Aoti (LSE:AOTI) — Half Year Results

0:00 Good morning, and welcome to the AOTI half year results investor presentation. The actual quarter presentation, investors will in listen only mode. Questions are encouraged, and they can be submitted at any time by the q and a tab situated at the right corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company can view all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to make the following poll. I'd now like to hand it to Mike Griffiths. Good morning to you, sir. Good morning. Welcome to to speak to everybody again. I'm Mike Griffiths. I'm the CEO and president of AOTI, and we're delighted to be presenting our half year results. Just wanna remind people initially that, you know, we are a unique company creating a new top option category in the med care space that's that's focused specifically on delivering what we call sustained wound healing and value based care. So long term outcomes in in an area of in in in the med care space. So here are disclosures, which I won't read, but you can read them.

1:00 As a self myself presenting and also our CFO here, Jayesh Pankani. Morning, everyone. And so I wanna highlight is we've had a robust half year performance despite what clearly has been a challenging market, particularly in The US, and we'll elaborate more on that. We're on track to deliver our revised guidance. And, you know, as you can see, grew in the first half of the year 21%, which considering some of the market conditions that we're dealing with, I think, is quite commendable. What we're doing, as as I mentioned at the beginning, is we're establishing a new category, topical option, in the chronic wounds space, not dissimilar to KCI DID back in the nineties in establishing negative pressure wound therapy. So I think that's more precedent, the big picture of where we're going.

1:46 As I say, our revenue growth was strong across all segments despite unprecedented external, upheaval created, you know, by the, efficiency, directives in in The US and, obviously, the big beautiful bill. And we touch up more of that, in the in the, later slides, which obviously impacted certainly, aggressively our our performance across the two quarters. But as a company, we've been pivoting and adapting proactively, and and targeting where we can drive revenue in the short term whilst not forgetting our our bigger strategic growth opportunities. I think some very encouraging news was we had free validation milestones of the longer term clinical outcomes, you know, delivered by a therapy from from varied segments around the world. The first being we we were able to gain our California Medicaid provider ID, and California not only being the most populous state in America, but also, the most populous Medicaid, state. It's over 15,000,000 or close to 15,000,000 Medicaid enrollees.

2:47 Separately, we we gained coverage recommendation from GBA in Germany, and this is the national agency in Germany similar to CMS in The US. And this is an evidence based assessment of our therapy, which obviously is very complementary endorsement, to what we're trying to achieve in The US. And likewise, we received in The UK a NICE treatment recommendation for our therapy, which, again, is based purely on the quality and quantity of the clinical evidence. So we believe these all set NICE strong precedent, for what we believe will be a positive recommendation in the future from CMS. If I want to then highlight the sort of framework behind what what we believe will give us long term profitable and scalable growth, the first thing is is the sector that we're playing in. Chronic care consumes about 90% of all health care spending in The US and somewhere around 70% of European countries. And we're creating a new category which is gonna allow us then to drive our more durable health care benefits to to the different stakeholders.

3:47 This market is large and expanding. You know, chronic disease and certainly, you know, diabetes and obesity are expanding epidemic proportions. So, again, it's an opportunity, that we can take on. And we clearly are the market leader in the top option space, but also in delivering long term clinical efficacy. How have we established that? That's because we've a product offering that's differentiated by all other topical induction therapy because it not only has significant clinical benefits, but because of the more durable healing results in less resource utilization and significant cost savings to the payers. We focus on hard to heal wounds and particularly diabetic foot ulcers because they are the highest spend area in health care, and we'll touch on that more in a minute. And I said we are uniquely positioned because we're not only just a manufacturer. We're actually a provider. We go into the patient's home. We deliver the therapy and engage with the patients in value based care to address the clear objectives of the US administration, which is to reduce cost and deliver patient centered outcome based care.

4:50 We continue to make strategic investments in the growth drivers for the business. So even though we have obviously, you know, one eye on delivering the short term performance, We want to make sure we invest in the future. And the future is expanding access to our therapy to more providers and payers, and we see it for our Medicaid strategy, which is gonna give us a springboard then to drive forward the broader national reimbursement that will come with CMS approval, which is clearly transformational. And we believe we have good confidence. The predicates we have seen in Germany and The UK really align well with what expectations on what will come from CMS in the near future. So now I'm gonna pass it over to our CFO to walk you through some of the financials. Thanks, Mike. So the first thing to note is revenue grew across all of our business segments.

5:39 Q one growth was really strong at 26%. However, by q two, that growth reduced to 16%, and that's a direct result of the disruption caused by the efficiency measures in The US and the big beautiful bill. We grew 21% on revenues, and I'll come on to these other areas in subsequent slides. So just sticking with revenue, as I mentioned, 21% year on year growth. The biggest contributor to that was Medicaid, which grew 57% and a contribution of $5,100,000. And the biggest item within that category was New York City New York State. The VA grew 2.4%, and the other segment grew point 7%, which was mainly improvements in the Gulf Region. Taking a longer term view of revenue, you know, revenue was primarily been driven by the VA and New York Medicaid.

6:34 And taking looking at the VA, firstly, we've had consistent long term growth. However, the impact in q two actually showed us declining between half two twenty four and half one twenty one. However, near term, it remains our main source of revenue with increased penetration. Medicaid has grown strongly over the longer term and remains robust. It's underpinned by New York Medicaid, which uniquely has mandated coverage policy. And Michael get into some detail around what that means later on. We also expect New York Medicaid to be a main another main source of revenue going forward in the near term, again, through expanded penetration. Our other segment is more early stage, and it encompasses sort of international and distribution.

7:24 It's gonna be a marginal revenue contributor in the near term, but this is where we're making validation and progress of our therapy in places like Germany and The UK, which we hope will be a good reference for things like CMS. And Michael will cover give a bit more color about that later on as well. From an adjusted EBITDA perspective, you know, longer term, we expect to achieve operational leverage. In the period, our adjusted EBITDA declined from 3,400,000 last year to 3,100,000, and that's as a result of the headwinds in The US health care system. We have invested in growth in through investing in sales and sales support headcount, which will drive sales in future periods. And some cost includes an increase in the noncash CECL provision, which should unwind once the Arizona debt debt situation resolves itself and receivables reduce. And, again, Mike will provide some color later on on what that means.

8:22 On a cash and debt position, we increased our debt facility judiciously to help us with, you know, our cash needs in the near term. So our SWK facility has increased by $11,000,000 to a total available facility of $19,500,000. We achieved that at at a lower interest rate, a longer amortization period, and our modeling shows we've got headroom against all our covenant tests. Our operating cash flow was negative to about 4,700,000, and that's mainly due to an increase in the Arizona debtors. CapEx investment was around 1,200,000, which is a combination of our eyes in the wound investment, which is an app under development for reinforces home based care, and the remainder is our controllers and concentrators, which we use to deliver our therapy.

9:10 And finally, just to say that, you know, we're on track to deliver our revised f y twenty five guidance with revenue expected to be in the mid teens and adjusted EBITDA margin to be low double digit. And happy to say that trading post period in July and August has been consistent with this guidance. I'll pass back to Mike now to do the business overview. Thank you, Jim. So I just wanna remind people about, you know, our product and what differentiates us from others in the wound care space. We have unique multimodality therapy that combines oxygen compression and humidification. It's that combination that give us very consistent outcomes in all types of chronic wounds. And our evidence then that supports that is second to none. We have state of the art award winning double blinded placebo controlled trials, RCTs, that show we're six times more likely to heal diabetic foot ulcers at twelve weeks, but probably most importantly, that the quality of healing, the durability, results in the six fold lower reoccurrence over twelve months.

10:08 So that great great quick clinical evidence then results to real world evidence that says if we keep these wounds healed longer, do we have less resource utilization? And we're able to demonstrate over an 80 reduction in hospitalizations, a seventy one percent reduction in amputations of these patients over twelve months, which, yeah, you can imagine, results in a significant cost saving. So the two segments we're focused on most, even though we're regulatory approved for any acute and chronic wound, are the lower extremity wounds and diabetic foot ulcers being the prominent one here. Diabetic foot ulcers consume a disproportionate amount of health care resources, but sadly, will affect about a third of all diabetics in their lifetime. Many diabetics, about fifty percent of these ulcers become infected, the leading cause of hospitalization for a diabetic is an infected diabetic foot ulcer.

10:57 And sadly, as many as twenty percent end up being amputated. Looking at the cost of diabetic foot in the in The US, in The US, they spend about $230,000,000,000 a year managing diabetes, and one third, nearly $80,000,000,000 of that goes towards managing the diabetic foot. It's an enormous burden, nearly as much as we spend on cancer in its entirety. In The UK, that that actually represents 1% of the NHS budget of a 192,000,000,000 is spent on managing diabetic foot. So enormous burden additional to suffering for patients. Now if we look at the quality of life for patients, not only does it affect their ability, their morbidity, their ability to live their lives, but also if you look at the study below where they compared the five year mortality of of diabetic ulcers and resulting complications and amputations to that of various cancers, you can see that you have mortality as bad as the worst cancers.

11:50 So it has enormous impact on quality and quantity of life and suffering and cost to the system. Venous leg ulcers, by by contrast, are ulcers on the leg, less on the foot, of patients with venous insufficiency and are characterized by a lot of swelling and edema. And sixty percent of these are chronic. You know, they don't don't correct themselves. They become refractory. Only sixty percent ever get healed in twelve weeks, and out of those, three quarters reoccur within three years. So these these are the most refractory and cost consuming wounds over longer term seen on the leg. We have equal efficacy demonstrated there, and we are commencing or have commenced, and I'll I'll be working through a randomized trial of similar quality as what we have in the DFU space, to improve the efficacy to payers on on a similar manner. So if we talk of how we've we've taken the product to market, most companies wait until they have what they call traditional CMS Medicare coverage and codes to enter the market.

12:44 We, because we've had, good progress prior to the IPO in both the Veterans Administration in The US nationwide, but also had clear coverage policy in place in New York State Medicaid, was able to start marketing into these sectors prior to that traditional CMS coverage. And as you know, historically, we've been growing for six years at over 30%, revenue even prior to having CMS in place, predominantly coming from these sectors. Where we are at the moment then is in phase two where we decided we would take this cost saving, health utility story to state Medicaids where you have managed care insurers that can make their own decisions on what they want to cover. And we the first step in that is you have to get the ability to get provider IDs to do business in each state Medicaid. And we've now been actively pursuing this in more states, now 13 Medicaid states where we can do business. And you'll see in a moment, Arizona being one of the first, which which grew quite quite significantly early on.

13:38 And as you can see, this allows us then to build infrastructure, but also to have relationships with payers and providers in more and more sites so that when we get to phase three where most people would only start their business marketing, which is full CMS coverage, which allows us access not just to Medicare, but will cascade down to improve traction and access into Medicaid and to other payers, we'll be able to hit ground running more effectively. Today, as I said already, 75% of our revenue, has come predominantly from our contract in the Veterans Administration nationwide and New York State Medicaid with clear coverage policy exist for our therapy. However, the VA is the first area we we start seeing some headwinds from the the the efficiency, exercises being done by the US government. And that resulted predominantly in significant headcount cost and and upheaval in the VA, we slowed down the processes of our purchase orders and and certainly, you know, ended up with more cost scrutiny where, obviously, when we're able to present our science and data, we have had good good, outcomes.

14:44 What that's done then is been a short term disruption in the VA that we begin we're beginning to see subside, and and we expect, you know, continue to subside progressively across the rest of the year. But it's also spurred the focus on more community care, which is where the VA allows veterans to seek care outside of their facility system in in the home care environment from other prescribers. And as we're able now to navigate to those prescribers, it allows us then to create, advocacy with with, prescribers for the therapy for not just community care patients, but also for Medicaid and managed, Medicare down the line when it comes down the pike. On the New York Medicaid where the therapy is mandated and we've not seen, you know, issues with insurers' pain, there has been a slight knock on we've seen in timing, but certainly not significant compared to that in other states. And that's driven by the overall challenges that US health insurers have faced with regards to miscalculating, you know, their expected medical loss runs this year, resulting, as you've seen in the press, most large US health insurers, these are retracting completely their guidance or at least reducing it significantly for '25.

15:51 So our commercial strategy then is to continue to invest in the channels to grow the business, but also let allowing us to pivot and executing in these paying areas more effectively, and that involves driving key key opinion leader awareness, working with academic centers that have residency programs across the VA and and the private sector, and then driving this market awareness as a therapy in general, and and better focusing of our sales force to then execute on that. If we look at every other Medicaid state outside of New York, currently, there's not coverage determinations for our therapy. So we rely to do business on on on our prescribers, on the physicians to write orders for the therapy saying this is clinically necessary. And then we work, and we've been successful historically with the payers in that state to pay for the therapy based on the clinical and the cost saving outcomes. And before the BBB act, you know, the the big beautiful bill, which was an attempt for the federal government to cut back their support of Medicaid, their contribution back to more historical levels, we were finding good progress. And an example of that was in Arizona and the growth we saw there and and growth we were beginning to see in some other states where we have provider IDs.

17:04 However, since the big beautiful bill, it's thrown in a lot lot of focus with both state agencies and insurers on trying to work at how they're gonna cover the shortfalls of Medicaid as a whole such that their focus on us and and working, you know, through our claims has become more secondary and certainly slowed our short term ability to drive revenue from this sector. Hence, we expect the majority of our revenue and growth will continue to come from New York, Medicaid, Arizona Medicaid, and, of course, the Veterans Administration in the near term. But what we've done by setting in place all of the infrastructure and and momentum with other payers in other states is we've driven our ability to lever for the future, our growth. Now specifically talking about Arizona.

17:49 Arizona has been, you know, hit with all the same problems under managed care insurers with regards, as I mentioned earlier, their medical loss runs, which has caused all of them to do anything they can to slow down payment and and exposure in this calendar year. However, it's also been the epicenter of another a number of other events. And, you know, the first one being about a year ago, the Change Healthcare cybersecurity breach was the main processing entity for all claims for all insurers. It definitely threw up the ability to process claims in into upheaval. In parallel, the state went through its seven year recontracting of its contracts with managed Medicaid insurers with all of the current insurers losing out to the new awardees, which then was challenged and subsequently was temporarily reinstated.

18:37 So there's a whole degree of uncertainty in these payers of whether they long term will be managing these patients. On top of that, this was sadly the epicenter for the cellular tissue based fraud and abuse issues, which the DOJ and and Department of Health in The US has focused heavily on, to to you know, a lot of them, sadly, of the of the abusees being there in Arizona as well and in Medicaid. And last but not least, the Medicaid director resigned, over half a year ago, and because of the structure, they haven't been able to yet appoint a new legislator. It's a it's a state that has split, you know, control being a legislator, Republican control, and the governor being a Democrat, and, seems to be neither the two can meet, these days. So what we're finding is effect of this has been, you know, significant reduction in time of payment of our sorry, extension in time of payment of our claims, and all of our claims where we have provided service with prior authorization are taking longer to get paid, although some of the longer ones have have now begun to be paid, and we're seeing movement there.

19:38 We continue actively to engage with the Medicaid insurers directly and with the agency to resolve the issues. And, obviously, with the work that we touch on in the moment regarding CMS and the and the activities regarding getting national coverage, which will cascade through to all of these payer groups, particularly the state Medicaid agencies that tend to use that as a predicate for coverage determinations, the board believes it's prudent to continue to service patients in in the short term here until our resolutions come into play. And likewise, you know, as we as we said earlier, you know, Arizona is a material contributor to our financial success, being about 50% of our business overall. So what where are we on CMS? Well, firstly, CMS is transformational for the company when it happens because it will not only open up the whole Medicare sector, which is fee for service and managed care, but it also would transcend through the fee codes will be transmit it down to the states and to private insurers.

20:33 And and in most cases, as I mentioned earlier, most of these insurers, including the state agencies, make their coverage determinations to mimic what CMS makes. They use them as a gatekeeper. So we will see not only uptick in momentum in Medicare, but we will see it also accelerate our ability to do business in all other areas as well. You know, how confident are we of where CMS will make a decision? Well, obviously, we believe in the quality of our evidence. It's second to none. And we've had some really good milestones that reinforce those beliefs with provision of our California provider ID that given us access, as I mentioned earlier, to as many as 15,000,000, Medicaid enrollees in California. As we announced recently, our positive treatment recommendation from GBA in Germany, is the equivalent of CMS in the German market, and the positive NICE recommendation in The UK, which likewise is an evidence based assessment like GBA, which is exactly the process that CMS follow.

21:26 And we cannot, you know, obviously, know, determine exactly the timing of this, but we know it's under review, and we know these are good predicates that should help and influence a positive decision. As I mentioned earlier, though, the work that we've done in building out market access and investing in our channels in the managed Medicaid and also in the community care VA space has allowed allowed us to build a lot a large infrastructure that we can then take advantage of. Now just to clarify, the the process in a little bit more detail that CMS goes through because because there are a number of steps. CMS are mandated by law to make a reasonable and necessary determination as to whether cover and therapy, and that's based purely on evidence, randomized control trial evidence that demonstrates efficacy. As you know, we have second to none quality of evidence, and we on our behalf, a team of key opinion leaders submitted a coverage request back in the summer of twenty three for coverage of topical option therapy.

22:20 The DME MACs, which are the body under CMS required to review this because we are a therapy that goes into home, so it's classified as durable, wettable equipment. These are the people that are mandated to make that decision, Accepted that as a valid request, meeting all the statutory requirements for them to review in in July '23, and it was not until December 24 that we know they actively started reviewing the request for coverage determination with a a coverage advisory committee meeting towards the end of the year. Since then, this is where we sit today is is they are considering then completing their review and coming up with what their coverage determination and policy will be. And the next step will be is when they publish a proposed or draft local coverage determination, which will cover the whole country.

23:06 And at that point, there will be a forty five day public comment period after which they complete their analysis and input to come up with a final rule, which when published after sixty day becomes a rule and law. It will then cascade out through the fee schedule to all payers. So, again, it will not only allow the code to be accessed, but it will set a predicate that's commonly used by all payers to make their own coverage determination on state Medicaid and in in commercial care as well. So when that happens, this would allow us to then to take that market access that we've done and then leverage the infrastructure. And here you can see on the map the 90 odd direct reps we have, and we have equally that many support structure in place as well in The US across the different states. The light blue states are the states where we already have either Medicaid provider IDs or we're in the process of of get gaining when we believe we'll gain over the next year.

24:00 And this accounts for about 86% of The US population. So we believe we're uniquely positioned that not only that we're to expand market access through the VA into community care, but also to expand where where we can work with dual eligible plans within Medicaid in the short term to gain business and traction, but also uniquely positioned that when Medicare coverage comes down the pike that we could hit the road running and and have a faster ramp than we would than most companies waiting just for Medicare to happen. So to summarize, we're a company that's focused on delivering durable wound healing and value based care. We saw in the first half year growth across all sectors of the business delivering over 20% growth in unprecedented US market conditions, you know, which which I think, you know, is quite quite exemplary considering everything that we're challenged to deal with like our peers.

24:49 We we've continued to establish top option as a new category and clearly are the market leader, not dissimilar to what KCI did in in in the early days. In the near term, we expect, predominantly, our our revenue will come from the VA, New York Medicaid, and Arizona Medicaid. We believe that the continued efforts we're doing with state Medicaid payers and insurers will not only gain dividends progressively in the Medicaid sector, but will give us a framework and a structure of providers because all those patient providers that are seeing Medicaid patients or community care patients in the VA are all seeing Medicare patients, so we'll be able to hit the road running as soon as that comes down the pipe. The recent news both in in Europe was was NICE and and GBA in in Germany of evidence based decisions to cover our therapy, I think, sets great precedence for CMS.

25:40 And I said we said CMS will be transformational because it won't only just drive Medicare, but it will drive all these other sectors that we're in. Additionally, we're on track to deliver the revised guidance for '25 with with good supporting performances in July and August consistent with that. And we do believe then as we open up more of these higher paying sectors that we will start seeing, you know, the leverage come through and and that we will return to much higher margins. And and we we see these headwinds today that we're facing as transitional. We're uniquely positioned to deliver effective outcome based care to patients at home, which tie in perfectly with the administration's focus to reduce cost and deliver patient centered value based care. So our belief is these headwinds, which is really just transitory, you know, disruption to business today, will turn into tailwinds in the future and and propel us to faster and higher growth as as time progresses.

26:39 Okay. Well, thank you very much for listening, and I think we're we'll take a look then at the q and a. Okay. Well, Mike, Jess, thank you very much for your presentation. Ladies and gentlemen, please do continue to make your questions. You can do so just by using the q and a tab that's situated on the right hand corner of your screen. But just while the company take a few moments to read the questions that have been submitted today, I'd like to remind the recording of this presentation along with a copy of the slide and the published q and a can be accessed via your investor dashboards. What I'll do now is I'll hand back to the team to run through the questions, and then I'll pick up from you both at the end. Okay. Thank you. So our first question we have is, how do you plan to balance margin discipline with continued investment in sales execution and international expansion? Do you do you want me to Yeah. When you first start with that, if you wanna yeah.

27:25 So so we we we invest in expansion across states and make sure that we earn a good return on each of our investments. So if you look at our gross margins, they're very, very high at almost 90%. And executing in those in expanding into each of the states, it's it's becoming a bit of a cookie cutter. So as long as we get reimbursement, we should be able to drive that return to the bottom line. On the international side of things, we're developing a market that will likely in in UK and Germany be similar to the to The US model. And we're we're in in The Gulf States. We're likely to be a distributor based models. So, again, but all three contributing to to good, strong returns on investment. So we have a process to analyze that and make sure we deliver that over the medium term.

28:19 Okay. K. So next question is you have 13 Medicaid provider IDs, and New York is driving most of the growth so far. When do you expect other states to start contributing in a more meaningful way? So so, yeah, before the the the sort of more recent, you know, headwinds, you know, driven predominantly in this case by the, you know, the BBB legislation and the Medicaid reduction in federal support of Medicaid. And and I think to put that, you know, in the framework, that what they're trying to do is bring it back to what the program is meant to be. We're meant to be fifty fifty state and federal support since the expansion of Medicaid has become predominantly federal support of it. So not it's like they're trying to think to do too radical, but any change creates temporary disruption. Before that, we were seeing that if we once we got Medicaid IDs, we would work then, obviously, we with advocacy with prescribers in the state. They would, you know, prescribe patients, and we would then work individually with the insurance to get paid. And we were getting consistent traction, and then and the growth that we saw in Arizona, I think, is a good example of of the trajectory we can achieve there. Obviously, with this bill, the these state agencies and providers are all distracted with one of the better with bigger problems in their own house, and they focus on dealing with those issues.

29:29 So us to be able to get that traction with them is slowed down. Hence, you know, we're doubling down a little bit with our resources on the areas where we can predict consistent revenue, you know, moving forward. What happens, by opening up a new state and and putting in place resources that we have on the ground, because of our VA nationwide infrastructure, we have headcount in all of those states we identified. So what we're able to do in some of the changes we've done is pivot those sales teams to not just deal with VA business, but also to deal where appropriate with with community care VA out out with prescribers, also see other patients like workman's comp where we get paid well for at the moment and manage Medicaid. So by doing that and doing sort of a parallel strategy, not just having dedicated sales teams, we can utilize and and get the best return of investment, but also we create those prescriber relationships so that as we move past this year and and we believe these these transitory headwinds settle down, even prior to CMS, we can start driving more of that traditional Medicaid revenue.

30:31 And then, hence, once we get national coverage, it will cascade down, and we'll have an infrastructure ready and prescribers knowledgeable and and adopters of our therapy to drive our business forward. Thanks, Mike. So we've had a number of questions around Arizona and the debt position and our our views on collectability of debt in Arizona. So, you know, we are we're we're assuming that in our in our in our sort of internal models, we're assuming that there's been gonna be minimal collection from Arizona this year. Okay? But we're expecting Arizona to start to unwind and and start to get collect over the course of next year with the majority of it being collected by the end of next year. So that gives us quite a long runway to to collect all of that debt.

31:22 We have got as I mentioned in in the presentation, we've got a facility with SKWK funding of $19,500,000. Although we've we've drawn drawn down all that, our cash balance is at 14,000,000 at the half year. So we've got quite a long runway to help us weather these weather these debt stops. One thing to add is, you know, we believe it's it's prudent for us to keep focusing. We are delivering service. We're delivering it based on prioritization from the insurers. So, you know, like us, we all believe that this this debt, you know, is is recoupable and will be paid. And at the moment, you know, we believe as as a company, as a board, that we because of where we are with with the direction, you know, looking positive towards national coverage determinations, we we really want to make sure we're we're prudent in in not not, you know, shutting down the market, that then we would have to ramp back up and potentially having knock on effects in in bigger picture things going on. So, you know, we believe at the moment the correct thing is to continue to service those patients, making sure we have adequate headroom, you know, to weather the debt in the short term.

32:29 Thanks, Mike. So what role does innovation or pipeline development play in supporting AOTI's medium to long term growth strategy? I think most of the the the the projections that we have at the moment are based around what we have today. So we've based it on the product range we have for extremity wounds, so we have different versions of the chamber from smaller wounds, larger wounds, you know, venous leg ulcers, DFUs. But we've what we've been doing is expanding that product line, and we had versions of the product that can be used on the body, you know, for pressure ulcers. And we're we're just releasing actually this month a version of the product that allows us to go after surgical incisions and other areas, you know, which which haven't been a focus point. So our our predominant view is that these line extensions are opening up new sectors, and they're not yet built into our financial modeling. And, you know, so they're all upside should they and when they come down the pike.

33:19 Thanks. Thanks, Mike. So just looking at the questions. The next question is there's a question on do you believe we have sufficient capital to see the headwinds? And I think I answered that previously. We do. How is the therapy actually delivered? What is AOTI's practical involvement with the patient? So depending on the market, but where we are direct, for instance, The US and The UK, what happens there is a prescriber orders the therapy. We then take the therapy. We have, you know, representatives that go and set up the patients that train them how to use it in their home. And then we engage with the patients with our eyes on the word, the apps, and stuff because the key is when you deliver therapy at home is that patients use it.

34:04 And that allows us to engage and encourage and make sure they use it adequately, but it also allows us to capture information and feed this back to the prescribers and the payers, which closes the loop on value based care, which is also usually very difficult to do. So we're directly involved with the patients. We're not doing providing anything clinically. We're training them. They're applying the therapy for themselves. It's very simple. But our job is to make sure they utilize it at an adequate rate, and if they don't, to work with the prescribers to encourage them to do so, which is very, very important. Yeah. And we're uniquely positioned. That that beachhead we have as not just being a a manufacturer selling to a channel, but being the actual provider to the patient at home allows us then the ability to, you know, believably and and provability wise, deliver value based care, something that everybody wants to deliver, but it's hard when you don't have control of that part of the channel.

34:56 It also opens us up for the future to deliver more than what we're doing today. So we wanna walk before we could run, of course, But, obviously, you know, these patients are comorbid with lots of chronic disease. So in the future, we have the ability potentially to do more holistic care should we so choose to. Thanks, Mike. So we've got a question on employee headcount and questions around, you know, where do we think we can get the margins to in the longer term. I sort of answer that in two ways. So right now, we've got about a 150 employees, about two thirds of which are in either sales or sales support slash operations type activities, so delivering, you know, for the customer. So the way we think about operating leverage is that the the sort of the cost of the business, the headcount won't won't rise in proportion to revenue.

35:49 And that in the longer term, you know, we we'd expect margins into the sort of twenties and 30%, you know, EBITDA margin in the longer term. So that's kind of where we how we think about it. So there's a question on adjusting commission terms, how it will help with it says data buildup. I think it means on on operating efficiency, I think it would mean. So so what what we've done is we've introduced as part of helping to drive growth and productivity and, again, then get to higher adjusted EBITDA margins is we've in we've introduced a new commission scheme. Well, we we will be introducing it in q four onwards. And what we found was that we had a, you know, a fair number of stars in our in our sales population, but there's also a fair chunk of people who could be more productive.

36:43 And so we've devised a scales a sales commission scheme, which incentivizes the, shall we say, bottom third of performance to to perform more towards the middle ground and to the top to the top ground. So it really incentivizes overperformance more than it previously did. And we think that that will drive productivity and enhance the margins going forward. So just looking for new I've got new questions, but they're very similar to what I've already answered. Talked about innovation. Do we know how far through the drafting process of the LCD DME MAC medical directors are?

37:30 So, I mean, the the fact that they've considered they've conducted a coverage advisory committee review back in December that since then, you know, had discussions with other stakeholders, which we're aware of. We believe that they're well along, but we obviously have no direct insight as to timing and when they will come come through. You know, obviously, there's a lot of activity in the wound care space with CTPs and and and, you know, resolving, you know, the release of the local coverage determination, which is, you know, January 1 should become active, but also in reimbursement and pricing. So, you know, our best guess is, you know, that that's the focus of the administration at the moment, and this this maybe will be sometime after that. But, you know, that's just a guess at at this point. We know they're actively working on it, but that's what we can say.

38:18 Okay. Thank you. There's a question on given the poor share price performance, are you considering going private? I think the short answer to that is no. We're not. You know, we believe in keeping the company public, and, you know, we chose AIM for the for the positive reasons of being a smaller company and having that focus, you know, on AIM. And appreciate the price has come down, but we are expecting that as we continue to deliver the results and as the operating leverage is is delivered, the share price will will go up. Any anything Yeah. No. And I I think, you know, obviously, we're all disappointed where the share price is. We think we've had great momentum in the strategic direction of the company and the big value drivers.

39:05 Obviously, we faced headwinds like everybody else in the short term, but still delivered 21% growth, which I think when you look at our peers is superior to many of them, all of which are dealing with the same headwinds, which are transitory. So I think if you take, you know, a a opportunistic look at it, I think the opportunity of where we're going and where the value should be to where we are today, I think that's a great, you know, investment, you know, proposition for for people who who are so so inclined. Yeah. Absolutely. Then just one more question around the revenue impact in 2026 of California, Germany, and The UK. So I think shall I have a crack in them? And you can you jump in if if you want to, Mike? So in terms of California, you know, we have our provider ID, and we'll look we'll look to get insurance coverage in that state. It is our home state, so we would expect some some traction to to to be to be made there.

40:05 But I think, you know, with Big Beautiful Bill, there are some some headwinds as well. So I think we will start to see some modest revenues in California, but it's really too early to say how fast that that could ramp until until we have a bit more experience of that. With with Germany and The UK, we I'll take Germany first. We've got GBA approval, which is a clinical approval. The next process is with subcommittee of of the GBA, an an INCWIC process, which is more around pricing, and then a final process with called the GKV process, which is to actually get a reimbursement code and reimbursement in Germany. That's still a little bit more longer term.

40:51 However, just having GBA approval does mean we can talk to insurers to to get coverage without that, you know, mandate at the state level. So that should help traction. But, again, we're we're being a little bit cautious at the moment, so we will we should see some some growth there the next period. And similarly in The UK with a nice approval, we should start seeing some better traction there, but, again, bit bit being a bit cautious there. Yeah. And I think being the big thing in The UK is that in parallel, we're also, as of September 1, on the NHS framework, and we've seen start seeing actually our first orders come through because now we're in the system, should we say. So, you know, we do believe we'll see some sort of gradual increase in The UK because it, you know, it doesn't happen overnight. But I think both of those should contribute aggressively more next year and as time goes on. Yeah.

41:38 Thank you. Okay. Any more questions? Okay. Okay. Well, Mike Mike, Josh, well, thank you very much for answering those questions from investors. Of course, company can view all the questions that have been submitted today, and we will publish those responses on the investor meet company platform. But just before redirecting investors, provide you with their feedback, which is particularly important to you both. Mike, can I just ask you for a few closing comments? Yeah. I think, firstly, we we are doing something different. We're we are out in the market prior to traditional Medicare coverage in The US, and we've been successfully growing the company over 30% compound growth for six years.

42:30 And why? Because we have a differentiated product offering that now that CMS, one of best words, is catching up because that process just takes its time, will allow us to cascade with normal momentum seen with with other companies in the market and, you know, to deliver, you know, you know, for the half year over 20% growth in the current unprecedented external, you know, environment in The US. And, obviously, with these big value drivers, you know, we believe somewhat imminent, we believe this company is a excellent opportunity for future growth and and profitability. That's great. Well, thank you once again for updating investors today. Gonna please ask investors not to close the session. As you know, we automatically redirected to provide your feedback, and the management team can better understand your views and expectations of the management team of AOTI. We'd like to thank you for attending today's presentation, and good afternoon to you all.

43:22 Good afternoon. Thank you, everyone. Thank you. Bye bye. Bye.