Oneview Healthcare PLC (ONE) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Oneview Healthcare plc HY '26 Half Year Results Call. [Operator Instructions] I'd now like to hand the conference over to Mr. James Fitter, CEO. Please go ahead.

Thanks very much, and good morning to everyone in Australia, good afternoon to those joining from the United States, and good evening to those joining this late hour here in Dublin, Ireland. First of all, I'd like to, as usual, just draw your attention to the legal disclaimer and particularly to our comments around forward-looking statements. I'd also like to remind everyone that we are a calendar year company, so we're reporting for the first half of 2026 for the 6 months ended June 30 and that our reporting currency is euros. I am joined here in Dublin by Darragh Lyons, our Chief Financial Officer, and Toni Pettit, our Company Secretary, and thank you both for joining me this evening. So in terms of agenda, as usual, we'll start with the financial performance. We will look at commercial momentum, updates on product and innovation, the outlook and obviously save some time for questions at the end. So first half of 2026 has been a period of great progress on our path to scalable growth. Our recurring revenue, which is the true measure of any software business, grew by 13% year-over-year. Our gross margin very pleasingly jumped 9 points from 61% to 70%, offsetting the impact of the decline in nonrecurring revenue, which continues to be lumpy and volatile. In March this year, we completed a $19 million placement in extremely challenging market conditions. You might recall, we started our road show the same week as the United States launched the war in Iran. So it was a very challenging environment, but I wanted to thank all of our shareholders who participated at what was such an uncertain time in markets. You're going to hear a lot today about our new revenue channel, which we've already announced, the Bedside Hub product, where we're working with our partners at Epic. And really pleasingly, our operating cash outflow is down 15%, which really speaks to the cost discipline we've demonstrated across the business. So in terms of financial highlights, Darragh will elaborate on this shortly. But just importantly, we are domiciled in euros, as I already mentioned, which means that our revenues are received predominantly in U.S. dollars and Australian dollars, and both of them have weakened materially against the euro. So total revenue is down 14% headline level, but on a constant currency basis is down just 9%. And recurring revenue, as I already mentioned, was up 13%, but on a constant currency basis was up 20% given the fairly substantial weakening of the U.S. dollar and the Australian dollar against the euro this half year versus last half year. As mentioned, our gross margin increased nicely, which offset the fall in the nonrecurring revenue. Our EBITDA loss improved by 11% year-over-year, which is very pleasing, and we finished the half year with cash of EUR 7.2 million, and we still have to settle the second tranche of the placement from March, which brings our pro forma cash balance to EUR 11.4 million. In terms of commercial development, we have 4 new logos in contract negotiation, which means we're going to continue our very successful addition and growth in new logos that we've seen over the last 3 years. I'll talk further about our live endpoints at the end of June, which were just over 15,000. As we already mentioned, we were added to Baxter's National Care Communication agreement with the general (sic) [ group ] purchasing office of one of the largest 10 health systems in the United States. We've opened Bedside Hub as a new channel to market, which we'll elaborate on shortly. And on the product side, there's been great progress with the launch of Bedside Hub, our new front end, which is now substantially complete and, of course, Ovie, which is evolving into our agentic intelligence layer. So why don't I pass it across to Darragh, who's going to speak to the financial performance in a little bit more detail.

Thanks, James. So turning to the P&L. Recurring revenue, as James has said, grew 13% during the first half of 2026 compared to the same period of '25. And that growth was negatively impacted by the weaker U.S. dollar during the first half of '26 compared to the first half of 2025. So underlying growth on a constant currency basis was actually 20% in '26 versus '25. Nonrecurring revenue declined by EUR 1.3 million in the half, and that's due to a lower number of deployments in the first half of '26 compared to 2025 and also due to a couple of significant hardware sales alongside deployments of hardware refreshes that we made during the first half of 2025. The shift towards higher-margin recurring revenue in the first half of 2026 resulted in our gross margin increasing to 70% for the first half of '26, and that's up from 61% for the same period of 2025. As a result, gross profit remained stable at EUR 3.8 million despite the 14% reduction in total reported revenue. Our cash operating expenses is 6% lower than the same period of 2025. And the key reason there is the global restructuring that we completed in June 2025. And that means that our overall operating EBITDA loss for the first half of 2026 was EUR 4 million, which is 11% lower than the loss for the same period of 2025. So turning then to Slide 10. And you can see that our strong growth in recurring revenue, 13% on a reported basis and 20% on a constant currency basis, meaning that recurring revenue represented 79% of total revenue for the first half of 2026 compared to 60% a year ago. The increase in recurring revenue during the first half of 2026 was driven by new endpoint deployments over the past year as well as some price increases that we've secured on recent customer renewals. And obviously, the continued growth of this high-margin recurring revenue stack is the foundation for reaching cash flow breakeven in the near term and is a major focus for management. Turning then to Slide 11 on costs. We have invested heavily in our platform over the past few years, but really our spend peaked in the second half of 2024, and it has reduced by 10% since then. Cash OpEx in the first half of 2026 is 6% lower than the first half of 2025, and that's driven by lower employee costs since that restructuring that we completed in mid-2025. First half 2026 costs were broadly flat with the second half of 2025 as we worked on the completion of a key development project, building a new front end. But our total head count at the end of June is now lower than it was at year-end, and we expect some further efficiency gains during the second half of the year. So then turning to Slide 10 (sic) [ 12 ] to look at our operating cash burn. So as you can see, it's reducing over the past 3 first half of the year. And there's a 15% decline in H1 2026 compared to H1 2025, and that's driven by the 11% decline in our EBITDA loss in H1 '26 versus H1 2025. On Slide 13, then you can see our balance sheet has been strengthened, having completed the 2 tranche placement of $19 million in March 2026. Tranche 1 of $12 million was received in March 2026 and the receipt of Tranche 2 of $7 million is subject to shareholder approval, which we expect to seek and receive at our AGM during the fourth quarter of the year. So our pro forma cash at 30 June 2026, including this Tranche 2 of the placement of $7 million, or approximately EUR 4.2 million was EUR 11.4 million, which gives us the bandwidth to execute on our strategic growth priorities over the next period. All other balance sheet movements are broadly and largely timing related. Management is very focused on reaching cash flow breakeven, and we're pulling on all levers that we can to achieve this as we've set out on Slide 14. We have significant opportunities to build on our recurring revenue stack with more deployments and live endpoints. With Bedside Hub, which James will cover in more detail later in the presentation, we've created a new revenue channel that's targeting enterprises who are seeking a lower price tier patient engagement solution. And certainly, the early momentum and our current opportunity pipeline suggests that this could become an important new channel of recurring revenue for us over time. We also continue to have significant pipeline opportunities for our core platform through both our Baxter and direct sales channels and through our targeted expansions into the significant white space that exists within our existing customer base. And obviously, the recent and forthcoming innovation, which James will cover later in the presentation, particularly around Ovie, is expanding our role in alleviating the burden on care teams, creating the potential for improved pricing power in the future. On the cost side, our trends on costs and cash burn over the last few periods are encouraging, and we remain focused on driving further efficiencies, including through the adoption of AI into the software development life cycle and across the business in general. And we're already seeing substantial gains in software development deployment and overall business efficiency. So I hand it back to James, who's going to talk through some of the commercial highlights from the period.

Thanks, Darragh. Appreciate that. So first half has been an incredibly busy time. I'm just back from -- I just spent 5 weeks in the United States, and we're really starting to see the benefits of the investment we've made in the Epic strategy. So I just wanted to elaborate a little bit on where this all fits together. So it was almost exactly a year ago at their Annual User Group Meeting in 2025 that Epic began to place greater emphasis on the TV in the patient room by inviting vendors like us to support their bedside TV strategy. So their objective is to use the TV in the room as a clinical information hub for inpatients to access lab results and information about their care plan. Now that information is generally also available to patients on their smartphone through the MyChart app, but Epic has made a decision that they wanted to try and utilize the device in the room to try and make that more prominent. But in order to deliver that content, they need to certify patient experience specialists like us to deliver a fully integrated experience. So they themselves do not provide entertainment. They don't provide a TV player. They don't provide meal ordering or other ancillary services that we typically provide, and they don't manage the hardware that's required to deliver this experience. So this requires us to complement them and provide a unified experience delivered on our proprietary bedside technology, which is the Bedside Hub that we developed some years ago and which is standard deployment in all of our customer deployments. Because of Epic's market position with nearly 43% of acute hospitals in the United States and nearly 56% of beds, they obviously have enormous influence in the market. Deploying an electronic medical record is the single most important investment that any health system is going to make. And large health systems in the United States can often spend as much as $1 billion deploying their Epic instance. So because of that, they want to try and leverage as much functionality as Epic can provide. So we see this as a natural extension of a very significant investment that's already been made. What it also means is that Epic customers are -- I wouldn't say beholden, but they're certainly encouraged to explore Epic-related solutions. So we've taken the decision to get our device certified, which will happen in May of this year. It's also consistent with the funding backdrop we're seeing in the United States. We know, obviously, from the Big Beautiful Bill that there's been pressure on Medicaid and payer mix, and that's starting to show up in some capital budgets. So Epic TV is -- or Epic Bedside Hub is a lower-cost solution that allows more cost-conscious organizations to avail of an entertainment experience in the room, which is not the full immersive experience that we would typically deliver. However, what it has done is it's given us really unparalleled introductions to some very interesting Epic customers. So the unveiling of this certainly had some impact on procurement time lines, and we have seen some full platform decisions being delayed because of the focus on Bedside Hub. So in terms of commercial highlights, as already mentioned, we were really thrilled that Baxter got us added to the GPO of a very significant U.S. health system, which is the most important delivery from that partnership. We've now launched the new revenue channel. The combination of those 2 events is seeing us, as I mentioned earlier, in contract negotiation with 4 new logos, continuing the trend of new logo adoption, which we've seen in recent years. So just so everyone understands on Slide 18, we're talking about the 2 product offerings that are now the real forefront of what we're doing. So our Care Experience Platform is for those smart room buyers that are invested in a totally immersive experience. I should stress that all of our U.S. customers, bar 2, are existing Epic customers. So these are health systems that have placed a great emphasis on patient experience, leveraging our expertise to bring the nurse call, the virtual care, meal ordering, environmental controls, service requests, patient feedback, all built into a unified user experience. Bedside Hub customers are a slightly different profile. They are more likely to be cost conscious and focused on really delivering the clinical insights that Epic is focused on rather than the full immersive patient experience. But for us, we see it as a great opportunity to accelerate our sales cycle and provide an offering that is more in keeping with what certain segments of the market are looking for. The Baxter funnel continues to be incredibly impactful for us. We are obviously privileged to be partnered with a company that has such extraordinary reach through their bed business, their nurse call business, their infusion pump business. I don't think there are many health systems in the United States that Baxter doesn't have a relationship with. Obviously, landing this large system at the start of the year has been a huge win for us, and we start to expect to see the benefits of that flowing through in the fourth quarter of this year. So Baxter are typically offering the full product set, the Care Experience Platform, Digital Door Signs, Digital Whiteboards for those systems that are looking for the fully immersive experience that I talked about. The benefit of Bedside Hub has also -- and it's interesting because as always happens in this business, in the sales cycle, oftentimes, sales opportunities will go quiet. You don't know why they've gone quiet. But what we've subsequently learned since we were certified in May is a number of opportunities that were in our pipeline have resurfaced. They've been reignited and come back and said, look, we know we were looking at you. We're very interested in your Care Experience Platform. But for now, we're focused on the Epic Bedside Hub. So that's driven a really significant growth in our pipeline that is focused on specific Bedside Hub opportunities. We have 16 opportunities representing over 20,000 beds, which, of course, is more than our current deployment of 15,000 endpoints. Leading up to the User Group Meeting this year, we already had 10 demonstrations with some very large health systems. We see this as a much stronger proposition for Epic-centric customers. And we now are about to kick off our first enterprise pilot where we'll be deploying a 15-bed pilot across 3 different hospitals for one of the top 20 health systems in the country starting next month. So what that looks like on Slide 21, you can see the breadth and depth of the opportunities across the country. And you can see the ones where customers have come back, previously stalled opportunities are highlighted in darker colors. And you can see they've come back and are now reengaged and have confessed to us that, as I said, whilst they were very interested in the full scope of our platform, either for budgetary reasons or because of the Epic-centric nature of their organization, they are looking to deploy Bedside Hub. The other -- so last week was the Annual User Group Meeting in Madison, Wisconsin, where Epic is based. There were 20,000 health care customers from across the country, and we were 1 of 15 vendors that was invited to participate. It's the first time we've been invited to this event. And it's a great opportunity for our sales organization to hear firsthand what it is that these customers are looking for. And what is very clear is that the existing providers in the toolbox, so there are -- in our category, there are 3 certified vendors. The 2 other vendors are quite niche in their evolution. One of them only has 5 employees. The other is a very niche TV producer in the United States that has less than a 6% market share. And both of those 2 organizations seem to be having some teething problems. They don't have the length and breadth of experience that we have in the patient experience industry. So we have a lot of very exciting conversations around how we can help deliver to this very strong demand in the market. And I think it's early days, but I think we feel as though based on the feedback last week that we are very strongly placed to be the provider of choice for those that wish to explore this strategy with Epic. So between Baxter and Epic, we're getting really unparalleled access to the market. The other really important conversation that's happening in the United States, and this was the quid pro quo from the Big Beautiful Bill. So on the one hand, the federal government is taking away through cuts to Medicare and Medicaid funding. But on the other hand, they have launched a very large USD 50 billion program called the Rural Health Transformation Program. It's split into 5 installments of $10 billion each year over the next 5 years. And that funding is made available to remote rural and community hospitals that are looking to invest in their digital infrastructure. And of course, one of the key components of that digital infrastructure is virtual nursing to deal with the issue we've been talking about now for nearly 5 years, which is the virtualization of care that's happening in the United States. So we are -- as you know we are the conduit to deliver that virtual care through our virtual care API. And this federal program is driving a lot of fresh interest in bedside technology. It's something that Baxter is particularly motivated by, and we're seeing a number of our virtual care partners also coming to us to bid jointly on opportunities that are available through this funding program. And to put this in context, the previous largest funding program made available was the $30 billion funding for the digitization of medical records, which was part of the Obamacare plan. So this is bigger than that, and I think it's going to have a real impact on our growth in the next 5 years. So live endpoint growth is probably the 1 frustrating part for us in the first half of this year. We had expected to deploy nearly 1,000 endpoints at the Children's Hospital of Ireland, which, unfortunately, as noted on Slide 24, has been delayed yet again. It's now been delayed 16 times, believe it or not. We are still unclear whether it's going to open this year or more likely in early 2027. But that obviously had an impact on our endpoint growth for the half. And secondly, we had another Australian public sector customer that has decommissioned 481 endpoints in the first half. And I'll talk a little bit about Australian market conditions on the next slide. So as I think we've addressed in the past, the Australian private hospital market has been under incredible pressure. I think those on the call will be very familiar with the demise of Healthscope and the impact that's had. What we're seeing is that because of the pressure on the private sector and because public sector health systems need to go out to RFP, for those competitors of ours that operate exclusively in the Australian market, the only business that really has been available to them is in the public sector. So we've had 2 situations where we've gone out to RFP for existing customers. And in both cases, we have been undercut on price by a pretty substantial margin, in the most recent case by the winning bid was around about 1/3 of what we were charging previously. So that's been a pretty difficult environment for us. We've chosen not to chase down on price. And importantly, the new endpoints that we deployed in the first half of this year in the United States have average recurring revenue that's nearly 60% higher than the Australian bids that have been decommissioned. What I would say, though, is just in recent weeks and months, we have seen a bit of a pickup of inbound commercial activity in Australia from the private sector. We had 3 active opportunities in the start of the year, we now have 8 active opportunities, as you can see on Slide 25. So we're hoping that the worst is behind us for the Australian business. We are not expecting any further churn. Our existing customer base or remaining customer base in Australia is incredibly supportive and gets great value from the work we're doing. And unsurprisingly, we have rightsized our Australian business to reflect the operating conditions in that part of the world. So just in terms of customer acquisition, as I think you all know, we've won 18 logos in the last 3 years. I think we're on track to obviously continue that trend with the 4 logos that are currently in redline contract negotiation. These opportunities alone, as you can see on Slide 26, have an ARR opportunity. Even if we deploy 2.5 endpoints per room, we could triple the size of our recurring revenue business just by selling into these customers. So a really important opportunity in front of us, and we're excited about the outlook for new logos in the second half. So let me turn now to product and innovation. On Slide 28, I just wanted to remind everyone of the fundamental change in the value of bedside technology prepandemic versus postpandemic. We've spoken about this at length, but the nursing shortage isn't going away. In fact, arguably, it's getting worse in the United States. The demographics are such that the population is aging faster. The number of Americans over the age of 65 is doubling from 40 million to 80 million by 2040. So the demand for hospital beds is growing. The virtualization of care continues to be the dominant theme that is driving the demand for bedside technology. And our decision to build a virtual care API and to partner with the various virtual care companies is really underlying that continued growth in our annual recurring revenue. As Darragh mentioned, we are just coming to the end of the rebuild of our new front end, which is probably the most significant investment the company has made in the last decade. It's really about reimagining how we deliver an experience that is appropriate for the agentic world that we're all living in. We know we're moving to a voice-centric user experience where patients are going to control their environment using Ovie. The care team is going to get real-time context and insights from Ovie and the new front end is going to deliver that in spades. We've had fantastic feedback from customers that we have -- obviously, existing customers have been very involved in the design of this. It is a contemporary design system with a great modern experience. And this is the thing that is going to differentiate us from the bedside TV cohort to those that want to invest in a truly immersive experience. So I think this is going to raise the table stakes, and I think will be the most sophisticated patient experience platform available anywhere in the world. So super excited to get that deployed. We're currently deploying for our first 2 customers this quarter. So in terms of innovation delivered in the first half, and again, I want to acknowledge the great job that we've done on cost control because we've delivered Bedside Hub. We've delivered the new front end. We are building our agentic intelligence layer. And we've also made a really significant upgrade to our data and analytics platform that brings the concept of real-time data into the hands of care teams as part of the evolution of Ovie and the orchestration of care. So it's been a really significant time for innovation that is going to deliver dividends. And again, we've spoken at some length about the progress we've made in AI. I want to give a shout out to Declan Bright, our Chief Technology Officer, and his team around him who continue to really drive significant innovation across the whole software development life cycle. We are continuing to invest in internal training. We're bringing in external experts to help to drive that initiative. But some of the gains here on Slide 31, you'll see that 85% of code is now written by AI agents, obviously supervised by humans at every step of the process. We've increased the speed of our feature development by about 170% based on [ story ] points delivered. And perhaps more importantly, we have seen a dramatic acceleration in our ability to use AI to identify root causes for bugs and deliver a higher-quality product at a better velocity. And ultimately, that's going to drive speed to value, which is hugely important. And all of this is being done under the guise of the AI governance that we've already spoken about in the past. We're currently also undergoing SOC 2 certification, which we think is going to be incredibly important and continuing to put more discipline around our processes and the way we deliver our product. So turning to the outlook. Again, I want to just quickly remind everyone on Slide 33, how we're differentiated. This is a very sophisticated product. It looks very simple on the front end. It's extraordinarily complex on the back end. We're wired into the electronic health record, the nurse call system, the dietary system, building automation, virtual care systems -- we're effectively becoming the operating system for the patient room. Every time we layer in new integrations, that obviously increases the power of our moat. Our installed infrastructure means that switching costs to move are really material. We're already seeing that in some of the conversations we're having where we are trying to displace competitors. There is a pretty significant cost involved in that. So you need to have a product that is dramatically better than what's currently on offer. And I think we can say now that with the new user experience, we're going to have that. We are obviously deeply embedded in the clinicians. We are hosting and acting as the conduit for the virtualization of care, which makes us incredibly valuable from a platform point of view. We are laser-focused on regulatory requirements and health care, as everyone knows, I think we've talked before about how the sales cycle moves at the speed of trust. It's a really high bar for new entrants, and that's something that we're very proud of, and it's shown in the quality and the retention of our customer base. We have 3 of the top 25 U.S. hospitals. And whilst we have had the churn of 2 public sector hospitals in Australia, we've only ever lost 1 customer in the United States, and that was due to their financial predicament postpandemic where they almost went bankrupt. So incredibly proud of our customer retention. So in terms of commercial priorities in the second half, obviously, we are in this late-stage negotiation with some really exciting new logos. We want to get them landed. In addition, we want to land another 3 or 4 Bedside Hub logo wins before the end of the year. And I think we're going to finish the year very strongly. Darragh is doing a great job, as you heard, optimizing our operating cost base. We're laser-focused on recurring revenue, trying to get as much of the nonrecurring revenue out of the business because it's low-margin, low-quality revenue. In terms of product, we're really excited to be getting the new front end in the customer hands in the coming weeks. We're going to be getting customer feedback from the first 2 Ovie pilots, and we've also launched some further innovations on the Whiteboard and the Door side. And then from an operational point of view, we'll be out deploying Bedside Hub. I should stress that it is a much lighter touch deployment than our Care Experience Platform. So that's also going to help speed to market. And then as I mentioned earlier, we are excited to finally kick off this big new project with Baxter with the top 10 health system. We hopefully will be able to tell you who that is in the very near future. So with that, Darcy, I think we're ready to pass it back and see if there's any questions.

There are no phone questions at this time. I'd now like to hand the conference over to Toni to address any webcast questions.

We have some questions here from Wei Sim Homodeus Research, some of which I think you've already addressed, James. The first one here, could we bring Epic solution to Australia to compete with those undercut opportunities as a cheap and cheerful alternatives?

Great question, Wei. Thanks for the question. So as you undoubtedly know, New South Wales Health made the decision to deploy Epic as their single patient record. And that current deployment, I think, has just gone live in Hunter New England, the first deployment has gone live. So absolutely, New South Wales Health is ripe for Epic deployments. We're also in conversation. There's an Epic deployment in Canberra, and there's a couple of Epic deployments in Melbourne. And obviously, our sales organization down there is laser-focused on starting those conversations. So I think as we get into a more broader rollout of Epic across New South Wales Health in 2027, I think this is a solution that is really ripe for the Australian market as well.

James, our next question from Wei. What has AI done for development expenses? And what other levers are there to see us get to cash flow breakeven sooner?

Yes. Well, look, I think we've made real progress. We have embraced AI across the entire software development life cycle. I think we know because we're plugged into a pretty rich technology ecosystem here in Ireland because 18 of the top 20 U.S. technology companies have the European headquarters here. And I think we're well ahead of the curve. I think that's showing up in the operating cost line that Darragh already spoke to. But I think the main benefit we're seeing is that we're delivering a better quality product faster. And I think that's going to lead to greater customer satisfaction. It's going to lead us to be able to deliver faster on our road map, which is going to create more value and lead to higher retention and hopefully, pricing power. In fact, we've seen some great pricing power in a couple of renewals this year in the States. We've seen 15% to 20% price hikes as part of the renewal process. So we're pretty proud with that. And I think, look, at the end of the day, Wei, the hardest thing about this business as you know because you've been following us for a while, is the length of the sales cycle and the length of the deployment cycle. And I think Bedside Hub is going to address both of those issues. I think in certain cases, Bedside Hub, the sales cycle is going to be measured in weeks, not months, and the deployment cycle similarly will be much less painstaking because we're not relying on the customer to provide us access to their Epic interface team. Epic is simply pushing a URL to our hardware to get the devices up and running. So it's going to be a lot lighter touch from us as we scale. So I think that's going to give us good operating leverage as well.

Staying with Wei, could you provide more color on the conversations at UGM? Being invited to participate in UGM suggests that Epic is very positive on the idea of collaboration on the bedside TV opportunity.