Good morning, everybody, and welcome to the ImpediMed FY 2024 results presentation. With us this morning, we have Parmjot Bains, the Chief Executive Officer, and MacGregor Grant, the Chief Financial Officer, who will take us through the presentation that was lodged with ASX this morning. Just a bit of housekeeping. Today's webinar is being recorded, including the Q&A, and we intend to lodge this on the ImpediMed website after the webinar has been completed. And if you would like to ask questions, please raise your hand, and we will deal with these at the end of the meeting. We will need to turn you on so that you can speak, but if you raise your hand, we will get to research analysts and investors shortly.
Handing over to Parmjot Bains for the results presentation.
Good morning, and welcome to our ImpediMed investor call for the fiscal year 2024 , ending June 2024 . At ImpediMed, our mission really is to improve patient outcomes by setting the new standards of care in fluid and body composition management. We achieve this through our bioimpedance spectroscopy technology to assess and monitor the fluid composition and tissue composition in patients. Our primary focus is breast cancer-related lymphedema, to reduce its devastating impact on quality of life and avoidable healthcare system costs. 80% of breast cancer patients are at risk of lymphedema, with 20% progressing to chronic lymphedema, a lifelong, costly, and debilitating condition. Our SOZO Digital Health platform uses L-Dex, which – and it is the only BIS technology that is FDA-cleared.
It is supported by a large randomized clinical trial in the U.S., has 140 million covered lives, and is recommended by guidelines. It sets the standards in the detection and prevention of chronic breast cancer-related lymphedema. Today, I'll outline the FY 2024 highlights. MacGregor will touch base and go through the financials, and I will cover the strategy and outlook for the next financial year. First, covering our FY 2024 full year results. Global revenues were down 9%, which is disappointing, but it is driven by AstraZeneca clinical trial revenues no longer in progress. On a positive note, as a SaaS business, the business had strength in the growth of our annual recurring revenue and our SOZO core business revenues. Patient tests were also up at 18%.
This is an important driver of our renewals and reflection of the health of our lymphedema prevention program with our customers. The number of units in TCV is down compared with FY 2023, but we are seeing positive momentum in our later quarters. Gross margin remains high at 87%, and cash balance at the end of financial year 2024 was $24.6 million. We'll go down and break down some of these data points for you further. Our core business revenue is really the underlying driver of our business, and it was up 14% on FY 2023. Ninety percent of this is generated in the U.S. market.
One of our hence being our core area of focus for us as a business, but also one of our focus areas as we look through 2024, is really reviewing the go-to-market model in the rest of the world. In terms of our annual recurring revenue, in our SaaS business model, ARR is showing positive growth. We look across our business, it is up 18% on FY 2023 and over the years since 2021. In slide 10, when we look at our patient testing, patient testing is an important factor in our device renewals, as contracts renew after three years. Our patient testing grew 18%.
This is a key area of focus for us as we move into 2025, to really ensure the health of our customers' lymphedema prevention programs, and we do this through our CPS support team and strengthening our analytics platforms. In terms of our unit sales, unit sales were down on FY 2023. However, we are seeing growth in sales on Q4 through a focused commercial execution. We are seeing an encouraging growth in our sales pipeline, increase in our conversion rates, and a reduction in our sales lead time. Our new management team came on board. I came on in January of this year, and later in Q3 and Q4, we've had a number of new roles come on and have focused on a number of turnaround actions.
These have included prioritization around the top states, use of the Definitive Healthcare database and other databases to more effectively target customers. We had a new team building to build our sales capabilities, and we've had extensive marketing initiatives that have included extensive outreach campaigns and events, email campaigns. Recently, we've completed a search engine optimization, user interface, website optimization to really help build the leads. As I noted, encouragingly, we are seeing really positive momentum in our business. When we look at our next slide, when we look at our installed base, overall, the global installed base grew 9% across the board. As I noted, while the split between the U.S. and the rest of the world installed base is around 50%, our U.S. revenue is 90% of our business.
This helps to kind of add weight as to why we focus on the US, but also why we need to have a look at our rest of world go-to-market model, given this installed base. Finally, as we look at our TCV slide, the new team is really focused on rebuilding this momentum as we step into FY 2025. As you can see from the TCV, there was significant decline in the early quarters of the year, but now the focused execution activities around commercial, sales and marketing is really helping build up our forward momentum. Now I'm going to hand this over to MacGregor to go through the financials.
Thanks very much, Parmjot. This slide shows the full year P&L for FY 2024 compared with FY 2023. Total revenue for the year was down $1 million or 9% versus FY 2023. As we've mentioned before, this reduction was mainly due to the lower clinical revenue associated with the trials that were being conducted by AstraZeneca. Importantly, SOZO core business revenue was up $1.2 million or 14% compared with FY 2023. Gross margin was 87.3%, up from 86.4% in FY 2023. Operating expenses in FY 2024 were at a similar level to FY 2023 and included $2.1 million in severance payments. I'd also like to add here, as previously reported, we can expect cash expenditure in FY 2025 to be 10% lower than it was in FY 2024.
Other income was up $1.2 million, driven by a non-recurring U.S. government grant that was received of $1.9 million, which was offset by a lower Australian R&D tax incentive credit of AUD 0.7 million due to the lower R&D expenditure incurred during the year. Finance income for the year was up 0.6 million, driven by higher interest income on the cash balances that the company was holding. Now to cash flow. Operating cash flow of cash outflow of $17.8 million, compared with cash outflow of $18 million last year, which included the non-recurring U.S. government grant of $1.9 million and the R&D tax credit of AUD 1 million.
Cash used in investing activities was lower by AUD 2.9 million due to the lower R&D expenditure capitalized, and cash used in financing activities was AUD 23.5 million higher due to the AUD 30 million capital raise that occurred in FY 2023. Cash at the end of the year as of June 2024 was AUD 24.6 million, and again, I note that the cash expenditure is forecast to be 10% lower versus FY 2024, and this is mainly as a result of adjustments to headcount and salaries, which is net of investment in customer-facing roles. Now back to Parmjot.
Thank you. So as we look at slide 18, our real focus for the next financial year going forward is building a sustainable business. We had a new executive team that's come on in the second half of financial year 2024, and a new board that is now well-established and working well. We have an expanded commercial focus on lead generation for targeted U.S. customers. We've prioritized the key states, those that are high reimbursement. We have 16 critical mass states with over 80% coverage and high population states. We have reduced costs and are focusing on accelerating our growth. We are also building a pathway to future growth opportunities. Sustainability is key for us. Since our update at the end of July at the quarterly, we have done considerable work on testing our budget and our business plan.
If we deliver on our sales and rigorously manage our costs, we have a pathway to free cash flow break even without needing to raise capital. We are focused on accelerating our sales and very tightly managing our cost base. If we go to slide 19, our immediate priority is BCRL. We are focused on that U.S. market, sales, marketing, clinical execution, and the BCRL opportunity. The slide, you know, is our overall strategy has been our core focus since we've come in quarter three, quarter four, and will continue to remain so as we build our business out over the next year. As I've kind of reiterated on a number of occasions, it really involves building out our leads and converting these more quickly to sales.
We are focusing on our large accounts, our IDNs, and academic medical centers, and with our new VP of sales and renewals, have a deep focus on this activity. This year going forward, we're working hard to ensure that our customers have very strong lymphedema prevention programs with analytics to support. We are continuing progress towards our 85% payer coverage target and efficient cost management. As we look at the years ahead, we're building out our strategy to expand the reach of our technology to more broadly in oncology and new indications to capture new market opportunities, as well as our global go-to-market strategy. As I wrap up on slide twenty, at ImpediMed, our priority is to support clinicians to provide top-tier clinical practice, guideline-driven care to prevent breast cancer-related lymphedema, prevent complications, and ensure positive outcomes.
SOZO is not just an investment in patient care, but it is also a financially sustainable decision for customers where the tests are reimbursed by payers. In 2025, our focus is on creating that sustainable business, with growth driven by the U.S. BCRL sales and the efficient management of cash. We have undertaken a lot of work as a team to improve our sales, our lead pipeline, our faster lead conversion, improving the strength of our programs, and improving our cost efficiency. And that this positive momentum is continuing into this quarter. Sales and lead generation continues to build, and this coming quarter and second half of the year, we have 14 conferences scheduled. I am seeing a very encouraging growth in leads, conversion rates, and reduction in sales lead time. This is why I'm confident about our growth.
On a very positive note, an additional NCCN center has purchased SOZO devices in this quarter, resulting in now 23 out of 33 NCCN centers with SOZOs. We will continue to focus on executing our strategy with our new executive team and our board. We will capture this valuable US breast cancer-related market opportunity in the US. We will continue to target 85% payer coverage, tightly manage our cost base, and develop our new product growth strategy. Thank you for your time, and we'll open the line up now for questions.
Thanks, Parmjot. Just a reminder, if you would like to ask a question, please raise your hand. And if we could go to our first question, Shane Storey. If you could go ahead, please.
Yeah, I'll just check that you can hear me, if that's okay?
Shane, yes.
Good morning, everyone. I'd want to go back to a conversation we started, I think, back at the last quarter, around the covered lives number of 140, which was stable, I think, from Q3 through to Q4. Question on that is, like, if we think about that number, forgetting what it means, but just what would be a good target, do you think, that you'd like to see that number reach, you know, in the happy event that you sort of get to what we could call sort of full coverage, knowing that no one ever gets really full coverage? And then the second question on that is, when we think about, I guess, the progress from 140 to whatever that target is, it, it...
Do you think it's fair to think of the situation like this, where we may have had some, a lot of payers kind of move early on the technology, but then necessarily there are some who, for, let's say, just their annual kind of review cycles, just sort of haven't got into a position to make that decision, and therefore you'd be looking for some of those sort of annual review processes to sort of play out over the next six to 12 months? Is that a fair way of looking at it?
Yes. So just answering the first question, we are still targeting that 85% national coverage, and so really working with a number of the national providers, as well as some of the state-based providers in achieving that, and doing so really is by working to get support letters from various doctors and societies, and really just leveraging the data that has been increasingly published around the technology. In terms of looking at the timing of that one, a lot of that is out of our control. We can do what we can do in terms of, you know, supporting publications, and supporting payer guidelines and supporting letters of recommendation. Yeah, so we...
We're working, so we're waiting for review cycles, but also seeing if there are opportunities through these various letters of support to get coverage outside of those review opportunities. One of the other strategies that we work on is with key customers. They can get helping to support them to get their own coverage within the institute. So there's kind of a number of ways of addressing that, and we really are with our market access team working on a number of these to try to get to that 85% target.
Okay. So then back, sorry to harp on the number, but-
Mm-hmm.
If so, a 140 ultimately becomes something in the high two hundreds, would you say that's true?
Yes. Yeah, yeah. Absolutely. Yeah.
Okay, great. Second question was just on the cost, but one really for McGregor. Just seeing there that you want to take that sort of OpEx envelope down 10% this year, but within that, could we also expect to see still increasing in customer-facing roles over the course of FY 2025? And if so, I mean, presumably that says there's savings in other areas, so I'm interested in what those might be, please.
Yes, Shane. As we said, overall, we are taking the cost base down by 10% on a cash flow basis. And but at the same time, we have increased our investment in customer-facing roles. So overall, our headcount has actually gone up slightly, but the overall cost base has gone down quite a bit, and there's been a shift towards resources in the customer-facing component of the business to support the growth plans.
And I think at this time, we will always continue to review the need for those roles, with a very, very tight focus on reducing costs. Right at this point, don't envisage a need to further increase these roles, just really working on supporting our sales leads to get that lead generation and faster execution.
Thanks, team. That's all I had. Cheers.
Thank you, Shane. Next question comes from Tom Godfrey at Ord Minnett. Tom, go ahead, please.
Good morning, Parmjot and MacGregor. Thanks for taking my questions. Can you hear me okay?
Yes. Yeah.
... Great! Can I just start with the additional NCCN center that you've signed in the first quarter, 2025? Are you able to sort of help us with how many SOZO devices that contract was, and does that sort of reiterate the view that,
Yeah.
You know, for some of these larger systems that are rolling out LPPs, you will sort of see those ten plus SOZO unit sale contracts come through?
Yep. This was actually a multi-system sale, but only I think two to three devices, so not a big one. But it's also in a relatively low reimbursement state, so a really critical academic medical center that is initiating. There are other devices around in their network, so we are working to see if we can kind of release their name and share some more data with you guys. There's another NCCN center that is also very close to signing, so we're seeing a lot of positive momentum in these centers moving forward.
Great. And then just my second question was picking up on that commentary around the positive momentum. Parmjot, you made the comment before that if you execute, that will drive you to Free Cash Flow Break Even. Are you sort of seeing enough momentum in the first quarter and across your pipeline in the year ahead, to feel confident in that outlook around Free Cash Flow Break Even?
Yeah. Look, we've got. From, you know, from our perspective, we've got a budget and a business plan for the financial year, which has got an assessment of those future earnings and their capital requirements. And what we need is really gonna depend on the achievement of that budget and business plan, including delivering on our sales target and managing our costs. I am very, very encouraged by the growth of our sales lead time and that increase in conversion. Over the last two months, we saw a 20% reduction in that closing of that sales lead time. We've also modeled the business under various downside cases. So just, you know, if we don't generate as much revenue, we've got a plan to better align those costs to really get ourselves through to that cash flow break even.
But, you know, really, I am very positive about the momentum that we're building with that new team and the leads that are coming through.
Great to hear. That was all I had. Thanks for taking my questions.
Thank you.
Thanks very much, Tom. Scott Power at Morgans, if you could go ahead with your question, please.
Yes, good morning. Just following on that reduction in those lead times, Parmjot, you mentioned 20%. What's driving that? What sort of-
Mm-hmm
Changed in the last six months to sort of suggest that the lead generation, the lead time is coming down? That's my first question. And the second question is just perhaps if you're able to expand on some of the work that Andrew's been doing in terms of the other indications that you're looking at. Thanks.
Absolutely. Look, I think, you know, a lot of things are driving it. Look, a lot of the team we've been on since January, and then VP of Sales in April. So a lot of us are still fairly new in the business, but just a very, very big focus on the leads generation and the pipeline. We've hired a new contracts role. You know, it is a fairly paper-intensive process in terms of contracts as customers, you know, need to sign a number of different contracts given the use of patient information and data. So we've hired a new role that's really aimed at accelerating that time to getting all that contract closure so that things are being managed, that can be managed from our side.
We've pivoted some of our IT team, more of our IT team, to kind of really help that, IT assessments from the customers. Really just making sure we've got more leads in the pipeline so that, you know, we can convert them a lot faster, as they come in as well. Just a number of activities, and really, hopefully, we will continue to see that momentum, as we move forward. Very early days still, but we do very closely track our metrics now, and so we're kind of watching a number of these and seeing how we can pivot our tactics, as we look at these numbers.
In terms of Andrew's work on other indications, so he is doing a lot of work looking at kind of what are the obvious adjacencies for us in the business, and, you know, highlighted for those, it's moving into that oncology area where, you know, right now we're focused on upper limb lymphedema, but, you know, lower limb lymphedema is there and getting reimbursement across some payers. The body composition within oncology and how we can really better leverage that in that survivorship journey, and then he's also looking at the, we've got a number of studies that have already been done and data in those other indications, and really building that out.
And so he is working with the team on that one, and we will bring out more information as he tightens that strategy up over the next couple of months.
Great. Thank you.
Thanks.
Thank you, Scott. We might go to a question that's come in via the Q&A function on Zoom, and it is one that relates to the difference in the business structure between the US and other markets in the world. Given half of the machines are in rest of world, is there an opportunity to develop a recurring revenue model outside of the US in a similar way to what occurs in the US?
Yeah, absolutely. So it's, you know, when you look at the numbers, it's pretty compelling. 50% of the base sits outside the U.S., but really, you know, it generates 10% of our revenues. So absolutely, it's a core area of focus, particularly Australia. It's gonna take a number of kind of levers. You know, we've got payer coverage in the U.S. and Medicare reimbursement, but that hasn't been an area of focus here. So it's something that, with Tim and VP of Sales and I, we're going to be looking at in detail to see how do we support our customers here with a similar SaaS business model, you know, with making sure it does for them. It helps patient outcomes, but is also a financially viable decision. So we are working on this.
It's a priority for me. You know, it's obvious we can do better here.
A follow-up question. You mentioned Australia. The question was: do you see an opportunity in Europe and/or China and India?
Yeah, absolutely. So right now the technology is in English, and so our priority is kind of English language countries, and we do have distributor in the U.K. that has a device in the U.K. and Ireland. That's just, it's a key area of focus through the distributor. So also looking, working with Tim and I, looking at this rest of world strategy and how we can expand it. China is not on the radar for us. Language is gonna be a barrier, and we've, we've got to look at, you know, the areas and where we can kind of implement an effective lymphedema program. So we are, we will build out the strategy, and it's an area of focus because, you know, these guidelines, NCCN guideline is a global guideline.
We have increasing literature and even European guidelines were the MASCC guidelines that were published.
Thank you. Just a reminder, if you would like to ask a question, please raise your hand on the Zoom call. In the meantime, we might go to another question that's coming via the Q&A function. Have you had any progress in securing further clinical trial work?
Yes, it's a very small part of our business. We do look, keep an eye out for that, and see where there are opportunities to leverage our device, and so with Steven Chen and Dennis Schlaht within the R&D team, you know, we do get requests in for the device and those indications, and so we do look at that. It's not a big growth area for us, so right now the focus has really been executing on US, but we do look at that, you know, more on an opportunistic basis.
Okay, thank you. A question for you, McGregor. Could you clarify for us what churn you experience across your customer base? And then what the key driver of your recurring revenue growth is looking forward?
So we've reported that our churn on our global installed base averages at just under 3%, and the key driver of our annual recurring revenue is the growing of our installed base, and that's something that you can see through the increase in the total contract value that we report each quarter, or the total contract value that we report each quarter. So it's building the installed base that will grow our annuity revenue stream.
Okay, we have no further questions on the line. Andrew, I might hand over to you to make some closing remarks. I suspect investors will be particularly interested in what you've said previously around the outlook.
Yes, absolutely. So I, you know, many thanks to you all for A, listening in, and B, continuing to support this business. You know, we've done a lot of work. We've got a fantastic management team, you know, broad team in ImpediMed, and a board have done a lot of work in the last half year. We have a lot of work ahead of us, but really, really encouraged by the momentum that this business is achieving. You know, and out there with the customers, they really see the need for this technology. You know, when you're out there with the patients, you really see the impact this has on patients' lives. You know, a number of people I talk to, they've got an aunt with, you know, lymphedema in the limbs.
We really do know by rapid implementation of this technology, we do change patients' lives. And, you know, with the SaaS business model, you know, we can create a very sustainable, very kind of viable growth business, and really, really encouraged by what we're seeing.
Okay. Thank you, everybody, for attending. A reminder that a recording of today's result presentation will be on the ImpediMed website shortly. Thanks, all, for your attendance.