Beamtree Holdings Limited (BMT) Earnings Call Transcript & Summary

Good morning, and thank you for joining our first half financial year '26 financial and operational performance market presentation. My name is Marek Stepniak , and I'm the CEO of Beamtree. With me today is Beamtree's newly appointed CFO, Michelle Spiller. Michelle, we are delighted to have you part of the team. Michelle comes from Altium where she was part of its impressive growth story. It's great to have you on board bringing your financial progress and business guidance to help us scale. Michelle will be sharing more on financial performance very shortly. Also in the room, is Kyle Ferreira, our immediate past acting CFO; and also our Beamtree Board Chair, Emma Gray. Our agenda today will cover first half financial highlights, then our AI competitive moat, followed by progress against our strategic priorities and update on our pipeline, a deeper dive into the first half financial performance and then finally, we will come to outlook. I will now hand over to Michelle.

Thank you, Marek, and good morning, everyone. It feels great to be here participating in my first investor call as CFO of Beamtree. I look very forward to meeting many of you over the coming days and building deeper relationships with our community of investors going forward. As Marek mentioned, I'm ex-Altium Limited, a founder-led small cap software company that scaled into a much larger, highly performing global SaaS leader. One of the key lessons I took away from Altium was how to simplify financial metrics to reflect a clear, consistent measure of strategic progress against an ambitious growth agenda. In my first months at Beamtree, I have been applying that same lens to simplify what we report and how we report it and support other business preparing to scale. Turning to our first half financial highlights. Annual recurring revenue, or ARR, of $28 million is up 10% from $25.5 million in the prior corresponding period. Later, I will speak to our revised ARR reporting framework through a more meaningful lens of momentum. Statutory recurring revenue of $13.5 million is up 10% on the prior corresponding period. We delivered a breakeven operating profit and $0.4 million positive operating cash flow which is pleasing to see as we continue to invest in our strategic priorities while maintaining financial discipline. We have $2.9 million cash on hand and a strong current ratio of 1.9 with further funds of $4.3 million immediately accessible via an undrawn facility.

So thank you, Michelle. Michelle will return for a more detailed update shortly. I want to first talk about our competitive moat. AI in Software-as-a-Service has been dominating the news. And I know that analysts are asking, how does that affect the business like Beamtree. I want to share what sets Beamtree apart on how we leverage artificial intelligence in health care. We believe our AI advantage is delivered through 4 key attributes. The first is deep customer relationships with profound understanding of clinical constraints. Clinical decisions have life or death, or life-altering consequences. Our AI models are designed with clinical validation in mind. They're explainable, audible and trustworthy. We understand regulatory requirements, clinical workflows and liability concerns that health care providers face daily. And we have a track record that has delivered. Our customers work alongside us in development, ensuring our AI solutions address actual needs. These have been reliant on us earning long-term trust and meeting a high clinical bar on accuracy. The second attribute is extensive domain expertise around data. Health care data is notoriously complex, fragmented, inconsistent and highly sensitive. Our team has spent years understanding electronic health records, clinical coding standards and patient flow data. This expertise enables our AI to deliver actionable insights, not just statistics. We understand the multitude of coding and data standards that most technology companies find impregnable. The third attribute is a highly regulated environment. Health care is one of the most highly regulated industries globally. We've built our entire AI infrastructure and proprietary databases with privacy, security and compliance baked in from day 1. This is a massive barrier to entry for competitors and a key reason why hospitals trust us with their most sensitive data today. Whether it's meeting any of the at least 3 regulatory coding regimes in Australia or all the 6 in Saudi Arabia, every market has a multiplicity of regulations, and we are compliant. The fourth and last attribute is Beamtree being AI native. We've been deploying AI for almost 3 decades through RippleDown. We have -- we are embedding this knowledge and experience into products and enhancing customer value creation within existing products. All of this has enabled us to bring our AI capabilities and IP to our customer co-development. For Evolve in the U.K., we are leveraging our well-established core AI analytics and benchmarking platform used daily by over 200 hospitals in Australia and New Zealand. Autonomous coding leverages are proven PICQ and RippleDown solutions used daily across the world. Clinical coding is time-consuming and error-prone. So our AI automates much of this process potentially saving hospitals millions in administrative costs while improving accuracy. Autonomous data entry for pathology laboratory leverages RippleDown reducing administrative burden by automating routine data capture in pathology laboratories. These capabilities weren't developed in isolation. They emerged from working directly with our customers, understanding their pain points and co-creating AI-enabled solutions that truly matter. We combine our deep health care experience, trusted customer relationships, profound understanding of clinical constraints, combine it with our extensive AI experience and religious compliance in all environments. This is our moat today. Next, moving to our markets and products. You are familiar with Beamtree's footprint. We have shared with you before and it's worth pausing for a moment, just to remind you of the scale and breadth of Beamtree's global footprint and impact. We are very proud of the impact we deliver globally. Firstly, we continue to grow our partner relationships with Abbott for pathology laboratories globally and with Lean for coding solutions in Saudi Arabia. Our newest partnership is the Evolve partnership with the NHS Confederation. They represent all U.K. NHS providers. This partnership provides validation, access to NHS trusts and insights into system-wide priorities and challenges. It also gives us 2 feet into the NHS. And secondly, we are also codeveloping with customers on products across geographies, whether it's autonomous coding in Australia, U.K. and Canada or Evolve in the U.K. I now want to just turn our attention to progress against our strategic goals for this year. This has been a period of significant product launches, market expansion and organizational leadership strengthening. Each achievement positions us for accelerated growth in the second half and beyond. But before I provide an update on our progress against our strategic priorities, I want to share some of the measurable benefits being delivered to customers today. 6 to 8x return on investment for improved clinical decision-making and quality in pathology laboratories, 30% reduction in rework costs for coding teams, up to 24x return on investment for hospital revenue optimization. These are results that we are very proud of. So going on to our first strategic priority. Evolve goes live with the NHS. Our Evolve platform has completed user testing and went live on Monday of this week. This is a major milestone for Beamtree. Why this matters? Well, you all know the NHS. What is important is that 4 leading NHS trusts chose to be founder partners and completed user testing, validating both our technology and our understanding of NHS workflows. We have proven the underlying platform works as it's already in use by over 200 hospitals in Australia and New Zealand each day. We have codeveloped our sales plan with our partner, NHS Confederation, which is being rolled out to 130 NHS Trust, [sole] trust in England with first customer onboarding expected in Q4. Second priority is autonomous coding validation across 3 countries. We are achieving significant validation of our autonomous coding solution, which builds off our core strength in coding solutions across 3 major markets. We successfully completed our Australian trial and continue progressing trials in both the U.K. and Canada. In Canada, the first public sector RFP for autonomous coding is now underway. Let me remind you why autonomous coding is important to customers. It reduces resourcing costs. It improves accuracy. It also closes resourcing gaps where trained coders are in limited supply and it speeds up cash flow. From some of our trials, we've been able to observe a 95% level of accuracy in the work that we've been doing. We're progressing our trials and expect first customers in Q4. Saudi Arabia expansion and acceleration is the last strategic priority I want to focus on. Our integrated coding platform is now live through proof of concepts at 3 public hospital clusters in Saudi Arabia. These started in January and will be running for the next few months and are expected to move to procurement at the end of the fiscal year. As a reminder, our integrated coding platform is an end-to-end solution that manages the coding of the information relating to patients, clinical care after they have been discharged from hospital and meeting all of the regulatory requirements that are within Saudi Arabia. We expect to see sales from the end of this fiscal year. And the last area I want to focus on is organizational strengthening for scale. We've made critical senior leadership appointments, a new GM sales for Australia and New Zealand to drive deeper penetration and faster expansion in our core home market and a newly appointed CFO, who brings experience to scale our infrastructure and solution offerings. These roles are critical support for the next phase of growth. Final topic I want to cover is pipeline. You've seen this slide before. First, a year ago, we showed you a qualified pipeline of $61 million. Good news is it continues to grow, reflecting growing demand and now stands at $84 million. We have sales stage gates that enable us to actively qualify our growing pipeline of opportunities. Secondly, the important number is $24 million, which is a subset of $84 million on the right side of your screen. So let me explain $24 million is made up of late-stage pipeline. The quality and depth of opportunities is growing. This is demonstrated. And we, of course, operate in a highly regulated industry. And as a result, frustratingly, time lines remain unpredictable. Third, 76% of this pipeline is coding solutions, which is our core. That's up from 70% from 12 months ago. And more of this is now international at 66%, which is up 5% from before, predominantly due to Evolve. I'm now going to hand back to our CFO, Michelle to take you through our first half financial performance in more detail.

Thank you, Marek. And I will begin by highlighting Beamtree's strong recurring revenue growth, up 10% on the prior corresponding period or PCP to $13.5 million. Looking at recurring revenue by product, what you will note is that consistent with our strategy, first half growth is driven by PICQ and PICQ ordered clinical coding products, up 21% on PCP. That is alongside the continued scaling of core diagnostics and knowledge networks offerings, up 8% on PCP. Renewals also continue at 95% plus across our core products, which underpins the quality of our recurring revenue base. If we look at revenue by geography, it is clear that ANZ remains the powerhouse of the business. Aligned to our new GM of sales ANZ appointment, we continue to see a strong sustainable opportunity in our domestic market while building out our international footprint. Total revenue of $14.5 million is up 2% on PCP and includes an element of nonrecurring revenue, noting that the strategic intent of these projects is as a precursor to ARR. In first half '25, nonrecurring revenue primarily relates to the Saudi HMG project, a demonstration of PICQ capability, which may convert into a recurring PICQ license. In this half, we commenced a new clinical coding audit in Singapore, leveraging our core coding quality and benchmarking software. Moving to the profit and loss statement and having just covered revenue, I will zoom in on costs. The breakeven operating profit demonstrates strong cost discipline as we invest in our strategic priorities and geographical expansion. However, as a new CFO, I will focus the business on cash operating profit and loss. This adjusts for the cash impact of capitalized development costs, and we'll note this as a key financial metric going forward. Importantly, my attention will be on charting a pathway to breakeven cash operating profit over time, supported by accelerated revenue growth and a disciplined capital allocation with investments assessed against a clear ROI and payback horizon. This half included incremental targeted investments of $0.9 million to stand up the Evolve platform in the U.K., which Marek mentioned is now live. We have also scaled local sales and product delivery teams in the U.K. to support the monetization of the Evolve platform in the second half. This drove a 2% increase on OpEx on PCP. Turning our focus to cash. Our liquidity remains strong with cash on hand of $2.9 million and a net current asset position of $4.6 million. We also have access to further funds of $4.3 million via an undrawn facility. Pleasingly, operating cash flow is positive, driven by effective working capital management. We are comfortable that our current capital position will allow continued disciplined investments in value-accretive opportunities as we simplify the business for scale. And against that backdrop, annual recurring revenue is the clearest lens on strategic progress and the impact of that investment and hence, my first focus area as CFO, a simple, consistent, scalable metric. We have implemented a onetime reset of our annual recurring reporting revenue framework for clarity and transparency, which I will now unpack. First, let me just clarify the measurement date of ARR. Our historic disclosures have reflected ARR at the date of our results announcement, not the financial period end. In FY '25, we reported exit ARR of $29.2 million. This was measured at the 28th of August, not the 30th of June, with the growth from $25.5 million to $29.2 million, driven by momentum in the July and August months. We will continue to measure ARR at a point in time that coincides with our market release. As a result, we will now only report ARR on a half yearly cadence with consideration to other relevant news flow provided via our quarterly market updates. As a second point, we have restated FY '25 exit ARR from $29.2 million to exclude $0.9 million that did not convert to recurring revenue. For clarity, ARR has historically included contracted revenue as well as high confidence variable customer commitments. Going forward, we will continue this practice and provide improved transparency of the components making up ARR as depicted in the table on the right corner of the slide. This will enable the market to form their own assessment. With this context, I'll speak to a few points on our first half ARR outcome. As previously highlighted, ARR of $28 million is up 10% on $25.5 million, our PCP. However, and more importantly, momentum for the last 6 months is flat. This is due to the timing of enterprise contracts that did not convert in this half and expected churn of $0.8 million relating to stranded legacy products that we no longer support. Looking ahead, I am confident that we now have a clear ARR baseline to accelerate from in the second half. And we'll pass over to Marek to provide an update on the business momentum and outlook for FY '26.

Thank you, Michelle. So as we look forward, it's all systems go. Evolve, now live with the NHS, autonomous coding validating across 3 countries. ICP in production in Saudi Arabia, and we are executing the strategy. We have a strong team, new capabilities and have added a CFO, GM sales for ANZ, GM sales for Middle East. We have the added commercial horsepower to convert and scale. We have defined markets, strong partners in Abbott, NHS Confederation, Lean. These multiply our reach. And our AI innovation is in production, autonomous coding, autonomous data entry, Evolve, all AI-driven, all co-developed with customers, not AI for sure, AI that works. Our outlook and targets are double-digit ARR growth for financial year '26 and being self-funded in the near term. The team is focused and going. To end our presentation, Emma, over to you to talk about our Board-initiated strategic review.

Thanks, Marek. And I am just incredibly pleased that the progress the team is making. It feels like we are at the -- we've got some very exciting opportunities ahead, and we're particularly pleased that Evolve, which is the NHS partnership was launched on time, and we're very excited to see what that delivers. However, the Board is firmly of the view that the share price doesn't reflect the value in the business in terms of our products pipeline or operations, and we're determined to close that gap. So to that end, we will commence a focused strategic review, examining the potential for streamlining operational priorities, so potentially in the product portfolio or geographies, and we'll look at corporate options and partnerships, all included to unlock shareholder value. I will lead this review, and I'll be supported by Stuart MacDonald, our newest Non-Executive Director, and we have appointed a financial adviser to assist us. We will provide further updates as the review progresses in accordance with our continuous disclosure obligations. Thanks, Marek.

And thank you, Emma. So we'll just pause now to take any questions that may come through.

No questions.

No, there are none. If there are no questions, then we will say thank you very much for making the time and wish you well for the remainder of your day.