Alcidion Group Limited (ALC) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us today, and welcome to Alcidion's Full Year Financial Results Webinar for the 12 months ending 30th of June 2026. Before we begin, I would like to acknowledge the traditional owners of the land from which I'm presenting to you today, which is the Wurundjeri people of the Kulin Nation and also to acknowledge the lands from which all of you are joining me today, and I pay my respects to their elders past and present, and I extend that respect to all Aboriginal and Torres Strait Islander people who have joined us on the call. Joining me on the call today is our CFO, Matt Gepp; and our Chief Marketing Officer, Nick White. Nick will moderate the questions for us as they land during the course of the webinar. Earlier today, we released the Appendix 4E and annual report, along with an update of the business activities for the year. Before I get into that presentation, I'd like to recommend that you take some time to look through at least the first half of the annual report as it has some great information in it on the impact of our technology and how it is impacting our customers and patients. And the team has done an excellent job in pulling together a cross-section of case studies and thought leadership pieces that highlight our work. So I thought I'd draw your attention to that because I know that sometimes annual reports can be a bit of dry reading. As we take you through the presentation, we'll cover off key financial and commercial highlights for the year, followed by our thoughts and approach to the year ahead, and then we'll open up the call for Q&A. All attendees will have an opportunity to ask questions at the conclusion of today's presentation. [Operator Instructions] We will aim to answer as many as we can. Note, given time constraints, we may group together similar questions to avoid repetition. If we do run out of time and we're unable to answer a question for you, we welcome you following up by sending an e-mail to investor@alcidion.com, and we'll seek to address that as soon as we possibly can. Just as a reminder as well, the webcast is being recorded, and it will be available on Alcidion's website later today. Just going to move through my slides. Before I get to the results, though sometimes we're joined by people on these calls that are new to the Alcidion story and being a full year results call, I thought I'd just take a brief moment to remind shareholders and people that are new and of interest to Alcidion about the core problems we're solving with the types of solutions that we offer to our customers, which is leveraging the flagship platform of Alcidion, which is Miya Precision. Hospital and health care systems globally are facing a range of complex challenges, and they affect stakeholders at every level from health care administrators and clinicians through to patients and their families. And many of those challenges trace back to really a handful of fundamental problems. Administrative and clinical staff who lack real-time visibility of bed availability and where a patient is in their hospital journey right from an ambulance approaching a hospital to discharge to hopefully home or in some cases, to aged care or rehabilitation facilities. Long-term patient history is often incomplete. It could be missing context or in -- it hasn't transferred between care settings or there's just so much information that it's hard to work out what is core and important to the decision-making process. We have disparate systems that don't talk to each other. And realistically, we've got hospital executives who have not got a real-time view of what's happening across the hospital from an operational perspective, underpinned by the need for -- underpinned by the fact, I guess, that there is an ever tightening fiscal environment and that's driving our customers to look at alternative models of care that allow us to treat more patients outside the walls of a hospital. Miya Precision is a cloud-native modular platform that helps to address some of those problems. We ingest data from multiple systems or in some cases, we act as the actual system record as you will -- as we do when we deploy an electronic patient record. And the consolidation of that data can then be analyzed and presented back to our users in a way that's intuitive, that prioritizes the critical things they need to focus on and helps to reduce that administrative burden on our frontline staff. Because the way in which we construct the platform is modular in nature, it can be scaled up and down depending on the functionality and the budget of every customer. And on this slide is where you'll see several of our most common solutions in the pink bars. Patient flow solutions are core to our business and have been for -- since our inception, and that was recently bolstered obviously, by the acquisition of the Kyra flow products. The integrated care record relates predominantly to our work with Leidos and the Australian Defence Force, but increasingly is being looked at by other government bodies who want to consolidate data into a single patient record view. We have a comprehensive electronic patient record platform, which is a combination of all of our modules coming together. And then we have an innovative operations center and virtual care capabilities, which we're really seeing a demand -- an increasing demand for. We also have a selection of the customers who utilize some of those solutions here. And just to articulate that customers can use a combination of these. So Hume is a very good example where they use the operations center, command center capability as well as patient flow and remote patient monitoring. As most of you will know, we currently operate across 3 geographies: Australia, New Zealand and the U.K. However, we are making progress into new geographies with a particular emphasis at the moment and has been on Canada and the Middle East. Moving now to the full year results summary. It was a milestone year for the business as we delivered our strongest financial performance to date, whilst also increasing the customer base, delivering a record number of go-lives alongside the strategic acquisition of the Kyra products. Matt is going to talk in more detail about the numbers shortly. However, I thought I'd just touch on some of the headline numbers. We had full year FY '26 revenue of $51.6 million, which we indicated to people at the quarterly. That is up 27% on the prior period, and it was driven by really strong contributions from expansion of the Leidos contract and the North Cumbria contracts and also new opportunities and contracts such as the Sussex electronic patient record contract, but we also saw increasing sales and increased renewal across a number of our other contracts as well. The annual recurring revenue or ARR as of the 30th of June is $38.3 million, which is up 34% compared to the same time period last year. And just noting that, that figure also includes approximately $3.6 million of ARR contribution from the Kyra products acquisition. During the year, we signed $78.5 million in new TCV or total contract values, which is a record for the business. And importantly, $62.2 million of that represents new or upsell deals as opposed to contract renewals. We delivered an EBITDA of $6.2 million. And after you exclude M&A transaction costs, share-based payments and other one-offs, the underlying EBITDA result we delivered was $6.8 million, 34% up on the prior year. We generated positive operating cash flow of $6.8 million, representing 100% cash flow conversion from underlying EBITDA, and that does highlight the strength of our business model. We finished the year with $20 million of cash and no debt. So obviously, that reflects a year of significant momentum continuing from that momentum that was evident through FY '25. It's now carried into FY '26. The operating leverage that sits within our business is being demonstrated now and as we continue, particularly to win and expand those long-term contracts. Before I get Matt to take you in more detail, just give you some of the operational highlights for the year. We continue to build sales momentum whilst executing on strategic acquisition, and that really allowed us to consolidate our position, particularly in the patient flow market. Some of the expanded contracts and new contracts we signed during the year was the extension of North Cumbria for Mizaic document management solution. And as well, they extended the Smartpage contract they had to include nonclinical Smartpage. In November '25, we expanded our contract with Leidos to support the ADF by adding additional Miya Precision capabilities and medications management capability from our partners at Better. In March '26, we signed a new 5-year contract with Gold Coast Health to deliver an end-to-end remote patient monitoring or virtual care solution. Very exciting for us as it was our first deployment of Miya Precision in Queensland. And I'm pleased to say that, that is now live, indicating a fairly quick transition from contract signing to go live earlier this -- in July. In May '26, we signed the milestone electronic patient record contract with University Hospital, Sussex, which I'm sure most of you are aware of. As always, we continue to expand many of our long-standing customer relationships as well. Several of the PCS has customers renewed for multiyear periods, including Harrogate and Northumbria and Western Health in Australia signed a 4-plus 1-year renewal for our patient flow capability. And really importantly, and very pleasingly, that is the fifth contract renewal with Western Health over the past 20 years for Miya Precision really focused on Flow and Command. And then on the 20th of June, we completed the strategic acquisition of the Kyra flow products from Telstra Health. It added 33 customers, of which 31 are new, really helped to consolidate that leadership position that Alcidion has in the Australian patient flow market. It's -- that acquisition was immediately earnings accretive from day 1 and forecast EBITDA of $1.1 million was what was indicated from the FY year, and we expect that to potentially improve into FY '27. I will come back to Kyra in a little bit more detail after Matt has gone through the financials, so I can get to you soon. Handing over to Matt now.

Thank you, Kate. Okay. Good morning, everyone. Thanks for joining us. Again today, over the next few minutes, I'll take you through the key financial highlights of the FY '26 year, starting, of course, with the profit and loss. So after delivering a maiden positive NPAT in FY '25, we followed that up with a 38% increase in the NPAT in FY '26 to $2.3 million as well as a $1 million increase to the EBIT. As Kate highlighted earlier, we reported revenue of $51.6 million, a 27% year-on-year growth. That's the largest organic revenue growth rate the business has delivered to date. Really pleasingly, this growth came from both the ANZ and the U.K. regions with the ANZ business delivering 26% year-on-year revenue growth and the U.K. business delivering 27% year-on-year revenue growth. FY '26 annual recurring revenue, which I will refer to as ARR moving forward, increased 23% from $26 million to $31.9 million. And as we enter '27, the business has $44.9 million of sold and renewal revenue on the books, $38.3 million of that, as Kate mentioned, is ARR, and that's a 34% increase on the prior year. That contracted base alone represents a 20% increase in -- on the FY '26 ARR before any new sales were added in FY '27. Looking at the services revenue, which includes a full year of the NCIC EPR, a full year of the Hywel Dda Miya implementation. In the U.K. as well as the inclusion of the third Leidos expansion in ANZ, we see an increase in services revenue of $3.5 million or 56%. With Sussex signing quite late in May, the implementation from that deal is still to come, and we'll see that starting to be recognized in FY '27. The capital license revenue increased to $9.8 million. This number includes primarily the Sussex EPR license signed in H2 as well as the NCIC Mizaic expansion that was reported in the H1 results. FY '26 moved by $5.5 million. That's compared to a $4.1 million increase that we delivered in FY '25. The percentage margin moved from 88% to 80%. That's a result of the resale of third-party products -- partner products during the year. In the absence of these, though, we expect to see the margin returning to the long-term average of around 85% in FY '27. The staffing levels remaining pretty steady at around 140 during the year. There was a modest increase in salaries and wages expenses of 3% with the total operating expenditure, including staff, increasing just 6% on the prior year. With revenue and margin growth significantly outpacing expenditure growth, we are very pleased to report an underlying EBITDA of $6.8 million, an increase of 34%, a result achieved despite the $1.9 million swing in the unrealized FX expense year-on-year. Moving to the revenue dashboard, please, Kate. So on the top left here, we see that Alcidion has now delivered 3 successive halves of record revenue. On the top right, we demonstrate the mix between ANZ and the U.K., which is unchanged year-on-year with the U.K. contributing 63% in '25 and '26. Largely, this is underpinned by material capital license revenue in the U.K. in each of '25 and '26. On the bottom left, I've talked about these numbers. This demonstrates or shows the solid growth in all 3 of our revenue streams. And then moving to the bottom right, the strong growth in services and capital license revenue in the year has seen the ARR moderate slightly as a percentage of total revenue. However, as I discussed on the previous slide, in dollar terms, it increased 23% in the year to $31.9 million. Moving on to the revenue model. So here, we're showing the onboarding of new customers and the progression of the revenue build through the implementation phase, where we typically see implementation revenue making up around 10% to 15% of new TCV. Miya flow implementations take 3 to 6 months, larger EPR implementations take 12 to 24 months. Recognition of that revenue usually crosses over multiple financial periods. Capital licenses, as we've discussed a lot are a feature of U.K. contracts. As a rule, we don't see this structure in ANZ. Typically, these are paid upfront between 5 and 10 years before rolling on to annual license subscriptions. For example, Sussex purchased a 7-year license in FY '26, North Cumbria purchased a 10-year license in FY '25. And if you cast your memory back to South Tees purchased a 5-year license that has since reverted to a rolling annual license subscription. And then moving to the right, all new contracts have hosting component combined with ongoing annual licensing and support and maintenance, and it's this revenue -- these revenue components that contribute to the steady build in the ARR that we're seeing in these numbers across the last few years. All right. My favorite slide here. Without a doubt, this is the strongest balance sheet we've delivered to date, providing us with the flexibility to pursue growth opportunities as we did this year with the Kyra acquisition that was funded 100% from cash reserves. We have $30 million of current assets, including around $21 million of cash and excluding the unearned revenue, we have around $20 million of working capital at our disposal now. The unearned revenue of $14.4 million includes an increase of $1.4 million that was acquired as part of the Kyra acquisition. Also related to the Kyra acquisition, we now have $1 million of contingent consideration on the balance sheet, which we fully expect to settle in early FY '28. And the cash flow, which we've all seen already, this is consistent with the numbers we released and talked to in late July. The business added $2.9 million of net cash in the year, and that's after paying $1.5 million for the Kyra acquisition in June. We ended the year with $20.6 million cash in the bank with no external borrowings. We're a capital-light business with CapEx relatively immaterial at around $200,000 for the current year. And consistent with the seasonal profile of our billing where most customers pay either quarterly or annually in advance, the business delivered a record $9.4 million of operating cash flow in the second half of the year, more than recovering the $2.6 million outflow we reported at the half year. As a result, we ended the year with operating cash flow of $6.8 million, up 19% on the prior year. And what I talked about then is largely a structural aspect of our business. H2 receipts represent 70% of full year receipts and Q4 alone contributed 44% of full year receipts in both FY '25 and FY '26. Lastly, on the cash flow side, we've now demonstrated 2 consecutive years of operating cash flow conversion of greater than 100% of reported EBITDA. And that's what we really want to see when we're looking at the EBITDA and the operating cash flow. With that, I'll hand back to Kate to take you through the sales and operational highlights.

Thank you, Matt. This slide, whilst showing information already known to many of you, I think illustrates well the progress the business has made, approximately $150 million of new and renewal TCV has been won over the past 2 years, typically on contract terms between 5 and 10 years in terms of the initial contract. I think this slide also highlights our broad customer mix across both new electronic patient record deals, but patient flow wins alongside consistent expansions and renewals across both Australia and the U.K. I talked a little bit about the new contract wins. So well, gosh, slides are going a bit crazy. Sorry about that. Sorry, I just go back to where we were WiFi is not going great. I'll stop touching things. So I don't want to go through -- I won't labor these because I think people are familiar with them in terms of the new deals in terms of expansions and the Sussex win and the North Cumbria. But it's also worth pointing out that we had a number of other contract wins as well that don't meet materiality in terms of individual announcements. We're very excited by the progress of the emergency module, Hywel Dda added that to their contract during the year, South Tees added that to that. And it is really a good indication of the relative newness of the Miya emergency module and how quickly we can build these new modules and then commercialize them into contracts with our customers. And further illustrating that point is whilst -- and I have presented this slide before, I think as time goes on, the relevance of this slide increases as we start to see that conversion and the land and expand opportunities really play out. And across several of our flagship customers, we've now established a track record of delivering material upside value post that initial contract signing. Leidos, North Cumbria and Tees are the most recent examples, but they do join an increasingly longer list. By way of example, if you look at North Cumbria, they started out with a core suite of EPR modules, then they added Smartpage Clinical and then they followed by adding Mizaic and then more recently, Smartpage nonclinical. And they still have not got all of the modules yet. So over that 10-year period, of the contract, the TCV is now just under $50 million, having started closer to $40 million initially. I think by now, most of you as shareholders are across the signing of the third EPR contract with University Hospital Sussex. It helps to underpin this growing referenceability we have in the U.K., particularly around being a supplier of modular EPRs. It is a flagship contract with a minimum total contract value of $35 million for an initial 7-year period. Built into the contract, there are options to extend to 10 years, which would increase the overall TCV to over $45 million, but there's also opportunities to add modules such as ED and PAS over time. We have received an initial upfront component related to that license fee. However, the contract will continue to generate just over $3 million in ARR over each of the next 7 years. And so therefore, it serves as one of our largest single ARR contributors just behind Leidos -- well, not just behind Leidos. Leidos is in the vicinity of $6 million per annum. Our EPR selection followed a competitive tender process, and it sees us expand our long-standing relationship with Sussex who have used our observations or patient track module for many years. So a very significant win for us. We have commenced deployment. And obviously, a project of this scale will take 18 months to 2 years to deliver. So that implementation will continue on into the FY '28 year. We had a year of very successful deployments, and there were a lot of them. This just pulls out a few of them. I think what's really important is to highlight that deployments are not necessarily the part of the business that often generates investor headlines, but it is one of Alcidion's great strengths and the competitive advantage that we have. Our in-house capability, implementation capability provides very deep technical expertise, and it helps to improve the customers' experience and support deployments of this nature and of this size at scale. And the importance of that is that a seamless implementation experience builds trust and it provides confidence to the customers for them to expand into further deployments, but also to act as references for us for customers who are going through other -- their own tender processes. Just a little about patient flow, particularly. I just wanted to -- I thought it was important to highlight this, there's a report. Patient flow is such an important capability and need within health care systems worldwide that there is a research report recently being released from OG Analysis about the patient flow market. And since Alcidion's inception, we've been at the forefront of creating digital solutions that address these critical challenges around flow within our aging population and difficulty in fiscally building new physical infrastructure or new hospitals. And, of course, statistics have demonstrated that staying longer in hospital or being in the hospital in the first place actually can adversely affect patient outcomes. The value proposition for patient flow has never been greater than it is right now. And this slide really validates many of those growth drivers with underlying data that we've probably been talking about now for well over a decade. And according to this analysis, the global patient flow market is expected to grow at a compound annual growth rate of 18% to a forecast $10.4 billion in 2034. Our current 2 core markets are expected to grow at similar rates to that. But if you look at the depth of this report, you will see this across all countries that are represented in the report. And so we are really focused on accelerating our penetration in the flow market and particularly at this point in time. And the acquisition of the Kyra flow products business in June was really -- was a way of helping us to achieve that through the strategic means of acquisition, giving us a really clear leadership position in this part of the world. That acquisition ticked a lot of boxes for us in terms of the key criteria we consider when we're looking at acquisitions. It was highly complementary to our core business. We've got deep industry expertise and product knowledge in this type of solution. For customers, it's created an element of trust because they know that we know what we're doing when it comes to patient flow. And certainly, the feedback we're getting from them already is that it has been a very positive transition. We have just moved all the customers over to logging calls directly with Alcidion. It also consolidates our leadership in flow across this region and gives us meaningful scale in Queensland. It added 31 new customers, 33 in total, but 31 of them were new. Financially, the acquisition was earnings accretive. And if you look at the -- from a financial perspective, we acquired the business at an upfront EBITDA multiple of approximately 2.7x and 3.6x EBITDA if you include the 12-month earn-out, which we fully expect to pay as customers are already looking to expand -- to renew their contracts and certainly, the novation of contracts has been going well. Over time, of course, the strategy is around moving those customers to Miya Precision at a time and process -- place in the process that works for them. We remain focused on the growth pillars that we have talked about previously. In our core markets, we continue to scale, looking at opportunities across patient flow, virtual care and the broader modular EPR offering and increasingly an interest in New Zealand Defence Force. We are leveraging AI to shorten our product development cycles whilst also building AI capability into our products so that we can better improve workflows for our customers. Miya Emergency and Miya Scribe are both really good examples of our ability to innovate and then commercialize that new functionality to get it to our customers. We are expanding into new geographies. The priority targets and discussions have been in Canada and the Middle East. The Middle East is obviously a little bit more challenging at the moment, but things are continuing there, but going well in Canada, and starting now to look at Southeast Asia as a potential market opportunity, although that's still very much in the early days. We're actively progressing conversations in some of those markets and have some meaningful opportunities in the pipeline. In addition to the above, we will continue to review potential M&A opportunities that will help to accelerate the growth profile. If we look forward as we start FY '27, the contracted and renewal revenue of $44.9 million is up 32% on the starting point of FY '26. And that FY '27 contracted revenue base provides really strong visibility and supports our expectation of further growth in both revenue and underlying EBITDA in FY '27. And that's even just the starting point of $44.9 million before we have any additional sales in FY '27. And it really marks a very important milestone for Alcidion. It validates the strength of the business and the long-term sustainable nature of our operations when you start with that type of contracted revenue as you go into the new year. In terms of guidance, we expect FY '27 revenue and underlying EBITDA to outperform FY '26. That outlook is underpinned by a qualified pipeline with active opportunities that sit across all areas of our product offerings, including multiple EPR procurements. Given our demonstrated track record of conversion of that pipeline into revenue over the last couple of years, combined with the sustained demand that we're seeing for modern digital health solutions, we are genuinely excited about the opportunities that lie ahead for us in FY '27 and beyond. Before I move to questions, I would really like to thank though, all of our staff at Alcidion and the senior leadership team for the incredible work they've done throughout this year. FY '26 has been a record year for Alcidion across multiple measures, and that is as a direct result of their effort and commitment. So I think Matt and Nick are going to rejoin us. I will stop the sharing at this point. And let's move to questions.

Thanks, Kate. We've got a number of questions, so I'll jump straight in. The first one is we've had a couple of these. As of 30th of June '26, you had circa $20 million in cash. What are your plans for it?

Well, I think I just kind of covered that off in some ways when I talked about the strategic pillars under which we're operating. We are obviously focused on growing the growth in our existing markets, but we are moving into new markets, and we are continuing to invest in development, albeit judiciously around particularly AI, but also new markets -- sorry, new opportunities to support health care. And also, we keep an eye on strategic M&A opportunities that fit the sort of criteria that I covered.

Next question. To achieve the guidance that you just referred to around FY '27 and EBITDA growth, do you need to win another EPR contract?

Look, the contract of the deals that come through in any given year is generally made up of a number of different things. We are not banking on that to actually deliver that guidance. We believe that the pipeline is sufficiently broad and deep that we would not have to win an EPR contract of the same nature as Sussex in order to achieve guidance.

Thanks. Okay. The next one is around UHS Sussex. So how much revenue was recognized in FY '26? I think we covered some of that. What do you mean by the comment that the recurring revenue from UHS Sussex EPR contracts will commence in FY '27 due to the timing of the contract execution. Did you expect this to be in FY '26? And what was the quantum?

Yes. No, we didn't expect it to be in FY '26. The contract was signed towards the end. They pay an upfront component, but they don't -- they haven't started paying -- well, they have now started paying the annually recurring component, which is a combination of support and maintenance and hosting, and that kicks in, in this financial year.

Question maybe a little different. Can you elaborate on who our competitors are?

It's always a really interesting question because we're a platform with a whole lot of modules. Those modules can be combined in different combinations that allow us to compete in more opportunities. It genuinely increases our total addressable market. So who our competitors are is going to depend on what the opportunity is that we are going forward. So the competitors for electronic patient records in the sector that we tend to go for in the U.K. are companies like Nervecentre, Altera, System C. If we were going for virtual care in this market, I think there's companies like -- maybe like CareMonitor that we come across. So it will depend very much on the geography we are in and what challenge we're trying to solve for the customer.

Okay. The next one is a ARR now covers the OpEx base. We can see that this usually carries a premium for HCIT companies. How does this change the impact focus on operational leverage expansion versus growth initiatives, meaning where you start to increase marketing spend, to increase top line or keep costs stable at CPI inflation and modestly grow top line?

Yes. Great question. And obviously, something that as we go into a new financial year, and we're in a position that gives us lots of options when you've got such a healthy balance sheet. I think we will -- we have made a decision to increase marketing spend a little as we move into FY '27 to support greater revenue growth. Obviously, when you're looking at new geographies, we need to ensure that we are known in those geographies from a presence perspective. But we are spending it -- we are looking at that spend judiciously and really wanting to maintain that operating leverage at the same time as growing the top line. And we think we're in a really good position to be able to keep that balance correct to demonstrate the ongoing growth and strength of the business.

Next one is around some of the numbers. So those salaries are approximately 52% of revenue. Industry benchmarks are around 45%. Can we explain why there's a difference between those? Might be one for Matt.

Yes. Look, I can answer that. Look, it's a good observation. It's a number that I certainly keep an eye on year-to-year. Last year, that number was 64%. And in the 3 or 4 years before that, it was hovering around the 70% mark. So it's a marked improvement on last year, 12 basis points. And as our revenue grows at the rate it's growing, our staff costs will not follow that, and I expect that percentage to improve year-on-year as it has for the last .

Thanks, Matt. Direct costs, we've seen an increase. Why the rise is the next question?