Micro-X Limited (MX1) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Micro-X Limited Quarterly Investor Call. [Operator Instructions] I would now like to hand the conference over to Mr. Kingsley Hall, Chief Executive. Please go ahead.

Yes. Thanks, Mel. Good morning, everyone. My name is Kingsley Hall, and I'm pleased to welcome you all today to Micro-X's quarterly investor call, along with our Chief Operating Officer, Anthony Skeats; and Brian Gonzales, President of Micro-X, Inc., who is this week in New Jersey. All 3 of us will be available for question-and-answer as part of today's call.

Hello, everybody. This is Anthony.

Hello, everyone. This is Brian.

Thanks, guys. Today, we'll be providing listeners with details on our commercial and development progress during the quarter ending 31 March 2025, as outlined in our Appendix 4C filed with the ASX on the 29th of April before we open up to a Q&A session. Before we begin, we would like to remind everyone on the call that today's call may contain forward-looking statements, which involve inherent risks and uncertainties. Those risks and uncertainties include those disclosed in our ASX lodgments, which we recommend that you review. While there are reasonable grounds for any forward-looking statements made today, due to their inherent uncertainties, we recommend that you do not place undue reliance on those statements and that you note that actual results may, of course, differ materially from those forward-looking statements. Before we start with the quarterly, though, I'd like to extend our appreciation to all of our shareholders, who attended our Investor Open Day at Tonsley yesterday. Both Anthony's presentation and the tours were really well received, and it was fantastic to meet so many of you in person. For those of you on the call today, who could not make it, we probably had around probably 40 or so shareholders at Tonsley for a tour of the facility and an update on our unique NEX technology and the applications that we're pursuing. And once again, I thank everyone that attended. So back to the business of the March quarter. And when I look back at the quarter, it has certainly been one of transition as well as strong progress on a number of fronts. The key for us was executing the strategic reset that we announced in January. as we narrow our focus with our NEX technology to the medical imaging market, where we have our range of commercial and development products being Rover Plus, mobile X-ray, Head CT and the recently commenced full-body CT development. The related work for us was to close down Argus and implement some major cost cutting, which is now behind us, making us a focused and leaner organization moving forward. And finally, we strengthened our balance sheet with an additional $6.4 million of new capital raised during the quarter. On today's call, I want to focus on 3 key near-term objectives outlined in the renewed strategy. one, executing on the large sales opportunities for Rover Plus in front of us to drive near-term revenues; 2, progressing our high-value medical CT products specifically moving the Head CT into human imaging trials and advancing the full-body CT for ARPA-H; and 3, building our partnering opportunities, which includes monetizing our security business. I'd like to start off with our partnering work, firstly, and most recently, our newest strategic partner, Billion Prima, the Malaysian-based security product manufacturer. This partnership has an initial value to us of $5.6 million. But importantly, we see the ability to generate long-term revenues from selling our Micro-X tubes and generators to Billion Prima once their new baggage scanner, which includes our technology hits the Southeast Asian market. I would expect within about 12 months from now. To recap the way we've structured the partnership, there are 3 elements to this. The first is that Billion Prima acquired an equity stake in Micro-X and paid us $2.4 million at $0.09 a share, which was completed this quarter. The second is the commercialization development agreement, where our team will support Billion Prima in developing a baggage scanner, which incorporates our NEX technology. We see this as a lower risk short-term program of work, given we will leverage our security development work to date. But I would add that this scanner will be differentiated from the product we've developed for the DHS, which is used for screening passengers through airports. We will receive $3.2 million for this collaboration work and the first $1 million payment has already been received. The third and final element is the future supply of Micro-X NEX technology tubes and generators. And as I mentioned, this positions us nicely as the technology specialist with strong margins, as our partner builds their unit sales without us deploying any sales infrastructure or incurring any CapEx. As with all partnerships, the real test is when both teams get together to put the plans into action, and we're all really pleased with the way things progressed. At our first project meeting with the Billion Prima team a few weeks ago, their CEO and Founder, Mr. Goh, joined his team on the visit to our Tonsley factory, where myself, Brian, Anthony and the Micro-X team spent 3 days with them laying the groundwork for their baggage scanner product. I would add that after seeing our operations firsthand, Billion Prima told us how impressed they were with what we were doing and how we're able to achieve such high-quality image quality, love the different applications and the portability of our range. We started talking about a range of other things outside of the baggage scanner. In short, we now have a product road map and 2 partnering teams working to a common outcome. It was a tremendous visit. I'll talk to our other partners, Varex, the ASA, DHS and ARPA-H, as I step through the review of operations for the quarter. But I'd also like to update listeners on our process of partnering out our security applications. This is so we can fund our security products into market in return to Micro-X receiving consideration commensurate with the value that we've created in those applications. We have a number of advanced discussions with large potential partners. At this point, none of them are completed, but I do remain confident that we will get the right deal done that is in the best interest of Micro-X shareholders. Now turning to our operations and activities during the March quarter, our key focus to execute on the large sales opportunities for Rover Plus that we have in front of us. The good news is that we have 2 large opportunities, both progressed very well during the quarter. The first involves a U.S. group, which operates hundreds of U.S. hospitals and treatment clinics, where we successfully completed a 2-stage evaluation of the Rover Plus. The second stage, as flagged last quarter, involved a number of our Rover Plus units in in-hospital evaluations at 4 of their facilities across Southern and Western United States. This provided their radiographies the ability to test out Rover Plus with patients in their daily work streams. And I'm pleased to say we came through with flying colors. From here, our commercial team, led by Scott Bryant, is busily working with their procurement teams on contractual terms and pricing. Naturally, we are all very keen to lock this down, and I hope to be able to announce further details in the near term. The second Rover Plus opportunity is a U.S. group purchasing organization that has indicated a real need for an additional mobile X-ray unit that offers the functionality and pricing that Rover provides. This process is also now at the commercial and contracting stage, and we hope to announce shortly that we've been added to their approved procurement list, giving access for the Rover Plus to be acquired by the clinics and hospitals that they service across the U.S. We also have a number of other opportunities in the sales funnel and have taken the step of adding a really strong U.S.-based key opinion leader to bolster our U.S. in-hospital acceptance. We're thrilled to have [ Tiffany Watson ] join the team, having served as a Director of Radiology at one of the largest providers of radiology in the U.S. Her role will largely involve introductions, conferences, help with hospital engagement and getting -- finding us additional Rover Plus opportunities. Lastly, our product receipts for the March quarter improved to a little under $800,000, although we expect this to fluctuate, as we await the outcome of the larger sales opportunities. With that, I'll now pass over to Ant and Brian to provide further detail regarding the progress we've made on our second key priority, advancing Head CT and full-body CT programs.

Yes. Thanks, Kingsley. I'll start off with the Head CT, where we are fine-tuning our work to launch the human imaging trials this year, following the major milestone in the December quarter, where the ASA accepted the image quality for milestone 4B of the first 3D CT images of the phantom head and brain generated with our technology and the investors that visit us yesterday got to see that prototype. The work this quarter was largely to optimize the mini tubes we use in the Head CT, and I might add they're also used in the full-body CT product. Our objective here is to increase the performance and reliability, which was not because we had any issues. It's a natural engineering process, as the products move towards their design and freeze point to achieve the best possible outcome with the technology. We believe the version of the mini tube that we have now achieves all our goals, and we are close to completing life cycle testing and switching multiple tubes with the generator on the array to which the tubes are mounted. This will enable us to complete final integration work and allow us to finalize the build of the first of the 3 hospital test benches with the Head CT scanner by the end of the June quarter. Once built and delivered, we can then gain the hospital ethics approval to commence imaging trials, which will be conducted by the ASA with our Head CT and compare against conventional in-hospital imaging. Turning now to our full-body CT product, where we have up to $25 million of funding from the U.S. government agency operates the Advanced Research Programs Agency for Health. The first major piece of work, which basically covers all of 2025 is the design stage, which we've shared across the software and design engineering teams in Tonsley and Seattle. This is a team of about 20 specialists. And because they are across both the Head CT and now the full-body CT work, we have an ability to accelerate time frames and avoid issues we have already identified and overcome. This quarter, there was considerable progress on imaging architecture specification ring of requirements and planning documentation for the commencement of the project technical development program all being worked on, which is necessary to define the platform for the eventual full-body CT prototype that we will subsequently build and then refine into a final product. And with that, I will now pass over to Brian.

Thanks, Ant, and thank you, everyone, for joining us today. I would like to echo what Ant has just said outlined about the teams working jointly on the 2 CT imaging projects. We see this combined learning as a key advantage in terms of risk reduction and a customer benefit, as we've already proven we can take 3D CT images with our technology. The extension from head imaging to full body on -- we will focus on -- will build on imaging algorithms and X-ray tubes that were already developed for the Head CT and advancements that we make for the ARPA-H can flow back and further improve the Head CT scanner in the future. I will add that our regular dialogue with our ARPA-H team lead has been very positive and supportive to date despite what has been a very busy time across the number of arms in the U.S. government. I will now provide listeners with an update on our 2 Micro-X security products, the checkpoint and baggage scanner products being developed in partnership with DHS and TSA. As we announced in the quarterly, the key event we achieved a few weeks ago was the completion of the first prototype passenger self-screening checkpoint. We have just completed installation of this checkpoint at a TSA test laboratory and today posted the first demonstration walk-through of that checkpoint. As Kingsley mentioned, I'm joining this call from New Jersey, where that laboratory is located, and I'm here with the Micro-X team supporting the installation and initial assessment of the checkpoint. This project demonstrates the value of government and small businesses working together to drive innovation into complex challenges. I cannot emphasize enough how proud the team and I are to have reached this point after a multiyear development program. In this program, Micro-X has been both the supplier of a completely new CT scanner and the prime contractor leading the whole system of systems checkpoint integration. This is typically the sort of program run by much bigger companies, and it speaks to the dedication, creativity and hard work of the entire team to have reached this point close to schedule and more importantly, on budget. In addition to advancing Micro-X's technology capability, this project has grown Micro-X's experience and status managing large complex development programs for customers, experience that has been recognized by new partners such as Billion Prima and ARPA-H. The checkpoint will remain in the test lab for several months, as we gather data to advance automated detection algorithms and test the system across a wide range of passenger scenarios. While we will continue to support this testing, Micro-X will build an additional 2 prototype self-screening checkpoints over the next 10 months, and then these will be delivered as a multisystem checkpoint. This next step was awarded by DHS in February for an additional $6 million to be paid to Micro-X across the 16-month period to build and test these additional checkpoints. I will now hand it back to Kingsley.

Yes. Thanks, guys. And I think -- I mean, we're just at such an exciting point in each of those major projects. We look forward to keeping everyone on the call up to date on the further really exciting milestones that we achieved. There are a few corporate matters I'd like to cover off before we get to the financials. Firstly, the capital raising has now been completed with $6.4 million raised. As I suspect listeners are aware, this included the $2.4 million strategic placement to Billion Prima, the $2 million broader placement and the $2 million entitlement offer across both institutional and retail components. I might add that following approval at our AGM on the 16th of April, the 4 directors have all now completed their placement investments, which totaled $200,000. With quite a lot of uncertainty in global markets, we're pleased to have completed the raising when we did, and we're being very careful with all our expenditure moving forward. On that point, the imposition of tariffs by the Trump administration in the U.S. has also led us to evaluate our operations, as well as any threats or challenges to our supply chain. We see this as a prudent course of action and not any recognition that we are exposed to any particular risk. While the form and extent of the U.S. tariffs continue to move almost daily, our initial assessment is that there would not be any material impact on our operations. The key factors here are that Micro-X unit -- Micro-X Rovi units, along with the tubes and generators we sell are manufactured in Australia and imported into the U.S. by our subsidiary, Micro-X Inc. Also, the substantial value of components used are manufactured in Australia. Australia has the lowest 10% tariffs expected to be imposed in our goods. And for a relative competitive position, that's -- we're quite comfortable with that. I'll now run you through the financial activities for the quarter, as reported in the Appendix 4C lodged with the ASX on the 29th of April. The numbers I will be referring to are all in Australian dollars and in accordance with ASX listing rules, these are not audited. So for the quarter ended 31 March 2025, our headline numbers were receipts from customers of a little under $800,000, receipts for project work from existing partners, ASA and DHS of $1.1 million, receipts for project work from new partners, Billion Prima and ARPA-H of $2.1 million, net cash outflows from operations of $3.2 million and proceeds after financing -- proceeds of financing after costs of $5.9 million. And that did not include the $200,000 from directors, resulting in an actual cash balance of $5.1 million at the end of March. I'd also like to point out some additional context to how we're managing our capital resources. We had $700,000 in mobile DR orders to be delivered at the end of the quarter and $4 million of Rover Plus inventory on hand for sale. Looking forward to the future, we are pleased to have had a smooth transition following our strategic reset with the key initiatives underway and the cost reductions executed. As we look forward, we're cautiously optimistic, firstly, about our potential to generate Rover sales from 2 large opportunities, which we now see as deeply advanced. Our partnering strategies are working well, and we aim to complete the work to monetize the security products as soon as possible. And with that, we will continue to advance our medical CT range, where we're really excited to commence imaging trials with the Head CT in particular, as it brings us closer to approval and the ability to launch commercially. We are conscious of ongoing global uncertainty, but we feel we are well positioned from a funding and strategic perspective to deliver value for our shareholders. I'll now pass you back to the operator, who will commence the Q&A portion of this call. Thanks, Mel.

[Operator Instructions] We are showing no questions at this time. I'll now hand back to Mr. Hall for closing remarks.

Yes. Thanks very much, Mel, and thank you again to everyone on this call for your support and for joining us on this call. The remainder of 2025 will be crucial for Micro-X, as we bed down the strategic reset and a number of those key outcomes fall due. We look very much forward to speaking with you again to report on our progress. And again, thanks to everybody who came to Tonsley yesterday. Thanks very much. Thank you, Mel.

That does conclude our conference for today. Thank you for participating. You may now disconnect.