Beamtree Holdings Limited (BMT) Earnings Call Transcript & Summary

Okay. I might start now. There's still a few people joining us, but we'll kick off. And nonetheless, there'll be plenty to talk about today and the opportunity for those that wish to ask questions also to ask questions. I'll take you through that procedure in a second. First of all, I'd just like to obviously thank the management team that are here today. I'll introduce those in a second as well as we've got the directors of the Board of Beamtree online today, too. Plus, we've obviously got Duane, the Founder of Potential(x), who is joining us today and he'll talk to a few of the slides today. Duane is the Founder of Potential(x), so I'm sure you're all keen to hear a bit from all of the team as we go through today. But let me just start the day by acknowledging the traditional custodians of the land on which we meet today and pay our respects to the elders, both past and present, extend that respect to the aboriginal Torres Strait Islanders people here today. With the welcome behind us, I'd like to just, first of all, let you know who's going to present today. We have Tim Kelsey, the CEO of Beamtree, who joined us back in December. And Tim's going to take us through some pretty exciting transformational steps that we've undertaken over the last -- not just the last week while the business has been finalizing this acquisition, but over the last 6 months as the business has been really starting to transition towards a fully serviced data analytics health care business. I've got Cassandra Chen, the CFO of the business, and she will take on some of the slides associated with the financial aspects of both the acquisition as also obviously the full year results, given we've just clicked through the 30th of June. Cheryl McCullagh is here. She is the Chief Strategy Officer of the company, and Cheryl will be talking to a number of the slides associated with those strategic moves and the rationale behind why we're doing certain things and bringing some of these important parts of the Beamtree story together. And as I said before, Duane will address some of the Potential(x) slides that -- for those that have just joined us, Duane is the Founder of Potential(x). And he's going to take us through exactly what that business is and what he sees, why it aligns in well with the Beamtree story. So lots to cover. We're going to try and cover it in 2 parts. We've got obviously the latest news, which is the acquisition that I'm sure a lot of people are interested to hear about. Then we've also got to cover off the full year results, some of the rationale behind the brand change, the name, the rationale and reasons behind that. We've also got a second acquisition we need to cover off, too, the Ainsoff acquisition, which Tim will talk to. So that was released as part of the full year results, a bit smaller but very strategic, nonetheless, than the current acquisition that we'll dive into today. But maybe I'll just touch on before I throw to Tim a little bit of the story behind Beamtree. We listed the company back in 2019. Obviously, we set out to grow both organically and via our acquisition the Beamtree business as it was known back then as PKS Holdings. The first acquisition was made back in April 2020, where PKS acquired a business called Pavilion. That's been a great success, and the integration is fully undertaken now and allows us now to move into this next acquisition that we'll go through today. We did raise capital back in February both towards the organic growth story but also to allow us to undertake these types of transformational acquisitions that we'll walk you through today. The important theme behind all these acquisitions is that we're not just throwing cash out the door. We are bringing businesses that are completely aligned to the strategy. And those participants, founders of those businesses are all joining by taking equity in the enlarged group. So fully aligned now with this acquisition and the other acquisitions I mentioned a second ago that are starting to really bring a business now with scale. On a pro forma basis, you've got a business now doing more than $20 million of revenue. And we think that, that now gives us the scale, together with the organic pipeline that Tim will talk to, to really continue to evolve this business into something quite significant over the next 6 to 12 months. So let me just throw at that point, as I lose my voice, to Tim and let Tim take you through the acquisition today. Thanks, Tim.

Well, thanks, Mike, and thanks to all attending. So as Mike says, we're going to present on the annual -- our record annual results, the acquisition of Ainsoff, an Australian AI and decision support pioneer; our new partnership with the University of Sydney; and the establishment of our Global Impact Committee. But first, I'm going to start with the very exciting acquisition of Potential(x), creating in Beamtree Australia's largest health analytics and innovation knowledge management platform. Cass, if you could go to the next slide. So Potential(x), for those who don't know, is an Australian pioneer in health data, which provides most large public and private hospitals with cutting-edge comparative analytics. It's best known for being a service provider to The Health Roundtable, which brings together more than 200 hospitals in a subscription-based outcomes improvement network. Potential(x) has a 26-year long history of improving the outcomes and value of health care for Australians and then for other communities in the world. The commercial rationale for this acquisition is unique and very compelling. The acquisition, as Mike mentioned, doubles the scale of Beamtree. But it's not just a financial rationale. It also transforms our data science and analytics capabilities. And on a pro forma basis, revenue grows to $20 million, of which 82% is recurring. The acquisition is about accelerating global growth, 2 very well-established and trusted Australian innovators serving the majority of hospital services in this country now accelerating their global growth. We already operate together in more than -- in 23 countries across 4 continents and now looking to more widely export our unique and proven services, which have demonstrated their impact on improving outcomes and efficiency. So in summary, this is a well-established Australian success story now set to rapidly expand its proven subscription software and data analytics services around the world. The acquisition is fully funded. The transaction structure is positive for our shareholders and increases Beamtree's pro forma FY '21 EBITDA by 86% with only 9.6% dilution to existing Beamtree shareholders. Duane, as Mike mentioned, will be joining Beamtree's executive team and becoming a substantial shareholder. Next slide, please, Cass. Just on this slide, the -- I'll just touch here quickly on Beamtree's FY '21 results, and we'll come back to that in more detail later when we go through annual report. But just to reflect that this financial year, we've reported a record 109% growth in revenue on a statutory basis, 21 -- 20%, sorry, year-on-year pro forma growth, 78% of that recurring revenue, ARR running at 15% growth year-on-year and 34% operational EBITDA in summary. The acquisition, as you can see from this slide, increases the quality and scale of our financial outlook. It increases the level of our recurring revenue to 86%. The company's combined ARR is $16.2 million. Next slide. And this slide just emphasizes the very high level of recurring revenue that both companies, in fact, report in FY '21. And that together, this increases the quality of Beamtree's revenues following acquisition. Just also on this, just to note quickly that we're obviously planning integration and implementation as we speak, but we'll be coming back to the AGM with more details of how, in fact, that integration will take place. Next slide, please, Cass. So just very quickly to remind those on this call about Beamtree itself, and we can discuss this a little bit further in the annual report presentation. But you'll obviously see the new brand, which we launched publicly last week. And for those who don't know, Beamtree is the name of a variety of pear tree, and it's also the name for a type of advanced data analytics. In that sense, it kind of combines science and nature, knowledge management and adoption to the real world in which we all live and its changing circumstances. Our name speaks to our global strategy and our mission to offer precision and authority in data and decision support for health services but also crucially to that sense of evolving partnership we have with our trusted partners in health care around the world. Beamtree today is solving real-world problems, improving quality, reducing waste. These problems, priorities emphasized very much by the pandemic, that's the COVID pandemic. Next slide, please. Beamtree already, of course, is a global company. We operate in more than -- well, in 22 countries currently across 4 continents with -- and have clients in more than 700 hospitals around the world. We had big wins this year, the largest of which was in Saudi Arabia, where we have a team on the ground currently auditing all public hospitals in the Kingdom to support them in improving the quality of their data and health services use of it. The key focus of this acquisition is to accelerate that global opportunity in Europe, the Middle East and in Asia Pacific by being the best-in-class provider of cutting-edge analytics and AI decision support. Cass, next slide. So the learning health system. So our objective as Beamtree is to provide an enterprise-wide knowledge management platform that supports that learning health system, from data inception to frontline clinical decision-making. Next slide. And here to remind you are our products, which we can come back to in the report -- the results presentation, but just to make the point that these are very complementary to the services that Potential(x) offers. And I would just quickly bring your attention to new services which we're bringing to market this year. So our new insights platform, offering real-time analysis and benchmarking of key aspects of hospital performance, clinical and financial; and our new global comparators program, offering hospitals around the world access to field-leading data services. Also to note here, the new products that we'll be promoting after the acquisition of Ainsoff that add great value to our RippleDown decision-making platform. Together, Potential(x) and Beamtree already serve most public and private hospitals in Australia. And now we can exploit synergies between us so that we can support Potential(x)'s client group with access not only to their outstanding data analytics but also to our real-time software services. And with that, I'm going to hand over to Duane Attree, CEO of Potential(x), to take us through the Potential(x) story. Thanks, Duane.

Thanks, Tim, and good morning, everybody. Can I also pay my respects to the First Nations people of Australia and of New Zealand, where we have a large footprint, and pay my respects to elders past, present and emerging. It's terrific to be here, and it's a very exciting moment for myself, the shareholders and everyone associated with Potential(x). Just to introduce to everyone, I've been in the health industry for over 20 years and have qualifications in health informatics, business marketing and leadership. And my career has traversed a broad sector of health insurance, executive roles in the New South Wales and Victorian hospital sector and advisory leadership roles with PwC, KPMG and DuPont. As Mike said, I've been with Potential(x) and founded the business in order to undertake a management buyout of its predecessor, Chappell Dean. And I really want to acknowledge the legacy of David Dean, who's been very influential throughout our history and the history of The Health Roundtable. And next slide, please, Cass. The Potential(x) business is fairly unique. Our primary model is to partner or co-create by industry for industry collaborations. The most prominent of these is the one that underpins our history the most, which is a 26-year partnership with The Health Roundtable, and I'll introduce that shortly. These collaborations focus on improving service delivery, quality, workforce well-being and patient experience. And we bring together data insights and communities of practice to share benchmarks, to learn and to collaborate on proven innovations that make a difference to service delivery. Our end users typically include C-suite executives, quality improvement, clinical leaders and operational managers, where we provide a range of leading analytical modules, benchmarks and networking forums that support clients with their regulatory compliance, continuous improvement and staff development. Next slide, please, Cass. As I mentioned, our core partnerships cover 3 segments of the health and human service sector. We deliver bespoke benchmarking for the private hospital segment through partnerships with the APHA and Catholic Negotiating Alliance. We have a long-standing collaboration with Ability First Australia and the Ability Roundtable, which has a membership from the major NDIS providers across Australia. And our foundational and foremost is a long history as the service partner for The Health Roundtable, where we've deployed the vast majority of our products and analytical tools. As you can see, the bulk of these partnerships have a long tenure, and that speaks to a level of trust and stewardship that we feel with our clients. We think this goes to an ethos and a purpose which we know that Beamtree shares, which is to make a difference. And we're really excited to share this across the globe, as Tim said. Next slide, please. Just to touch a little bit on our products. As you can see, they sort of cover the vast majority of service aspects for each of our partners. And we also have a data acquisition platform called Activity BarCoding, which is deployed to about 2,500 users across both Australia and New Zealand. Next slide, please, Cass. Just to briefly touch on The Health Roundtable partnership, which underpins a lot of what we do as Potential(x). It's a pioneering and membership-based organization. It was established in 1995 with the preeminent Royal hospitals from around Australia and New Zealand. Over its history, The Health Roundtable has steadily grown, and it now has participation from over 200 hospitals in Australia, New Zealand and the UAE. We've recently renewed our contract to a 5 plus 5-year term, and we support the Board to deliver all aspects of the business, from member support, the analytical and solution products to members under a subscription model. Thanks, Cass. Next slide. Both myself and the Potential(x) executive team are really excited to be joining with Beamtree today. As you can see from their backgrounds, we have a combination of extensive industry and commercial experience and some deep skill and understanding of data science, informatics and technology. As Tim said, we see an amazing combination for those skill sets, quite complementary to Beamtree's extensive software, clinical coding, AI and technology teams. And I know for a fact that my team of data scientists can't wait to get in and work with the software team within Beamtree. Our financial performance shows some solid growth trending over the last few years, and we've delivered this through expanding our product suite. We've invested heavily in digital transformation, and we've expanded our footprint into new territories. And as Tim said, while Beamtree have been terrifically successful in Saudi Arabia, we also, in the last few months, have signed an agreement in Saudi Arabia. So you see, this fits really well with the international growth plans of both companies. Delivers great results, our annual recurring revenue and client retention really underpin that stewardship and financial success. And we've typically reinvested that back into the business and paid off debt. So we're really thrilled that this takes us to the next level. Just to finish off, we really believe that this partnership is a wonderful opportunity. We're really excited for our people and for our clients to see this shared vision of an empowered and learning health and human service system. Thanks, Tim.

Thanks, Duane. Thank you very much. So moving then on to the strategic rationale for this acquisition partnership. This -- we've covered a lot of this already on this slide, but I just want to, in a way, just ask you to think for a moment of the following, that we take all the capabilities and expertise that Potential(x) has developed in data analytics and improvement networks and combine that with the deep expertise Beamtree has in the automation of data quality and decision support and building on our existing international foundations to become the world's most trusted health outcomes improvement platform, just as we already are in Australia. That, in a nutshell, is the rationale for this acquisition. Next slide, Cass.

Tim, might just I interrupt up for one second? One thing I did mention at the start, but I can see some good Q&A starting to come through, that if anyone does have questions, please, there's a little button there. [Operator Instructions] There's a few good questions there. What we'll do is we'll just tidy up this presentation now, and we'll come back to those questions and allow both Tim, Duane, Cass or Cheryl to address each question. But just so you know, the Q&A button is there.

Yes. Thanks, Mike. So this, just to -- this slide, just to make the point that the acquisition is -- empowers our -- the growth strategy we launched back in February at the time of the capital raise in every respect. And I'm going to hand it now to Cheryl, our Chief Strategy Officer, just to take us through some of the highlights of the way in which we're currently implementing the growth strategy. Before I do that, just to say that it was a tremendous privilege, really, an honor, that -- when Cheryl agreed to join the team back in March. She has a very distinguished history in public health services in Australia and most recently was the Chief Executive of the Sydney Children's Hospital Network. So I will hand over to Cheryl just to take us through aspects of the growth strategy. Thanks.

Thanks, Tim. So as Tim said, I've worked in health for more than 30 years and the last 15 of that as a health executive. And I really do understand the importance of data backing good decision-making. And at Beamtree, we're really empowering our services -- health services to examine that data in a targeted way to focus their attention on what really matters to avoid the noise and get down to the detail of what's actionable. And I think Potential(x) and Beamtree together are really aligned in that strategy, to turn data that's already available to us into insight for good decisions and, wherever possible, extending automation to smooth out health processes, supporting health delivery, activity monitoring and management and planning. And with more than 2 decades of experience between these 2 companies of supporting health services, we've got this great opportunity to sort of combine our strengths. And together, those existing capabilities, both in clinical record coding and classification and the tools that we have in clinical -- in decision support rule writing, we have the opportunity to drive rapid progression to support the automation of the health coding process, which is so important to planning and funding our health services but also improving data quality and driving better health understanding and patient outcomes. So we're really excited about this endeavor, and it's something that people in health really want. And we additionally kind of understand the analytics of health data from different angles. But we both have great skills in quality, the safety and niche areas like pathology medications and outcomes reporting. And we're already operating in global markets with this sort of expansion potential. We've got unique products with crossover, different global footprints that will help us engage with new customers. And we have this experience of creating special interest groups for technical specialty and educational support, developing thought leadership and research and publishing that. And this is shared and valued through the health sector, both in Australia and internationally. And our tools are really ready to support more targeted analytics at the specialty peer and patient level to pursue personalizing our responses to health data at different levels. And I feel philosophically, we're really aligned with this strong public service mission to improve the quality, safety and efficiency of health services wherever possible, supporting the data that's already available to us to further our health planning and efficiency for better patient care. Next slide, thanks, Cass. So together, we've got secure recurring revenue and cross-market expansion, but we have discussed extensively the risks and opportunities of coming together. And everything we've looked at is absolutely weighed out by the benefit and possibility of the combined talent and customer loyalty that we've built over decades. So many of the people inside our company have already known each other and worked in collaborative and different endeavors over the years. We're all focused on addressing new and emerging issues of risk in health through better analytics. And combining gives us the chance to share resources in customer service, security, regulation and new endeavors, creating a stronger collective growth potential and this aligned mission to improve service outcome and also working on that sort of real transformational and increasing automation through the quality use of information for, we think, the entire global community. So thanks, Tim. Back to you.

Tim, there's a few good questions here, and maybe we might just pick off a few of those, conscious that we don't want to just take on lots of questions and not address them, given I said you should do that. The first -- maybe I'll just throw a few questions out to the team. The first question really talks to the Ainsoff acquisition. So we might come back to that one in terms of what does Ainsoff bring to the RippleDown product suite. So we will definitely get to that. I'll allow Tim to take you through exactly all the great things about why we did the Ainsoff acquisition. Duane, there might be a couple here for you on Potential(x), just a couple of people trying to understand that better. The first question was really driving towards the gross margin that you generate from Potential(x), whereas a software -- typical software SaaS-based margin might be in the 80%, sometimes 90%, and your margin is 66%. So the question really is trying to get to what -- give us an example of how Potential(x) interacts with its clients and why it drives that type of margin.

Sure. Thanks. So under the 3 kind of core partnerships that we have, first and foremost, it is a subscription-based model. So we are seeking commitments from clients typically under the branding of that partnership. So sometimes we do go to market as Potential(x), but we typically go to market together through those collaborations. The products itself are very modular. So they're very much about the context within which the audience exists, so whether that's disability or hospitals. We develop those dashboards and analytics in a co-design model with our clients, and I think that goes to a little bit of that retention and trust that we have. So for example, we recently have developed community mental health dashboards. And so we bring together the problem custodians, people from within the sector, and we speak to their data challenges, so their quality, their source systems and extracting information as well as the sorts of problems and improvement hypotheses that they have or that they want to target and the evidence that they need. So we build the dashboards that provide that insight. And part of our platform allows for the workflow to then -- to be shared across a collaboration within a client's site. So typically, that might be at a hospital level producing a national standard, key performance indicators report in line with the various accreditation standards and then producing benchmarks such that a single facility can see how it compares to its peers, how it compares to a broader industry and also increasingly how they compare to predictive and machine learning models that are starting to become far more adopted within our system. So the product is modular. It is a combination of analytical tools in online platforms, together with networking and events that bring the humans together. And the common language is that data and analytics so that they can share and learn both at a problem level and at an evidence-based solution level. So I guess that probably goes a little bit, Mike, to the margins. They're not quite software. It combines a range of subscription product suites.

Yes. No, I think that addresses it. And it probably addressed a couple of the other questions here, too, about a couple of examples of how clients actually use Potential(x). There's one here that asks a little bit about, did you have a big year because of COVID, which I think I know the answer, but I'll let you answer that.

Yes. No, we took a very deliberate approach last year to emerge better. So while we did produce some COVID analytics, we really knuckled down, and our theme for the year was to emerge better. So we're trying very much to support our clients. They were clearly dealing with far more important issues and serving us all, I think, as a community. So COVID, from a growth perspective, didn't have a huge impact. And so we're looking for that to occur once we get out of the current situation and into the new normal.

Yes. The next question, I'm going to probably throw it to Tim, and really, I think, goes to the core of the integration and strategy as to why we acquired the business in the first place. We're talking here about the synergies. But there's a query here on both revenue and cost, and I think I'll just say something on cost. And that is whenever you bring 2 businesses of similar size together, there's always cost benefits, but it's not necessarily cost that you take out of businesses. It's cost that you would have otherwise perhaps invested into the core business before the acquisition came along. So there's definitely going to be benefits of scale here that we can derive from the OpEx of both businesses coming together. But I think the bigger picture here is about the revenue synergies and the potential road map of bringing all these customers under one roof and then offering them the software products that Beamtree has from the original part of the business. But Tim, do you want to expand on that a touch?

Yes. I think Cheryl touched on it a bit, but let me just flesh it out. So I think the synergies are really important in revenue terms, and we can break them down into a number of key areas. So one is to do with the ability of both organizations bringing together the different and complementary capabilities and experience to drive automation of coding services. That's a really important transformational area for medicine, in my view, is that automation of coding, which is the process by which the clinical record is turned into administered data that we use for billing or for analytics. That process, currently manual, is very costly and sometimes inefficient and introduces error into data sets. We -- automation should solve most of those problems, and we believe we have a very strong offer to really rapidly scale into that emerging opportunity. As I said, my view is that over the next decade, that will be the most important technology transformation in health care around the world. The second, obviously, area to point out just in terms of revenue synergy is around the global growth of benchmarking services. Duane's talked about Health Roundtable. Let's imagine Health Roundtable as a global phenomenon. Already, he's got hospitals in Abu Dhabi participating, but we believe we can grow that much, much more quickly across the world, utilizing, again, the synergistic capabilities that both businesses bring together. So just some -- a couple of examples which hopefully can bring it to life for people.

Yes. We've got another good question here for Duane. Where Duane has now taken us through some examples of how Potential(x) works with its customers, the question then throws it back to Duane to say, "How do you think BMT can help you expand your own business?" So in other words, why do you see the synergy between bringing your business under the umbrella of the Beamtree organization?

Thanks, Mike. Great question. And I guess I'm very much about purpose and value. So that was a really important consideration for us was we want to make a difference, and that is absolutely shared by Beamtree. So that was an important part of the consideration for us. At a real practical level, we have a real depth and long history with data science, algorithm development, benchmarking, health data. We have had and have a very small but underresourced software and development capability. And clearly, that's a real strength of Beamtree. And that's something that we see as a real opportunity and have plans as part of our strategy to grow into that space. And so the complementary nature of the team that Tim and Cheryl and the Pavilion and PKS combination for us is really exciting. We have, over the last few years, been quite heavily investing in machine learning and artificial intelligence. And again, the RippleDown technology and its underlying IP for us was a real beacon for us of attraction to this opportunity. So it really is in that combination of software, the underlying IP that Beamtree has in its legacy and all of the analytical and science capabilities that we think we can complement those 2 parts together. This is, for us, a great accelerant and a great opportunity for the 2 organizations.

Okay. Maybe just a couple more, and then we'll move on with the rest of the presentation. But there's a question here that talks to the percentage of ARR associated with a subscription-based business versus a SaaS-based business. I think the financial table pretty clearly showed what the SaaS-based licensing revenue was that Potential(x) generates, and that's line by line associated back to the Beamtree core business prior to the acquisition. But I think just to try and touch on, maybe just how -- Duane, how the members of The Health Roundtable and other partnerships that you have come together pay their subscriptions to get access to this data analytics platform is perhaps the real answer there, if you want to touch on that.