Atomo Diagnostics Limited (AT1) Earnings Call Transcript

So welcome, everyone. We're really pleased to start the Atomo Diagnostics webinar where we're going to talk about the fiscal year 2026 results and give you an update on the strategy. I'm really pleased to see our Chairman, Patrick Cook, is on the line, also John Kelly and John Keith, our former Chairman. Welcome to everyone and to all the shareholders that are here today. I think most of you know our Financial Controller, Suzy Elhlou. She'll be presenting the numbers a little bit later in the presentation. I'm going to give an update on the business as well as the evolving strategic focus for Atomo going forward. In terms of introductions, I've been the interim CEO for about a month now. I've spent more than 25 years in the diagnostic and life science tools industry and have a science and finance background. I hold a PhD in molecular genetics. I began my career as a stock analyst at Deutsche Bank, covering life science tools companies on a global basis. I spent time in senior executive roles at companies like Invitrogen, which now part of Life -- which are now part of Thermo Fisher, QIAGEN, Abcam, Charles River Labs, but my real passion is for mid-market companies, companies like Atomo that have really game-changing technologies and can make a big impact on the market. So I'm really excited to be here. I'm really happy to be talking to you about Atomo today, and I think we're ready to jump into the presentation. So if we go back to the first slide, thank you. Fiscal 2026 at a high level was a really strong transitional year, where multiple and growing revenue streams provided more than 41% growth. Our EBITDA improved by 39% as revenues started covering the majority of our operating costs. There was strong cash generation in the business from both sales and through our fundraising activities. And in terms of the business highlights, which we'll go through throughout the presentation, we're starting to see a really diversified revenue stream from both HIV and OEM, and our R&D pipeline is making significant progress. I want to thank John Kelly for passing the baton in terms of leadership of Atomo. His vision for an easier point-of-care device was visionary and really turning this concept into a company into a regulated device that was approved and marketed on a global basis has really had a big impact on patients for the better. And it's just usability that provided 99% concordance between professional and nonprofessional users in the FebriDx clinical trials really is poised to improve the performance of rapid diagnostics on a decentralized testing basis around the globe. So thank you, John. In terms of reflections over the last year, Atomo experienced accelerating revenue growth, improving economics, prudent capital management with its investments in infrastructure and R&D for new product innovation. We now have more and growing visibility on our revenue growth and our new products are advancing through the pipeline. And important to you, the shareholders, is that we're building a sustainable basis and new product pipeline that will drive increasing revenue growth as each product is layered upon the previous to compound the enterprise value and the stock price over time. So who is Atomo today? The company is really evolving and evolving rapidly. We are a commercial stage diagnostic company, and we're starting to realize the financial promise of that platform technology. We're growing our pipeline of products and we're driving current sales and future growth. If we go to the next slide, please. In terms of our diagnostic pipeline, you can see that we do have several products already in the market, and we're rapidly growing our pipeline. Our Gen 3 HIV products are registered and sold on a global basis outside of the United States. These are experiencing double-digit growth. We're doing very active feasibility work for a Gen 4 HIV product. We're excited about the possibilities here to add to our portfolio. We are in the market with the blood pregnancy test for early detection trough blood or if the patient is potentially incapacitated for professional years and we're continuing to drive those sales. Our active syphilis product, which we'll go into more detail later, is very differentiated from the other syphilis products in the market. It does detect whether you have an active case versus whether you've had a previous infection, and that will be a really ground breaking and important test to get to market. We do anticipate starting on clinical trials for that product on schedule in the beginning of calendar year 2027. Our liver ALT test is progressing nicely as well and we're doing early feasibility work on a variety of new targets. Some of the ones we're contemplating and looking at are things like HBV and HCV. You've heard a lot about our partner, Lumos Diagnostics and the FebriDx products. We're really excited about their progress. I'm pleased to see that their success is also our success. It's really that strong usability, 99% concordance between professional and nonprofessional that we believe is going to drive a lot of the adoption in that marketplace. And we're looking forward to continue to see the results as flu season kicks off in the U.S. We have 2 products in the pipeline through other OEM partners, the Ferritin product and another partner that we hope to announce somewhere in the near term, both of those are also pretty exciting and large opportunities for Atomo. FebriDx. I think I'm not going to spend a lot of time on it. That's really the Lumos Diagnostics story, but we are really excited to see how that -- the fact that they got their CLIA waiver and how that product is progressing this year. And we already talked a little bit about the Ferritin and the U.K. customer. When you look at the company and the HIV portfolio, revenue grew very strongly, 21% year-over-year to a total of $2.8 million. Our OEM product growth, largely driven by FebriDx grew over 200% to $2.2 million. So we're very excited at the overall growth of the diversified product lines. We've seen a lot of activity also in our pharmacy side, and we continue to sign up new partners in this space as well. Our syphilis product has continued to advance through the pipeline. We are in the process of finalizing all the analytical data and studies, the transfer to manufacturing and fully on target to start of clinical trials at the beginning of next year. The ALT liver test is in the early stage of development. But again, we believe this is a very large indication, and we'll be continuing to move it through the pipeline aggressively. FebriDx continues to move forward on target and we're actively waiting to see what flu season brings this year. In terms of the Ferritin opportunity, this product is also moving forward with our Canadian partner, Chromacare, it's a rapid test that measures the level of Ferritin from a patient blood sample. And the U.K. product is also moving forward, we have been looking forward to hopefully announcing more information on this one in the near term. In terms of operational updates, we've been very focused on making the right capital improvements to increase our capacity and then also to bring the Blister Machine here to Sydney. That's been completed. The validations are completed. We're also in the process of working on new tooling that will allow us to do smaller blister packages that will give us more flexibility for multi-analyte testing and increased sensitivity going forward. And when we think about where we're going in the future, where are we heading? First, we're going to unlock aggressive new product development. And this is one of the keys to our future success for unlocking more value for shareholders. We're focused on more partnerships, so OEM development projects, partners for new products to help us take to the U.S. and other markets. We're focused on operational efficiency, increasing capacity and reducing our cost of goods as well as increasing our capabilities and our flexibility that will allow new assay formats going forward. We're working on commercial execution, so continuing to build out the team and the capabilities there. And this is to support our current products as well as to lay the groundwork for our future product launches. We're focused on long-term value creation, increasing shareholder support and dialogue and then more Investor Relations activity. And now I will hand it over to Suzy to talk about the financials.

Thanks, Cheri. Well, hi all, and thank you again for joining us. It's a pleasure to present our financial results. So FY '26 was a pivotal year for Atomo, delivering strong revenue growth, disciplined cost control and a substantial improvement in EBITDA as we move closer to breakeven. So starting up with the profit and loss. FY '26 delivered strong results, with revenue increasing 41% to $5.3 million, and that's reflecting our continued momentum that we are seeing across our commercial channels and growing demand for our products for both HIV test and OEM technologies. In saying that, however, gross margin did reduce from 51% to 35%. There are 2 key factors underpinning this movement that I do want to highlight to you all. Firstly, the prior year included approximately $340,000 of high-margin one-off license fees and development fee revenue. Excluding these ad-hoc items, the year-on-year margin decline was considerably less pronounced on that front. And secondly, the sales mix will skewed towards more of our HIV global health and LMIC market revenue during FY '26. Whilst these remain strategically important growth segments for Atomo, they do, however, actually carry lower margins in some of our other revenue streams. So which, as a result, contributed to the overall margin softness that we observed during the period. So looking further down the P&L. Other income increased 47% to more than $2.2 million. So this reflects a combination of our non-dilutive R&D tax rebate and government grant funding that we received during the period under the active syphilis development program. So together, these funding sources supported our R&D activities and helped offset our development costs as we continue to invest in our future product pipelines and offerings. So pleasingly, we also maintain a strong cost focus -- a strong focus on cost discipline throughout the year. Employee costs and professional fees reduced by a combined amount of $840,000, so roughly 20% year-on-year, and that's reflective of our continued commitment to improving operating leverage while still investing in our growth opportunities. So as a result, as mentioned, underlying EBITDA improved 39% to a loss of just over $2 million. So this is yet another meaningful step towards profitability that we're taking. Overall, the FY '26 results demonstrates the business that is growing revenue, we're investing in future products and we're controlling our costs. While product mix remains a near-term influence on our gross margin, the underlying business fundamentals continues to grow and strengthen, and this positions Atomo well for sustainable growth in the future. So now moving on to the balance sheet. We ended the period with $3.7 million in the bank with no debt. Our balance sheet asset base remains relatively clear and consistent with prior period. This brings me to the cash flow activities for the period. Excluding the capital funding, monthly cash burn averaged around $290,000 per month. This was up from prior period of roughly $170,000 million, and that's reflective of our resources directed to building pipeline opportunities and short- and medium-term revenue streams there. So overall receipts for the period totaled $10.2 million, and that was made up of $4.6 million from customer receipts, $875,000 from the R&D tax rebate, a further $660,000 from our nondilutive CRC-P funding and $4 million in net of capital raised, net of costs raised during the period there. On the outflow side, total cash payments was $9.7 million, of which $4.1 million was for inventory to support revenue growth and demand, that we had coming through the business and $5.6 million of operating expenditure, and that was directed towards continued investment in our product development, regulatory activities and commercial expansion. So in taking a step back and looking at what FY '26 was for us. FY '26 was a transformational year for Atomo, delivering over 40% revenue growth while significantly improving EBITDA and maintaining a debt-free balance sheet. As I've shown on the EBITDA graph in the bottom right corner, EBITDA has substantially improved year-on-year with over 50% improvement over the last 24 months alone. We are seeing strong momentum across the established HIV and OEM revenue streams, while simultaneously investing in the next generation of growth through our syphilis and liver monitoring programs. So as we move into FY '27, our priorities are clear. We will continue to drive revenue growth, restore margin strength and maintain rigorous cost oversight. So on that note, I'll hand back to Cheri, and we can run through some questions at the end.

Yes. I'll love to wrap-up. Thank you, Suzy. And what we're really focused on is building a platform and company that will provide sustainable growth. Along with that is strong revenue growth and momentum that we saw in this year. And we have good visibility for as we move forward. We're improving the operating leverage in the business. So we're making smart decisions about how we invest our dollars into new product innovation and capacity and other operating improvements. We're really building a business that's positioned for scale. We need to be able to grow and grow rapidly for our own products and for our customers' products. We do have confidence in the sustainable growth that we're experiencing. We are reinvesting that growth into innovation, which we talked quite a bit about. We are expanding the new product pipeline. It's one of our most critical initiatives. And what we're really focused on is increasing the value within the company. And with that, the enterprise value and then with that, the stock price as the company grows over the next many years. So we just want to thank all of you for attending. We're happy to take a few questions. And we had a few that came in before the webinar started. So maybe we'll start there.

Yes. So we've got some webinar questions. Just running through the list. The first one was, I noticed that Fiji has a major problem with HIV infections. Is this a country target for sales?

Yes. And I would say it's been in the news, of course, and there is a very large crisis. It's a very high prevalence now of HIV in Fiji. And we are focused on accessing that through our networks and it is definitely a target of ours for sales and also to see if we can help make a difference.

The next question that we have, will the time be open for mergers and acquisitions offer? Is that something the Board might be planning for?