CurveBeam AI Limited (CVB) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the CurveBeam AI investor webinar for the quarter ended March 2025. [Operator Instructions] On the webinar, we have from CurveBeam AI today, we have the Managing Director and CEO, Greg Brown; CFO, Ura Auckland, and we're shortly expecting the CTO and COO, Arun Singh, to join us as well. The presentation will last for approximately 15 minutes, and then we'll go to the Q&A. To begin, I'll hand it over to Greg for the presentation.

Yes. Good morning, and thanks for that, Matt. Welcome to our quarterly 4C for Q3 fiscal year '25. I'll bring your attention to the disclaimer. And now to a summary of the key activities for the quarter. We had 7 purchase orders for the quarter. That represents about a 40% growth on the prior corresponding period from last year. For the year-to-date, we're at now 20 purchase orders, which compared to the prior corresponding period of fiscal year '24, was around 12, so showing around a 67% growth in purchase orders. So we're seeing a nice positive trend, and we remain very confident in our pipeline and prospects for Q4, and we look forward to give you that -- giving that update in the next 4C on placements or orders for the fourth quarter. During the quarter, the company pursued a vendor financing facility. We've now moved to a nonbinding term sheet, and we're targeting to put a contract in place in Q4 of fiscal year '25. That's an important program for the company, especially for Europe. In Europe, it's a major hurdle, 4 accounts in our core markets of Germany and France for placing devices. And having that facility in place will really reduce that hurdle of entry in closing those accounts by offering a vendor facility. Now we believe that the facility will allow a user, especially in Germany, where you have very good reimbursement, to match their outgoings with their incoming through their reimbursement under the CT scanning. It also has the benefit that where we have existing leased devices that we get to capitalize those and that becomes a positive cash inflow after signing. The other area that we need to update, of course, is the validation around the Enhanced HiRise on the MAKO, based on the last announcement from the 31st of March. We have submitted all of the validation data. It's a substantial dossier that is in front of the vendor. We remain confident that this submission will meet the requirements. From the CT quality of the image compared to MDCT, it's excellent. We hit all those landmarks. The CT quality is very, very good. We're very confident in the submission. We need the vendor to complete the assessment of the standing CT scan versus the lying down CT scan and whether those cut guides are substantially equivalent. And that can only be done by the vendor under their regulatory clearance. So that continues to move forward. We remain positive, and we will update the market as soon as we have feedback. There were 2 meetings that were scheduled in March that weren't able to take place, and we're hoping that a meeting can take place in the not-too-distant future. So looking at that quarter-on-quarter growth, some nice trends there for our progress in device placements, and we remain confident in our pipeline for Q4 and the -- and for our purchase orders for Q4. On the cash analysis, the cash at the end of Q3 was around $5 million. We had receivables around $8 million. Those receivables are near-term, and they represent our near-term cash position of around $13.8 million. That's important to recognize because we have these receivables. There was less receipts than we expected in Q3, but that was due to room readiness delays, and we expect that to impact in Q4. Now outflows were down. However, where we don't have the receipts, of course, it leads to a higher use of cash from operations. The inventory levels were around about $12.7 million as of the end of March. But we expect based on those receipts that were due in Q3 coming into Q4 with the other receipts from -- receipts due from the end of Q3, we expect to be cash flow positive in Q4 of fiscal year '25. Given that and our cash inflows that are expected from device installations and other targeted initiatives that we have underway, the company's Board remains confident in the company's cash position. And again, our near-term cash position is $13.8 million based on the receipts and cash due as of the end of quarter 3. That is not covering Q4. And that final point again, that we are also advancing other opportunities in delivering non-dilutive capital to the company. And we will update the market when appropriate as those programs progress. The Enhanced HiRise project, the Enhanced HiRise was developed. It was developed to have a higher energy source to deal with larger patients and being able to hit the required landmarks. That is done. The FDA clearance is in place. We have that now in multiple sites beyond just trial sites. It allows us to hit those key anatomical points, which are critical in the processing of cut guides for the various vendor robotic systems. We announced on the 31st of March that we had completed all of those requirements. We had a substantial dossier of documents ready for review, and that was now with the vendor for reviewing the quality of the image and the images, the suitability for validating their cut guides is substantially equivalent. We're confident in this submission, but we're still awaiting that vendor review, and we need key people from the R&D and regulatory team to complete that file review so that we can come back to the market and announce that we are compatible for those systems. At this point, we're hoping that meeting will occur in the not-too-distant future. We remain positive on the data. It looks very positive for getting through this validation. We just need the vendor to pull the teams together to review that. Now we are working at the highest level with the vendor. They are themselves under a lot of pressure to get this HiRise validation from their major users because it represents a significant source of income to those users. So they're feeling the pressure as well. They also have 6 other major projects that they're trying to move through the system. There are key stakeholders that need to be involved in the review of our file. That's what is creating the delay. But at the highest level within the vendor, there is a focus in getting this reviewed as soon as possible. So in closing, look, we had a 40% increase on the prior corresponding period with purchase orders. Year-to-date fiscal year on fiscal year, we were seeing a 67% increase. We remain very positive for our Q4 purchase orders. And the cash at the end of the quarter, while around $5 million receivables plus cash that are due from purchase orders is around $7.9 million. So our near-term cash position for the company is $13.8 million. And the fact that we will be going -- targeting cash flow positive for the quarter, we remain very confident in the company's cash position. During that quarter, that vendor financing facility, again, is a big step forward if we can complete those contracts for the quarter, that has a big impact on our ability to close direct sales in Europe and also in the U.S. where we are working with other vendors where we can place a device directly. That vendor financing and being able to offer that to those accounts will be a significant step forward in helping us to accelerate purchase orders, not only in Europe, but also in North America. And then finally, we're continuing the validation process on the Enhanced HiRise. Everything that we can control is with the vendor. We have the highest levels of the vendor's executive team helping us to move this through the system to get our validation and announce to the market. And we will keep the market updated as soon as we have that review completed. Now the final slide that I just wanted to cover, again, so that people understand what's that tailback effect that we're seeing with those purchase orders. What happens is once we receive a purchase order, the medical physicist goes in, will do an evaluation of the room on which a device will be placed. If there needs to be a modification in that room, like an additional lead lining, then that room modification needs to occur first. Now about 70% of rooms with the Enhanced HiRise will need a modification. Where that modification in a group surgeon practice, that's usually done quite quickly. But in some of the hospitals, it can be a little bureaucratic and can slow down the process. So once that room is ready, we can then ship a device, and that's where the clock starts, once we ship with the Stryker payments. And then where we are with the distributor, of course, once shipped, we can also recognize that revenue and the clock starts on the payment. So just wanted to qualify that so that people can understand why our near-term cash position is around the $13.8 million. So on that note, I'll pass it over to you, Matt, for questions.

Thanks, Greg. As you've mentioned, we'll move on to questions now, and we've also had everyone join since, just so you're aware. The questions are based on those sent through via e-mail, and we'll take some live questions as well. So again, for everyone in the audience, please type in any questions you have using the Q&A function within Zoom. The first question I have is, and I know you touched on this a bit, Greg, but where are we at with the MAKO and HiRise validation? What happened with the MAKO validations since the last market update?

Well, since the last market update from our end, everything that we were responsible for was with the vendor, the full dossier. It's a very extensive dossier. That is now with the vendor. We have continued to work with the senior executive who is in charge of helping us to get this process through the vendor regulatory and R&D. At this point, there are key stakeholders that need to review the file and to have the meeting to then appoint on whether they've met the substantial equivalence for the cut guides. And at this point, we hope that meeting is in the not-too-distant future. We continue to keep that pressure on. And the market pressure is also coming back on the vendor to get this addressed. So there has been little advance since the last update. However, we continue to push for that scheduled meeting.

And the next question is, why the delay in receipts for the quarter? Please help me to understand where the delay is from a purchase order to sales/payment? What is the roadblock to installing a HiRise?

And that comes to the point that I was making around, we receive a purchase order. Once we have that purchase order, we have to look at the room for readiness to be able to take a device. You don't want to be putting the device, even though it is lower radiation than an MDCT, you don't want someone working on the other side of a Gyproc wall at a desk. So the medical physicist, radiation physicist needs to go in and make that assessment on room readiness for being able to take the HiRise. Now if a room needs modification for the HiRise, that's where the roadblock occurs. Now that may be a lead lining on a wall. usually in a group practice, it can be done quickly, and it's a straightforward process. But sometimes in the hospital systems, they can be bureaucratic, and that can create delays. Now the good thing is all the purchase orders up to the end of Q3, we have a firm grasp on where we are in that process. So we are very confident in what cash and receipts are due in the next quarter. For Q4, we're still in the process for that assessment for any of the new orders that we're receiving for Q4. But that's where the roadblock lies. It's -- that's where the receipt can be held up because we can't -- the clock doesn't start for payment with Stryker until we ship to that account, and we can't ship to that account until that room is ready. So that's where that roadblock is occurring. As I said, we've got a firm grasp on all those orders up to the end of quarter 3. So we're confident in the timing around our near-term cash. I would -- the only other delay is, sometimes for when we go to European market, again, it will be down to room readiness can also delay. But where we have a distributor, as soon as we ship, we can then recognize and go for our receipt on a device. So I hope that addressed the questions. The roadblock really does lie in that room readiness to take the device.

Thanks, Greg. The next question is 7 purchase orders is a lower number than I expected. Why this and why only 4 HiRise?

Yes. Look, we actually -- we had 8 orders. One order was from a tender that was awarded in Thailand. But due to the earthquake, there was major structural damage to a hospital that all tenders were canceled, so we had to withdraw that. We see that order coming back in the future. It's just right now we had to remove it from the quarterly purchase orders. So we're at 7 of devices. We had 2 or 3 devices that were very close to closing, and they were held up in legal review around terms and conditions. Now we will see those in Q4. It would have been nice if they had been able to drop into Q3, but they are literally that advanced. It was down to single term and condition changes in the contract. And when -- in these hospital systems, that can be not a quick process to get resolved. So yes, 2 or 3 of those orders will push into Q4. So I think that what we're encouraged by was the demand was there. We weren't able to get the purchase orders in on 2 or 3 of those devices. So yes, we remain confident that the demand was there, and we also remain confident in our prospect list and for purchase orders for Q4.

The next question is, are you [indiscernible] with 1 quarter of cash left as it reads on the 4C?

Look, no is the short answer. The 4C, that section $8.5 million, it's a very one-dimensional metric. You're looking at net cash outflows for the quarter and you're dividing by your cash and cash equivalents. It doesn't consider your receipts. So it is a one-dimensional metric when it doesn't consider the receipts. When you look at our near-term cash, we're really around $13.8 million. That metric, if that's what is being utilized to assess that, then I don't think it's a very accurate metric because it's not considering our cash position and the receipts and cash that is due. I think it's important to also understand that we expect to go cash flow positive. So now that metric goes the other way. So understand the limitations within that one-dimensional metric and that the receipts are an important part. So the short answer to the question was no.

The next question I've got is, what are the strategies to boost Enhanced HiRise sales outside of the vendor while it's being validated?

Look, we have a number of conferences that we're supporting. We have quite a good -- we have now our direct affiliates, and we've got a number of prospects that we're chasing down in Europe that we feel will help deliver good purchase orders from our key markets in Europe. In the U.S., we continue to work with all the other key suppliers around custom cut guides for their requirements. What you'll find in these group practices is one may use [ SIMA ], one may use Stryker, one may use Medacta. So we're working with the other implant suppliers, whether it's Conformis, Medacta, MicroPort to make sure that they too have their custom cut guides for their manual surgeries or their augmented reality systems. And there, we see that we can help to also where prospects through having that access to other cut guides can present themselves in the U.S., then we can work with other suppliers, and we work closely with other suppliers to be able to place those devices directly in the market.

The next question is, has there been any impact on sales pipeline following the Trump reelection?

That's an interesting question. Look, we are manufactured in the U.S., under Trump, that makes us -- this product is assembled and produced in Hatfield, Pennsylvania. And I think that that's very much under Make America Great Again. I think that it really does support local manufacturing for the U.S. market. Have we seen an uptick in activity from that? No, we haven't to date. However, we have continued to see a lot of interest in the device, but I don't think it was related to Trump's reelection.

Arun, I think you were going to chime in there. Did you have anything to add?

Yes. I would agree that there hasn't been any visible impact to date with the Trump reelection in the activities and the prospect engagement, it's been same as before. Nothing that stands out has changed because of the election, at the moment. And now the tariff equation does apply to international shipments. So far, most of the tariffs have been on pause. So we haven't seen anything on international sales yet, but that's something we will continue to watch and be vigilant on what -- how that affects us.

The next question I've got is, what's the next key milestones after Enhanced HiRise has been approved and rolled out?

The next key milestones, it's really rolling out the SaaS platform initially, the BMD MDCT product. And that will allow us direct access to the 500 MDCTs -- sorry, 5,000 MDCTs already in the hospital system. So for us, that's the next key milestone. We remain on our timelines around the BMD filing for the MDCT product. And at this point, we're excited to get that cleared and into the market as soon as possible.

And the last question I've got is, do you expect the nondilutive funding before the end of the June quarter? And any idea on how much that facility would be?

We have a number of initiatives. And we are in active discussions and each initiative is at differing levels. And we will come back to the market, and we are targeting to have some updates back to the market, hopefully, over this next -- over this quarter. And at that point, we can share more information around those initiatives.

One final one that's come through is, are we still confident that we have the best product in the market?

By far. Look, at this point, weight-bearing CT has been pioneered by CurveBeam AI. I feel that we are the only FDA-cleared product. We are the only CE marked product. We are the only weight-bearing CT product in our key markets. Where we do have other competition, it is really unilateral. I've shown previously on these calls, just the limitations of what is available today, and it's really unilateral weight bearing, and it's really ankle and knee only. So yes, I believe we are definitely the best product on the market. I'll pass that on to Arun for his position.

Yes. As far as FDA and CE cleared products, there's nothing that matches our capabilities, especially the bilateral coverage and the large field of view. We are the only ones at the moment. The competition will eventually come, but we are well ahead of them, and we'll strive to keep our lead with additional enhancements and features that just set us apart from the competition as it comes in the future.

And that's where our IP and some of our SaaS solutions and the IP around a fully automated BMD from a pre-existing scan will be significant hurdles of entry in the franchise that we look to build up our installed base. So yes, look, we remain positive in not only the footprint we can establish, but the footprint we can defend going forward.

I'll throw it back to you, Greg, just to provide a concluding comment.

Yes. Look, thanks, everyone, for attending. Thanks for the questions. Look, we look forward to reporting back on the 4C for the next quarter, and we look forward to keeping the market updated over the quarter on progress on all the initiatives that we have underway. Ura, Arun, and I are also available if there are further questions outside of the meeting, please let us know. Thanks, everybody, for your time, and look forward to talking again at the next 4C.