Vitura Health Limited (VIT) Earnings Call Transcript & Summary

Good afternoon, everyone, and thanks for joining the call today. For those of you who don't know me, I'm Robert Iervasi, Vitura's Independent Chair, and I'm pleased to be joining you for this call to discuss our Half 1 Results for the Financial Year 2025. Joining me on the webinar today is our new CEO, Geoff Cockerill; and our CFO and Company Secretary, Tom Howitt, and you'll have the opportunity to hear from both Geoff and Tom during the course of the webinar this afternoon. Over the next 30 minutes or so, we'll be looking at Vitura's results over that period. Our presentation will cover a number of topics, including an overview of the company, key highlights from our financial results, a leadership update and operational overview, detailed financials and importantly, the outlook going forward. The presentation that we'll take you through will run for about 15 to 20 minutes, and then we'll take questions that you could submit through the portal. Before that, I would like to open with some brief remarks from myself as capacity as Independent Chair. What I would like to note is since we commenced our reset strategy last year, I have been pleased with the progress we have made as a business. Importantly, and this cannot be underestimated, we've managed to successfully resolve material legacy legal and regulatory issues, all of which have acted as a hindrance to our future growth. Equally, the support we've received from our major shareholders has been exceptional and the level of cooperation that I've seen over the last 12 months has been significantly enhanced, which is also supporting our ability to deliver long-term shareholder value. Now it's up to execution, and Geoff has joined us for that very purpose. The recent acquisitions that we announced to the market are examples of how we plan to execute. We are setting up the business to deliver excellence in our core offering and execution is happening now and is front and center of everything that we're doing going forward. So with that in mind, I'd like to now hand over to our recently appointed CEO, Geoff Cockerill, for his remarks and then the presentation to follow.

Thanks, Robert. And firstly, I'm really looking forward to taking everyone through the presentation today. So I think we'll have some good period of time together to understand more about what we're doing and how we're doing it. So in terms of the overview of the business, as many of you know, we are a leading digital health business in Australia. We are focused on innovative healthcare delivery, primarily through our leading platform called Canview. Our operations are divided into 3 distinct areas: our clinics, including Doctors on Demand, Candor Medical and 50% of our recently acquired joint venture with the Releaf Group. Then we have our products. And then as we said, we have this great marketplace in Canview that we work with. Vitura is involved in each step of the doctor, patient, pharmacy and supplier ecosystem. Our market cap as at the 26th of February was $62.3 million. If you go to Slide 4, some of the highlights, and there's quite a few to go through here. So I'll take you through them sort of one by one. Since arriving at Vitura in late November, it was clear to me that resetting the foundations of the business was crucial to delivering both short, mid- and longer-term success for the business. The ever-growing demand for health service in Australia is not slowing down. High-quality digital healthcare delivery will have an even bigger role to play in our company's health future. And that's our sweet spot. We are really well positioned in this space going forward. With this potential also comes challenges. There's a lot of competition out there, and it's also taken us time to resolve some of the material external issues that Rob referenced before. These have been both legal and regulatory. We are pleased to say that these challenges are now behind us, paving the way for us to solely focus on growth, improving our profitability and delivering operational excellence. And finally, competing. We need to compete, and we're very focused on competing in the marketplace and getting our rightful share of market share. More importantly, we have a solid plan, and we continue to make progress against that plan. We have along the way had to balance our short- and long-term priorities to deliver this. When we do this, this should deliver sustainable shareholder value moving forward. We are pleased to note that our EBITDA and net profit for this half year covering Slide 24 and 25 is a significant improvement in the 6 months that ended 30 June 2024. We're pushing hard on all fronts to continue the momentum as we strive to achieve our goals, and we remain confident that the second half of the 2025 financial year will show further growth and improved performance. With that, let's now have a look at some of the highlights for H1 2025. Certainly, the new Board and leadership team is a highlight. The composition of the Board and the leadership team has changed substantially over the past few months. Vitura has secured a lot of new capability and new thinking to help execute the strategy reset. Both the Board and executive team are bringing new depth, experience and more importantly, really provide energy into the business. If we go to Slide 6, around the strategy reset. So just a quick reminder of what Rob and the team announced to the market in May last year. The strategy reset was done to respond to the changing market environment and the current financial performance of the business. For again, for reference, those 4 major pillars are as follows: strengthen our market position, expand our customer and market base, our technology enhancement and finally, our financial improvement. We'll now talk through the progress that we've made against these pillars in more detail. On the financial side, and there'll be more detail with Tom a little later through the presentation. But in the first half of 2025, so H1 financial year, our total revenue was $62.7 million. That was up 4.5% from the prior period. While normalized EBITDA of $4.6 million for the period under review was down 26% on the previous period, the figure was more than double the previous figure achieved in the second half of FY '24. This clearly demonstrates that our recent progress is showing a positive run rate for the last 12 months. While this improvement is encouraging, we have more work to do to take full advantage of the opportunities in front of us, which look positive in the short, medium and long term. Initiatives are now in place to increase our market share, improve margin and grow our margin pool. Our acquisitions also are delivering results. Our Doctors on Demand telehealth business continued strong growth during the half year. Our 50% joint venture with Releaf that was announced in November '24 has added another potential 30,000 registered patients to clinic operations. And the acquisition of Candor Medical that we announced on the 12th of February has now delivered what we believe is close to 15,000 patients into our system. In addition, the $5.1 million investment by Professor Charlie Shahin is a real sign of the interest, the motivation and the passion that's going to be part of this interest. So I want to call out, Charlie and say thank you for your confidence in what we're doing moving forward. I touched on our leadership changes and strategy reset earlier, but we're also maintaining a strong disciplined pace in the business. I've put a lot of processes in place where we're looking at our efficiencies, and they will materialize over time as we go forward. Slide 8, the importance of diversification. So the medicinal cannabis market is still growing, and we are confident that our strategy will secure a greater share of the expanding market for Vitura. So not only we believe the market is growing, we believe we have opportunity to grow share in this market. Our wholly owned subsidiary, Burleigh Heads Cannabis, sold a record half year of close to 460,000 units of medicinal cannabis via the Canview platform. We clearly have the team and partnerships to compete hard in this area, and we will continue to do that as a key priority. Our acquisitions of Releaf and Candor Medical bolster our telehealth clinical service and our patient numbers. We also have the opportunity to open up new verticals for the company, which is essential to further strengthen our market position. Digital healthcare is an increasingly attractive convenient solution to the ever-rising demand of GPs and hospital emergency departments. And again, we're well positioned in this area. Slide 9 around our operational overview. Just go to Slide 10 and you have a look at the digital health ecosystem or what we're calling our route to market also to how we get our right from the patient, the products right through the distribution and ultimately in our patient hands. We have a great ecosystem as part of Vitura's DNA. We offer a fully integrated end-to-end digital health platform, providing quality healthcare at every step of the journey. Crucially, we capture value at multiple points along the way, supporting our sustainable business growth targets. Whether patients access our 24-hour telehealth services through our Doctors on Demand or our clinic services through our expanding operations of Releaf and Candor, we can provide prescriptions, distribution, logistics and a route to market, which is second to none in the Australian marketplace around a whole lot of not just medicinal cannabis, smoking cessation, MDA and further products that we can increase in the verticals. All of these products are now serviced and managed via our centralized Canview platform and the vast majority of Australian pharmacies that operate in this space can access those products. A little bit about our acquisitions to date, and we've spoken about some recent acquisitions and joint ventures. But if we talk about Doctors on Demand, I'd like to update you how we're driving growth. Doctors on Demand was acquired in October 2023 and is now well entrenched into the Vitura ecosystem. DoD that we reference Doctors on Demand continued strong growth in both revenue and consult numbers in H1 '25. Our monthly consultation numbers are actually up 58% for the period with a record 184,000 consultations conducted through the half year. So big numbers in that business. We're continuing our $90 out of hours consult fee on the weekends, and we're actually putting a booking fee in there to drive future revenue and margin. So we're continually looking at opportunities to grow both margin in that business also. The growth of DoD's B2B business was also significant with revenue growth of 163% from the company's various B2B customers. And we're also working with those customers to look at more business in that B2B world. Continuing on the acquisitions. As I mentioned earlier, we acquired the majority of the assets held by the Releaf Group in a 50% joint venture in November '24. Almost 30,000 patients were registered with Releaf clinics when we acquired the assets, and we have now engaged with the Releaf patient base, recruited new doctors, recruited staff and the patient consultation numbers are coming back. More work to do in that business, but a lot of opportunity. As previously announced, we just acquired the Candor Medical business on the 12th of February 2025, and the integration process is in place. And as we speak, the founders of that business are in our office helping with the execution of that business. Candor also brings another 15,000 active patients through a fully integrated modern digital platform. The Candor business is both profitable and growing, and we look forward to continuing that trajectory leading up to the end of the year and beyond. The acquisition of the Candor facilities and expansion of specialty clinics for patients also continues to expand our traditional clinic offerings that we can add in other verticals as we move forward. On Slide 13, there about some further synergies to be realized. If we look at Vitura's existing clinics, CDA and Cannadoc, they will be migrated into the newly acquired platform and fall under the Candor platform. This will deliver a significant increase in the operational size and significant clinic offerings and value efficiencies. The combination of these will result in patients receiving a modern, responsive and expanded telehealth service from the Candor model. Integration synergies are being realized through consolidation of back-end services like IT, finance, legal and marketing. This diversification of revenue streams continues to support Vitura's growth in line with our overall strategic reset. Canview improvements and development. So very positive news regarding Canview to share about our central operating system. The full acquisition of Canview technology platform copy was completed this month. This important acquisition allows us to have further platform initiatives and enhancements and better connects us with our prescriptions and patients. We've added 185 unique product SKUs to Canview in the first half, and a number of brands in that platform is now over 60. So almost 270 new pharmacies, established accounts with Canview in the period, and that takes the total number of pharmacies almost to 4,700. And that represents the majority share of pharmacies that operate in dispensing medicinal cannabis in Australia. In addition, another 219 new doctors have been registered. That takes our total doctors to over 2,500, which is a significant number and puts us a significant player in the marketplace here. Despite increasing competition in medicinal cannabis, our average monthly spends of pharmacies through Camview remains strong. Let's finish off the presentation with a more detailed look now at the financials and some comments around market guidance. So I'd like to introduce you to our CFO and Company Secretary, Tom Howitt, who will walk us through some of these numbers.

Thanks very much, and good afternoon, everyone. We have a slide here that sort of sets out the numbers comparing the current half year results to the previous one. A few callouts from that. As Geoff alluded to before, it's pleasing to see the group operating revenue increasing by 4.5%. If we look at normalized EBITDA and NPAT for this first half year just gone as compared to the figure for H2 2024 ended June, we're seeing significant growth and momentum. And it's pleasing to note that as an example, our operating expenses for the period fell by 17% as compared to that period June. As Geoff noted before, we sold a record number of units of medicinal cannabis through the Canview platform in H1. And the Doctors on Demand telehealth business generated significant increase with over 184,000 consultations conducted during the year. As Geoff pointed out quite rightly, we do face a competitive environment, but we have a number of strategies in place and our recent acquisitions will certainly help to diversify our offerings and generate increased volume into the second half of the financial year. And it's important to note that when we talk about our normalized figures, that excludes costs associated with the acquisitions and the legal disputes that were resolved during the period. And we're confident that those one-off costs will be reduced in the second half of the year, delivering further growth and momentum in that period. Also it enables the management team to focus fully on the operational side of the business to execute and return the company to growth and increased profitability. Next slide, please. Looking at this slide, as I mentioned, revenue is up 4.5%, and that also included a growing number of product sales from the smoking cessation area, which came to us following the recent changes in the regulatory environment last year. The newly acquired businesses of Releaf and Candor Medical is starting to generate growth and diversification of our revenue streams, and we expect to see the benefits of that in in the second half of the current financial year and beyond. And this diversification obviously helps us to offset price compression and competition that we're facing in the medicinal cannabis area. Unit growth continues to be encouraging across the portfolio and we expect to expand on that as those acquisitions start to take effect. As I mentioned, we're focusing closely on our OpEx costs. And as I said, it was pleasing to see that OpEx in this half of the year was 17% less than it was in the previous period. And with the reduction in one-off costs due to legal fees and acquisitions, we would hope that, that trend will continue into the second half of the year. Next slide, please. Quickly touching on cash flow. It was pleasing to see that cash receipts were up $5.5 million or 9% on the previous period. The increase in receipts over revenue growth is due to an improvement in the collections of receivables from customers, which is now at an all-time high. Cash flows from operations for the half year fell by about $7 million due largely to purchases of inventories of higher-margin products that we expect to deliver benefits going forward and a significant reduction in trade payables of more than $3 million during the period and the timing of other payments to suppliers as compared to the previous corresponding period. Next slide. And if we turn now to the balance sheet, a few callouts there. Group cash still remained reasonably solid at $7.4 million, albeit that, that was down $4 million from the prior period. The main drivers of that fall were obviously the $2.5 million in cash that we paid to buy the copy of the Canview platform during the period and additional costs to integrate, enhance and develop our technology platforms, which are obviously both critical to generating further revenues and growth in the second half of the year. It's worth touching on the fall of the trade receivables. We made a number of announcements about this that was largely attributable to the $3.8 million of debt for Releaf that we relinquished in exchange for a 50% investment in the assets of the Releaf Group, which had previously raised money at pre-money valuations north of $50 million. And this correlates directly with an increase in investment in associates of the same figure, which effectively represents our investment in that Releaf joint venture, which as Geoff alluded to before, was starting to show positive movement as those Releaf patients come back into the fold. Inventories increased by $2 million, as I stated before, these products will hopefully as they start to sell through with the revenues from the new acquisitions in the second half will help to hold and hopefully improve our margins across the group. And finally, just noting a $3 million reduction in payables, which obviously has helped reduce the group's overall liabilities since 30 June 2024. Of course, all of the details are included in our half year financial report, which we released to the market and which is available on our website. And with that, I'd now like to hand back to Geoff with some comments in respect to our guidance and some comments on our view for the remainder of the 2025 financial year.

Thank you, Tom. Thanks for that level of detail. So just to share with everyone, we're absolutely remaining focused on achieving our key deliverables across revenue, EBITDA and OpEx for the second half of the year and for the full year in totality. We're pursuing the strategy with a clear focus on improved financial metrics across everything we're doing. Our acquisitions, as we said, are now complete. Our legal issues are resolved, and we now have a laser focus on delivering these results going forward. And my observation, and I've looked through this and look, our investment thesis and what we're doing remains really strong. We've highlighted throughout the presentation the potential and the challenges ahead for Vitura. I believe that all the hard work that we've done in H1 F '25 has really set the foundation for future success for the business. And I personally can feel that momentum going forward. So what we've got to do is keep executing well, executing well, and that's our absolute focus going forward. I want to end on that note and say thank you for everyone for taking the time to dial in today and listen to our presentations. And I want to end up by saying I'm feeling personally motivated and personally inspired to really get on and drive this business going forward with the help of shareholders, old and new, and a really renewed vigor across the team and both management and the Board. So thank you again, and we welcome any Q&A that you have.

Have a look through and see if there's any Q&A. Just one question I see. So okay, I'll address that question. The question is around Candor. You've spoken about execution, spoken about the importance of getting that right. What is it that you're doing with Candor that's any different to other acquisitions? That one I can clearly answer that the Candor execution that's very different is we've got the founders that are working with us in the business. And I found the founders to be extremely passionate and looking long term to what we do. We've also resourced the team to work on that execution of Candor. And what that means is that CDA, Cannadoc will be folding into Candor. And I said we're really only 1 week into the execution, but there's many meetings going on around how we do that and more importantly, how we engage the team on what we're doing. So there's a high level of confidence around the Candor execution. I hope that answered the question for someone. Let's try and have a look and see if there's any other questions. I can't see any unless...No other questions there, Rob. So I might hand back to you with any closing remarks.

Thank you, Geoff, and I appreciate, echo Geoff's sentiment to all of the investors and shareholders who participated in the webinar today. Thank you for taking the time out of a busy Friday to listen to the future. The capability that we've brought into Vitura and the reset strategy has set the foundations up for success, and we look forward to sharing the successes with you in the near future and keep you informed as how we're tracking along our strategy reset. Thank you for your participation, and we look forward to engaging with you all again soon.