Alcidion Group Limited (ALC) Earnings Call Transcript & Summary

Good morning, everyone. We'll just wait a few more minutes to allow everyone to enter. Okay. Let's get started. I'm sure there'll be still a few entering the webinar. Thanks, everyone, for joining us, and good morning. Welcome to Alcidion's Q2 FY '25 Appendix 4C and business update presentation for the 3 months ended 31st of December 2024. Firstly, I'd like to start by acknowledging the traditional owners on the land from which I'm presenting to you today, the Wurundjeri people from the Kulin Nation and the lands of which -- from which all of you are joining me today. I pay my respects to their elders past and present and extend that respect to any indigenous persons joining us on the call today. I'm also joined on the call by our Chief Financial Officer, Matt Gepp, who will be available for any questions at the end of the presentation. I'm going to take you through a short presentation covering the key commercial and financial highlights of the quarter as outlined in the business update and Appendix 4C that was lodged with the ASX this morning. All attendees will have the opportunity to ask questions at the conclusion. [Operator Instructions] We will endeavor to answer as many as possible. We received a few before the call, but not that many. So we'll bring them together as a combination of questions at the end of the presentation. Any other questions that are similar in nature, we'll combine to avoid repetition. And if we run out of time, we were not able to give you a fulsome answer, please send through your questions to investor@alcidion.com, and we'll seek to address it as soon as we can. And just as a reminder, the presentation today is being recorded and will be available later on Alcidion's website. So let's get started. Q2 was a very positive quarter for Alcidion with several new sales during the quarter, which in terms of total contract value amounted to around $13.1 million in new sales for the quarter. The majority of that was due to new customer wins. And as many of you will know, we added 2 flagship customers in the quarter based in Australia, and I'll talk a little bit more about the details of those new contract wins later in the presentation. We were very close to breakeven on cash with a small outflow for the quarter and a strong second half of cash collections expected. This is a material improvement on the same period last year by some $3.1 million. We're confident of the second half earnings and maintaining -- we maintain our expectation of an EBITDA and cash flow positive result for the full year. As I said, of particular note was the signing of 2 new 5-year contracts in November, both of them located in Australia and really serving -- seeking to serve to further help our increasing presence in this market in relation, particularly to patient flow command center management. And that will add to the referenceability for Alcidion across an important segment of the market. And I'll unpack a little bit more the details of those contract wins as we move through the presentation. Just to touch on the highlights as released this morning, during the quarter, we contracted new sales with a combined TCV of $13.1 million, with approximately $4.5 million of that able to be recognized as revenue in FY '25. Approximately 88% of the new contracted sales are what we classify as recurring product revenue, with the balance, the other 12% being related to services, which are predominantly the implementation of our products into those markets. At the end of Q2, we had $30.8 million of contracted revenue, reflecting both the sold and renewal revenue expected to be recognized over the course of FY '25. Important to note is that figure does not include any contribution from the North Cumbria contract, which is now in the final stages of completion. It also doesn't include any upside from any further new contract wins that we might achieve in the second half of the financial year. The Q2 cash receipts for customers were $9.1 million, reflecting our strongest second quarter for cash receipts in the past couple of years. We delivered the operating cash outflow of only $260,000, which was, as I said at the outset, was a material improvement on the same period last year. And this comes from a combination of the new sales as well as a continued disciplined approach to cost management. And that's allowed us to deliver this close to breakeven result with, as I said, strong cash returns expected in the second half as well. As of the 31st of December, the company had $7.7 million of cash and no debt and a further $5.9 million has already been collected this month, in the month of January, from an expected strong second half for cash collections. So the cash position of the company is strong. The slide shows these slides here, and just picked out a couple of graphs, really, to give you some important reference points to watch some trends over time. On the left-hand side, we've got a graph demonstrating or depicting quarterly new sales. You can see we enjoyed a nice uplift in new sales this quarter. Given we have North Cumbria deal expected to close shortly, we further -- we expect to see further momentum to continue in that positive trajectory into the second half. And new sales are expected obviously to outpace Q3 and Q4 last year as a result. On the right-hand side, this is a graph we use consistently to depict the seasonality of our cash receipts. And anyone that's been following Alcidion for a time will understand that, that is -- it is a consistently lumpy business in respect of cash receipts depending on when those material contracts are signed, but a positive trend demonstrating here, which we would continue to expect in a positive manner throughout the rest of this financial year. In respect of a bit more detail about the business update, as I highlighted at the outset, we were really pleased to sign those 2 new contracts in Australia during the month of November. Both the NALHN, which is the Northern Adelaide Local Health Network and the Peninsula contracts were won in competitive tender. It's important to note that we have won, Alcidion has won all competitive patient flow tenders in Australia that we've gone through for over the last 12 months. And that just continues to demonstrate the strength of the Miya Precision platform in supporting our health care services to deliver positive benefits and releasing time to care when they deploy our flow, access and command modules. The first contract that we signed that I want to talk about is the NALHN one. They're one of the largest local health network in South Australia. They provide a range of public hospital community and home-based services to around 400,000 people across metropolitan Adelaide. The initial focus for that contract will be to support patient flow management and their command center, but also mobile access to real-time data and clinical messaging as well as real-time data from their electronic patient record. And as I said, that was a competitive tender process. The value of the contract is around $4.5 million over 5 years. Importantly, this contract marks our first deployment in a new territory or a new state in South Australia, which is the founding state of Alcidion and that, so, has been particularly exciting for us and -- especially our staff located in Adelaide, which is one of our largest -- or in fact, our largest office in terms of staff numbers. Shortly after signing that, we also announced a new partnership and contract with Peninsula Health, which is a major public health service group that serves a diverse region across the Mornington Peninsula and Frankston areas of Victoria. And similar to NALHN, Peninsula will utilize the Miya Precision platform to support real-time patient flow management, mobile access to consolidated data from their electronic patient records. And that data will be sitting on top of their electronic patient record as well. Peninsula also recently announced a decision to merge with Alfred Health and a couple of other smaller health services to create Bayside Health -- and we're really looking forward to this as an opportunity to demonstrate the power of Miya Precision to connect data across those health services, thereby hopefully reducing the need for them to replace or change their underlying systems that provide that data. We're continuing to see increasing demand for Alcidion's platform to support patient flow. We continue to demonstrate really tangible benefits. Nick White and Kaye Hocking are actually over in the U.S. at the moment about to present at a patient flow conference there, the benefits that we are realizing as a result, not only the study that we did at the Alfred but across a number of our other customer bases. And so that continued evidence base is really important as we seek to bring new customers on, but also to expand the opportunity that Alcidion has around the world. As I said before, and it can't really be overstated how important the ability to demonstrate those positive benefits are in order to show how our platform helps to improve efficiency around the flow of patients from admission, from ED through to admission, through to discharge, relieving time to care, releasing more bed availability and supporting our clinicians in what is a pretty challenging health care environment. Following on from that Peninsula Health partnership, I also want to highlight how significant our presence now is in the Victorian acute care market. We're currently deployed in some of the largest health care groups, including Western Health, Alfred Health and the Hume Health Regional Alliance, and we continue to demonstrate those benefits. And we're increasingly -- that ability to show real value is a differentiator for Alcidion in these markets. During the quarter, we also renewed several key contracts. Notably, we renewed for a further 2 years, the contract with Sydney Local Health District for the use of Miya Precision to support virtual care and remote patient monitoring. And we also signed a 2-year renewal for the use of PCS, our patient administration system module at Northumbria Foundation Trust in the U.K., which is a trust that is also part of the ICS or integrated care system that both South Tees and Northumbria are part of. These renewals continue to reinforce the strength of the customer retention that we have and highlight the critical and embedded nature of our platform once we are implemented with the customer and demonstrating those benefits. As of the end of the second quarter, as I said, we have approximately $30.8 million of contracted and scheduled renewal able to be recognized. Importantly, it doesn't include any potential from North Cumbria, which I've said is well progressed and in final stages of approvals. We entered the second half in a strong position given that Q3 and Q4 are our highest periods for customer receipts and would expect to see that trend continue with a material uplift in H2 customer receipts compared to H1. For reference, the debt ledger at the end of Q2 was $8.2 million, of which we've already collected $5.9 million. Of course, we've added further to that ledger during January as well with additional invoicing, which continues, obviously, throughout the course of the year, in line with normal customer billing cycles. We confirm our expectation of being EBITDA and cash flow positive for FY '25, noting that we're an EBITDA breakeven business at around $36 million of revenue. And as the year has progressed, we have an improving line of sight on what is able to be recognized during this financial year. The increased contract signings over the last 6 months have been the result of us executing on our evolving and maturing pipeline, several of those opportunities progressing through tender stage, into selection stage and obviously, new opportunities entering the pipeline all the time, particularly as the referenceability of Miya Precision grows, our ability to demonstrate those benefits helps us to continue to obviously build that pipeline over time. I'd like to thank you for your time today. That's really all I wanted to cover. But at this stage, I'm very happy to take questions, and I'll stop sharing at that point. And Matt will rejoin us and let me know what questions that we have.

Okay. So we had a few questions come in prior to the webinar. So I'll go through those, and we've had a couple come in on the chat so far. So the first question, I think you already touched on, Kate. When do you expect to be cash flow positive?

Yes. I really have, I think, outlined that. We're extremely close to cash flow positive this quarter. And as we stated in the presentation, we expect to be cash flow positive for the full financial year.

Thanks, Kate. The second question that came in is, how is scalability factored into the business model? And what are the plans for driving margins?

Look, I mean, I think we've been performing well with the current cost base and expect to be able to continue to drive those positive margins. As the product matures and the need for development levels out, the implementation teams continue to deliver very efficiently and consistently, as many people know, we scaled the business. We've cut back in the last 12 months or so as our processes and products have matured. So I think we're really well placed to continue to increase revenue from the cost base that we have and therefore, continue to drive greater margins.

Okay. So the next question is about pipeline. What is the size of the sales pipeline? And how has it changed over the past 6 months, past half year?

I often get this question. We don't declare the pipeline size. And really, that's because it changes as deals enter and mature. In some cases, they come out of the pipeline, obviously, if we sign a new deal, but then other ones are entering. And all of the deals in the pipeline vary in size so significantly. Being a platform, Alcidion is not reliant on just 1 single solution to drive our revenue. So we can have EPR deals that are obviously of the potential size of North Cumbria at the $30 million to $40 million mark. And then we can have modular sales where we might be signing up Smartpage, for a couple of years, at a couple of hundred thousand. So the pipeline is widely varied. Over the 6 months -- the last 6 months, the pipeline has continued to mature. It continues to grow. There are still significant opportunities in there in the EPR market as well. So very comfortable and confident with the maturity and also our understanding of how that pipeline may progress in the next -- certainly in the next 12 months.

Okay. So there's a question come in, Kate, which if you want, I can answer this one. Excluding NALHN and Peninsula contract -- excluding the NALHN and Peninsula contracts, which countries did the other $5 million of new TCV sales come from?

Well, I mean, predominantly, the U.K. -- well, actually, the 2 biggest ones are the ones I talked about, Northumbria PCS, which is a sizable contract at 2 years, which is the U.K., Sydney Local Health District. And what others, Matt, that you -- there's a lot of smaller ones, I know.

There are a lot of smaller ones. So Sydney LHD and Northumbria made up the lion's share of the $5 million, I think. And then there's just a lot of other smaller renewals and smaller kind of nonannounceable sales in Australia and the U.K. and some smaller ones in New Zealand as well.

Yes. Yes.

So there's a good question here. I think I'll summarize it instead of reading it. But looking for rough numbers, what potential is there for expanding our revenue from the current customer base?

There's definite opportunity to do that across all of our customer base, Miya Precision customers, PCS customers and so forth. I don't -- I couldn't really give you the percentage at the moment other than to say there's very few customers -- existing Miya Precision customers who bought all the modules. North Cumbria and South -- not even South Tees actually, they've still got some potential upside there as well. So the -- nearly all of our customers would have potential for us to sell them additional capacity and capabilities.

Thanks, Kate. A question on Northumbria here. Does Northumbria have an EPR system? Will we tender for it if they go to tender?