Q1 2021 Streamline Health Solutions Inc Earnings Call
Hello, and welcome to the streamline health solutions first quarter 'twenty.
'twenty 1 earnings conference call and webcast at this time, all participants are in a listen only mode.
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And answer session will follow the formal presentation.
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It's not my pleasure to turn.
On the call over to Jacob Goldberger director of Investor Relations and SG&A. Please go ahead Sir.
Thank you for joining us to review the financial results and streamline health solutions for the first quarter of 2021, which ended April 32021.
Call Operator indicated my name is Jacob Goldberger, and I'm responsible for our company's investor.
Mr Relations activities joining me on the call today are Tee Green, President and Chief Executive Officer, and Chairman and Board, Tom Gibson, Chief Financial Officer, and Randy Salisbury, Chief sales and marketing officer.
The conclusion of today's prepared remarks, we will open the call for a question and answer session.
And you wanted to participating on today's call does not have a full text copy.
Its release announcing these results you can retrieve it from the Companys website at Www Dot streamline health dot net or from numerous financial websites.
Before we begin with our prepared remarks, we want to be sure. We are clear for everyone on the record how certain information, which may be provided today as with all of our earnings calls should be viewed we therefore submit for the record.
Following statement statements made on this conference call that are not historical facts are considered to be forward looking statements within the meaning of the private Securities Litigation Reform Act and 1995. These are subject to risks uncertainties assumptions and other factors that could cause actual results to differ materially from those we may discuss please refer to the company's press releases and filings made with the U S Securities.
And of our price and Exchange Commission, including our most recent form 10-K annual report, which is on file with the SEC for more information about these risks uncertainties and assumptions and other factors as always we are presenting management's current analysis on these items as of today participants on this call should take into account. These risks when evaluating the topics. We will discuss please note streamline health is not.
Undertaking any commitment or obligation to publicly revise any such forward looking statements made today on today's call and we'll discuss non-GAAP financial measures such as adjusted EBITDA management uses these measures to help provide better insight into our financial performance. However, certain items of income and expenses are not included in these measures. So these calculations may differ from those which another.
Security is utilized and calculating their own non-GAAP measures.
To help you compare these amounts on consistent terms. Please refer to our website at www Dot streamline health Dot net and our earnings release for a reconciliation of such non-GAAP measures and the most comparable GAAP measures I would now like to turn the call over to Tee Green, President and Chief Executive Officer. Thank.
Thank you Jacob.
And thank you all for joining us this morning.
As I'm sure most of you are experiencing.
<unk> is beginning to return to more normal procedures.
The prevalence of vaccine to slow the spread of the virus, which is proving beneficial to all of us and.
Not only on Americans able to return.
And maintenance of normalcy, including gathering with friends and dining out but on health care providers are experiencing the same.
Returning to more normal operations and the number of Covid patients decreases, allowing for more elective procedures, which is a primary source of top line revenue from them.
As stated.
And on previous earnings call that we anticipated a change and the buying patterns of hospitals as they returned to more usual decentralized planning and budgeting.
And we are in fact seeing this among our many evaluate our prospects, but the demand to find and implement all of the individual department initiatives that.
And just and on the shelf since last March or creating a bottleneck that each health care providers working through and their own way most.
And most hospitals need to ensure new contracts have approved funds and the macro budget before proceeding to the next step.
We're just committing internalized T resources, so that new.
And <unk> will be implemented on a timely basis.
The final step and most instances as legal review and to from.
And then last sales contracts every legal department and we deal with today are inundated with these new request and new contracts.
Mentioned this because while we are seeing a fall in.
<unk> linear planning centered around caring for COVID-19 patients, we are not yet back to normal.
As Randy will detail on a few minutes our pipeline remained strong.
And with more opportunities moving into the last stage of the sales process, where force to be patient, while we get through the backlog of new.
And our prologis approvals and signatures.
We know the moves necessary to advance our technology to the top of the list and I believe we are doing a good job of this given the powerful return on investment or evaluate our technology has proven to deliver.
And result from my chair is that contract.
Technical will be lumpy over the near term, while we wait for final approvals on a number of contracts.
There are reasons from my enthusiasm around our evaluating technology. Besides the strength of our sales pipeline created by our direct selling efforts.
I mentioned last quarter and where.
And our signing new reseller.
Signature and it's with meaningful players in the healthcare provider industry <unk>.
During the quarter, we signed a referral agreement with a large consulting firm and.
And just recently, we signed a referral agreement and our 1 RCM a public company and I'm sure. Many of you are familiar with <unk>.
Our 1 Nasdaq.
And that symbol RCM is a leading provider of technology driven solutions that transform the patient experience and financial performance of hospitals health systems and medical groups. We are very excited about the potential for growth from these new agreements and the others were currently negotiating.
We.
We will keep you posted as these relationships grow and the coming quarters.
Moving now to our financial results total revenue for the first quarter of 2021 was $3 million compared to $2.8 million during the first quarter of 2020, notably our SaaS revenue grew 32% from the.
First quarter, 2020 to 'twenty 'twenty, 1 and recurring revenue accounted for 76% of total revenue this quarter, which was the same as the first quarter of 2020.
First quarter 2021, adjusted EBITDA was a loss and $700000 compared to an adjusted EBITDA loss of 600.
On $1000 during the fiscal quarter of 'twenty 2.
As of April 30.
And as we announced late in February we successfully closed a public offering during the quarter, resulting in gross proceeds to the company.
Company of $16.1 million.
GAAP table remains clean with approximately 43 million fully diluted shares outstanding as of today, all of which is common stock.
Our finance team has completed the paperwork to apply for the conversion of our P. B P loans secured and April 20.
And 2 a grant.
Tom Gibson, our CFO will provide additional details about our financials during his prepared remarks the.
And the streamline team has built a strong operational foundation that will enable us to support accelerated revenue growth.
We are using the new capital we raised in February to make.
Vital investments and sales marketing and key software enhancements that will enable us to continue to provide world class service to our clients and lead and industry movement to improve the financial performance of every health care provider through our evaluated pre bill coding analysis technology.
I will now.
I'll turn the call over to our Chief sales and marketing officer, Randy Salisbury for an update on sales activities and the state of our pipeline.
Andy.
Good day.
P mentioned, we're seeing more activity and the purchase decision, making process among our many prospects, but that process is by no means moving quickly.
During the quarter, we signed 2 new evaluate our customers amounting to $1.8 million and new bookings for the quarter.
And as we move into our second fiscal quarter, we have approximately 4 new contracts that are in what we would call. The final stages of our sales process on.
Pipeline remains very strong with prospects that have been generated primarily.
Through our direct selling efforts, but as Keith stated with the growth and the number of reseller partners and we anticipate seeing growth on the top of the funnel and the quarters ahead as we work together with these partners to target their best clients for our evaluate our technology today, we have fixed prospects in the pipeline from partners that number should gross substantial.
Italy, Italy overtime.
Our customer success team continues to meet monthly with customers to document the results evaluated and delivered specifically in terms of ROI.
As a result, we're growing and stable and happy customers willing to provide testimonials to the power of evaluating.
These references on our.
Standard both selling tool from a product like evaluate or our potential clients want to know that a they can achieve a significant ROI and be with their team can add this new tool into their workflow without disruption.
We completed an analysis last month looking back and comparing the ROI we projected.
And for our customers based upon on initial evaluated data analysis tool.
And to actual result months or years later.
Every case, where we projected and ROI the <unk>.
Actual results exceed.
And the projected results.
And my final comments this morning relate to the excitement we have regarding the growth and our sales.
And marketing efforts.
And as mentioned in April we're expanding our sales team from 4 regional Vice Presidents day 6 I am pleased to report we have met with a number of very qualified sales executives and believe we will feel both of these new regions by the end of the second quarter and.
Additionally, we're interviewing to fill the 2 new business development resource positions.
And we created at the end of last quarter.
These actions will have a positive impact on sales later in this fiscal year and into 'twenty 2 and beyond.
I'll now turn the call over to Tom Gibson, Our CFO to review and the first quarter's financial results in more detail Tom.
Thank you Randy total revenues.
First quarter and physical 'twenty, 'twenty, 1 were $3 million compared to $2.8 million and the prior year period.
SaaS revenue increased $287000 or approximately 32% compared to the same quarter a year ago.
And the revenue growth during the quarter.
Was driven by higher revenue from SaaS and software licenses offset by lower revenue from professional services audit services and maintenance and support.
Net loss for the first quarter of fiscal 2021 was $2.1 million.
For the first compared to net income of $3.7 billion during the first quarter of fiscal 2020.
First quarter fiscal 2021 net loss included $320000 of income from discontinued operations.
<unk> of the company's legacy ECM business, which closed February 2000 and for 2020.
This compared to $4.7 million of gain on sale and income from discontinued operations during the first quarter of fiscal 2020.
Income from discontinued.
Additions was offset by a loss from continuing operations for the 3 months ended April 32021 and 2020.
$2.5 million and $1 million respectively.
A large portion of the increased loss.
Operating <unk> operations and the first quarter of 2021, compared with 2020 was derived from higher amortization of software development costs incremental stock based compensation and certain non routine or transaction costs.
From people like adjusted EBITDA was relatively flat on consistent revenue.
Adjusted EBITDA for the first quarter of fiscal 2021 was a loss of $700000 compared to an adjusted EBITDA loss of $600000 and.
Of course quarter of fiscal 2020.
Moving to the balance sheet, we finished the first quarter with approximately $16.7 million of cash on hand.
Compared to $2.4 million at the end of fiscal year, 2020 and February.
In February the company completed a successful capital raise with gross proceeds of $16.1 million.
In March we replaced our asset base revolving credit facility with a $3 million capacity recurring revenue line facility.
We plan to leverage.
February seeds of our capital raise and additional debt capacity to make investments into sales and marketing and continued investment and the development of our flagship evaluate your solution.
Our mission remains to take full advantage of our position.
And as first to market.
And the pre bill coding analysis technology.
The company received a PPP loans of $2.3 million and April last year.
Company has applied for but not been granted forgiveness of the PPP loan at this time.
No accounting from the forgiveness will be reported and the company's financial statements unless or until it is granted by the SBA.
Outside of the PPP loan the company has no debt outstanding.
The company is not.
And to provide guidance for fiscal 2021 due to the continued uncertainty around the effects of the novel Coronavirus and.
As we have previously discussed the company is targeting 18 to evaluate your bookings for its physical 2021.
The company remains focused.
And the continued growth of SaaS revenue.
We are targeting a gross margin for SaaS revenue of 80% and physical 2023.
And our SaaS GAAP gross margins include amortization of historical development expense.
Given our evaluate or SaaS revenue volumes and the high levels of historical software development amortization, we have not yet reached our targeted gross margins and addition to potential operational improvements we will achieve this gross margin go as the aforementioned development.
And on good spend amortizing and we increase our evaluate or unit volumes.
And the fiscal year ended 2020, the company used approximately a million cash.
Cash per quarter from operations based on the company's current.
And the cash it will began generating cash from operations and Q2 or Q3 of 2022.
That concludes my remarks, I will now turn the call back from Tee Green for his closing comments G.
Thank you Tom.
And our executive team as managers and leaders, we maintain our focus on controlling what we can and winning at that every day.
Pleased and many of the difficulties of the past year are fading and we look forward to benefiting from significant improvements to our organization, including our teams and our products.
<unk> made during the past year that we believe will create a foundation for rapid growth about evaluate a solution.
Our vision to lead and industry wide and movement to improve the financial performance of every health care provider through our evaluate or pre bill coding analysis technology is being validated.
And with their customer base and the resorts they realized continues to growth.
Before we begin our Q&A session and I want to reiterate that I am pleased with the strength.
And talent of our people and I, thank them for their commitment and hard work on behalf of our customers ensuring they have the tool.
Tools, they need to free up time and resources to provide quality care to the communities they serve.
Thank you all for your support and streamline health and for your support of our vision.
Now I'd like to open the call up to your questions.
Operator.
And sorry to not be conducting a question answer session, if you'd like to be placed and the question queue. Please press star 1 on your telephone keypad, a confirmation tone will indicate your line is it. The question queue. You May press star 2 and people like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing.
And Darwin 1 moment, please pull for questions. Our first question today is coming from Matt Hewitt from Craig Hallum. Your line is on life.
Good morning, and thank you for taking the questions Ive got a handful here first up or maybe if you could walk us through the typical sales process I think you and it was helpful.
To hear kind of where the potential logjams are where those logjams are popping up but could you walk through the typical sales process and then I think you mentioned kind of the budgeting and on the legal side is where you're seeing those logjams right now maybe walk through what you know how those logjams are coming about and more importantly, what do you think it's going to take to kind of get.
Get through a breakthrough those those items.
Yeah, Matt. Thanks. This is T O our part and then let Randy chime in but.
Obviously coming out of of.
Of Covid and health care systems, we're beginning to see the clinical financial and administrative decisions you know going back to that.
Departments, rather than what we spoke about during the pandemic was that linear decision. It was Covid, then and everything else kind of had to fall in line. We're seeing health systems go back to where it departments are beginning to prioritize.
Their needs and which you know that translates into new contracts with new companies and new vendors.
They were spent so that that's the positive ROI, you're beginning to see that happen.
The negative is that most health systems have that 1 legal department where.
And now there's a backlog of contracts and need to be reviewed and.
And so we're beginning to see those contracts come back to.
And Red line, which is fantastic and that means that they're working through the system not just sitting there and.
And so that's phase 1 phase 2 then is once we get through the Red lines, which we haven't had real issues doing that with any of the other contracts is fairly straightforward, but the second thing is is is having a T resources assigned to the stream.
Why and evaluate a project.
And so that's another backlog. So you know very similar to the supply chain, you're seeing and and.
And and other.
Goods around the country, where.
And L. A you've got 42 ships that are backed up and the port.
Got to come through the system that's no.
Different and what we're seeing and the health systems, they're getting back to business.
I think the thing that we're encouraged by we will see and the next you know.
All of it and there's certainly this next quarter is will our contracts to get to the top of the list. We think they will because 1 its an ROA at it and it's not it's it's.
Its new its not a replacement because if you're on the replacement business with technology.
And I believe yeah.
We can still we can do what we're doing what we will get to it but if it's a new technology or service that has a tremendous rois like evaluate or does.
We believe those and so on and it's a fairly light.
Implementation, because we're not converting off anything right, we're not having to migrate data from 1 system to and it's kind of a net new install with with with Greg on ROA. So we'll see but I you know I'm encouraged that the the dialogues, we're having with Ceos and Cfos.
They're getting that when we if there's 10 contracts on the on the desk.
And you pick the 1 that's going to give you the the biggest bang for the Buck with the easiest implementation, so I'll pause there and let Randy chime in.
Yeah.
Mike I can't add anything to that.
Right.
Momentum.
Oh, Yeah, no that's really helpful and and thank you.
I guess it kind of staying on the pipeline side of the equation on.
As you've had some success are you seeing the size of the contracts or the size of the customers grow and I guess as we enter June 30th that's you know fiscal year and for.
For over half of the health systems and the U S are you seeing and opportunity to get into the new budgets for the upcoming fiscal year.
Randy why don't you take that 1.
Okay.
The answer to that and that is absolutely and that's a lot of what T and speaking of.
As.
Approach. This next fiscal year on July 1 start and by the way we're working on a couple that are October 1 start.
And that's where we're seeing this return to more normalcy doesn't mean they'll get funded but what they're what we're finding is the efforts we put in last year on.
And now coming to fruition.
As we have and as a number of the prospects that have their hands tied are saying. This is great. We're really excited about this.
And in the month of May and mostly we put it into the budget, we expect to hear and June with approval, we'll move ahead.
And the new physical and I'm I've mentioned, it's looking back real quickly on them.
Probably.
Fruition for those that are waiting.
Budget approval, they may not get it I think they will in many instances, but as Tee mentioned every department now clamoring for money because they've had their initial initiatives put on hold for so long, but we've done a pretty good job of showing that this pays for itself pretty.
Quickly.
So even though they have to be budgeted unquote.
It makes it a little easier and swallow so we'll see but that's part of what we're doing this month.
Okay. That's good on their side of the question is the other side was yes, we are calling on larger and larger institutions and we leverage relationships we have with our.
Current large ones.
And health Memorial Hermann and some of those guys come to mind as you know 2500 beds and up and were seeing.
Great product progress with a number that are and the 4000 and bad and 5000 and bed range.
That's great. Thank you and then kind of shifting gears to the partnership side of the equation.
Congratulations on the on the new agreement with our 1 maybe talk a little bit about how that came about and whether or not and this is something that they could you know I think about their business being you know throwing people at the problem and trying to get the audits done and is this something that they'll be using internally I mean are you selling them a license or is this is the.
<unk> sign on either new contracts or ones with existing customers there'll be kind of bringing your recommending you to that customer.
Yeah, Matt I'll take the first part and let let Randy.
Phil and the blanks, but you know in general you have.
A number of.
Of health systems, or outsource organizations that are very labor intensive right and and that work on your labor Force was there.
But with this low.
And obviously what's happened.
You're seeing it and I don't know the percentage yet, we'll certainly see that over the next several months but.
Or maybe the next 2 quarters.
A lot of these these these.
Auditors coders Biller and what are you know people that worked and that RCM service world, they're not coming back into the work force.
And so I think a number of companies and health systems are saying wait and we have to have technology.
That's going to make us more efficient and and and being able to perform at a higher level. So I think it's you know.
Evaluated had such a demand going into it and I think the demand coming out of it those that.
And where might not necessarily been looking for technology to replace the human capital.
We're looking at it now so Randy I'll, let you take the rest of that 1.
Sure. Thanks day ma'am.
Matt just like the a reseller arrangement from a couple of months couple of 3 months ago with a large.
Accounting and slash consulting firm.
Each remained unnamed.
So our 1 is not licensing it and using it themselves I think even better there, they're referring us to their customer base, they're finding that.
<unk> is a much more efficient and smarter use of new technology. It has a halo effect and that it makes them look good as the trusted adviser.
So and extends the strength of their relationship.
And it brings to their user base technology, with which they're probably not familiar and where they can see the benefit and return on investment pretty quickly. So both the previous large a big 4 accounting firm and our 1 are approaching the market and similar ways.
Got it Alright, and then maybe a cup.
A couple for Tom on the expense side of the equation. The 440000 of nonrecurring expenses that hit and the first quarter, what were those tied to and and you know.
Is there going to be any tail to that and in here and the second quarter.
Hey, Matt.
Bill on this morning.
So theres going to be a little tail on some of those non routine costs are there a lot of that is associated with some strategic transactions.
On that are underway as well as there was a 1 time.
How are you and this to certain executives for successfully coming out of Covid and complete and the capital raise.
Got it and then on the gross margin front and and thanks for giving us that.
Our guidance on this SaaS gross margin.
What is.
But the ramp I mean, how should we be thinking about the ramp to get to 80% is that going to happen over a couple of years and you know where do you see that kind of shaking out over the course of fiscal 'twenty 1.
Yeah, I think it's a it's a gradual improvement from where we are now to physical 2023.
And achieving that 80%.
So you know we have and our models.
60 to 70.
Evaluated clients and fiscal year 2023, so as you add that volume and you have that amortization.
Becoming a smaller portion of your overall costs you're going to.
Achieve that margin.
Great. Thank you and that's all I've got thanks a lot.
Thank you Matt.
Thank you, we reach and of our question and answer session I'd like to turn the floor back over to Jacob for any further closing comments.
And thank you all again for your interest and support and streamline health, Yeah, and any additional questions or need more information. Please contact me at Jacob Goldberger at streamline health Dot net.
Look forward to speaking to you all again in September when we will discuss our second quarter financial performance Good day.
Thank you and.
It does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day.
And for your participation today.
Yeah.