Beamtree Holdings Limited (BMT) Earnings Call Transcript & Summary

Right. Thank you all for attending. This is the annual results briefing from Beamtree. My name is Tim Kelsey. I'm the Chief Executive Officer of Beamtree, and I'll be joined by my colleague Mark McLellan, who's the Chief Financial Officer and Chief Operations Officer for the company in running through these results. There is a facility for questions. We have, I think, 30 minutes scheduled, but we can run on a few minutes after that, if we do have questions from participants. If you were able to put those questions in the Q&A box, then we will monitor those and go through those in order at the end of the briefing. I would like to start by acknowledging the traditional owners of the various lands on which we meet and pay my respects to elders past, present and emerging. So if I could just start by basically just saying that we feel we've had a very strong year this year. FY '24 has been a record year actually in terms of our overall performance, both in terms of annual recurring revenue and profit. We reported a 20% growth in reported revenue, 21% growth in reported revenue over the year. And importantly, 47% of that growth was driven by international revenues. You may be aware, certainly it's been a key part of our strategy for the last 18 months or so that a real focus on driving growth in international markets, particularly in the U.K., Canada and Saudi Arabia, whilst, of course, we continue to develop the opportunity in Australia and New Zealand. And what we've seen from a revenue perspective really this year is a step change in the size and scale of those ARR contracts that we are being awarded. We have had a string of wins, which have been much more significant than we had historically, reflecting the value of the products we're producing across all our markets. And just in a general sense, just pulling back a little step -- and what we really see and what we've seen confirmed in FY '24, and we look forward to confirming further in FY '25 is the way in which we believe Beamtree is perfectly positioned to give to our clients all the benefits of emerging technologies, particularly new artificial intelligence applications to solve really core business and clinical problems in health care from a perspective -- from the relationship we have with those clients of deep trust and with our deep expertise in the areas of our operations. So in a way, just capturing the opportunity that sits before us with application of these new technologies. Another feature, I think, just to report in overall terms for the year has been a very deep level of partnership that we've been continuing to develop with distribution partners across the world, particularly including Lean and Abbott and we'll come back to those in a minute. Another key feature just to -- also on the highlights page to bring to your attention is the fact that we not only delivered operating profit over the year, but we also ended the year on a cash flow breakeven basis, with a very healthy cash balance at the year-end. So just a quick review there of the overall highlights of the year. Next slide, please. Annual recurring revenue has been growing consistently since FY '22. And that was really since we invested -- we did our original capital raise and invested in growth in both go-to-market capabilities and products over that period. What we've seen ever since has been a steady increase in the level of recurring revenue again, reflecting the value of the products and they're a boost to deliver real measurable impact on efficiencies, financial efficiencies as well as clinical quality and health services. Next slide, please. So this is just a very quick review of some of the kind of commercial highlights, trading highlights from the year. As I mentioned, we've done a lot of work to really deepen our partnerships with clients in the core international geographies in which we've been operating. We've announced a number of key wins in those markets. We've also been working to mature the relationships with our distribution partners with Abbott and Lean, in particular, Lean, of course, in Saudi Arabia, the country's leading technology enterprise, part of the Ministry of Health. Though we've also been really focused in FY '24 and continue to absolutely to be focused on this in the coming year on -- is that essentially cross-selling to our existing client base. Improving pricing, we inherited in a number of products, legacy pricing from -- which haven't really been looked at for some years. But with our ability to demonstrate serious ROI return for clients, people have been -- we've been able to increase pricing to a sort of level which is equitable in relation to the ROI that's being received by the customer. And we've also made very significant investments over the year in product development. So just to call out a couple of those things. We've invested significantly in our coding services, partly funded by Lean in Saudi Arabia to develop now a world-class platform that will support the manual process of clinical record classification. And we've also developed a more novel application of RippleDown to actually allow for autonomous coding. That is the coding of clinical records without the need for human intervention using AI approaches. And we've, in the course of FY '24, run 3 trials for that new technology in New Zealand, Australia and the United Kingdom, which have reported very high levels of accuracy. In fact, roughly speaking, about 60% of activity that we have being -- we've submitted as it works, the artificial intelligence has been coded with 100% accuracy and this offers transformational potential for both costs and quality at hospital services around the world. So we're very excited by that development and expect to see significant growth in those services over the course of the coming year. We also invested significantly in the digital platform for The Health Roundtable in Australia. So this is within our knowledge networks division. We have elevated the ability of members. There are about 200 hospitals in Australia and New Zealand that participate in what is probably the world's largest certainly leading collaborative network of health services in sharing data and improving performance and clinical outcomes as a result. This digital platform with which we co-invested with the Board of the client, The Health Roundtable and enables for the first time some very modern, contemporary user experience opportunities and the ability to kind of customize feeds of data to almost any local requirements. So a very exciting development for The Health Roundtable. And that platform also allows us to expand and export the knowledge of that service into other domains. So we are launching a program in England with the NHS Confederation to set up a local NHS knowledge network, leveraging the technology that we've developed in Australia. And similarly, we'll be able to and are developing approaches for the aged care community in Australia, again using the same platform opportunity. So just some highlights there of our product development investments. And they're in the slide, a bit more detail on some of the more specific contract wins and some of the other highlights for the year. So next slide, please, Mark. Mark, I think you're going to talk to this.

Yes, I'm going to talk. Good morning, everybody. This is a slide I think we've shown over the last 18 months showing that our long-term target of $60 million of ARR. The key message I want to leave with you is that we reaffirming that $60 million target, the work that we've undertaken in FY '24 to build the pipeline across all the segments allows us to reaffirm that $60 million conviction. I think the main change over the last 12 months has been the opportunities that have been developing in the coding side of the business, particularly in the near term in Saudi Arabia and around the integrated cooling platform that we've invested in, in FY '24. I think the other sort of key messages are the partnerships that we have with Lean in Saudi and then Abbott globally with the diagnostic product. We're starting to get some momentum as also those will drive that growth going forward. And the other key thing is around the growth we expect, 70% of growth to come from international market. And we've actually seen that in FY '24 with the international growth driving 70% of our growth in FY '24. So confirming the $60 million target still holds and the sales pipeline supports that long-term target.

Thanks, Mark. So we thought we might just quickly deep dive into the products and particularly with the focus on the coding services. I mentioned just briefly some of those already, but just a little bit more of a deep dive into those. So just to remind everybody, Beamtree is a company that is using AI and analytic technology to solve some very basic problems in modern health care, particularly waste. So our technology essentially reduces the cost of services and reduces that inefficiency. Of course, it also improves the clinical outcomes for patients but a very material issue as health services around the world face varied testing, fiscal constraint is the way in which technology can through automation and through analytics, actually reduce the cost of labor and reduce the expense of service delivery, so just a quick overview there. Next slide, please. We are -- the way we think about the Beamtree platform, and this is how we think about the cross-sell to clients. We have -- we're on average at the moment, we are -- to our major clients, we are selling 2.4 products already. We intend to get that up to over 3 during the course of this financial year. So people are already buying into multiple facets of this -- of the Learning Health System platform as we consider it. And that really has 3 elements with a number of sub products across those elements, but 3 core elements to the Learning Health System and the Beamtree platform as a whole. The first of those is data quality. So focusing our AI on the -- its ability to automate the process of clinical record coding, both supporting the very expert and increasingly scarce human resource that is undertaking coding activity at hospitals. And just to remind those you may not be familiar with this process. The act of coding is the act to conversion of a written or documented clinical record on a paper basis or electronically, into a set of rigorously defined classifications, which are used then for financial reimbursement and for quality analysis. So fundamentally, all we really know about hospitals and all we know about their economic standing is based on this process of what's called coding or classification. At the moment, the world faces a very serious shortage of people qualified to undertake that process. And it also is an inherently expensive process to undertake. For various reasons, additionally, there are errors that are caused during the process of coding, which can have a material effect on the financial health of both individual hospitals and broader health systems. Beamtree has globally renowned expertise in the audit cycle and sort of the understanding how best to support systems to improve the quality of that coding process. So in that space, we have technologies, which I'm going to come to a little bit later, which support, as I say, both the human coding process and now more recently, the actual automatic process or autonomous -- of autonomous coding as we call it. The second element of Beamtree Learning Health System relates to comparative data analytics. And so the hypothesis which clients are buying into is that if you've got good data, and that data is trusted by the clinical community in particular, then you can use it with effects for comparative benchmarking. And in health care, like other industries, the ability to peer review your performance against others is fundamental to the ability to both understand where [ good ] is and drive your trajectory for improvement, again, both for clinical and financial purposes. So this issue of benchmarking as -- we run, as I mentioned, The Health Roundtable in Australia, really the world's premier collaborative benchmarking group, and we are now beginning to look at other markets for establishment of similar programs. The United Kingdom will be the first of those. We also have the privilege of serving The Ability Roundtable in Australia, which is a group of providers who are serving the disability community. And that's another example of the way in which this active peer review and benchmarking can serve a much broader constituency of providers in health and social care than just hospitals. And for that reason, we're developing approaches now for the aged care community, in particular, in Australia. The third element of the Learning Health System relates -- you've got good data, you have data that, therefore, can be used for benchmarking. During the course of that comparison, you'll identify areas of variation. And that equity -- the reduction in unwarranted variation is a key focus for health services around the world for which ideally you will have decision support and we have a unique platform, RippleDown, a technology which has very proven credentials in improving the quality of decision-making at the clinical front line, has been used for many years in pathology and is now being used more broadly across the hospital. We launched a couple of years ago a new product, which -- an AI product, which supports one user case in relation to decision support to predict the future risk of a patient's deterioration in the hospital, an area of acute focus for providers internationally. And that product, we call that the Ainsoff Deterioration Index has now been through clinical trial, has had 2 publications in international journals and is now being -- in financial year '24 is being implemented in Australia and Hong Kong and will shortly be initially implemented in the United Kingdom. This follows evidence that the application of this particular decision support algorithm is having really material impact not only on reducing adverse events or harm to patients in hospitals because doctors are able to intervene more quickly with them before an event of deterioration occurs, but also, in fact, reducing the length of stay, the index of time they stay in the hospital, a very important economic efficiency driver. So we're looking forward to some considerable success with that product. But if I can just move forward and just quickly deep dive into the coding space. I'll just quickly give you a quick sense of -- these slides obviously are available for review subsequently. But just if I can go to the next slide, actually, Mark. The next one after that, sorry. Yes. So this just gives a quick visual overview of what we're doing with coding. So at the moment, we are -- we have our product PICQ, P-I-C-Q, is used to automatically audit the quality of coded data in hospitals. Around the world, we run international health system data quality services in Ireland, for example, as well as doing so very widely in Australia and New Zealand. And we are now about to start -- we've won our first national contract in Saudi Arabia to provide the same service and we expect other contracts both there in the U.K. and in Canada. In both the U.K. and Canada, we're now using PICQ technology to do an initial audit of hospitals in those countries with a view to move towards recurrent subscription to software relatively shortly, actually. But the developments we've made in FY '24 go beyond PICQ. They -- in the first instance, they work into what's called the assisted coding pathway. So a platform that supports the entire process of human classification of clinical records. We call that the Integrated Coding Platform, and that is being launched in Saudi Arabia as the first market in this financial year. We will be tweaking it for application in Australia and in England, also during the course of this financial year and in Canada. So expect that the Integrated Coding Platform supporting the full flow of coding process across the human pathway will be in-market during the course of this financial year. But in addition, the world is demanding that at least some of the workload of the human coders is taken from them and mechanically resolved. And so we've developed using RippleDown an approach to autonomous coding, essentially the automation of the coding process without the need for human intervention. And as I said earlier, we've had some considerable success in initial trials and are now anticipating rolling that out. And again, reference site environments in Australia and the United Kingdom initially during the course of this financial year. So just a quick overview of some of the work we're doing in coding, opening up new market opportunities for us and new value opportunities with clients in those countries. Thank you, Mark. So again, we could just review that. I've probably covered those points in my previous remarks. But our focus remains on those countries. And this gives you a bit more of an overview of the international expansion. So I will now hand over to Mark just to run through the financial results. Thank you.

Thanks Tim. This slide shows you to summarized profit and loss. So I'm just going to run through the highlights of what's shown on this page. In terms of annual recurring revenue, it grew by 12%, about $3 million. I think given our $60 million target, we have therefore forecasting an acceleration in the growth of our ARR going into '25 and '26. And on as I said previously, that's driven off the work we've done in FY '24 and really building up the sales pipeline and the product offering across all our segments. Running down this P&L, you've got the revenue broken down the first -- by the first time by each segment. So that's a new disclosure that we've provided to the market. It shows the revenue split between the 4 segments. So revenue grew 21% year-on-year. And you can see sort of the main drivers of that, the growth in the revenue is about just under $5 million, coding was about 2/3 of that growth, so coding went from 5.2 to 8.4. I would say that the revenue numbers for each segment include recurring and normal recurring revenue. [ It ] was recurring about 85% overall revenue. The coding grew by, as said, 2/3 of the growth was from coding. That was Saudi, it was Canada and also the ANZ also off main market or domestic market where we introduced some pricing uplifts during FY '24. So a strong performance from a revenue perspective. On the cost front, costs went up 12% year-on-year, 80% of that cost increase was really around people costs and the sort of main driver of that cost. The overall sort of number of full-time people we have in the business hasn't really changed year-on-year. We've brought in contractors to help us with nonrecurring projects to deliver those with a view of trying to achieve recurring revenue sales off the back of that. So most of that increase in people costs has been from short-term contractors. Overall profitability improved by 129% year-on-year. Our reported EBITDA, which I'll come on to in a later slide, that went from 1.2 to a loss to 0.5. Depreciation and amortization, I'd like to call out that's 5.4. So it was last year, it was 4.9, 5.4. About half of that relates to assets that we were acquired with Potential(x) in September 2021. So we're amortizing those over 5 years. That's acquired software and a customer list. So that's about half of that cost, and that will be fully amortized by September 2026. So that P&L will look quite different in FY '26 and '27. Overall, the profitability went from 6.9 loss to 5.1 loss. From a revenue perspective, we took 5 years of very strong growth. Some of it's been underpinned by M&A. But the top half shows you the trend in organic growth. So we continue to increase the level of organic growth year-on-year. If you look at the bar chart, you can see the sort of light purple is the international revenue and the dark is Australian revenue. About 80 -- certainly, almost 2/3 of the growth has come from international. So that's the Saudi, Canada work that Tim referred to. But we still believe there's still growth in the domestic market, which went 15.5 to 16.9. And we feel there's -- with the investments in our product, particularly around RippleDown and the coding and the knowledge network that there is still significant growth in both the domestic market and international market. From a cost perspective, again, we want to show the sort of track record on costs. In FY '22, there was a conscious decision by Board to invest in selling Australian IP globally. So there's a significant investment into the business tied with acquisitions as well. In the last 2 years in FY '23 and FY '24, we sought to work within that cost envelope, really sort of managing the costs very closely in order to continue to drive the 20% growth in revenue. In terms of the short shape of that cost base, it is -- 70-odd percent is employment and the 28% is nonemployment. We sort of start to see some leverage in the nonemployment space with that growing 9% versus the 14% employees. So there is a strong revenue growth and managing our cost base has allowed us to improve the profitability. On the left-hand side, you can see the year-on-year trend over the last 3 years. So it's gone from a $4 million loss to a $400,000 profit in FY '24, so that's a significant success for the business while also growing at double digit. And then you can see on the right-hand side in the second half and that trend in the second half going from a $2.6 million loss 2 years ago to our $1 million profit in -- in the second half of FY '24. From a reported EBITDA perspective, it's a similar trend where we went from a $2.3 million loss to $0.5 million loss in FY '24. We expect that to tip into profitability in FY '25. On the right-hand side is a reconciliation from operating profit to reported EBITDA that takes you -- if I look at FY '24, it takes you from a $400,000 operating profit to $0.5 million loss. There's a number of [ reconcile items ]. The big one I'd call out is share-based payment expense. That's about $1.2 million of the loss. That number in FY '24 is somewhat elevated by -- to the tune of about $300,000, really driven by some LTI issuance at the end of FY '23, which relates to FY '23, but the costs were spread mainly in FY '24, but only 1 month in FY '23, so there is -- that's, as I said, somewhat elevated in FY '24. So we expect that cost to be lower in FY '25. From a balance sheet perspective, a reasonably straightforward balance sheet. I think the key thing to call out is the strong cash position and I'll talk on to cash in the next slide. But again, we go into FY '25 with a strong cash position of $5 million. We've got trade and receivables of 6.3. We don't have an issue around recoverability of our debt. We are receiving cash from our international clients, some in the second half and continue for that to happen in FY '25. So that's a positive trend. The other things that happened in our balance sheet, we signed a 5-year lease for our new offices in Sydney. So that has gone on to our balance sheet for the right-of-use assets and the lease liabilities. That's what's changed there. And then the final one I'd call out is we had deferred shares of deferred consideration on our balance sheet at the end of FY '23, they've been paid out during FY '24, so somewhat cleans up our balance sheet. So we get that strong balance sheet going into FY '25. Cash flow, Tim has alluded to this. We had a very strong second half from a cash flow. We started the calendar year at $5.1 million, and we ended in June at $5 million. So broadly cash flow breakeven for the second half. That was aided by some receipts from some of our international clients. So it was an outflow of $2.3 million in the first half versus an inflow of $1.8 million in the second half. That was one of the major contributing factors that was around receipting from some of our international clients. The other thing I'd call out from a cash flow perspective is the investment we continue to make into our products. So that's in the line payments for intangibles where we're investing in our products. That has again been elevated, which I called out last year that it went from 2.5 to 4. That was driven by 2 major projects. One was the data platform upgrade in our Health Roundtable business, which is a one-off project in FY '24 and the [indiscernible] investment into the integrated coding platform funded -- partially funded by our Saudi partners, Lean. So that's why we spend $4 million of products in FY '24. I expect that number to fall below $3 million in FY '25. So it's a one-off uplift in '24. So that's the sort of -- the final position is around a $5 million cash base going into FY '25. We are looking to deliver a cash flow breakeven in FY '25. So we did not have any to -- any more cash in the business. Tim, I'm going to hand over to you to talk about the FY '25 outlook.

Yes. And just to take one of the questions we've had, please, if you do have any questions, feel free to put them into the Q&A box. So one of those, what's the estimated cash position at June 30, 2025? So as Mark said, we will be delivering a cash flow breakeven year in 2025, just to answer that question. The FY '25, we remain extremely positive about the outlook both towards the $60 million by the end of 2026. As Mark says, that implies a significant acceleration in any recurrent revenue delivery during the course of FY '25. What I would say, as we've been saying historically is that health care has a long sales cycle. So you must see this program of getting to $60 million and beyond as something that's a long-term project that we started back in 2022. So we've been developing a pipeline, which is now absolutely unprecedented levels across all segments of the business and the job between now and the end of '26 is execution of that pipeline. But it did take us a while to develop the original pipeline to the level it's got to today. So we're very confident about what is indeed a kind of hockey stick trajectory for ARR delivery over '25 and '26, based on the fact that we're harvesting a pipeline that's been developed, has been into procurement in many cases, has been through the sort of initial phases already. So I have good confidence about that number. And as we move beyond it, of course -- in a way, it's an artificial target, but we move beyond it towards subsequent years in which we expect to continue that trajectory of high growth in ARR. We are also obviously confident about implicitly, obviously, explicitly, really about revenue growth in FY '25, being significantly above 20%. And we are also delivering profitability across the year as well. Just in terms of some geographic highlights, bringing up the cross-selling pricing strategy that we've had real success in delivery of in Australia and New Zealand during the course of '24. We continue with in '25. And actually, we expect to see some significant growth in Australia and New Zealand with new products like some of the ones I've mentioned, are already attracting considerable interest in the markets here. Saudi Arabia, I mentioned we're launching our new integrated coding platform there later this year. We don't expect sales to be dramatic or very, very quick, but we do believe we will have some important sort of initial market making sales during the course of FY '25 in Saudi Arabia. U.K. a very important market for us. It's all the issues that we're familiar with in relation to waste and efficiency calls through coding or poor analytics and so on are very much present in the NHS and significant demand for our services there. So expect to see some growth during the course of FY '25. And likewise, in Canada, where we've seen some significant quite rapid demand actually for coding services initially and now beginning to expand into other areas of our portfolio. So just to give you a quick sense of that. So that finishes our formal presentation.

We're probably at time. We might have a few minutes for a couple of extra questions. And I'm just looking at one from Christian from Blue Ocean. Could you just clarify, do you mean you will reach cash flow breakeven during the period or the annual cash flow should be positive? Mark?

So Christian, what we mean by is we will reach cash flow breakeven during the period rather than be cash flow positive through the whole of FY '25.

And Christian, obviously, we reached cash flow breakeven at the end of the last financial year as well. So continuing to invest whilst we grow. Those, I think, were the questions we had so far. I've answered one other in the course of the narrative. I just gave on the outlook there. If anybody else has any questions. Otherwise, I'll bring the meeting to a conclusion. Great. Well, I'll assume then that people don't have any further questions. If you do, of course, feel free to reach out to us. Thank you again for your time, and thank you.

Thank you.