PharmX Technologies Limited (PHX) Earnings Call Transcript & Summary

Good morning all, and welcome to the PharmX FY '26 Results Presentation. I'm Tom Culver, CEO of PharmX, and we also have Zoe Hillier, CFO. Today, we will provide you a brief overview of our business, our key results and metrics as well as provide an overview of our focus areas for FY '27. We also provide an opportunity for questions at the end of the presentation. Please throughout, submit your questions via the Q&A function that you will find in the call. Positioned at the heart of the industry, PharmX offers critical industry infrastructure to the ANZ pharmacy network. Our strategy to expand our network and diversify revenues continues to deliver strong results. In the year, we released the new Marketplace platform, which provides both a one-stop shop for pharmacy ordering and a new channel for suppliers, whilst expanding the revenue base by capturing our increasing share. Additionally, a program of work has started to modernize the PharmX Gateway to enable the provision of vertically expanded services throughout the supply chain, expanding our addressable market. And finally, we continue to develop and grow our AI-enabled analytics capabilities, further diversifying revenue and driving value back to our network customers. Today, we deliver our critical infrastructure through a secure, high availability, single platform solution made up of 3 core services. Our Gateway, which increasingly operates as the truth layer for the sector with near universal connectivity, facilitating $26 billion of network flows across 120,000 active SKUs and over 300 million invoice lines per annum. This is making us one of the largest EDI providers in the world. Marketplace improves ordering supply chain outcomes for pharmacies and suppliers through a modern, accessible e-commerce layer operating on top of the Gateway, diversifying revenues to volume-based revenues for our business. PharmX also now offers a market-leading data and analytics capability to commercialize the rich data created from our dominant position within the industry. FY '26 was another pivotal year for the company. Whilst a number of key strategic building blocks were put in place to facilitate future growth, we continue to see growth in our core business as well as across all key areas of our strategy. As a result, recurring revenue grew by 9% through the Gateway. Excluding the impact of a change in distribution model for 2 suppliers, Gateway grew 8% year-on-year. Net of this impact, Gateway recurring revenue grew 3%. Notably, our vertical expansion strategy will increasingly shield the business from similar ad hoc customer decisions impacting our business in the short term. Recurring revenue throughout the Marketplace grew impressive 73% year-on-year. Our New Zealand revenue, equally impressive, increased 67% year-on-year, whilst our analytics revenue grew 25% year-on-year. Our gross margin has improved year-on-year, demonstrating the increase in non-rebate-related revenue streams. We've maintained a positive EBITDA despite the significant transformation and strategic activities that have occurred during the year, and we have $2.6 million of cash in the bank at June 30 and continue to generate positive operating cash flows. I'll now hand you over to Zoe, who will talk through profit and loss and our cash flow.

Thanks, Tom. Good morning, everyone. So as Tom mentioned, I'll now go through a bit more detail on the financial results for the year. Revenue for the year was $7.7 million, which was a positive result, in line with our expectations, underpinned by strong platform growth in line with our strategy. Recurring revenue has grown by 9% year-on-year, excluding a distribution change that occurred during the year for 2 of our suppliers. For example, changing from a direct-to-store model to a wholesaler distribution model. Net of this, recurring revenue increased 5% year-on-year. Marketplace commission revenue has increased 73% versus prior comparable period. In November 2025, our new marketplace was launched, and we have seen continuing month-on-month growth in gross transaction value and pleasingly, an acceleration of pharmacy adoption and usage metrics. In H1, there was an intentional pause in onboarding and marketing activities on the old PharmXchange platform until the new marketplace was launched. Year-on-year, there has been a reduction in paid marketing revenue and one-off integration fee revenue received. We expect this to increase again as the Marketplace continues to gain more traction and we can charge for these services again. This has all resulted in a net increase in total revenue by 3% compared to the prior period. Total operating costs were $6.7 million, which is $0.7 million more than the prior period. This increase in operating cost was in line with our plan and to support the launch of the new Marketplace. The increase was driven by our investment in development resources, sales and marketing capability, and IT infrastructure. People costs have increased by $183,000, technology costs by $137,000 and marketing costs by $103,000. Professional fees were also up by $394,000, mainly due to some additional one-off legal and advisory costs in relation to the Sigma and Chemist Warehouse strategic partnership that was established during the year. EBITDA for the half year (sic) [full year] was positive at $1.1 million compared to $1.6 million in the prior period. This reduction was entirely driven by the increased growth expenditure I mentioned. Amortization and depreciation for the period was $1.6 million, an increase of 22% on the prior comparable period due to the ongoing investment in product development and the capitalization of those costs. Employee performance rights expense also increased in the current year as a long-term incentive scheme was rolled out to the broader organization to incentivize and retain talent. In addition, there was a $644,000 noncash share-based payment expense recognized in the current period in relation to the Sigma strategic alliance. The remainder of this investment of $9.7 million will be recognized over the duration of the 5-year contract as a noncash item. I'll now go on to cash flows. So a positive operating cash flow was delivered even with the upfront work on the Sigma strategic alliance as well as the launch of Marketplace and the increased investment in people, sales, marketing, and IT and technology. The prior period operating cash flow included the payment to Fred IT of $9.9 million, which was made in accordance with the final orders issued by the Victorian Supreme Court. The net R&D incentive received in the current period was $368,000, which is down on the $862,000 received in the prior period. This was due to the one-off true-up payment of income tax in relation to the previously reported early termination of the Alchemy revenue share agreement, which was in relation to the PharmXchange intellectual property. We will shortly be lodging our FY '26 return, which will include an R&D tax refund claim of $1.2 million, which we expect to be received in H1 of FY '27. The launch of the Marketplace has led to increased development costs with $2.1 million of capital expenditure on product development during the current period. Prior comparable period capitalized development was $1.7 million. In the prior period, there was also investing cash flows partly offsetting this related to the sale of the pharmacy software business. And we have ended the year with a positive closing cash balance of $2.6 million. I'll now hand back to Tom.

Thank you, Zoe. The strong financial results are supported by excellent platform metrics displaying strong growth over the year. Total platform GTVs increased by 11% year-on-year. That's a 30% increase from FY '23. Orders have increased across the platform, demonstrating an increasingly strong competitive position and strong uptake in our new platforms. ARPU has increased across our 3 core revenue-generating pillars, which demonstrates growing value of the solutions that we're providing. As we look at our Marketplace, which remains our principal long-term growth engine, we see strong growth across all metrics, resulting with July 2026 reaching $4.7 million in GTV, which demonstrates both strong signs of change in ordering behavior as well as an increased confidence in us achieving our near-term goal of $100 million GTV run rate within 12 months. As we look at FY '27, our key focuses are on margin expansion and improved commission mix on the platform, increasing the number of manufacturers and distributors on the Marketplace as a strategy to increase this blended take rate, continuing pharmacy growth, expanding the number of pharmacies and also the monthly spend of our target cohorts and additional revenue streams coming online in platform, including marketing and advertising. These are areas that, as I previously mentioned, were put on hold previously, which we now anticipate will start to generate revenues in FY '27. We clearly achieved a great deal in FY '26, strengthening our business and continuing to grow. Key highlights of the year include the launch of the PharmX Marketplace platform, diversifying revenues. Operating metrics are increasingly compelling for both pharmacies and suppliers, supported by an impressive order fulfillment rate of 94% on the platform, which is a 34% improvement against the traditional EDI ordering process. And we have a cart abandonment rate of just 1%, which is extremely strong and a demonstration of the value and the quality of the platform. Supplier partners on the platform are recording measurable market share and product line growth whilst pharmacies continue to grow their average spend month-on-month. We completed the strategic alliance with Sigma. The alliance secures access to Australia's largest pharmacy retail footprint, renewed Sigma's EDI wholesale agreement for a further 5 years and brought Sigma onto our register as a substantial shareholder with Board representation. We modernized our core platform services. The development of Gateway 5 and our vertically integrated VAN-to-VAN EDI solution drive vertical expansion, expanding our addressable market, add value to our existing network and increase the efficiency of our cloud services with an expected cost reduction of 18% in FY '27. Our network has continued to widen. During the year, we signed 25 new suppliers, added over 3,600 new Gateway accounts and migrated 8 suppliers to variable pricing, shifting revenue towards transaction value rather than account-based fees. We also expanded into the key accounts across hospital ordering, vendors and health stores, again, expanding our addressable market. We also resecured our agreement with the NDSS, supporting services for a further 2 years. We have continued our investment into AI, driving productivity in our business as well as leveraging solutions within our products. Further, we've recently strengthened the executive leadership team with Vaughan Ryan joined as our Chief Revenue Officer in June 2026, bringing global commerce experience across e-commerce, data and analytics. Taufiq Khan has also recently joined as our Chief Product Officer. TK brings deep expertise in e-commerce, digital transformation, and B2B platforms, and both appointments give us senior capability in precisely the areas where FY '27 growth will come from. As we think about our market, demand spend and channel shift continue to move in the favor of the PharmX operating model. What we see is structural versus cyclical shifts, meaning the sector remains highly attractive for the years to come, driven by aging population, rising chronic disease and with the retail pharmacy market expected to continue to grow, efficiency and technology investment remain crucial in the industry with rising need for digital ordering, optimized front of shop and data-led innovation across the entire supply chain. To close, FY '26 established very strong foundations for growth and demonstrated strong early traction and success across our key focus areas. Year-on-year performance remains solid with uplifts in revenue and impressive increases in activity across all key metrics. We've also enhanced AI and executive leadership team capabilities to increase productivity and drive executional excellence. Off this stable base, we now look ahead to FY '27, a year of execution and our priorities are clear. We continue to scale the Marketplace volumes and supply growth with continued optimization and sharper focus on supplier outcomes. We expand margins through supply migration and improved commission mix. We've modernized the platform to Gateway 5 and our vertical integration solution rollout with scale onboarding and AI integration to support both platform take-up and insight delivery. We maximize the opportunities available under our strategic alliance with Sigma and Chemist Warehouse across the combined network. We further embed AI-driven data solutions, leading with demand planning, forecasting and data services. And continue to focus on New Zealand with supply growth expanding market exposure through Bargain Chemist, our partnership with TONIQ, vertical integration partnership with Sigma. We thank you for your time today, and we look forward to a very strong FY '27 and beyond.

There is one question in the Q&A.

Yeah. Just bear with us a second. Our Q&A is just loading. So this question relates to our delivery of revenue against the delivery of our initiatives and the lag of which we see behind the investment in our products and the return on revenue. For those who follow our business closely and would have been taking part in previous presentations, we've talked about FY '26 very much being a year of investment for our business. Laying the core 4 foundations for growth, particularly across Marketplace capabilities and Data & Analytics, as well as our step forward with our Sigma alliance, which leads to our vertical integration strategies, all of which, as we have communicated previously, are designed to drive revenue forward from FY '27 and beyond. And so from our perspective, our revenue result for FY '26 is absolutely in line with expectations and absolutely in line with what we have communicated to market. And as we've just presented, we believe we're in a very strong position now to drive uplift in revenues for FY '27 and beyond as well as margin expansion in the business. James, you have your hand up. Do you want to ask a question?