Alcidion Group Limited (ALC) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to Alcidion's Fourth Quarter FY '26 Appendix 4C and Business Update Presentation, which covers the 3 months ended June 30, 2026. Joining me on the call today is our Chief Financial Officer, Matthew Gepp, and Nick White is also joining us, our Chief Marketing Officer, and he's going to assist in managing the Q&A. Before we get into the detail, I would like to acknowledge the traditional owners on the land from which I'm presenting today, 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 also extend that respect to all Aboriginal and Torres Strait Islander people who are joining us on the call today. Shortly, I'll take you through a presentation, as we normally do, covering the key financial and commercial highlights in the quarter. Just to remind you all attendees will have the opportunity to ask questions at the conclusion of the presentation. If you would like to ask a question, could you please use the Q&A function that should be at the bottom of your screen and we'll aim to answer as many as possible. Any questions that are similar in nature, we may combine to avoid repetition. And if we run out of time or we're unable to answer any of the questions, please send it through to investor@alcidion.com, and we'll seek to answer as many as possible. And just as a reminder, the webcast is being recorded today, and it will be available on Alcidion's website later today. So kicking straight off. Q4 was a very strong period for Alcidion, closes out what's been a record year for the business across several key financial and operational measures as well. I'll cover the financials in more detail, obviously, as we go through the presentation. But at a high level, we delivered record positive operating cash flow of $7.7 million, leading us to a full year positive operating cash flow of $6.8 million, this is up 19% on last year, beating our FY '26 guidance, and highlights really the strength of the Alcidion business model as we continue to sign long-term contracts that underpin the growth and profitability of the business, not just for this year but for years to come, given the long-term nature of those contracts. And just to illustrate a couple of those. In May, we signed a milestone contract with University Hospital Sussex for the Miya Precision platform. That's going to be deployed as their new comprehensive electronic patient record solution. UH or University Hospital Sussex will be our third U.K. EPR deployment and our largest trust yet to deploy Miya Precision for full EPR capabilities. And it gives us that clear point of referenceability as we remain engaged over several other new EPR procurement opportunities that are also going through the pipeline. We also extended our relationship with Western Health in Victoria, which I'm particularly proud of. It marks our fifth contract extension across 20 years that Alcidion has had with Western Health. Miya has been running at Western Health for, as I said, a number of years. It's a great example of the embedded nature of our platform, and the critical role it plays in the day-to-day support of administrative and clinical staff at that site and others. On the 29th of June, we completed the acquisition of the Kyra flow products suite from Telstra Health, which was -- is a highly strategic transaction for us. It brings 33 customers, 31 of who are new customers to Alcidion, establishes Alcidion with a strong presence in Queensland. And further to that, this transaction was immediately earnings accretive for our shareholders. We've confirmed our guidance for FY '26 with revenue of $51.6 million subject to audit, and that's a 27% increase on the prior year. We see EBITDA to be in excess of $5 million, and we will update that at the full year results later in August. If one -- just maybe dig into the financial highlights in a little bit more detail. During the quarter, we delivered new sales and renewals with a combined contract value of $43.2 million, which was primarily driven by the UH Sussex and Western Health. Approximately 89% of the new sales relate to recurring product revenue and the remainder being for product implementation services for implementing our products. We finished the full year FY '26 with new TCV sales of $78.5 million, which is a record for the business and continued demonstration of the validation of our product offering and the go-to-market strategy that we're deploying. The fourth quarter cash receipts from customers were $24.6 million and that helped to drive a positive operating cash flow for the quarter of $7.7 million. Included in the cash receipts for the quarter was a $10.6 million payment from University Hospital Sussex, which represents the upfront capital component of the total deal for the 7 years. There is obviously additional recurring revenue related to that, which I'll touch on later. The product development and operating costs were $4.1 million for the quarter. And as we spoke about in prior quarters, this cost line is higher than last year, and that's mainly because it reflects the payment to third-party providers in this instance, predominantly Better for the medications component -- medications management component of the University Hospital Sussex contract where we are serving as the prime contractor, but in this instance, providing them with the third-party medications management partner solution we use from Better. For those that have not been on prior webinar, just to clarify that we're absolutely focused on sales of our own product suite, and it will continue to be the primary driver of growth moving forward. This year has been a little different to others in that we have had a higher component of third-party revenue comparative to prior years and comparative to Miya Precision. We don't expect that will be how it continues. But one of the strengths of Alcidion is that we have a platform approach. That platform provides for the ability for specialist applications like Better Medications Management to be seamlessly incorporated into the workflow. It's actually a real differentiator of Alcidion to other providers of electronic patient records in the market. And it really works for our customers in that it allows them to keep investments that they potentially had already made. And in the instance of North Cumbria, for example, they had already chosen to deploy Better medications management. We're seeing a similar thing in Hywel Dda, in Wales and a number of other Welsh sites that have already gone forward with medications management ahead of choosing an EPR provider. The staff cash costs remain well controlled with cash staff costs up approximately 5.5% on the same period last year. Similar to what we did last year within this quarter, Q4, we have paid in advance half of the one-off FY '26 short-term incentive bonuses that will be due and achieved as a result -- of results. The balance of those STI payments will be made in Q1 of FY '27. Underpinning the Q4 cash flows are aligned to that, Alcidion delivered full year positive operating cash flow of $6.8 million, which is an improvement of $1 million on last year or 18%, and it represents an accurate reflection of our operating cash flows because we do not capitalize any of our R&D. So as of the 30th of June, Alcidion had $20.6 million of cash in the bank with no debt. And it is important to note that, that's after we've paid the net completion payment, which ended up being around $1.5 million for the Kyra products business after we had made adjustments. This slide, we like to present consistently quarter-on-quarter. I've covered a lot of the information already. On the left-hand side, you'll see quarterly new sales. The $43.2 million we delivered in Q4 was our second highest ever and shows in back-to-back years, we've now delivered new sales and renewals of around $70 million plus. On the right-hand side, this again highlights the seasonality in our cash receipts and the material uplift we typically see in the final quarter of the year. Pleasingly, we've been able to deliver an uplift in cash -- Q4 cash receipts in each of the past 4 years, so very consistent in terms of that delivery. As I mentioned in the summary at the beginning of the presentation, 1 of the major announcements this quarter was the signing of our third electronic patient record contract in the U.K. with University Hospital Sussex. It is a milestone contract. The minimum contract value expected to be $35 million over an initial 7-year period. Built into that contract are options to extend it out to 10 years, which would include -- increase the TCV to over $45 million, but also additional module expansion is possible throughout the course of the contract, and that includes PAS and ED as potential add-ons. Post the signing and as expected, we received an upfront payment of $10.6 million, inclusive of VAT for the capital license component of the contract. And a portion of that payment does relate to our third-party partner products, which has also been paid in this quarter. Despite the fact that there's an upfront contract -- component to the contract, which contributes, obviously, the cash in this quarter, this contract actually contributes $3.5 million in annually recurring revenue in each of the 7 years, and it will actually be our second largest AIR customer behind Leidos. The selection of Alcidion and Miya Precision for UH Sussex EPR follow the competitive tender process. And it sees us expand our long-standing relationship we've had with Sussex where our observation and assessment module or, previously known to some as Patientrack, has been deployed for a number of years. And we have commenced deployment of the wider EPR. And given the scale of the project similarly to other EPR projects, we'd expect that to run for around 18 months. During the quarter, we also signed a 4-year plus 1 potential extension for our long -- for Miya Precision access flow and command modules with Western Health. They are 1 of Victoria's largest public health networks and have just moved into a new facility where Miya flow facilitated that move of patients, and it was excellent to see them demonstrate how they used Miya Precision at a recent Alcidion customer event that we held earlier this year. As I mentioned at the outset, it is the fifth contract renewal in the past 20 years that we've had with Western Health. And it's really exciting in that when they started their journey with us, they did not have an electronic patient record and as part of the Victorian deployment of the Oracle Cerner solution during that period, Western Health actually implemented electronic patient records, but Miya Precision has remained in place across all of those changes. And that serves as a prime example of just how embedded our software becomes and how it helps lead to these long-standing customer relationships that we have. And they -- the reason that those customer relationships are of such long-standing is the ability of our solutions to solve some of these very complex customer challenges. I also wanted to update you on a major implementation milestone for us and, of course, for our customer. Often, we talk about the new wins, but I think it's really important to recognize that the strength of a company like Alcidion lies in our ability to seamlessly implement our solutions and our partner solutions in an efficient and effective manner, and we recently demonstrated that at North Cumbria by the Phase 1 go-live of the Miya Precision EPR solution. It has been recognized widely as a very successful implementation, including by NHS England. It was implemented very smoothly without incident, completing a major milestone for the trust, and we look forward to continuing to roll out further phases of that deployment. This referenceability is a very, very important part of Alcidion's go to market and also a very important asset of Alcidion as a company. As shareholders would have seen, we also put out a non-deal roadshow presentation as a part of some of the recent travels I did through Singapore and Hong Kong. It was focused on 2 components. One was around looking at sharing the story of Alcidion with potential new investors in those markets, but we also attended the Smart Health Asia conference to look at Southeast Asia as a potential geographical expansion area. Shareholders will know. We have had some focus on this, and I will update in more detail at the full year results how we're progressing across all geographical expansion. But in Singapore in general and some of the countries in the Asian region, they operate a similar single-payer model to Australia and the U.K. with government funding a lot of the hospital care. But interestingly, you see a stronger play from the private providers in some of these markets where a lot of the private providers are actually tertiary hospital, providing the full range of specialist care. So they are very significant organizations in themselves. So it's very early days in terms of our -- looking at this as a market for patient flow, but we certainly feel very strongly that the challenges that we see in the regions that we currently operate in equally exist in that part of the world. A little bit more just for those who have not been across the acquisition of the Kyra flow products. It was a highly strategic acquisition for Alcidion. We closed this on the 29th of June. We are actively working with customers and transitioning them over to Alcidion environment and Alcidion support. It's highly complementary to our core business. From a customer's perspective, when we are known to bring deep industry and specialist product knowledge in flow, and we have the infrastructure in place to ensure a seamless customer transition -- and putting it simply, we're not stepping outside what we do. We're deepening our exposure to it in relation to this acquisition. It consolidates our leadership in the patient flow market across the ANZ region, particularly in that, it adds meaningful scale in Queensland, and that's a market where we've historically been underrepresented in terms of our position of flow. As I said at the outset, 31 new customers, including a mix of public and private in that across most states of Australia. And with the average top 10 customer relationship being about 10 years, it's immediately earnings accretive. If you look at the FY '26 forecast EBITDA of $1.1 million for that business, we acquired the business for an upfront EBITDA multiple of 2.7x -- 2.7. In our investing cash flows in the Appendix 4C, shareholders will note that the net completion payment was $1.5 million for the acquisition. And the payment reflects the upfront consideration of $3 million, less completion adjustments for a cash-free, debt-free transaction. So overall, this was a very positive result. And over time, we really definitely see an ability to create future opportunities for Miya Precision with the Kyra customers. And I think that's an excellent increase to the potential pipeline for FY '27 and beyond. If we look ahead at the outlook, given that we're now in July, we've got a high degree of confidence, obviously, in our FY '26 financial guidance. Therefore, we've given you the indication of where we expect revenue to land for the year at $51.6 million. Of course, that's subject to audit, but we're confident it will be in or around that number and continuing to commit, obviously, to the EBITDA being in excess of $5 million, and we will confirm that at the full year results. We enter FY '27 with really strong momentum across all our existing markets, and we're continuing to progress several opportunities. And important to note, we also have a very significant book of implementation revenue that carries over from FY '26 sales, and that's particularly associated with the deployments of the critical care component for Leidos, North Cumbria, and, of course, University Hospital Sussex. As I said, we'll give a full update on results at FY '26 full year results in later in August, including what the contracted revenue is when we start FY '27. Before I hand over to questions, I thought I'd just touch briefly on our role and how we see the AI landscape as it relates to Alcidion because it's obviously a question I get a lot of lately and a lot of people are talking about it. And there's 2 elements to that. Obviously, that's how we're using AI in our own business, and there is how we're using AI and deploying AI through Miya Precision. We're actively using it in our own business, and I think I've got a question later on that I'll unpack that a little bit more. But really important, at its core, Miya Precision is a horizontally integrated system of record. We ingest raw data from multiple input sources and store, analyze, standardize that data. And that provides an opportunity to deploy AI on a very highly regulated, but standardized set of data. And this is 1 of the challenges that health care is seeing at the moment with the deployment of AI, is it is a quite rightly risk-averse environment. It is an environment in which one has to be particularly careful about the use of AI. And of course, we're still evolving, I think, in terms of what the regulatory environment about the deployment of AI in health care will be. But we are firmly of the view that the evolution of AI in health care will need platforms such as Miya Precision to act as the AI gateway, so that these niche or particular AI algorithms can actually be deployed safely into a workflow where clinicians are not expected to go in and out of systems, which we know they firmly are resistant to doing. So we are excited with the way in which Alcidion is positioned to support the deployment of AI into health care. Thank you very much for your time today, and I'm happy at this point to take questions. I will stop sharing.

All right. I'll jump into the first question we've got here. So it's a question regarding the Canadian Armed Forces electronic health record platform procurement, noticing that Alcidion has been shortlisted amongst the qualified providers. Can you shed any light on what makes Alcidion stand out from other qualified SaaS providers when decisions regarding contract awards are expected to be announced and anything the company is able to share about the opportunity.

Thank you very much. As you can probably appreciate, any tender engagement with Armed Forces from any country has to be managed in a confidential manner. So there's not a great deal I can share about this. I do believe it is public knowledge that we have been shortlisted for this opportunity along with the 4 other vendors. The process is expected to take a number of years, and it already has been going for -- I don't know, Nick is actually leading this, but perhaps 12 or 18 months. And we would not expect any outcomes from the next phase, which is a more formal tender until earliest FY '28.

Thanks, Kate. Next question, an update about NALHN and prospects for expansion in South Australia would be appreciated.

Thank you. NALHN project has been extremely successful, and we are working with them on their Phase II optimization program. There's been a number of visits to NALHN from other local health networks in South Australia. Flinders University has been engaged by NALHN through the Digital Health CRC and they are close to completing a study similar to what we did at the Alfred and we very much look forward to sharing those results with you when published, which I believe won't be too far away. And we expect that to be closely watched by other local health networks in South Australia.

Next question, you referred to the fact that we had an AI question. So the next one, AI question, which is, what do you see as the role of AI in the business going forward? Is AI a threat to the business? Or is it an opportunity to improve productivity? I know you tackled some of this but is there anything else you want to add.

I talked a little bit about the opportunity for us. Absolutely, we see AI as a distinct opportunity. We are actively using it across all parts of our business. We started with a focus on engineering and product development, which has proven that it can deliver greater velocity and quality in our product outcomes. Like many businesses, we use tools to speed up searching and production of documents and preparation of things. And I doubt there'd probably be any member of the Alcidion who wasn't using AI in some manner. But the biggest impact, I think, we've seen has been the speed and quality of product production, and I expect that's only going to get better as models improve. So we certainly don't see it as a threat from a Miya Precision perspective. We think that we are incredibly well placed to position ourselves as the gateway for the deployment of AI safely into health care.

Next question is, when do you think Alcidion will no longer be required to report on a quarterly basis?

Look, I'm not sure this is a hard and fast rule, but I believe the standard expectation is 8 consecutive positive cash flow quarters. Now I'm not sure that's actually a rule, but it's sort of the benchmark. So let's see how the next few quarters go. And then no doubt, Matt will be making a case to the appropriate people as to whether we will be relieved of needing to do that.

Thanks. Okay. The next 1 is around UH Sussex, and I think just some clarity, Matt, you may want to jump in here around the revenue, but just clarifying in terms of the revenue booked for the quarter and how that is being recognized, I think it is. And if you could just discuss that in a little more detail, Matt.

Yes. So the question here is around the cash receipt from UH Sussex of just over $10 million. So look, it's a good observation. And what you need to remember when we're doing an Appendix 4C is all the cash flows -- the cash receipts and the cash flows we talk about include the VAT in the U.K., which is 20%. So the $10 million is not revenue, 20% of that goes to HMRC. And -- so that brings it down to about $8.5 million, $8.6 million, I think, and 100% of that wasn't booked in the year. So that's the reason those numbers don't tie up because we're mixing that inclusive numbers with the revenue.