Nova Eye Medical Limited (EYE.AX) Q1 FY2026 Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Nova Eye's Investor Webinar for the September quarter. And thanks again for all of you joining, and some great interest in our recent results. Tom and I will cover the quarter's trading, the reimbursement update, the new 24-month clinical paper on the iTrack Advance, our guidance again for FY '26 and also an update on the drug delivery work stream. Very happy to take your questions. Please use the Q&A box. I have received some already from shareholders, and I will be asking those, but please submit the questions any time via the Zoom function. With that, we can kick off, and we'll get started and pleased to introduce Nova Eye's Managing Director, Tom Spurling. Over to you, Tom.

Thanks, Mark. Yes, over 50 people on the webinar. That's really pleasing that we always get good numbers. I want to, as I promised him, a particular shout out to Bilal Khan at New World Medical. He tells me that he listens intently to our story and reads everything we put up. I only wish that he was not a private company so that he could reciprocate the favor. So welcome, Bilal. Now just recapping our business, I'd like to remind everybody -- just to remind what we do have. So iTrack Advance is a leading minimally invasive glaucoma surgical device. We have FDA approval, we have CE approval, and we're nearly through our MDR process. And we're excited to announce this quarter NMPA, the Chinese government approval. And we've got strong reimbursement in the U.S. and in other major markets. There is 170,000 patients that have been treated with iTrack Advance. That is a lot -- I mean, you can say that's not that many, but that is -- there's longevity associated with our treatment, that means that it's safe and there's long-term safety data now. We are a participant in a large established global market that's growing. Now we only have 3.5% as we assess of the U.S.A. market. And -- but -- which means -- imagine if it became 7%. That's an exciting concept to me. We have a direct sales force in the U.S. and Germany. I know there's some questions about that. We have a large distribution partner in China. But in the U.S., we choose and very importantly, it's a major asset that we've got a strong footprint in the United States, dealing direct with doctors, which drives good gross margins. We have trailing revenues of nearly $20 million growing at -- growing more than 20%, and we're on track to be EBITDA positive. There is a lot of really good things happening with our business. Next slide. This is a reminder to us all, and a lot of you have seen this slide before about why doctors choose iTrack Advance. People ask, how do you separate iTrack from the rest of the field? It's this slide that is central to our pitch, particularly in the United States, but globally, as our sales team go out and talk to doctors. And as I say to everybody here that reads this, yes, well, of course, this is an Nove Eye deck, of course they're going to have green ticks across everything and where are the red ticks -- where are the red crosses? Well, if we had a red cross, the red cross would be on the right-hand side, it would say global footprint or footprint in the U.S., number of sales reps, number of investment in marketing and sales. We are carefully limiting that investment. We are not taking advantage of all those green ticks at the moment. We are progressing in accordance with what our shareholders demand, which is to improve the bottom line and grow the top line, and that's a balancing act I'm involved every day. FDA approved doesn't do any damage, a light to provide navigation and preserves tissue for future treatments. It is a wonderful procedure. Next slide. The wonderful procedure I described has most recently been put together in a 24-month results paper by our good customers, Simon Ondrejka and Dr. Norbert Koerber in Germany, where it was just recently published. The paper describes a study of 98 eyes, which is a good, as they say, end followed for 24 months. And the treatment with iTrack Advance showed high -- about a 20% reduction in IOP and near elimination of medication over the 24 months. We remember our pitch is, let's get you off drops a patient. A doctor says let's get you off those drops. And because the drops are what the manifestation of glaucoma to a patient is having to daily put drops in their eyes. Getting patients off drops is what patients are happy to do. And we've got some great data here that we are putting in the hands of our sales teams, and it will drive further adoption. Next one. The revenue, which we reported, it's now the -- so we have nearly got quarter-on-quarter growth in our direct markets. I highlight there the fact that Chinese revenue can materially change the amount in a quarter. Our delivery to China took place in October rather than September as scheduled, which is not unusual. It can be very lumpy. And our sales growth was good. I mean it was creditable, but it is a little lower than what we planned. Our commercial expansion of new salespeople in the Southeast of U.S.A. has been slower, and Canada was slower than we expected. They seem small matters, but every dollar, every sale, every day counts when we -- as we continue on our mission to grow our sales in accordance with the guidance we provided and in accordance with our mission of improving the bottom line and improving our operating cash flow. I'm really pleased to report that October 2025 was the biggest month in the history of the company. We will provide more color at the AGM, but that is a great milestone. Next slide. U.S. Medicare reimbursement over the years, the shareholders have been watching this, and we wait and there has been scares in this area. I wrote here during the third week of July that we got the proposed rates. And I write these rates are usually finalized in November. They were actually finalized yesterday. And well, the professional fee, there's 2 parts to reimbursement. One is the amount the doctors are paid and the amount that the facility is paying. And the doctors are paid depending on how they quote, either $542 for their labor or $724 for their labor. And doctors choose which one. And they don't always choose the highest one, believe it or not. But what's important is that, that proposed -- those professional fee rates, the doctors' rates were confirmed yesterday. We have not yet got the facility fee. So they were confirmed in accordance with the proposal, which is great news. We are halfway through making sure that -- more than halfway through, that our reimbursement for 2026 is solid. Facility fee will be expected any day now. Next one, Mark. Trading revenues are important. You can see we're up nearly $20 million. Our quote around across the globe, we're around that $1.3 million, $1.4 million per salesperson across the U.S.A. and Germany where we have sales team. And we -- our research indicates that this is a leading -- industry-leading statistic. Direct sales channels continue to deliver superior margins versus markets with distributors. I know we get questions about that all the time. Why don't you hand it over to a distributor? And I think I've used the term rather colloquially, distributors have no love. They will not look after you the way they will when they present to you at a nice dinner. They will lose interest. Our own sales reps owe us their time, their dedication, they deliver what we want. Next slide. Our FY '26 guidance, we can all study that. Our sales revenues are between $21 million and $24 million. We've got our trailing revenues nearly up there anyway. We expect breakeven in FY '26. That is a slippage against what we hoped, which was the first half, and we attribute that to the slower than below planned sales still ahead of everything, but just below where we wanted to be. And I've got to say that the timing and size of sales into China, which can be difficult to predict, and the timing, both timing and size, we're working on that, can impact breakeven as well. And cash flow from operations is expected to improve. Cash flow, of course, is impacted by working capital, not just EBITDA. So we will provide a little bit of story on that in a minute. Next one, Mark. A lot of questions about drug delivery opportunity. Now just let me recap what we're really here for. The primary mission of the business is to grow revenues and improve the bottom line of our interventional glaucoma business. We were approached by a large pharma, we are approached by large pharmaceutical, plural, companies and to talk about whether this catheter could do other things. We talked about -- we have had some feedback that during some -- feedback that the results are not any -- the results we got do not provide any definitive decision for us on timing. Just remember that because we're not spending our own money, it is not just about our device that's important. It's also about the drug efficacy that the pharmaceutical company wants to put into someone's eye. So the success of the project is not in our hands. The success of the project is in the hands of whether or not that drug -- that particular drug, and there's more than one involved, is important. So we'll continue to work with potential partners on this project, but we are not spending our own money on it. We are responding to requests because our mission is to -- I get lots of questions about your costs is to get bottom line in performance on our interventional glaucoma business. That's just to reiterate. Last slide, I think. Working capital facility. Some of you have noted that we now have working -- an unused working capital facility to fund inventory and accounts receivable. Our business has high-quality accounts receivable. It is nondilutive. It's secured by accounts receivable and the tangible assets of the company, not the intellectual property. We manage our cash very carefully. And before this meeting, we had our weekly working capital meeting. We look at inventory levels, accounts receivable, collections for the prior week, old accounts receivable and average daily collections and the payables that we need to make to keep our business going. That's a meeting that it's not just devolved to the lower levels of the Nova Eye business. We have a very thin management team. I'm directly involved in that working capital management. So I want to reiterate that this is a positive thing. We have sufficient funds to meet our objectives and the working capital facility is part of that. So that's what I wanted to present. There are some questions, Mark. Did you want to ask those?

Some good questions coming through, Tom, and I've got a couple here, but I'll -- some received earlier and then some through the webinar now. So one question was, "What caused the Q1 expenses to be higher than in other quarters?" Now you may have answered this, but -- and a couple of these, but I don't think it's expenses, but can you answer that one?

Yes. We have never released expenses for the quarter. We have reduced cash. And I must admit that what I do know is that our company ratios are changing all the time because our sales are growing and there's leverage with our operating expenses against those sales. And there's nothing special about Q1. But all we really focused on was the key ratio of improving the EBITDA to sales ratio and ultimately cash flow from operations. We have highlighted our cash flow from operations, it continues to decline. And so I -- individual expenses in each quarter is we manage it on a ratio basis, I guess. Anything else?

One through from Michael Youlden at MST, "What drove the strength in the record October sales?"

Well, October is a good month because it is, in ophthalmology, there is some trade shows. It's the end of summer. It's just a period in autumn before doctors want to get some surgeries done, in the northern autumn. And we just keep -- there's some seasonality to it. But we actually -- every month, our sales team has out in the -- and some of them have been here a long while and others haven't. And as the message gets across, the growth keeps happening. So there's no particular reason apart from the investments that we've been making, and the plan is to do that. And so we are just achieving what we plan to achieve.

Okay. Where is the iTrack Advance gaining share? And who are our main competitors?

Well, I think our main competitors are listed on iTrack who -- on that slide I put up before that says why do we -- why is an iTrack-- why does a doctor choose iTrack? We're gaining share across general ophthalmologists and increasingly cataract surgeons. We had a good following with or we have a good following with glaucoma surgeons. The versatility of the device means that it's able to be used in a number of stages of the disease. Glaucoma surgeons tend to be treating patients with later-stage disease, cataract surgeons with earlier-stage disease and comprehensive kind of both. So as our mission, as our reps get into all the territories, and we are underpenetrated in those because we don't have enough reps to truly get to everywhere, we are increasing sales. And the market is growing. So it's not just about share.

Continued questions on the U.S. sales strategy and potential partnerships. So again, I know you've answered this, but it's probably just a little bit more is, have we considered using partners to accelerate? Or is there any large direct sales teams that could benefit from a glaucoma treatment product portfolio?

Yes. So in one of our decks, we talk about -- in the deck I put out in August that we put out in August, we talk about the current cataract and glaucoma. 1 in 5 patients that have -- that need a cataract surgery also have glaucoma. That makes it interesting to those large cataract companies that I've cited in that list. But the direct sales model remains central to our strategy because it ensures we get proper engagement, proper take-up and good gross margins. It is expensive, and I get pointed out every day about why are the expenses so high, why are the expenses? It's because professional sales teams in America cost a lot of money. Now we're getting there. Our sales team is expanding. Partnerships, we have never -- we have not been able to locate somebody that could do a better job than our own sales team. And I think I've said before, we have a small company that helps us sell into the large states west of Minnesota and east of Seattle, east of Washington, D.C., those so-called big sky states because it's very sparse. But apart from that, it's our own sales teams, and that's why we think it's best for our shareholders.

Something we've put out today, and what is the impact has the new 24-month clinical study had on adoption recently?

Yes. Well, I mean, I haven't -- that was released just a couple of days before our quarterly report. And so it's basically been in the hands of our sales reps, and we expect to have -- expect it to be positive. We think our German people because Germans like other German doctors. And so our German sales team have really grabbed it and they're out there doing something about it right now.

China is obviously a big market opportunity for Nova Eye. What is the outlook now following that NMPA approval of the iTrack Advance?

Well, that NMPA approval was a hard one, and it's a major milestone. We had a really good approval in a very large market. Our investment in that market is still very low. To be really honest, it's a single person, helped by Kate Hunt and helped by me, where we are pushing our distribution partner, not pushing. We're working with our distribution partner. The ratio of cataract surgeries in -- to population in the United -- in China is very, very low compared to the ratios of cataract surgery to population in the United States. As health care improves in China, cataract surgeries will rise and the interventional glaucoma, which is mostly about concurrent cataract and glaucoma surgery, will become a bigger business, much like it is in the United States. In the United States, we're delivering 14,000, 14,500 units a year -- surgeries a year. We're currently at about 2,000 -- 2,500 in China. It is a large market opportunity, and it's a long-term value-creating market for us.

Okay. Just on some research and development and obviously pipeline, but wrapping a couple of questions that have just come through now on IP and our patent strategy. So what's next for that R&D and how are we protecting that patent.

Yes. So we've got a constant work on issuing patents, freedom to operate, all those boring things that we have to do to make investments to protect our IP, both with patents and with first-to-market activities. But it's fair to say that our product development focus, and I would not call it research, it is development. We are not a research company. We're a company trying to -- we're a company that has a viable product that is working to increase sales and generate EBITDA. Having said that, the idea of the differentiation of our product to the rest of that space that is highlighted on the why surgeons choose iTrack slide is the central theme of our product development. All those things that make us better is where we see the investment and improvement in the product, giving us the opportunity to increase sales further.

Sales across the rest of the world outside the U.S. ex China as well, but more around Germany or Europe, obviously moved around a bit. The reasoning behind that lumpiness of those sales in Europe?

Yes. So the sales in Germany are relatively smooth because of -- we have our own sales team. But in outside of Germany and the U.S., we use distributors. Obviously, we talk about how lumpy China is and that's its own case because it's materially lumpy. But the rest of the world markets can be lumpy. They're relatively small numbers. So just imagine if our distributor in the U.K. buys 50 catheters in September and then doesn't buy another one -- well, buys 50 catheters on the 29th of June and then buys another one on the 1st of October. It could miss a whole quarter. Now I'm making that number, it's more than 50 catheters, but $50,000 makes a difference on that slide. So it is about the timing of deliveries to our distributor markets.

Okay. Probably a final question is, and back to China, which is obviously a growth market for Nova Eye, does Nova Eye -- is it the same competitors in the Chinese market as per our comp slide?

No. We're aware that Glaukos has a presence in the market. But apart from that is that's the main one that we come across.

Okay. Thank you, Tom. With that, thank you very much. As Tom said, another record attendance on the webinar. If any further questions, there's a number have come through, and we'll look to answer those directly to others, but please e-mail Tom and I, and we'll endeavor to get back to you. But thank you very much for joining, and thanks, Tom.

Thank you. Thank you, everybody. Appreciate your attendance.