Vitura Health Limited (VIT) Earnings Call Transcript & Summary

Good morning, everyone, and thanks for joining the call this morning. I'm Robert Iervasi. For those of you who don't know me, I'm Vitura's Non-Executive Chair, and I'm pleased to be able to present our half year FY '26 results to you today. We have a few team members joining us for the webinar this morning, including our Interim Executive Director, Shane Tanner; our Chief Revenue Officer, Ryan Tattle; and our newly appointed Chief Financial Officer, Andrew Cook, and you'll be able to hear from each of our management team during the call of the webinar this morning. If we turn to the next slide, I'll take you through our agenda and broad topics for discussion. We're focusing on a broader business update together with Vitura's half 1 results. I'll provide a brief company overview. The management team will focus on some of the financial and leadership highlights of half 1 FY '26. We'll provide an operational overview and provide some concluding remarks that reflect on what you can see from Vitura going forward. Now the presentation itself is likely to run for about 20 minutes, and then we'll open up for a question-and-answer session. As we go through the presentation, feel free to submit any questions you may have through the portal, and we'll do our best to get to those questions during the time we have available today. If we're unable to answer all of the questions raised during the webinar, we'll endeavor to do so separately during the course of the next day or so. So, as I mentioned, let's remind ourselves about Vitura and provide a bit of a company overview. Importantly, when you look at our unique digital health ecosystem, moving to the next slide, you'll see that Vitura is a leading digital business in Australia. We offer patients a fully integrated end-to-end digital platform, providing quality health care at every step of the journey from general practice consulting to medication dispensing. Crucially, what underpins our value is that we capture value at multiple points along the way, which is designed to help us deliver sustainable business growth. We facilitate consultation, prescriptions, distribution, logistics, and a route to market for the licensed wholesale supply of medicinal cannabis, therapeutic nicotine backing products, MDMA, and other products that are starting to grow in the market. Importantly, all of these products and services are managed via our centralized Canvue platform, used by the vast majority of Australian pharmacies dispensing alternative therapies today. And you'll see from the slide that we do distribute to about 4 out of every 5 pharmacies. Now our business has grown over the last few years, and we do have operational segmentation. In each of our areas, we focus on innovative health care delivery. We're continuing to grow and integrate our portfolio of brands to provide the most efficient and seamless patient experience possible. Our operations are divided into 4 distinct but interrelated segments. Doctors on Demand represents our operational segment for a general practice clinic. That's a telehealth service, which has grown significantly over the past 12 months, and you'll hear a little bit about Doctors on Demand during the discussion this morning. Our next operational segment is our specialty and JV clinics, such as Candor, Relief, CVA clinics, and Cannadoc Health, to name a few. These clinics are our route to market, through which we prescribe specialized medication to patients. We also have our marketplace being our Canvue platform, which is a market-leading platform that is now 100% owned by the Vitura business. And we have products that belong to us in terms of the brand and what we're able to drive going forward. Each of those 4 operational segments comes together to formulate what we know as Vitura Health today. Now, of course, as you grow an organization, it's absolutely critical that we're clear on our vision and mission, which I'll share with you on the next slide. Now we clearly articulate where we're going and how we will get there. We want to lead the future of health care access in specialty and emerging therapies. That's really our North Star, focusing on that specialty and emerging therapy space and ensuring we're delivering appropriate and best practice health care services. Creating those connected ecosystems of patients, clinicians, pharmacies, and suppliers is our constant focus. We know that we're better with some of our individual parts. And as we get that end-to-end ecosystem working well, we're positioned to deliver on the vision of providing health care across specialties and emerging therapies. So really, I know a number of our investors and shareholders know about Vitura and what we stand for and what we're made up of, but it's really important to remind ourselves of our North Star, including our vision and our segments. I'll now hand over to the management team, kicking off with Shane Tanner, who stepped into the role as Executive Director, to share some of the highlights and financial highlights of half 1 '26.

Thank you, Robert, very much, and good morning to everyone. Ryan Tattle and I will do a bit of a tag team on a number of slides over the next few minutes. It's now been 4 weeks since Ryan and I assumed our new roles within Vitura. Hopefully, the comments we make today will provide all of our investors and shareholders with confidence that the company is a lot more focused than it has been, and some of the initiatives that we're undertaking at this point in time. Next slide, please. I'll just quickly, Andrew, our CFO, will deal with this in a bit more detail, but just the headlines from our half-year results. It started well and finished fairly poorly. So an 8% growth, which I would describe as okay. It's a pass mark, but I think we can rest assured investors that our growth going forward over the next 18 months or so will be higher than what we've achieved in the last half. So the market is buoyant, and we're going to be part of that. The major part of our reduction in EBITDA was really to do with an industry reset of our gross margins. Our gross margins half-on-half dropped from 27% to about 23%. I might just ask Ryan to briefly explain what has happened and what we're likely to see going forward.

Thanks, Shane. The gross margin contributors are split into 3 main areas, all of which are related to the ongoing evolution and continuing maturity of the medicinal cannabis market specifically. Those 3 contributing factors are split across the reduction in our average unit price of products with the largest volume cohort of patients now preferring the lower cost and lower quality of flower specifically, the increased remuneration levels for doctors to be able to service our patients as some of the perceived risk over the industry has increased with the focus from APRA specifically on a few of the bad actors across the industry and has pushed those costs up. The final one being a combination of that ongoing product price, which puts pressure on a lot of the supplier margins, as well as over the last 1.5 years, a number of low-cost, low-value distribution competitors that have entered the market, and where we have held our margins very, very strongly up until the end of FY '25. We needed to be able to stay competitive to make sure that we maintain our market share and continue to attract new brands, which we've done, while then offsetting some of that lower pure-play distribution margin with higher margins on our internal channels, which has generated direct sales and growth over the half. The good news is that we have been able to offset some of that decline with the higher margins through our internal channels, including Canada and relief. Diversification over different product formats, including next-gen banking products, and also platform-based revenue that we've now brought in at a very, very low cost to serve or 0 cost of goods. We're pretty confident that that has now stabilized and has the ability to increase over the coming period.

Fine. I might go to the next slide. Just a couple of points here to note that revenue was strong, but we can do better. The call out on this slide is the nearly 11% growth in our Burleliheads cannabis business, which is effectively our Canvue platform, up to well over 500,000 units for the half year, which is much, as I said, 11% higher than the previous half. Another call out is, as Rob alluded in his earlier comments, that our specialty clinics and Doctors on Demand, and so Candor Relief and Doctors on Demand together were up 25% on the previous period, albeit on a still low base. We'll talk about their market share later, but they're becoming a bigger and bigger part of Vitura. If we just move to the next slide. A little bit more information on those 3 businesses, starting with Doctors on Demand. I won't go through them. You can probably read those for yourself, but 21% growth, and we'll deal with a bit more detail on doctors on demand in a minute, but very, very high growth, consultation numbers up. More importantly, after our consultation is well underway, and when we bought this business a couple of years ago, 2 or 3 years ago, it was effectively a B2B business, and it's pleasing to see the B2C growth over the last half year, and that will continue. It's well managed, and it's one of the really up-and-coming performers in the group. I'll quickly touch on Candor and Leaf a little bit later, but just to call out that all the metrics are heading in the right direction. All 3 businesses that are on this slide give us enormous growth potential if we execute correctly. Next slide. Bit of a repeat of an earlier slide, but just to cover off on that, is that we spoke to, obviously, the challenges of our margins earlier. It's not something we're shying away from, as Ryan said, but we're acknowledging it, we're working with it. And if we can keep our gross margins at the current levels, we have a very bright future. So we'll deal with some of the initiatives about that shortly. I'll just go to the next slide. And at this stage, I'll just ask Andrew Cook to take over for a couple of slides. Andrew has only been with us for 2 weeks. So he's very, very new, but he's incredibly experienced and already working well with him. So Andrew, over to you.

Thank you, Shane, and good morning, everyone. In terms of the cash flows for the half year, net cash flows used in operating activities for the half were $1.4 million, and this is largely driven by tightening margins as both Ryan and Shane have mentioned as well as some adverse working capital movements relating to the timing of customer receipts and also holding higher inventory to support the increased sales volumes as well. As of the end of the half on 31 December, the company had a cash balance of $6.1 million, and we are currently in negotiations with our bank for a more flexible facility going forward. In terms of the next slide, the revenue is split by operating segment. As you can see, sales and distribution were $52 million for the half, which is up 4% year-on-year, and clinics and services revenue was up 25% year-on-year as well. And this shows that our clinics and service business are increasingly diversifying our revenues. Ryan and Shane have touched on the challenges of margin, and this resulted in a 20 basis point reduction in the half versus the prior year. But as Ryan mentioned, we believe that we have stabilized these levels and are determined to hold them in the short term and marginally improve them in the long term. So there is a strong business focus on driving volume and margin improvement by leveraging our specialty clinics and, obviously, ongoing OpEx management across the business as well. Thank you. Next slide, please.

Great. Thank you, Andrew. And obviously, that's a look at the first half of FY '26. So it's time to shift gears a little bit and start focusing on some forward-looking activities and initiatives that you'll see play out in the marketplace. The management team, including the Board, is very excited by some of the initiatives that have been developed and explored over the last few months and are now being brought to life. Firstly, I want to touch on the changes that we've made from a leadership perspective. A critical starting point for half 2 '26 is the recently announced leadership transition that we undertook in January. As I mentioned in the opening of the call with our former CEO, Jeff Cockroll, departing the business, Ryan Tattle, who has the role of Chief Revenue Officer, has assumed day-to-day responsibility for the management of the company on an interim basis. Shane Tanner, who was operating as a Non-Executive Director, has assumed the role to support Ryan as Interim Executive Director. And really, the focus there is to provide extra support and focus and challenge to ensure that management is challenging themselves and delivering to expectations. Our new CFO, Andrew Cook, who you just heard from, commenced on the 9th of February, a little earlier than expected, but we're very excited to have him on board. Our search for a new CEO is well underway, and we're quite pleased with the caliber of candidates that we're seeing come forward to be the future CEO of Vitura Health. And as soon as we're ready and we have more information to share on that, we will make the appropriate announcements to the market at the appropriate time. So that's just a short reflection on the management and executive changes at Vitura. Now we want to focus on the strategy over the next 6 months and going forward. And I'll hand it back to Shane and Ryan to take you through what they're excited about seeing over the next 6 months.

Thanks, Rob. There's no change to our strategy. It remains very much the same. And this slide, you could place this slide on just about any company globally of this size. There's nothing magic to it, but it's making sure the 5 parts of that strategy are actively being worked on at any one time. Ryan and I, along with the wider team, over the last 4 weeks, have certainly put some short-term and medium-term action plans in place for each component of this strategy. And just as a bit of a tease over the coming weeks, you will see a number of new initiatives that tick all 5 boxes in this area. Next slide, please. So, just looking at Candor and Relief, our specialty clinics business. There are a lot of initiatives going on here. Already, and Candor has only been on board for 12 months, and relief is not much longer. Already, Candor and Relief represent over 20% of the company's revenue, and it's growing quite fast. You'll probably think why we reduce pricing on initial consultations. I might just ask Ryan to explain the rationale for that.

Yes. Thanks, Shane. We're definitely in a growth period within Candor with the integration of the business complete now, and a very concerted effort from the team over the last few months, we've been able to increase our clinical team capacity so that it's sufficient to now scale the patient side. Similar to other 2 side of businesses, it's a delicate balance between matching the number of patients to keep the doctor's books full and the number of doctors to be able to see enough patients and vice versa. So we're currently in a focused drive to increase those patient numbers to make sure those doctors' books are full. And so that initiative of a lower consultation fee, as well as a concerted marketing effort behind that. And it's, again, similar to the analogy of Uber drivers and riders, where they shift campaigns based on where the balance of their market is. And then once patient flow starts to match, we'll shift the focus back onto prescribers again so that we can scale in a sustainable way.

And just as a bit of a call out, just the launch of our nicotine vaping product service through Candor is growing extremely fast. And I think I'm right in saying, Ryan, that I think our nicotine vaping business in the last half year was well over $1 million. Okay. Just moving to Doctors on Demand, which is our other clinic business. This is more of a traditional telehealth GP business. It runs 24/7. It runs all through the night, and we have 300 doctors now on board. It'd be fair to say that we bought it 2 or 3 years ago; it was a bit of a basket case. It was losing money. It was turning over about $20 million to $25 million. It's now a $30 million business. All the metrics are trending upwards. It's well managed, and I'll put a bit of pressure on the management team; it's capable of growth of around about 10% a year. So we see that as a very good business. It's a growing trend for particularly young people to talk to doctors in their own time and the doctor's own time as well. So it's a business that we hope to develop, as I said, more on the B2C. It's traditionally been a B2B business, but it's slowly morphing into a B2C business as well, which we can then look at better integration with the mothership, Vitura. The next slide is just a little bit about what we've been doing in the last 4 or 5 weeks. There was no question that our operating expenses were way too high in the first half, given the general gross margin pressures we had, and our annual run rate of operating expenses is about $28 million. In the last 4 weeks, we've reduced that by 10%. So $2.8 million has been taken out of the business, and that will slowly flow through for the rest of the next few months. So quite a major change, but it's something that we are very, very keen on, and the trick is to keep the OpEx down at manageable levels. It can grow a little bit, but we want to see double-digit revenue growth and hold our operating expenses. You don't need Einstein to work out. If you do that, you'll do very well. I might pass the next slide, which is our last business slide, over to Ryan and take the handle on it. Ryan, as most of you will know, is effectively one of the major architects of Canvue. Canvue is the business's greatest asset. As we've heard from Rob, most of the pharmacies that deal with medicinal cannabis are on Canvue. It's a very strong product. So I might just ask Ryan to take you through what we're currently doing to improve Canvue and to make sure it stays a supreme asset.

Sounds good. Thanks, Shane. Yes, well, there's definitely been a number of companies over the years who have tried to replicate either the entirety or at least parts of Canvue; it most certainly still remains the most preferred platform out there for pharmacies dispensing medicinal cannabis. Over the last 12 months, our internal development team has completely transformed the platform from what it was, and that includes significant releases, which, as part of that has a completely new user interface and functionality across each of the main areas of the platform, the prescriber app, the pharmacy app, and the patient side as well. And now Canvue serves as the default prescribing platform for all of our Canvue prescribers. It's also utilized within the relief clinics as well. And importantly, as part of the underlying business model, this connects our patients with a pharmacy network that now receives in excess of about $30 million in revenue for their businesses and results in further distribution volume for Vitura. And this is part of the growth that we've seen over H1, with that being increased for the integrated businesses. Going forward, the road map is really focused on deeper integration of both pharmacy and prescriber day-to-day operations that really allow them to run their businesses more cost-effectively and efficiently, which again produces or results in further distribution for Vitura. And we do expect pretty significant operational efficiencies throughout the business as we continue the development and get operational leverage across what we have right now as we continue to scale. Shane, I might hand back to Rob for the final couple of slides.

Thank you. Thank you, Shane, and thank you, Ryan, for that. So I might conclude with a few closing remarks if we move to the next slide. When you do reflect on FY '26 or certainly half 1 FY '26, you'll see that we had a mix of highlights as well as some challenges that we have had to tackle. Our new leadership team is already starting to make a difference in terms of sales growth and cost reduction, as Shane just mentioned. Importantly, one of the areas I needed the team to focus on is the pace of execution and the pace of decision-making. And certainly, over the last 4 weeks, the pace has increased to a level which is consistent with what I would expect to see of an organization of our size and scale. We do expect to see strong double-digit revenue growth over the next 2 years, commencing from this month, so in half 2 FY '26. Of course, it's important that we maintain current gross margin levels into the immediate future and keep managing our OpEx closely. When we do look at our OpEx and how we reduce the cost base of the business, we're targeting those areas that are considered to be value-added. Certainly, we will continue to make investments in our Canvue platform in the patient experience and ensuring that our doctors, who are our privileged route to market, are delivering an exceptional outcome to their patients. Canvue itself continues to be the industry benchmark, but there's room to grow it further. And now that we have control over the Canview platform and an internal team that's dedicated to making the customer experience one that's first class and different from our competitors, puts us in a position where we can continue to grow Canvue and therefore, our products and profitability into the future. Just a reminder that the discussion today is really focused on the half 1 results, and you'll see on the ASX website that we have released a number of documents relating to half 1, including a copy of this presentation itself. Familiarize ourselves with the disclaimers on the presentation, especially in relation to forward-looking information. On behalf of the Board and the management team, I would like to thank all of our investors, shareholders, and participants for listening today. And I'll now open it up to a Q&A.

We have 2 questions that have come through, which I'll pose to the team. The first question that I'll ask is in relation to the profitability of the company, and when we believe Vitura will become profitable all the way down to net profit after tax, recognizing we are generating a profit and an EBITDA perspective. I'll make some remarks and then hand over to Shane to add his flavor to it as well. What's most exciting for me over the half 2 is some of the momentum that's being gained in doctors on demand. As Shane attested to earlier, Doctors on Demand, upon acquisition, was a business that was loss-making. And as we look at that particular business division or business unit in isolation, it's generating a significant contribution at an EBITDA level to Vitura Health overall. So our ability to continue to scale the Doctors on Demand business by providing offerings to more B2B customers as well as the B2C base is quite important to our future profitability and will become quite a material part of Vitura going forward. One of the challenges we had with the Doctors on Demand business, which didn't generate the level of profitability that was earmarked in the original acquisition case, was being able to launch verticals through the Doctors on Demand platform. So we've had to pivot on that strategy and ensure that we can deliver a profitable Doctors on Demand on a stand-alone basis, which the team has now done. In addition to that, the way that we tackle margin compression to deliver a more profitable and sustainable business going forward is by focusing on those products that generate a higher margin for Vitura Health. And you would have heard from Shane today that focusing on brands that we own is quite critical going forward, ensuring that Canvue is a platform where our patients and our pharmacies and our doctors are wanting to use because of the experience that we generate and fostering those strategic partnerships with the right distributors who are wanting to partner with an organization that is seeking to lead the future of medicinal cannabis and specialty care here in the Australian market. So we see some strong momentum over the next 6 months in FY '27 to further add to the profitability of the business via those levers. But I'll hand over to Shane to add any comments that he would like to address.

Thanks, Rob, very much. All I can add to what Rob said is that if the number of revenue initiatives that are currently underway, if they come through, we are seeing a different company. We believe we can deliver on those. And if we can deliver on the revenue increases that we're looking at, at the moment, we'll deliver a very strong profit at all levels, certainly in FY '27. I think wait for the news flow, have a look at it when it comes through, but we will be on the front foot in a number of areas, and you'll be reading about these in the not-too-distant future.

Great. Thank you, Shane. The second question that's come through is a question from management. I'll direct it to Shane, Ryan, and Andrew. What are you most excited about for half 2? And what's the biggest challenge that you think the business will face in half 2? Might just flick that one to Ryan in the first instance because he's close to the team.

Yes. Thanks, Shane and Rob. I think for me, looking over a number of years of going into this period of an H2, Shane mentioned the initiatives that we have in place now, and truly do believe that we've got the execution cadence a lot better or the best that it's ever been. And so that, along with our foundations that have been set up from a gross margin point of view in the background over H1, puts us in a very good position, so that everything that flows in the top has the downstream already sorted and working very, very well. The realization of some of the work that has gone into the technology platforms across the business will also start to be realized more and more, which we haven't been able to fully see yet, with only just having, I believe, almost to the date, 12 months of ownership over that. And so those all accumulate together, put us in a much better position, and excited to really see all those things come together.

Thank you. Andrew, is there anything you wanted to add from your perspective as a fresh eye in the business at the moment?

Thanks, Robert. Just from our side, yes, I mean, being here a couple of weeks now, but definitely hit the ground running, lots of activity across the business, and I feel a lot of excitement about the opportunities that lie ahead. So, really looking to work with the team to bring those to life, as Ryan said. So, really targeted, focused priorities to deliver value to the business going forward.

Great. Thank you. And certainly, from my perspective, I know that the last 6 months have been relatively quiet in terms of news to the market. So what we're also focusing on in sort of the next 6 months and then in FY '27 and beyond is ensuring that we're communicating the number of successes and the initiatives as they come to live in the marketplace to the market. So we will be communicating as appropriate over the course of the next 6 months. So our shareholders and investors are aware of some of the initiatives that are being brought to like to achieve the growth that management has taken us through this morning. Based on the questions that have been submitted, that covers all of the questions for this morning. Again, thank you to those who took the opportunity to dial in this morning, and for management and the Board for working collectively and collaboratively to deliver the presentation of the results for half 1, and we look forward to a strong half 2. But thank you, everyone, for your participation in this morning's webinar.