Beamtree Holdings Limited (BMT) Earnings Call Transcript & Summary

Good morning, everybody. We are just about to start the meeting. Thank you, everybody, for joining. I'm Emma Gray. I'm the Chair of Beamtree, and this meeting is about our first half FY '25 results. I am joined today by Tim Kelsey, Marek Stepniak and Mark McLellan. Before we start, I would like to pay my respects to the elders, past, present and emerging. We are on Gadigal land today and want to make sure that we recognize those elders and all of our elders. As we start, I will pass over in a minute to the team, but I wanted to acknowledge a couple of things. First of all, this is a really strong set of results. I'm really proud of the work all of the team have put in. I think we'll be able to demonstrate to you a really significant and deep pipeline, and Marek, in particular, will talk to that. And it's really a testament to the work and the innovation that the team has been able to produce. Secondly, I wanted to pay some very deep respects to Tim Kelsey. This is going to be his last results presentation, and we want to recognize his service to Beamtree. He's been our CEO for 4 years, and we've had quite a journey since he started. We've got a really clear vision. We spent the last couple of years deeply innovating our product set, and it is having incredible traction in the markets in which we serve. So, thank you to Tim. This is also your first opportunity to meet Marek Stepniak. He assumes the CEO position next month. Today, he's going to talk to the sales pipeline. And as our Chief Growth Officer, he has been uniquely positioned to drive growth for us, particularly in our international markets. And so, you'll get the benefit of some of his commentary there. And obviously, you'll get to see more of him in the coming months. And we've also got Mark McLellan, who's our CFO. He's the numbers guy. And once again, I think we've done a tremendous job on husbanding our cost position, and you'll hear more about that from him today. So, with no further ado, I'm going to pass over to Tim Kelsey. Thank you.

Thanks, Emma. Welcome, everybody, and thanks for your time. Thanks for those kind words, Emma, about my tenure at Beamtree. I'll come back to that in a second. So, the results are very strong. If we can go to the next slide, please. Yes, so first half, I think the highlights are the very strong performance on profitability, just to start with. Obviously, revenue growth, I'll come back to in a second, but we will deliver a full year operating profit this year. You may remember, for those who've been tracking the stock that we started our investment journey back in '21 when we did our capital raise in order to invest in growth. We have subsequently penetrated and grown market positions in our core international targets, Saudi Arabia, Canada, U.K. And whilst we've been growing revenues very significantly, we are in this excellent position of having also getting back to operating profitability for the whole year this year. So just to point to that as the first step. Alongside that, our cash flow position is very strong. And as you may have noticed, if you've seen the presentation already that we have now agreed a debt facility with the Bank of New Zealand, which gives us access, if we need it, to working capital, which will mean that we are in a very strong position for ongoing investment as we progress. In terms of revenues, the highlight here is international growth. So, 31% growth in international revenues, attributes that to Marek's work as Chief Growth Officer, but the team in general, developing a very important set of positions in those 3 countries I mentioned in particular, ANZ, Australia and New Zealand, clearly not a laggard. We are growing in our home markets, but I think the important opportunity for us is the international one, and that's just being revalidated in these results. And so, the management -- the company as a whole is very confident of delivering 20% plus growth in annual recurring revenue for the full year. The reported revenue in the first half was 10%. That was mainly attributable to some delayed contracts. We expect those to land in the next month or 2, but the full year will be a 20% plus growth year. And we're also giving the market confirmation of our confidence in our performance to achieve the $60 million target we've given you guidance on previously by the end of 2026. So, those are some overall highlights. Next slide, please. So I'm retiring as CEO in the middle of March, as Emma mentioned. It's been an incredibly important experience for me, the last 4.5 years with Beamtree. I'm really proud of the team and the work we've done to build a narrative, which I think fills a very important gap for international health care around supporting what we call the learning health system with essentially a series of technology services to support the use and improvement of data in the decision-making of healthcare systems, and that's a very resonant message with our clients. As you'll note and Marek will talk to you, we already -- our top 15 clients already have more than 2 products on average in the portfolio. We want to get the whole customer base up to a kind of average of 3 or more products. But we're a company with a very strong narrative of benefit to the -- in health care, and we have a very measurable ROI to our clients. And that's why we report a very strong level of retention. In many areas of our business, we literally have 100% retention of clients, and we don't dip below 97% in any part of our company. It's very strong client success relationship. So that is one of the reasons for my pride in what we've achieved over the last 4 years. And I'm delighted that Marek is now taking over CEO. Marek, of course, has been the Chief Growth Officer in the company for the last 18 months, very involved in not just international growth, but also in the governance of the business as a whole. So, congratulations. I'm delighted to welcome Marek to the role of CEO. Just some quick highlights on performance in the first half. So, obviously, coding is growing very, very quickly. And just to remind those who may not be familiar with this concept in health care, unlike many other industries, data is created and standardized by humans. So, when a person enters the hospital, a clinical record is created for them, whether that's on paper or electronically. When they leave the hospital or are discharged, that record is handed to a human expert who then turns it into a set of classifications that can be used for billing or for quality evaluation. That process, even despite the expertise of those individuals, is prone to error and also to inaccuracy. And we have -- we create software that supports the automation and the reduction of those errors in the data, which has a very material impact on the financial health of systems as well as the quality of outcomes to patients. And what we've seen over the last 4 years is a very, very significant acceleration in global demand for our products in that space. And again, this last half, again, validates that. And in particular, what we've seen is, in Saudi Arabia, a new coding product supporting that process, the integrated coding platform has now been launched, and we are able to confirm that we have now our first major implementation at one of Riyadh's leading hospitals. We expect that, that will open the door through our partnership with Lean, the Saudi a government-owned company that is leading on health technology in the Kingdom, that opens the door to a major opportunity for us with the 21 hospital clusters in the Kingdom, and hence, our estimation of the market value, very significant. That's really just one part of the overall Saudi Arabian story. We are delighted, I was very, very pleased to confirm that we won our first 2 national contracts for our PICQ coding product with the government of Saudi Arabia during this last half, a very significant step forward. And there are many other opportunities, as Marek will explain later, for us in the Kingdom. Canada, again, in coding, we've been working with 15 hospitals in British Columbia to audit the quality of their data as a precursor to their subscription to our technology, and we're now in advanced stages of negotiation for their acquisition of that -- procurement of that technology. Again, very encouraging progress. And we have also now launched a new product to autonomously code records, so be able to actually classify clinical activity without the need for human intervention, and we're seeing demand for that grow very rapidly. And in fact, today, I've just had confirmation that one of England's leading hospitals in Milton Keynes has now contracted for second stage implementation of that service in the U.K., which is a very important milestone for us. We also have implementations taking place in Australia, and we will be announcing shortly that Canada also will be launching its first implementation of our product for autonomous coding. In Australia and New Zealand, we've launched a new product, PICQ audit, which is a very significant improvement to our existing PICQ product to support revenue assurance in public hospitals, and we've seen very rapid demand for that in the first few months of its availability. Just a couple of other highlights. Diagnostics. So this is RippleDown. You all know our artificial intelligence platform supporting automation of human expertise. It's used worldwide to automate the work that otherwise would be done by human pathologists in reviewing test -- lab test results and converting that data into diagnostic interpretation, which can be given to the referring physician, the GP or the hospital doctor for review. And this reduces literally the need for human pathologists in the laboratory. What we see, we have a partnership with Abbott, the very large American devices company to distribute that product worldwide. And what we've seen in the first half is a 50% increase in revenue from that source, which is very encouraging. We've also entered a new market with the product, which is veterinary services. Human medicine, obviously, is not the only medicine. Veterinary medicine, in fact, is a very, very significant worldwide market, and we have now got our first application RippleDown in that marketplace. And then the third point, just to quickly reference was, in the analytics and knowledge networks part of our business, we have now completed the refurbishment of our digital infrastructure for the Health Roundtable, which is the program in Australia and New Zealand, bringing together 200 or more hospitals to share data and in a peer-to-peer learning environment, be able to drive improvement in the outcomes that they deliver for both their patients and financially. We have -- that platform offers a very significant new means of delivering a whole range of more advanced analytics than are currently available and really is the world's now best platform for comparative analytics in health care. We have now leveraged that investment and are taking the platform to the U.K. We announced last year that we were in partnership with the NHS Confederation, the body in England which represents providers, including hospitals, and we are now very close to agreeing a contract with the Confederation to launch that program in this current half, and we expect that to be launched before the end of the financial year in the U.K., which will be a major step forward for us. So, those, I would point to as the key highlights in the first half. It's been a very successful half, great privilege for me to have led the company to this point. And I will now -- if we move to the next slide, just quickly talk to this, and I'm going to ask Marek to come in and talk about the pipeline. So we remain absolutely standing by our commitment to the $60 million objective by the end of 2026. Now, clearly, where we are today, it's a pretty steep curve. It's a hockey stick for us to get to the '26, which is why we're going to tell you a bit about the pipeline. So, one of the contexts here, really important context of Beamtree is that we -- in health care, particularly in public health care, there is a very long sales cycle, I mean, multiple years of effort required to both engage the client in the conversation about the product and then go through the procurement process, which can itself take quite literally, years. And so, really what we've been doing since we made that initial investment in FY '21 is building the pipeline, knowing that it would take us years to start harvesting the benefits of the investment. And that's now beginning to happen. And I point you back again to the work in Saudi Arabia, which started with the coding audit, an advisory piece, and now has ended up with 2 national contracts as our first evidence, in a way, of the hypothesis of building towards that objective of recurrent software sales in a new market. And so, this hockey stick is essentially, it is planned. It is part of beginning to harvest the investment we've made over the last several years in just developing the pipeline. So, we remain very confident in the $60 million, and we'll now spend a bit of time just quickly taking you through the pipeline assumptions and the current state of our pipeline to give you, I hope, assurance of that as well. So if we go to the next slide and I'll just ask Marek to come in and talk to this. Thank you very much.

And good morning. Looking forward to meeting more of you in person over time. Delighted to be stepping into the CEO role in the middle of March, and thank you to Tim, a big shoes to fill there. When we look back, and you've heard Tim talk about the work that we've put in over an extended period of time in developing this pipeline. So, over the last 12 months, we've continued to rationalize and grow the pipeline. The rationalization has meant that we have now very clearly focused our energy and effort on our much higher value solutions. I'll come to that in just a moment. We are now at a stage where we know that 20%, about $13 million of our current pipeline is in the later stages of what we refer to as our own procurement process in health care. Health care is frustratingly challenging because of its complexity in decision-making. That applies to all of the markets that we're in. So, sometimes decisions take months, sometimes they take years. And so the predictability of when final decisions are made is always very hard for us to pinpoint. But we know that with the concerted effort and focus and also delivery of value-adding solutions, we're very much in a position now where our customers are extending and looking to us to help them solve their real-world business problems. Our pipeline, which is in later stages of procurement with our customers across our geographies, it's Australia-New Zealand; in the Middle East, it's Saudi; in the U.K. and in Canada. Our pipeline now is very much reflective of what we believe is also the demand in the market for our products. We are focused on growing our share of the $20-plus billion global coding market. And as such, what you see in front of you is our pipeline now begins to show, about 70% of our opportunity is in our high-value products, the integrated coding platform, which was built together with our partner and is now, as we speak, beginning to be rolled out for the first time in Saudi Arabia. We know that, that coding platform also has demand in Australia, and we look forward to sharing with you over time as we grow that pipeline in Australia. We are competitive, both in what we provide in terms of functionality and also pricing against existing customers. We have another fully hands-off product, which is called autonomous coding. This is the first time that we believe that there is in the market a solution which allows providers, hospitals to be able to code without the use of human beings in the process. Our competitors assist in decision-making. When human coders do this work, our solution allows us to fully automate and completely hands off. Demand for this has grown exponentially over the last 12 months for us, and every one of our markets is demonstrating a real interest. And also, as you heard from Tim, we're now signing some of the first contracts and looking forward to sharing more about those as we set those off across the markets in Canada, in Australia in the U.K. as well, and in time in the Middle East. Our coding platform and coding solutions are the big growth area for us. However, each one of our other solutions, knowledge networks, you heard Tim talk about, we are in the process of beginning the rollout of that in the -- and with the NHS. It gives us entry to a large number of hospital providers through one single channel. We know that the solution that we use, which is enabling hospitals, health services to benchmark and use analytics to drive better decision-making, is also equally as relevant and is in demand in Canada and in the Middle East. And so, those markets continue to also be our focus for the expansion of our knowledge networks solution, which is around the platform that we've invested in very heavily over the last 12 months. We continue to do well with our Abbott relationship and our sales, and you heard Tim talk about entry into new markets, and we remain very positive about that continued growth through that channel being Abbott and the relationship there. And lastly, we -- although it's been a slow burn, our clinical decision support, which is through an AI-enabled tool called the Ainsoff Deterioration Index, you've heard that we've signed a very large health care provider in New South Wales, Western Sydney. They are responsible for providing care to 1.8 million people in Sydney, and there's a 2 year contract that we are commencing with them now. We're also continuing to do well in Hong Kong, where we are well in the rollout of -- in the first hospital there and targeting the further rollout across additional sites over the coming next 12 months. So, for us, there is a lot that has increased and improved. There's one other area for us of focus in our growth of the -- both the pipeline and conversion, and that is to ensure that we target existing customers and provide them with a greater range of our solutions. You heard the top 15 customers already account for almost 3 solutions per customer. That has grown over the last 12 months, not by accident. We continue to set ourselves a challenge and a focus on delivering at least 3 of our solutions to our existing customers across all of our customer base, wherever possible. And lastly, we've got ongoing investments, as you would be aware, we've shared with you, both in our hands-off autonomous coding into new markets and then also the growth of our integrated coding platform initially out of Saudi Arabia.

Thank you, Marek. And we're now going to hand over to Mark to take us through the financial results. Thank you. And Mark, if you could just relatively speedily, we can take some questions. These slides are, just to give you a bit of a sense of where we're -- what the business is doing, but I'm going to hand over to Mark now for the financial results.

Thanks, Tim. Thanks, Marek. Thanks, Emma. Good morning, everybody. I have a few slides on the first half results. First one in front of us is Slide 14, which is the summary profit and loss account. So, a pleasing result for the first half, really the kind of key highlight was around our profitability. So, we crossed over into profitability in the first half of FY '25. Our revenue growth was 10%. The growth was across all segments, but the key 2, 3 things I'd call out was around coding. So you can see coatings is up 19% year-on-year. That's driven by activities in Canada, Saudi and Australia and the U.K. And then the other one I'd call out is the diagnostics, so up 11% year-on-year. That's off the back of both direct sales and also our relationship with Abbott. So double-digit revenue growth for first half. From a cost perspective, we've continued keeping a lid on the costs. Our costs are up 5%, and that's allowed us to drive that profitability increase year-on-year. Next slide, please. Just a bit more insight into the revenue growth. What I would say in terms of international revenue growth, that is now 44% of our business, it was under 30% 3 years ago. So, it's been a rapid change in that side of the business. In terms of ANZ, that's been broadly flat year-on-year, but plans to grow that in the second half. In terms of cost growth, consistent with prior years, about 70% to 75% is head count related spend. That's up 15% year-on-year. That's been driven by the need to hire a number of people to help delivery in the international markets. And then the non-employment bucket is 25% of our business. That's gone back 16% year-on-year. That's focused on cost management. We also invested in our analytics platform and that allowed us to reduce some costs in the IT space in the first half. So, next slide, please. So, in terms of profitability, a very pleasing trend in the last 4 years in terms of moving from a loss position in first half of [ FY '22 ] into profitability. So a gradual change in the business in the last 4 years, and that's consistent with the reported EBITDA number as well. On the right -hand side is a reconciliation from operating profit to EBITDA. The main cost within that is around share-based payments. That sort of makes up 90% of the move from operating profit into the reported EBITDA. One of the most pleasing aspects of the first half was around cash. So we hit cash operating breakeven in the first half compared to $2.3 million outflow this time last year. So that's a real significant change in the business. We continue to invest in our products. We invested $1.2 million, down from last year, which we'd called out in full year results. And so that leaves us a cash burn of $5.1 million to $3.7 million. We are forecasting that cash burn to reduce as we sort of go into the second half, and we're targeting a cash flow breakeven business by the end of FY '25. To support our cash position, we've also agreed, as Tim mentioned, a facility -- a loan facility with Bank of New Zealand which is NZD 7.5 million or AUD 6.75 million. That is to fund intra-month working capital and the growth opportunities that we see in front of us. Final slide for me is the balance sheet. The balance sheet is pretty straightforward. Big thing is around the cash, and we'll add the loan facility to that. But overall, it's a fairly straightforward balance sheet. So, with that, I will hand over to Tim for the last slide.

Great. Thank you very much. So, if people have any questions, please put them in the Q&A box, and we'll answer them in the last couple of minutes. There is one question here from Christian from Blue Ocean. Could we get a bit more detail on the contracts which have slipped into the second half FY '25 and whether those have been won to date? So, just to give you -- again, as is just the way of the market we operate in, some of our contracts that we had thought might land in FY -- in the first half have moved into second. We haven't lost anything. One of those has just landed today, actually. We have mentioned the Milton Keynes contract. And we anticipate that a number of others we'll be able to confirm to the market in the next few -- shortly. Can't give details on those at this point, but yes, none have been lost. And as I said, we remain very confident in the strength of the pipeline and its delivery and our ability to deliver a plus 20% ARR growth rate for the end of the financial year. Let me just have a quick look. So, I'm looking at [ Mark Yarwood ]. Very kindly, congratulations on an excellent presentation and granularity. A couple of questions from me. On the pipeline, can you articulate what late stage means in terms of time lines? And secondly, can you directionally describe what needs to happen to the funnel to get to that '26 ARR? What is the pipeline, based on your conversion estimates to hit the target? And thirdly, why is the bank -- the debt facility with the Bank of New Zealand? So, I might start with that one first. why did we pick the Bank of New Zealand, just hand quickly back to Mark.

Well, we ran a process both with Australian and New Zealand banks and also some non-financial banks and Bank of New Zealand came up with the most competitive products. So that's why we went with them.

Yes. Marek, you may have an opinion on the late stage. Late stage basically means that in salesforce terms, we're in either -- we are in propose and negotiate for those contracts. So, whilst we can't put a date on them, they are -- proposals have been issued. We're either in contracting discussions or in a procurement process. It's very hard to pin down what that looks like, but it is months rather than years for closure of that portion of the pipeline. And the reason we put this data out there is to give you a chance to reflect on what you think is realistic in terms of, if we close the $13 million in the next 6 months, that would take our ARR to a position significantly ahead of where we currently are. You will then have to make a judgment about what you think is realistic for closure of the other elements in our $60 million pipeline that take us to the $60 million overall ARR outcome at the end of '26. When we've looked at that, we think that, that's a very achievable objective, but we leave that to you to model and analyze for yourselves. But Marek, do you have any comment on the -- essentially the achievability, the conversion time for the pipeline into the $60 million target?

So, the reason why we're very comfortable with the pipeline as it exists at the moment is that we can see a line of sight to very specific events, whether they are large-scale national tenders, which we are very well set up for, which we've had an ability to be able to help market understand offering or we actually can see the demand decision-making process is on our customer's side on their cycle of decision-making and investment. And so, that's why all of the pipeline now gives us a line of sight towards decision-making and closure for the offerings that we have in there.

Great. Thank you Marek. So with that, I haven't had any other questions. Oh, there's one. Let me check. Weitmann from BOEQ is asking about the opportunity in the veterinary market, how big is the TAM? I don't have that data on me right now, but it is a very significant opportunity for us, and we actually have opened -- we've contracted both with an Australian veterinary laboratory and we have just also closed with a U.K. lab in this new market. So we will bring to the community an update on that for the next bulletin, but I will find out what the total addressable market is and be able to report that to you in due course, but it is a significant one. With that, we're over time. So, I will take the -- thank you again for your participation in the meeting and congratulate the team on what I think are excellent results for the first half and close the meeting. Thank you very much indeed.