Vitura Health Limited (VIT) Earnings Call Transcript & Summary

[indiscernible] through today's presentation. We'll do that as a tag team, and we do have [indiscernible] that is capturing questions and our intent today is to answer all of them burning sensible ones, of course. The agenda will also include just a quick overview of the company, a deeper dive into the financials and update and then talking about some of the things that certainly from my early days are positioning themselves as immediate priorities for the future and beyond and then concluding with questions, et cetera. So if we can move to our company overview very quickly. I'm sure most in the audience would be very familiar with what we do and how we do it. But next slide, please, and we'll do a recap for those that may not, we have a vision that is to lead the future of health care assets in specialty and emerging therapies. And I do pivot in this moment to say that strategies moving forward, may be broader than just that in the coming months, we will confirm. Our mission is to build connected ecosystems of patients, clinicians, pharmacies, suppliers and all sorts of partners by our platform and delivering trust to that particular pathway for access to specialty and emerging therapies, but not limited to in respect of the health profile that we encounter with our patients and suppliers. Next slide, please. We do have a unique digital health ecosystem. And we do have a unique ecosystem in which Vitura operates. We have over the many years since being listed invested in companies and platforms that do give us a differentiated scope across emerging therapies, but also in general health, as you know, with doctors on Demand business. But the ecosystems that we are working with and integrating still are about full integration of an end-to-end platform. We know that the tenants of our business really center around Medicinal Cannabis emerging nicotine vaping products, but also about emerging therapies and the space that mental health takes up the info better health is, but also how we can play a role particularly as a distributor and supplier in the MDMA and Psilocybin space on those therapies that are approved for their use. And we do see absolutely the growing need for bit triage and access to all sorts of therapies, [indiscernible] health space in Australia and that's sort of commenting most of the stuff that you do really around the health ecosystem. We manage our platform through a centralized platform called Canview and that allows us to integrate with pharmacies and doctors and patients alike and of the pharmacy distribution points that support our business model, we distribute 4 out of 5 in the marketplace in Australia. So we do capture value at multiple points and trying to extract good sustainable growth from those points as well as satisfying what are the health needs of patients and practitioners alike. Next slide, please. These are our brands, and it is a moving feast at times to see some of the brands evolve. So from a general practice perspective, we have our doctors on-demand telehealth service that is truly integrated to telehealth and general practice service into specialty clinics, those are the clinics that look at specialty verticals. We have Candor and Releaf, which all provide via our joint venture face to face annual physical representation. And of course, we have a marketplace which is Canview, which connects the supply and the prescribing to the various stakeholders in the system, we wouldn't call them products as much, but for the sake of this presentation, [indiscernible] cannabis in Cortexa. I'll focus on Cortexa law specifically. Cortexa is our joint venture that allows us and continually allow us at the moment for us to play a role in supplying MDMA and sale cyber into the treatment options for authorized prescribers alongside treatment-resistant depression and PTSD treatments were appropriate that it to be made by the appropriate medical practitioners. So we are in that space. And we do know that the world of emerging therapies, particularly to psychedelic is an important growth opportunity, not just in the Australian market, but it's evolving internationally quite rapidly. Next slide, please. This is where our hand to Tom, and he will talk more about the financials and then I'll catch leadership update and a view of the future. Tom?

Thank you, Justin, and good morning, everyone. Let's start off with revenue, and I'm pleased to report that Vitura had a record year again. Revenues have continued to climb every year since the company was listed back in 2019. If we look at total revenue overall, $131.2 million, up nearly 6%, which is encouraging, broken down by the company's 2 business divisions, sales and distribution, which is covers off the sale of principally nicotine trading products and medicinal cannabis. Revenues peaked at over $100 million, up 4.2% on the previous financial year. and clinics and services, which comprises docs on demand in our specialty clinics division peaked at over $30 million for the first time, up 11.3% year-on-year with encouraging results. And you'll see in the graphs on side to the right of the slide, the deception of the revenues by category. Next slide, please. If we break down the revenue growth into a little bit more detail. As I said, our overall revenues of $131.2 million broken down by a combination of Medicinal Cannabis and Nicotine Vaping Products and driven largely by further growth in doctors on demand. If we turn to the number of units total number of units that passed through Burleigh Heads Cannabi 1.13 million units comprising Medicinal Cannabis and Nicotine Vaping Products by Canview. That's impressive 17% up on the previous financial year. Nicotine Vaping revenue in isolation, more than doubled to $1.5 million, and we're confident that the FY '27 budget shows continued in that sector going forward in next financial year. The main thing that's worth calling out comes into all the positivity with the revenue is that the margins, particularly on medicinal cannabis were compressed due to competition discounting during the year. By illustration, the average gross margin for the company across the board fell from 27% down to 22% during the year, again, driven by our competition and in -- and the average sales price of the products that pass through Cambie fell from $105 down to 97, largely due to competition, but also cost of living pressures. resulting in consumers trending towards cheaper products. One thing that's worth calling out here is that these are all industry-wide phenomenon. -- they're not necessarily unique to Via. And I think you'll find that this is something that the industry as a whole is facing up to as we move forward. Next slide, please. If we look at Doctors on Demand, 13% increase in growth, total consultation numbers up 11% on the previous financial year to more than 420,000, which is encouraging. As we've mentioned before, the specialty clinics division that comprises Canada, CDA and the former Cannadoc business, all combined now into one fully integrated platform. You'll recall that the Candor acquisition delivered 15,000 more patients to the group last year, and we continue to expand that part of us going forward. And you'll also recall last year the acquisition of the Releaf Group of Bricks and mortar clinics, which has been expanded with the acquisition of Candor as well has done to see the patients continued patient numbers continue to grow, and we're looking forward to the revenue that they will do go into FY '27. Next slide, please. Justin, I might throw it over to you.

Thank you, Tom. Yes. Some key points on the leadership transition because it has been quite here in terms of movement. Obviously, I started in the role on the first of June after being in sometime in April, but we did see throughout the year our Chief Revenue Officer, Ryan Tattle assume responsibility in the absence of the permanent CEO supported by Non-Executive Director, Shane Tanner, those arrangements then led to my appointment and the departure of CRO and in the early stages within the first week in fact. the CFO that was appointed to the organization a few months earlier also to parting. What I was able to do with these movements that were inherited to a degree was to really look at the structure and exactly what was needed in the short term. It's certainly being built on that and metal look forward on what was needed and we could create a leaner, more patient-centered view with less layers and less cost. -- was the opportunity that I was able to take in that particular first few weeks. So we now can see ourselves as a more stable and integrated leadership team that's probably less heavy around the role of the Chief and having the same sort of limiting some structures that many larger companies would expect and we're probably rightsized to the organization's demands in this next period or what I call Verizon in. Next slide, please. In summary for the financial results. Clearly, operating revenue improving is helpful. Normalized EBITDA has come down. And whilst we acknowledge the pressures and what Tom referred to management and the Board find an unacceptable position and note that affordingly for the 26 financial year results. Net profit was to the negative and normalized net profit slightly positive to 100,000, all down on previous year, including normalized earnings per share. normalization for things has come with impairment, redundancy acquisition and other one-off expenses in the year. But nonetheless, the overall result has been soaring and 1 that we don't expect to continue or do we accept as being acceptable.

Just make a couple of quick comments. If we look at OpEx for the year, OpEx, excluding the impairment, the normalization costs that I described there was roughly flat with the previous financial year. And looking forward into FY '27, we're confident that there will be significant real cost reductions into the next financial year, we should see the company return much closer to profitability into FY '27. We're also forecasting improvements in the average gross margin and the average sales price again going into FY '27, which we're confident will deliver a significantly better result than the result for FY '26, which as Justin pointed out, did include one-off costs that we are working hard not to see replicated in the next financial year, including some impairment redundancies and other one-off costs.

Thank you, Tom. Next slide, please. And so just an overall summary, a challenging FY '26 with lots of reasons to sort of point to why. But nonetheless, it's our job to stabilize and that unfortunate result does not appear again on our books. But our revenue increase was clearly offset by the pricing margins and the competition pressure that's in the marketplace overall. So we will talk about some of mediation steps to improve the result. We have budgeted and had budget sign-off for a return to profit in FY '27 and certainly a little buoyant outlook beyond that. Next slide, please. So we'll go to the next Slide too. We can talk about path forward and immediate priorities. This slide will talk about some obvious tenets of execution from against strategy and the focus that we have as an organization. I may talk in slightly different language at this point as a new plan and a new strategic direction is being put in place post my appointment. I'm working currently with the Board and stakeholders and internally on a strategic plan that will take us into the next phase and into the future that is a stronger, more complete more mature and disciplined view of how the organization will perform. But what you see on your screen there is absolutely correct in saying that we do need to strengthen team and company culture. We need to work with a fantastic base of people that I've been very impressed with and joined the organization but it's about that discipline of focus and the ability to act in all mature less entrepreneurial way in certain areas of the business, and that includes risk management and strategic planning, as well as the discipline that comes with margin pressure in managing that financial benefit. We do understand our market position and the need to strengthen that against competitors, particularly in our core markets, but we also understand that strength market position may include diversification around health. And with our assets, we think that's entirely reasonable to consider and to our plans for future with more patients, more stakeholders or pharmacies, doctors, et cetera, dealing with burning capacity, that means more opportunity for patient success and obviously, returns on those activities. So expanding those bases, it makes total sense in terms of that pillar as well. Now technology, I've heard a couple of times we've mentioned inside the company, we're a technology company. We're a health company, I think I define ourselves as a health come enable supported and absolutely reliant on technology as a success feature. Now the technology that we use on Canview and within our clinic environment is integral to how we've succeeded in the business model thus far, and how we evolve with iterations on that over the next period will be vital work has already and had been priced by arrival invested in what that will look like, and we will definitely share stronger plans on how that technology outlook fits with the financial expectations of the organization and then keeping us fit for purpose in a very agile and fast and certainly AI-driven world as we know it set today. And we're doing that with the purpose of seeing the financial performance approved for this sobering result. Next slide, please. Okay. I think I've spoken to starting, but we have had the introduction of a couple of new team members noting Chief Financial Officer, who will come into the business starting first of October being James Frayne will bring good experience across listed entities in the Queensland location and a new GM for our strategic technology and risk responsibilities being through the arms who has already started and begun work. As pointed out, we've really tried to delayer and allow patient outcomes to be more of a focus and a closer focus to the executive so we were reduced costs quite significantly in the 12-month period until now on what was the top heavy structure. Based on [indiscernible] at time, at that. But in moving forward, we definitely need to be leaner. I think that's going to be a better outcome for the work that we've got to do in the nation environment. So absolutely prioritizing earnings and value creation, and we think that, that can happen absolutely. My view of the world and the evolving view it as that we will look at the future in terms of horizon planning. And that first rise in the next 12 months being sort of our hygiene year very much around in the core of the business, building a maturity and discipline into some of the risk management and strategic frameworks, settling in a new CFO and getting to work around margin improvement, whilst also looking at the important business of what happens in that 12 months afterwards, we're calling that period or arise period where we think accelerated growth can be possible, achievable and very much aligned to core strengths but strengths that we can leverage without us changing the capabilities of our business model. And you're saying that those things that we report to in that regard are we are certainly not in the business at the moment of doing a lot of things within the assist around medicinal cannabis. We are wholesalers and distributors and connectors and patient-led clinician owners. We don't do everything in the value chain, and we will assess continually our position in that value chain as being appropriate. But we do think of all mainstream health outlook as we see in just cannabis as a mainstream or built being important to, but not limited to medicinal cannabis. Next slide, please. So again is iterating about $1 million in savings in terms of the leadership structure. And we do think there's more room for improvement -- we note that our management expense ratio could be looked at over the coming 12 months, too, but we are very poncious with our investment in technology and the capabilities required to actually build growth pathway. So we need to assess when we make those decisions and exactly what impact they had, but that will be part of what we do in the next 3 months to really set ourselves up and a comprehensive strategy is being implemented/created as we speak. I look forward to sharing that with all our stakeholders when the time comes over the next 1 or 2. And it will give a very clear outlook of those horizons being the short, medium and long term around the future of the organization where we see bets and where we see strengths being utilized in more profitable on and why we still recognizes respect and treat the patient with the dignity that are operational like us has the opportunity to. Next slide, please. Margin performance is a big issue. And we have being somewhat bullish around saying what our margin position would be over the next year or 2. So we do know that there's some hard work to come in capitalizing on what is the right trade-off between volume and dollars. We also know that being all things to everyone is a strategy that in the early days, was important. -- but we're not entirely sure that such segments shouldn't be prioritized over others. And we do feel like the race to the bottom on cheap-and-cheerful products is something we need to consider our strategic view on in order to improve margin. So those trade-offs will be real, and those trade-offs will come with potentially less unit higher margin. or a position where certain segments are dealt with in a way that sees margin performance improved. We've seen a budget outlook to improve margin performance rather than see it continue to deteriorate even if it's a subtle improvement, that would be better than the 2 years of deterioration in industry has certainly suffered, and we as a main player in the industry. We do think that other verticals will continue to offer growth opportunity and NBP is one such vertical, Tom alluded to the growth in the last year. We see that continuing to be an engine room for growth as we start to mirror what our margin position looks like on Medicinal Cannabis side. And we absolutely see be it in distribution of drugs and/or pharmaceutical products. or in the clinical triage and in care space, we think that, that world will continue to grow, provide opportunity and certainly, the noise coming out of different markets overseas, such as Americas that there is a win change to ininalization and the therapy psychedelic in a whole range of areas, and then that will include a lot more, I think understanding and education, but also have a lot more interest in this particular part of the industry that we are currently leaders. Lastly, but not least and vital to our success as it has been to date, will be what we do with technology, as I've already discussed, and our Canview V5 platform is evolving in a way that we think will add the ability for us to look at a whole range of different complementary services and how patients and are stable aviate, our health system here in an entire sense. So that will include improved user capability and experience across that platform for all participants. Next slide, so in conclusion, before we get to Q&A, which I think we've got one question on, so that's great. And we really are focusing on hygiene in this next year, bringing back a profitable position for the group to invest in its future. We absolutely believe that the 1-, 2- and 3-year plan can bring back healthy profitability and some of the key words I've used and apologies for reusing is the maturity and discipline now acquired for an organization like teraversus the wonderful work that was done in a more entrepreneurial sense in those for years is the pivot point. And we believe that we've gotten the plan and that seem to work around that, but we will continue to evolve that plan share it as appropriate, but absolutely returning to sustainable profitability in the long term and having those dollars to invest and share with our stakeholders is vital to that particular mission. That will continue to be under the guides of good cost control as well and being very clear and focused on the important things. And that will be a prioritization exercise that the amortization against for sure outlook will be to be very good at I think that's in conclusion, the slide pack and our comments around that, I think now feel we go to Q&A, it's by the website if everyone understands how to use that, hopefully.

We have one. What is the plan to improve margins in the digital cannabis? Why not spin-off of Daman as a separate company to create that to shareholders as the current market cap by sure is undervaluing the company significantly due to low margins in other sectors of the company. On 1 question. We have -- look, discussions are ongoing around the role of Doctors on Demand play. We absolutely feel value and Doctors on Demand for that name significantly undervalued. Doctors on Demand does provide access to the client base access to credibility in which general practice space or of the stream health space. but we think is going to be very helpful and pivotal in our positioning in particular to the next few years. I have to speak to the Board and understand what our appetite is around separating, in terms of margin improvement, I think I've gone through those points, but we're clearly looking to rid ourselves of low value, low turnover type arrangements and contracts which I have to say, are buried in nature across a lot of different state holders and suppliers really uniforming those contracts to meet a certain sweet spot in the markets that we think add the best value and again, racing to the bottom in the cheerful area of Medicinal Cannabis, it's probably not where we think the biggest stock then lies, definitely think that being a trusted partner with trusted long-term players that we currently have been dealing with will be an access point to that margin improvement. That it won't limit us to the choice that consumers demand. And I think what I've seen in terms of the Canview platform being a very unique and bouyant marketplace for the prescription of Medicinal Cannabis products. It probably does have more than less. And I think that's something that we need to consider. We also need to absolutely know that we've got to provide choice and access by the medical professional that is in charge of prescribing the particular pharmaceutical and not be as the aggregator of unit numbers for purpose or from sold being sort of 1, we want to provide choice -- and our contracts at the moment, I think, the same city business themes around making sure that the [indiscernible] we already have some external help in understanding our position around that, and we do feel that will drive margin improvement quite considerably. Now we'll go to some more questions.