REG - AOTI, Inc. - Half Year Trading and FY 2025 Guidance Update

AotiAnnouncement

Mon 07:00

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RNS Number : 8264R  AOTI, Inc.  21 July 2025

This announcement contains inside information for the purposes of article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.

 

21 July 2025

 

 

AOTI, INC. (the "Company" or "Group" or "AOTI")

 

Half Year Trading and FY 2025 Guidance Update

 

Strong trading performance in Q1 2025 - c.26% growth

 

Q2 2025 saw a more significant impact than expected from US government
initiatives

 

Growth strategy remains unchanged; TWO(2)(®)'s proven clinical efficacy and
cost-saving potential aligns with US government focus on health economics,
which is expected to drive medium-term US growth opportunity

 

Breaking news today in a separate announcement; Medicaid Provider ID received
in California, providing access to the largest Medicaid state by enrollment
numbers

 

AOTI, INC. (AIM: AOTI), a medical technology group focused on the durable
healing of wounds and the prevention of amputations, announces its trading
update for the six months ended 30 June 2025 ("the Period") as well as an
update to FY 2025 guidance.

 

The Company expects to report revenue for the Period of not less than $31
million (H1 2024: $26.3 million), representing growth of not less than 18% (H1
2024: 26.4%).

 

In the first three months of the Period the Group recorded revenue growth of
approximately 26%. Revenue growth in the six-month period ended 31 March 2025
was approximately 37%, reflecting the strong momentum within the business post
the IPO. Trading in Q2 2025 has been more volatile and weaker than
anticipated, in common with our peers with significant exposure to the US
healthcare sector. This is due to the impact of US government tax and spending
initiatives that continues to cause greater disruption across payers than we
had anticipated at the time of publishing our final results in late April
2025.

 

The Company now expects revenue growth for FY 2025 to be in the mid-teens and
adjusted EBITDA margin to be low double digit, reflecting our current
assessment of the likely impact of these headwinds. At present, the Company
expects these immediate headwinds to be transitional in nature and we remain
focused on executing our growth strategy and achieving greater growth in the
medium term.

 

This update to guidance reflects the following segment specific factors:

 

Veterans Administration (VA) (approximately 54% of total revenues in H1 2025):
Revenue growth was weaker than anticipated in the second quarter due to
greater than expected disruption from the impact of VA head count reduction
and efficiency initiatives. While we now expect the disruption to extend into
H2 2025, we anticipate this to abate as the year progresses as it has been
reported that most of these initiatives have now been implemented(1).

 

Medicaid and commercial channels (approximately 46% of total revenues in H1
2025): Medicaid segment revenue growth for the Period remained robust and is
expected to be between 50%-55% (H1 2024: 83.8%). Revenue growth in H1 2025
would have been higher if not for the continuing disruption with billing and
payment in one state, Arizona, which has significantly impacted our ability to
project the level of revenue arising from this state (see "Receivables"
below).

 

During the Period the Company added two new Medicaid states, and very recently
received its provider ID for California, as disclosed today in a separate
announcement. This progress is in line with Company guidance of adding two to
three states per year.

 

In H2 2025 we now expect to see business disruption as a direct and indirect
result of the US government cost containment initiatives within the healthcare
provisions of the recently passed "One Big Beautiful Bill Act". Given the
significant implications of this Act across the healthcare industry, and in
particular for Medicare and Medicaid, it is likely to impact progress in
securing informal coverage in new expansion states and patient populations
prior to receipt of more definitive coverage determinations and has the
potential to cause disruption into the middle of 2026. However, the Board
believes that the implementation of this Act, that focuses largely on cost
reductions and value based care, should ultimately provide AOTI with a more
favorable health economic framework to drive accelerated growth in the medium
and long term, due to the Company's products' proven durable clinical outcomes
and cost savings.

 

In response to these external challenges, the Company has implemented a number
of organisational and operational changes across its commercial teams, as well
as making targeted cost savings to ensure it is better positioned, more agile,
and able to adapt to a landscape that is changing at an unprecedented rate.

 

Receivables

Against a backdrop of major upheavals in the Arizona healthcare system,(2) the
Company remains actively engaged with Medicaid insurers in the state and with
the State Medicaid agency, and continues to make progress in resolving the
previously flagged payment issues. Payment of legitimate claims, although
making progress, have been taking significantly longer than previously
experienced. The Company is monitoring the situation closely.

 

Cash and Debt

The Company has made an amendment to its existing loan agreement with SWK
Funding LLC, providing an additional $11.0m loan with a reduced overall
interest rate and longer amortization terms. Other terms and covenants are
consistent with those previously in place (see details below). The Board
believes that this, together with cash on hand, provides ample headroom to
accessible capital to enable the Company to continue to execute on its growth
strategy.

 

The Company expects to announce its interim results for the six months ended
30 June 2025 in September 2025.

 

Outlook

The Board believes that AOTI is uniquely positioned to deliver effective
value-based care through its innovative TWO(2)(®) therapy. While the
uncertainties and disruption caused by US government efficiency initiatives
are greater than was foreseen at the time of our earlier 2025 guidance
announced in late April, the Board is encouraged by the US Administration's
indication that these initiatives are transitional in nature. Furthermore, the
compelling cost saving benefits of TWO(2)(®) therapy align with the US
Administration's focus to deliver value-based care.(3) As a result, the Board
is confident that the Company is well-placed to deliver on its strategic
priorities and growth drivers in the medium term.

 

Dr. Mike Griffiths, Chief Executive Officer & President of AOTI, Inc.,
said:

"Despite current headwinds caused by the ongoing transformation of the US
healthcare landscape, which has been faster and more ambitious than previously
anticipated, I am confident in our medium and longer-term outlook as we
continue to establish a new market segment for Topical Oxygen. In particular,
the recent positive G-BA recommendation in Germany for TWO(2)(®) not only
strengthens our position across Europe but also serves as a valuable benchmark
for other reimbursement bodies, including the CMS in the US. Additionally,
receiving our California Medicaid Provider ID is a significant milestone  in
our growth strategy and further validation of the value proposition of
TWO(2)(®). We are also continuing to move into new and higher-value market
channels to diversify our revenue streams. We remain fully committed to our
strategy of expanding market access, building awareness and adoption of our
innovative TWO(2)(®) therapy, and driving market penetration to ensure
sustainable, profitable growth."

 

1.
https://www.nytimes.com/2025/07/07/us/politics/veterans-affairs-layoffs-jobs.html#
(https://www.nytimes.com/2025/07/07/us/politics/veterans-affairs-layoffs-jobs.html)

2.
https://azmirror.com/briefs/two-top-arizona-health-officials-resign-amid-unprecedented-politicization-of-process/
(https://azmirror.com/briefs/two-top-arizona-health-officials-resign-amid-unprecedented-politicization-of-process/)

3.
https://www.cms.gov/newsroom/press-releases/cms-proposes-physician-payment-rule-significantly-cut-spending-waste-enhance-quality-measures-and
(https://www.cms.gov/newsroom/press-releases/cms-proposes-physician-payment-rule-significantly-cut-spending-waste-enhance-quality-measures-and)

 

ENDS

 

 AOTI, INC.

 Dr. Mike Griffiths, Chief Executive Officer   +44 (0)20 3727 1000

 Jayesh Pankhania, Chief Financial Officer     ir@aotinc.net (mailto:ir@aotinc.net)

 Peel Hunt LLP (Nominated Adviser and Broker)

 Dr. Christopher Golden, James Steel           +44 (0)20 7418 8900

 FTI Consulting (Financial PR & IR)

 Ben Atwell, Simon Conway,                     +44 (0)20 3727 1000

 Natalie Garland-Collins                       AOTI@fticonsulting.com (mailto:AOTI@fticonsulting.com)

 

The person responsible for making this announcement on behalf of the Group is
Jayesh Pankhania (Chief Financial Officer).

 

ABOUT AOTI, INC.

 

AOTI, INC. was founded in 2006 and is based in Oceanside, California, US and
Galway, Ireland, providing innovative solutions to resolve severe and chronic
wounds worldwide. Its products reduce healthcare costs and improve the quality
of life for patients with these debilitating conditions. The Company's
patented non-invasive Topical Wound Oxygen (TWO(2)(®)) therapy has
demonstrated in differentiating, robust, double-blinded randomized controlled
trials (RCT) and real-world evidence (RWE) studies to more-durably reduce the
recurrence of Diabetic Foot Ulcers (DFUs), resulting in an unprecedented 88
per cent reduction in hospitalizations and 71 per cent reduction in
amputations over 12 months. TWO(2)(®) therapy can be administered by the
patient at home, improving access to care and enhancing treatment compliance.
TWO(2)(®) therapy has received regulatory clearance from the US (FDA), Europe
(CE Mark), UK (MHRA), Health Canada, the Chinese National Medical Products
Administration, Australia (TGA) and in Saudi Arabia. TWO(2)(®) therapy has
also recently received positive recommendation from the Federal Joint
Committee of Gemeinsamer Bundesausschuss (G-BA) in Germany. Also see
www.aotinc.net (http://www.aotinc.net)

 

Key terms for the revised SWK Funding LLC loan

 

The loan has been increased by $11.0 million to a facility of $19.5 million at
an interest cost of SOFR plus 7.75% (reduced from SOFR plus 9.50%), with
maturity extended to February 2029 and an interest only period until February
2027.

 

The SOFR floor has reduced from 3.50% to 3.15%.

 

Covenants are tested calendar quarterly and include (1) Minimum Consolidated
Unencumbered Liquid Assets being the greater of $2.0 million and last three
months Operating Burn (mainly consisting of operating cash out flows plus
expenditures for property, plant and equipment); (2) Minimum Revenue on a last
twelve month basis of $61.6 million as at 30 June 2025 increasing quarterly to
$67.2 million as at 31 December 2025 and reaching $75.0 million from 31
December 2026 onwards; and (3) Minimum EBITDA on a last twelve month basis of
$5.5 million as at 30 June 2025 increasing quarterly to $6,000,000 as at 31
December 2025 and reaching $6.8 million from 31 December 2026 onwards.

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