MindWalk Holdings Corp. (HYFT) Q1 2027 Earnings Call Transcript

Hello, everyone. Thank you for joining us and welcome to MindWalk Reports Financial Results and Recent Business Highlights for First Quarter Fiscal Year 2027. After today's prepared remarks, we will host a question and answer session. Before we begin, I would like to remind listeners that today's discussion contains forward-looking statements. These statements reflect management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated, including the company's history of net losses and the ability to convert platform adoptions into contracted recurring arrangements, market acceptance of Reef IQ and Lens AI, intellectual property risks, competition and capital market conditions. A fuller description of these risks appears in the company's annual report on Form 20F, and other filings are available on SIDAR Plus and EDGAR. All financial figures discussed during this call are Canadian dollars. Financial statements and MD&A are available on the company's website at mindwalkai.com, as well as sec.gov and SIDAR Plus. A replay of this call will be available following its conclusion today. I will now turn the call over to Dr. Jennifer Bath, President and Chief Executive Officer of MindWalk Holdings. Please go ahead, Dr. Bath.

Thank you very much. Good afternoon. In this first quarter of fiscal year 2027, MindWalk advanced toward our goal of becoming the leading bio-native AI drug discovery and development company. In June, we launched ReefIQ, our proprietary data platform, and our focus is now on enterprise adoption. For those newer to the MindWalk story, ReefIQ is the substrate layer between complex, unstructured biological data and AI models. It turns that data into structured, biologically meaningful representations. So AI models deliver deeper, more actionable insights for our pharmaceutical partners. ReFiQ's commercial model is built around multi-year recurring revenue relationships that can scale as clients expand their use of the platform. Because ReFiQ is integrated directly into a client's biological data and the discovery workflows, these relationships are designed to deepen over time. As a trusted partner to many of the world's largest pharmaceutical companies, we know how drug discovery works inside these organizations and what they need from a platform like ReefIQ. Those relationships give us a real advantage as we drive adoption. We have made good progress. We are engaged with multiple large pharmaceutical companies around potential enterprise deployments of ReefIQ. These discussions vary in maturity and we are encouraged by how the platform is resonating with our clients. We are not yet in a position to announce specific partners or discuss contract values, but the level of engagement reinforces our conviction of the commercial opportunity. We look forward to providing additional updates as these discussions progress. These opportunities are substantially larger than our historical lens AI recurring revenue agreements. Investors should not use prior lens AI contracts as a benchmark for the size or the scope of Reef IQ enterprise relationships. We have built a leading wet lab discovery franchise. Our clients include 19 of the top 20 global pharmaceutical companies and every one of those relationships is a potential opening for Reef IQ. Two decades of biologics discovery work for our clients across multiple platforms and capabilities has already contributed to several dozen molecules reaching the clinic. Ten are in active phase one through phase three trials today and four of those are first-in-class molecules. We are also reshaping how we structure our commercial relationships with our pharmaceutical partners. Increasingly new engagements are being structured as broader platform partnerships where MindWalk participates in the economics of the assets we helped create, rather than simply being paid for discrete projects. This structure aligns our incentives with our partners, has been well received by our clients, and is contributing to increased activity across our commercial funnel. Today, roughly 80% of our current funnel by value is now structured this way. spanning data management, ReefIQ, and multi-target discovery. We also reached a clear infrastructure milestone. With our engineering partner AMD and Vulture, we validated a production deployment of OpenFold3 on AMD Instinct MI325X GPUs, and the first of those results are being published this week. open fold three is open source and any drug discovery team can use it which is exactly the point models commoditize the layer they run on compounds every model run on reef iq enriches the biological context for every other program and lens ai our reasoning layer is deliberately model neutral so a client can bring their own model any open source one or any third party and still reason over that same context layer. The compute win simply gives us more room to run discovery and scale ReefIQ. This is a marquee week for that partnership with much more to come. Our internal pipeline continues to advance through pre-clinical development and we remain excited about the opportunity to drive value in this part of our business. Timelines there are hard to forecast so we advance multiple programs in parallel and prioritize resources based on the strengths of the data this quarter we added experience leaders to accelerate our ind enabling work and move our best programs toward ind filings in the clinic we will update the market as they hit scientific regulatory and development milestones finally our capital position. This morning, we announced a binding commitment for a 30 million U.S. dollar in unsecured revolving credit facility at a fixed 7% rate drawn as needed. It gives us financial flexibility without issuing equity, which matters given where our stock trades set against how AI enabled discovery platforms are valued in public and private markets. We do not believe our market capitalization reflects what we have built or the scale of what we are pursuing that informs how we think about financing and the business financing the business and makes this facility particularly attractive to us this is not a response to a step change in our cash needs a model our model is not capital intensive the facility gives us the flexibility to invest behind reef iq advance our internal pipeline and pursue opportunities as they develop on terms that we believe are very favorable to MindWalk and its shareholders. Our focus is on execution and we believe sustained delivery will be reflected in the stock over time. Turning to the quarter, revenue grew 21% year-over-year and growth margin expanded to 59% from 48%. The larger loss this quarter reflects deliberate investment behind the commercial opportunity we see ahead of us sales and marketing expense increased by 1.9 million we are investing to build a larger and more durable revenue base not simply support the business we have today on the bottom line this quarter is not directly comparable to the same quarter last year which included income from discontinued operations with that i will turn it over to scott to take you through the numbers thank you jennifer and good afternoon everyone i will take you through our first quarter fiscal year 2027

financial results as a reminder all figures are in canadian dollars revenue for the first quarter of fiscal year 2027 was 3.8 million versus 3.2 million in the first quarter of fiscal year 2026 This is an improvement of approximately 673,000, or 21%. That represents five quarters of consecutive year-over-year revenue growth. Gross margin was $2.2 million, or 59%, for the first quarter of fiscal year 2027, as compared to $1.5 million, or 48%, for the same quarter last year. Looking at operating expenses. For the quarter ended July 31st, 2026, R&D was $1.3 million compared to $1 million in the same period last year. This increase is due primarily to increased salary costs to support the commercial development of our platform. Sales and marketing expenses were $3.2 million for the first quarter of 2027 as compared to $1.3 million in the first quarter of 2026, which included non-recurring costs incurred in the quarter. As I mentioned in our prior call, these are plain investments in our commercial infrastructure and represent increased headcount to support our commercial initiatives, as well as investments in advertising and promotion. G&A increased to $3.9 million for the quarter ended July 31st, 2026, as compared to $3.3 million for the same quarter last year. The increase is due primarily to non-cash stock-based compensation. Net loss and loss from continuing operations was $6.1 million for the first quarter of fiscal year 2027, as compared to net loss from continuing operations of $4.1 million in the first quarter of 2026. Overall net loss in the prior year was $3 million, which included $1.1 million of income from discontinued operations. Turning to the balance sheet, the company ended the quarter with cash balance of $7.6 million as of July 31, 2026. Net cash used in operating activities was $4 million compared to $4.2 million in the prior year quarter, due in part to non-cash expenses related to share based payments. Cash was $11.3 million at April 30th. I am also pleased with our announcement earlier today of a binding commitment for a $30 million U.S.

Seniors Unsecured Revolving Credit facility this facility demonstrates confidence in our long-term strategy around our emerging pipeline and anticipated adoption of reef iq and provides the capital necessary to execute on that strategy with that i will turn the call back to jennifer jennifer thank you scott as we've mentioned this morning we announced the binding commitment for 30 million us dollars of unsecured capital without issuing a single share and this gives us the runway to execute the strategy is showing up in the business with revenue of 21 percent and growth margin at 59 percent reef iq is a recurring revenue business and it compounds as clients adopt and expand we are in active negotiations with multiple large pharma companies on reef iq enterprise deployments and you will hear from us as those conclude as mentioned do not measure them against our historical lens ai agreements these are a different scale on the discovery side we are moving from discrete projects to platform partnerships where we share in the economics of the assets we helped create both of these are happening with clients we already have a distribution advantage that no new entrant can buy on top of that our internal pipeline adds upside with catalysts ahead the

higher losses quarter is an investment behind a larger opportunity the market is moving toward exactly what we built and our job now is to lead it operator we are ready for questions thank you we will now begin the question and answer session if you would like to ask a question please press star one on your telephone keypad now to raise your hand. To withdraw your question at any time, press star one again. Please pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Now please stand by while we compile the Q&A roster. And our first question comes from the line of Charles Wallace with H.C. Wainwright. Your line is open. Please go ahead.

Hi, thanks for taking my question. This is Charles on for RK. So I guess for my first question, could you maybe help us understand what portion of the $3.28 million in the first quarter revenue was contracted reoccurring platform revenue?

And, you know, I guess, yeah, let's start there thank you Scott if you have those numbers before you I don't know if we do have those broken out I can say that um if we're if by platform recurring revenue we're referring to ReefIQ ReefIQ has not is is not a data management program or platform that is currently in place these are the ones that we've just discussed negotiating that is like a whole new level of of engagement from clients that you'll definitely hear about as we proceed through that and this was the platform that we just released in June quite recently. Now if it's recurring revenue or annual recurring revenue off of the SAS model subscriptions we do have that and we have announced that historically I'm not sure that we have that broken out since we don't break these out by COTS centers, but I can have Scott confirm.

Okay, so I guess for my next question, so for the active negotiations that you mentioned with the multiple large pharma partners for the Reef IQ, which, you know, as you mentioned, just launched in June, what are the current gating factors in these negotiations, and when do you expect to see these convert in fiscal year 27?

Fair question. So the gating factors between each group actually differ significantly in terms of, I'm sorry we're getting a lot of feedback on our side, in terms of negotiations with clients on our side for gating factors, what we are seeking are primarily people who are already engaged with MindWalk, who are running different programs already with MindWalk. and primarily starting off with people who are also engaged to the sas model subscription um we do look at um for large pharmaceutical companies when they're moving you know into a vendor bringing a vendor into their core infrastructure none of them are really about whether or not the platform works they kind of fall in three boxes buckets for us um the first big one is really about i.t security and data governance review which is something you probably heard us talk a lot about over the last six months reef iq is different in the sense that it sits inside of a client's biological data and its discovery workflows and so it goes through the same enterprise security data residency and governance processes as really any system of record um the second one is legal and procurement and um you know these are multi-year platform relationships so instead of like project statements of works that we've done historically with our large pharmaceutical climate clients um and then also when we're sharing in the economics of different assets during co-development and partnership relationships so the contract itself is a very new shape it's very different than the historical contracts we've had and so it's different for their procurement terms as well and then I would say Charles probably the third component of that is the scoping and just agreeing which programs and which data domains that the first deployment are going to cover so that it lands cleanly and then it's expanding from there and um so i would say those are kind of the three core areas as companies are are by and large taking a relatively new and fairly big step and bringing us fully into the data landscape of what exists throughout their company oftentimes in a multinational setting um as far as when we plan to um to close our first agreement or when we plan to see these start closing i'm i'm going to leave that question alone for now i don't want to i don't want to create that specific of an expectation um but what i what i am comfortable saying at this point on the call is that um we have these negotiations occurring at various different stages and um that includes groups that have worked with us for many years um that also includes one group that's been with us as many years and also has a SAS model subscription and has been in negotiations in this particular component across multinational jurisdictions for their company for quite some time. So we have a very good line of sight on where and how this is going and when we anticipate it closing. But, of course, not everything's under our control, so I'll hold off on giving an exact more specific timeline. Oh, yeah.

That's very helpful. And then maybe one final question, maybe on the $30 million revolving credit facility. So, when do you expect the initial draw from this facility and kind of over what timeframe? And how will it be allocated between the ReFiQ commercial rollout and the biological progress? Thank you.

Yeah. So, we have 60 days to get the credit agreement. drawn up so we won't be able to do anything until the credit agreement is is complete um as far as the investments you know we'll we'll draw capital as we as we need it and as we we need liquidity but you know we still have we still have cash runway in our in our bank account as well great and maybe maybe one final thought one follow-up from that question um does that does this credit facility replaced kind of the ring fenced program level financing structure um that you have in the in the cayman uh asset came in a style of uh financing sure it does not sure we hear you

correct exactly it it absolutely does not replace that so um we still have interested parties and investing in reinfenged assets within the cayman structure and are probably 90 95 of the way in terms of completing the legal and tax planning efforts that go around setting up those structures.

Thank you for taking on my questions.

Thank you, Charles.

Your next question comes from the line of Dania Benhale with Jones. Your line is unmuting, and you are unmuted. Please go ahead.

Thank you for taking on my question. um how should investors think about their revenue growth over the next 12 months and next two years yeah i mean these um these initial refi q agreements are probably going to be relatively lumpy it's just the the nature of the structure um they're they're going to be milestone based there's their engineering efforts at the at the outset and then they become you know annual recurring revenue so i do think revenue is going to be a little lumpy it's hard to forecast it really just depends on you know how quickly we get adoption of reef iq okay and so we expect it to be around these numbers or next few quarters

until things settle down and you get more um subscriptions uh and annually and things like yeah i think you know once we're in a position to announce an agreement i think we'll we'll take a deeper dive into what the revenue model looks like and sort of what when we expect recurring revenue to occur based on the timing of the contract yeah okay thank you and just another question about um the discussions with the pharmaceutical and biotech companies um What are they focused on? Are they getting more engaged with the RecyQ? Is it more of the subscriptions right now for the DPI?

Yeah, what parts of it are more- Yeah, that's actually a great question, Danya. No, I really appreciate that. So one of the things we've talked about in the past is, you know, we definitely went about this from a different direction from others. You will see that there are companies that have a technology and some discovery capabilities that prepare those offerings for others as a partnership model. And, you know, really a little bit more on the premise of it's extremely low risk, so we'll backload it, but without really having the proof point or the evidence to support the quality of the work. And that low risk was given in exchange for not having that type of a relationship with those clients we've really done the exact opposite we've spent the last five years demonstrating our ability to send really good molecules to the clinic that are quite successful in the clinic and then also demonstrated our ability to do that with an understanding of the function of a molecule and its mechanism of action providing a greater probability of success in later stages of a clinic and that's been a really different approach that we've made so as we enter into these conversations you know we've mentioned before we're working with hundreds of different clients in building these therapeutic drugs and one of the biggest changes we've had in the last two quarters is that every one of those programs coming in is an integrated lab in a loop with our in silico work intertwined very directly with our wet lab work. Providing clients with data sooner, larger amounts of data for more data-driven decision-making. But there's two components of that that really tie in. Actually, technically three, Danya, that I think specifically address your question. One of them is that all of that data is turned back within Lens AI. So clients are directly exposed to the SAS model subscription they have the opportunity to use base layer of applications within our lens ai and that has brought more clients to the table with those inquiries around sas model subscriptions so it expands their ability to work with the data within the platform in which is being received the conversations around the partnerships which are back-loaded but always include some sort of upfront payment the structure of those being ones that are milestone and royalty-based that is now a conversation happening with every single client so that fee-for-service option that we have provided in the past, where we use that opportunity to build a relationship with these clients, to be one of their preferred vendors, which is no easy task, and to demonstrate the competencies that we have, I would say superiority that we have in our AI and wet lab journey discovery is what we're building on in those discussions. So every single one of those discussions is now a partnership discussion. There's no longer the opportunity to just walk the door and put down money for fee for service so it is a longer negotiation period for us so even given the fact that we're still up in revenue with these you know double digits over last year where we were up significantly in revenue as well while back loading approximately 80 percent of the discussions now in the pipeline as partnership discussions to us is bringing us additional confidence these clients are not walking away from that discussion they're not you know, they're not turning away from it because we've become the trusted provider that we've shown we can execute. And so that's enabled this discussion with, going back to your question, actually every single one of our clients. And then the third component of that is Reef IQ. And I would say the majority of the earlier adoption interest and communications we're having from that is from the larger pharmaceutical companies, which I guess makes sense. These are companies that are oftentimes juggling multiple jurisdictions a lot more siloed data um and and are are also oftentimes being asked from the top down to find a solution to help their data make sense and to connect their data and so um we're really seeing it across the board in all three areas and i would say um the majority of those conversations if we had to pick the one that was leading the way would be partnership discussions because again that's not an option to not have that discussion with us any longer and then the second most would be refiq where people are looking for an advantage to find meaning in their data an advantage to get away from hallucination and make their ai models better than their competition and we're able to bring that to the to the table with something we've been building for 20 years and something that no one else is able to offer thank you very much thank you there are no further questions at this time and this will conclude today's call.

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