Hello, everyone, and welcome to MedAdvisor Ltd's results briefing for 3Q FY25. My name is Sarah Sweeney, and I support MedAdvisor Solutions as SVP of Global Marketing and will be your moderator today. Joining me is Rick Ratliff, who is CEO and Managing Director. Hello, Rick.
Hey, Sarah.
Also joining us is Ancila Desai, who is MedAdvisor CFO. Hello, Ancila.
Hello.
The format for today is that Rick and Ancila will walk you through the results released this morning, which should take around 15 to 20 minutes. This will be followed by a 10 to 15-minute question-and-answer session. I will then pass it back to Rick for closing remarks. If you'd like to ask a question, please click on the Q&A tab in the ribbon below and type your question, or click the raise hand icon, and I will notify you when it is your turn. We will get through as many questions as we can in the time that we have allotted. Please be aware that our presentation may not yet be available on ASX, but will be loaded shortly. I would now like to hand the floor to Rick, who will get us started.
Okay, very good. Thanks, Sarah. Good morning, everyone. Thanks for joining us today for our 3Q FY25 update. We'll go to slide three, Karika. As many of you will have read, our guidance update released earlier this month. Today's result carries many of the themes discussed in that update. As the slide title says here, we've indeed experienced some headwinds through the period, largely in the U.S. business. With that said, we've been working diligently in the background, positioning the business to take advantage of some tailwinds, and we'll talk you through that today. Let's first review some of the highlights of the key of the quarter, and I'll start at the group level. Trading conditions experienced, particularly in 2Q—I’m sorry, 2Q continued into the third quarter. This resulted in revenue and gross profit declines of 49% and 52%, respectively.
I'll expand on the reasons for this in a moment. To address the decline in business activity and also prepare the business to capitalize on the current market trends, we announced on April 1 of this year that we're fast-tracking the restructuring of our U.S. commercial sales team and accelerating our cost reduction program. Again, I'm going to expand on this shortly. The strategic options review that we announced in November, which focused on maximizing shareholder value, is progressing well. While no final decisions have been made, the company has received strong interest in both our Australian and U.S. businesses. Again, we'll expand on that a little bit further later, but we do expect to complete the review by the 30th of June of this year.
Post-March quarter close, as many of you know, we took the opportunity to successfully raise $5 million in new equity, which included participation from key institutional shareholders as well as from members of the board. These funds will be used to continue executing the strategic and cost optimization initiatives and to assist with working capital requirements. Also, in early April, we provided FY25 guidance, and we will reiterate that today, and we'll go into more detail later in the presentation. In April, Linda Jenkinson, our Chair of three years, decided to step down from the board to pursue other opportunities and priorities in the United States. She has been replaced by Kate Hill as the Interim Chair. I do want to thank Linda for her leadership and contribution during her time at MedAdvisor. Moving to the U.S.
Business, we continue to experience short-term headwinds due to continued budgetary pressures from key pharma clients across vaccine and non-vaccine categories. On a positive note, there continues to be solid support for both our THRiV and digital patient programs. Looking ahead, we're confident in the breadth and depth of our pipeline. We'll talk more about that later. In the fourth quarter of FY25 and first half of FY26, we are shaping up for improved conditions with a stronger representation across pharmaceutical manufacturers, brands, and categories. Importantly, we've contracted around 90% of the lower end of our revised guidance for FY25.
Looking at Australia, the recent softness in performance in Australia largely reflects timing of health program delivery and strategic changes that we've made with our SaaS platform pricing model, which we expect will deliver long-term benefits to MedAdvisor while better aligning with our pharmacy clients' patient engagement activity. As we transition towards implementing a transaction-based fee structure, we're already seeing solid benefits with third-quarter transaction fee revenue up 12% on the prior corresponding period. Full migration of MedAdvisor for pharmacy is expected to be achieved during this quarter, and this will enhance our ability to deliver platform-enabled services and scalability over time. We are also continuing to build momentum with expanded scope of practice offerings in that initiative and positioning MedAdvisor as a key enabler and supporter of broader pharmacy-led healthcare delivery. We will turn to slide four.
I just want to spend a few minutes talking about the challenges that we've faced in FY25 and outline how we're positioning the business for growth and the opportunities ahead. Firstly, I do want to acknowledge that our U.S. commercial business has significantly underdelivered. Growth has been constrained for a variety of reasons, predominantly due to low sales engagement. Talk about more limited customer diversification and a historically inexperienced sales team. Our account management approach has been too operational in the past, and our innovation across the pharmacy network has lagged. We have taken swift and focused action. We have restructured the sales team, bringing in experienced leadership in FY25 and moving out underperformers. We have also revamped our customer success function, streamlining the headcount and reorganizing for greater efficiency and impact, and we have reshaped the pharmacy network team to sharpen its strategic focus.
In parallel, the broader pharma landscape is shifting. Reduced vaccination rates led to sudden budget cuts, as we've discussed in prior updates. Buyers are moving forward towards a direct-to-consumer model, stretching our sales cycle and impacting contract values. Both direct and indirect competition in digital and omnichannel spaces is intensifying in the United States, and marketing budgets are being reallocated to what we call specialty medications. I think with these same dynamics and challenges, we are seeing new doors open and new opportunities, we believe, in front of us. Our Transformation 360 program is progressing well with a next-generation platform set to be launched in 2Q of FY26. This will dramatically reduce fixed costs and position us well for the anticipated growth we'll talk about later. We're seeing early signs of a vaccination rebound expected to really be seen in the August-September timeframe of FY26.
With specialty medications, as I mentioned a minute ago now, accounting for over 60% of consumer spending on medications in the United States, we are starting to identify creative opportunities within our pharmacy network and see some significant upside with specialty medications. Pharma is clearly shifting, as I mentioned, the spending towards digital engagement solution, and that's where we're investing in our future platform and focusing our efforts with our pharmacy network. We believe that this is going to position us well for growth as we move into the future. While the path hasn't been without its hurdles, we're putting the right building blocks in place, and we're confident the U.S. business is well positioned for growth as we move into the fourth quarter and first part of FY26. If we go to the next slide, drilling down further into the U.S.
Business, we are laying the foundation for accelerated revenue growth and margin expansion as we head into FY26. We're driving a number of strategic initiatives to unlock even more value. We're optimizing our sales cycle to improve conversion and reshaping our go-to-market approach to accelerate growth. Critically, we're executing on a triple-layered diversification strategy by brand and manufacturer across therapeutic categories and even within those categories. In FY26, we'll launch our next-generation patient engagement platform in the U.S., and this is a key lever in our strategy to lift gross margins and strengthen our customer value. In terms of the U.S. outlook, while trading conditions did remain challenging through Q3, we're anticipating a stronger Q4. We expect to deliver between $14 million and $18 million U.S. in revenue for the second half of FY25.
Pipeline conversion from January through today is trending ahead of the same period in FY24, with more than 90% of the lower end of our revenue guidance already contracted. If we look at the pipeline more closely, we're sitting at around $25.4 million in 4Q—I'm sorry, in second half of FY25, spread across vaccines, general medications, and specialty medications. Looking into FY26, in the first half, we have a solid pipeline. We believe we're in good shape for solid performance with around $180 million in the pipeline across general medications, vaccines, and specialty medications, with good diversification across both manufacturers and brands. We now have a significantly larger and more varied pipeline, as you can see on the slide, and we're forecasting around 15% organic growth in FY26. Now let's focus for a few minutes on AN Z business. Excuse me.
We're a clear market leader with a proven track record of performance and strong foundation for continued growth in Australia and New Zealand. This business has delivered a four-year compound annual growth rate of 22.6%, and today, MedAdvisor reaches 98% of patients accessing prescriptions across Australia. We're trusted by 95% of pharmacies, and 72% of our revenue in the region is recurring. We see this as a strong signal of the value of the business and the platform in Australia and New Zealand. Looking ahead, we're focused on a number of strategic initiatives to strengthen our leadership position. We're continuing to restructure our pricing by standardizing our SaaS fees to ensure consistency and scalability. At the same time, we're expecting to leverage a recently announced women's health initiative to accelerate return on investment from our expanded scope of practice programs.
We're also completing the migration to the new MedAdvisor for pharmacy platform, which is a major milestone that will improve functionality, ease of use, and operational efficiency for our pharmacy customers. There are clear pathways for future growth in Australia and New Zealand. We're increasing transaction fees to better align with value we deliver for our customers. We're expanding pharmacy solutions, including telehealth, to meet our patient expectations through interactions with their pharmacies. Additionally, we're unlocking new monetization opportunities through our expanded scope of practice programs, as I mentioned earlier, and we're enhancing our AI-driven workflow solutions to further streamline pharmacy operations. The combination of strategic focus, strong fundamentals, and clear growth levers gives us confidence in the AN Z business continuing to deliver well into the future. We'll turn to slide seven.
I now want to provide a brief update on our accelerated cost-out program, as we describe it, which was announced on April 1st. This program, alongside our Transformation 360 initiative, is set to deliver approximately AUD 3 million in savings between FY24 and FY26. In FY25, we expect total savings of AUD 4.5 million, rising to AUD 8.4 million in FY26. These savings come from two key areas: our Transformation 360 program contributing AUD 1.4 million in savings in FY25 and AUD 5 million in FY26, and the new targeted cost-out measures, which have already been implemented, will deliver a further AUD 3.1 million in savings and—I'm sorry—and AUD 3.4 million, respectively, between 2025 and 2026. As part of this reset, we've implemented a significant but necessary headcount reduction. This is always very challenging, but we have reduced our headcount in the United States by around 44% and in A N Z around 15%.
This is designed to align our resources more closely with strategic priorities and the current market conditions, current and expected market conditions. Overall, we forecast a steady decline in operating expenses from AUD 67.4 million in FY24 to AUD 62.9 million in FY25 and further down to AUD 54.5 million in FY26. At the same time, management and Board remain significantly focused on both external environment and our internal performance, and we stand ready to act with further agility if conditions require. If we go to the next slide. On November 14 of last year, we announced the strategic options review process aimed at addressing what we believe is a clear disconnect between MedAdvisor Solutions, market valuation, and the underlying value of our Australian and U.S. businesses.
While no final decisions have been made at this stage, the process does continue to evolve in line with our commitment to maintaining our leadership position in pharmacy-driven patient engagement. MedAdvisor has received multiple proposals relating to both the AN Z and U.S. businesses, validating our view that the company remains materially undervalued. We will advise the market if and when any initiatives or proposals require disclosure with an expectation to bring the majority of the process to closure at the end of June this year. If we move to slide nine, focusing on the outlook and starting with the FY25 guidance table on the right-hand side of the slide, you'll see that there are no changes to the guidance since our update we provided on April 1st. Looking ahead, we believe that MedAdvisor is well positioned for strong growth and improved profitability.
To recap, in the U.S., we've reshaped and strengthened the sales organization to both de-risk and accelerate revenue growth, ensuring greater pipeline, greater discipline, better customer engagement, and more consistent delivery. We expect our next-generation patient engagement platform will be a key lever in our strategy to expand gross margins and offer differentiated value to pharma customers and patients alike. In AN Z, we continue to see strong momentum with enhanced fee models and new service offerings driving sustained growth. Our presence is unmatched, and we are unlocking more value through expanded pharmacy services and digital innovation. Across the group, our focus on targeted cost reductions and business optimization will further support operating leverage, helping us scale more efficiently and improve profitability.
Looking into FY26, we are forecasting group revenue growth of around 15%, coupled with meaningful margin expansion, a sign that our strategy is working and that we're building a business with long-term strength and scalability. With that, I do want to thank everyone for your time today, and I'll hand it back to Sarah to start the Q&A for the time remaining. Sarah?
Thank you very much, Rick. Again, if you'd like to ask a question, you can either click on the Q&A tab in the ribbon below and type your question in the box, or if you'd like to ask a question directly, please click on the raise hand tab, and I'll notify you when it's your turn. We already have several questions in queue, and I'd like to start with Thomas from Bell's.
Is Thomas off mute?
I don't think there's any questions from Thomas this time.
There you go.
No, sorry. He's unavailable at the moment.
Oh, okay. Thanks, Daniel.
Apologies. Let's see. We have a question from Alan. Rick, thanks for the presentation. Obviously, the share price has dropped significantly in recent months. Is this the view within MedAdvisor that the market is undervaluing the true value of the company?
Thanks for the question, Alan. Absolutely. Even at the point we launched the strategic review process, while the share price was higher at that point in time—this was in November of 2024—at that point in time, we felt like the company was being undervalued as a whole and particularly as a component, both the Australia and the U.S. That was the reason for launching the process.
Through the process, we've had a number of discussions with both strategic investors and other types of investors in the U.S. and Australia. Based on the feedback we've received and the non-binding offers, if you will, at this point, we've definitely been able to validate that the market is currently undervaluing the business and has for some time.
Thank you, Rick. We have a question from Steven. Can you please provide background and an update to the current ASX suspension?
Sure. Ancila, do you want to answer that, please?
Y es. I can take that. There are actually a couple of questions on that. Just to address the trading hold and suspension, there was an administrative error where there was a delay in lodging the cleansing notice. The cleansing notice needs to be lodged within five days of issue of shares, which was the 8th of April.
This is for the capital raise. What we've had to do is we've had to go to court and get clearance for this. The application has been lodged. We have a hearing on Friday morning. As per the ASX announcement that we put out yesterday, we expect to come out of suspension on Friday. As soon as the court hearing has taken place, which is first thing Friday morning, we will provide an update to the ASX, and we hope to come out of trading hold/suspension soon after.
Thank you, Ancila. Looking for other questions. We have just received confirmation that our Appendix 4C and presentation are now up on the ASX. We have time for one more question. Rick, what is the company intention with the sale of proceeds in the business division?
If I understand the question correctly, what I would—I think what we could say at this point is that the strategic evaluation process is primarily focused at determining or assessing the overall value of the business and determining where the gaps in that value reside. The result could be any combination of transactions, which would then likely create funds for both bringing down the debt as well as addressing growth initiatives where appropriate. That would—but at the end of the day, that depends upon what the final transaction or set of transactions might look like, and that's still yet to be determined. We expect to be providing more information on that in June.
Thank you. We have a question from Deepak. Is there any overlap with Strong Room AI? Given what has happened there, is there a possibility of picking up some of their business or customers?
There is very little overlap with Strong Room AI. Their business was focused on a specific segment of documentation for certain kinds of what I call scheduled medications that is required by the Australian government. That has been the primary focus. There are some elements of medication and patient engagement that might overlap somewhat with what we do. They have gone through an administrative process where there are entities that you can look up on the internet and see the latest, but there is an administrator that has been assigned, and there are a number of bidders for the asset. That asset could be the asset. It could be broken up, etc., and that has not been disclosed as to the specific direction.
The assets itself would complement what we provide to the market, but all of the pharmacies that they are supposed to be supporting are pharmacies that are already in our network since we support close to 98% of pharmacies in Australia.
Okay. Great. We have a question from Darren. Please, can you provide some color on interest from parties to purchase U.S. operations?
I think all we can say at this point is that there are strategic parties in the United States that see value in the U.S. platform as a complement to current business or as an opportunity to expand into the pharmacy space. It kind of runs the gamut of those areas. In most cases, it is really leveraging the opportunity to expand an ability to reach patients through pharmacies.
There are a couple of cases where getting into pharma relationships and accelerating the build-out of pharmaceutical relationships, not only for pharmacy but potentially other categories, could be a value add. That is probably about the most we can say at this point.
We have a question from Theo. With a U.S. reduction of 44% in FTE count and considering US pipeline looks strong, is there a risk we do not have boots on the ground to convert and implement programs effectively? While I get the cost savings, you cannot save yourself to growth.
Theo, that is a very fair point, and it is a very significant part of our analysis. Maybe what I should say in relation to the changes that we have made.
The changes we made in the January timeframe that reduced the headcount in the United States by over 22 people, about half to two-thirds of those roles, either individually or in some other structure, were moved offshore. There were additional roles that were created, but they were created in a lower-cost structure to run the business as usual while we're building the new platform. Just so everyone's aware, we are running our business in the U.S. We have to support and execute to your point in the U.S. on our existing platform while we finalize the new platform, which will be launched in the, I'm sorry, second quarter timeframe of FY26.
At that point, as we move to that platform, that platform automates a lot of manual processes and enables us to actually run the operations with fewer people, much more efficiently, at a higher quality, and drive more scale. To your point, we are monitoring very, very closely where we may have certain kinds of exposure to cost—I'm sorry—to execution. That is something we take a look at on a continual basis to ensure that the resources are there. As we scale back up, if we need to add in certain areas, we will. The intent is to optimize the structure and then ensure that we've got the right skills and expertise as we move to the new platform.
Thank you. In consideration of everyone's time, this will be the last question, but please know that Rick and Ancila are available for questions later and offline. Richard has asked, "Can you please reiterate second-half guidance? Is it for group revenues of U.S. $14million-$18 million ?"
The guidance has two elements. One is the U.S. finish, which is $14-18 million U.S. That is factored into the guidance that is on the very last slide on revenue, which is AUD 93-99 million, and then the other data on the EBITDA targets. That is at the group level. $14 million-$18 million U.S. The other data is at the group level.
Thank you. With that last question, I will hand it back to Rick for closing comments.
Thank you. Maybe a couple of things, just real fast.
I do want to reiterate, we're very disappointed in the results in the third quarter. We're very optimistic in the business and the business fundamentals and the momentum associated with pipeline conversion and continued build-up of the pipeline through today, end of April, and see some very positive signs as we start to move forward. We're very confident in the commercial team structure that we have in place and execution on our plan as we move forward. While, as Theo pointed out a moment ago, there are challenges in getting the costs down to a certain point, it has been our plan to get costs down 20% or more. That's been a part of the plan all along. We've accelerated that plan.
We're accelerating our cost reduction plan so that we can ensure that even if we have moderate revenue growth in FY26, we're going to see positive EBITDA performance. With that said, in Australia and New Zealand, I've mentioned the very strong platform that's in place. 72% of our revenue is recurring. That recurring revenue business, at the right cost structure, driving positive EBITDA, has significant value in Australia and an opportunity to grow significantly as Australia moves pharmacy from the role that pharmacists play today to a role that looks like more of a general practitioner-type role and a participant in the broader healthcare system. We have very good confidence in both components of the business and the future forward, and that's been validated from individuals as we've gone through our strategic options review. With that said, appreciate everyone's time today.
Thanks for joining us, and we look forward to updating you as we move forward in the future. Sarah, back to you to finish up.
Thank you, Rick. I will add my thanks to everyone for joining us today. That wraps up our proceedings, and I invite you all to disconnect. Have a great day.
Thank you.
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