Doctor Care Anywhere Group PLC (DOC) Earnings Call Transcript & Summary

I'm pleased to welcome you to this extraordinary general meeting. Good evening and good morning to our shareholders. I can confirm that a quorum is present and therefore declare the meeting open. The notice calling the meeting has been in the hands of the members of the company for the prescribed period and with your consent, will be taken as read. Is this agreed? Thank you, ladies and gentlemen. There being no objections, we shall take the notice as read. On the 12th of December, the company announced that it has plans to repay its GBP 10 million senior loan facility with AXA PPP Healthcare Group from funds raised under an offer of convertible notes to raise GBP 10.6 million. As set out in the Notice of Meeting, this offer of convertible notes is subject to shareholder approval. The key terms of the convertible notes and the reasons for raising these funds, are set out in both the announcements and the Notice of Meeting, but I will briefly summarize the terms. The convertible notes will be repayable in 4 years on the December 31, 2027. No repayments of principle is required until that maturity date. The conversion price is 4.59p, which is equivalent to an Australian dollar price of AUD 0.875. That is a premium of 94% to the closing price of our shares on the December 11, 2023, the day before the deal was announced. There is no interest or coupon payable on the convertible notes. The funds raised will be used to repay GBP 10 million loan facility with AXA Health. AXA Health will itself participate in the convertible notes with an investment of GBP 5.4 million. The issue of the convertible notes exceeds the company's placement capacity of 15% of issued shares. And for that reason, it's subject to shareholder approval under the Australian Stock Exchange listing rules. I will ask our Chief Executive, Ben Kent, who is with me today, to give you some more detailed information about the deal structure and benefits of the transaction.

Thank you, John, and good evening and good morning to our shareholders. I'll give you some further detail on the transaction. Doctor Care Anywhere or DOC has entered into Convertible Note Agreements with 2 principal investors, AXA Health and Axia Investments Limited. AXA Health is DOC's largest customer and has been a valued partner to DOC for several years and more recently, DOC's main lender. In December 2022, just over 1 year ago, AXA Health provided a senior loan facility for up to GBP 10 million, which the company has fully drawn down during 2023 to fund our operations. AXA Health is subscribing for approximately GBP 5.4 million of convertible notes. Axia Investments is a private client fund, managing funds on behalf of the family office. Axia is subscribing for approximately GBP 5.2 million of convertible notes. Please note that AXA Health and Axia investments are totally unrelated parties. So the similarity in names is a coincidence. We are delighted to welcome both AXA Health and Axia Investments as investors in our convertible notes. The company will use the proceeds of the convertible note financing to repay in full the GBP 10 million AXA loan, together with accrued interest,and costs of this transaction. The material terms of the convertible notes are set out in Schedule 1 to the Notice of General Meeting and some have been covered already by John, but I'll mention some additional terms now. The holders of the convertible notes may choose to convert their notes into CDIs at any time. The company may redeem all outstanding notes in full on or after January 1, 2026, about 2 years from now, by repaying the outstanding principal. The refinancing of the AXA loan has the following benefits. The convertible notes will extend the term of the company's debt facilities to the December 31, 2027, compared with the current AXA loan, which would otherwise become repayable from November 2023 and be fully repayable by November 2026. This refinancing removes the need to make quarterly repayments of the AXA loan. It frees up the company's resources to be invested in the operations and growth of the business. In addition, we expand our relationship with AXA, our largest customer, as AXA Health becomes a potential significant investor in the company if it chooses to convert its convertible notes. And this evidence is the strength of our relationship. The Notice of Meeting includes tables showing the effect of the company's entry into the convertible note agreements and grant of related options, the effect on the capital structure of the company. Assuming full conversion of the convertible notes into CDIs at a future date, the number of CDIs on issue would increase from approximately 367 million CDIs to approximately 599 million CDIs. If both AXA Health and Axia were to convert their Convertible Note holdings into CDIs, AXA Health would hold just under 20%, and Axia would hold approximately 19% of the CDI's on issue. I will also briefly mention the Consultancy Agreement, under which the company engaged Mr. Matthew Addison to advise on the proposed refinancing, including engaging with potential investors, procuring commitments to invest and also to assist the company with increased investor relations and supporting stock market liquidity initiatives. Elements of that work will continue in the first half of 2024. The company has agreed, subject to shareholder approval, to grant to Mr. Addison 3.5 million options over ordinary shares. Note that the exercise prices of the options of $0.075 and $0.125 are set at significant premia to the current share price, so they will only approve value for the consultants when the DOC share price has increased significantly. By structuring the fees in this way, we have ensured that Mr. Addison's’ remuneration is aligned with shareholders' interests. I can report that Mr. Addison’ has provided high-quality advice and support throughout this transaction. And therefore, we are happy to recommend the grant of the share options, which will be covered under Resolution #3. I will also take the opportunity to comment briefly on current trading. In the announcement of this transaction, we took the opportunity to report that based on our unaudited management accounts, in October and November 2023, we met our guidance to achieve margin targets of 50% to 55% for gross margin and 35% to 40% for contribution margin. We expect the margins to have been slightly lower in December due to seasonality. We also reported that we are on track to meet our guidance of positive EBITDA in Q1 2024. Note that this guidance is subject to the same assumptions and dependencies that accompanied that guidance when it was first issued on the February 28, 2023. I can also report that trading volumes in Q4 have been steady on Q3 with a small reduction in December due to the Christmas period and represent high single-digit growth over Q4 2022, excluding GP2U, the business that we sold in July 2023. The volume outturn reflects 2 main factors. Firstly, a mild winter in the U.K. so far. And secondly, limited marketing of our service in the short term by AXA Health as like other private medical insurers in the U.K., it is managing a significant increase in overall claims from its private health insurance customers. Consultation growth is expected to accelerate once AXA works through these short-term issues and as we broaden our client base in 2024. Nonetheless, despite the steady consultation volumes in Q4 2023, we expect to report in our Appendix 4C for Q4 2023 that our cash burn continued to improve compared with Q3 2023. This is due to margin improvements and cost management, as we continue on our journey towards positive EBITDA in Q1 2024 and cash positive later in 2024. I will now hand back to the Chairman to take you through the resolutions.

Thank you, Ben. For those attending the meeting virtually, today's meeting is being held online via the Computershare Meeting platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. Online attendees can submit questions any time. To ask a question select the Q&A icon, type your question into the text box. Once you finish typing, please hit the send button. Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated. And if we receive multiple questions on one topic, amalgamate it together. To ask a verbal question, please follow the instructions written below the broadcast. If you are eligible to vote, once voting opens, press the vote icon and all resolutions will be activated with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You will receive a vote confirmation notification on your screen. You can change your vote up until the time I declare voting closed. For those attending the meeting here in person, once you come to question time, you can ask a question by approaching the microphone attendant, showing your attendance card and providing your name. If you are eligible to vote, you can scan the QR code on the attendance card with your mobile device at any time after I open the voting. This will take you to an online voting page. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You will receive a vote confirmation notification on your screen. If you do not have a mobile device, you may complete the voting items on the reverse side of the attendance card. You can change your vote up until the time I declare voting closed. I now declare voting open on all items of business. Please note that all undirected proxies shall be put in favor of the resolutions. We have recorded the appointments of proxies and corporate representatives. There are no corporate representatives on file and the only appointment of proxies is to appoint me as Chairperson. Proxies represented 213,514,569 shares being 58.24% of share capital. Proxy results will be shown once voting is completed. I will now open the voting. Please submit your vote from now on until when the resolutions are voted on. Those shareholders attending in person, please complete your voting card and return it to Kevin at the end of the meeting. Kevin is our representative here on my right. I will now take you through each of the resolutions. Please be ready to cast your votes. The first resolution set out in the notice is to consider the approval authorizing the allotment of shares and share rights in connection with the convertible loans. Are there any questions?

None, Chair.

I'll now formally put to the members of the company that the resolution be approved and adopted. The second resolution set out in the notice is to consider the approval of the issue of convertible notes under the convertible note placement for the purposes of Australian listing Rule 7.1. Are there any questions?

None received, Chair.

I now formally put to the members of the company that the resolution be approved and adopted. The third resolution set out in the notice is to consider the approval of the issue of share options pursuant to the consultancy agreement and allotment of shares on exercise of those share options. Are there any questions?