Clever Culture Systems Limited (CC5.AX) Q4 FY2025 Earnings Call Transcript & Summary

An audio recording of this call will be made available on the company's website later today. I would now like to hand the conference over to Ray Ridge.

Thank you, Jack. I would like to remind those listening to this call that today's update may contain forward-looking statements, which do involve inherent risks and uncertainties. Those risks and uncertainties include those disclosed in our ASX lodgings, which we recommend that you review. There are reasonable grounds for any forward-looking statements made today. However, due to their inherent uncertainties, we recommend that you do not place undue reliance on those statements, and actual results may differ materially from those forward-looking statements. I'll now hand over the call to our CEO and Managing Director, Brent Barnes.

Great. Thank you, Ray, and good morning, everyone. Thanks for joining today's investor call. I'm really pleased to report that fiscal year '25 has marked a pivotal turning point for our company, a year underpinned by our successful launch of APAS Independence into the pharmaceutical market. AstraZeneca has been our cornerstone customer, who has made the decision to standardize our APAS technology across their largest manufacturing sites globally. APAS Independence has now moved into routine use within their global sterile drug manufacturing network with 9 instruments installed across their global sites. This milestone marks us as the only endpoint culture plate reader technology currently in routine use in pharmaceutical manufacturing, representing a clear validation of the maturity, reliability and value of our technology. Just a few weeks ago, we welcomed Novo Nordisk as a new customer. They placed an initial order for APAS Independence and will commence a group-wide evaluation of the technology for consideration across their global manufacturing network. This evaluation will cover both the 90-millimeter settle plates and the 55-millimeter contact plates and assess potential integration within their existing systems. What's important here is that this level of engagement from a top-tier pharmaceutical customer further demonstrates the traction we're gaining across the sector, and that we are successfully engaging with some of the largest manufacturing companies globally. As it stands, 5 pharmaceutical companies, AstraZeneca, Bristol-Myers Squibb, Thermo Fisher Pharma Services, Novo Nordisk and one other top 20 pharmaceutical company, are either actively deploying or evaluating APAS Independence. We estimate that these 5 customers represent a potential combined early-stage opportunity of 60 to 80 instruments, equating to approximately $40 million to $50 million in potential upfront sales and between $7 million and $10 million in annual recurring revenues. I want to emphasize that this is just 5 customers. Our total sales pipeline is approximately 50% greater than this. The progress is underpinned by a deliberate focused sales strategy, targeting the world's largest pharmaceutical manufacturers within an estimated $2.8 billion total addressable market. Beyond the pharma market, our clinical market had some positive traction through our exclusive distributor, Thermo Fisher Scientific. During the quarter, the Health Services Laboratory in the U.K., part of the Sonic Healthcare Group, has purchased its third APAS Independence instrument. We're not just delivering on our commercialization goals. We're also expanding our instrument capability. We're on the cusp of finalizing a major upgrade to release the new contact plate analysis module that effectively doubles the capability of the APAS Independence instrument. Contact plates represent approximately 50% of the cold plates used in environmental monitoring, and we've now built, tested and shipped instruments with this new functionality. The development effort to launch this to market has been the major focus of our team over the past 12 months and has required enhancements to the instrument and the software as well as a new analysis module for the application. The hardware and software improvements have now been released to manufacturing and are available to existing customers as upgrades to their instrument. The analysis module is in final validation with launch targeted towards the end of August 2025 or later this month. This enhancement has already been provided to AstraZeneca and Bristol-Myers Squibb for in-field testing, and it's playing a direct role in accelerating customer evaluations and purchase decisions. For example, our top 20 pharmaceutical customer who recently completed a 6,000 plate evaluation on settle plates will now extend their assessment to move on to contact plates. I want to reiterate that fiscal year '25 has been a breakthrough year, but we believe we're only just at the beginning. We launched APAS Independence with the ability to automate roughly half of all environmental monitoring tests. By the September quarter, we'll be able to address the vast majority of those tests through the addition of contact plate functionality. Our progress to date underscores the strength of our technology, the value it delivers to customers and the growing demand from a highly sophisticated market. We are no longer proving the concept, we are in the early stage of scaling adoption. The result of our commercialization efforts, along with a carefully managed cost base, has delivered financial stability for the company from both a cash flow and a profit perspective for the full year. This financial position is supported by a robust sales pipeline and growing recurring revenue base. I'll now hand the call over to our CFO, Ray Ridge, to talk through our financial results for the quarter.

Good morning, ladies and gentlemen. I will now provide an overview of the financial results we reported in our Appendix 4C lodged with the ASX in July. All figures are in Australian dollars and in accordance with ASX listing rules are not audited. So for the quarter ended 30 June 2025, the company had net cash outflows of $0.95 million. This was predominantly net cash outflows from operating and investing activities of $0.9 million, which included inflows of $1 million comprising $0.7 million for AstraZeneca, $0.2 million for other income being maintenance and software renewals, together with $0.1 million received for the CTCM grant, which has part funded our contact plate's development. Then we had outflows of $1.9 million, which were higher than usual but included $0.3 million in payments relating to the final design changes for APAS Independence to enable that processing of the smaller contact plates and $0.2 million for the purchase of instrument parts. So these cash flows resulted in a cash balance at 30 June of $1.3 million. This cash position is underpinned by committed or unknown cash inflows of at least $3.8 million in the next 2 quarters, which includes $1.4 million in receivables at 30 June, $1.3 million to be invoiced for the purchase commitment from Novo Nordisk in addition to the second instrument now installed at BMS, and $1.1 million estimated for our research and development tax incentive plan for the financial year 2025. Any new sales, obviously, will further improve these cash flows over the coming 2 quarters. Finally, the company has 397 million listed options with an exercise price of $0.008 expiring 15 of November 2025. If fully exercised, these options will raise $2.4 million, and that's net of the final repayment of the loan from the South Australian government. That's it from me. Back to you, Brent.

Thank you, Ray. Look, as we look ahead for the remainder of calendar year 2025, we're entering an important phase of growth driven by expanding our top-tier pharmaceutical customers in addition to an important launch of contact-type application. The release of contact plates will include upgraded instrument hardware, software for processing, 55-millimeter contact plates along with a fully validated contact plate analysis module. That's the AI application. With these enhancements, APAS Independence will offer dual-plate capability, processing both 90-millimeter settle plates and the new 55-millimeter contact plate in bulk and on a single instrument. This is a unique value proposition in the market. No other solution delivers this level of automation for pharmaceutical, environmental monitoring. It's a key differentiator that positions APAS Independence as a comprehensive automation platform. Feedback from our customers has been clear: To realize the full operational benefits of automation, they need a solution that handles both plate types. The availability of the contact plate capability directly addresses this requirement, and we believe it will unlock broader adoption across the pharmaceutical industry. On the commercial front, our momentum continues to build. We've seen strong early traction with 5 top-tier pharmaceutical customers. Our sales and marketing strategy remains focused on expanding deployments across these global networks while also engaging and growing our pipeline of new pharmaceutical companies. We anticipate converting additional sales over the next 6 months, helping to diversify our installed base and build a foundation for sustained growth. We're also continuing to support our existing customers as they progress through evaluations and moving into routine use. This is an important point in the sales cycle, paving the way for broader enterprise rollouts. Finally, the second half of 2025 represents a major opportunity for further market engagement with several leading pharmaceutical microbiology conferences taking place after the Northern Hemisphere summer. We plan to showcase new customer data that demonstrates real-world outcomes. These events are essential for strengthening our reputation, building credibility and reinforcing APAS Independence as the leading platform for automated culture plate reading. We remain confident in our outlook and focused on executing on our growth strategy with discipline and precision. That's it for me. I'll now hand it over to Jack to facilitate a question-and-answer session.

Thank you, Brent. We'll now commence the question-and-answer session. [Operator Instructions] So our first question online. What percentage of the installed hardware is repair per quarter? And what is the cost of this? And then please include this in future reports.

Good feedback. So a bit about reliability. The product has been in the market for a number of years. So it's actually quite a highly reliable instrument. In terms of -- so note taken. We don't have that as a kind of a public report, but we certainly have that as an internal report. We have 1 preventative maintenance on the instrument per annum. And so that's part of our planned maintenance program. And we have an outsourced service model. And the way that, that works is it's a set fee that we pay this outsourced group on an annual basis for every installed unit. And that cost and that fee has been agreed based on the performance and the reliability of the instrument to date. We would note that the service part of our business is a profitable part of our overall business, too.

Thank you, Brent. [Operator Instructions] I'll just provide a short moment for any additional questions. So we have no further questions at this time. So that does conclude today's investor conference call. Thank you for participating.