Prenetics Global Ltd Q4 FY2025 Earnings Call

Greetings, and welcome to the Prenetics Fourth Quarter and Full Year 2025 Earnings Conference Call. As a reminder, this call is being recorded. Your hosts today are Danny Yeung, Chief Executive Officer and Co-Founder; and Stephen Lo, Chief Financial Officer. Mr. Yeung and Mr. Lo will present results of operations for the fourth quarter and full year ended December 31st, 2025, and provide a corporate update. A press release detailing these results was released today and is available on the Investor Relations section of our company's website, www.prenetics.com. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates and other information that might be considered forward-looking. These statements are made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially and are not guarantees of future performance. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. Unless otherwise specified, all information provided on this call is as of today's date, and we undertake no duty to update such information. For a more complete discussion of these factors and other risks, you should review our annual reports and other documents and disclosures on file with the Securities and Exchange Commission at www.sec.gov. At this time, I'll turn the call over to Prenetics' Chief Executive Officer, Danny Yeung. Please go ahead, sir.

Great. Thank you. Thank you, and good morning, everyone. Welcome to our Fourth Quarter and Full Year 2025 Earnings Call. For those who have been following our story, thank you very much for your continued support. And for those new to Prenetics, you are joining us at a pivotal inflection moment. 2025 was the most transformative year in our company's history. We achieved record revenue of $92.4 million, a 480% increase year-over-year, driven by the explosive launch of IM8, our premium consumer health brand cofounded with David Beckham. In just our first year, IM8 reached a $120 million annualized revenue run rate, a trajectory that we believe is one of the fastest ever recorded in the global supplement industry. We also completed a decisive strategic pivot, divesting our noncore assets to become a pure-play consumer health leader. This has sharpened our focus, improved our margin profile and solidified our balance sheet, which now stands at approximately $171 million in total liquidity with 0 debt. Most importantly, we now have a clear road map to adjusted EBITDA profitability by Q4 of 2027, supported by strong unit economics and significant operating leverage. Today, I'll walk you through our strategic transformation and the incredible growth story of IM8. Stephen will then provide a detailed overview of our financial results, and I'll conclude with our outlook for 2026 before we open it up for Q&A. Let me begin first with the transformation that occurred in 2025 and early '26. Our goal was to streamline the company and focus all of our resources on the highest growth, highest margin opportunities. We executed this by divesting 3 noncore assets. In June 2025, we sold ACT Genomics for $72 million with $46 million in cash back to Prenetics. In January of '26, we exited the low-margin Europa business and had an all-stock $30 million deal with that. And just yesterday, we announced we sold our 35% stake in Insighta to Tencent for $70 million in cash, in which we have already received $69 million in our bank accounts. These moves have unlocked significant shareholder value, simplified our story and fortified our financial position. As a result, our balance sheet is stronger than ever. As of February 15th, 2026, we have $171.1 million in total adjusted liquid assets, including cash, financial assets and our BTC Holdings with 0 debt. This gives us ample runway to invest in IM8's global expansion. I also want to clarify our position on Bitcoin. We ceased all Bitcoin purchases as of December 4th, 2025, and we will permanently not engage in any Bitcoin or Cryptocurrency purchases in the future. We currently hold 510 BTC on our balance sheet, which provides additional financial flexibility as we scale IM8. Our focus is squarely on building IM8 into a global consumer health powerhouse. In line with this strategic focus, we recently announced a change to our Board of Directors. Andy Cheung, who joined our Board in connection with our Bitcoin strategy has resigned. At the same time, we are thrilled to welcome Dr. Darshan Shah to our Board. Dr. Darshan is a leading expert in longevity, performance optimization as well as building a network of longevity clinics in the U.S. and his expertise will be invaluable as we scale IM8 globally. Now let's turn to IM8. As everyone knows, we co-founded with David Beckham, IM8 was built on the vision of making elite science-backed nutrition accessible to everyone. This powerful combination of global influence and scientific credibility allowed us to achieve $120 million annual recurring run rate in less than 12 months. This growth trajectory has been nothing but extraordinary. We went from $6 million in Q1 to $27.4 million in Q4. This isn't just a launch spike. It's a reflection of deep product market fit with IM8 on a global basis with 40% of revenues coming from the U.S. and 60% of revenues coming internationally across 30 different markets. And we achieved this growth with exceptional capital efficiency. Our blended LTV to CAC ratio is projected to be approximately 3x across all of our products, including the premium backend stack. Our payback period for the full year of '25 was just 3.4 months, allowing us to recycle marketing capital incredibly quickly. In early 2026, we made a strategic shift to prioritize quarterly subscriptions, which was a new option for our customers. This, we believe, has been a game changer. Our blended average order value for every new customer has more than doubled from $110 in 2025 to approximately $233 in early 2026. We are intentionally acquiring higher-value customers, which strengthens our cash flow and locks in long-term predictable revenue. With an 80% new customer subscription rate, our business is built on the foundation of recurring revenue. Our brand is also validated by the best. We built an amazing Scientific Advisory Board, including leading doctors and professors from the Mayo Clinic, Cedars-Sinai and many more. And our global ambassadors, including world #1 tennis champion, Aryna Sabalenka and recently announced F1 phenom, Ollie Bearman, reinforce our credibility in the world of elite performance. Before I hand it over to Steve, I want to share some exciting news on the investor research front. We are happy to announce that both ROTH Capital and Sidoti & Company have recently initiated research coverage on Prenetics, both with buy ratings and 12-month price targets, respectively, of $36 and $30. This is a strong validation of our strategy and growth trajectory. And given our momentum and increased market cap, we also expect a few more investment banks to initiate coverage in the coming quarter as well. With that, I'll turn the call over to our CFO, Stephen Lo, to walk through the financials in more detail. Stephen?

Thank you, Danny, and good morning, everyone. I'll begin with our fourth quarter results. Total revenue in the fourth quarter surged 457% year-over-year to $36.6 million and increased 55% sequentially from Q3. This was driven by IM8, which contributed $27.4 million in Q4. Gross profit in Q4 grew over 800% year-over-year to $21.7 million with a consolidated gross margin of 59%. Adjusted EBITDA loss for the fourth quarter was $2.3 million, a 70.4% improvement from the same period in the prior year, demonstrating the significant operating leverage in our model as we scale. For the full year 2025, total revenue was $92.4 million, up approximately 480% from 2024. Gross profit was $48.9 million, an approximately 428% increase. Full year adjusted EBITDA loss improved by 27% to $13 million. IM8 was a clear driver, generating $60.1 million in revenue for the full year 2025 at a healthy 63% gross margin. The divestiture of the low-margin Europa business will further enhance our consolidated margin profile in 2026. Looking ahead, we are confidently reaffirming our 2026 guidance. We expect IM8 revenue of approximately $180 million to $200 million for the full year 2026, representing nearly 300% year-over-year growth. We are targeting a gross margin of approximately 60% in the full year 2026. We expect a full year 2026 adjusted EBITDA loss of approximately $16 million to $20 million as we continue to invest in marketing to drive growth with a clear path to achieving adjusted EBITDA profitability by Q4 2027. With that, I'll turn it back to Danny for closing remarks. Danny?

Sorry about that. Yes. Thank you, Stephen. Yes, to summarize, we have successfully transformed Prenetics into a high-growth, well-capitalized consumer health leader. IM8 is on a clear path to becoming a $1 billion global brand. And even for myself in my last 20-plus years of entrepreneurial career as both an operator and investor, I have never seen such strong momentum in one brand. We have the team, the strategy and the financial strength to execute on this massive opportunity, and I'm particularly excited about what's ahead. In Q4 of this year, we plan to announce 2 new products that will enter very large total addressable markets. These launches will further diversify our portfolio and accelerate our growth trajectory. I am more confident than ever in the future of Prenetics and IM8. Thank you for joining us today. I will now turn it over to the operator for Q&A.

And our first question will come from George Kelly with ROTH Capital Partners.

First one just on the 90-day offering. I was wondering if you could walk through the reasoning behind having that available? And when do you expect the benefit to be to your model?

Yes. Great question. So we actually started quarterly subscriptions in the U.S. first in December, right? And typically, how we do this is we do a lot of testing on our website optimizations on a daily basis. So we start testing in the U.S. It was clear basically after a month of testing that consumers, number one, they really like this option. And number two, it provides benefits for both sides. So the benefits for consumers, they get 3 months of product at a time. Consumers also save about $10 monthly as well, right? So from a comparison perspective, typically, a normal customer previously would buy a 1-month subscription for $89 monthly. And since the introduction of the quarterly subscription, it becomes $78 times 3, right? So there's basically $235 for the quarterly subscription. So we get that payment upfront. And we also save on logistics costs because instead of shipping 3 monthly shipments, we ship it all at once. And so what that has done is actually significantly increased our average order value from approximately $130 from the end of Q4 to $233. So basically, if you think about every single new customer that's coming into im8health.com, on average, every new subscriber is paying us $233. So what this does is that basically it shortens our payback period or the period of time that we recoup our customer acquisition cost. So we believe this is a significant benefit. And at the same time, now for consumers, they now have 3 months of product to try the product, right? And based upon our clinical trial results after 90 days, individuals will then significantly feel the difference. For example, 95% of individuals after 90 days have felt a noted difference in higher energy levels, better sleep quality, better recovery, greater sleep, right? So we do believe the 90 days will also increase retention rates as well. So overall-wise, we believe it's going to be a significant enhancement to our overall business.

Okay. Okay. That's helpful. And then a second question, Danny, in your concluding remarks, you talked about 2 new SKUs coming this year. I understand if you don't tell us what they are at this point, but maybe if you could provide a little more information just about timing of those launches? And how should we broadly think about sort of the new product opportunity? Do you expect any new product, at least in the near term, to be similar to what you offer now where it's a subscription and it's monthly? Or might you expand into categories where there are different characteristics to the products?

Great question. Yes. So right now, our plan is to release 2 new SKUs by the end of Q4 of this year. Now due to competitive reasons, I think we don't want to release too soon what these 2 SKUs are, but it will be in the health and performance space. And it will definitely be in the health supplement categories, right? And also, these will be 2 large total addressable markets, which competitors are already doing easily anywhere from $500 million to $1 billion annually just in terms of these SKUs. So we do believe it could be a significant growth driver for us.

Okay. That's helpful. And then last question for me. With respect to the guidance you put out for IM8, the $180 million to $200 million for the year, I guess 2 questions on that. First, we're now through January and into February. I was wondering if you could help at all just the trends you've seen so far. I think January is a pretty important month for the year. So any sort of commentary there would be great. And then secondly, are the new products baked into that guide?

Yes, great question, right? So I think we are still seeing continued momentum. So momentum hasn't stopped basically on a month-over-month basis, right? In terms of the 2 new products in terms of the revenue guidance, those are not baked into that $180 million to $200 million number.

We will now hear from Thomas Forte with Maxim Group.

Great. So first off, Danny, congratulations on a wonderful fourth quarter and year and the breakout performance of IM8. So I have 3 questions. I'll go one at a time. So the first one is, can you talk about your customer acquisition costs and lifetime values for IM8 and how that's trended over time?

Yes. We outlined our customer acquisition cost in our investor deck, which is available on our website. You can expect a return on ad spend of approximately 0.8x. For example, if our blended average order last year for 2025 was $110, our customer acquisition cost was $130. The important aspect here is that the payback period is around 3.4 months. We consider this when deciding whether to increase spending. Given that the payback period is short, we believe we have the flexibility to extend it from 3 to 6 months. In the direct-to-consumer space, a 3-month payback is excellent, while 6 months is still good, giving us ample runway. Regarding trends, our customer acquisition cost has risen in line with our average order value, which has increased significantly from $110 to $233. Even from last January to now, we haven't experienced major increases in customer acquisition cost despite scaling. Additionally, we've focused our digital marketing efforts on Meta and Google, allocating about 85% to Meta and 15% to Google. Moving into Q2, we plan to diversify our marketing channels to include YouTube, podcasts, AppLovin, and TikTok, allowing us to broaden our marketing strategies even further.

Excellent. And then for my second question, so one of the many things you're doing that's impressed me is capitalizing on artificial intelligence. Can you talk about how you're using AI, including from a digital marketing standpoint?

Yes. Great question. So I'm a big proponent of the whole entire company using the latest AI tools and systems in place for us, not just from a digital marketing perspective, but across the organization, every function, every single employee doesn't matter whatever department it is, right? So my team knows this very, very well, right? Any free time I have personally, I'm looking and studying AI like crazy, right? So for example, how we leverage AI in terms of digital marketing efforts on a weekly basis, we'll roll out anywhere from about 800 to 1,000 new ads. And we just look to the algorithm to decide what works. And then only about 10% of these ads will actually work. And we call these the winning ads. And then every single week, we'll replicate basically, we'll take 10% of those that work, and we replicate another 800 ads on a weekly basis. So that gives you one example of how we use AI. And of course, I think if you look in the investor deck, you'll also see we launched an AI video last September with Aryna Sabalenka right before the U.S. open. And this one AI video had the highest number of views of any brand on Instagram. It reached 233 million views with one AI video featuring Aryna Sabalenka. So when you get 233 million views in one video at the top of the funnel, you can then significantly much easier target new other customers that have seen that video, right? So I think these are specific examples of how we're leveraging AI in all parts of our business.

Wonderful. And then last one for me. You've done a great job of divesting multiple successful businesses. You have an unbelievable balance sheet. As a result, can you talk about your strategic M&A strategy, including your decision process and when to build versus when to buy?

I believe 2025 was a very busy year for us. We successfully established a strong business from the ground up, building the brand, the playbook, and assembling our team of doctors, scientists, and brand ambassadors, along with our product. Simultaneously, we sold three of our non-core assets because the growth of IM8 was exceptional, prompting us to focus on it more intently. As a result, we now have a robust balance sheet, which gives us plenty of options. However, our primary focus will be on organic growth, as we believe we have a solid performance marketing strategy in place. Unless a highly strategic acquisition opportunity arises, we will concentrate on expanding organically, as that is something we can manage effectively. That said, we remain open to exploring new opportunities if they align with our goals.

Our next question comes from Alex Hantman with Sidoti & Company.

Congrats on the quarter. Maybe we could just start on the revenue growth for this year. I know you mentioned that new products are not baked into that. Could you share a little bit more about how much of the growth is expected from customer base expansion versus like average revenue per user uplift from quarterly plans?

The majority of our growth is expected to come from acquiring new customers. We achieved $60 million in revenue in our first year, and as a relatively new brand, there are still many people worldwide who have not heard of IM8 or tried our product. Once they do try it and experience its effectiveness, they tend to continue using it. A key portion of our growth will therefore stem from new customer acquisition. In terms of our top markets, the U.S. leads with 40% of our revenue, which last year accounted for $23 million of the $60 million. I genuinely believe that the U.S. market could support $300 million to $400 million for this product, indicating a lot of potential ahead. Our other significant markets include Canada, the U.K., Australia, and Singapore, making us a truly global and diversified brand. We see substantial opportunity in bringing new customers onto our platform.

Great context. And 2 more from us. Dan, I know you just spoke about some of the international revenue opportunities. I'm curious, as you started localizing websites, what kind of revenue uplift have you seen? And what international market then are you sort of most excited about given that?

Yes, that's a great question. We are in the process of utilizing AI tools for our international localization efforts. By the second quarter of this year, we plan to localize our entire website, ads, and campaigns in at least five different markets, including Germany. Currently, Germany ranks as one of the top global markets. We anticipate that localizing our entire website will result in at least a 10% to 15% increase in local markets. We expect to launch this by the second quarter, likely by the end of this quarter.

Perfect. And last one from us. I know you mentioned the Q4 2027 EBITDA profitability target. Could you talk a little bit about some of the key factors to achieving that, marketing leverage, scale, product mix? And do you have an accompanying EPS target?

Yes. I believe that as we grow and with our gross margin at 60%, profit will follow. We will have significantly more leverage once we reach $250 million to $300 million in revenue because of our established manufacturers, suppliers, and logistics. We think we can gradually increase our margins from 60% to 62% or 63% over the next 12 to 18 months. Combined with our growth, we expect to achieve profitability by the end of Q4 2027. We plan to continue our current strategy but at a much larger scale, which will allow all costs to be absorbed effectively.

And this now concludes our question-and-answer session. I would like to turn the floor back over to Danny Yeung for closing comments.

Great. Thank you, everyone, for joining us this morning. Again, I can't be more excited about what the future holds. I know I've been an entrepreneur, as mentioned for 20-plus years, but this is something I'm incredibly passionate about building a global brand that's making an impact on millions of people around the world. We have a lot of great support from around the world as well from highly influential athletes, doctors, and professors that makes it so much fun to be able to go on this journey. So again, thank you, everyone, for being with us today.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.