BTCY: Topline Growth Continues Despite Omicron Headwinds as the Company Expands Salesforce & Is Unleashing New Revenue Streams Soon

By T. Moore, CFA

NASDAQ:BTCY

READ THE FULL BTCY RESEARCH REPORT

Business News Update

Biotricity Inc. BTCY reported December quarter results of 93% sales growth from the year-ago quarter. 7% sequential sales growth was held back by Omicron COVID-19 causing the delay of patient visits and some temporary closings of clinics and doctor's offices. Simply a deferral and pushout of revenues into the late winter as that overhang fades.

We like how the company is evolving into an ecosystem for remoting monitoring and cost-effective earlier detection of health issues. New offerings & further penetration of it doctors network and their patients.

We initiated coverage last week and refer investors to our in-depth report about sales growth catalysts including its expanding network of cardiac physicians, better workflow for nurses, Biocare & Telemed launch (cloud) and the recent FDA clearance of Biotres.

93% sales growth in the December quarter was nice to see despite Omicron drag.

Triple-digit sales growth this March 2022 fiscal year and next year was guided.

33%+ salesforce growth in the past three to four months and a goal to double it during calendar 2022.

Biotres could be a good growth contributor by the end of the calendar year after receiving FDA clearance received last month.

Monthly care subscription (Cardiac & Chronic) offering should be available by July 1st. 
We deem this a big revenue contributor for the March 2024 fiscal year (see our model). Current sales reps will cross-sell and upsell the new offering while visiting clinics and offices for continued penetration of Bioflux. Part of building out a complete suite solution and ecosystem.

Greenshoots being seen the past few weeks of initial fading of the Omicron overhang variant of COVID-19 created from late November through mid-January. Some patients opted to not go see their cardiologist and instead delay until Omicron would fade. Some offices were closed during the initial spike in Omicron and over the holidays. We expect there to be some catch-up demand on this front for March and April as COVID cases have subsided recently.

Chips shortages are not much of a supply constraint and the company believes they are insulated.

International expansion opportunity could be pursued with distribution partners and for countries that recognize US FDA approval instead of having to start from scratch for slower regulatory burden.

$14 million Cash at late December will support funding of working capital growth for devices, hiring additional salesforce and monthly care subscription rollout.

Highlights of the December Quarter Results

Biotricity (BTCY) reported December quarter results of 93% revenues growth, which was a 5% beat versus our expectation. While the sales growth was only 7% sequentially higher than the September quarter, we point out that the Omicron variant of COVID-19 was severe and kept many patients away from going inside. Including visiting their doctor's or cardiologist offices. Some offices and clinics were temporarily closed during the main spike period. Holidays also created a drag.

We are confident that this was simply a deferral or pushout because people still need to maintain and track their cardiac health. We suspect that doctor visits will restart soon and already began to the past few weeks. Sales reps are likely to be allowed to visit clinics again soon to find new customers, clinics and penetrate current ones further.

Gross margin 43% was down 640 bps due to a mix shift in the quarter to low-margin Devices. Technology Fee and study rendering is higher margin, but studies were delayed during Omicron.

Net loss adjusted was negative $6-7 million (-$0.13 EPS) depending how you treat a financing expense. Our focus is on the topline and we believe that sales growth is the #1 catalyst that investors care about.

Valuation

We value Biotricity Inc. using a peer comparables valuation methodology based on EV/Sales multiples of the peer group applied to our 2023 forecasts.

We reach $7.50 valuation price per share based on a blend of the peer group median of 8.9x EV/Sales 2022 and average of 9.7x, but applied to our calendar 2023 Sales forecast for BTCY to capture a full year of Biocare & Biotres. If our assumptions prove to be accurate.

We appreciate the company's runway and addressable market for additional penetration of its network for Bioflux, the Biotres launch contribution and the recurring revenues stream. Our focus is on 2023 sales potential.

We used 49 million shares count and Net Cash $3.2 million as of 12/31/21.

$7.50 price target compares to the stock trading as high as $6 in early 2017 & $5 in December 2021.

Please see the Risks section of our full report.

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