Monash IVF Group Annual Report 2021

Chief Financial Officer’s Report

Malik Jainudeen — Chief Financial Officer

We experienced strong industry growth during the year across all our domestic IVF markets and market share gains that drove 26.3% revenue growth on FY20.

Monash IVF Group achieved strong revenue growth, up 26.3% as a result of 36.6% stimulated cycle growth and 12.9% ultrasound scan growth in FY21. In Q1, we serviced all the pent-up demand created at the end of last year and strong activity continued across the remainder of the year.

Our first half revenue was close to $91m and we surpassed that in the second half with revenues of almost $93m. Activity levels from Q1, which included the pent-up demand, continued for the rest of the year, reflecting real underlying growth in our business. As a result of the 26% increase in revenues, we generated operating leverage whilst deploying marketing initiatives to drive and maintain our strong new patient pipeline and support our doctors. In the period, we have invested heavily in our nursing and scientific workforce which is improving our patient experience and in turn increasing our staff and doctor engagement.

Our KL business generated an additional $800k of revenue in a very challenging environment due to the pandemic. Movement control orders were in place for most of the year in Malaysia and the business did a great job to deliver more than 1,000 stimulated cycles in FY21.

Our average IVF revenue per stimulated cycle declined which resulted in a $1.8m negative impact on revenue. This was a result of offering no out-of-pocket stimulated cycles to patients impacted by the suspension of the Non-invasive preimplantation genetic testing (NI-PGT) program. This impact will reduce in FY22.

Our Fertility Solutions business in Queensland, which we acquired in FY20, generated an additional $1.7m revenue. This clinic operates a hybrid pricing model with full service and low-cost offerings. It was pleasing that the majority of the additional revenue was generated from providing a higher proportion of full service cycles. This has helped us validate that full-service offerings are strong notwithstanding the pandemic. Our ultrasound business also generated additional $3.8m revenue following a 13% increase in scan volumes.

Our reported NPAT was up by 117% and our Adjusted NPAT of $23.3m was 61.5% higher than FY20 noting Adjusted NPAT excludes the impact from JobKeeper subsidies in FY21, commissioning costs associated with the new Sydney CBD fertility clinic and adjustments to Business Combination earn‑out provisions.

The Group achieved an Adjusted EBITDA of $47.7m, up by 37.1% with EBITDA margin percentage improving from 23.9% to 26.0%. EBITDA Margin percentage improved following leverage gained from the increase in volumes which was partly offset by a 12% increase in marketing expenditure, patient communication through digital platforms and approximately $1.7m of additional costs related to the suspension of the NI‑PGT genetic testing program.

Our cash flow performance during the year was extremely strong with Free Cash Flow increasing by 60% to $32.8m driven by 100% cash conversion of EBITDA to pre-tax operating cash flows. $44.1m of post-tax operating cash flows allowed for investment expenditure to be focused on future growth initiatives including new clinical infrastructure ($5.3m), new state-of-the-art laboratory assets and technology ($2.1m) and $0.6m minority investment in a new Jakarta based fertility clinic which opened in February.

Our capex for the year was $10m which included the new Sydney CBD clinic and new equipment in our laboratories.

Going into FY22 and notwithstanding the ongoing pandemic, the balance sheet is well positioned to withstand any potential impact the pandemic may present and to execute and capitalise on potential growth opportunities. These opportunities include improvements to our clinical infrastructure with project designs and approvals obtained for new infrastructure in Melbourne, Penrith, and the Gold Coast. In South East Asia we now have two clinics in Malaysia, a minority holding in Jakarta and a soon to be built clinic in Bali which all form part of our evolving strategy in the region.

I would like to thank all our stakeholders, including employees, doctors, and shareholders, who collectively enable us to achieve our mission of helping to bring life to the world.

Malik Jainudeen

Chief Financial Officer