ImpediMed Limited (IPD) Earnings Call Transcript

Thank you for joining us to discuss the Q1 fiscal '27 results. I'm pleased to be here with McGregor Grant, our CFO, along with our brand-new Chief Clinical Innovation Officer, Nicole Stout. We'll be referring to the 4C quarterly activity report, which you just received and presentation we lodged this morning with the ASX. After our remarks, we'll be answering questions, you can lodge any questions through the presentation using the Investor Hub Q&A function. So McGregor, I'll begin with Slide 3 with an overview of the agenda for today's call. I'll start with a business overview, including key highlights and take you through an update on each of the 3 business segments. I'll then hand over to McGregor to present the financials. And then I'll finish up with some closing remarks and cover our outlook for this quarter before handing it over to Nicole as an introduction to her background, her insights into the cancer survivorship space and why she's here. We'll then open it up for Q&A. So now turning to Slide 5. I know many of you will have only had a chance to briefly read the 4C activities report, and you will see my commentary at the end, which I will refer to throughout the webinar and my recap of Q1. We start from a genuinely strong foundation, an FDA-cleared, TGA-cleared CE-marked digital health platform with a now complete clinical and commercial leadership team that is building the right field team to drive commercial execution. We have seen some exciting developments with new standards and clinical applications in cancer survivorship this past quarter, along with expanding the clinical evidence and FDA indications in heart health and the extension of our new clinical applications and partnerships in weight management and body composition to support long-term growth. While these new standards and heightened focus on cancer survivorship is great, it's on the commercial and clinical team to execute on these tailwinds. And lastly, number three, what makes this durable is the platform itself, 662 devices in leading U.S. health care systems, 27 IDN partnerships, representing over 1,400 hospital opportunities and an infrastructure we can leverage across cancer, heart health and body composition without rebuilding from scratch for each one. Now as we move to Slide 6. On the financials, McGregor will go through some of these in detail shortly in the presentation. But clearly, there were some positives as well as some areas we need to do better. The sales metrics are encouraging, but definitely below where we would like to see them. Quarter-on-quarter revenue increased, and we have seen a reduction in operating cash flow, consistent with expectations. Regarding sales, overall unit sales was 47 units, up on the prior quarter, with 28 units sold in the U.S. compared with 36 in the prior quarter. Again, this is not something we, as a team, are satisfied with. We continue to see growth in our average price attached to contract renewals. Later in the webinar, I will share more on our commercial leadership in sales and the action plan with our field team. On the reimbursement side, while there's been no change during the quarter in the level of reimbursement, national coverage is over 95%, representing 331 million covered lives. This level of coverage is sufficient to support new customer acquisition and reengagement with existing accounts, giving our clinical teams a concrete reason to help our customers increase utilization. Turning to Slide 7 to discuss lymphedema and cancer survivorship. Although sales in the quarter fell short of the company's expectations, there are converging factors, both externally and internally that continue to confirm our confidence with the opportunity across cancer survivorship and our lymphedema plus strategy. Most notably, the National Accreditation Program for Breast Centers, otherwise known as the NAPBC, released its 2027 standards, including a new standard 5.8, which requires their 540 accredited centers to implement a lymphedema surveillance program for all breast cancer patients at risk. Our recent FDA clearance for sarcopenia risk assessment opens the door to providers beyond breast surgeons that are monitoring patients during treatment and in long-term recovery, supporting the clinical pathway to execute our lymphedema plus strategy. With new clinical and sales leadership in place, we're addressing performance-driven turnover within the sales team and building the right team to execute on this opportunity. Let's take a closer look at the new NAPBC standard in Slide 8. So the new 5.8 lymphedema assessment standard is required. This isn't an optional or nice to have or a recommendation. In addition, existing return to wellness and surveillance standards can also be addressed with the implementation of a lymphedema surveillance program, giving us the ability to support opportunities in addressing 3 standards with 1 program using SOZO. Looking forward to Nicole talking more about that at the end of the call. This is referenced directly in this standard and is the only method referenced that is objective, fits into existing clinical workflow and is reimbursed. With a January 2028 date for compliance, this is the priority target for the commercial opportunities as we are currently only 25% penetrated in these NAPBC sites. Moving to Slide 9 and our new sarcopenia risk indication. Our recent FDA clearance for sarcopenia risk assessment as a clinically relevant output before, during and after cancer treatment as low muscle mass is directly linked to worse outcomes in chemotherapy treatment and tolerance, long-term health and the risk of cancer recurrence. We have already witnessed how this expanded indication is having an impact with opportunities and unlocking access to key stakeholders beyond lymphedema. For example, and thinking back to the stakeholder map that I'll discuss a bit later, but showed you all last quarter, our sales team has mentioned that more and more of these NAPP discussions, guideline-driven meetings are now including multiple full stakeholders across surgery, radiation oncology, medical oncology, nurse navigation and cancer service line directors. That is how you advance deals, having all the stakeholders involved in the conversation from the outset versus relying on a single surgeon champion expecting them to drive broad compliance and implementation. Slide 10, McGregor. I'll speak to our leadership team, which in my opinion, this slide is as important, if not more important than any slide in this deck. And I've had this tone since the day I took the job and what I focus on. We now have a complete commercial leadership team with 2 key roles added since last quarter. And as you can see, just under half our leadership team has been here less than 6 months. [ Gena Kimball ] and commercial ops is the veteran of that group, having started in June and [ Lake Ato ] started less than 4 months ago in July. Dr. Nicole Stout joins us as Chief Clinical Innovation Officer effective November 1. Nicole is an internationally recognized authority and cancer shift and rehabilitation and has built a network of C-suite and program leaders in cancer care and survivorship in her 25 years in this field. Nicole will show more about her background and insights to this segment at the end of the call. Eric Johnson joined the company in August as Head of Sales, replacing prior sales leadership. Eric brings more than 15 years of med tech sales leadership experience, 12 of those years at Hologic, where he consistently exceeded sales targets. Eric's first priority has been to assess and rebuild our sales team, and we're excited about the new hires that Eric is working to bring on to the team as well as some of our more tenured reps that are liking Eric's leadership style and focus. I believe we have the right commercial leadership team in place to capitalize on the cancer survivorship opportunity in front of us. With the convergence of new standards, our clinical offering and this leadership team, we are well positioned to win. I'll also note that it's been fun for me personally to watch the rest of the leadership team, a group of talented people that I inherited 6 short months ago, blend extremely well with the newer members as we all share a fear sense of alignment and accountability to one another. We have the full team together in a earlier this month. Nicole [indiscernible] was there as well as McGregor and the step change in culture was palpable. That's what wins and it sets the tone from the top down for how every team and function needs to operate in this organization. Let's go back to Slide 11 on the key stakeholder map I just discussed and talked about in last quarter's update. We know this is a complex sale. But this shouldn't scare you. I got news for you. Most sales in U.S. med tech are complex. The business I most recently was running had numerous customer stakeholders involved in every sale, and the sales force members are leaders that couldn't pay across those different levels simply didn't last long. For us to be successful, we'll need to effectively move beyond our historical champion, the breast surgeon to who and where in the patient is being cared for along their diagnosis, treatment and survivorship journey. There can and will be multiple clinical champions driving a system-wide opportunity. The breast surgeon remains an important piece of that map. As I previously mentioned a few pages ago, we have already seen the impact of our new [ sarcopenial ] risk assessment indication, opening access to medical oncology and survivorship leaders where lymphedema alone doesn't capture the appropriate mind share. With our customer success, sales and clinical leadership team in place, we're well positioned to quickly understand what these care pathways look like within our customer base and new opportunities. This is what allows us to position SOZO as an enterprise solution and the anchor for longitudinal objective measuring across the patient treatment and survivorship journey. Now to Slide 12 to discuss the progress we're making in heart health. While there were no heart failure sales this quarter, our focus remains on building the clinical evidence and customer foundation for scalable adoption. We are working with a prominent large health system with 44 heart failure clinics actively enrolling patients in 2 studies, the first using SOZO in our patients with frailty and the second using SOZO in comparison with the market-leading implantable pulmonary artery pressure monitoring system. This is coupled with our FDA application to expand our clinical indication across additional cardiovascular conditions. Along with the clinical evidence generation, we're also pursuing collaboration with leading device companies in this space to conduct bench testing alongside active implantable technologies. With the goal of broadening our patient population reach for SOZO Pro. We're progressing multiple multisystem opportunities and increasing visibility with participation in 2 national heart failure conferences in the last 4 months. We remain deliberately paced with our investment in heart health until the segment demonstrates the momentum to warrant investment at scale. The small customer-facing team focused on this every day remains excited about the future. Let's turn to Slide 13 to discuss weight management and body composition. So we continue to see significant opportunity across our 4 key body composition segments primary care, sports medicine and research, wellness and longevity and medically managed weight loss. Although sales fell short of expectations this quarter, the FDA clearance for sarcopenia risk assessment, together with the existing indication to assess body composition in unhealthy patient populations extends the clinical relevance of the SOZO platform with GLP therapies as a common threat across these segments. We are excited about our partnership with Dr. Jessica Shepherd. Dr. Jessica's Shepherd is a recognized leader in longevity Medicine and OB/GYN by background, Chief Medical Officer for HIMSS Hers and the CEO of SanctaMed and Wellness in Texas. Dr. Shepherd will be instrumental as a SOZO advocate in the longevity women's health and concierge medicine space. Dr. Shepherd is delivering an education session and partnership with ImpediMed at the upcoming American College of Lifestyle Medicine Conference next week in Orlando, Florida. Having personally worked with Dr. Shepherd in the past, her impact is consistently felt and it's an honor to be working with her again. In addition, we have upcoming presence at obesity medicine and wellness and longevity national conferences. As we're learning across these market segments, we have rightsized our direct body composition sales team and in parallel, are pursuing partnerships with larger strategic players to drive scale more efficiently and control our direct cost basis. We can now go to Slide 15, and McGregor will go through the financials. McGregor, I'll kick it to you.

Thanks very much, Erik. So this is the cash flow slide. And from this, you can see that the total operating cash outflow for the quarter came in at $2.5 million, which was in line with our expectations and down $2.4 million versus the last quarter. The main drivers of the lower operating cash outflow were lower product-related costs, which were down $800,000 compared with quarter 4. And this is mostly driven by the timing of inventory purchases. And staff costs, which are the largest cost component of the business and were down $1.2 million compared with quarter 4. The quarter 1 net cash outflow reflects the actions implemented to reduce the operating cost base by approximately on a full year basis. The company's cash balance at 30 September was $11.6 million, equating to [ 4.7 ] quarters of operating cash flow. On to TCV and ARR. TCV for the quarter was $4.4 million compared with $5.5 million in quarter 4. The reduction was driven by a lower volume of contracts that were due for renewal in the period. Pleasingly, on average, there was an 18% price increase for contracts that were renewed during the period. As previously mentioned, we sold 47 units in the quarter, of which 28 were in the U.S. and 19 in our Rest of World markets. Regarding annual recurring revenue, contracts in place at 30 September 26 are expected to generate ARR of $14.9 million for the 12 months to 30 September '27. In constant currency terms compared with quarter 1 FY '26 a year ago, ARR was $16.1 million, up 12%. As Erik has already discussed unit sales, you can see the installed base is close to 1,300 units with 662 units placed in the U.S. And patient testing continues to trend upward 8% on the prior quarter with a 3-year compound growth rate of 17%. So before handing back to Erik, I'd like to add my own reflections. The challenges we've faced have forced us to implement changes that strengthen the business for the long term. We now have a sharper focus, a stronger leadership team and have significantly improved our cost base. I'm very excited that the work we are doing is building on a platform for sustained growth and long-term value creation. So I just pass back to you, Erik.

All right. Thank you, McGregor. I appreciate those thoughts. All right, over to Slide 19, some additional thoughts here on the Q2 outlook. So every week that I spend with customers, KOLs, our team, the message is consistent. Cancer survivorship needs an objective clinical anchor. Treatment impacts patients in many ways from lymphedema to muscle loss to changes in body composition and the customers we're talking to are aligned that caregivers and patients need a reliable way to measure and manage all of it. That's exactly what SOZO does. With the new standards that will drive lymphedema surveillance programs within NAPBC accredited sites, we have a unique opportunity to drive SOZO as that objective anchor across the [ river ] ship programs. Our pipeline remains strong and continues to grow, and it's clear and greener than ever, but we need a highly engaged and talented sales reps in every seat to go execute. With the new sales leader, several newer experienced reps now in place and more in the hiring process, there is a ramp to meaningful countrywide productivity into the larger system-wide deals this opportunity demands. We're solidifying strategic and KOL partnerships in the weight management and body comp market segments and have validated that we're in the right segments with the right solution. And we're building the clinical evidence, industry collaboration and regulatory clearance in the heart health segment to support commercial reach and broaden the patient populations the technology addresses. Our sales performance this past quarter was not acceptable. Significant change within our commercial and leadership teams was absolutely necessary to win in this market, and I own that decision. As a consequence, our path to cash flow breakeven may be impacted, and we're actively evaluating a range of initiatives to mitigate that. We have the right leadership, talent and strategy in place and a clear plan to execute against it. My priorities remain clear as I communicated last quarter, the right talent in the right seats, disciplined processes and execution and a relentless focus on results. Make no mistake, the urgency inside this company has never been higher and neither has my conviction in this opportunity. So thank you to our investors for your continued support and to our employees around the world for their commitment in achieving our shared goals. Before I open the webinar for questions, I'd like to invite Nicole stat to introduce herself and share her thoughts as to why SOZO should become the standard of care in cancer survivorship. Nicole Stout joining us as Chief Clinical Innovation Officer, says a lot about where this company is headed. Nicole is one of the most respected voices in cancer survivorship and rehabilitation in the world, and she brings a unique combination of clinical and business strategy. That matters for our customers, for our team and for the credibility of what we're building. Over to you, Nicole, and welcome.

Thank you so much, Erik. Thanks, McGregor. Good day, everyone. I'm obviously thrilled to be here. as the new Chief Clinical Innovation Officer, I have almost a 30-year history in this field of breast cancer survivorship, cancer survivorship in lymphoma. And I've known the cement company and the device since its inception. I know the research. And I've seen the evolution of that technology through the research I've done, the work that I've conducted and I have no doubt that this is the best the technology has ever looked in my mind. And that's the reason that I'm here. I see unprecedented opportunity for this technology going far beyond lymphedema, far beyond breast cancer-related lymphedema. Now I know our intent is expansion in lymphedema, of course, an expansion in breast cancer, and that's our core, and we will succeed there. But more than that, and you see my background here, I have been around the world across the cancer care continuum, and I recognize the longitudinal needs that cancer survivors experience I also recognize how unmet many of those needs are. And that drives me every day to do better in my clinical work and in my research. Now you can look at all the papers that I published and that's fantastic. But at the end of the day, what matters is implementation in our clinical sites. What matters is getting patients measured with this device in an ongoing interval fashion so that we can detect meaningful change early and we can intervene. Now that's been important in the lymphedema world, but it becomes more important now with expanded indications in heart failure, body composition, especially in sarcopenia. MacGregor, if you could go to the next slide, please. So what I think about is the patient journey. And Erik [indiscernible] to that very complex stakeholder map. I don't think of that so much as a complex math. I think of it as an interconnected continuum of care. And along that care continuum, we have multiple points and multiple stakeholders that we now have the capability to engage in a way that we never had opportunity in the past. Lymphedema was centralized in the breast surgical clinic necessarily sell. That was the individual, the provider most concerned with a follow-on after axillary dissection in sentinel [ lymph ] biopsies to monitor for lymphedema happened in the breast surgical clinic. And now that we've expanded indications in sarcopenia and body composition, it makes us relevant, more relevant throughout that entire continuum of care. Medical oncologists care about what happens to their patient's body composition so that they don't have to dose reduce their chemotherapy. Medical oncologists care about what happens to patients on anti-hormonal therapies because over time, those individuals lose lean mass. When they lose lean mass, their performance data suffers, their cancer outcomes are core. That's the case that we make in breast cancer. We now have the right to be in that space, 1 to 2 [indiscernible] SOZO becomes the clinical anchor for a survivorship program. I've been in the survivorship space for decades. And survivorship as a program service line has languished and our capability in implementing service lines. It's been tough to do. The reason, as I reflect on 25-plus years, I think one of the reasons is we have not had a clinical objective point-of-care measure that can help to guide clinical decision-making with the sensitivity and specificity that we have in SOZO now, and that isn't just about lymphedema. So when we talk about body composition and we talk about heart health, we're not just talking about the longitudinal pathways that a breast cancer patient follows through medical oncology, radiation oncology and beyond, as you see here. We're talking about every cancer patient. We're talking about every prostate patient. We're talking about every lung every colorectal and GI cancer and many, many others. So the longitudinal nature of ongoing interval surveillance becomes the anchor for how we conduct survivorship care. It's the first time we've had a clinical objective measure in this space. And that is just the beginning because as Erik alluded to, heart health, sarcopenia assessment in our GLP-1 patient population, we have tremendous opportunity to put our device to put our sales teams, to put our progress into different rooms, in different clinics and to have those conversations on a much larger scale within our health systems to get these devices to wherever the patient happens to be moving to within the system. So breast cancer remains our core. Proceeding and following the patient along that journey, though, now becomes a challenge, and the 1 that I'm sure that we're going to meet through this interval surveillance anchor to a SOZO device. So I'm thrilled to be a part of this because I see unprecedented opportunity for us to grow in sale. And I'm thrilled to hand it back to Erik. And I'm thrilled to be here and to see the questions that you all have. Thank you for the time.

Absolutely. Let's open it up for questions, McGregor.

Thanks, Eric, and thanks, Nicole. We do have a couple of questions that are in a similar vein here. One is, well, they're both asking around sales for quarter 2, how are they looking for the start of the quarter and how is the remainder of this quarter tracking.

Yes. I think we got a couple in today. I think it's similar now. I'm in my third time doing this first time I was a weekend on the job, and I've kind of seen this pattern of -- we forecast a bunch, a bunch fall out at the end of the quarter, we missed the number and then a few of those trickle in early on in the quarter. So kind of similar story. What I haven't liked is kind of an erie of lag or pause or quiet period throughout the middle of the quarter. And that's just -- it's not sustainable, and it's not -- it shows the lack of account control and sales process and discipline there in advancing these deals versus begging for signature at the end of the quarter to get it through. So I would say, going back to my comments, I like the pipeline. I like with the NAPBC how clean things are looking and our messaging and what we're doing. But we're also down -- we fish this quarter down 4 sales reps and through healthy turnover, I would say, and we're in the process of hiring those sales reps and getting them ramped up. So that's where we sit for the start of the quarter.