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

Good morning, everyone. And once again, thank you for joining us. Welcome to the Nova Eye Medical Investor webinar covering our half year results for the 6 months ended 31 December 2025, along with an update that we put out this morning on our recent EU MDR certification. My name is Mark Flynn. I look after Investor Relations at Nova Eye. Today, as usual, our Managing Director, Thomas Spurling, will walk us through the key financial outcomes from the half, the continued momentum we have in the U.S., margin and EBITDA progression, cash flow and obviously, the outlook for the second half for FY '26. We'll cover the strategic importance of securing that EU MDR certification, which is a big and major regulatory milestone for the company and supports our ongoing commercial activities in Europe and elsewhere. So as always, there will be time for Q&A at the end of the presentation, so you can submit your questions at any time through the webinar using the Q&A function in Zoom. I have received other questions via e-mail, which I will be asking. With that, I'll hand over to Tom.

Thanks, Mark, and thanks, everybody. We've had a few webinars over the last month or 2, and I appreciate everybody sitting in and listening. We have an exciting company. At the end of today, I would like you all to think of the three reasons that we like Nova Eye. First of all, we are operating in a big market with endless supply of customers, point one. Point two, our company over the years has built infrastructure and a position in that market, which is very valuable and strong and well -- and reasonable, it's not insignificant. And three, we've got sales growth and bottom line improving in our business. We're delivering on those three -- so we're delivering on the third one, but we have in terms -- this is the three points that make it interesting to be a shareholder at Nova Eye. Mark? There's disclaimer. My first point, a big market. Lots of people, lots of glaucoma surgical devices at a reasonable growth rate. The use of topical drops for treating glaucoma is problematic because it reduces the quality of life, QOL for patients. And so there is a growing theme, our interventional glaucoma theme that treating disease early, treating glaucoma earlier, often in conjunction with cataract surgery leads to an improved quality of life because you don't have to remember to take drops and you're not bathing your eye in drops all the time. That link with cataract surgery, it's not just cataract surgery that patients still do a stand-alone, but 32 million procedures globally every year. That is, as a number of you would have heard, the most conducted surgery in the world. And you can ask artificial intelligence data, and they will give you that answer. One in five of those patients also have glaucoma because of the nature of someone who needs a new lens in their eye associated with cataract disease. So we have a good market to work in. That's the point of this slide. And what about our competitive position in that big market? It's okay to have a big market, but do we have something that's useful. And I know some of the people have been on these webinars have heard this before, but it is a fundamental strength of our business. We have -- doctors have choices, why do they choose us? The procedure is canaloplasty, angioplasty of the eye, clearing of the irrigation systems around the eye. We have an FDA indication to treat glaucoma, to target the natural outflow system that Schlemm's canal, collector channels and the trabecular meshwork, TA. Our device is implant-free and tissue sparing. We are not cutting anything and we are not leaving anything behind. The device is -- the procedure is completed with a single pass and the light, which is shown barely on that slide, the light provides safety of navigation to the surgeon conducting that procedure. iTrack maintains the natural anatomy and can be repeated. It's a very important point, and it is often repeated. It does complement cataract surgery. Doctors are reimbursed and the facilities are reimbursed in an economically viable way. And we're putting our runs on the scoreboard, 17,000 U.S. procedures per annum by us, market share that 3% to 4% range and a CAGR in America of 40% over the last 6 halves. First two points, big market, and we are a good part of it. I'd like to put this up because this is the valuable part of our company. We have a good product, the bottom of the jigsaw parts. We have clinical data. We have reimbursement. We have a product that is safe and efficacious. There's a question about production capacity. It's in this slide. We currently have capacity to produce 100,000 units, and we are currently producing about 25,000 units a day. Over the top of that, we layer some marketing costs to get key opinion leaders to help us get our message out, attendance at trade shows, make sure our band is understood, positioning our thing in the market. We then have surgical trainers, sales management, and then we have sales reps in the U.S.A. and Germany and Europe that go out and put that catheter in the hands of doctors based using all the stuff underneath it to make sure it's right. This is all very valuable. And I'm often asked about operating leverage. When are you going to make a profit? Your costs go up. We -- that operating leverage is flowing through now. These costs are all important costs and they are very valuable. Next one. So on EU certification, that's the most recent addition to our foundation. So the European Medical Device Regulation, in the broadest terms, the world is divided into -- it used to be called the EU MDD or a CE Mark. And then there was the FDA. And I don't -- this is my rough layman's translation. The FDA requires you to show safety and efficacy before they let you sell in America, safety and efficacy. In Europe, it was and still is Europe -- we'll just show us it's safe and we'll let the doctors decide if something is efficacious. What the MDR has done has moved it a little closer to the FDA version. They want more compliance and more statements about efficacy. It shows that we have a very strong system now. We've had to lift those -- in some circumstances, we've had to make additions to our system to meet the MDR requirements, and that makes it all very valuable. Have people say, will this increase sales? It ensures that we have a platform to enable us to sell in Europe, and we will continue to increase in sales because our product is good, and it has MDR certification. Next slide, Mark. So highlighting our execution. We've had record sales revenue. It is AUD 16.7 million, but in constant currency, that's 31%, 6 consecutive halves of growth, and those that have tuned in have heard me talk about that a lot. Our last 12 months, LTM global sales of AUD 32 million, up 24%, which is 3x higher than the industry average growth rate or the industry quoted growth rate of 8%. Underlying working capital, underlying cash flow from operations was generated in the last quarter after allowing for working capital and a significant continuing improvement in EBITDA on the bottom line. Our position is that we are delivering on our promises. Our three things: big market, good structure, a good position in that market, and now we are delivering that bottom line. This is some detail in our deck on where the sales revenue is coming from. You can see it's dominated by our U.S.A. sales. Our direct markets of U.S.A. and Germany, in the rest of the world where we use distributors. China, we also use a distributor. And I know there's a few different sub-totals there, but I figure that we'll just explain to people how we manage our business. We give guidance on sales, excluding China because it's always hard to know. We started doing that because of the uncertainty of tariffs earlier in the -- well, about 12 months ago. And they're still moving around a bit, but sales, excluding China, are on target. Next one. Last 12 months, really important to me that we continue to look at the last 12 months, not just the 6 months that is the subject period. And that number to me is really important, nearly USD 21 million in the last 12 months revenue, 3x the growth rate. And I can report, we put in here our January '26 sales have increased that last 12 months revenue. So that means we are increasing compared with the previous month. And that trend we expect to continue as stated in our guidance. So we're up to sales, excluding China of $20.1 million. Our minimum guidance was $22 million. So we're nearly there. Next one. I -- people may be sick of this graph, but I'm not sick of it because we should all be proud of it. This is 6 consecutive halves of growth, 7 stakes in the ground is 6 periods of growth reflects the continued success we have in the U.S. market. And I know talking on the trade show floor, this is -- people are envious of this. Our industry colleagues are envious of this. New surgeon facility adoption as well as expanding utilization within existing facilities. So very proud of it, and our shareholders should be proud of it, too. Next one. This is our working capital going back since we've been reporting quarterly. You can see we're getting better. And that's what we can do. A small positive underlying after adjusting for our working capital investment. We have big receivables and inventory right now. And I think that's okay. And we are -- that is a harbinger of continued improvement. So the message from this slide is, hey, you're delivering on what you said you would. And that's the message I want to get to through today. Next one. And there's the EBITDA improvement on a half basis, you can see some seasonality there with second half, that is the period from January to June each year is always better than June to -- sorry, than June to December. That's probably -- not probably, particularly in Europe. The Northern Hemisphere summer impacts us more than anything. Certainly, Australian market doesn't help -- doesn't affect us. Northern Hemisphere summer and particularly in Europe, there's a lot of slowdown in July and August. Now therefore, we don't have that. They've all got their foot to the floor during January to June. And we would -- and that is consistent with our expected outcome in the second half. So you can see the trend of improvement in the second half with a net reduction overall. These are small numbers. I wish they are bigger numbers, but we are working with small numbers in a big market. Whether we have 3.5% share -- I don't really mind because that's generating $32 million of revenue for us or USD 21. Imagine if it was 6% or imagine if it was 7%. That is really important to our shareholders. It's certainly important to me. And that means we'll have a revenue -- growing revenue, EBITDA positive company that I think will -- implies value for our shareholders. Next one. This is a rather complicated guidance. I'm being very open here. We're being very open on where we -- the most recent guidance on the left and our scorecard. And the most important word is we're confirming guidance in each case. Our sales revenue, excluding China, is now at -- as of the end of January, $20.1 million at 30% growth rate. That 31%. Now that's actually more than what the growth rate was implied in our guidance. We're targeting breakeven. We've talked to that slide. We're calling out a positive EBITDA in December, historical seasonal improvement, which will help us get there and the substantial improvement that we've reported. Ongoing improvement in cash flow, we have our underlying cash flow for 6 months is materially better than previously and underlying cash flow achieved -- cash flow positive achieved in the December quarter. So we're confirming our guidance again. We're at March 3 now. I don't -- I just -- I'll have February sales later today. I have no reason to believe that we'll be anything but continuing a good outcome. I think the last slide -- I won't -- this is for the record. Some of the people can look at -- this really answers questions about operating leverage it gives. My one message here is the substantial investment that we've highlighted in clinical data. Clinical data does not directly affect sales in the current year. And so therefore, it does inhibit that operating leverage. So people can get their calculators out and do some calculations on how collecting clinical data, which rolls into that sales and marketing and clinical line will -- does not have to go up at the same rate as sales go up. So the words there really provide some guidance on operating leverage.

Thanks, Tom. Questions coming in thick and fast here as well. Firstly, on revenue momentum. So revenue grew, as you said, 31% in the half. What were the key drivers behind that growth in that half?

Well, we're very U.S.-centric. And the utilization by -- sorry, new accounts and utilization by existing accounts both went up in that period in America. We have expanded our sales team in Europe. There was also some growth in markets. We particularly are enjoying some nice growth in Poland and the U.K., believe it or not. U.K. has a good system, and it's a -- been a real sleeper for us, which is going quite well now.

On the U.S. growth sustainability, obviously, the 6 consecutive halves are great, but what gives you confidence that, that trajectory will continue? And you can put another stake in the ground?

So I go back to my first point about why we invest in Nova Eye, and we have a big market treating a disease people worry about, and we have a tiny share of it. So having a tiny share is not something to be ashamed of because we can double that share and continue the growth. It's that small share that gives me the confidence to say that for us, us shareholders in Nova Eye with $32 million of revenue right now or USD 21 million have got scope to make that bigger. And that's the exciting part.

And the margin in that, so we -- margin improved to 70% in the half. And should we expect those margins to hold again?

So we make our judgments based on the records. We just put our record out there and put it on our scorecard and say shareholders, this is what we're delivering. There's operating leverage. There's -- as volume increase, technically, cost of goods sold comes down because there's more absorption per unit or less fixed costs over greater units. So all the signs are there that we can improve the total bottom line, which is what I worry about.

Just as we need to remember, not everyone's come -- sat with us through these webinars, but a question on the reimbursement. So just a quick run-through of the -- how much of the reimbursement does Nova get for the procedure. So just to...

Just back to that slide, Mark, I think it's about 5, so we can talk to it. That one, yes. So you can see on the left, second dot point, USA reimbursement. Surgeon -- there are three parties to the transaction. There's us as a supplier of the product. There is a surgeon who conducts their surgery, and there is the facility who houses the surgery. We send an invoice to the facility for, broadly speaking, around a bit over $1,000 on net, just for the sake of argument. And that surgeon, that facility will pay our invoice from that reimbursed amount of $2,231. So the facility gets to keep $2,231 less what it pays us of around about $1,000. And the surgeon receives $542 for the time to conduct the surgery. And so when -- you add in the amount of time to do the surgery, that -- I think I said it before, it's an economically feasible -- economically rewarding for the three partners in the glaucoma surgery.

On sales rep, just add two things here. How are you thinking about U.S. sales rep expansion in 2026, and adding in the EU MDR, will you be expanding sales in Europe -- people?

So our overriding consideration, broadly speaking, it's -- we are, as I say time and again, trying to balance our bottom line improvement with our sales growth. People want sales growth and bottom line improvement. We can accelerate our sales growth by spending and by making a loss straight away. We're not doing that. So we have a measured approach to recruitment of reps. We think the market is large. We see territories in the U.S. that we are underrepresented in. And so we are constantly balancing bringing on new reps since we brought on 2 in the last -- during January and February, 2 more reps. So -- yes, that's where we are now. Our guidance is on sales growth that we've been providing guidance to. And I guess pretty soon, we'll have to talk about guidance for 2027. But that's rather than forecasting the number of reps we have, I would rather be forecasting what our total revenues are by region.

Okay. Manufacturing capacity, we mentioned in the presentation today, capacity of approximately 100,000 units. How much headroom exists before additional capital investment required?

Well, we pretty much see that as 100,000, and we're at 25,000 today. So there's 75,000 units of headroom, more or less. The costs of bringing on people are 1 week, 3 weeks, 5 weeks of training, maybe a microscope for $1,000 or $2,000. That's about it.

Okay. The EU MDR significance, obviously, development there, we've announced that. So that certification change, what have we been selling under previously? And how does it work?

Yes. So we've been -- the existence of the EU MDR was announced, I don't know. It was announced before COVID. But COVID -- they gave some delays in implementation due to COVID. So we've been selling under the Medical Device Directive, but now it's the Medical Device Regulation. So it is a -- what we have is a company that meets that requirement and therefore, remains valuable and able to deliver. People say -- so people know that Nova Eye has a production facility that meets the MDR requirement. That is a valuable thing to know. Not meeting MDR is a very bad thing. So we meet MDR.

One we haven't had for a while, but on FX and FX strategy here. So obviously, Aussie dollar rising, geopolitical, I mean what's your plan? Obviously, Aussie dollar rising means we make more Aussie dollars, but...

Yes. I -- just about all our costs and just about all our revenues are in Australian -- U.S. dollars. The goal is to make a profit in U.S. dollars. Whether or not a U.S. dollar is worth $0.65 or $0.70, it's kind of a little bit weird for us, but I think that the -- we do not have an FX strategy because we're naturally hedged, and we're right at the cusp of profitability. Taking bets on the U.S. dollar against the Australian dollar is not on our list of things at the moment. I do appreciate, though, that if we start making more U.S. dollars and the U.S. dollar is less valuable than Australian dollars, that it's kind of like damn it. I shouldn't be ruling out any some sort of low-cost collar arrangement to try and give shareholders some certainty that's possible. But really, it's only a reporting currency, Australian. We have almost no costs in U.S. in Australian dollars. So it's natural.

Just a question from a shareholder from [ Kush ] actually on China. So iTrack Advance getting -- is iTrack Advance gaining traction in China diverting to there? And was it softer in the half? And what are you seeing on the ground? And how should we think about the next few quarters in China?

So we only have approval for iTrack Advance in September. We only received the approval from the NMPA. We were doing prelaunch activities. And our guidance is that during 2026, we will be making sales into China. And I think we make our guidance sales, excluding China because there is uncertainties associated with -- there's always some event that we can't predict. So I'd like to talk about what we have achieved in China in the future rather than what we might -- rather than project what we will achieve. We have a lot of confidence in that market. There are a lot of people with glaucoma. There is a theme on interventional glaucoma that's growing. We have a good approval. We have a good partner. So yes, I think it's -- I don't like this term, but let's just watch this space and just deliver good news.

Just a question on competitors. We haven't got it in this deck, but we obviously -- we keep that in our ticks. Question is, who are the major competitors just broadly? And what sort of market share in broader terms could you give today? But obviously, we can -- I can follow that up.

Yes. Look, I -- the leader in interventional glaucoma is Glaukos. And it has revenues of $500 million, which isn't that big. It has a market cap of $6.9 billion and has never made a profit, which says to me there's a lot of confidence in the future in this market. So the leader is Glaukos. I think -- and there's one other listed and a private company, but I think we've given a historic just to name. I think we should just leave it at that.

Okay. Sales strategy and going back to obviously, sales reps and your experiences there. But good question here is sales strategy is very -- seems to be very person to personal, salesperson to doctor. Is there an opportunity more modern technology-driven sales approach available in the U.S. or other markets?

Well, I shouldn't ever say that there isn't another approach. At the moment, it is shaking hands with the doctor, convincing them of the reason to use our device. Doctors -- that's how doctors do it. That's how our competitors do it. That's how the industry is currently working. I don't really feel like we should be leading the world. Look, no, I will say -- that's an interesting question. But nothing comes to mind straight away with technology. And because doctors receive a lot of e-mails, they receive a lot of stuff, getting a doctor in the hallway while he or she is between patients is a very -- or at a trade show is always so powerful. They have a bit of time to listen to your story. If that -- if the person asking the question has got a specific idea, I'd be quite happy quite happy to hear it because maybe something that I haven't thought of would be great. Everyone knows my e-mail.

Thanks, Tom. And on that, which is about 12:00. So conscious of time for everyone, 12:00 Sydney time. Thank you very much for your questions. There's a couple that have been left unanswered that I'll try and respond to directly for those people that have registered and put their name through, I will get back to you. But otherwise, please drop e-mail through to Tom and myself. Our names and numbers are always on the back of the presentation, as always, plus the ASX announcement. So please don't hesitate to get in touch, and we'll be in touch very soon. But thank you very much for joining us, and thanks, Tom.

Thanks very much. The three things, the three things, big useful market; two, we have a good position in that market; and three, we're delivering on our promises with revenue growth and bottom line improvement. They are the three reasons we like Nova Eye Medical. Thank you.

Thank you, everyone. Thanks, Tom.