PharmX Technologies Limited (PHX) Earnings Call Transcript

Good morning, all. Thank you for those who joined early and waiting. Welcome, everyone, who's just joined. So today, we will be going through the PharmX FY '25 results presentation. My name is Tom Culver. I'm the CEO. We also have Zoe Hillier, our CFO, presenting today. We'll be taking you through our FY '25 financial and platform metrics, some business highlights as well as P&L and cash flow. I'll also be providing an overview of the business and our FY '26 strategy. You'll note in the pack that we have provided a fairly detailed appendix. So should you want any additional details on, say, platform metrics, transactional insights or deeper understanding of our services, you will find that detail in the appendix. However, of course, we will leave time for Q&A. So please throughout the presentation, [Operator Instructions]. So without further ado, we are very pleased to announce strong results for the year-end 30 June 2025. We've had a very positive and strong results on our revenues, with a 13% increase of total revenues across our business, coming in at $7.53 million, just a little bit under $900,000 increase on the previous year. We've seen 11% increase in our gateway revenues, which is very positive given the maturity of that business, as well as nearly 200% increase in our marketplace revenues. Again, a very solid outcome. We know the platform is new and growing, but this is again extensive growth in the platform and threefold increase in revenues compared to FY '24. We've maintained a strong gross margin, with a 1% increase. And in a year of investments where we have invested in people and technology and development, we have a positive EBITDA and a very strong cash balance. Our strong results are supported by excellent platform metrics, displaying strong growth over the year as well as illustrating the impressive strides made over the last 2 financial years. Our total platform GTV, so gross transaction volumes have increased 18% year-on-year. This is an illustration of, I guess, a forward-looking indicator of the increased volumes that are coming through our platform as the market grows and as our capture of the market also increases. Pleasingly, we've also seen a 20% increase in our volumes-based ARR. So this is the amount of revenue we generate on a volumes based versus an account fee basis. For those of you who've been following our business, you will know this is a key strategic focus for us, and so a very pleasing results and a demonstration of the execution to this part of the strategy. We've also seen a shift in the origination of orders throughout the market. And again, those of you who follow our business and this industry will understand there is a general trend from pharmacies moving to being a -- moving from being a traditional medicinal distribution hub to a community-centered retail store. And we're now seeing this across our platform with a 7% increase in general retail sales on the year and a 4% increase in OTC medicines for the year. As we look at our business and think about where the volume growth has come from, but also the impact on revenue, we look at our increase around our connections and those insights that are driven. Our focus has been on increasing the number of suppliers that operate within our network. A total increase of 16% in that number over the last financial year. This, in turn, leads to an increase in total and what we define as active accounts or revenue-generating accounts across the business. These are what lead to an increase in our order flow for our gateway and also an increase in order flow across our marketplace, all of which drive revenue and our forward indicators of revenue and growth to our business. In addition to strong financial performance and strong growth in those leading indicator metrics, the PharmX team has delivered several notable outcomes throughout FY '25 as well as completing a series of proof of concepts that will inform our FY '26 road map. As we think about what these are and a quick overview, it's the focus on new partners and market expansion. So throughout FY '25, we integrated with market leaders such as Toniq, which secured access to 99% of the New Zealand market as well as new market vendors and distribution platforms such as LS Retail and Healthy Life, among many, many others. We've expanded existing accounts through the renewal and expansion of key contracts such as with the NDSS, through wholesalers as well as pharmacy groups that both secure and widen services with those parties, often resulting in recontracting to new commercial and extended commercial terms. We resolved some operational things within our business throughout the year, leading with the early termination of the Alchemy revenue share agreements. We also implemented a team restructure, but also expanded the team. We've improved our priority and metric tracking and all of this has resulted in increased productivity and efficiency. We also delivered new platforms and enhanced our existing platforms, again, which are driving growth throughout our business, both today and our ability to scale in the future. So the rollout of our supplier and pharmacy portals, enhancements to our e-com platform, the delivery of our analytics platform, which supports both our internal services, our product services as well as a stand-alone revenue-generating business unit. We've developed a new growth-focused website as well as infrastructure upgrades that modernize our platform through management, data flow and security. We also completed market-wide product and brand customer research that informs the development road map for us, but also refreshes our brand identity and reinforces our commitment to the market and the industry, as well as delivering a number of enhancements to our internal enablement systems. So the implementation of AI tools across the business, implementation of new CRM as well as automated marketing capabilities, product analytics and sales enablement support, all of which again drive greater efficiency within our business, drive stronger results and drive additional scale as we look forward. I'll now hand over to Zoe, who will take through profit and loss and cash flow.

Great. Thank you, Tom. Good morning, everyone. So as Tom mentioned, I'll now go through some more detail on the financial results for the year. I'm really pleased to be able to present a strong set of results for PharmX for the year ended 30 June 2025. Revenue for the year was $7.5 million. This is a 13% increase on the underlying revenue in the prior comparable period. There has been strong growth in activity across both the gateway and marketplace platforms, driven by growth in new suppliers added, growth in our transaction value and growth in account connections. Total operating costs were $5.9 million, which is $1.1 million more than the prior year. This increase in operating costs was driven by our investment in resources, specifically development resources, sales and marketing capability and IT infrastructure to rebrand and reposition the business for continued future growth. People costs have increased by $976,000. Technology costs, up by $173,000 and marketing costs have increased by $129,000. Importantly, this additional investment has enabled the successful launch of the supplier and pharmacy portals during the year and has driven an improved gross margin, which is up 1% from the prior year. EBITDA for the year was $1.6 million compared to $1.8 million in the prior period. This is a significant achievement, considering the investment that has occurred during the current year and the fact that the result for the comparative period also benefited from the allocation of some overhead costs into the pharmacy software business prior to its sale. Amortization for the year was $1.3 million, which is an increase of 5% on prior period due to the ongoing investment in product development and the capitalization of those costs. Performance rights costs for the year have also increased through an initiative to incentivize and retain our talent, with a reward aligned to business performance and share price. Tax expense has increased with the prior year benefiting from some additional one-off deduction items. The profit before tax for the year was $79 million, and there was a net loss after tax of $264,000 for the year. In the prior year, the loss was $1.8 million, which included a net cost of $380,000 related to the now settled dispute between Fred IT Group and PharmX and an accounting loss on the disposal of the pharmacy software business of $1.9 million. Next, I'll discuss cash flow. So receipts from customers were up 14% on prior year and a positive underlying operating cash flow of $902,000 was delivered even with the increased investment into people, sales, marketing and IT costs. The statutory operating cash flow was an outflow of $8.1 million, which included the payment to Fred IT of $9.9 million, which was made up of the original judgment sum of $8.1 million and an additional $1.8 million relating to costs and interest payable in accordance with the final orders issued by the Victorian Supreme Court on the 8th of August 2024. This is the final payment in relation to this matter and no further payments will be made. As Tom mentioned earlier, during H1 this year, the group executed a deed to terminate the revenue share agreement with Alchemy relating to the acquisition of the Pharmxchange intellectual property. $275,000 was paid in total to settle this acquisition, which was a saving of $824,000 compared to the liability that was originally recognized. There was no P&L impact related to this. The positive operating cash flows, together with the revenue share savings and the deferred consideration of $1.3 million received in the year from the sale of the pharmacy software business have been used to fund the ongoing investment in new product development during the period. $1.7 million has been invested into intangible assets during the year. This includes the launch of the supplier portal and the pharmacy portal. Financing activities in the prior period related to the return of capital that was paid in December '23 of $4.5 million. Excluding the payment of $9.9 million to settle the Fred IT legal matter and the deferred consideration received for the sale of pharmacy software business, the total outflow for the year was $321,000. We have ended the year with a very healthy $4.2 million in the bank, and this provides us with the ability and capacity to continue to invest for our future growth. I'll now hand back to Tom to discuss more around our strategy and the future.

Thank you, Zoe. I'll now give you an overview of the business and strategy for FY '26. To start with, our purpose remains to make a difference to health care by reimagining how the industry connects. I think it's an important statement to understand where we sit in the industry and how we see our role. As we look at what the industry is and how we think we fit in its future, the ANZ pharmacy market remains highly attractive as we see it. It's forecasted to grow at 7.6% CAGR to 2030. This is driven by population growth, demographic shifts and increased need for digitization. Regulatory controls such that prevent national consolidation, limiting vertical integration and preserving the fragmented landscape, which we benefit from as well as a rising need for tech-enabled workforce expansion and digital innovation in the supply chain, all indicate that PharmX will maintain its strong position in the industry for many years to come. Positioned at the heart of the pharmacy network, connecting the industry, streamlining inventory management and enabling smarter business decisions through data-driven solutions, PharmX genuinely offers critical industry infrastructure to the entire ANZ pharmacy network. We operate and are connected to 99% of pharmacies. So 7,000 pharmacies across the region trade through our platform and we facilitate that trade. We're connected to all major POS and IT vendors, which again facilitate trade and GTV across the market, integrated with all major integration partners, including government departments as well as all wholesalers and hundreds of leading suppliers, all of which are mobilized by PharmX and the role that we play. That said, it's clear we're built for complexity, and we are delivered at scale. We are creating the world's best multichannel ordering experience for the pharmacy sector, with about 99% pharmacy coverage across Australia and New Zealand. We enable a single integration to the entire pharmacy network. We reduce time, we increase accuracy and efficiency, and we support scale and modernization for our partners. We do this through the delivery of a number of core product suites, starting with our PharmX Gateway. This is an enterprise-grade EDI solution purpose-built for the industry. As we look at our PharmX Portals, together, they reduce friction, enhance visibility and drive engagement across both sides of the network and are the first stages in moving us into what we define as our single platform solution. Our supplier portal is a proprietary self-service platform that enables global and local suppliers to trade with the entire network in as little as a day, leveraging the PharmX Gateway. Our PharmX Portal is the first time that we're able to provide pharmacies, with a PharmX interaction point for gateway transmissions, bringing a high level of utility and engagement with our business. As you look at our e-com solution, this is currently in the form of Pharmxchange that is currently being integrated into the single platform and rebranded and leveraging the gateway network and our other solutions, reducing manual processes, increasing transactional efficiency and unlocking new revenue opportunities. Our analytics solution are tools that enhance operational efficiency for our customers, deepen our customer relationships and drive continuous improvement in our customer businesses, as well as our services. So we develop tailor-made solutions, both technical and marketing to form partnerships and help our businesses and our partners grow. So what sets us apart? Why is it that this network operates with us so fully? We are seen as the trusted multichannel total network solution for seamless support to pharmacy trade. We are the industry's first choice. We've been around for a little over 18 years, with 93% brand awareness and over 80% of pharmacies site our integration capabilities as a key differentiator. We have an unrivaled network coverage, as I've explained. We have a whole of market technology that is modern, cloud-based architecture and most importantly, delivers very high availability, stable and secure systems to the entire market. We've got extensive analytics with unrivaled longitudinal data. We have the most products in the greatest range in one place with over 120,000 available SKUs. And we operate in a market that has supported trends. The market remains highly attractive, driven by those demographic shifts and those trends that we're seeing in the industry. FY '26 strategy centers on finalizing the development of our single platform, deepening relationships with existing partners, working to provide more for more in a value exchange, increasing the number of suppliers across the PharmX network, which in turn drives revenue and engagement from pharmacies, increases volumes and enhances both our analytics capabilities and grows our total addressable market. We're focused on 4 key pillars to deliver these outcomes. Its -- growth is going to be driven through an increased focus on the use of AI, investments in operational excellence, platform automation, digital enablement and increasing commercial resources to increase the efficiency and the velocity of our business and accelerate importantly, the take-up of volume-based engagements through platforms such as our supplier portal, which is a SaaS-based model. As always, we intend to achieve this while maintaining prudent cost controls with the goal of funding essential investments from our cash flow. And to summarize, we're backed by a strong balance sheet. We've got a clear strategic road map. We've demonstrated growth over the last couple of years with the new strategy. We've got a highly experienced and embedded team and favorable market conditions. We're well positioned to capitalize on opportunities ahead and continue on our growth trajectory. Our year-on-year performance remains strong with uplifts in revenue and activity across all of our key metrics. We continue to be that dominant independent ordering network in the region. We've got a strong strategic growth agenda that's supported by tailwinds as well as a strong forward-looking strategy and a well-governed expert team, and we have well-managed costs resulting in growth uplift. So that today concludes our FY '25 investor presentation. We will now open up for questions.

[Operator Instructions] Looks like we have no questions. So hopefully, that means it's all been extremely well explained and everybody has got everything well understood. Here we go. We have a question. Thank you, Michael.

It's Michael from MST. Can you -- are you able to provide any further breakdown of revenues between gateway and marketplace? And maybe just any insights around where you expect the largest driver of revenue growth in FY '26 on the back of the new strategy?

Yes. I mean, as we've said before, we don't break down our revenues across marketplace or data or gateways until marketplace and data are deemed to be material. So essentially once they're making 10% of our revenues. So they both remain under that threshold. So we won't break down additional detail. In terms of your second question, no, we certainly see marketplace as a key area of revenue growth for this financial year, and we expect strong outcomes once we deliver the new e-commerce platform in early November and start to migrate existing customers across and focus on growth of new customers into that platform and essentially migrating suppliers and order flow away from our gateway and new order flow from our gateway to our marketplace under the new commercial model.

Got it. And maybe one more, just quickly, just on -- can you comment on the competitive environment? I know obviously, your position is extremely strong. But has that evolved? Or do you see that evolving at all?

Yes, absolutely. I mean the competitive environment hasn't changed dramatically over the last couple of years. There's essentially 2 competing platforms in market, one marketplace called Directo. Now those familiar with us will know that Directo is both a customer and a competitor. They're a competing marketplace that operates through our gateway and processes their transmissions around gateway. And then we have a competing EDI platform called MedView eX owned by Fred IT. Now I won't comment in too much detail on Directo, but they maintain a customer of ours, and we would like to strengthen our strategic alliance with them over the coming year. In terms of MedView eX, they are a small platform that -- from a comparable basis is currently relatively insignificant. To put that in perspective, we run about 60,000 accounts between pharmacies and suppliers. We suspect they've got something in the range of 3,000 to 5,000 accounts. More notably though, we are strengthening our relationship with Fred IT who own MedView eX, and we hope to be able to work more closely together in the market rather than compete throughout the financial year.

So first, I'm assuming from Christian. Do you want me to read them out?