I would now like to hand the conference over to Ms. Parmjot Bains, CEO and Managing Director. Please go ahead.
Thank you. Good morning, and thank you for joining us to discuss our Q3 FY 2025 results. I'm pleased to be here with McGregor Grant, our CFO and COO. We'll be referencing the Fourth Quarterly Activity Report and presentation we launched this morning with the ASX. The presentation is a summary of the more detailed Fourth Quarterly Activity Report. After our remarks, we'll take questions. It's been another busy year with more progress and more change as we continue to refine and execute on our strategy. This week, I'm in the U.S. to attend the American Society of Breast Cancer Surgeons Conference, which begins later this week. It's a great opportunity to meet with a large number of customers and potential customers, and it's also a fantastic time to get the entire U.S. sales team together under our new SVP of Sales, Scott Long.
It's also a great opportunity, and I'm excited to be joining the team here again this year. Now, let's move into the presentation, and we'll begin with page three with a quick overview of the agenda for today's call. Consistent with previous quarters, we'll start today with a brief strategy recap. Then we'll cover the key highlights for quarter three. We'll take you through an overview of the business. McGregor will go through the financials. To finish, we'll cover the outlook for the next quarter before commencing with a Q&A session. Now, turning to page four, I think it's always worthwhile to start with a reminder of what our immediate strategy is. It's to execute to a focus on profitability with a focus on sales, marketing, and execution and BCRL. We continue to execute on our strategy and are making real progress on a number of fronts.
Where that progress is not coming at a satisfactory rate, we are making changes. The work done on establishing the sales processes and systems has driven record lead generation. The conversion of these leads to sales in a faster timeframe is priority number one. As I mentioned last quarter, the business is not where we want it to be in terms of U.S. sales, and we have challenged all aspects of the sales process. On the back of these reviews, we've made a number of changes, including to the team, and expect to see early evidence of improvement in unit sales this quarter and across the balance of the 2025 calendar year. We continue to see good financial results in a historical context. We saw record results in terms of revenue and an extremely pleasing record cash receipts result.
Cost control remains a focus, and with recent non-dilutive debt capital raise, we will have the runway to execute on the strategy. This quarter, there was smaller progress with reimbursement, but it's important to note we believe we have enough coverage to achieve the sales needed to meet the company's stated goals. Although BCRL remains the main focus, we are progressing with goals four and five, and the slide has been updated to reflect on those changes. The product roadmap was delivered to the board, and we are building the base in heart failure, initiated through the clinical research partnership, utilizing a soft launch of SOZO Pro, our next-generation device. We have also embarked on a market assessment to form a more complete risk-averse strategy to be delivered upon in FY 2026. We will continue to execute on our strategy as outlined above.
We are focusing on the delivery and will make changes where necessary. When I look at the progress we're making, I continue to be very confident that we can execute on the opportunity. Turning to page five, we will touch base on the key highlights for Q2, Q3. As I mentioned upfront, there's a lot to like in the result. In the financials, we recorded record revenue and cash receipts. Operating cash flow was in line with our forecast. We have an even healthier cash balance after the drawdown of the first tranche of debt capital facility, increasing our runway quarter-over-quarter. On reimbursement, while coverage remained static, we have had small wins that continue to improve the position for providers, assisting them to provide patients with access to SOZO measurement to prevent breast cancer-related lymphoedema.
Despite lower reimbursement in some states, coverage is sufficient to achieve the sales that will meet our goals. Finally, to sales, trends in revenue, average recurring revenue, TCV, and cash receipts are all positive. U.S. unit sales are slightly better and, importantly, took us above the total of all of last year's sales while still having a quarter to go. While that is positive, we still need to see more sales to meet our goals. We are confident that we have the processes in place and, together with the changes made, put us in a position to capitalize on the opportunity. We expect to see significant improvement in U.S. sales this quarter and the balance of the calendar year. Now, moving to page six. As we mentioned last quarter, we have a very strong foundation.
The strength of the ARR business model that builds itself with every contract, the quality of our customers, the list of the new and renewing customers this quarter is a who's who of world-renowned quality institutions. These renewing customers are validating the clinical value of our device. Not only are they renewing, but they're renewing with price increases. Overall, we saw just under a 20% rise in TCV for these renewals, and churn remains less than 3%. As well as seeing an increase in TCV, we are also seeing an expansion of units within our customers. Within our NCCN customers, we are now averaging just under four SOZOs per institution. That number continues to grow and should be the base model for all major hospitals and cancer centers.
In today's environment, where hospitals are still struggling, SOZO sales are a new service line for our customers, which are both clinically validated and financially sustainable. Reimbursement is reaching the tipping point. It's more important than ever to have high levels of reimbursement, not just financial sustainability, but to also reduce the administrative burden for reimbursement for our hospitals. Importantly, our coverage is considered sufficient to achieve our goals and sales that will meet our company's goals. With that understanding, along with our cost discipline, gives us the confidence to further allocate resources into sales as we focus on accelerating the conversion of the opportunity pipeline towards profitability. Now to page seven. When we joined the business a year ago, it was clear we needed to invest in systems and processes to develop a robust sales pipeline. That investment has been successful.
Implementing systems like AcuityMD and Seamless.AI, introducing Salesforce productivity metrics, and investing in measures has generated a record number of quality leads in the quarter. It was not just a small step up. It was a meaningful lift in leads quarter-over-quarter. Credit goes to Tim Benkovic, our more recent SVP of Sales, and Julie Kuhlken, our Senior Director of Marketing, for all of their work in implementing these systems and businesses and processes and trade shows and events for this business. We now have a sustainable lead generation system in place that will benefit the company for many years. The pipeline is in good shape, containing several multi-order opportunities. MSAs, Master Service Agreements with clients that cover many hundreds of potential sites of service, and more than sufficient opportunities to reach our initial goal of breaking even.
While lead generation and having a sufficient opportunity pipeline is crucial, executing and converting these leads is equally as important, and we just have not been getting the results that we need to get to our goals. As I mentioned in the previous quarters, we have reviewed and challenged all aspects of our sales process. We found some deficiencies that need to be addressed in a number of potential areas of improvement. One area identified was the overall lack of direct breast cancer device experience within the sales team, or particularly within the newer sales team members. To this extent, we are very, very pleased to announce the appointment of our new SVP of Sales, Scott Long. Scott has over 30 years of experience in breast cancer and medical device sales in the U.S., predominantly in startups. In over 30 years, Scott has developed extensive relationships with breast surgeons.
His in-depth experience working with smaller startup sales teams, normally from six to twelve reps, really brings a lot of experience to the organization. Through this, he has developed a wide-range network of high-potential sales candidates that we are looking towards as we expand our team. Scott started this month and has gotten quickly up to speed with the SOZO technology. He will have his team together for the first time this week at the ASBS conference, and we will participate in in-depth training across the new site assessments and sales tools across all of the teams. After ASBS, Scott is excited to hit the road with the sales team, utilizing his contacts and assisting the team on execute on their goals rapidly.
In addition to Scott, we are recruiting two additional key account executives with breast cancer experience and the networks to support accelerating qualification and conversion of leads into sales. This will take us to a total of 11 reps across the United States. Now to page eight. Clearly, the markets have been concerned about the potential impacts of U.S. tariffs on businesses. We continue to conduct ongoing assessments in what is a very rapidly changing environment. Note that the company does not expect any material impact. ImpediMed manufactures SOZO within the United States, utilizing third-party manufacturers, and a substantial number of components are manufactured in the U.S.. The majority of the value in a standard three-year contract is derived from the various software applications that are not subject to tariff. ImpediMed also maintains a high level of devices and component inventory to guard against potential supply disruptions.
For our business, cost is less of an issue than continuity of supply. To this extent, in the current quarter, the company will purchase an additional $1.2 million of key electronic components at pre-tariff pricing to further reduce the risk of supply disruptions. As I mentioned earlier in the presentation, the company has embarked on implementation of stage four and five of our strategic plan. We are initially doing this alongside a soft launch of SOZO Pro for clinical research applications. This brings a number of benefits. Firstly, it's a low-cost way of building data sets and indications such as heart failure and creating that foundation for future growth for our technology. It also enables us to acquire valuable customer feedback on SOZO Pro ahead of a full-scale launch across multiple markets. In reimbursement, we continue to support initiatives that assist in broadening coverage.
In this quarter, NCCN updated their breast cancer guidelines. Historically, they have just referenced the survivorship guideline, but this year's review includes a reference to consider baseline lymphoedema screening as per the NCCN guidelines for survivorship. Although this is a very small change, it has a very positive change as it highlights a need directly with breast cancer surgeons. Now I'll turn the presentation over to our CFO, McGregor Grant, to go through the financials.
Thanks very much, Parmjot. Starting on slide nine, as Parmjot mentioned, it was a positive quarter from a financial perspective. We achieved record quarterly cash receipts of $4.1 million. Operating cash outflow came in on forecast at $3.5 million. This was in line with last quarter's result after adjusting for the annual R&D tax credit received during that quarter. A few things to note in the cash flow report.
Firstly, product manufacturing operating costs increased with a planned inventory build. We are also forecasting an additional one-off $1.2 million payment in quarter four for key electronic components at pre-tariff pricing to ensure continuity of supply, just as Parmjot has mentioned. Secondly, you will note an increase in advertising costs reflecting investment in conferences. It's the first time we've attended the Oncology Nursing Society conference, which was very successful, generating a substantial number of new leads. This figure also includes expenses for the ASBS conference, which starts later this week. This is ImpediMed's largest conference investment. We have strong representation with the sales team, and a number of ImpediMed's senior management team are also attending. As previously announced, we have drawn an initial $10 million of the growth capital facility.
As a result, cash and cash equivalents of March 31, 2025 were $27.4 million, which equates to over eight quarters of available operating cash flow. Turning to slide ten, another record revenue quarter of $3.4 million, which was up 28% year-on-year and up 2% versus quarter two. U.S. revenue was on trend, up 5% quarter-on-quarter, while rest of world revenue was slightly lower. Rest of world was affected by the distributor restocking we experienced last quarter. Importantly, you can see in the revenue graph that the trend line remains positive as a result of upward trajectory in the core U.S. business. Another positive was the continued improvement in cash receipts that came in at $4.1 million for the quarter. Over to slide 11. Firstly, to ARR. Again, a nice upward trajectory as TCV gains translate to increased annual recurring revenue.
Contracts in place at March 31, 2025 are expected to generate core business annual recurring revenue, or ARR, of $13.7 million for the 12 months to March 31, 2026. This equates to a 27% increase year-on-year, up from $10 million as of March 31, 2024. The value of new contracts signed during the quarter, which we refer to as total contracted value, or TCV, was $4.9 million, compared with TCV of $2.2 million signed during Q3 FY 2024 and $3.2 million in the previous quarter. TCV reflects both new contracts written and contracts renewed. Last quarter had less contracts up for renewal when compared with this quarter. We continue to be very pleased with the quality of accounts initiated or renewed in the quarter, together with the continued strong price increase on renewal, averaging 19% for the quarter. As mentioned, churn remains low, below 3%.
I'll now pass it back to Parmjot to talk through the remaining slides.
Thanks, McGregor. If we go on to slide 12, we've already spoken about U.S. unit sales and the need and expectation for these to improve significantly over the coming quarters. I just want to make a couple of additional observations. Firstly, this is now the fourth quarter in a row where at least 20 units are sold in the U.S.. Prior to that, going back to FY 2023, we only had one quarter above 20 units. Secondly, this financial year, we've already surpassed the number of units sold last financial year with a quarter to go. There is tangible improvement, but we have mentioned both this quarter and last, we need to produce a step change and to move unit sales consistently into 30s, 40s, and 50s to meet our goals.
Testing is back on track this quarter after a small dip down last quarter on the back of some short-term volatility and rest of world testing. In the U.S., our clinical program specialists closely monitor the customer testing levels, and the U.S. testing volumes continue to grow this quarter. We're upgrading our customer analytics platform to continue to support customer engagement and LPP, Lymphoedema Prevention Program Health. We continue to monitor testing numbers closely. Program Health at the customers is essential to patient outcomes and essential for renewals, so they remain a priority for the company. Moving to page 13 and taking a look at a high-level scorecard of what did we say we're going to deliver last quarter and what were the outcomes. As you can see, we did manage to achieve most of the goals that we set out to achieve this quarter.
We continue to initiate awareness. For example, with the Oncology Nursing Society conference, this assisted in generating a record number of leads this quarter. We've invested in the sales team and brought two new key account executives on board in the last quarter and a new SVP of Sales. We've achieved strong contract renewal increases with key customers, continued engagement with payers, and produced record revenue and cash receipts. The one thing we didn't get a take on was improving U.S. sales. Business metrics did improve as did the U.S. sales, but we have stressed we still need to see a significant acceleration in these sales, which takes us to page 14, this quarter's goals. These are an extension of Q3 with some refinement around the sales goals.
Executing on the strategy with a focus on number one, sales, we're focusing on forecasting a significant increase in U.S. sales in quarter four and in the balance of 2025. This will come through further measured investment in the sales team, continued lead generation, and improving our sales metrics. Number two, we continue to focus on initiatives that support customers and broaden private payer coverage. Three, controlling costs remains critical for the organization. Finally, we have broadened out our Australian executive team to help execute on the next phase of our strategy, innovation, oncology expansion, develop the rest of world sales, and move into other clinical applications. Turning over to page 15, the value proposition. We've been talking about this value proposition over a couple of quarters now.
Like the strategy slide, we think it's important to not lose sight of what we've achieved and the value inherent in these achievements. Starting with SOZO, SOZO is a platform technology with multiple clearances, which can provide significant upside over time. As mentioned, we're starting to take steps to leverage this opportunity and the incredible data that this device provides for multiple clinician types. In BCRL, we have a successful global randomized clinical trial demonstrating the efficacy in reducing lymphoedema. This has been recognized in the NCCN guidelines, now both in breast and survivorship, and with the NAPBC standard inclusion. The company has over 1,000 devices deployed globally, and that is within some of the most highly regarded institutions on the planet.
We have a growing pipeline which exceeds the number of devices required to reach breakeven and sufficient reimbursement, with 11 of the top 15 payers covering around 75% of the U.S. population to generate sales volumes consistent with meeting our goals of moving to profitability. The focus at the moment is BCRL with that TAM of $600 million. As you have seen, we have initiated measured investment with developing other applications and also potential to increase the addressable total market for SOZO. At our stage in market cap, we believe we are hard to match. On that note, I will open the call for questions.
Thank you. I f you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two.
If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Tom Godfrey with Ord Minnett. Please go ahead.
Hello, good morning, Parmjot, McGregor. Thanks for taking my questions. Can you hear me okay?
Yes. Yes.
Yes. Yes.
Great. Maybe if I could just start with your Outlook slide and sort of the first point around expecting us to give you an increase in U.S. sales from sort of fourth quarter onwards. Can you maybe just sort of step us through what's giving you the confidence around that acceleration and then also maybe just the mix of that near-term pipeline, like you've sort of called out some idea and opportunities, but should we expect larger contracts or sort of brick by brick smaller additions?
The depth of the pipeline and the quality of the pipeline gives us the confidence that we will definitely get a significant uplift. We do have a number of sales proposals we are working through that are multiple unit deals right now, and probably for the first time, a number of significant deals coming in. It is both depth and quality. Even in this last quarter, we had a six-system deal go through with one of the major providers. We are now starting to see some significant uplift, both in the quality of the pipeline and then the number of devices that customers are looking at buying.
Great. I appreciate the color. The next question I have was just around the lead pipeline. I think you have given relatively detailed metrics historically. I was just sort of wondering where that has gone to this quarter.
I think you're at 622 last quarter, and there's a comment, I think, on slide seven saying that across your MSAs, there's 750 identified opportunities. Like is that the number for the third quarter? Is it 750 versus 622?
Yeah. No, no, no. The MSA is more like when we go across all the Master Services Agreements we have with large accounts, there should be at least 700. And those are the ones with large accounts where we've got MSAs and 700. Some of those are incremental to the existing pipeline. We are basically measuring all of our opportunities that are going through that CLEF process and monitoring how going through opportunities that are going through our sales process and monitoring how they advance.
It's pretty similar to what it was last quarter because we've done a, with the new team, we're doing a bit of a cleanup of some of the old opportunities. I'd say it's pretty much the same as it was last quarter, but we didn't put it in because we're doing an intensive cleanup.
Got it.
When we look at the lead, we had a massive increase in lead, so we're just pulling those through and making sure that they're very kind of clear and accurate.
Understood. That's helpful. Thank you. Just last one from me, just around rounding out the Australian executive team.
Maybe just what's the key focus initially for the Chief Product Officer, and does that incrementally impact the sort of 10% reduction in cash costs, or how should we be thinking about your cost base just with some of these additional heads coming in?
Yeah. No, that won't. Anything we do, we do on a kind of headcount, kind of neutral position. We see we had a number of vacancies already, so the quality and the speed of our outputs, of our current software platform, as well as supporting the development of our new initiatives as we move through BodyComp.
Got it. Thanks for taking my questions.
Yeah.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Peter Gregory, who is a private investor. Please go ahead.
Good morning, Parmjot and McGregor. I've got a couple of questions that I'd like to ask about slide 12. First, you're to do with the global install base. And looking at the chart and just looking at the U.S. part of it, my understanding of that is 22 new devices placed in the quarter. The change in install base is 20, means a loss of two. Is that the correct way to read that?
Yes.
Okay. Are those for reactivations?
One or two of reactivations, just off the top of my head. There is a couple of reactivations in there. Not many. One or two.
Yeah.
Yeah. One. Sorry, it's one.
Okay. So we're still talking north of 20 in terms of the actual new customers from the ground up, new devices from the ground up.
Yeah. Yeah.
Now, on the second chart in that slide, patient tests, I noticed first of all that you're now showing the total patient tests. You're not spitting out new and follow-up. Is that correct?
I'm sorry, Peter, could you repeat the question?
In terms of patient tests, you used to show separately the tests that related to new patients and the tests related to follow-up on patients.
Yes.
And you're now not showing that. So aren't you for not showing it?
Yeah. From a customer perspective, it's a total number of patients being tested, right? So the new ones and then the recurring ones. They're all filled out at the same price point from a reimbursement perspective. We've aggregated them to just that simple total patient testing.
My interest in the new versus my interest in the new versus follow-up is really, to me, that's a good indication of the success of their surveillance standards, which they're saying tests on a regular basis quarterly for up to two years. That, to me, suggests if you're seeing that kind of pattern happening, in which case the follow-up tests might get to be between four and 8x the level of new tests, suggests to me a lot of this.
Yep. It's okay. We can put it back in next quarter if it's something of value. It's not a problem.
Yeah. Okay. Also, just a comment you made about hands-on support of the field sales team.
I think that is absolutely fantastic that you've got essentially a pretty much new sales team that they're doing active field infill support to get them to be up to speed as quickly as possible. Thank you for that initially.
Yeah. Yeah. No, we're very, very thrilled to have Scott on board. Okay. We're reusing SOZO decks and reaching out to all the contracts. It will be a good weekend with the American Society of Breast Cancer Surgeons. They're all together in Las Vegas. Hopefully a fruitful weekend.
Okay. No, that's it for me. Thank you.
Thank you. T here are no further questions at this time. I'll now hand back to Ms. Bains for closing remarks.
Great. Thank you, everybody, for your questions, for listening in, and your continued support. Look forward to catching up next quarter.
Thank you for your time as we look forward to really continue to accelerate the growth of ImpediMed and for really aiming to eliminate breast cancer-related lymphoedema in this patient community. Many thanks, and we look forward to connecting soon.
That does conclude our conference for today. Thank you for participating. You may now disconnect.