Biotricity, Inc. (NASDAQ:BTCY) Q3 2024 Earnings Call Transcript

Biotricity, Inc. (NASDAQ:BTCY) Q3 2024 Earnings Call Transcript February 21, 2024

Biotricity, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon, I welcome to Biotricity Third Quarter Fiscal 2024 Financial Results and Business Update Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Debra Chen of Investor Relations. Please go ahead, Ma’am.

Debra Chen : Good afternoon, everyone, and welcome to Biotricity third quarter fiscal 2024 earnings conference call. As a reminder, Biotricity’s third quarter 2024 fiscal year ended December 31st, 2023. So, all figures presented for this period will reflect that end date. Earlier Biotricity issued its fiscal 2024 third quarter press release, which highlighted financial and operational results. A copy of the press release is available on the Investor Relations section of Biotricity’s website and the full financials have been filed with the SEC on Form 10-Q, and posted on EDGAR 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’m pleased to turn the call over to Biotricity’s Founder and CEO, Dr. Waqaas Al-Siddiq. Please go ahead.

Waqaas Al-Siddiq : Thank you, Debra, and thank you, everybody, for joining us today. This quarter proved to be quite successful for us. Despite limited news announcements, our diligence and focus efforts can be seen across various operational and financial metrics. We not only improved our margins once again, but also achieved record margins, increased our revenue and reduced losses. This brings us closer towards our path to profitability, and I believe that time has never been near. We continue to leverage our data intelligently, pushing the boundaries of operational automation and efficiency, and in late January, we announced the development of our cardiac AI cloud platform. The platform is being designed for predictive monitoring, helping physicians and users in detecting potential issues before they arise.

This supports our objective for early interventions, which decreases the likelihood of readmissions and contributes to lowering healthcare costs. Biotricity product portfolio is already recognized as one of the most extensive remote cardiac monitoring collections worldwide, and this further reinforces our commitment to advanced healthcare solutions. Today, we have successfully recorded over 500 billion heartbeats a data set that is supporting our R&D efforts to continuously improve analytics, to help drive better patient outcomes. Additionally, we were proud to announce that to date we have monitored, recorded, and helped diagnose over 250,000 patients. Some additional features that further enhance our existing products include fascia analytical results, improved scalability, improved operational efficiency and support for other commercial models.

Our efforts to build a comprehensive cardiac AI cloud are the first step in making cardiac care not only accessible, but also affordable and scalable. Today, cardiologists are overwhelmed with too many patients and too much data, making it difficult for them to service more patients. An accurate cardiac cloud will provide the necessary support and assistance to cardiologists so that they can service more patients and focus on the most relevant pieces of data. I believe that we have the ability to transform cardiac care into a more streamlined and effective healthcare solution. Results for our third quarter, demonstrate year-over-year revenue growth and improvements in all key operating metrics, specifically in recurring technology fees, device sales, and gross margins.

Throughout this, we’ve maintained a strong focus on cost control, managing expenses, and making consistent progress towards our goal of achieving positive cash flow and profitability. We’ve upheld our track record of strong customer retention, supported by the quality of our customers and the cardiologist-friendly support services that emphasize the accuracy of our diagnostics and ease of use. Our recurring technology fees and growth margins continue to trend upward, and we have successfully managed expenses, all while penetrating the market and securing market leadership in cardiac remote patient monitoring devices and solutions. In looking forward, we plan to leverage our sales force to expand and penetrate new markets. With that, I’ll turn the call over to our CFO, John Ayanoglou.

John Ayanoglou : Thanks, Waqaas. Let’s review the unaudited highlights of our third quarter fiscal 2024 period. Recurring revenue generated from our technology as a service subscription model, as well as our usage-based subscriptions, is driven by popularity of our FDA-cleared cardiac devices. Biotres and Bioflux, both remain strong. In fact, we’re seeing growth in demand in market adoption for the Biotres and the next-generation Biotres pro. Atrial fibrillation or Afib is a primary contributor to stroke, so we are very proud to be able to report that Biotricity has protected patient lives using the metrics that Waqaas mentioned earlier that we have monitored and recorded over 500 billion heartbeats and that over the last two years we estimate that we have facilitated the diagnosis of over 250,000 patients, 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. Revenue for the third quarter into December 31st, 2023 increased 21% year over year to $2.97 million. We continued to persistently advance our focus on our flat fee subscription-based services by transitioning most of our customers away from a usage-based subscription. This is strategic for us as it establishes the foundation for a higher quality of revenue that is more predictable, a more consistent recurring revenue stream in the long term. A gross proper percentage of 73% for the quarter and December 31st, 2023 as compared to 57% in the corresponding prior year quarter. This increase in gross margin was a result of expansion in our recurring technology fee revenue base, and efficiencies gained in using proprietary AI and operational automation and improved efficiency in infrastructure.

This is in line with our performance expectations on improving margins as our recurring business grows. Looking ahead, we anticipate continued improvement in overall blended gross margin over time. Technology fees comprise 93% of this quarter’s total revenue for the three-month period ended December 31st, 2023. Gross profit total $2.2 million, up 55% from $1.4 million compared to the same period in the prior year. Through the continued success of our sales team, we have reported a geographic expansion into 35 states that include thousands of cardiologists in over hundreds of centers. Our expansion is intended to allow us to compete in the broader U.S. market using an insourcing business model. This approach allows our cardiac medical professionals to have direct control and management over our solution, potentially enhancing efficiencies, but it also establishes or enables us to tap into a broader market.

Our technology has a large potential total addressable market which can include hospitals, clinics and physicians’ offices, as well as other independent diagnostic testing facilities or IDTs. Let’s discuss the business dynamics to support the level of revenue reported by comparing this quarter to the corresponding quarter one year ago. Our SG&A expenses improved by 31% and we reduced our R&D by 48%. This was a quarter in which we continued to focus on long-term building. We continued to transform our sales force and focus them on longer sales cycle, larger accounts, some of which are also independent hospitals or belong to group purchasing organizations or GPO networks. In this and the last few quarters, we have purposefully changed our variable sales compensation for our sales team to reward the hunting for new device sales since that is the precursor for recurring technology subscriptions.

We then used trained account professionals to do the account management work that we previously used salespeople to do. This has required that we form a stronger partnership between our outside sales force and our inside sales force. The results, the third fiscal quarter of 2024, on which we’re now reporting, was a successful device sales quarter. To date the highest-selling device sales quarter ever. And these device sales will nicely impact technology fee subscription revenues in the next quarter and beyond. Device sales achieved, and indeed, the revenue reported should also be seen in the context of the fact that they occurred in a traditionally low-selling quarter that included Thanksgiving and Christmas or Hanukkah vacation periods when we would’ve expected lower usage-based revenues.

Speaking of GPOs, we now have relationships with the strongest GPOs in the country, which we anticipate will translate into an ability to sell to over 80% of U.S. hospitals, something we expect to start giving us traction in coming quarters. Through this focus, we’ve been able to manage our resources more effectively while controlling expenses in the areas that allowed us to retool and effectively impact our future sales growth. We’ve been able to be nimble and flexible by being proactive and pivot in the areas that better manage our cash flows and push forward the other areas that enhance our financials. We continued our path toward EBITDA breakeven later this year. To do this, we significantly retooled our cost of goods sold expenses, including our infrastructure.

In addition to reorganizing our sales expenses to ensure that our sales force is focused on direct revenue growth, we curbed our spending on other expenses and reduced the pace of some of these, including some of our R&D initiatives, in favor of rescheduling some of these initiatives later into 2025. We are pleased with our focus on building our technology, our insistence on registering our devices with the FDA, our focus on building a more effective sales force and on mindful spending. The results show this progress. On a year-to-date basis, our total operating expenses were reduced by $4 million, which resulted in a loss from operations that improved to just under $6.2 million. Net loss attributable to common shareholders for the three months ended December 31st, 2023 was $3 million compared to a net loss of $4.7 million during the comparable quarter in the prior year.

This improved result was reported despite some mitigating factors that include the expenses associated with necessary infrastructure growth and rising variable interest rates, which impact short-term notes and our term debt, resulting in a year-over-year increase of $377,000 in interest that impacted this quarter. Earnings per share for the quarter improved to negative $33.09 per share versus negative $41.01 per share compared to the preceding quarter. Quarter over immediately preceding quarter adjusted EBITDA improved by about $720,000, such as adjusted EPS improved to negative $0.12 per share. Each quarter, I’d like to provide a big, high-level explanation of how we drive our revenues. First is our technology fees, which are recurring subscription service fees generated by our software platform, diagnostics, and biosphere data platform.

For the third quarter, fiscal 2024. Our technology fees rose 23% year-over-year to $2.78 million. This growth reflects our strong customer retention that is supported by the quality of customer and cardiologists friendly support services that emphasize accuracy of diagnostics and ease of use. Our second revenue segment is device sales, which are the sales of our proprietary hardware, which like our software is all designed in-house. In third quarter, fiscal 2024, the device sales comprised 6.5% of our total revenue, or 193,000 for the three-month period ended December 31st, 2023. In January, 2024, we hired Dr. Farida Siddique as our VP Healthcare to spearhead community health and remote patient diagnostics for chronic care. This has the potential for being a significant business for us in 2026 and beyond.

More on that in future quarters. Our technology is truly globally useful. Cardiac is the number one chronic care condition in the entire world. We’ve recently made inroads or received approvals from regulatory bodies of other countries that will allow us to sell in other jurisdictions. This sets us up for new initiatives, we intend to move on in 2026 and beyond. As we advance the commercialization of Biotres, Bioflux and Biocare products. We anticipate continuing this growth trajectory. The market scoring interest and demand for our suite of products dedicated to chronic cardiac disease prevention and management reinforces our confidence in our market position and our focus on commercialization and development has resulted in significant advancements in remote monitoring solutions for both diagnostic and post-diagnostic products, bringing us closer to achieving positive cash flow.

With that, I hand it back to you Waqaas.

Waqaas Al-Siddiq : That concludes our opening remarks. I will now turn the call over to the operator for questions. Thank you.

Operator: [Operator Instructions]. Our first question comes from the line of Ben Haynor with Alliance Global Partners. Please proceed.

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Q&A Session

Ben Haynor : Thanks for taking my questions. First off for me, just on the salesforce changes, the hunters and the farmers, the changes that you’ve made there, how much more efficiency is available to you there? And have you — the trends that you’ve seen, obviously they look positive, but any more color you can provide to us there?

Waqaas Al-Siddiq : Yes, I mean, it’s early days. It’s hard to kind of like quantify what the efficiency gain is, but I can certainly say that, with the Hunter Farmer methodology, you have people that are focusing on purely account management and individuals that are focused purely on sales versus before the sales rep was spending part of their time on selling and part of their time on account management. So certainly, that has made the sales force more efficient and each individual more focused on new business.

Ben Haynor: I mean, that certainly makes sense, and then on the larger account opportunities, the GPOs and such, what do you see out there? I mean, in terms of closing dynamics to, for these sorts of larger groups and such, are there near-term opportunities that you expect will hit the P&L sooner rather than later? Or is it kind of later in or in calendar ‘24 that we should start to see a bigger impact?

Waqaas Al-Siddiq : I mean, the GPOs are really allowing us to focus on the larger deals and the larger customers and the IDNs and those deals typically take longer, and I think that based on our internal projections and conversation that we’re having, we’re expecting to see that towards the end of 2024. Typically, sales cycles on those deals are well above a year. But having GPO relationships shortcuts that, but they’re still pretty long sales cycles. The key for us is building a base of our business, which is got its path to break even. And so that allows us to have the extra time and the ability to go after these bigger accounts. And with the GPO relationships, it helps us shorten that process.

Ben Haynor: And then how do the hunter’s kind of spend their time in between going after the larger accounts and then smaller accounts or one-offs, how does that typically get spent? And anything you can share on that?

Waqaas Al-Siddiq : The way we think about it is like pillars and fillers, if you will. So, the larger accounts are our pillar accounts that are going to be leveraged with the GPO relationships and the longer sales cycles. But reps have quotas and they have to sell a certain amount on a quarterly basis. So, they’re building that base pipeline to meet their quota requirements on a quarterly basis, and then they’re augmenting that with the larger deals.

Operator: And our next question comes from the line of Michael Davin with H.C. Wainwright. Please proceed.

Michael Davin : Thank you, operator, and congrats on the quarter Waqaas. Can you add a bit more color on your cardiac AI cloud platform? What sort of milestones and timeline can we expect as you work towards commercializing the new predictive features?

Waqaas Al-Siddiq : Our cardiac AI cloud that is really focused on getting and taking our traditional algorithms and really improving those and improving the sensitivity and specificity on that so that we can essentially scale faster and service more patients with essentially less resources, and op and scale the operations of the organization a little bit better. In terms of timeline, we’ve tracked about 500 billion heartbeats that grows every month. It is a big initiative for us. And the FDA clearance process on stuff like that is typically a year, sometimes a little bit longer. Right now, we are in the stage of analyzing and establishing a foundation which we will then file an FDA for. So, I expect that we’ll file something by the end of this year, maybe a bit earlier, and expect the FDA response to come in, nine months after we file.

So, I would say probably you’re looking at mid to late next year in terms of commercial availability. But that is something that is going to be a game-changer for us.

Michael Davin: Great. Thank you. Now will this platform be prioritized in terms of R&D expenses? I know you mentioned having reduced R&D initiatives and then pushing a little bit more of these initiatives later out in the calendar year 2024. So, if you can, kind of break that down a little bit more, that’d be helpful.

Waqaas Al-Siddiq: Yeah, so I’m sure you guys have — read and probably paid attention. We have a lot of initiatives that are going on. So, in terms of an R&D perspective, we recently got a couple FDA clearance. We launched a couple products. So, a lot of those products are now in maintenance mode. So just naturally some of our R&D expenses come down because those products are no longer in the R&D phase. They’re in the maintenance mode. And the cardiac AI cloud is the priority right now for us. And anything that’s related to our cardiac ecosystem, the stuff that we have pushed out is stuff that is ancillary and things that we have plans for in the future. Unless of course that gets accelerated, so we got an NIH grant to work on our stroke prediction in kidney patients.

So that we brought closer because that was a funded program, but other initiatives that we have in terms of development and bringing in other biometrics into our cardiac ecosystem, that stuff is, has been pushed out a little bit further. So, we’ve been really focusing on things that are driving direct business outcomes and direct operational efficiency.

Michael Davin: Great. That’s very helpful. And one last question. So, for these, the increased device sales, did these arise from previous relationships with hospitals or do you think that these increases from new relationships with GPOs and whatnot?

Waqaas Al-Siddiq: A combination of both. I mean, there were certainly deals that were already inside of our pipeline that we had recently closed and we’re closing accounts. So, they were, they were continuing to increase in terms of sales and growing in terms of our sales. And then there were new accounts that we closed. So, device sales come from a combination of accounts that are growing and new accounts.

Michael Davin: Great. Thank you so much.

Waqaas Al-Siddiq: Thank you.

Operator: [Operator Instructions]. There are no further questions at this time, and gentlemen, I would like to turn it back to you for closing remarks.

Waqaas Al-Siddiq: Thank you everybody for attending the call, and we appreciate you taking your afternoon and listening to our remarks. We are always available. You can reach us at investors@biotricity.com or reach out to us on our website, if there are any questions that weren’t answered, please feel free to contact us and join our mailing list.

Operator: This concludes today’s conference. You may now disconnect your lines at this time. Enjoy the rest of your day.