Visioneering Technologies, Inc. (VTI) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Stockholders of Visioneering Technology, Inc. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn the meeting over to Dr. David Mazzo. Dr. Mazzo, the floor is yours.

Good morning, and good evening to you all. My name is Dr. David Mazzo, and I am the Chairman of Visioneering Technologies, Inc. It's my distinct pleasure to welcome you to our 2023 Annual Meeting of Stockholders. This meeting is being held via the Computershare virtual meeting services platform, which allows stockholders, proxies and guests to join virtually while encouraging greater participation and engagement. The platform is designed to allow the meeting to be interactive and be assured that you will be able to vote, ask questions and/or make comments during this meeting. [Operator Instructions] It is now just past 8:00 a.m. in Sydney, nominated time for the meeting, and I have been informed that a quorum is present. I note that the meeting has been solidly constituted, and I'm pleased to declare the meeting in session. There may be a slight time delay experienced between the slides we're viewing and the audio. So again, I encourage stockholders, who may have questions to please submit them as soon as possible to avoid any undue delay. Before getting to the formal business of the meeting, I will take this opportunity to introduce company management and my fellow directors, who are present online today: our Chief Operating and Chief Financial Officer, Mr. Brian Lane; Dr. Ashley Tuan, Chief Medical Officer; Mr. Andrew Silverberg, Non-Executive Director; Dr. Dwight Ackerman, Independent Non-Executive Director; Dr. Alan Rubenstein, Independent Non-Executive Director; and Kathy Miller, independent Non-Executive director. We also have several other parties online, including Leanne Ralph, our company's Secretary; representatives from Computershare, the company's share register and representatives from Johnson, Winter & Slattery, the company's Australian legal counsel. There are 2 components for today's meeting. We'll start with a business update from our Chief Operating and Chief Financial Officer, Mr. Brian Lane. We will allow time for general questions on the business at the conclusion of his presentation. Following the general business questions, we will then progress to the formal business of the meeting, where the resolutions provided in the Notice of Meeting will be put to stockholders. We will allow time for questions and answers regarding the resolutions before proceeding to vote on them. So without further ado, allow me to introduce our COO and CFO, Brian Lane. Brian?

Thanks, Dave. Good morning and good evening to everyone. I'll remind you that we'll be making forward-looking statements during the call, and we ask you to keep this in mind as information to make investment decisions. Unless otherwise noted, dollar amounts are quoted in U.S. dollars. VTI is in the business of providing better vision to our customers by using innovative products to serve high-need patients. Our flagship product is a daily disposable soft contact lens called the NaturalVue Multifocal, which is revolutionary and patented contact lens targeted patient populations. The first group is children with nearsightedness that becomes worse over time, which is a condition called pediatric myopia progression. This condition has become much more prevalent over the past 40 years, have accelerated during the COVID-19 pandemic and is estimated to affect 80% to 90% of children in parts of Asia and up to 1/3 of the children in the U.S. The other patient population includes people over the approximate age of 25 who have difficulty seeing things within arm reach, a condition called presbyopia, which affects almost all older adults. We also sell a NaturalVue Sphere contact lens for the simple correction of blurry vision. We have clearances or registrations to sell our products in the U.S., U.K., Europe, Australia, New Zealand, Singapore, Hong Kong, Canada and Malaysia. Here's a quick look back at 2022. We started the year focused on the rollout of our enhanced Multifocal product that we launched in 2021 and we expanded to all of our eligible markets in the first half of 2022. This product is the next generation of our flagship NaturalVue Multifocal to manage myopia and presbyopia. It features the TripleTear lubrication system and Ultra-Tapered Edge designed for optimal fit and comfort for all day wear. We also made good progress with our PROTECT clinical study. We began the study in 2021 and designed it to allow head-to-head comparison with other myopia management clinical studies. We're confident that PROTECT will corroborate the real-world data we generated through retrospective cohort advances, including 196 subjects. This 6-year data was published in Clinical Ophthalmology in mid-2022 and compared our product very favorably to the competitive products that were subject to 2 large studies announced in the past few years. We designed the PROTECT protocol with those -- similar to those other 2 protocols, and it's been approved by an independent review board. LabCorp Drug Development, one of the largest contract research organizations in the U.S., is managing the study for us. PROTECT includes 8 sites with 2 in Canada; 4 in the U.S.; and 1 each in Hong Kong and Singapore. We completed enrollment in early December of 2022, and we project the announcement of 1-year interim data end of this year. With previous studies of this type, the 1-year data has been highly predictive with the final study outcome, and we expect the announcement of the interim results to be a significant positive milestone for VTI. We believe the investment we've made in PROTECT may help to minimize regulatory [ expense hurdles with our entry ] into China and other new markets. We recently began pursuing partnerships to expand our global distribution channel, particularly for the distribution in China. We are excited and optimistic about our prospects, especially given that China represents the largest pediatric myopia market in the world. Now to our fiscal 2022 operating results. VTI recorded net revenue of USD 7.3 million in 2022, which is up 2% over fiscal 2021. With the new product launch that we had in late 2021, our distributors purchased initial stocking orders in Q4 of '21 and essentially pulled forward revenue from fiscal '22 to fiscal '21. Excluding the impact of this new product launch, net revenue increased 14% over 2021. This increase is consistent with the 13% increase in our internal metrics, shipments to U.S. ECP or eye care providers. The shipments metric represents patient-level demand and is not impacted by changes in inventory balance on our distributors. We consider shipments to be the best real-time view of market demand for our products. We also lowered our operating expenses in 2022, primarily to lower personnel costs and we did not replace several people that left VTI early in the year. Trial lens costs also were elevated in '21 due to the new product launch, a decline during 2022. Despite having higher costs associated with the PROTECT clinical study, we lowered our net cash used in operating activities by 25% in 2022 compared to 2021. We also amended our convertible notes to allow conversion of 60% of the notes, a decrease in the interest rate from 10% to 8% and an extension of the maturity date of July 2023 to 2024. This amendment will save the company approximately $1.7 million in interest payments. We're forecasting that our cash is sufficient to finance our operations to the beginning of 2024, when the remaining convertible notes mature. We plan to explore the acquisition of capital, including nondilutive such as business development transaction in fiscal 2023 as necessary to support our long-term strategic plan. I'm happy to report that VTI started fiscal '23 by setting records in several key metrics, including net revenue, shipments to U.S. ECP [ and ] margin percentage. Net revenue of $2.3 million was a 32% increase from the same period in 2022. Shipments to U.S. ECP of $2.2 million was a 9% increase over the same period of 2022. The disparity in these 2 metrics is due to the impact of the new product launch in FY '21 that positively impacted net revenue in that quarter and negatively impacted revenue in the first quarter of 2022. Net cash used in operations was reduced 78% from the first quarter of 2022, marking the second lowest operating net cash since VTI became a publicly traded company in 2017. Gross margin was a record 51.2%, the first quarterly gross margin for the company of over 50%. We are pleased to have a great start to the new year and plan to continue with the momentum going to the end of the year. Now I'll turn it back to Dave.

Thank you, Brian. I would now like to open the meeting to general questions on the business. We'll have the opportunities to ask questions pertaining to each resolution when we get to the formal business of the meeting. A reminder that this is a stockholder meeting, and therefore, only stockholders of record are able to ask questions at this meeting. Brian, have we received any general business questions?

I do not see any questions, Dave.

We will now progress to the formal business of the meeting. The Notice of Meeting was sent to all registered stockholders within the notice period required, and I will take the notice convening this meeting as read. As set out in the Notice of Meeting, voting on all resolutions will be decided on a poll, to provide everyone with an opportunity to vote. And in case anyone cannot stay for the whole meeting, I will now formally declare the poll open. Stockholders can now cast their vote using the electronic voting system, select the vote icon at the top of your screen to bring up a list of resolutions and present you with voting options. To cast your vote simply select for, against or abstain. There's no need to hit a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare the voting closed. The results of the polls will be released to the ASX shortly after the close of the meeting. I have been advised that all proxies received for the meeting have been checked, and I declare them valid for voting. I will disclose proxy votes on your screen prior to the vote being taken to each item. These figures are as of the closing time for receipt of proxies, which was 6:00 a.m. Australian Eastern Standard Time, Thursday, 25 May 2023. Resolution 2 could have a voting exclusion, which was outlined in the Notice of Meeting. However, the company is not issuing new equity securities under the ASX listing rules and, therefore, there is no voting exclusion for this item. As Chair of the meeting and as detailed in the Notice of Meeting, I will vote, where authorized, all undirected proxies in favor of each resolution. The first item of notified business concerns the election of a director, myself. As this resolution concerns myself, I will pass the meeting over to Mr. Lane to act as Chairman for this resolution.

Thank you, Dave. This actually is a resolution for Dwight. So I think you can continue.

Okay. Thank you. I put this resolution to the meeting as displayed on your screen. Dr. Dwight Akerman, being a Director whose appointment expires at the conclusion of the annual meeting of the company and being eligible, offers himself for reelection, be reelected as a Class III Director of the company. I now open this item for discussion. I will check to see if there are any questions online. Are there any questions, Brian?

We have no questions, Dave.

Details of the votes received for this item are on the screen. If you have not already done so, please now select either for or withheld for Resolution 1.1 on your electronic voting card. The second resolution, Resolution 1.2 is that Dr. Allan Rubenstein, being a director whose appointment expires at the conclusion of the annual meeting of the company and being eligible, offers himself for reelection, be reelected also as a Class III Director of the company. I now open this item for discussion, and I will check to see if there are any questions online. Brian?

No questions, Dave.

Details of votes received for this item are on the screen. If you have not already done so, please now select either for or withheld, the Resolution 1.2 on your electronic voting card. The next resolution returns the approval of a 10% placement facility. I put the resolution to the meeting as displayed on your screen, Resolution 2, that pursuant to and in accordance with ASX Listing Rule 7.1A and for all other purposes, approval is given for the issue of up to 10% of the issued capital of the company at the time of issue, calculated in accordance with the formula prescribed in ASX Listing Rule 7.1A.2. And the terms and conditions are in the explanatory memorandum. I now open this item for discussion. Are there any questions online, Brian?

We have no questions.

Details of votes received for this item are also on the screen. And if you have not already done so, please now select either for, against or abstain for Resolution 3 on your electronic voting card. Ladies and gentlemen, this concludes the formalities of the meeting. If you haven't already done so, please complete your electronic votes as I will be closing the poll in the next minute. As I mentioned earlier, the results of this meeting will be announced to the ASX as soon as they have been counted and verified. I now declare the polls for this meeting closed, and I also now declare the meeting closed. On behalf of the Board of Directors and Executive Management of VTI, I thank you for your attendance and participation today. We look forward to meeting with you at our next annual meeting of stockholders.

This concludes the meeting. You may now disconnect.