Total Brain Ltd

ASX:TTB

Earnings Call Transcript 2022-Q3

[Operator]

Welcome, everybody, to the Total Brain March 2022 Quarterly Teleconference. [Operator Instructions] I'll now hand over to our first speaker, Matt Mund. Please go ahead.

[Matthew Mund, executive]

Thank you. And good morning, Australia, good evening, North America, and thank you, everyone, for joining us today. This is Matthew Mund, CEO of Total Brain.

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.

This quarter was one of continued momentum building as the company refined its go-to-market strategy against the updated segments we outlined last quarter while we also signed and progressed several key deals. The Total Brain capabilities desired by new clients are reflective of the changing health care industry and how Total Brain is poised to take advantage of those sectoral evolutions.

Health care is moving beyond traditional care models into a more quantitative, measurement-based approach focused on value and outcomes. The new clients we have brought on over the last several months are a strong validation of the efficacy of our product market fit and solving the challenges associated with care delivery and standardized measurement. And our scalable, configurable platform is enabling us to solve those challenges across multiple use cases.

During this quarter, we made the groundwork for future recurring revenues as most of the clients we have been onboarding have significant opportunities to scale. The ability for our revenues to scale as our clients adapt and grow is one critical aspect of the shift in our go-to-market strategy over the past several months. We are seeing that strategy starting to pay off as we are growing against the market that is a great fit for Total Brain.

Now I would like to cover a few key financial items from the quarter. We reported Q3 fiscal year '22 cash receipts of $1.64 million, representing a 58.5% decrease quarter-on-quarter. Now the previous quarter was driven by a large one-off payment received from the J&J deal. So on an adjusted basis, cash receipts increased 61% quarter-on-quarter.

Total cash outflows via payments from operating and investing activities were essentially flat quarter-on-quarter. We expect business expenses to continue to remain at this level in the current quarter.

In March, we announced that we had paid F45 a sum of $560,000 in principal and interest to finalize repayment of the USD 380,000 loan between us. We had also announced that we had entered into a convertible note subscription agreement with Zoltan Varga to issue $1.2 million worth of convertible notes to Mr. Varga, which was used to repay the principal and interest of USD 500,000 as well as replace the capital repaid to F45.

Additionally, the company's $2 million loan with Mitchell Asset Management remains due on May 31, 2022. Just as a reminder, this loan serves as an advance payment on the R&D tax incentive refund, which we will repay upon receipt of the R&D tax rebate that is forecast to be received in this current quarter.

Next, I would like to take you through some specific highlights from the quarter. During the quarter, within our provider segment, Total Brain began integration of our platform capabilities into Kerna Health's Behavioral Health Technologies in preparation for the launch of the first customers under the TB Inside deal for BHI, Specialty Pain and Wellness and Integrated BHI with Collaborative Care Management on their platform.

As a reminder, Total Brain signed a deal with Kerna Health last quarter to integrate the Total Brain digital neurotech platform into their Behavioral Health Integration support solution where our assessment and self-care tools will become available to all Kerna's managed patients, and Kerna's clinical clients will have access to Total Brain's patient management and reporting capabilities.

Demand for integrated behavioral solutions like this is likely to increase as the Biden presidential administration in the U.S. prioritizes the integration of mental health and substance-use treatment into primary care settings. And this is part of an overall push to expand access to mental health care.

Kerna has already presold the BHI platform into several of their customers. We're now queued up for launch ahead of the completion of the integration planned for release in fiscal year Q4, so that's this quarter. These initial customers represent hundreds of thousands of covered lives, providing significant revenue growth potential for Total Brain as we are paid on a per-user basis based on our standard rate card.

We view this early demand, coupled with the U.S. President's agenda, as further validation of the strategic shift we made to prioritize the provider segment and capitalize on our TB Inside approach.

Total Brain also grew its provider support segment client base in fiscal year Q3 through TTB Direct implementations, adding 6 new provider customers, each with the potential to scale as they add more patients to the platform.

In the quarter, Total Brain also renewed 2 marquee population health clients, each for multiyear extensions totaling a little over $200,000 in ARR. Additionally, we're working with several of our multinational corporate customers to expand access to their international employees. The company believes these signed renewals and future expansions continue to underscore the value of the Total Brain platform in population health settings.

Our deployment efforts with IBM and the VA continue to progress very well. And as a reminder, we are generating monthly revenue through this contract.

In my last update, we spoke about the ongoing product refinement efforts with key VSOs or these are the veterans service organizations. These refinement efforts have fulfilled most of the final items ahead of the next scaling of distribution, which is likely to happen over the next month or so. We feel very confident that the VA is pleased with the platform and the expected value to veterans. So we expect that in September, we will move into year 2 of the contract and see increasing volumes of veterans brought onto the platform.

In the precision medicine segment, the deals we have signed in fiscal year Q2, so a little over a quarter ago, have opened up additional inquiries for the company's iSPOT data across various use cases, including drug development, clinical trial modeling and pharmacogenomics. We expect to update you on additional deals coming out of those discussions on a future call.

On the product development side, in March, Total Brain released several new features that continue to enhance the core mental health measurement value proposition of the platform. We have talked about stress as a primary issue for mental health, and these features are part of the growing suite of capabilities designed to help users measure and manage stress as a part of their overall mental health.

As a reminder, while these features are important for our end users' personal health management, the data is also highly actionable and a key aspect of the value proposition for customers in both the population health and provider segments.

The first new feature is what we're calling the Mood Meter, which is available to all Total Brain users. The Mood Meter provides a quick and efficient way to identify and tag a user's current mood. And by rating them, the users can better understand the impact of certain activities on their state of mind, along with other notable new changes that they may experience throughout the day.

Another feature is our HRV stand-alone measurement. Previously, Total Brain's HRV measurement tool was available only through the Resonant Breathing exercise. Now iOS users can take a single reading whenever they choose and use tags to better -- to help better identify trending data related to stress. HRV measurement is currently only available to iOS users.

The last feature here is the improved HRV measurement metrics. Users now have access to 2 new sections under the Insights tab: Your Stress and Your Mood. These new features combine metrics from HRV measurements and the Mood Meter to give the user a more holistic view of stress levels and stressors over time.

Finally, I want to share a quote from a Total Brain user. We receive a significant amount of feedback on the product from our users that helps us refine the platform and improve the value for users and for organizations. And sometimes we get feedback from users that is incredibly powerful and gives us pause as it is a reminder of the importance and the efficacy of the work that we're doing.

This particular quote came from an employee at one of our population health customers. And the quote is, "My father was recently diagnosed with cancer, and it felt as if my whole world was crumbling around me. The positivity challenge came to me in a somewhat perfect time because it has been very helpful in keeping me grounded during this difficult time. The meditations and breathing exercises have been incredible tools in moments of heavy stress and despair, and the numerous videos and articles in the library have been extremely helpful and insightful in moments of confusion. So in terms of good deeds, I'm very grateful to my company and Total Brain for giving me a platform and many tools to help me and my family go through this difficult time."

This quote serves as a powerful reminder to all of us of the impact that Total Brain is having on our growing community of users. And at the end of the day, this, this is why our clients work with us and grow with us, to get outcomes like this.

So in closing, the quarter-over-quarter financials were in line with our expectations and reflects the continued lumpiness in deals we expected from our developing pipeline. We remain very enthusiastic about our future growth prospects. And as I mentioned earlier, fiscal year Q3 was a great foundational quarter to set up future growth. We've continued to contain our cost basis, and the progress we've made this quarter continues -- provides continued validation of our platform, our data and our go-to-market strategy. We look forward to sharing more on our continued momentum in the coming quarters.

And with that, we'll now open the call up for questions.

[Operator]

[Operator Instructions] It doesn't seem like we have any questions at this point, Matt.

[Matthew Mund, executive]

All right. Well, thank you to everyone on the call [ as well as those listening and follow us ]. We appreciate your continued support and look forward to keeping everyone updated as business unfolds. Thank you.

[Operator]

That concludes the Total Brain March 2022 Quarterly Teleconference. Thank you once again for joining us today. You may all disconnect.