenue generated from our Technology-as-a-Service subscription model, as well as our usage-based subscriptions, remains robust, driven by the popularity of our FDA-cleared cardiac monitoring devices, Biocore and Bioflux. Both continue to see strong demand and market adoption, particularly the next-generation Biocore Pro, which features cellular connectivity. Atrial fibrillation, a primary contributor to strokes, remains a significant focus. To date, we estimate that Biotricity has monitored and recorded over 500 billion heartbeats, providing early intervention opportunities and improving patient outcomes. Over the last two years, we estimate that we have facilitated the diagnosis of over 250,000 patients with atrial fibrillation, providing them the opportunity for earlier medical intervention. This not only improves patient outcomes but also underscores significant healthcare cost savings for both individuals and the broader healthcare system. For the fourth quarter ended March 31, 2024, revenue increased by 15.9% year-over-year to $3.2 million. For the fiscal year, revenue rose by 25% to $12.06 million, compared to $9.64 million in the prior year. This growth is a testament to the efficacy of our strategic sales initiatives. Underlying this, though, is a significant improvement in the quality of earnings, our focus on transitioning our new and existing customer base to a flat-fee subscription-based model, which establishes higher quality and a more predictable revenue stream. Technology fees accounted for over 93% of the quarter's total revenue, reflecting our strong customer retention and the quality of our support services. Gross profit for the quarter totaled $2.3 million, up 48% from $1.5 million in the prior year period. Our gross profit percentage was 69.3% for the fiscal year ended March 31, 2024, as compared to 56.5% in the prior year. For the fourth quarter, gross margin was 71.5%, up from 56% in the same quarter last year. These are significant improvements. This increase in gross margin was a result of expansion in recurring technology fee revenue, the revenue base, as well as efficiencies gained in using proprietary AI in operational automation and improvement in monitoring cost structure. Through the continued success of our sales team, we have expanded our geographic footprint to 35 states, serving thousands of cardiologists across hundreds of centers. Our insourcing business model allows cardiac medical professionals to have direct control over our services, enhancing efficiencies and enabling broader market penetration. Operating expenses for the fiscal year ended March 31, 2024 were $17.2 million, a decrease from $20.9 million in the prior year. For the fourth quarter, operating expenses were $5.3 million, compared to $5 million in the same period last year. Our SG&A expenses decreased by 17%, and we reduced our R&D expenses by 20%. The increase in quarterly SG&A was largely due to a one-time expense. It should be noted that on a full-year basis, we reduced SG&A by $3 million, or 17%. We have strategically transformed our sales force to focus on longer sales cycles and larger accounts, including independent hospitals and GPO networks, that is, group purchasing organizations that sell into hospitals. As Waqaas mentioned, we've now signed three of the largest GPO networks, providing us access to approximately 90% of hospitals in the U.S. Our shift to rewarding new device sales within our sales compensation structure has paid dividends, resulting in increasing device sales that will positively impact future subscription tech fees. This approach, combined with our streamlined operations and proactive cost management, has set us on a path toward achieving EBITDA neutrality, breakeven, later this calendar year. We are pleased with the progress made in building our technology, obtaining FDA registrations, developing an effective sales force, and implementing cost-cutting measures. On a year-to-date basis, our total operating expenses were reduced by $3.7 million, resulting in an improved loss from operations by nearly $6.6 million. Net loss attributable to common stockholders for the fiscal year ended March 31, 2024 was $14.9 million, compared to a net loss of $19.5 million during the prior fiscal year. For the fourth quarter, net loss decreased by $4.4 million from $4.9 million in Q4 fiscal year '23, despite the expenses associated with infrastructure growth and rising variable interest rates. Adjusted EBITDA for the fiscal year improved to a loss of $7.8 million from a loss of $14.8 million in fiscal '23. This improvement underscores our progress towards breakeven and profitability. Looking ahead, we remain committed to advancing the commercialization of our Biocore, Bioflux and Biocare products. Our tech is truly useful globally. Cardiac is the number one chronic care condition in the entire world. We've recently made inroads or received approvals from the regulatory bodies of other countries that will allow us to sell in other jurisdictions. These set us up for new initiatives that we intend to move on in 2026. The growing market interest and demand for our suite of products dedicated to chronic cardiac disease prevention and management reinforce our confidence in our market position. Importantly, our focus on innovation and development continues to yield significant advancements in remote monitoring solutions for both diagnostic and post-diagnostic products, bringing us closer to achieving positive cash flow. We're excited about the future and are confident in our ability to deliver sustained growth and profitability for Biotricity. That concludes our prepared remarks.

Operator, Operator

Thank you. We will now be conducting a question-and-answer session. One moment please while we poll for questions. Thank you. Our first question is from Michael Donovan with HC Wainwright. Please proceed with your question.

Michael Donovan, Analyst

Thank you, operator, and congratulations Waqaas from me. The year, can you discuss a little bit more about expanding into pulmonary and neurology fields and how you see kind of a product pipeline in these areas as more research comes across linking cardiac vascular disease with especially neurological conditions and how this plays into your current product lineup? Thank you.

Waqaas Al-Siddiq, CEO

Great question. Basically, we have a solid understanding of the market landscape now, especially since many of our referrals come from pulmonologists and neurologists. Patients referred to these specialists often have an increased risk for cardiac issues, and vice versa; if a patient visits a cardiologist without a cardiac issue, they may be sent to a neurologist or pulmonologist for further evaluation. To address this, we have partnered with organizations that provide sleep diagnostics to pulmonologists and home-based neurological tests to neurologists, allowing us to offer cardiac diagnostics through their channels. In this initial phase, we are testing the market by combining cardiac and sleep diagnoses, as well as cardiac and neurological studies simultaneously. We recognize the growth potential in this area, and our partners span across all 50 states. Although it's still early, we plan to monitor this development over the next 9 to 12 months. If it proves successful within their networks, we anticipate similar effectiveness in our own cardiac network, allowing us to provide sleep and neurological tests to patients already undergoing cardiac diagnostics. Our focus is not on creating new technology since there are already excellent home-based neurological testing tools and sleep tests available; instead, we aim to incorporate these into our ecosystem, starting by testing them within our partners' systems.

Michael Donovan, Analyst

Okay, that makes sense. Thank you. Well, just a quick recap on the pilot studies that you have ongoing right now. My count shows you guys have two ongoing pilot studies. Is that accurate?

Waqaas Al-Siddiq, CEO

So we're adding, our pipeline is growing all the time, but yes, we have two active ones right now, and we have quite a few in the pipeline, and that pipeline is growing every month ever since we got onto the GPOs. And so these pilots in these systems are usually multi-site pilots that take a few months, but they're significant opportunities for the company.

Michael Donovan, Analyst

Okay, that's a good lead into my next question about the GPOs. Are you seeing this also help you in your new markets, such as Canada? I know it's more of an at-home type of test, but how do your current partners in the U.S. translate to additional expansion that will assist you in Canada or your new markets?

Waqaas Al-Siddiq, CEO

So in the GPO world, most of that is very U.S.-focused. There's not much support there for the Canadian side. In the Canadian market, we have some anchor relationships. There are customers that we have that were Canadian and did their specialty over here. So there is a very good Canadian-U.S. relationship. I, myself, am Canadian, so we do have a network out there. Our focus in the Canadian market was to get Health Canada approval, which we did, go and find some anchor sites to showcase, and then focus on building out distribution relationships. A lot of the diagnostic equipment in Canada is actually sold through distributors. So it wouldn't be a GPO-style relationship because it's a different payer model right? It's not a private-public model; it is a pure public model, and so the distribution approach works better there for at least the cardiac diagnostic side of things. So we're actively working on building out a distributor network in Canada.

Michael Donovan, Analyst

Okay. And final question, do you expect to see similar margins in the Canadian market? And then as your expansion proceeds in the U.S. market, are you still seeing gross margins north of 70%?

Waqaas Al-Siddiq, CEO

I think that margins are important to consider, especially regarding the percentage of revenue that is recurring. If we have a quarter with higher device sales, particularly when entering new markets like Canada, there might be a temporary impact on margins due to those sales. However, I believe that we are consistently growing every year and improving our margins. When we have a stronger quarter in hardware sales, we may see a slight dip in margins, but overall, as our recurring revenue approaches 99%, we will see margin improvement. From the current margins, we anticipate an increase of about 5% to 6%. Whether that increase appears in the overall blended margin depends on the number of devices we distribute. In essence, our steady state margin will align with our subscription margin, which is currently trending in the 70% range, moving towards the mid to upper 70s. We expect margin improvements to continue, despite some fluctuations.

Michael Donovan, Analyst

Great, great. That's very helpful. I'll hop back into queue. And thank you, Waqaas. Thank you, John. Congrats on the year.

Waqaas Al-Siddiq, CEO

Thank you.

Operator, Operator

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

Waqaas Al-Siddiq, CEO

Thank you. And thank you everybody, for joining our fiscal 2024 yearend conference call. I just want to highlight the trending that is happening with the organization, and I think that a lot of organizations can benefit from revenue growth, margin improvement, as well as operational efficiency. Biotricity is experiencing all three of those at the same time, which is making us very excited. At the same time, we have launched a very new product just a few months ago, which is our Biocore Pro, which is having a great reception, which is also a product that is a higher margin and a higher AFP product that both our existing customers and new customers are very interested in. And on top of that, the market expansion and access that we now have as a result of having those three GPOs has really set us up foundationally to be at that point of scale. A lot of companies struggle to get to a $10 million revenue. And that's a big goalpost for the maturity of an organization, for their ability to set up for scale. And we see ourselves at that inflection point. So thank you again for joining us and please stay tuned and we will be announcing and putting out news as some of these major milestones continue to occur.

Operator, Operator

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