Nova Eye Medical Limited (EYE) Earnings Call Transcript & Summary

Okay. Good morning, everybody, and thanks again for joining us. My name is Mark Flynn, Investor Relations for Nova Eye Medical. Today, we're covering the June '26 quarterly report, which we lodged last week with the ASX and also we'll provide some outlook on FY '27. Presenting, as always, today is Tom Spurling, our Managing Director. Again, Q&A is available. If you look inside Zoom Q&A function, we'll look to get to as many questions as possible. Also, we can follow up post the webinar, but I will ask a number of questions. So please place them in the Q&A function within Zoom. As we can see from the recent results, Tom led the company through a wonderful 4 consecutive years of sales growth above 25% and our FY '26 closed at just below USD 24 million, up 26% and the second half delivered the company's first positive EBITDA as guided by Tom and the team. So Tom will take you through these results, what drove it and also to provide some FY '27 guidance. So over to you, Tom.

Thanks, Mark. I'm very pleased again to be speaking and talking to our company. It's another record attendance webinar. Having a lot of people interested in our company is very, I'll just say, heartwarming because it is. Now you see our opening slide. Just leave it up there -- sorry, Mark, just back, back, back. Our opening slide, I just want to say regular viewers will note that, that's quite a change in our slide formatting, and that's intentional. We hit some major milestones in this last half, and we are different. We are combining profitability with sales growth just as we promised. We promised it, and we've delivered it. It's a big thing today. Thanks, Mark. Let's just not forget glaucoma. The second leading cause of blindness in the developed world is a well-documented statistic. We build and design devices that enable surgeons to treat patients with glaucoma. Glaucoma is incurable, but we can delay the progression of glaucoma. Nobody can cure it. It is about a failure of -- on the slide there, it's a failing of the eye's ocular irrigation system, blockages causing a rise in pressure, which cuts the optic nerve. Our glaucoma solutions work with the body's anatomy, open up the natural outflow pathway and use surgical interventions to stop this without leaving anything behind, tissue sparing. Very, very important. We don't -- we are promoting the body to do its own work. Next slide. There's the top line. We want the message you receive today that the market we are in is early in the commercial growth stage of this market. We're early in our commercial rollout, and we've achieved strong growth, 26% year-on-year to $23.7 million, EBITDA positive in the second half as we guided and EBITDA positive in FY '27. We haven't put a number out, but we will be EBITDA positive. We are FDA cleared and MDR compliant. That MDR is, some people may consider it very boring, some people who follow health care stocks know it was a milestone, a very important milestone we achieved during fiscal '25 to make sure that we converted from the CE mark regime into an MDR compliant regime. And the truth of the matter is that MDR has made it more -- is a higher bar than CE. It is closer to FDA. So we have a -- we're not -- we are well-positioned to move forward and grow. Now I'll accept that I'm cheating with the scale a little bit here, but that's so what. I've put the numbers there. USD 9.3 million in fiscal year '22, following the release of our iTrack Advance over these last 3 years -- 4 years, we've got to $23.7 million. And we can do all the corporate finance maths on that, and that is a 26% compound annual growth rate. It's a very -- you almost couldn't make up a curve looking that so strong and consistent. And I ask you to put your rulers on that so that you can say, well, what could it be next year? We've given guidance, but I would like you to form your own view just on that trend. Next slide. Interventional glaucoma is the future. In this approach, surgeons treat the disease surgically and early instead of reliance on drops and the wait-and-see approach. I have -- in our quarterly report, we [ flamboyantly ] and with the permission of Glaukos inserted some of their statistics because I think they have a really good outlook. They have a really good description. 90% of patients don't take their drops as prescribed. The old legacy of drops and drops and when it gets really bad, you drill a hole in your eyes to relieve that pressure. It's barbaric. The idea of intervening surgically early to improve the outcomes with minimally invasive solutions like iTrack, particularly the tissue sparing nature of iTrack means that we have a -- we provide better quality of life to patients. And which is wonderful, better quality of life for patients, but there is a business to be made. Doctors can make money out of that. And so it is a valid theme, a real theme that is only in its infancy globally. Next slide. So currently, glaucoma about $944 million, so that's not much. Well, I don't care. We only need a very small part of that. Glaukos have said that by 2035, they estimate that there will be just as many IG procedures as there are cataract procedures in America. Currently, it's about 500,000, 600,000, 700,000 cataract procedures. So they see that growing by 10x. That is -- currently, we estimate that we have about 4%, 3% to 5% -- put 4% in the quarterly report of the interventional glaucoma procedures. And that means -- there -- I estimated in our quarterly report, we stated that there are about 30,000 to 35,000 procedures in the U.S.A. every [ month ], and we're doing 4% or 5% of those and growing. So I often talk about this market share. Market share of 4%, that's meaningless it's tiny market share. It doesn't matter. That has developed $23 or $24 million of revenue for us or $19 million in America, sorry. And that just shows there's room to grow. And we're proving our platform can make -- participate in that growth profitably. Next slide. Here's another depiction of the opportunity. These are estimates of cataract surgeons driving interventional glaucoma growth. That is, as I've said a number of times in these talks, 20% of the patients who present for cataract surgery have concurrent glaucoma, 15% to 20%. That presents the doctor with an opportunity to say to his or her patient, at the same time as me fixing your eye so you can see the golf ball or drive better at night, I can do a minimally invasive procedure that will ensure -- or not ensure, which will get you off drops. The data says it will get you off the drops or reduce the number of drops you're taking and that will improve your quality of life, all at the same time. And that offering by cataract and comprehensive surgeons is appealing to their patients. That is the space we're working on. That very, very simple concept that a patient doesn't have to go in and can get better vision through the cataract surgery and improve quality of life by getting off drops or reducing the drops without a device there. This green light and the Green iTrack Advance was just released in the last 6 months. And it with the Shear Clear technology is driving growth. It is driving growth, I have to say. Next slide. This depicts -- that's a cutoff version. We keep refining these pictures, but that's a cut version. The canal is theoretically wrapping right around that. But you can see a picture of our green catheter running through the canal. I actually personally believe that it's obviously a depiction. That canal is a bit fat on the left-hand side. It's thinner than that. But you can see the idea of our catheter running through that canal and clearing the blockages and then we withdraw the catheter and flush it with viscoelastic -- thin -- with the Shear Clear technology, our proprietary Shear Clear technology to make the way into the collector channels into the whole ocular system to reduce pressure and clear blockages. It works with the anatomy. We do not have an implant, and we do not tear the tissue. I note there about our reimbursement or the reimbursement, $542 for the surgeon to do the procedure, $2,204. They're the current in 2026, draft of 2027 results were released and they're approximately -- by Medicare in America, and they're approximately the same. That we highlight as a -- they will be confirmed or we hope they will be confirmed. They should be confirmed in November later this year, but it provides confidence in our go-forward American revenue, and therefore, our guidance for our business. We're approaching 20,000 procedures a year in the United States with the device, tiny part of the market. But for us, 20,000 procedures is good. Thanks. iTrack Advance is ready for the interventional movement. No trials to run. We have our approvals. There's no reimbursement to secure. Plenty of people on this call may be following various med tech companies that are trying to have a -- deciding will we get FDA approval? Will we get reimbursement? When will we get first revenue, how we're going to get first revenue? And on this slide, I debated whether to depict revenue growth. We decided that we finally ticked first revenue. Revenue growth is what's about to happen, okay? Very important. Let's go. And here's the revenue growth, all lots of numbers, but it shows -- it does show the dominance, $18.6 million in the United States, 30% year-on-year growth. Interestingly, in our quarterly, you'll see that our U.S.A. growth was 21% quarter-on-quarter. We really had a great quarter in America. Germany, it's steady or it's growing to steady. Rest of the World, our guidance is sales excluding China, 22.7% was above the midpoint of our guidance, 29% growth. And yes, China, we're only -- there's 18% theoretically, it's a big drop, and it's what, $200,000. It's not very much. That we are growing in Europe. In China, we're only -- it's lumpy, and we're only just getting started. Next one. So further, the opportunity in China, we consider that interventional glaucoma is only in it's -- is in a nascent stage outside the U.S. China lags most on interventional glaucoma adoption. The statistics say that when interventional glaucoma picks up, China will be there. Our investment in peak -- I've had a few questions about our investment in China and why has it gone back and et cetera, et cetera, gone backwards 18% loss. Well, first of all, it's a tiny amount. It's about percentages on small numbers. But second, our investment, we are proudly putting forward our EBITDA positive position. We put forward that EBITDA positive position because we're very careful with every dollar we spend. We can -- the opportunity in America is large. We invest in America hard. We are investing more slowly in China because we have that constant need to improve the bottom line at the same time. It will come. We are well positioned. We have our structure. We have our platform. But for the time being, we're excluding China from our guidance. Let's go. Now dwelling a little bit, there's a lot of numbers here, but the messages are on the left-hand side. We hit our guidance target on revenue. Revenue growth and EBITDA are positive in the second half. And operating expense, regular followers will know I often get asked about operating cost leverage. We've provided there a breakdown of the OpEx, sales and marketing, operations, product development, engineering, corporate and clinical data so that people can look at the history and have a look at what is varying with sales. And they say, what's your leverage? What's your leverage? Lots of people are telling me that our sales -- our costs just keep going up at the same -- at the same rate of sales? Well, it's not. Our sales and marketing costs in fiscal -- in the first half of 2024 was 76% of sales. That's a big number. In this last half, it's 52%. The trend between 76% and 52% has been very consistent improvement. That data has all been provided historically. It's all in our releases. But one can assume then that, that progression will continue. However, we're not -- so that -- someone called it jaws. I've got a note about it being jaws, the widening of the gap between sales growth growing faster than OpEx. That's where we are. So we got there on the EBITDA. We said we'd get there on FY '26 guidance. We did. And in July, we started F '27 with continued growth in America. That's right up to today -- well, last Friday. Our guidance is USD 26 million to USD 31 million in -- excluding China. People interested can add on to China -- add on for China, what they will. That's between 15% and 37% growth. As I said, we point out, we always have achieved for years 26% growth. So some people may say that 15% is too low, but we're not. That's what we're saying. We want to hit our guidance. We have not forecast what our EBITDA will be, but we are saying that it's positive. And as I said, we're tracking at 30% above in July. We have liquidity in place that will facilitate us achieving these targets. You often say we don't have enough money, when are you going to do a capital raise? We have enough money to meet our FY '27 guidance. Next slide. I think this is the last one. It's just getting started. We built our business for this exact opportunity. And it is now hitting the market, hitting the streets and turning into fiscal outcomes that we think are interesting to our shareholders that add value, EBITDA and sales growth. Nobody can tell me what's more important. Plenty of people say, are you going to have sales growth. People say you go to have a profit. We're doing both. More than 25% growth and EBITDA positive, I believe -- we believe, makes us a valuable company. And we think we do have a valuable company. Next one?

That's it Tom.

There we are. So thank you. we'll just go back to the -- just go back 1 slide there, and we'll leave it on that, and we'll hear any questions, I guess, Mark.

Yes, a couple of questions. One from [ Tom Wagner ] at E&P. Straight off to that is, given the EBITDA positive, where do you plan on spending or investing that cash? And will it be in the sales force?

So we want to continue our growth. Investments in salespeople are -- we're finding to have a very good payback period. So we're worried about cash greatly as one would expect, we don't have much. We have enough though. And so yes, the answer to that, Tommy, is yes, we will be investing in sales growth.

And we've gone through the numbers in FY '26, obviously, the unaudited numbers closed up USD 23.7 million, so up 26%. You sort of covered a little bit. What really drove that growth this year?

Well, it's hard to go past America. That 30% growth, 79% of our revenue comes in the U.S., and it grew at 30% and particularly that last quarter with 21% quarter-on-quarter growth. We think that in the last 6 months, we released the Shear Clear proprietary technology that the shear-thinning technology that makes the OVD travel more through the ocular system. And the green light has been very well received by doctors that navigational beacon, giving doctors the safety of navigation as they place the catheter in the eye of the patient. The doctors have liked it a lot better than the red one. So we have high performing -- we have a bunch of good reps from what I can gather, industry-leading revenue per rep. In our quarterly, we talked it's approaching, I think it was $1.9 million, close to $2 million revenue -- annualized revenue per rep. And going back to Tom Wegner's question, we should add more reps. So that's where we are.

People are unpacking and coming through to me asking around corporate costs falling in from [ $1.7 million to $1.3 million ] and also product development fell too. One of the questions was, were we underinvesting to make the EBITDA number for your guidance?

So corporate costs have come down. There has been -- unfortunately, we have had to wind down our investment -- our spending on 2RT. That is -- but -- and so that has been a big contributor -- that has been a contribution to EBITDA positive. So in that last context, we are limiting -- we think 2RT is really good tech, but we need -- we are not funded to be able to do it as we've said a number of times. So in that context, maybe we are. But in terms of iTrack, we aren't. We have an approved product. We are making changes, as you can see by the Shear Clear and the Green Light. And -- but we -- and that is working within that sort of incremental improvement, is working within our budget, which is make a profit, Tom, make a profit.

Good question from Paul Jensz at PAC Partners. Are we expecting any changes to the reimbursement in the U.S.A.?.

So we have -- on July 2, we received the -- CMS announced reimbursement for 2027. And as I've said that was roughly in line with what it is for 2026. So one can never know what's going on beyond that's 18 months from today. And those next 18 months follow the last, that reimbursement thing has been in place. So we have no reason to believe it's going to be changed.

Okay. Just on FY '27 guidance, we've provided a guidance of between $26 million to $31 million. The question is, it's a wide range, what separates the bottom from the top?

Well, I can be really honest and say, well, we want to hit it is one thing. But the top is what we think we can achieve. And I guess the bottom is what we know we can achieve. And think and know I don't -- for a little company like us looking out 12 months, it is -- it does relate to the -- we could have confidence in -- I think it will narrow over time. And that may -- and will lift -- I expect we'll be lifting that lower one. It is about surgeon -- about our ability to keep getting new accounts and keeping those accounts. So lots of stuff goes into that. For now, for our little company with our -- we think that gives our shareholders something to have confidence in.

One from Nick Lau at Taylor Collison. With the previous new sales rep hires that have been onboarded, have they transitioned into underpenetrated territories? How are they progressing? And what are they seeing on the ground?

So the last 2 reps we hired, the first one was in the Pacific Northwest was absolutely an underpenetrated territory and the other one is way up in the Northeast where we split the territory where it was underpenetrated. We consider the revenue per rep number of $1.9 million being an amalgam of bringing people on so that we don't let the sum drop to $1.9 million. Now the person in the Pacific Northwest is not at $1.9 million, but she is not in a -- not far behind. The person up in the Northeast is right up there. So it just depends, and we work on the total number because we -- of bringing on reps so that we try not to have too much of a dip in that annualized revenue per rep. The annualized revenue per rep is certainly a leading indicator of profitability.