dorsaVi Ltd (DVL) Earnings Call Transcript & Summary

Thank you for standing by. My name is Felicity Donnelly, business admin at dorsaVi, and I would like to welcome everyone to the dorsaVi Q3 business update for the financial quarter ending 31 March 2020. Joining me on the call today are dorsaVi's CEO, Dr. Andrew Ronchi; and General Manager, Matthew May. Andrew Ronchi will provide an overview of the key activities and results for the quarter, and then we will open up the conversation to allow for Q&A discussion. [Operator Instructions] I would now like to turn the conference call over to dorsaVi's CEO, Andrew Ronchi. Please go ahead.

Thank you, Felicity. Good morning, and welcome to everyone on the call. Thank you for taking the time to join the conference call today for dorsaVi business update for Q3 financial year '20. I wanted to provide you with a brief update on developments across our business in the face of emerging disruptions caused by COVID-19. We are making every effort possible to support our employees, customers, supply chains, investors and other stakeholders through this rapidly changing health care landscape. One thing that is true especially at this extraordinary time is that the COVID-19 epidemic has heightened the need for the adoption of digital solutions by the health sector and emphasize the need to deliver health and safety services remotely. I would like to thank dorsaVi's staff who have been exceptional at this difficult time arising from new challenges, modifying their working hours, adapting our products and services to meet the needs of the new normal. It's an absolute credit to each and every one of our team members, and this is much appreciated by our management and our Board. More specifically now, I'll refer to our recent business update. At a high level, dorsaVi's strategy implemented during COVID are providing a sustainable business model in the current climate. Whilst new sales are better than anticipated over the past few months, they are not, of course, at normal levels. It is a good sign that business sentiment within our sectors is changing where companies are willing to reengage with service and product suppliers. We anticipated a 25% reduction in subscriptions or recurring revenue across the company. But have been pleased with the subscription revenue that has stayed solid. Our recurring revenue reduced by only 8% in Q3 from $396,000 to $365,000. It should be noted that this is still an increase of 25% on the prior corresponding period of $293,000. Our closing cash for Q3 was $1.92 million, compared to closing at the 31st of December 2019, of $2.56 million. Net cash outflow from operating activity in Q3 reduced to $870,000 from $1.46 million for the prior corresponding period of Q3 financial year '19. This is a 41% reduction and in line with the operational and HR changes that business has implemented over the past 12 months in order to reach our goal of being cash-neutral as soon as possible. To provide more detail on revenue, our recognized recurring revenue, or RRR, year-to-date for financial year '20 is $1.16 million, an increase of 22% from the prior corresponding period at $952,000. The recognized recurring revenue for quarter 3, as stated, was $365,000, an increase of 25% on PCP, but a decrease of 8% or $31,000 on Q2. The 8% reduction quarter-on-quarter is due to a combination of 2 factors. Firstly, the early impact from COVID has made a significant reduction in new sales for the month of March. There has also been a small number of clinical sites who requested that their subscriptions be put on hold due to clinic closures, and we have endeavored to accommodate these requests on a month-by-month basis. Secondly, dorsaVi has adopted a new standard for revenue recognition, which has required the reclassification of some revenue allocated to projects or once-only revenue instead of recurring revenue. Our total contracted revenue, which relates to new deals signed for Q3, amounted to $250,000, which is a 24% reduction on Q2 contracted revenue of $330,000, mainly due to reduced sales during the month of March. Of the new deals won in Q3, Stryker, the Fortune 500 medical technology company that makes products used in the orthopedic market, signed off on a second stage evaluation agreement which will see Stryker's staff utilize and evaluate patients via dorsaVi's technology, with the goal of improving the management of orthopedic conditions. The orthopedic market continues to look for ways of being able to capture data insights, both in the preoperative phase and the postoperative phase in order to optimize patient outcomes, manage patients remotely and drive down health care costs. From a high level point of view, the U.S. physical therapy market has been significantly affected by COVID. To this point, one of the large franchise PT groups in the U.S., U.S. Physical Therapy, Inc., publicly reported that patient volumes in the U.S. market at their centers are down by 50% due to COVID disruptions. Considering this market shift, dorsaVi note that an 8% reduction in subscription revenue is seen as a positive result to date, considering the challenges for the larger PT groups in the U.S. In relation to new prospective clinical customers, our feedback from the groups who are looking to take on dorsaVi's clinical products was that purchasing decisions in March were being delayed until their practices return to pre-COVID levels. It's worth noting that some new clinical deals have been signed in April, providing promising signs that buying sentiment may be returning to the clinical market. In the workplace market, companies are also asking for time to review the COVID impact prior to signing off on new deals that involve using dorsaVi's technology. In regard to our existing myViSafe customers who utilize the technology on their own workers and pay a monthly subscription for this, the high majority of these groups continue to pay their subscriptions on a monthly basis. For our ViSafe consulting projects, the majority of these projects have been put on hold until social distancing rules have eased. This will have an impact on our total revenue but not affect our recurring revenue. Like the clinical market, some new myViSafe deals have been signed in April, showing positive signs for the workplace market. At this time, the digital health options and remote services are essential. DorsaVi has expanded its product offering to include dorsaVi Telehealth, a virtual clinic. The platform allows health professionals to assess and treat their patients through a secure consultation video conferencing platform that is HIPAA compliant. The platform has been designed by a physiotherapist and contains additional features, including exercise programs, billing facilities and appointment scheduling. We are proactively promoting the telehealth platform, and from the leads coming through to date, our salespeople are noting that majority of clinics are already using a form of simple video conferencing. We aim to emphasize the benefits of our specialized product and believe that a data secure platform with added benefits will be more advantageous for clinicians in the medium and longer term. There has been a notable uptick in the use of telehealth worldwide, and this offering provides an opportunity for dorsaVi to enable our customers to provide a telehealth solution which allows health professionals to connect with patients virtually. To proactively manage the dorsaVi business through these uncertain times brought about by COVID, a number of actions are being taken to reduce costs and optimize cash reserves. I'll take you through these now. Firstly, all our staff has agreed to a reduction in their working hours of around 30% until the end of May. Secondly, operational expenses have been reduced by 20%, and the business has successfully accessed several stimulus benefits in Australia, for example, the JobKeeper Payment scheme. And finally, dorsaVi is exploring similar government stimulus packages in both the U.S. and the U.K., although it is too early to know whether the company will be successful in these applications. Finally, on a positive note, the company's cash reserves have been maintained through April. We acknowledge that there may be further challenges ahead dependent on the further impact of COVID and we'll remain vigilant in order to proactively deal with them. From an operational perspective, dorsaVi is focused on protecting our existing customers and the recurring revenue they generate, and looking to secure new customers as buying sentiment improves. We remain dedicated to optimizing our cash reserves and managing expenses to ensure that we can trade through the impact of COVID. We are also looking to broaden our product offerings and position our core products to create greater value for our clients and position the business to succeed in the new normal. Thank you.

Thank you, Andrew. [Operator Instructions] As there appears to be no further questions at this time, I would now ask Andrew Ronchi to provide his closing remarks.

Thank you, Felicity. In closing, I would like to thank everyone for listening to the dorsaVi quarterly business update. We'll continue to keep our investors informed on the progress of the company going forward, and this concludes our quarterly update. Thank you.