CurveBeam AI Limited (CVB.AX) Q4 FY2025 Earnings Call Transcript & Summary

[ Welcome to the CurveBeam AI investor webinar for the quarter ended June 2025 ]. [Operator Instructions] I'll now hand it over to Greg.

Thanks, Ben, and welcome, everybody, to the CurveBeam AI quarter 4 conference call. Just bringing everyone's attention to the disclaimer, and the 4C summary of key activities. During the quarter for fiscal year '25, Q4, we had 6 purchase orders, 2 of which were HiRise. We had 2 HiRise purchase orders that missed the deadline, so they are going to fall into Q1, so with 6 purchase orders for the quarter. A lot of the -- some of the processing within these hospitals, the bureaucracy can delay the order number being received, and that happened in 2 cases. And so hence, those 2 orders will be seen in Q1. Year-on-year, we had 26 versus 22 for the prior year, which showed about an 18% increase in purchase orders. We continue to progress the validation of the enhanced HiRise with our surgical vendor, and we've got increased and positive engagement during the quarter. And I'll go into a little bit more detail on this point on one of the slides further in the presentation. We remain confident in our ability to meet the requirements to complete the validation and discussions continue to be constructive. We're also in the final stages of establishing a financing facility after entering into a nonbinding term sheet in Q3. We've been able to move that forward to draft agreements, and we hope to be able to announce something within the quarter. This facility will have a significant impact in helping us in North America and in Europe, U.K. and Switzerland, in helping to overcome a significant hurdle in closing accounts, especially in our key markets for Germany and France. I also wanted to update everyone on progress with the bone density. Based on that Q-Sub from last December, we were required to not only do predicate comparisons, but also to do a comparison with bone mineral density done on a dual-energy X-ray. To date, we processed the first 200 patients with DXA scans and MDCT scans, and the data was very comparative. We were very happy with that performance, and we are now completing the final 200 patients, and we should have that data within a month. So we remain on track for a H1 calendar year '26 FDA clearance on the BMD for the MDCT product. Then the second step is for the HiRise, which is a separate filing. So if I go to the purchase orders, again, Q1, we had a very strong Q2. Q3 was a good quarter. Q4 was down. We did miss 2 HiRise orders, which will go into Q1 of next fiscal year or this quarter. But we had good growth year-on-year with purchase orders from 26 to 22. So on the cash analysis, we ended with cash of $5 million at the end of Q4 with receivables plus cash due of around a further $5 million. Receipts from customers from fiscal year '25, Q4, was a record at $5.6 million, and that was up from $1.5 million in Q3, so a significant jump. This generated positive cash from operations and around about $400,000 compared to negative cash generation in Q3 and the Q4 of fiscal year '24. So cash outflows for the quarter were also down from $6 million in Q3 and $6.6 million for the prior comparison period last year. Inventory levels, it was pleasing to see came down from around $13 million down to $10 million. And we are advancing that agreement with the vendor financing facility. That will allow us to capitalize some of the existing leases that we have and will also help our near-term cash position. The company expects to also generate around $1.3 million in R&D tax incentive receipts in Q1. And we're also continuing to pursue other opportunities around cash for the company. So to the HiRise project. I think in the last announcement around March 31 or in the 4C of April, we explained that the company had submitted the validation data with the substantive documentation that was needed to validate the HiRise, including the package insert or instructions for use changes. We were then waiting to have resources available to review that file. We remain in a priority list, and we're high up in the priority list. And the company is pleased to share that we did get engagement from the technical leader helping to review and triage the file to help us through the process. The regulatory compliance is not yet resourced, but we are making very good progress. He's been very engaged, and we've had several positive calls. The company, we remain confident that this submission will meet the validation requirements, and we have more meetings scheduled for updates over the coming weeks. So we'll be able to give more information to the market when we have that available. It's difficult for us to provide guidance on completion because it's an internal project being managed with other priorities. And while we're putting a lot of pressure on, we're in constant contact with the leadership. They've been responsive, and they've now assigned a senior technical leader to the file, which has been a nice step forward. So in closing, year-on-year, we had 26 orders up from 22. Cash was at $5 million, up from $4.9 million from Q3. Receipts from customers for Q4 were a record $5.6 million. So it generated positive cash flow for -- cash from operations for Q4 of fiscal year '25. We're in those final stages of securing the agreement with a vendor on that $18 million vendor facility. We really see that as a positive step forward in helping us to increase purchase orders going forward. And also, it will have a near-term benefit with positive cash flows with capitalizing existing leases. And of course, on the BMD product, we're having a good progress there and hoping to have that file completed for the 500 patients -- sorry, for the 400 patients needed for that filing. And then finally, we continue to progress the validation of the enhanced HiRise with the vendor. We have increased and positive engagement through their senior technical leader, and the company remains confident that the submission will meet those requirements for completing validation. and we continue to have constructive conversations. So on that note, Ben, I might hand it back to you for questions.

[Operator Instructions] We've got a few questions here. I'll kick off the first one here. The HiRise validation just drags on. Does Stryker not care about the CVB business? Or has the relationship broken down? Or is there another issue not being shared?

The issue here is that CurveBeam AI has a contract with Stryker Foot & Ankle, and they're our distributor in the U.S. And within that division of Stryker, which is the trauma division of Stryker, Foot & Ankle is within that group. And that's where we have our agreement. Now the Robotics division is part of a total joint division. It's a totally separate division. And I think that the engagement that we have with Foot & Ankle has been very positive and continues to be very positive with Stryker Foot & Ankle. And they continue to help put pressure on the process in advancing the validation. So I think that the relationship is still very positive. We're still getting very good interaction on a regular basis. But at this point in time, we're just competing with some of the other priorities within another division. And that other division for the robotics, for their patients or their customers today, they're very focused on expanding into spine and shoulder. That's where we're competing against, but we're gaining traction in the priority list for review with the senior technical leader being assigned. Would you like to cover off on anything on that as well, Arun?

Yes. Just to supplement the fact that this new contract that we have been assigned has been very, very positive and responsive and it's triaging all the data. So when the time comes to officially resource and activate the project within the regulatory team, he will have everything ready to go in a quest to minimize the time it will take to do the review and get it completed. So at least, I'm quite pleased with the advanced work that's being done with their help to get ready for the official review whenever that resourcing occurs.

Thanks, Arun. And so I think Stryker remains very engaged. They care about the CurveBeam business, but we're in Foot & Ankle. We're dealing with a validation requirement within another division who has competing priorities. We're in their top list of priorities, thanks to the interaction with Foot & Ankle and some of their key users. And we hope to see that progress soon.

Next question, 6 purchase orders is disappointing for the last quarter. What is the company doing to address this going forward if further delays with MAKO?

Yes, look, 6, we were expecting 8 for HiRise. There was 2 orders that just missed the cutoff. And it was held up due to bureaucracy within some of these hospitals. I mean it can take a quarter to get it through the bureaucracy of these hospital systems sometimes. So we were encouraged that there was a lot more activity in the quarter than what we could recognize. Those 2 orders will now be seen in Q1. We feel that going forward, to increase the order number demand, look, that vendor financing facility will have an impact. It will help us to place more devices, both in North America and in Europe. We are working very closely with Foot & Ankle to keep a core focus on the key pathologies in which weightbearing has clear advantages. And there's an extensive prospect list that we have within the Foot & Ankle division that they continue to manage. And then in addition, what we're doing on the HiRise is there are a lot of other vendors out there with knee and hip implants that we're looking to customize their scan protocols for knee and hip. And that's a number of other knee and hip suppliers. I mean there's a number of them. And we're going ahead and validating those protocols on the device because even in a group surgeon setting or a hospital setting, you can have multiple surgeons using different types of implants. And by validating multiple vendor custom scan protocols, then there's a wider array of surgeons who can access the device for scanning and planning their surgery, not just related to the robotic surgery.

I just wanted to supplement there. So we are in a very advanced stage of validation with the #2 and the #3 supplier of knee replacement system, or PSI, not robotic necessarily, but the knee replacement PSI. So we are in very, very advanced stages with the #2 and #3 in the market share.

Next question, what are the remaining risks for HiRise validation?

Arun, do you want to cover that?

Yes, sure. So our previous round of assessment that we had gone through with the MAKO team, we have met all the requirements, so we are very, very confident in that. So the remaining risk is that they are concerned about patient motion because patient is standing and not supine. And so there's a greater chance of having some movement during the scan. So the initial results had some movement. And so the risk is that a number of patients who have motion exceeds their threshold that they would like to have. On the plus side, learning from the experience from our beta sites and the pilot sites, we have enhanced the mechanism to stabilize the patient and position the patient comfortably and, at the same time, strapped in a way that they have a very stable and supported position, so they are less likely to move. So we have made some strides in that while waiting for MAKO, so that looks very promising. So we are confident that we will be able to address the motion concerns when the next phase starts. And so the risk -- that's the biggest risk that's known at the moment. But at the same time, we are ready to meet it.

Next question now, what is the cash outlook for Q1 FY '25?

Ura?

Sure. Look, we're not in a position to give a forecast. However, the relevant context, I guess, is that we're positive on the prospect list for orders this quarter and have had some orders, as Greg mentioned, spill over from Q4 into Q1. We're carrying a bank of $5 million in POs into the quarter, without factoring in any more orders from that quarter. And some of those will be installed during the quarter and cash collected. Due to the summer months in the U.S., they'll probably be later in the quarter, the installs and some will spill over into the following quarter. But there will also be funding in the quarter that relates to the R&D tax incentive of about $1.3 million, and we expect some other nonoperating cash flows that will contribute to cash in the quarter.

In the last 4C, it was stated the company was advancing other opportunities that may deliver further capital. Is there any update on this?

Yes. Those programs remain active, and we will update the market when appropriate.

I think I have some other questions come through. So this one has got 2 parts. So the first one is any forward guidance? And what are the implications, if any, on upcoming tariffs?

Well, I think, number one, we can't give guidance. Number two, at this point, from a tariff management perspective, we are manufacturing in the U.S. So our final assembly is really U.S.-based. Now it will impact some components, but we have a good inventory level to absorb that. But I might hand that over to Arun to handle that question. He's better placed to address the tariffs.

So far, we haven't been impacted in our exports to Europe because Europe has not imposed any reciprocal tariffs yet. Of course, the dealer announced yesterday that there's some intense negotiations going on between the 2 sides about medical devices. So far, the indications are that Europe is not going to retaliate on medical devices. But that's good news because that's our second largest market outside the U.S. So far, we have been -- our impact of tariffs have been very minimal. There are some components that we buy from international sources, but they are lower-cost electronic components. So the tariffs have a very insignificant premium to the prices. So far, we are fairly unscathed from this tariff situation.

There appears to be very marginal increases in product sales. What reviews have been taken on the sales process as there appears to be very limited market penetration?

Well, we do regular meetings. In fact, it's a weekly or fortnightly meeting with the Foot & Ankle team. And we review that process on a regular basis on the sales activities. One clear requirement and one clear hurdle is the validation of the enhanced HiRise for the robotic systems because it generates the need for a lot more CT scanning and, of course, it's reimbursed. So that's what really helps in the process in closing some of the orders. Arun, would you like to cover off on that question from leading that part of the process?

Yes. So we continue to pursue some leads directly as well because we can sell direct in addition to the Stryker team. So we have been analyzing those opportunities aggressively, in addition to the HiRise, also for the InReach device that we have gotten some really good traction lately, and we foresee some orders from our InReach device that will supplement the orders and revenues. And we have also gotten some traction from children's pediatric hospitals, and there's been strong interest from those. So we have actually one already placed directly, not through Stryker, but directly. And we have a second one forthcoming soon. So we are pursuing any other opportunities that we can get, some of them direct. And at the same time, we are also aggressively pursuing some prospects in Europe, especially Germany; and secondly, in France. So yes, so we are exploiting any opportunities we can have and we can capture before the MAKO gets validated -- sorry, the robotics system gets validated.

Yes. And just to close that off, that vendor financing will help. That's a significant hurdle for closing accounts, and we'll have that available hopefully in the U.S. and in Europe. So we'll be able to apply that to both markets. That will help take out a significant hurdle. We've sat down and really focused on the core pathologies within Foot & Ankle, where there is extensive publication support. That is, I think, where electronic pre-approvals can be set up. That can also help in advancing some of the Foot & Ankle prospects, and we're working through that process with our partner. And also these vendor custom scan protocols, don't underestimate when the #2 and 3 knee and hip implant companies also will need a surgical custom protocol needed for their surgery. Being able to do that and validating those protocols on the HiRise will also open up that part of the market for expanding the purchase orders going forward. So there's several things. There's a very extensive list that is being -- a prospect list that we remain very confident in. And to help try and reduce some of those hurdles, we're focusing on those core pathologies, expanding with some of the vendors with significant market shares in knee and hip. We're also advancing the Foot & Ankle focus on the core 9 pathologies where there is good clinical support.

Are you able to split Q4 sales between U.S., Europe and other markets? And what's the expected targeted -- sorry, what's the expected or targeted split in FY '26?

The U.S. will remain the largest market for sure. But Europe is expected to contribute a nontrivial portion of the sales. Not so much yet in Australia, I mean there's prospects there, but subject to some developments that we are anticipating. But once those are in place, we will expect Australia and Asia to start to ramp up as well. But for next fiscal year, U.S. still remains the largest portion of the sales with some meaningful contribution from Europe and whatever we can get from Australia and Asia.

And one of the orders from this quarter was from Australia, and we have now multiple prospects that we're trying to advance in the Australian and New Zealand markets. But as Arun has pointed out, the majority of the sales will come out of the U.S. It is the core market. And typically, it would contribute 60% to 70% of purchase orders.

Next question, following the technical lead approval with Stryker, what visibility do you have for the rest of the robotics approval cycle?

Yes. So right now, look, the interaction with the senior management for that robotics system has been very good. They are working with us and helping to have the project advanced as quickly as possible within their competing priorities. We did see the senior technical leader assigned to facilitate and triage and discovery on the file to help us so that we're ready for when their reg compliance resources are available. Right now, the reg compliance resources are not yet assigned to the project. But it's a very positive step that we're getting the file reviewed because it's going to be on the technical support or the technical leadership side that they're the ones who read the cut guides and will be giving a lot of advice on their comfort with the HiRise scans. So yes, look, it's been very good engagement. The response and engagement with this resource has been very good as well. So we've had good engagement at the senior levels of the company and at the head, like the leadership level in the technical support and then waiting for the reg compliance to be assigned to the project.

To be more exact, the steps that are pending is a review of all the data formally by the regulatory team within MAKO, within the robotics support system. And they will need some R&D input because they don't fully understand all the technical aspects and the surgical planning aspects. But with some input from R&D, the regulatory team will review all the data. We believe the data is quite complete. But of course, it's up to them to decide if they need anything more, but we have to wait for them to review. But as soon as they get to review the data, that's the key step. Whether they deem it to be complete or they need some additional data, either way, we'll be able to respond once they start the review and then that will pave the path forward.

Could you please explain the vendor financing facility to someone not familiar with it from inception? And we have a follow-up question for that, too.

Ura, do you want to cover that?

Sure. So this facility is through a Swiss organization who specializes in working with medical device companies who set up arrangements with customers with monthly type revenue collection models, and they can fund the core cost of the unit, so the manufactured costs. So it allows us to cover our manufactured costs, place a device on a monthly model and then pass on an interest rate at fairly commercial market terms to the clinician that averages down slightly above market interest rate that we pay on the cost of goods sold. So we recover our interest, but get to place a deal that we probably wouldn't otherwise have got. So it's not something that we'll dominate ourselves with, but it allows us to meet the needs and capture a placement with opportunities where we weren't going to get it otherwise.

So it means that as a company, a lot of these surgeons have a lot of equipment already leased. And if they're finding it hard to get additional devices leased, then we can step in and help them with this facility. It allows them to match their cash inflows with reimbursement, with their cash outgoings on a lease payment versus having to buy the unit upfront because they can't get leasing presently. But it does really help us in addressing a big hurdle in closing some of these accounts. As Ura has pointed out, it's not going to be the #1 reason we're selling devices, but it will have a relatively good contribution having that facility.

And ultimately, it helps us to increase the park of devices that we got out there so that when we get to having our SaaS product, we have that expanded park of devices that we can sell SaaS services into.

Another question on the same topic, when do you expect to have the financing facility in place and live, going live?

Well, we're still in discussions. We've completed the final DD, and we would hope within this quarter that we would be able to execute on that agreement.

Is there a way for AI module to cancel the effect due to movement? Is that already available? Or are you planning to implement such a module?

Yes. It is available already. It's already implemented. So there are 2 types of motion. One motion is within a single joint. During that one orbit, when one joint is being captured, if the patient moves, we have a very effective motion correction algorithm for that single orbit capture. But then for a total knee replacement protocol, we scan the hip. If there's a gap in the femur, then we scan the knee. And then if there's a gap in the tibia, then we scan the ankle. So the gaps that we have -- and they have to minimize the time of scan and the exposure in relation to those of the patient, so that's how the protocol is defined. So if there's a shift between the joints, that a patient moved between the hip and the knee orbit, that's the motion, that's currently the issue because the motion correction algorithm cannot correct that because there's a gap in between, so there's no continuity. And there's a motion rod, but there are some issues with that as well. So that's where the motion concerns have been, and that's what we're addressing with the mechanical stabilization. That's a key component to that. And then there's some software adjustment as well that we are actually refining, which is making it more minimal in impact. So to answer your question, the former is already implemented, the motion correction; and the latter is something that's more in the defining phase.

And we've also put in patent applications around the AI approaches to movement and metal artifact correction as well.

Yes.

What percent of the orders placed in Q4 would have used the facility if it were available? Also, can you explain how this will relate to a device sale in brackets and preserving cash?

Could you say that question again, Ben?

Yes, no problem. So what percent of the orders placed in Q4 would have used the facility if it were available? Also, can you explain how this will relate to a device sale and preserving cash?

Okay. Well, I think there's 3 questions there. The second part of the question, I think, was addressed already. But on the first part of the question, I feel that had we had the vendor facility in place, could we have seen 1 or 2 more orders out of Europe? I don't know because I think there's a change in reimbursement where they're waiting for the payments on reimbursement for the scan to be reset by the Krankenkasse. And I think people are waiting to know what that final number is, is it EUR 300? Is it EUR 200, at which point they were able to better make their decisions on that vendor financing. So we expect that to come out soon. And I would expect that, that would have an impact going into this quarter and the following quarters once they've got a surety on that reimbursement level from the Krankenkasse. That's for Germany. And I think on some of the other markets, could we have got an extra order or 2? It would be possible. But at this point, that's pure conjecture because we didn't have the facility to offer. And then the final question is that where it will help with getting the facility in place, where we already have some existing leased devices, it will allow us to capitalize those existing leases. And we would have a few of those in place.

Does the sales team collect visibility of each sales order, procurement and installation process before PO is signed to minimize slippage of sales?

Yes, very, very extensively. So we are very closely engaged with the sales process because the Stryker team does defer to us for our expertise that we have built up over the years, especially when working with admins. Stryker team has greater contact and relationship and experience with the surgeons, not so much with admins, the Stryker Foot & Ankle team at least, our partner. So they bring us in as soon as the prospect advances to the level of discussion, of sales discussion. So we track the entire process very closely and study all the nuances of all the objections or obstructions or process delays. And so we have a very good feel for what it takes to follow through the sales cycle and what factors do apply. And so yes, our team has become very, very seasoned in understanding the customer and their objections, for sure.

Can you talk us through how you view the capital position of the business?

Ura, well, I think we've already covered that, but do you want to cover that?

Yes. Look, we're working on nondilutive options for capital and the company and the Board are very cognizant of shareholders and avoiding dilution wherever possible. So we're looking at all nondilutive options and avoiding capital raising where it's not necessary. So we reserve the right, I guess, to do what's necessary for the company. But we're very cognizant of the shareholders' position. And well, there are serious shareholders amongst management who share the same pain as shareholders have had experienced, I guess.

So yes, we review and manage cash through receipts and outgoings, and we watch it very closely. And we continue to evaluate other strategies to source funding, including vendor financing, the R&D tax refund. And of course, the receipts for purchase orders that are building up on each quarter. So right now, with the positive cash flow from this quarter, we feel that the company is able to manage its cash position while pursuing other opportunities, but always reserves the right to raise cash if needed.

All right. Thank you. That concludes the Q&A segment of this webinar. I will now hand it back to Greg for closing remarks.

Thanks, Ben, and thanks, everybody, for participating in the call and for your questions, and look forward to updating the market on progress during the quarter and at the next 4C.