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Welcome, everybody, to the Total Brain 2020 Quarterly Teleconference. [Operator Instructions] Thank you for joining us today. I'll now hand over to Chief Executive Officer, Louis Gagnon, who is joined by Emil Vasilev, Chief Financial Officer; and Matt Mund, Chief Operations Officer. Please go ahead.
Thank you so much, Rachel. Good morning, Australia. Good evening, North America, and thank you, everyone, for joining us today. Before we start, please note that our comments and responses to questions on this call reflect today's management views only and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in our quarterly investor report and Appendix 4C. In the December 2019 quarter, we made significant progress on many fronts. We consolidated our relationship with key customer affinity groups like IBM, setting us up for recurring revenue generation in early 2020. We signed 5 corporate HR and pharma clients, with more signatures expected in early 2020. We launched a foundational pilot in the addiction clinic space with an enthusiastic partner, and we launched the first half of a new product interface internally called Total Brain 2.0. So here's more details on each of our business segments. On the consumer affinity group front, we completed a very successful field test of our integration with GRIT, the first instantiation of the IBM Mental Fitness 360 platform, targeting U.S. veteran -- war veterans through a partnership with the U.S. Veterans Administration, commonly known as the VA. The test included more than 1,400 veterans who, for a 2-month period, spent between 11 and 16 minutes per day using our application. A survey of field testers found that 69% of them would recommend the use of GRIT to other veterans. The mind gym, part of the app powered by Total Brain, was cited as the top feature in the app and drove the vast majority of the user engagement. Those very positive results will help us in more than one way. One, they will help the VA make its case to internal and external funding stakeholders that a large number of vets should be funded to use the app over the next years. It will also help IBM sell the platform to other veterans organizations in other countries and to other organizations targeting vulnerable populations like active military personnel, first responders, foster kids, prison systems and universities in the U.S. and abroad. We are in the final hours, literally, of monthlong contractual -- a monthlong contractual process that will firm up our economic relationship with IBM. We are still planning to launch GRIT with a significant number of vets in early 2020. Total Brain will be paid on a user license basis. Users will be funded by the VA and its funding sources, and they should grow over time as we further penetrate this population. We expect our revenue per user to be in the same order of magnitude as our current price per employee rate card for corporate HR. Such pricing is likely to raise our ARPU, or average revenue per user, as we expect our volume discount curve to be less steep. As a reminder, there is 18 million veterans in the U.S. Significant penetration of that population at the expected ARPU level will likely change our revenue trajectory. How deep and how fast that penetration will occur remain unfortunately out of our control and fully in the control of IBM's clients. We are somewhat removed from the decision makers, and this is part of the risk that comes with such partnership. Timing uncertainty is simply the price that we will have to pay in order to access those revenue dollars at that scale. To help us navigate and influence decision-makers at both IBM and the VA, I am pleased to announce that Mrs. Nicole Gardner, Former Vice President of Innovation at IBM Global Business Services, is joining Total Brain as a senior adviser. Nicole has recently retired from IBM where she led the Public Service Health Group and founded the GRIT and Mental Fitness 360 initiative. We are thrilled to be able to count on Nicole to help us penetrate not only IBM, but the entire health care sector. Outside of IBM, in the consumer affinity vertical, we have made significant progress in maturing a new opportunity, and we hope to finalize the extensive due diligence and contractual process shortly. Moving from affinity to our corporate HR business. We executed 5 contracts during the December quarter, representing an annual minimum value of AUD 800,000 and the potential for additional proceeds based on usage and account penetration. Highlights includes: a Fortune 500 client that renewed and expanded its contract to use the screening product; an ASX-listed [ vault ] intelligence company with 1 million users has decided to integrate Total Brain into their workplace performance and protection solution; a U.S.-based pharma company entered into a data licensing agreement for nonexclusive access to Total Brain scientific and data assets. Based on preliminary figures, incremental quarterly revenue brought the total revenue for the 12-month period ended December 31, 2019, to AUD 3.7 million, which represents a 38% year-on-year growth rate. We have made significant progress in maturing a number of opportunities in our December quarter sales pipeline on the HR front, and we hope to finalize the extensive security diligence and contractual processes for some of them in the months to come. Regarding the clinical sector, we launched a proof-of-concept pilot with a U.S. addiction clinic. We are in the process of training their clinicians and getting the applications into the hands of patients, and the initial feedback is very positive. After we review the funding from this pilot, let's say, around May, we expect to refine the product and onboarding experience and to scale to a predefined set of larger clinics in the quarters to come. The addiction space represents a significant revenue opportunity for us given the opioid and addiction epidemic ongoing in the United States, with 4 million out of a total of 20 million addicts seeking in-patient care every year. With 90% of addiction clinics accepting insurance, there is a strong market need for data-driven objectivity and tech-enabled patient engagement tools. We have already validated that the Total Brain assessment is reimbursable by insurance for $26 in U.S. terms per assessment, assuming a 50% revenue share with the clinic and an average of 4x assessment by a user. While in the clinic and during the months thereafter, we expect to make USD 50 per user, which is roughly 3x our current rate cards annual pricing. Our pilot in the clinical world is led by Adam Pearson, who was formerly Vice President of Chronic Care Management at Quest Diagnostic, a Fortune 500 company with 45,000 employees. We are very excited about the clinical market opportunity because it provides shorter sales cycles, a great product market fit, solving very valuable issues for the owners of those clinics. Now moving on to users and business KPIs. In the last quarter, we've increased cumulative registrations by 30,000 and brain profile by 21,000, representing a 4% quarter-on-quarter and 19% year-on-year growth for both metrics. We collected AUD 700,000 in cash receipts, representing a 33% decrease quarter-on-quarter, driven by a large upfront annual payment from AARP of AUD 357,000 included in the September quarter figure. Adjusting for this amount, the December quarter figure represents flat quarter-on-quarter growth. We expect significant cash receipt growth in the March quarter, following several pending payments of executed and new contract that I just alluded to. I will now quickly review the progress made in each business function for -- during the December quarter, starting with a great news for the reach and the caliber of our Board of Directors. David Daglio, formerly Chief Investment Officer and Executive Vice President at Mellon, also a shareholder in our company, was one of the largest institutional asset managers in the U.S., with $500 billion in assets under management, has officially joined our Board as a Nonexecutive Director. We are thrilled to count on his vast expertise as a manager and a Board member, and we will greatly benefit from his deep knowledge of the public markets, both globally and in the United States. In product and technology, we've completed the launch of half of Total Brain 2.0 in December 2019. The first half included welcome and onboarding flows, assessments results and dashboard capabilities. The second half will be released in the months to come and will include the recommendation and exercises model. We've completed technical launch of Total Brain clinical platform, MVP, on time, including a clinician portal, clinician reporting, expanded screening surveys and reporting with the TB application. We've also supported unplanned security diligence from big potential customers as part of their due diligence work, and we've launched several Fortune 500 clients. In sales and customer service, while I have covered these updates in my initial remarks, I would like to point out that we continue to be very focused on iterating for optimal product market fit within our target markets. While the revenue and cash receipt impact of the new contracts and partnership signed during the December quarter have not yet materialized and some will be dependent on penetration going forward, our recent wins represent a very important market validation. We are currently rolling out new presentations and sales material, positioning Total Brain as a platform that delivers mental health and wellness, monitoring and support. The goal of this positioning update is to be as precise as possible as the work -- as to the work that we do and the work that we don't do, so that people -- the product market fit is as optimal as possible right from the get-go. We are a mental health and wellness platform that does monitoring and support. On the marketing front, we continue to scale our account-based marketing strategy, resulting in 250 new marketing qualified leads from U.S. corporates with 5,000 and more employees since inception. We completed the calendar year 2019 with 21 events and speaking opportunities. For 2020, we are focused on reaching to CHROs and senior contacts in the HR community as well as senior clinical decision-makers through high-touch engagements. Lastly, we completed the development of a new media asset to reflect our evolved brand positioning as well as clinical market proof of concept. In human resources, we sourced and filled positions across engineering and product, continuing to proactively address the high turnover rates of the San Francisco tech scene. We also finalized our 2020 hiring plan and build pipeline for an expansion of the team in key roles such as engineering, product data science, sales and marketing. We held a successful company-wide retreat in San Diego, California, where we focused on strategy, team building and cross-functional collaboration. In closing, we are thrilled with the momentum that's emerging at the end of 2019, beginning of 2020. We have made steady progress in each market vertical, and we expect that we will now materialize -- that it will now materialize in ARR uptick over the coming months. We are very enthused by the size and the magnitude of the opportunity that we are very deeply engaged with. We really wish that we had more control over the agenda and the pace of the mammoth organizations we deal with, but we also accept the lack of timing and the lack of timing control as the price to pay -- to play with the big boys. In light of the important strategic gains we made in 2019, namely the development of this new relationship with IBM, our 2020 strategic imperatives are: number one, penetrate and expand the affinity deals already signed or soon to be; two, harvest efforts to put into corporate HR by retaining and upselling current book of business, converting ABM accounts and try more of a pull versus a push strategy by creating newsworthy events with our content and data; three, invest aggressively in developing more consumer affinity deals given the much larger total addressable units per effort deployed; finally, fourth, nail clinical as a product and value proposition that can generate 3 to 4x the ARPU of other verticals. I want to thank the Total Brain team for its total dedication to the cause. I am very proud of the culture we've built, a culture based on our shared values of compassion, passion in this fashion as we grow our headcount to address the numerous challenges ahead of us in 2020. I invite us all to remain alert and to protect this precious way of being that we have as an organization. Finally, I want to thank you all, dear shareholders, for believing in us and supporting us along this product market fit discovery journey. I know that I speak for every Total Brainiac when I say, we will do everything possible to honor that trust. That's it for me, Rachel. If you want to move into the Q&A sessions, feel free.
[Operator Instructions] Your first question comes from Finola Burke from RaaS.
Congratulations, Louis, to you and the team on the progress made in the last quarter. And congratulations as well on the partner with Nicole Gardner as an adviser. That's a great move. I just wondered how the success of the Veterans Affairs trial generated any interest or opportunities for Total Brain's engine to be used in other apps or platforms outside of IBM.And my second question is just regarding the clinical market. How quickly do you think you can onboard insurance companies? Have you had any early indications of their support for what you just established there? And are we likely to see the current revenues from that segment in this calendar year?
Yes. Thank you so much for the question, Finola. I'm going to take a quick shot at the question. And Matt and Emil, if you feel like adding to my answer, feel free. So Finola, regarding light deals and IBM, we definitely want more, and we definitely made that the strategic imperative for the year 2020. We have many discussions underway, which we hope will lead us to similar opportunities. These deals are transformational, but they take a long time to come. And it's a question of finding the right partner at the right time. And we are definitely optimistic that we're going to be able to add to this kind of partnership in the year to come. On your second question regarding the insurance market, we do have a pilot right now with a small insurance player here in the U.S. called CNA. We are going to try and see the impact that the usage of Total Brain has had on the claims that they have. And we will, from there, see if they want to expand significantly, which we hope they will. And other than that, we will also try and take this pilot to other insurers. There's many conversations that have started there, the insurance market being extremely slow and difficult to penetrate. We don't expect any revenue coming from there that is significant in the short term. I think you might also have asked about the clinical market. On that note, we have a very clear set of targets that we have pre-identified and prioritized, but we want to take our time before we actually go after them. We want to make sure that we have solidified the product value proposition that we have and have some results to talk to before we go wide. Emil and Matt, if you have anything to add, feel free.
No, Louis, I think that was clear and perfect.
All good.
[Operator Instructions] Your next question comes from David Millhouse from Anavio Capital.
Congratulations on the quarter. I was just wondering if we could get to more detail, Louis, on the pharma company that you've entered into for data licensing. Just any detail you can give us in terms of how long from a revenue perspective that might look would be helpful. And also just on IBM, just take your point on them driving it from a user perspective, but I guess everything sounds pretty encouraging. I just wanted to get your thoughts -- based on what you said previously, are you still as excited longer term in terms of the addressable opportunities from that business to what you said in previous calls?
Yes. Thank you so much, David. I am more optimistic about IBM than I've ever been because we are closer and closer to it. We are also clearly -- we have validated the value proposition with users, which is the most important driver. So I am very, very optimistic that we will penetrate the pool of veterans that we have in significant ways. And it is just a matter of making that case to the funding authorities that may help the VA do this. So I'm also super enthusiastic about the reaction that IBM has every time that we pitch to yet another stakeholder that could take us to yet another type customers. The relationship is very strong, and the level of enthusiasm for what we do is very high. I think we are perceived as solving a fundamental problem across many sectors, and so I remain very optimistic. I will let my friend, Emil, maybe comment on the pharma deal. And I will invite Matt to give us some color on IBM as he has been dealing with them very, very recently on all -- on many fronts. So Matt, if you want to add to IBM after Emil, feel free.
Yes.
So Emil, how about the pharma deal?
Yes, David. So this deal is with a big publicly traded multibillion-dollar market cap company based in the U.S. It's really how we view it. It's a testament to the clinical grade science and innovative big data approach of us compiling that times over the last 2 decades. And from there, it's also a great testament to our ability to deal with such large clients. From the point of view of announcing additional details just to the nature of the counterparty, we are not able to provide much more color due to confidentiality, but I hope this gives you a bit of a sense for this transaction.
Yes. Perfect. I understand. It sounds exciting.
This is Matt. With respect to the IBM questions, I reiterate Louis' comments. We are more excited than ever. We continue to work with IBM on multiple opportunities that continue to extend and expand the overall opportunities we believe are addressable with our joint solution. They've been an incredible partner, integrating us into internal discussions across many different parts of the business. So we still feel very confident and very excited about this partnership with them.
We have no further questions at this time. I'll now hand over to Louis for any -- sorry.
Rachel, it's Nigel Kassulke from Cannings in Sydney. And I have some presubmitted questions from shareholders for the team. The first one is, "Although the partnership with IBM should be a priority due to the scope of the opportunity, would the company ever consider celebrity endorsements and social media as a cost effective way to market the app globally to the average person in order to create an identity for the company outside of IBM?"
So this is a great question, Nigel. We -- this is definitely something that we will consider in our future. Up until now, we have focused our marketing efforts on the B2B segment and that did not call for the same kind of spokesperson strategy as we would if we had gone direct to consumers, but we did, however, hire and have collaborated with some serious influencers in the B2B space like Garrett Walker, ex-IBMer, CHRO of many multibillion-dollar companies; Professor John Boudreau from University of California, who is kind of a spokesperson in the circle of the HR thought leadership; Nicole Gardner as a health representatives; and if you remember, Barbara Van Dahlen, who was our mental health adviser before she had to resign to join the government mental health initiatives. So we have done that, believe in it, have done that in the B2B, and we'll do it when we engage further in a direct-to-consumer strategy, which we are always evaluating as part of a readiness exercise. There is a time to go direct to consumers, and we are and patiently waiting for that time. And when that happens, we will definitely look into endorsements. And I'm inviting any shareholders or any investors who would know such personality, either locally or internationally, to feel free to submit their names to us so that we can include them in our consideration set.
And Louis, the next question is, "What advancements have been made in the area of integrating heart rate variability, monitoring the stress through the use of a smart watch?"
So that is a very, very exciting area for us. We are very, very much looking forward to leverage a biological signal to approximate stress, and from stress, approximate the impact on mental health. Because it removes one of the major barrier to using Total Brain right now, which is you have to take a 20-minute assessment, if we remove that, all of a sudden, we open up a completely different engagement model. And as a statement, I will repeat that this is something we're very excited about. Since signing the partnership with the American Heart Association to study the link between the brain and the heart, we've been deeply engaged on the subject. The first part of this project was to test the validity and reliability of the many wearable options in capturing the HRV signal itself. We have tested many watches, straps, rings and camera phones. We've also started to form a set of science-driven product hypothesis such as HRV of a certain level will have a certain impact on certain parts of the brain or on other behavior or parts of the body or health in general. We are deep in the process of formulating those hypothesis and reviewing all literature that is related. It is still early days, but we're very excited about the value that we will be uniquely positioned to provide given the fact that we do already have a significant amount of data on HRV in our database and we do obviously have other sets of data that has never been necessarily well correlated or explored together with HRV. So super excited. Our goal is to have a functional prototype built by this fall so that we can get consumer feedback on an MVP. And that is really what we intend to achieve this year, a prototype that's validated and hopefully something more robust built by the end of the year.
The next one is to do with dementia. Brain training -- the shareholder asks, "brain training has been proven to be effective prevention of dementia. Does the company have plans to market the app as a possible tool for treating dementia?"
This is a demand that has come to us from many customers, and this is something that we have definitely in mind and are scoping one of the clear trigger for us would be to add something called mild cognitive impairment, or MCI, to the list of mental conditions that we screen for. Having that in place would allow us to screen the people who may have the beginning of dementia as mild cognitive impairment is usually a precursor to dementia and/or Alzheimer. And so we're going to use the signal to give people preventive exercises and support. And this is something that we unfortunately need to prioritize in the queue of all these other things we have to do with the limited amount of resources. And so it is a matter of time before this becomes a priority, not in the very short term, but definitely part of the -- what we call in product lingo, our backlog.
And finally, obviously, a local question, "Can we expect to see the Total Brain application on any Australian telehealth platforms in the near future?"
Yes. Yes. I have to say first that Australia as a market is more and more important to me than it's been since I joined. And the reason is that I recognize how similar the conditions -- the market conditions are from the one we operate on here. But more importantly, I think it's very important for the investment communities and for our shareholders and for the ASX market to be exposed to the goodness of Total Brain and to be exposed to what we can do for companies and consumer alike. So when we think of international development, Australia makes the top of our list. We started last year in doing a partnership with Vault. We are considering maybe hiring a local talent on the business development front. And so expect that we will definitely explore more and more opportunities on the Australian market in the months and the year to come. Part of this will definitely be talking to Australian telehealth platforms, and that is the short answer.
Thanks, Louis. That's all the questions from the Australian shareholders that I've got. Thanks.
Thank you.
You have one more question from [ David John ], a private investor.
Congratulations on what you've achieved today. My question is around the IBM relationship, and you touched on, Louis, at the beginning how you're targeting other populations within the vets, but also, I think you mentioned university is another population. How does that work with IBM? How do IBM give you -- practically give you the access? And then how will it work around contracts over the medium term between yourself and IBM? Any color you can give on the interaction and how it's developing, that'd be great.
Yes. So very, very high level. IBM has a dedicated amount of people working in the public sector division where GRIT has found a home. And so these salespeople are now being trained, and they are putting Total Brain into their bag, if you like. There are many other areas of IBM that are being made aware of what we do and what we could do for their audience. So we are not limited to those 30 people. We are also not limited to the United States. And for more color, I will let Matt maybe provide more details as he's been very, very involved in the contractual negotiations that are hopefully coming to a close very, very soon. But Matt, if you want to share some more color as you find appropriate, feel free.
Yes. The relationship we have with IBM is an enterprise supplier relationship. It's a partnership level agreement. And that allows us to both co-sell, co-market as part of integrated within their platform. So IBM utilizes their channels and sales team to market the platform across multiple different segments, and they contract their clients. And so we have an enterprise relationship with them as part of any subsequent client arrangement. So it's very seamless once we get through the primary enterprise relationship with any subsequent clients that IBM contracts with. So that makes it seamless for us, seamless for them, seamless for the client. Does that answer your question thoroughly?
Yes, it does. I'm assuming that as each vertical has for each opportunity, for instance, as universities opened up or something like that, there's individual contracts around each segment, if you like.
It'll be client-by-client engagement and contracts with IBM, but multiple different internal sales teams that would have the opportunity to sell into multiple segments of the market.
David, maybe one of the -- one question that may be implied in what you're asking is, are the terms of the deal that we are currently rolling out, will it always be the same terms across all sectors. And the answer is it will depend on the customer constraints and the customer level of adoption in the platform. As you know, we still a very modular platform. Some people can have more or less modules, which can influence the price. So we have a very good kind of reference point that we've agreed on with IBM in terms of what [ works well ] in general. And customers can take some feature in, some feature out. And so the price could vary slightly around the terms that we will be rolling out. So...
We have no further questions at this time. I'll now hand back to Louis for any additional or closing remarks.
Just wish you guys a wonderful sunny day in beautiful Sydney. I look forward to being back, and I thank you again for your support.
Thank you, Louis. That concludes today's Total Brain teleconference. Thank you once again for joining us today. You may all disconnect.