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

Welcome to the Annual General Meeting of Micro-X. My name is Rebecca Puddy, and I'm Head of Corporate Communications. Today's meeting is being held online via the Zoom platform, with voting to be facilitated via the Computershare meeting platform. Shareholders and proxies have the ability to ask questions via Zoom and submit votes via the Computershare meeting platform by clicking the link published in the Notice of Meeting. Depending on the format of your video screen, you may find it helpful to select Fit to Window under the Zoom View Options in the toolbar. Today's meeting is being recorded and parts of it, including the Chair's address and the CEO presentation will be uploaded to the ASX and the company website. [Operator Instructions] Please also note that your questions may be moderated, or if we receive multiple questions on one topic, amalgamated together. Finally, due to time constraints, it may not be possible to answer all questions. If this happens, we will answer them in due course via e-mail or by posting responses on the Investor Presentations section of our website. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, the Chair will shortly open voting for all resolutions. If you have not already lodged your proxy vote, you may vote live and online during this meeting via Computershare. With us via Zoom today is Angela Liapis from Computershare, who will be acting as Returning Officer for the poll. If you've not already downloaded the application, please do so now. You will need your postcode and shareholder identification number to log in. When the poll is declared open, select the Vote icon and voting options will appear on your screen. To vote simply select your voting direction for each resolution. The steps for voting are straightforward. However, if you require assistance, please contact Computershare on (613) 9415-4024. I will now introduce Mr. Patrick O'Brien, Chair of Micro-X.

Good afternoon, ladies and gentlemen, all shareholders and other interested parties. It is with pleasure that I welcome you to the 2025 Annual General Meeting of Micro-X Limited. I am Patrick O'Brien, and I'll be your Chair for today's meeting. As the appointed hour has been reached and a quorum is present, I declare the meeting open. Before proceeding with the formal matters, let me first introduce my fellow nonexecutive directors, Ms. Ilona Meyer, Mr. Andrew Hartmann and Mr. Jim McDowell. Also here with us is our CEO, Kingsley Hall. Mr. Andrew Tickle is attending online today representing BDO, the company's auditors, and should any questions or matters need to be directed to them. As Rebecca mentioned, voting today will be conducted by way of a poll on all items of business. Please note that voting online is now open. I will commence by providing you with my address to the meeting. To reiterate, I'm pleased to welcome all shareholders to our 2025 Annual General Meeting, which is being held virtually this year, and I extend that welcome to those of our Micro-X colleagues and partners also in attendance as we reflect on the year that has been and share our vision for the road ahead. The past year has seen a number of commercial achievements and some exceptional technical progress across our portfolio. It has been a year of sharpening our commercial focus, developing and strengthening partnerships, and laying the groundwork for long-term growth. Technical achievements and innovation. I've long held the view that the defining strength of Micro-X is our ability to innovate and develop breakthrough technology. And this has become even more evident over the past last year as we continued our push to become a global leader in CT imaging. Our miniaturized X-ray tubes are now producing the world's -- I'm sorry, we've lost that, are now producing the world's first high-quality 3-dimensional images with a truly portable head CT scanner. This is not just an engineering milestone, but a genuine leap forward in using our NEXT technology to deliver medical imaging in a way that is faster, more portable and affordable while maintaining the requisite diagnostic precision. At the same time, our next-generation airport products, the baggage CT scanner and the passenger self-screening checkpoint system have progressed to prototype testing. The feedback from our U.S. government partner, the Department of Homeland Security, following early trials, has been overwhelmingly positive, reaffirming the value these systems will bring to airport security. These are not small steps. They are evidence of Micro-X's unique capability to take complex, high-performance imaging technologies and make them lighter, smarter, more affordable and more adaptable than anything else on the market. When I was reappointed as Chair in January, I said that my goal was to ensure continuity of leadership, while bringing a sharper commercial lens to everything we do. Part of that discipline has meant making hard choices. Early in the year, we took the difficult but necessary decision to discontinue the Argus X-ray Camera. While the technology delivered as planned, we realized that given the way warfare had evolved over the last few years, our resources would be better directed toward areas where we see stronger customer engagement and greater commercial potential. This was a pragmatic and disciplined decision to focus our efforts on medical imaging while monetizing our security technology, thereby building the foundations of a more sustainable, scalable business. A hallmark of this year has been the notable progress in our partnering activities and funding support. In total, more than $36 million of external funding was secured during the year. This includes a contract of up to $25 million from the U.S. Government's Advanced Research Projects Agency for Health for development of a full-body CT scanner solution. The Department of Homeland Security also exercised an optional $6 million contract extension, underscoring their confidence in our technology and its potential applications. We also entered our first co-development partnership with Malaysian Company B and Prima for a commercial baggage and parcel scanner valued at $5.6 million. This partnership brings investment capital, creates a further revenue stream and accelerates our market access in Asia. Our technology partner, Varex Imaging continues to expand the global reach of our proprietary NEXT technology through their multi-beam X-ray offering, with ongoing commercial benefits to Micro-X through sales of our high-voltage generators. Together, these achievements show a business model that shares risk, leverages partner funding and validates customer demand, all while driving forward Micro-X's world-leading innovations. Of course, our highest priority remains to convert our innovative technology developments into sustainable commercial businesses, driving the revenues we need to underpin our emerging growth opportunities, particularly in medical CT, that is why over the past year, we have reshaped our sales approach and distribution channels to seek to identify and capture larger sales opportunities. The path to revenue in advanced medical technology is rarely linear. However, I'm encouraged to see our renewed sales strategy beginning to bear fruit. This is evidenced by our recent $3.3 million Rover Plus order from the Malaysian Ministry of Health, the single largest order in our company's history, and our supply agreement with one of the largest U.S. health care providers, allowing us access to their 700 health care facilities. I expect our strategy will continue to deliver positive outcomes as our execution matures over the coming year, translating into wider market adoption and consistent sales growth. We know we need to deliver more to create a successful and sustainable business. We are also making strong progress with our next generation of imaging products. The head CT development program continues to progress well. Our first hospital test bench is ready for delivery, allowing us to commence clinical trials here in Australia very shortly. This product has huge application and the potential to transform outcomes for stroke victims, bringing CT imaging to the patient to save precious time in providing life-saving treatment. Building on that core technology, in the past year, we've extended development to a portable full-body CT scanner. This natural evolution of our technology road map is now underway fully underpinned by U.S. government partner funding. Our progress this year was supported by a successful capital raise that allowed us to pursue our updated strategy and accelerate key programs. I want to extend my sincere thanks to our institutional investors and to our many loyal shareholders who participated. We also welcome to B and Prima as not just a commercial partner, but as a new shareholder, further deepening the alignment between strategic collaboration and shareholder value. As we move forward, we will continue to seek partnerships that help us scale production open new markets and monetize our technology platform. Strong governance is vital for a company of our scale and ambition. This year, we said farewell to 2 highly respected directors, former Chair, David Knox, and long-serving Director, Alexander Gosling, both made significant contributions to Micro-X helping guide the company through key stages of growth. I want to express my deepest gratitude to them on behalf of the Board and shareholders. As we look to the year ahead, I am confident that Micro-X is building the right platform for long-term success. The coming year will bring further milestones as we progress our head CT trials, continue to build Rover sales and seek to execute on further partnerships to bring our security platform to market. To our employees, thank you for your commitment and ingenuity to our partners and customers, thank you for your collaboration and trust. And to our shareholders, thank you for your continued support and confidence. I will now hand over to Kingsley Hall, who will take us through a more detailed overview of our year and our future plans. Thank you.

Thanks very much, Patrick. On behalf of everyone, at Micro-X, I'd like to mirror Patrick's comments earlier. And welcome, everyone, to our 2025 Annual General Meeting. A few matters of housekeeping. Noting that this presentation has been lodged on the ASX platform and is approved by our Board of Directors. . Moving on, and I always like to start our corporate presentations with -- from the perspective of our company purpose, which is creating revolutionary X-ray imaging to better lives. This purpose was created a couple of years ago now, thanks to the contribution and collaboration of our staff and represents all those things, which are important to our people about our workplace, creation and creating. It's the design, development and manufacturing of something new, the fact that our technology is revolutionary and groundbreaking, and that the outcome is ultimately to better people's lives, and we do this by getting our products into as many real-world situations as we can through effective commercialization. The core values that we look for in our people, in our behaviors and our company are to be curious to collaborate and to be determined in everything that we do. A little more background on the company, most of which you'll be aware of, but some of which you may not, our vision is to create a safer and healthier world, and we do that by becoming a world leader in disruptive X-ray technology. A few details about our great company. We're an Australian technology company commercializing innovative X-ray and CT imaging solutions for global health care and security markets. We have 87 staff across Australia, the United States and the U.K. We have 2 R&D manufacturing sites in Tonsley, Adelaide, and Seattle, Washington. We are the first to commercialize carbon nanotube, cold cathode X-ray emission in a medical device. Our technology is proven. To date, we've sold a little under 400 X-ray systems around the world. And when you add to that imaging chains, high-voltage generators and other components, it's over 400, and we have a global sales footprint. We're now counted in close to 40 countries around the world. And a question we're often asked, yes, our intellectual property is patented, protected, including 27 patents around the world. Looking at the technology platform that we've developed, and the platform consists essentially of carbon nanotube based X-ray tubes, high-voltage generators, high-voltage switching arrays, and in the case of CT imaging, image reconstruction software. Our tubes are capable of imaging at up to 160,000 volts, powered by our internally manufactured generators. Once again, our internally designed and manufactured high-voltage switching arrays enable our tubes to be turned on and off, almost instantaneously and in sequence. And finally, our proprietary image reconstruction software enables the images taken to be reconstructed into a 3-dimensional CT, providing the final element necessary for our revolutionary technology to provide CT images in ways never before possible. As we announced earlier this year, our company's core focus moving forward is medical imaging. So let's take a quick look at our medical imaging portfolio. On the left, we have the Rover, and as I mentioned earlier, we've sold a little under 400 of these units across almost 40 nations, 40 countries. Moving to the right, we have our world-first head CT, which is now very close to entering human imaging trials. And on the far right, we have the Micro-X full-body CT, which is being developed under a $25 million agreement with the U.S. government. I'm sure you'll agree all revolutionary products all very consistent with our company's vision and purpose, and all enabled by our proprietary NEXT technology with the tube at the bottom there on the right, weighing in at just a little over 300 grams. So recapping on our refreshed strategy, which we released earlier this year and the three big short-term priorities for us this year were: one, building Rover sales; two, commencing head CT imaging trials; and three, monetizing our Security division. These 3 priorities are important to us because they lay the foundation and create the path for Micro-X to become cash flow breakeven through further improvement in our commercialization efforts and also the creation of the right additional strategic partnerships. I'm really pleased to say that we made great progress against each of these three priorities this year. And while I'll speak to each of them in more detail shortly, our headline achievements are best demonstrated on the following slide. And you'll see we achieved a lot in 2025. We significantly increased the amount of nondilutive funding coming into Micro-X via both new development and collaboration agreements. Our groundbreaking head CT took its first 3-dimensional CT images as it prepares to enter imaging trials. We now have prototypes of not only our baggage scanner, but also our airport checkpoint being tested at the TSA, we brought a significant partner into the business via Billion Prima, consisting of a capital commitment, development funding and also the opportunity for future component sales. And we continue to expand our portfolio of U.S. professional sports teams as customers. And the pace of achievement has not slowed since we entered the current financial year. With the announcement of a supply agreement with one of the U.S.' largest health care companies. The execution of our largest-ever Rover order for $3.3 million to the Malaysian Ministry of Health, our first head CT test bench is now ready for deployment, and we recently announced the award of $4.4 million to trial our head CT in Australian ambulances. Throughout 2025, we've continued -- we've also continued to expand our commercial partnerships, which over the past few years have brought in excess of $85 million worth of funding into our business. DHS and TSA really airport security development for up to $31.7 million. The Australian Stroke Alliance for $8 million for the development of our head CT, Varex and our $15 million collaboration across multi-beam emitters. And then this year, we announced the $5.6 million collaboration with Billion Prima out of Malaysia, including an equity purchase, a collaboration agreement to develop a baggage and parcel scanner, and then Billion Prima's distribution of that product across Southeast Asia for 20 years, during which time, Micro-X will be the source of tubes and high-voltage generators. In December, we also announced an up to $25 million development agreement with the U.S. government via ARPA-H, the Advanced Research Project Agency for Health to develop a full-body CT using our NEXT technology, a further expansion of our technology platform. And finally and most recently, we announced a $4.4 million grant from the Australian federal government's industry growth program, which will see our Micro-X head CT trial in Australian ambulances. We've been talking about the importance of these partnerships to our business for some time now. I'm sure you'll agree what tremendous value they are to us, enabling us to scale our technology platform across multiple applications in a very collaborative and very capital-efficient manner. As I mentioned earlier, with growing Rover sales, one of our highest priorities, we were delighted to announce that we won the $3.3 million tender with the Malaysian Ministry of Health. We were able to fill the order very quickly. Over 2/3 of the units have already left our factory, the final tranche we'll leave tomorrow with delivery completed to our distributor by the end of November. While we're looking to build upon this initial success in Malaysia, the deal importantly provides us with an additional 32 reference sites, which we expect will become advocates for Rover moving forward. And our supply agreement with a major U.S. health care organization gave us the additional confidence that our renewed approach to focusing on our customers is working. With head CT, our progress and achievement this year has been spectacular. During the year, we took our first 3D CT images and our first prototype is complete and ready for installation in Royal Melbourne Hospital to commence imaging trials. It will be a significant trial, which we expect to take between 6 and 9 months with the data being integral to our regulatory submission for the device expected in late 2026. As I mentioned earlier, we're also successful in obtaining a $4.4 million grant to trial our head CT in Australian ambulances. This trial -- this project we expect will take the next 2 years. We also continue to make really strong progress with creating value within and also the monetizing of our security applications. We announced a $2.5 million extension to our DHS and TSA development contract to airport security, bringing the total for that contract to $31.7 million. As I mentioned in February this year, we executed a collaboration with Billion Prima, Malaysian company to develop a baggage and parcel scanner for them to distribute in Southeast Asia. We've made fantastic progress across the year on that project. And I'd like to thank Billion Prima for being such committed partners. Once the Billion Prima scanner is complete and launched into market, we will be the supplier of tubes and generators for that product, providing an additional revenue path for Micro-X. And as we have mentioned previously, across the year, we continue to discuss additional potential partnerships with various parties around the world to bring our applications to market and to realize value for our company, and to the most recent addition to our development program, the full-body CT. In December of 2024, we were thrilled when the U.S. government's operate agency chose Micro-X to develop a portable full-body CT and executed an up to $25 million funding agreement with us. And I'd say our technology won out over multiple conventional CT vendors. The Micro-X full-body CT will be at the core of the paradigm projects, Hospital on the Wheels, with the aim to bring health care equity to regional Americans providing the opportunity to have gold standard access -- sorry, access to gold standard CT imaging in regional and remote parts of America. While the current phase of the project is focused on design and documentation for the first prototype. Should the project run its full distance, we would see a lightweight portable CT in a 510(k) regulatory submission in the U.S. in approximately 4-or-so years. This further validation of our technology ensures Micro-X is again at the forefront, though a significant step-forward in global medical imaging, all leveraged from the value created in the core technology platform that's been developed through Rover, head CT and our security products. And looking to 2026 and beyond, and it's very fair to say there's as much planned for the coming year as ever. With Mobile DR, we will continue to focus on our customers, creating sales opportunities and driving revenue through an approach, which combines direct sales with targeted distribution, where we use distributors, we will continue to support them fully and set them up for success like we do with our own staff. This year, we'll also see the release of a refreshed Rover, incorporating some design changes, and most importantly, increasing the Rover offering, having listened to our customers, with a couple of the most notable changes being a larger screen and the ability to charge detectors while being stored in the unit. This is the first major change to Rover since the in-sourced high-power generator was added in 2022. Moving across the page. We will commence hospital human imaging trials this year with our head CT across 2 sites. As I said, we expect that will take between 6 and 9 months. In parallel, we will commence work on the commercialization and productization of the head CT for in-ambulance use via the $4.5 million industry growth program grant, which we announced just recently, and this is expected to take place across '26 and 2027. With full-body CT, our team is aiming to develop the high-voltage ring and electronics switching in order to complete the first test bench. And from a partnership perspective, we will continue to unlock value by executing the right strategic partnerships. We plan to deliver the next 2 airport checkpoint modules and complete the Billion Prima collaboration. And we will continue to explore ways of monetizing our broader security applications. This next slide essentially provides a visual representation of those key milestones, planned for '26, but also giving some insight into 2027, where we would expect to see head CT join Rover as a product in market. Full-body CT is planned to progress beyond design into prototype manufacture and then into an initial testing phase. And subject to the DHS and TSA exercising the various options in our agreement with them, we would expect to see the completion of the airport checkpoint prototypes and the commencement of live airport testing. I'm sure you'll agree that while the next couple of years are critical, they represent an exciting set of opportunities upon which we should capitalize. Looking at some of our financial metrics, we finished the September quarter with $2 million in cash. And as noted in our recent investor call last week, across the month of October, we received an additional $3.7 million from the initial Malaysian Rover receipts, the ITP grant money is in our first tranche of R&D rebate for the year. We also extinguished our R&D line, and we have no debt outstanding. Our institutional shareholding remains really solid, with substantial and strategic shareholders accounting for over 40% of our register. Our market capitalization set at approximately $65 million at close of business yesterday, representing a significant increase since we raised capital in March of this year. So in conclusion, we have a clear path forward. Our commercial drive and customer focus remains our priority, and we're seeing strong results being delivered in this area. We continue to see momentum in Rover Plus sales and are looking to build on the significant first half of the year that we've had so far. We're excited to see head CT entering human imaging trials and look forward to supporting the Australian Stroke Alliance over the next 6 to 9 months. We are prioritizing unlocking value through the monetization of our security applications, and we continue to be encouraged by the validation provided by our strong and committed partners, all highly respected, who have provided invaluable funding, but also market access and critical feedback. And with that, I'd like to echo Patrick's comments from earlier in thanking all shareholders for your continued support, in addition to thanking our incredible Micro-X team for the tireless and phenomenal contribution that they give our company each and every day. And with that, I'll hand back to Patrick. Thank you. You're muted, Patrick.

Thank you, Kingsley. We'll now proceed with the formal matters for today. The purpose of this meeting is set out in the Notice of Meeting, which was dispatched to shareholders, and unless there are any objections, I'll take the Notice of Meeting as having been read. There are 4 items of business for today, as detailed on the slide, you should now be seen. And we will present on individual slides the proxies received for each of the -- for each of these. Three of these require formal resolutions. The first item is to receive and consider the financial accounts and the reports of the directors and the auditors for the financial year ended 30 June 2025. It is not a requirement that shareholders vote in relation to the accounts, however, we are pleased to answer any questions relating to them and any other matter you would like to raise -- and as I mentioned, we have Andrew Tickle from BDO with us also. Does any shareholder have any questions or comments? If you do, please submit them via Zoom through the Q&A button or by selecting the option to raise your hand. There will also be time allocated for general questions at the end of our formal business. Rebecca, does any shareholder have any questions or comments?

Yes, I have got 1 question that's come through. Since the strategic reset, Micro-X has seen a 60% drop in actual product sales from $6.410 million to $2.590 million. First, with these dropping resources, should Micro-X be allocated funds to comply with Australian sustainability and reporting standards and DEI initiatives, when it's far from the ASX 300 and not yet required to do so. And secondly, does this decline in product sales indicate a failure of the strategic reset?

I might just give a short answer to that and then hand to Kingsley, who will add upon that. But I certainly don't think it reflects as a failure of the strategic reset. I think Kingsley will be able to explain the sales differential there in a moment as to why that does not rely -- relate to the strategic reset, but as to the DEI, I think, it may not be understood by all shareholders that we're operating not just in Australia, but in Europe, Asia and the U.S. And for a number of those markets, we actually need to be complying with some of these matters that have been raised. And it's just a simple matter of being able to tender in certain circumstances. We are not allocating extra resources, they are internal resources. So, Kingsley, I'll let you expand upon that.

Yes. Thanks, Patrick. Yes, you're absolutely right. We report on sustainability and other related matters largely because we want to be ahead of the curve in that regard. We don't need to at this point, but we're not ASX 300. We do so because a lot of the tenders that we compete for globally are looking for that behavior from us and from other tenders. So we want to be at the front end of that, but we don't spend any external money on it. In regards to the sales question, I think at the point of our -- of the commercialization journey that we're on at the moment, our sales can sometimes be a little bit lumpy. The '24 year, which was materially larger than '25, did have two very large government orders very early in the '24 financial year. There was about a $1.6 million sales units to the Australian government, which were allocated to Ukraine, and also, I think, about a $1.3 million completion of Australian defense sale, which was in October or November of 2023. In 2025, for example, in the half of the year that we're currently in, we've already eclipsed our total in 2024 sales, with the $3.3 million Malaysian Ministry of Health deal, and also some additional sales that we've made around the world. So whilst as a company, we're trying really hard and we would like to have a more standard cadence of revenue, where we were getting closer to a standard kind of monthly, weekly, quarterly volumes. We're not quite there yet. But certainly, this year, this year will be much better than last year, and we have great faith in the strategy reset.

I've got another second question that's come through as a follow-up, asking about Micro-X' decision to focus CT in the mobile market. The shareholder says that they believe that it's a very small market, while Varex is using multibeam to enter a larger hospital market. That's a question for you, Kingsley, I guess.

I'll be happy to answer that. I mean, I think the move into mobile CT is, it's a game changer globally. To be able to take imaging to the patient is going to change the way. It's going to save lives, and the head CT is going to be the nearest example of that. I think the fact that the U.S. federal government wants to fund mobile CT to the tune of $25 million over the next 4 years, again, shows that they want to be at the forefront of medical imaging. Micro-X is currently the only company that can do that. Our technology enables a range of portability applications, that traditional X-ray technology does not. We believe firmly that taking imaging to the patient is the future of medical imaging.

I have no further questions at this time.

Okay. Well, in the absence of further questions, I'll move on and we'll move to the formal resolutions. Proxies received in relation to the formal resolutions are set out on the following slides. The first item requiring a resolution is the adoption of the remuneration report forming part of the directors' report for the financial year ended 30 June 2025. I move that the remuneration report be adopted on the basis set out in the Notice of Meeting. Rebecca, does any shareholder have any questions or comments?

No.