Rua Bioscience Limited (RUA) Earnings Call Transcript & Summary

[Foreign Language] Anna Stove, Chair of Rua Bioscience. Welcome to our 2026 Annual Shareholders Meeting. Thank you for joining us online from across Aotearoa New Zealand and beyond. It's a pleasure to deliver an update on our operations over FY '26, a year in which the foundations we build in FY '25 began to translate into real commercial traction. Before we start, I'd like to call on Panapa Ehau to open the meeting. Panapa?

[Foreign Language]

[Foreign Language] Today's meeting is being held online via the Computershare online meetings platform. This allows allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting and read the company documents associated with the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. Now I'm quickly going to take you through the online instructions. If you would like to ask a question, the Q&A is always open. So please feel free to submit questions throughout the meeting. These will be addressed at the relevant time. Questions may be moderated or if we receive multiple questions on 1 topic, amalgamated together. Any questions not answered and time will receive an e-mail response from us after the meeting. You'll be able to cast your vote under the vote tab. Once voting has opened, the resolutions will allow votes to be submitted. You can change your vote up until the time I declare voting closed Firstly, I would like to introduce you to Rua's Board of Directors, who are all deeply invested potential and strategic expertise. I would like to thank them all for the steadfast mahi during the year. Rua's Co-Founder, Panapa Ehau, has been a Director since the company's inception in October 2017, and he is pivotal to our important links with the Tairapati community. Teresa Ciprian joined the Board in August 2022 and brings extensive governance and senior management experience, including international marketing and business development. Teresa also chairs our Remuneration Committee. Tony Barclay joined the Board in May 2023. Tony brings significant financial and business acumen, having been CFO at Fisher and Paykel Healthcare for more than 17 years. Tony also chairs our Audit, Finance and Risk Committee. We continue to follow Maramataka, the Mari-Luna calendar when setting our Board meeting dates, aligning our decision-making with the phases of the moon and our well-being. Shareholders will have also seen that Mr. Keith Zhou has been nominated for election as a director. Keith brings close to 20 years' experience in international trade, logistics and consumer health product manufacturing with strong relationships across Asian markets. We will cover this -- his election under the formal resolutions later in the meeting. Outlining our agenda today I will give you an overview of the year, how our export-led strategy is now translating into commercial momentum, how we've expanded our market footprint and our capital position. Our CEO, Paul Naske, we'll dive more deeply into our operational highlights and our key markets. Our CFO, Liam Walker, will take us through Rua's financial performance. In terms of formal business, we have 6 resolutions to put to the meeting. the auditor's remuneration, reelection of myself, Anna Stove, as Director, reelection of Panapa Ehau as Director, reelection of Tony Barclay as Director, and the election of Keith Zhou as a Director; and finally, approval of the issue of new ordinary shares if required. There also will be plenty of time for questions. I'd like to confirm to have a quorum and that 41,704,679 valid proxies have already been lodged. These proxy holders have been directed to vote 40,564,120 shares in favor of Resolution 1; 39,441,500 in favor of Resolution 2; 39,142,119 in favor of Resolution 3; 39,253,697 in favor of Resolution 4; and 38,948,682 in favor of Resolution 5; and finally, 35,443,609 in favor of Resolution 6. In addition, I intend to vote the undirected proxies that are held in accordance with the Board's recommendations being in favor of all resolutions as do my fellow directors holding proxies to the extent permitted by the NZX listing rules and Rua's constitution. Please note that under listing rules 6.3.1, directors and their associated persons may only vote on Resolution 6 as proxies where they have been given express directions to do so. Thank you, everyone, for your attention so far. I'd now like to move on to providing you a company overview. Rua's strategy is built around the capabilities that differentiate us and create the greatest value. Our starting point is unique genetics selected in Te Tairawhiti, supported by relationships with legacy growers. Genetics, clones, licenses and trusted, best-in-class cultivation and manufacturing partners to access scalable capacity in each market. This is the model we are taking into international markets. The results provide very encouraging evidence of its commercial potential. FY '26 delivered progress across both our financial performance and our commercial footprint. Total revenue reached $2.9 million, up 53% on FY '25. Revenue from customers grew 71% to $2.6 million, driven particularly by growth in Australia and Aero New Zealand. We reduced our operating loss before net finance inventory and working capital to support sales growth. During this period, we raised $2.3 million in new shareholder capital, which helped strengthen our commercial operations. Thank you to the shareholders who supported Rua during this period. We also expanded our commercial footprint; we completed our first known legal export of live cannabis genetics from New Zealand launched, our first product in the Republic of -- Czechia, sorry, I struggle with that word,Czechia through Motagon, broadened our New Zealand product portfolio and strengthen relationships with leading clinic chains in Australia. Subsequent to year-end, we secured Rua's largest export agreement to date, a United Kingdom sales and distribution agreement with Curaleaf expected to generate more than $10 million in revenue over its initial 2-year term. to support the business. I want to be clear about why we remain confident in Rua's prospects. We have secured our largest export agreement even over its initial 2-year term. For a company potential of our strategy and the value of the business we are building. It is frustrating that having secured the agreement of the scale, our immediate challenges finding the working capital required to fulfill it. We need to fund inventory ahead of sales while continuing to meet the demand of our established markets. Our capital-light model means we can scale without taking on the cost of building additional infrastructure or headcount. The opportunity is there. We just need to fund its delivery. The Board remains confident that we can secure the additional capital required. We are already in discussions with existing shareholders who wanted to see the outcome of the public offer before making further commitments. These discussions are ongoing and securing the funding remains the #1 priority. We have also consolidated operations in our Gisborne facility, which is now set up to be a tenanted income-generating asset. We continue to pursue options to realize value from the property, providing another potential source of capital. And the Gisborne facility is still being actively marketed for sale. Our focus is on disciplined execution, securing the required funding fulfilling customer demand, managing working capital carefully and converting our growing commercial opportunities and to sustainable cash generation. The Board believes Rua has established a credible platform for growth. Our priority now is to ensure the business has the capital to realize that potential and move forward to a self-sustaining position. I will now invite Paul to take you through the business in more detail.

Thanks, Anna. [Foreign Language] As Anna mentioned, FY '26 was about execution. Filling the sales channel we established in '25 with new products and our unique genetics from Te Tairawhiti. Total revenue and other income reached $2.9 million, up from $1.9 million last year and $0.3 million in FY '24. Revenue from customers grew 71%, and we've now got a footprint in 6 markets. counting our genetic opportunity in Canada. That gives us resilience with multiple independent revenue streams and no reliance on any single market. And we've kept a tight rein on costs with our operating losses narrowing by 7%. From the beginning, Rua has believed that global growth is essential to creating local impact. FY '66 was a year of expansion with our global footprint growing in the United Kingdom, Czechia and Canada, all markets with significant opportunity for Rua. The regulations in each country are unique and Rua has methodically selected key markets to operate in. We've also learned that the market entry alone does not create a successful business. Sustainable growth depends on strong local partnerships, reliable supply, regulatory capability and disciplined execution. These capabilities are becoming an increasingly important part of Rua's competitive advantage as we operate across multiple jurisdictions. I'll take you through each of these key markets in more detail. Firstly, our home market of Aotearoa New Zealand. It is of course smaller in scale, estimated at $60 million, but it is very important and central to our identity. Strong relationships with patients and stakeholders continue to support our growth here. Rua increased both market share and revenue in New Zealand in FY '26. Revenue grew from $440,000 in FY '25 to $1.3 million, and we introduced new products including a medical vaporishing device named Oleo Panacea. In July '26, we received approval from the New Zealand Medical Cannabis Agency for five further products, which will be introduced in the coming months. With telehealth clinics becoming more prevalent, we expect sales revenue and margin to continue to grow and improve as new products are introduced and more product is distributed directly to pharmacies. Maintaining a strong presence in our home market remains an important part of Rua's commercial and social purpose. Australia is the world's second largest medicinal cannabis market, estimated at $1.4 billion, with telemedicine clinics again continuing to dominate prescribing There is also a growing shift towards more developed product formats. Rua delivered strong growth in Australia in FY26, with sales revenue and margin almost doubling. Revenue grew from $585,000 in FY25 to $1.03 million, driven by the strength of our consistent clinic relationships. It remains a very highly competitive market, and the regulator's ongoing industry-wide review has created some caution among prescribers and pharmacists. There is no formal timeline for the review's conclusion, so we are uncertain about the timing of any impact. Gaining ground while others have contracted is a strong signal of our products, our partnerships and our team. Our focus in Australia remains on portfolio management and improving our sales margins. Germany remains the world's largest medicinal cannabis market, estimated at $2 billion, with telemedicine Clinics dominant. FY '26 for us was a challenging trading environment. In the first half of the financial year, Germany had constraints on imports at a critical time for Rua. The country reached its import quota and in conjunction with the government review of minimal cannabis regulations, this softened wholesale demand. In the second half of the financial year with a loosening of the import quota and an apparent relaxation on outcomes from the government review, there was an oversupply of product in the market, resulting in reduced pricing. Even so, Rua expanded its product range with New Zealand growing genetics, and we progressed discussions with large clinic chains. And at this stage, we expect only minor amendments to the regulations to be confirmed by the government and very little impact on patient demand going forward. We, therefore, anticipate growth in FY '27 as these clinic relationships convert to sales. Importantly, in addition, recent supply and negotiations have reduced our delivery cost by close to 50%, which is expected to support improved margins. The United Kingdom is estimated to be the fastest-growing medicinal cannabis market. Prescription volumes have doubled over the past year, and the U.K. has a population of 63 million people and with approximately only 100,000 patients, we see considerable further growth in this market when we compare this ratio to others. FY '26 for us was a year of establishing new relationships for Rua in the U.K. Some sales were made through our previous distributor of Target Healthcare However, a new sales and distribution agreement was signed in July with Curaleaf Laboratories, one of the U.K.'s largest medicinal cannabis businesses. Importantly, they have their own telehealth clinic chain. This is Rua's largest export agreement to date and is expected to generate significant revenues in the order of $10 million over a 2-year term. It gives Rua immediate access to an established clinic network and pharmacy relationships. The agreement is a significant endorsement of our strategy to bring Rule's unique genetics to international markets. We are now working with New Zealand cultivators to bring our genetics into the U.K. market as we build out this agreement. Czechia is a small, early-stage missile cannabis market currently estimated at $10 million. However, regulatory changes from April 2025, allowing general practitioners to prescribe medicinal cannabis has opened considerable growth potential in a population roughly twice the size of New Zealand. Capitalizing on this reform, we launched our first product in September 2025 through our distributor partner, Montagon. We achieved our first revenues in the country and have established a foundation for further growth. We expect the market will continue to grow as prescribers and patients become familiar with the new access scheme. And because we've secured an early position in this market, and it does have significant potential, we expect modest revenue to build through FY '27. In April, Rua successfully completed the first known legal export of live cannabis genetics from New Zealand, shipping 4 varieties as clones to our partner, Apollo Green in Ontario. This was the first for both Rua and for New Zealand. This gives Rua its first foothold in Canada's regulated medical and adult use market, which is estimated at $5 billion to $6 billion. It establishes a genetic bank in Canada, providing further options for distribution and revenue. The milestone demonstrated our ability to navigate complex cross-border regulatory requirements, which is important as we established our genetics business. I'll now talk briefly about our Impact Programs. Some of the things we are most prouud as a company. For Rua, commercial success and impact are not competing priorities; they are complementary parts of the business we are building. In New Zealand, medicinal cannabis is not a subsidized medicine, which means it is out of reach for many patients. Our Compassionate Access Program, launched in 2022, helps reduce that barrier for people in Tairawhiti least able to afford it. In FY '26, the program continued to fill the prescriptions of up to 52 patients each month who would otherwise be unable to afford them. We make places available specifically for people receiving palliative care, so those who need support at this time in their lives can access it. One story in particular is striking for us, and this is the story of Karanga Marsha. Karanga, pictured here, has what they call drug-resistant epilepsy. Karanga was having dozens of debilitating seizures a day. He had tried CBD oil in Australia when he lived there and it worked. His seizures almost disappeared. Upon returning to his home of Uawa Tolaga Bay, he tried to access CBD but was unable to afford it and his seizures returned. As a result, he's now accessed the medicine through our compassionate access program and has dramatically improved his well-being and ability to live, work and play. So special thanks must go to Trust Tairawhiti, an anonymous donor and supply partners for their generous support in making this program possible. Another key element of our Impact Program is our scholarships and wider rangatahi program. In FY '26, we awarded 14 undergraduate scholarships to local rangatahi of Tarawhiti. And since the program began in 2020 and with the support of Trust Tarawhiti external partners since '21, Rua has awarded more than $90,000 in scholarship funding to a total of 67 recipients. In addition, we have supported 3 interns at our facility and planned and funded 8 school trips giving rangatahi exposure to tertiary and research opportunities in Auckland and Wellington. We've had one of our internships as progressed into full-time employment. Mahuta Morice joined our internship program in '24 and now works on cannabis cultivation, but he also leads the mushroom cultivation program for wide or the world's first indigenous-led clinical trial of psilocybin-containing mushrooms. His story shows what can happen when local talent has given the opportunity, support and platform to grow. But one truly inspiring story I just want to share, we have been part of this year is the story of Peyton van Der Lern. Peyton is pitched here. She's the head student at Ngata Memorial College in Ruatoria. Peyton has been to our facility a number of times and interviewed our growers and absorbed as much as you can about what we do. From this, she's undertaken a final year biology dessication on cannabis genetics and breeding a first for a student at high school in Tarawhiti. Peyton is going on to university next year to study veterinary science, and we are so proud to be out here along on her learning journey. We continue to measure our greenhouse gas emissions as this is part of our sustainability framework and last year was our fifth year of measuring and reporting. Our Scope 1 and 2 emissions. The more direct emissions from our own operations fell again this year, down 19% from 39 to 32 tonnes of carbon equivalent emissions. Compared with our FY '23 base year when Scope 1 and 2 emissions were 51 tonnes, we're now down more than 37%. During FY '27, we will continue to improve our reporting and work with suppliers to obtain more accurate data. So looking beyond FY '27, Rua is using our knowledge of controlled drugs regulations, cultivation and manufacture alongside our relationships in tip to develop potential new pipelines for further revenue and impact. The most recent addition is our distribution agreement with PharmaAla, a Canadian-based MDMA manufacturer. Subject to further regulatory approval, Rule has the ability to import, distribute and sell pharmaceutical grade MDMA in New Zealand. MedSafe recently approved 2 psychiatrists to prescribe MDMA for PTSD and so we are well placed if more prescribers are approved. Tu Wairua is a collaboration led by Rangiwaho Marae community on psilocybin-containing mushrooms to treat methamphetamine addiction ina marae setting. In this case Rua contributes specialist cultivation and regulatory capability and knowledge. To the area of psychedelics. In our case MMDA and psilocybin for use in medical therapy is a new and emerging area of research and practice showing indications of very promising results. Rua is positioning ourselves as an early-stage industry participant in the New Zealand context. Had is cannabinoids. And also, we're providing our regulatory expertise to develop a new product from a cytosine, a compound found in kowhi. Cytisine is a long-established smoking cessation medicine with strong clinical evidence, including New Zealand led trials. To be clear, no revenue from these programs is assumed for the next 2 years, but we contribute capability, licensing and access rather than capital, but it does give us potential options for future revenue and impact. So FY '27 begins from a stronger and more diversified platform with established sales in Australia, Germany and New Zealand, a growing position in Czechia a first foothold in Canada and a landmark agreement in the U.K. Our focus for 27 is on continuing sales growth across our established markets, accelerating sales growth in the United Kingdom, while building new revenue streams from emerging markets, including Tech in Canada. The U.K. market, in particular, is expected to deliver strong sales growth over the initial 2-year term. And in New Zealand, our 5 newly approved products will broaden our range Sales are anticipated to maintain upward growth through FY '27. Our focus continues to be on execution and delivery, converting opportunities into recurring revenue. So I'll now hand over to Liam Walker, our CFO, to give you a summary of Rua's financial results.

Thanks, Paul. Let's talk about Rose from a financial results perspective. Revenue from customers climbed 71% to $2.58 million for the year, up from $1.51 million last year, driven particularly by growth in Australia and New Zealand. Total revenue and other income was $2.9 million, up 53% on the year before. Rua's loss before tax for the year to 30th June 2026 was $3.36 million a 3% improvement on FY '25 $3.46 million. Excluding financing costs and one-off inventory impairments, the loss narrowed from $3.3 million to $3.7 million. Net finance costs increased to $285,000, reflecting the debt and inventory finance facilities that have supported our growth. In terms of our balance sheet, Rua's total assets were $7.17 million with total liabilities of $2.92 million, resulting in net assets of $4.25 million at year-end. Cash and cash equivalents were $534,000 and up from 241,000 last year. The net asset position is slightly year-on-year as capital raised during the period was deployed into inventory and working capital to support sales growth. As Anna outlined, with our growth plans over the coming year and working capital required to fund this growth, the company will require further capital. Since balance date, we have received $300,000 under our convertible note facility with a further 150,000 committed. In terms of where the cash was set. Net cash outflows from operating activities were $2.96 million compared to $2.79 million in FY '25, reflecting investment in inventory and working capital to support sales growth across multiple markets. Net cash inflows from investing activities were 5,600, down from $106,000 in FY '25. We Net cash inflows from financing activities increased to $3.24 million from $2.02 million as a result of the $2.3 million of new shareholder capital raised through private placements and the rights offer. Together with borrowings under our debt facility to fund inventory. Overall, cash increased $286,000 during the year. Our operating loss before net financing costs narrowed to $3.3 million in FY '25 to. Professional services costs, for example, reduced from $1.08 million to $0.84 million during the year. Revenue from customers has grown from $86,000 in FY '24 to $1.51 million in FY '25 and $2.58 million in FY '26. By market, New Zealand revenue grew to $1.3 million from $440,000 last year, and Australia grew to $1.03 million, up from $585,000 in the year before. while Europe was $261,000, down from $487,000 in FY '25 as the German market worked through its regulatory review and oversupply. With 5 new products approved in New Zealand, the U.K. agreement now in place and new products in each market, we expect this revenue to continue growing. As we have seen, access to capital for inventory remains important to ensure consistent supply and that our sales can grow. I will now pass you back to our Chair to open the floor for questions.

Thanks, Liam. Thank you, Paul. Right. We'll now take questions specifically relating to the presentations. Please in your question and via the Q&A tab on the right half of your screen. Just type into the field and press send. In the interest of time, we ask that you limit yourself to 2 questions. We'll, of course, accept further questions via e-mail after the meeting.

No questions at this stage. Nothing coming through. No, questions. No, definitely no questions. Everyone's very happy.

Okay. If there are no questions, we will have further questions on general business at the end of the session, but there's no questions in relation to the presentations. We'll now look at the resolutions. So I trust you've had time to review in the notice of meeting. As I said earlier, we have 6 resolutions to put to the meeting the auditor remuneration, reelection of myself and Stoves Director reelection of Panapa Ehau as Director, reelection of Tony Barclay as a Director, and the election of Keith Zhou as a Director. And also finally, the approval of the issue of new ordinary shares if they would be if they're required. So voting on all resolutions is by way of poll. As Resolution 2 relates to my own reelection, at that stage, I will hand it over to Teresa Ciprian for that resolution. So Resolution 1, that the Board be authorized to fix the auditor's remuneration. PricewaterhouseCoopers is automatically reappointed as auditor under section 20 of the Companies Act 1993 under Section 207S. The auditor fees and expenses must be fixed in the manner determined by the annual meeting. This resolution authorizes the Board to fix the fees and expenses of PriceWaterhouseCoopers as the company's auditor for the current financial year. Are there any questions on Resolution 1? If there are no questions, I'll ask shareholders, if you haven't already, to cast your vote on Resolution 1.

Resolution 2, that Anna Stove be reelected as a Director of Rua. Anna has been a Director of Rua since 2019 and was elected Board Chair in April 2023. She has more than 25 years global executive and Board experience across health care, biotechnology and regulated scientific sectors with a strong track record, guiding organizations through growth commercial transformation and complex regulatory environments. Her executive career spans senior leadership roles across Asia Pacific and Europe, culminating in her appointment as New Zealand General Manager for GlaxoSmithKline. Anna has held significant governance roles, including Chair of TAB. Insat, Chair of Global Women, Director of Medicines New Zealand and Vice Chair of Shooting Star Children's Hospice in London. She is also a Director of Pacific Edge Limited. I will now ask Anna to say a few words.

Thank you, Teresa. So I'm seeking your support for reelection because I believe Rua has a unique, valuable business to build, and I'm determined that we will succeed. We have something distinctive genetics development, hiraphathy, strong relationships, a capital-light business model and increasingly evidence that international customers want what we offer. Our U.K. agreement with the potential to generate more than $10 million over its initial 2-year term, demonstrates what ROA can achieve for our company of our size, that is a significant opportunity. I recognize that the journey has been difficult, and our recent capital raise reinforces the challenges we still face. I don't underestimate those challenges, but I believe we have a credible strategy, a committed team and a real opportunity to build a sustainable business that creates long-term value for shareholders and opportunities for our people in our region. I want to continue as a Director in Chair because I believe aer is worth fighting for. and I'm committed to seeing that potential realized. Thank you for your support.

Thank you, Anna. I'll now take questions on resolution 2.

No questions?