The format for today is for Rick to walk you through the results, released this morning, which should take about 20 minutes. This will be followed by a 10 to 15 minute question and answer session, and we aim to finish around 11:15 today. Again, if you'd like to ask a question, please click on the Q&A ribbon below and type your question in the box. Alternatively, click on the raised hand icon, and I'll open the mic at the appropriate time. We'll endeavor to get through as many questions as we can. I'd now like to hand the floor over to Rick, who will get us started. Thanks, Rick.
All right. Thanks, George, and good morning, everyone. I want to thank you for joining us today for our fourth quarter FY 2025 update. Before I get started, I want to reiterate the welcome to Sean Slattery, our incoming CFO, and welcome him to the MedAdvisor team. With that said, if we can turn to some, well, we're on slide three. That'll work. This morning, I'm going to provide a quick business summary, and then I'm going to walk through the ANZ and U.S. business results details. Unfortunately, we have downgraded our FY 2025 guidance, and I'm going to walk through some of the details associated with that as well. I'll provide a quick update on our strategic options review process and what to expect from here, then spend some time providing a little color on the U.S. landscape at present and our strategy for best navigating as we move forward.
We'll finish with a discussion on our FY 2026 priorities and the outlook for the year. If we can move to the next slide. As the subtitle indicates, we've continued to experience headwinds through the fourth quarter, largely associated with the U.S. business. With that said, we've been working diligently in the background, positioning the business to take advantage of some of the tailwinds that I'll spend some time talking about later in my comments. Let's review first key highlights from the quarter, starting with the U.S. business. Although we saw a marked improvement in vaccine-related revenue over the prior corresponding period, continued short-term headwinds due to delays in program launches across categories resulted in a notable decline in our U.S. results. We'll go into more detail on that in a few minutes.
Looking ahead, as we look at FY 2026, we do have a solid pipeline, which gives us some confidence in the outlook in the year ahead. Again, we'll talk more about that in a few minutes. In Australia, the business continued to perform strongly in the fourth quarter, and the big news there being the sale of the ANZ business. If we look at the group level very quickly, following the ANZ sale, the receipt of the initial AUD 27 million in proceeds were utilized to discharge all of the outstanding debt. As of the 7th of July, we were just over AUD 16 million in cash on hand in the bank. The strategic options review has now turned to focus on the U.S. business. In addition to the substantial improvement in programs that we have underway, there is a possible divestment of this business, as the board is considering various options.
Further update on this will come along in the quarter, and we'll talk a little bit more about this in a few minutes as well. As announced in April, Linda Jenkinson, our former chair, decided to step down from the board. She's been replaced by Kate Hill, who is the interim chair. More recently, we announced the departure of our Chief Financial Officer, Ancila Desai. As many of you know, Ancila has been instrumental over the past three years in working with myself and the rest of the team for MedAdvisor through a significant amount of change and transformation. We're very grateful for all of the leadership and the support that she's provided during that period of time. As mentioned a minute ago, Sean Slattery has taken over the CFO and company secretary role as of July 21st.
We're going to talk about the FY 2025 guidance here in a moment. If we'll move to slide 25, very quickly, the Australian business has now been divested, as I mentioned. This slide's really provided for completeness as the ANZ business did contribute to the fourth quarter results. It's suffice it to say that the business experienced a strong quarter, benefiting from initiatives over the past few years. I do want to acknowledge that I'm very pleased the business has moved to a good home. Wayne Marinoff, our former general manager of the ANZ business, is going to continue to lead the business going forward as the CEO. If we'll turn to the next slide, we'll go to the US business. Revenue for the quarter was AUD 10.1 million, which represents a 34% decline compared to the prior corresponding period.
This result reflects a softer operating environment and the impact of approximately AUD 4.8 million in deferred health program revenue. This is contracted revenue that was to run in the quarter, and late in the quarter was determined that it would move into the first quarter of FY 2026. On a more positive note, vaccine revenue actually rose 52% year- over- year with growth driven by pneumococcal vaccine programs primarily and a couple of other categories. In this category, there were several vaccine programs actually that were also subject to late quarter delays that affected the full revenue potential in the quarter. Both general and specialty medication revenue declined compared to last year. These declines were largely due to broader industry challenges that led to program deferrals in the quarter. We will see the results of that as we look into FY 2026.
There was a case with one specialty program; budget pressure from that brand moved that program out as well. There were a number of programs that we have been working on through the year that we're expecting to not only see run in the second half but restart for some programs. Thrive programs contributed to about 40% of quarterly revenue, slightly below the prior year. This was really the result of some adjustments in our program mix, partially due to some planning in relation to the transition to our new platform. Gross profit and gross margin were both lower year- on- year, reflecting the overall revenue decline but also reflecting allocation of platform costs that started at the beginning of the financial year and have carried on through the first quarter, and an unfavorable mix on the product side during the quarter.
Lastly, I highlight the pipeline I mentioned a moment ago. It is currently valued at around AUD 125 million, unweighted, which gives us a high level of confidence as we look into FY 2026. We will comment towards the end of the presentation. Turning to the guidance, despite a solid pipeline actually going into the fourth quarter, market conditions continued to be challenging, and there were some continued budget pressures. More so, there were delays in health program activations that were affecting the overall revenue. I have mentioned this a couple of times. Following the recent finalization of our accounts, but still prior to audit adjustments, we are revising the guidance for FY 2024 down. Revenue for FY 2025 is now expected to be around AUD 88 million , primarily reflecting the shift in programs that I mentioned earlier.
Due to the later-than-anticipated program starts in the fourth quarter and some updated government guidance on vaccines, as I mentioned a minute ago, approximately AUD 4.8 million of revenue that was originally expected to drop in the fourth quarter has now been deferred to the first half of FY 2026. Despite the headwinds, our overall gross margin is expected to remain stable at around 60.8% for FY 2025, consistent with FY 2024 levels. Finally, the EBITDA guidance is now expected to decline to a loss of around AUD 6.5 million - AUD 7.3 million.
If we move to slide eight on the strategic options, we've already covered much of this content, so I won't dwell on the slide except to say that the ANZ business or the ANZ sale has put the company in a stronger capital position, and the board's focus has now moved, as I mentioned earlier, to reviewing the path forward for the U.S. business. One option being considered by the board is the possible divestment of this business, and discussions are underway with a number of interested parties. As part of this review, the board is considering capital management options, including a possible capital return, and we plan to provide further updates during this quarter and wrap up the review by the end of the year. If we spend a few minutes on the U.S.
business, if we go to the next slide, I'll spend a few minutes talking through these different categories. As I've mentioned previously, we're seeing trends in the United States that are significantly reshaping the pharmacy and pharmaceutical landscape. Starting with the pharmacy industry in the upper left-hand corner, there is a shift toward what we call direct-to-consumer models, which is reshaping patient engagement-type programs, and it is lengthening sale cycles in some situations. Investment from the pharmaceutical manufacturers is focused on specialty medications and disease management. The fragmented channels across spend in the pharmaceutical organizations is driving a more significant demand and more focus on clearer return on investment. While we are seeing vaccine programs or vaccine funding remaining important with these organizations, because of public policy changes, we are seeing some level of market uncertainty, but there definitely will be spend in these categories.
In the pharmacy sector, major U.S. pharmacy chains like CVS and Walgreens are under significant financial pressure, closing stores and shifting to new digital-first strategies, which play to our advantage, but they are experiencing significant pressures on their margins. We've seen some of this most recently with the privatization of Walgreens through a private equity transaction and Rite Aid's recent bankruptcy. There's also the challenge with digital disruptors in the market, such as Amazon, who are raising consumer expectations. At the same time, we're seeing vaccine administration be a key driver for pharmacy store traffic and profitability across different categories of vaccination, such as flu, RSV, COVID, shingles, and in particular, pneumococcal vaccines.
The competitive environment has become more fragmented, with the rise of the number of niche digital vendors, which is challenging our ability as we're working with the DTC brand groups in maximizing brand budget allocation to the MedAdvisor programs. We're also seeing agencies who are representing the brands are becoming much more cautious. The planning cycles are getting somewhat longer. As I mentioned a minute ago, the focus on return on investment is increasing significantly. In addition to all of this, we have reduced our sales team significantly. Our infill presence is much lower than it has been in the past, which is affecting our brand and agency engagement. I'll talk about that more in a minute. Finally, on the government side, regulatory pressure around drug pricing and direct-to-consumer oversight is increasing, brand pharmaceutical brand caution, and market uncertainty.
Changes to vaccine coverage and funding, combined with the recent vaccine or advisory committee upheaval from RFK Jr., have impacted confidence and trust across the industry. This uncertainty is impacting not only pharmacy readiness but timing of brand investments. In summary, it's a very dynamic and somewhat disruptive environment. With the right strategy, we believe that there's still significant opportunity even in the face of these challenges. If we'll turn to the next slide. In the face of this market disruption, we're actively resetting our commercial strategy to unlock growth going into FY 2026. Our business development team is being rebuilt to strengthen brand engagement, expand our account penetration, and establish new agency relationships. There is a renewed focus on agencies.
The expected increase in our business development capacity going into FY 2026, and particularly in the first half, we believe will help support faster pipeline conversion as well as position us well for a very strong second half. We're also tightening our sales qualification criteria to prioritize high-conversion, brand-funded opportunities. In relation, we're expanding engagement with some of our top pharmaceutical sponsors we've been working with for a number of years, including Pfizer, GSK, Merck, Novo Nordisk, Dexcom, and others. The intent here is really to strengthen our position and gain a higher share of wallet as we build out our sales team as well as our account management group. Operationally, we've restructured our account management team under our Customer Success leadership to improve execution and retention. A dedicated team is now in place and focused on program delivery.
There's an operational aspect to our account management function, and there's also a coordinated effort with our Business Development team on client-facing related activities around relationship development, program renewals, and upsell of other services and opportunities. We're also taking our insights from the fourth quarter to better anticipate client delays and bolster program readiness. We did experience a number of delays that were not expected, moving revenue from the fourth quarter into the first half of FY 2026. The efficiency of getting these programs through their process and launched is a challenge in managing that, not only with the pharmaceutical manufacturers but ensuring we're as efficient as possible within our own operations. We're also looking very closely at aligning our channel delivery and program design so that we're matching our retail customers and pharmacies' pharmaceutical partners' expectations.
Getting the right alignment helps us to ensure programs get into production faster, and it also streamlines the sale cycle. In addition to that, we're continuing to focus on our in-pharmacy print solution. It continues to be the foundation. We have a much stronger moat around that particular offering, and it provides the most reach for our market. We can provide surround sound type capabilities with our digital function as we expand our pharmacy network capabilities. Lastly, we're very excited to launch our Next Generation Patient Engagement Platform that's going to empower pharma and pharmacy partners to more easily build tailored, data-driven patient engagement programs faster and at a lower cost. If we'll move to slide 11, we can now look at our FY 2026 priorities and the outlook. Key priority, as I've already mentioned a couple of times, is for us to complete the U.S.
commercial team restructure alongside scaling our customer success operations. These changes are critical to improving execution and ensuring that we can better serve our clients across the U.S. market. In Q2 FY 2026, we're set to launch the Next Generation Patient Engagement Platform that we've talked about quite a bit up to this point. This is a significant, major milestone for us and is going to be a key driver for expansion of our digital capabilities with our pharma and pharmacy partners. We're also strengthening and expanding our U.S. pharmacy network relationships to reduce execution risk and build greater resilience into our program delivery model. This will support more consistent performance and better program outcomes across the board. It's extremely important to the future growth of the business.
Transformation 360 will remain a core focus throughout the year as we continue to streamline operations, redesign business processes, and manage organizational change much more effectively. Another important milestone, again, will be the completion of our strategic options review process, which we will provide more updates on here in the near future. Turning to the outlook on the right side, from a market perspective, we're entering FY 2026 with a strong pipeline, as I've mentioned a couple of times. Based on this, we're confident in delivering a 15% revenue growth in FY 2025 and FY 2026. While we expect vaccine-related revenue to be below prior year levels, we do anticipate the restart of a number of delayed general medication programs in the first half of the year. In addition, we have good visibility to expansion of our specialty medication revenue, and we expect that to grow meaningfully through the year.
Importantly, we've been focused on reducing our cost base, particularly through the second half of FY 2025, and we'll continue to focus on that, as I've mentioned, in launching our new platform. In relation to all of this and the cost reductions that we've done in the February and April timeframe of this year, we do expect that FY 2026 operating expense in the United States to be down around 10% from FY 2025, and it'll be down around close to 30% from FY 2024. That concludes my statements for the presentation at least. I appreciate everyone's time, and I will hand it back to George to see if there might be any questions. Thanks, George.
Thanks, Rick, there are a few questions. Just as a reminder, if you would like to ask a question, please click on the Q&A box in the ribbon below and type your question into the box. Alternatively, you can click on the raised hand, and I can open your mic at the appropriate time. Rick, first question says, are you going to spend the, this is our cash, but I guess the proceeds of the sale in the U.S.?
No. The net proceeds from the sale after discharging the debt have been set aside. The intent at this point is not to use those proceeds in the U.S. This would include the expectation of the holdback that is yet to come. That's the additional AUD 8 million that we would expect to come in before the end of calendar year 2025.
Thanks, Rick. Next question. If you divest the U.S. business, what is left? Does a company become an ASX shell?
That's a good question. If there's a divestment of the U.S. business, there are several different options that are being reviewed with our advisors in Australia. Sean is involved in that, as we speak, to determine what that structure might look like. There's no specific answers to that question at this point in time. It's not a given, by the way, that there will be a divestment. That is an option that's being reviewed.
Thank you. Next question. I calculate the U.S. revenues to be around AUD 63 million for FY 2025 and gross margin at around AUD 33 million based on a margin of 53%. What is the cost base of the U.S. business now? Is that margin expected to improve in FY 2026?
The revenue sounds correct. I'd have to, Sean, I'd have to come to you for help on this if you have the data. If you don't, we may have to come back.
No, I'll have to come back to the person asking the question. I'll take this question on notice, just because I don't have it readily available.
All right. Thank you. We'll come back to you on that one. With all the changes impacting the U.S. business, are you still expecting revenues to be skewed to the first half of 2026, or has that changed?
Because there is still some emphasis on vaccine-related programs and an expectation that vaccines will continue to be a part of the business, maybe not at the same scale, there will be some skewing towards the first half, but probably not to the same scale as what we've seen in the past.
All right. Great. Next question. Do you think that your management team has lost their focus on how pharmacy retail wants to interact with pharma based on your pricing model and objectives?
Could you repeat that question?
Yeah, sure. Do you think that your management team has lost their focus on how pharmacy retail wants to interact with pharma based on your pricing model and objectives?
There are probably several different elements to that question. First of all, the management team is continually assessing the environment and the nature of how a pharmacy, that's part of the question, would like to engage with pharma, is definitely something we're continuing to evaluate. Keep in mind that whether you're a pharmacy in the U.S. or you're a pharmacy in Australia, the pharmacies are always interacting with pharma in various ways, sometimes through a wholesaler because they're working on distribution, sometimes with the media side of a manufacturer because they do in-store advertising, as an example. This is more physical advertising in the store. This is not digital. This is not technology.
We are continually working with the retail pharmacies to determine the best way to be their partner to help engage their customers with pharma-sponsored kinds of communications and drive awareness and adherence of different kinds of programs, of different kinds of products. That's the key. The pricing issue is different. The question might be in relation to vaccines as an example, which is an area that we're taking a look at. Vaccines have been about 30% - 40% of our revenue, and I would expect it to continue to be in the 30% range even going forward. However, the way that we run those programs in the pharmacies on behalf of pharma, that model could change over time. That's for a variety of reasons. That's not just because of the pharmacy. That's also because of the government and regulatory issues.
We have to balance what the pharmacies are looking for with pharma and the pricing models and structure for these programs that are compliant with regulations. The answer to the question is not easy, assuming I'm understanding it correctly, but it is something that is core to our business, and we have to continue to evaluate.
All right. Thanks, Rick. Next question. Given the uncertainty in the U.S. business, does it make sense at this stage to consider a capital return, especially if the U.S. business has not been cash flow positive for many quarters and the AUD 16 million in cash provides the business with some flexibility?
That's a part of the analysis that's being done relative to the capital management strategy. I would say, at this point, given where the business has come from, our strategic options evaluation process in combination with the processes to look at opportunities in the U.S. and Australia, while we're also running the business, we've got to continue to look at all of those components. That particular point is a valid point and kind of plays to the question on the appropriate utilization of available funds. Does that make sense for the business, but is it also in alignment with shareholder expectations? We've got to work through that, particularly in the next 30 days- 60 days.
All right. Thank you. Next question says, you say 15% revenue growth. How much is that in dollars? I think the question is probably around when you refer to 15% on up on FY 2025. Is that the reported FY 2025 number or the U.S. portion of the revenue?
The 15% growth would be off of the U.S. revenue base.
Okay.
Take that number x 1.15, and you got to, or x 1.15 if you just want the net.
Right. Thanks. Next question. Can you clarify the senior exec KPIs for FY 2026? Is there a reference to the sale of the U.S. business?
Because of the process we're going through, we're in the early stages of finalizing the KPIs in FY 2026. The KPIs are focused on revenue growth, margin protection, product expansion, deployment of our new platform, etc. Those are kind of the categories. The transaction, if there is a transaction to be had in the U.S., that's somewhat of a separate conversation, a separate set of objectives.
Thank you. I'm not sure you're going to be able to answer this one, but what's the expected EBITDA in FY 2026?
I would say at this point, we're working through, you've got an idea of what our focus is on revenue, and there's a good indication of where we're at relative to OpEx. I'll probably just leave it at that. I think we provided the metrics to be able to make some determinations there.
Okay. Next question. It says, is the business cash break even?
The business varies by time over time. At this point, given the level of revenue, as we brought down the cost basis, we're very close. It is dependent upon the revenue, the revenue growth.
Okay. Thanks. Back to this growth, it says, looking at the guidance, is revenue growth including the AUD 4.8 million deferral? Is it the 15% based on the group number or the U.S. number, which you answered earlier? I guess back to the first part of the question. Does the revenue guidance include the AUD 4.8 million deferral?
Yes, that's deferred revenue. We recognized across FY 2026.
Right. Thank you.
You're talking about the FY 2025 guidance. What are you talking about?
Is the FY 2026 guidance?
It says, looking at the guidance, is revenue growth, no, it's talking about the 15% revenue growth, including the AUD 4.8 million deferral.
Yes, it's in the, yes.
That will form part of FY 2026 revenue.
Correct. Thank you. Next question. How much of the AUD 8 million holdback are you expecting to realize?
At this point, we're working towards realizing the entire amount unless I'm told otherwise.
Given the stated outlook in the presentation for FY 2026, you should be able to state the outlook. I think he's just saying, given your outlook statement, you should be able to provide revenue, profit, and EBITDA guidance. It's not really a question. It's more of a statement.
We've given the guidance that we're planning to give at this point.
That looks like it's all the questions at this point in time. What I might do is just hand it back to you, Rick, for any closing remarks you might want to make.
Okay. Yeah. No, thanks, George. I appreciate everyone taking the time to spend with us this morning. We have been on quite a journey over FY 2025, and we've experienced a number of challenges. With that said, we are very focused on transforming the overall business and going into FY 2026. You know, we remain very confident that the best opportunity to engage patients in managing their medications continues to be through the pharmacist interaction with that patient. We believe we're in the right space. We believe we're making the right investments relative to our new platform. We're bringing down the cost basis. We're restructuring our commercial team. We're building for success and for turning this business around in FY 2026. I appreciate everybody's time today. I appreciate everybody's patience with all of the change that's been going on through this business. It's been a significant challenge. There's no question.
We do believe in the base fundamentals of the business and the direction, and we're in the right place. We have got to execute at this point, and we've got to convert our pipeline and bring value to our customers, and that'll turn into value to our shareholders. I appreciate again the time. George, I will turn it back to you to wrap things up. Thanks, Sean, for joining us.
Yeah. Yeah. Thanks, Rick, and thanks, Sean. I'll also add my thanks to everyone for joining us today. That wraps up the proceedings, and I'll invite you all to now disconnect. Have a nice day.