Artrya Limited (AYA) Earnings Call Transcript

Hello, and welcome everyone to the Artrya Investor Call for the September 2026 quarterly results and outlook. My name is David Allen from Hawkesbury Partners. I'm going to be your host for today's call. And joining us is John Konstantopoulos, CEO and Co-Founder, in Atlanta, Georgia. And with him, we also have Clayton Hatch, CFO of Artrya. I'd like to add this call that's being recorded today. [Operator Instructions] We will also have a recording of today's call on Artrya's website for future viewing. Now I'd like to hand over to John Konstantopoulos, CEO of Artrya to start off today's call.

Thanks, David, and thanks, everybody, for joining. And as David mentioned, I'm in Atlanta here in Georgia probably for the next 7 to 8 weeks, really here to move a number of initiatives along that we've been focusing on. But more importantly, we just want to focus on this past quarter that we've just finished off. For us, commercial execution in the U.S., as we've always mentioned, has been a major priority, and we've made quite a lot of progress during this quarter. We signed our largest customer to date and continued the rollout across many of our foundation customers and pleasingly, we also saw a material increase in Plaque utilization following the Phase 1 of the preauthorization workflow implementation at Tanner and we continue to build a growing pipeline of inbound interest from U.S. health care systems here in the U.S. And I'll take you through each of these different initiatives as we go forward before I hand over to Clayton to cover some of the financials. So going through the commercial and execution piece, including Huntsville, as I mentioned and as many of you heard in the previous call, we started our first SAPPHIRE partner as a commercial customer, the Huntsville hospital health system. And post the end of the quarter, part of that agreement was a 5-year commercial agreement that makes them our fourth largest commercial customer in the U.S. And what's really important about that is as part of our go-to-market strategy, we've always been mentioning that SAPPHIRE has been a very important piece to that. So it was very pleasing that we got Huntsville signed up as a commercial customer on a 5-year agreement, a lot earlier than we expected and what the market was expecting as well. And to give you a sense of the scale of Huntsville, they span about 15 hospitals across Alabama and Tennessee to have 19 heart centers with more than about 1,000 cardiac staff and about 58 cardiologists. They conduct roughly about 60,000 noninvasive cardiology tests annually. That includes roughly about 10,000 CCTA [ stands ]. And where we are going with them at the moment is the next step in -- the implementation piece is integration of Salix across their network so that they can start using it clinically, and that means that we need to formalize the full integration into [ packs ] across the hospital system as well as their electronic medical record. We will look at working through the workflow processes and onboarding the doctors as well as implementing the Phase 2 of the reimbursement pathway that I mentioned a little earlier. And that's all a major focus for our customer success team. A little bit more about the agreements. As I mentioned, it's a 5-year agreement with a minimum contract value of $0.5 million over the 5 years. That is only for the Salix Coronary Anatomy platform. We also have, in addition to that, as part of this agreement, the usage of the Salix Coronary Plaque module, which will generate additional fee per scan revenue as well as Salix Coronary Plaque -- sorry, Salix Coronary Flow module once we've cleared that. It's important that we've structured this way because it gives us a base for recurring revenue that makes the platform sticky within the hospital system and it allows us then to ramp through the [ pipe ] scan process that we have and the business model that we have as we get traction within the hospital system. Before I move on to some of the other highlights of this quarter, we're also progressing some of the other SAPPHIRE participants and many of them in varying levels of maturity and Huntsville was just 1 of them. It does give us the ability to use them as a reference. And we've seen some substantial interest from other hospital systems since we've signed that's the Huntsville Heart Center. Moving on to our foundation customers and the rollout as well as the utilization. Tanner Health is now fully integrated and all CCTA scan volumes are being processed through Salix Coronary Anatomy. And you can see that in 1 of the graphs that we had as part of the quarterly report. Our CCTA volumes are also growing since they started using Salix. Our focus has shifted heavily towards plaque utilization within Tanner and as well as in Northeast Georgia, as we start to roll out the platform across their remaining hospital systems. And when the Phase 2 implementation went live within the September month of this last quarter, we saw quite a significant increase in applied utilization at Tanner. And that's pleasing because we're starting to see that moving into the October month, and we hope that will keep on moving into the subsequent months and quarters as we go forward. One of the big benefits that we see within the platform is that it's really making a big difference to the commission's workflow. We're seeing some substantial increase in efficiencies within the hospital system at Tanner and that's really shifting into a lot of the other phases that they're trying to push for, which means that they want to use Plaque more and when [ float ] is clear, they want to use Flow more as well. At Northeast Georgia Health System the Salix Coronary Anatomy platform was deployed at their main campus in Gainesville at the beginning of the quarter. That site accounts for the majority of the scan volumes across the network. And we're now rolling out the remaining Northeast Georgia sites, which the first part started this past week, last Friday, when we had a big session with me, the cardiologists at the remaining sites, and that will continue to roll out across their network as we finalize the onboarding of those remaining doctors and start getting them using the platform and then using and utilizing the Plaque module as well. At Cone Health, we're working very closely with the clinical and IT teams to progress the implementation towards completion. The process was initially slowed down by Cone's transition into Kaiser Permanente, it's probably the largest hospital system in the U.S. But Cone Health has confirmed and continues to reconfirm that the implementation of Salix remains a key priority for them because of the workflow benefits that it provides them and the opportunity that they see within the hospital system. So across China, Northeast Georgia, Cone and now Huntsville, our commercial focus is very, very clear. We want to make sure that we're bringing the remaining hospital systems live. We want to make sure that we're increasing the number of CCTA studies processed through Salix, and we also want to make sure that we're driving the adoption of Salix Coronary Plaque module as we start finalizing the Phase 2 reimbursement module feature that goes live in the next coming months. And those are the major priorities for us that as we accelerate utilization and customer conversion, we'll start seeing our revenue generation really scale in the U.S. as well. On SAPPHIRE, we continue to progress the study during the quarter with the participation -- with [ me and the ] participating U.S. health care systems gaining early access to Salix and really starting to get used to that. We've onboarded many of the doctors to be able to play around with the software and could use it as well before the actual study kicks off. Our customer support team is focused on integrating the platform in many of these hospital systems that they can actually get some of the scans and reviewing their own scans as part of this training that we've got with them, but also continues to progress in close collaboration, both from a clinical perspective, but also commercially as well and we're starting to move many of those across the commercial maturity pathway, as I mentioned a little earlier. I do also want to mention that the SAPPHIRE study still remains a key pipeline generation for us, and we're very, very engaged with many of the SAPPHIRE partners to move them along commercially while the clinical study moves along and does it own thing. The 1 thing that I want to really address now is Salix Coronary Flow and it's a major discussion point, and I really want to make sure that I'm clear with some of the comments that we've made previously. And in previous ASX releases, we've mentioned that an FDA submission would be imminent with clear anticipated by the end of 2026. And I do want to explain what's clearly changed since then. So subsequent to the review of the clinical data when we did -- when we received something coming in and just post the imminent statement, we noticed some inconsistencies in some of the expert [ reader ] assessments for 1 of the clinical substudies, which is a reader -- repeatable and reproducibility study. And then taking into that into account, together with some of the recent [ break free ] outcomes that happened in the sector, we decided that we want to make sure that we added some further rigor into the study and clinical package and added a reader study as part of this so that we could really strengthen that and bring further evidence beyond just what the FDA asked of us before we file. The additional reader study wasn't requested by the FDA. However, from our perspective, as a prudent step as we've chosen to take a very comprehensive and high-quality approach to the submission and address any potential clinical requirements or evidence that the FDM may ask of us upfront so that they're not asking us post emission. And as a result, the previously submission date that we put forward has been extended, and we'll update the market when Salix Coronary Flow submission is lodged with the FDA and also when it is cleared. It's also important to put Flow in context of the broader business as well. The Coronary Flow module is an additional module within the Salix Plaque platform. our whole commercialization strategy is not dependent on Flow only and the clearance of Flow only. We're getting a lot of interest from Anatomy and Plaque, which are now both FDA-cleared and commercialized and we continue to push forward while we push forward with the FDA submission process, and we're confident that once that is cleared, the FDA -- Salix Coronary Flow model is cleared, that will be an additional tool that we can provide to the doctors to use in addition to the Salix Coronary Anatomy module as well as the Plaque module. I'll now hand over to Clayton to talk about some of the financial results.

Thanks, John, and thanks to everyone for joining the call today. It's great to be presenting to you for the first time as CFO of Artrya. I'll now run through the key financial activities for the quarter as reported in our Appendix 4C lodged with the ASX this morning. The numbers I'm referring to are all in Australian dollars and in accordance with ASX listing rules, these are not audited. But before I do, I'd like to add a couple of comments on where we are in our early commercial journey and how I feel the team is progressing. Firstly, I'm greatly encouraged by the early commercial success, especially in the U.S. health industry, which is a notoriously slow moving and takes a fair amount of time to gain market acceptance. So far, we have moved quicker and are more established in the first 12 to 18 months of commercialization than I [ stayed ] in my previous roles in the U.S. health care. Secondly, following my recent visit of hospitals in the U.S., I'm [ buoyed ] by our best-in-class technology platform as doctors deal with the ever-increasing workload and require efficiency gains from technology platforms. The Artrya platform was a major attraction for me joining the company, and I'm pleased to inform shareholders that this view was solidified on my recent US trip. And finally, CCTA volumes are increasing at such a rapid rate. The total addressable market is ever increasing, and this presents a huge opportunity for Artrya, which I'm really excited about. Moving on to the financials and a quick reminder that this quarterly report is based on cash receipts and not revenue -- net revenue recognition to the September quarter. In terms of our operating cash flows, customer receipts of $84,000 are almost entirely receipts of subscription revenue from our Salix Coronary Anatomy platform for Tanner Health and Northeast Georgia with a small number of receipts from Plaque revenues at Tanner Health. As John mentioned, once the preauthorization upgrade went live in mid-September, we've already seen a marked uptick in Plaque volumes. So those receipts will track increased Plaque reliefs in the future quarters. We also had cash inflows of $500,000 from interest on our $30 million bank term deposit, which we expect to bring in around $2 million interest for the year. On operating costs, excluding the interest income received, these were $7.3 million, up from $6.4 million last quarter, which reflects our growing investment in the U.S. commercialization activities. The main driver was increased staff costs, which were $3.6 million, in line with head count growth in both Australia and the U.S. as well as our annual paying [ process ] which began at the start of the financial year. Advertising and marketing costs also increased by $200,000 to $400,000 as our commercial and customer engagement activity continued to ramp up. Offsetting this, R&D expenditure reduced by $300,000 to $800,000 for the quarter. When we take all of this into effect, our total net cash outflows for the quarter were $6.9 million. On the 30th of September 2026, we held a total of $67.2 million in cash and term deposits. In addition, we will be lodging our claim for the FY '26 R&D tax rebate later this month, and we estimate receiving a further $4.8 million in cash in early 2027. So we remain well funded for the U.S. rollout and execution and for all of our group activities. I'll now hand back to John to discuss our outlook and priorities.

Thanks, Clayton. And before I get to what our focus is going forward, as part of the quarter, we're also very pleased to be included into the S&P/ASX 300 index, which is a really major step for us forward as a company as we grow and as we scale as a business. We also welcomed Helen Kurincic to the Board as a Nonexecutive Director. She brings more than 30 years of leadership experience across radiology, health care, specialist medicine as well as financial markets. And as part of that, we've also started strengthening the governance of our Board with the forming of the Audit and Risk Committee as well as a Remuneration and Nomination Committee. From an investor engagement perspective, we presented at the BIO Shares Conference in August and also had a [ non-deal ] roadshow following our FY '26 results. Since the end of the quarter, we presented at the Canaccord Drug and Device Conference, and we're also pleased that [ Organett ] has also now initiated research coverage on Artrya. So looking ahead, as part of our priorities, we firmly -- we are firmly focused on U.S. and U.S. commercialization and execution. And the 3 major priorities for me and the business are, we want to bring more health systems live and do that a lot faster. We want to start increasing the utilization across this installed base, and that means completing the implementation at Cone Health and expanding Salix across the broader Northeast Georgia network and continue to grow the CCTA volume and Plaque utilization at Tanner as well as Cone and Northeast Georgia when they go live. Secondly, we want to integrate into Huntsville and across their network. And planning is now underway. And given the scale of the system and getting the clinical and IT workflow and reimbursement process going, we really need to do that quickly, and it's a priority for us because of the volumes that they present for us and the opportunity that they present for us as well. And thirdly, and finally, we want to start converting more high-volume health systems into commercial agreements. Huntsville has demonstrated that the potential for SAPPHIRE relationships and converting them into commercial customers is great. And we continue to progress the commercial engagement with the other SAPPHIRE participants as long as -- as well as a growing pipeline of inbound U.S. opportunities. On the technology side, we focused on completing the additional clinical work to support a comprehensive and high-quality Salix Coronary Flow submission and that is an ongoing focus for us. And as I mentioned, Flow will expand opportunity with Salix. But for now, our commercial execution is a high priority for us and driving Anatomy adoption as well as Plaque utilization is a key focus for us as a business. So to summarize, commercial execution in the U.S. is a key priority. During the quarter and immediately after we signed our largest customer to date and achieved the first fit commercial conversion, we started increasing our CCTA utilization across the installed base and also installed a preauthorization workflow at Tanner, which showed that material increase in Plaque. And from here on, the focus is straightforward and it's really just bringing more of those customers live, process more CCTA studies, increased adoption of Plaque and those reimbursement modules that we have and convert the activity into recurring revenue. So I want to thank everybody for joining us today, and we're happy to start taking some questions. Thanks, David. You have to carry on from there.

Yes. Thank you, everybody. We've got a number of questions that have come through. [Operator Instructions]. And as we do have quite a number of questions, if they're on the same topic, we will combine them at the sake of efficiency. So our first question today comes from Martin Jacobs at Bell Potter and relating to Huntsville. Could you give us an idea of the time line for integrating hospital? And secondly, has the Huntsville subscription fee already being received?

So we can't get that yet. We are kicking off our first IT session with the Huntsville team in the next few weeks, and we'll know more from there. But from now -- for now, our focus is to make sure that we accelerate that and we'll continue doing that. And no, they have not yet decided bringing in the subscription fee that will happen post go live.

And just following on from there, how many other non-SAPPHIRE groups that you're negotiating with? You talked about the growing pipeline. Could you give some color on that, please?

Yes. It is a decent pipeline. And we're getting bearing levels of sizes, some very, very small and some decent sized and some really large sized hospital systems. And we're focusing on the ones that were -- that we have key relationships with and we'll update the market as we start bringing those into commercial agreements as well.

Okay. Next question from Melissa Benson of Barrenjoey. Regarding the Plaque adoption at Tanner, you noted a material increase during September post the preauthorization model being deployed. With this flowing through to October, how should we think about this as materiality and when do you expect it to play the preauthorization module live at Northeast Georgia's main hospital site?

Yes. Clayton, I don't know if you want to grab the first part of that?

Yes, absolutely. So it was sort of mid-September. So we saw a couple of weeks' worth of increased volumes of Plaque that has come through into October, how material, we will update that once it comes through. But we are seeing a step-up in Plaque numbers coming through, which is pleasing.

Yes.

Moving back to Huntsville, it's a follow-on from Melissa. Is there any implementation efficiency with onboarding at Huntsville's main site given it was already a SAPPHIRE site. Or is the implementation align with your prior foundation customers on a case-by-case basis?

Look, it is case by case. We know enough of Huntsville now to know where the -- I suppose, whether the bottlenecks could be. However, we'll know more once they start implementing and what their IT teams are like once they start that process. We've got our own blueprint, which we follow quite rigorously. Usually, it's not us that has a bottleneck, usually, for hospitals IT systems at the bottleneck. Once we have their teams committed, we can go very fast. Just making sure that they get the teams committed, which is what we're working on.

A question now from Tom Godfrey at Ord Minnett. Can you talk to step up in SCA volumes across Tanner and Northeast Georgia. How much is efficiency driven versus the broadening of the cardiologist numbers?

Yes, the volumes for Northeast Georgia and Tanner are in those numbers and the increase in those numbers. There has also been an increase in utilization from -- sorry, not utilization, increase in CCTAs being processed by Tanner as well since they started using Salix. So that has also increased part of that. But it also is, as Tom, as you mentioned, the combination of Tanner, Northeast Georgia coming [ aboard ], but then a smaller subset of that being the increase of CCTA volume that Tanner's seen as well.

Another follow-on in relation to Huntsville. We've got a few questions on this. Can you provide some context around the 60,000 annual tests being conducted by Huntsville Health? And will this some number end up being what is put through sales platform in time?

Yes. So 60,000 is all noninvasive cardiology [ read ], which could include echo. It could be Swiss tests that could -- a number of noninvasive tests that they run. As I mentioned and we've mentioned in the past, they do roughly around about 10,000 CCTAs. So that CCTA volume's a subset of that. I mean, as the platform expands and grows over time and we look at other modalities, yes, we could potentially take the full 60,000, but for now, we're focused on CCTA.

Okay. We have another question here from Andrew Wilkinson at Venn Brown. On the current trajectory, how long will it take Tanner to use Salix for all of their scans and Plaque expected to scan for around 70% of SCA scans?

So they're already using all of their scans for SCA. So all CCTAs have been processed by Tanner as well as Northeast Georgia, that's the onboarding for Northeast Georgia that we're looking at the other hospital system and the other cardiologists. So as soon as they go live, all CCTA scans are processed through the platform. With regards to Plaque volumes, as we've said before, the Plaque reimbursement only became a [ canopy one ] earlier this year in January this year. So there is a bit of time that it takes to get there. Our penetration rate with Tanner, I know it's not the size of 1 is increasing quite nicely. And we hope to push that further as we go forward as well. But hitting the 70%, that will take a bit of time as we build towards that and as people get more used to using Plaque as well as being reimbursed for it.

Picking up on the preauthorization that you installed, this is from Andrew Wilkinson. How long do you expect it will be before you complete the second phase of that preauthorization upgrade?

Yes. The focus is to get that done as soon as possible. We're focusing on in the next few months. But it's not an absolute way for that. We're really starting to see that Plaque utilization up because of Phase 1. But to fully automate that process, having a Phase 2 is the next step for us.

A question now from Tanu Jain at Petra. As part of the outlook, you've mentioned you'll be focused on getting commercial contracts and customers live faster. Could you talk about what factors would enable you to accelerate this versus the early rollout?

Yes, I'll have a stab at that. Clayton, if you want to have a crack as well. I mean, from our side, we're a lot more certain in our process to rolling out within the hospital systems and our onboarding process. Well, we do have the customer success team on the ground as well now here in the U.S., that gives us a little more certainty to make sure that we have the team to support our customers once that we sign agreements. And it also gives us a little more certainty that we can bring more customers on board as we go forward knowing that we've got a strong support structure going forward.

Yes, and just to add to that. Obviously, any new customers will have their own time lines, and that's pretty normal for health care and their IT department. A little bit unfortunate with Northeast Georgia and time being delayed the way they were in terms of going through a different process. The next ones could be quicker, but they all have their own time lines pretty much.

Great. We've got a question now in relation to financials. Our previous guidance has been for FY '27 exit run rate of around 15,000 scans, which is around breakeven, is the question. Has this changed? And when might you expect to forecast for breakeven?

Breakeven also to have them onboard the whole time and also have Plaque utilization at the rates that we're expecting, which will take time. So I'll leave that to the slide. I think the 15,000 was the foundation customers, clearly bringing forward Huntsville if we can get it implemented before the -- which we will, obviously get implemented before the end of this financial year, that will increase that 15,000 CCTA scans as our exit run rate more like around 22,000, 23,000 scans in the new financial year.

Next question follows on from 1 of the earlier ones. When will the September Plaque and October Plaque invoices actually be paid? Is there a delay from invoicing to cash in the door, is the question.

There's always a time delay obviously between invoicing, sending them out. Obviously, for October Plaque, if that's what we're talking about, sort of the increase in the Plaque volumes, they are billed at the end of the month, same as I say, November, December. So cash receipts for those will be in future quarters. It could be some, obviously received within this quarter, in the December quarter.

Question now in relation to the SAPPHIRE study from Melissa Benson. When do you anticipate the first start-up readout might be available from the SAPPHIRE study?

Yes. So our focus has been on SCF. So we've moved SAPPHIRE along the -- up in the [ space side ] to make sure that the [ epics ] work has been done, the product hall's finalized. The doctors are moving and looking at the actual product or and finalizing that review as well as looking at contracting as well in budgets to get that all sorted, that is going to -- that's happening over the next -- I suppose, the next few months. But because of SCF, and our major focus on SCF, we've heavily focused our team to deliver on that and then moved and help the prime investigator from as general giving them the ability to move that along with some of the other SAPPHIRE partners. So from that perspective, for us, SAPPHIRE is a clinical study that allows us to show future proof. But our focus has been SCF, and we're going to keep on moving that through as we go forward.

We've got some questions around our cash outflows and cost base. Next question is, is $7.3 million a quarter where you see the new floor or peak of your cash outflows? And what is the planned head count that you're thinking for this financial year?

Yes, that is the new cost base because we're obviously growing the team in the U.S. and as execution comes through. If we -- when we take on new work, there'll be additional head count as we grow it. There's no set number of how many we need over this period, but we'll be increasing head count in line with increasing customer acquisition and future revenues.

Okay. Related to that, this question is in relation to your progress to appoint a Chief Technical Officer.