Aoti (LSE:AOTI) — Results for the year ended 31 December 2025

0:01 Good afternoon, ladies and gentlemen, and welcome to the AOTI INC results presentation. Throughout today's recorded meeting, attendees will be in listen only mode. Questions are encouraged. They can be submitted at any time just using the Q and A tab situated on the right hand corner of your screen. Please simply type in your questions at any time and press send. Before we begin, we'd like to submit the following poll, and I'm sure the company would be most grateful for your participation. I'd now like to hand over to the management team, Mike, Jayesh. Good afternoon. Good afternoon, everyone. Welcome, everybody, and we're gonna walk through our results presentation. You got myself here, Mike Griffith, CEO, and our CFO, Jash Pankarnieth here. Okay. Little summary of who we are. You know, we're a company focused on both saving limbs and indirectly saving the lives of patients by healing their chronic wounds more durably.

0:50 And our overall mission is to really help people with chronic disease get back to living their lives to the fullest. We're a strong, value driven company, and we're able, you know, our market is defined by our leading, unique topical induction therapy, is proven to heal hard to heal wounds more effectively. The investment case, we believe, is strong and compelling. The hard to heal wound market is significant. We'll give you some ideas of the song and sound in a little bit. We have an established product with very strong clinical evidence. It's demonstrated better hearing with lower recurrence, so there's significant clinical, also cost saving for payers. The company had organic growth in in '25 of over $66,000,000 and positive cash flow and EBITDA.

1:41 We're a clear business model for expansion and significant future growth as broader coverage comes down the pike. And as I said, we are a profitable cash generative business already. The products that we have is called TWO2. It's a unique multimodality therapy that allows us to combine oxygen with non contact compression humidification. This allows us to heal these very difficult wounds at a much higher efficacy, six times more likely to heal at twelve weeks, but probably more importantly in a way that we produce stronger tissue and they stay healed over twelve months. This then results in significant reductions in hospitalizations and amputations, which obviously has the added benefit of reducing cost of care for these patients, as well as obviously improving their quality and quantity of life.

2:30 From a business point of view, our fundamentals are very strong, and we believe the business is well positioned for long term sustainable growth. Our mainstay product is our TWO2 therapy, which is differentiated and clinically proven and is also cost effective and cost saving. We saw in '25 good revenue growth despite significant health care headwinds in The US, and this was substantially greater growth in the advanced wound care device market as a whole. And we continue to evolve and invest in our business model and strategy, so we are increasingly well positioned to reaccelerate growth as these U. S. Headwinds start to abate and also as broader coverage comes into play. Regarding broader coverage, which which is driven by CMS, Medicare coverage determination, this will be transformative transformational for the company over time as it will open up significant new market segments.

3:25 And as a company, because we are not just a manufacturer, we're actually a provider that delivers this care to the patients at home, we are establishing an outcome based at home category within the advanced wound care market based around our platform. And this creates additional strategic advantages and very meaningful barriers to entry for competitors.

3:46 We've made significant operational progress in the last year and implemented a number of organizational changes, allowing us to have greater focus on delivering patient outcomes and improving sales rep productivity, and we're seeing positive signs for a number of changes we've made last year. We continue to move progress on market access and getting provider IDs, which is the ticket to play in Medicaid, which is the insurance in The US for people with low levels of income. And we now have 19 states additional to our ability ability to service Medicare nationwide. And we see continuous array of payer endorsements demonstrating and validating what we expect to be from a a CMS local coverage determination in the near term. These include achieving provider IDs in California, but also independent health technology assessments and resultant commercial payer insurance coverage for our therapy by Cigna, one of the large insurers in The US.

4:46 In Germany, we've seen national treatment recommendations for the German regulatory agency, GBA, and likewise in The UK, when the National Institute of Clinical Excellence last year published a fast track treatment recommendation based on the quality of evidence, and we're now beginning to start servicing the NHS through the supply schedule. Last but not least, we're seeing good progress rolling out our eyes on the wound engagement platform, which we'll talk about a little bit later. Now I'm gonna pass you over to JS to talk through some of the financial highlights. Thanks, Mike. So how did we do last year? We had good revenue growth despite US healthcare market disruption. Our revenue growth was 14% to £66,500,000 And within that, Arizona contributed around 9,000,000 So on an underlying basis outside of Arizona, the business grew 15%.

5:38 And Mike will explain later on the situation in Arizona. From a profit perspective, adjusted EBITDA decreased slightly to GBP 7,500,000. That was driven by an increase in investments in the commercial team and market access, which will drive future growth, but also in the noncash CECL provision, which increased as a result of the Arizona situation. Adjusted EBITDA margin was 11.3% and profit before tax was $3,000,000 compared to a loss last year of $900,000 In terms of working capital,

6:16 our receivables increased to a total of $21,800,000 largely as a result of payment delays by our Arizona insurers. And as previously mentioned in our trading update, the business will cease taking on new patients from the April 1 in Arizona that will limit our debtor buildup going forward, reduce our working capital needs and it will support our positive operating cash flow. Our inventory also increased due to commitments made in anticipation of growth in the early part of last year, and we expect that to normalize in FY 2026. From a net debt perspective, our net debt was GBP 6,500,000 compared to net cash of GBP 900,000 at the end of last year. Compared to the half year though, our net debt of the half year was GBP 5,400,000, indicating a better cash half two cash performance.

7:10 Since the end of last year, we drew an additional $11,000,000 loan with SWK, bringing the total loan balance now to $19,500,000 And that additional drawdown came with a reduced charge and longer amortization, which strengthens our balance sheet and ensures the business can navigate the unprecedented changes across The U. S. Healthcare landscape at the moment.

7:38 What do we think for 2026? So we think 2026 is going to be a transitional year. We will still have ongoing challenges from the one with beautiful bill and as we embed our revitalized sales structure to drive productivity and leverage market growth. We expect revenue growth for FY 'twenty six to be in the low single digits. But if you take out Arizona, we expect the underlying growth to be in the mid teens. Adjusted EBITDA is expected to be in the high single digits. I'll pass back on to Mike for the business overview. Thanks, Jiraj. So we wanted to articulate more accurately the opportunity size that we have today based on our current reimbursement structure in predominantly the Veterans Administration across The United States and and in New York State Medicaid.

8:27 We've done a bottom bottom up build from The US twenty twenty four US claims data, looking at hard to heal wounds of the lower extremity just in those two sectors. And by doing that, we estimate that the obtainable market today is about $400,000,000 with about 66,500,000 revenue. To to today, we have about 16% penetration. So plenty of upside for us to continue to expand and and go deeper into these sectors as we as we work on broader coverage. When broader Medicare coverage is established, and when it flushes down the system and opens up all of the payer pathways that it influences, we estimate that that will drive a serviceable market of about 26 26,000,000,000, so a 65 fold increase. So when we talk about CMS coverage being, you know, transformational for the business, you can see it magnifies the business opportunity 65 fold.

9:24 Now we've been executing over the last few years in different phases. The first phase was focused on the Veterans Administration nationwide in New York State Medicaid. We have clear coverage in place. The phase we work at the moment has been working to other state Medicaids and getting provider IDs so we're able to service various sectors of those those payer pathways, and establishing the precedence needed for them when we receive broader coverage from CMS so we can take advantage of the maximum 26,000,000,000 opportunity. We had some good progress over this year also in the private sector where Cigna, one of the big insurers, as I mentioned earlier, pass coverage criteria for our therapy and cover it as a covered service already. As Jayesh mentioned, in Arizona, we've had very good success in driving adoption and adherence to our therapy, and we've able to move prescribers along wanting to utilize.

10:18 However, you know, in the last year, we've had we've had certain restrictions with regards to payments from from insurers. And this has been driven largely by what what's been really a perfect storm of issues in Arizona, in addition to the pressures created and the the the upheaval created by the big beautiful bill. And you can see here, there are a number of different things that have affected the state. Consequentially, so that we limit our exposure, we have no choice, even though we're having good, intensified efforts with the state towards a resolution, but we have no choice to decide to cease enrolling and treating new patients from April forward until we get a resolution from this day relative to the payment issues.

11:03 However, we are confident in collecting historical debt due to the process that we've taken. With some of the organizational changes we mentioned earlier, we've taken our sales force somewhere, we're utilizing what was a predominantly VA sales force with certain areas where we had dedicated reps also for Medicaid, and maybe more geography and territory based. And if you look at where we have headcount, we have either headcount or infrastructure that encompasses about 26 US states, which involves about 86% of The US population.

11:38 And we're driving these reps to take advantage of all pathways for business additional to VA in those states today. But clearly, then once we get broader Medicare coverage, these reps can then take advantage of that broader coverage with the same prescribers they're working with today. And we believe we'll be able to hit the ground running without significant capital needs. As we're doing this, we're working very aggressively to drive the direct performance and the outcomes that we get from them. So something that's very unique is, as I said earlier, we're not just a manufacturer, but we're also a provider here. And what we're doing is we're building a new outcome based home care category, which really resonates with the administration in The US move away from fee for service that could be prone to such fraud and abuse towards more of an outcome based care. We are already the market leader in the top of auction space, and in over 75% of the top of auction segment, the advanced wound care market.

12:37 And our outcome based platform is really based on three pillars, our unique differentiated therapy that allows us significantly better clinical and long term outcomes, The fact that we are an accredited home care provider and have direct patient access and own the channel all the way to the patient at home. And then last but not least, an evolution of our eyes on the wound platform, which is patient data analytics and engagement platforms that allows us to deliver more effective care, and enhances engagement with patients, caregivers, prescribers, but very importantly with payers, so we can demonstrate and deliver these outcomes to the payers on ongoing basis. So, as we said, CMS coverage is something that will be transformative for the business, transformational for the business, because it opens up a market opportunity 65 fold from where we have today.

13:29 We believe that a local coverage determination is expected in the near term, and it unlocks not only Medicare, and Medicare is the 65 population, which have the highest prevalence of chronic disease, but also accelerates access to Medicaid, which is the people of low income insurance, and other payer channels as well.

13:50 We will then once we receive coverage and it flushes through the system, we will be able to leverage our existing commercial infrastructure, which we support without additional investment, the ability to hit the ground running and to drive patient access. And we're confident of a positive decision based on the repeat and ongoing

14:10 clinical and economic valuations that we've achieved over the last year in both The U. S, Germany and The U. K, where we've had positive recommendation based on similar grade based assessments of the evidence as CMS will do. Additionally, have very strong advocacy support from both patient groups, like the American Diabetes Association, and clinical groups, like the Wound Healing Society in The US, which help bolster the support for coverage of the therapy.

14:39 So to summarize, our fundamentals of our business are strong, and we are positioned very well for sustainable growth. We have a unique differentiated product that shows both clinical long term clinical benefits, but also health economic and cost savings. We generate a good revenue growth in 2025 despite unprecedented headwinds growth substantially better than the Advanced Wound Care device as a whole. We keep we're continuing to invest in developing our long term business strategy, and we're increasingly well positioned to accelerate growth

15:16 as these headwinds start to abate and turn into tailwinds, but also as we get broader coverage. We believe CMS Medicare coverage determination will be forthcoming in the near term. And as we have pointed out, this will be transformational because it will untap the much greater market potential for our therapy in The US. Last but not least, we are building an outcome based at home category within advanced wound care that creates significant barriers to entry to others and strategic advantage, which later on can be expanded to include broader chronic care management of these patients at home, as many of these patients have multiple comorbidities. I think with that then, we'll pass it back, and we'll look and see if we have any other questions or answers. That's great.

16:01 Mike, Jayesh, thank you very much indeed for updating investors. Ladies and please do continue to submit your questions. It's just in the Q and A tab situated on the right hand corner of the screen. But just while the guys take a couple of moments just to look at your questions submitted already, I'd just like to remind you, recording will be available shortly after today's presentation. Mike, Jayesh, you've received a number of questions from investors this afternoon. Thank you to everybody for your engagement. Perhaps, Mike, if I may, just ask you to moderate through the Q and A. I could ask you to read out the questions and give a response where it's appropriate to do so, and I'll pick up from you at the end.

16:31 So one question was why did we stop not stop Arizona sales earlier in order to avoid the buildup of receivables? This is a very good question. We have been working with Arizona State Medicaid to resolve the payment issues. We have very good payment terms with insurers, you know, up for a year and a half prior to this. But we take very responsibly, you know, managing and treating these patients, and we do believe we meet coverage criteria and medical necessity requirements that these payments will be made will be made over time even if we don't come with clear coverage policy with the stay. So we believe it was the right thing to do, to continue treating patients. And as of the last year, we just it's just built to a point now that we feel in order to limit continuing receivables and the pressure on our working capital that we need now to take this stance, and and hopefully, the state will move forward with coverage in the near future.

17:33 What another question here. What gives you confidence in achieving CMS approval It's really CMS coverage. What gives us confidence is the body of evidence and the quality of the clinical trials and various other health technology assessments in both The US, including ECRI and coverage by Cigna, the big commercial insurer, and in The UK with NICE, National Institute of Clinical Excellence, and GBA, the German body, that have all looked at the evidence and come to to consistent coverage decisions based on assessing the quality of it, which is the process that CMS are mandated to do by law. Okay. Let me see something. Okay. Could your data platform evolve into a standalone value driver?

18:23 I I think definitely over time. So we see our our platform that allows us to engage with with with the patients and caregivers, but also to capture information and generate automated reports back for prescribers. And that then can be evolved then to payers where we can demonstrate that we actually deliver the outcomes in the real world. And a lot of this is being driven by an AI backbone. So we see our focus today to use it as a value driving platform for our therapy to deliver outcomes, but it could certainly be expanded to do more chronic care management in the future. So, yes, we do think so. Shall I take that one on cash flow? Yes. Why you take that one? So so the question is, can you give a monthly picture of your budgeted cash flow over the next twelve months and be clear on the minimum debt headroom you expect to have over the year? So so we don't provide monthly cash flow data, but what I can tell you is that we've got sufficient headroom for the next twelve months in a number of scenarios, even in the downside scenario, which we had to go through to as part of our going concern assessment for the audit and which the auditors have signed off on. So, you know, in in a nutshell, we've got sufficient headroom, you know, and sufficient cash resources to, you know, build on where we are at the moment and and expand the business.

19:48 Another question here, operationally, how prepared are you to scale rapidly if CMS coverage is is is received? As we pointed out, we have a sales infrastructure that encompasses headcount and offices across 26 different states. So as soon as CMS coverage is received and completed finally through the system, we can start treating patients in those states, utilize that existing infrastructure. We certainly have also in the background plenty of capacity both with devices and consumables. So we will be able to hit the ground running and allow ourselves then to scale as that coverage comes into play. So there's another question on the non US territories absorbing cash. If so, how much?

20:36 So I think, obviously, in in FY twenty five, that was an area that that was an investment for us in terms of getting the coverage both in The UK and in Germany and was a net cash drain on the business. Going forward, our expectation is that that will get towards a breakeven situation and start contributing, you know, on a on a going forward basis. So it is in that it is in that position now where it's starting to make that transition to be a to to be a net contributor. Very good. Another question here. Can you help me understand why obtaining Medicaid provider IDs in so many different jurisdictions? And we had nine in 24, now we're up to 19, so we're making good progress.

21:21 That's still not translated into significant revenues, and and when do you anticipate significant revenues? The provider ID is Medicaid is a joint administered program where it's funded jointly by the federal government and state government, but administered by the states. So even though we are a provider nationwide for Medicare, we need to get provider IDs in each state to be able to service Medicaid patients. We were having great success getting provider IDs, for instance, Arizona was an example to driving business even prior to having clear coverage policy in place with the state, like we have in in New York, for instance. However, the turbulence that's been created by the big beautiful bill made that less reliable. However, we need to have to provide IDs so we can service certain subsets of the Medicaid population today that sets predication for need, but also for pricing for Medicare when they come to make a coverage pricing determination as part of their process.

22:19 So we do expect that we will start seeing some revenue from other Medicaid states, but until CMS or the effect of the big beautiful bill and that turbulence abate and or CMS natural coverage is achieved when when the the codes and and and coverage then is is flushed through the system, which will start unlocking all payer groups, including Medicaid. We don't believe most expansion states on Medicaid will be substantial in the near term. That's great. Mike, Jaj, I think you've taken every question from investors. Thank you once again to you all for your engagement this afternoon. Mike, George, I know investor feedback is important. I'll shortly send those on the call to give you their thoughts and expectations. But perhaps before doing so, Mike, I should ask you for a couple of closing comments.

23:07 Yes. I'd like to thank everybody for joining us here. We have a lot going on in an exciting space, and we do good by helping people save their limbs and improve their quality of life. Thank you for joining us. That's great. Mike, Jayesh, thank you once again for updating investors. If I could please ask those on the call not to close this session, we'll redirect you so you can provide the company with your thoughts and expectations. On behalf of the management team of AOTI, we'd like to thank you for attending today's presentation, and good