Q2 2021 Streamline Health Solutions Inc Earnings Call
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Greetings and welcome to streamline health solutions second quarter, 2021 earnings conference call and corporate update.
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A question and answer session will follow the formal presentation.
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I would now like to turn the conference over to your host Jacob Goldberger Director of Investor Relations F. PNA. Please go ahead.
Thank you for joining us for the corporate update and financial results review of streamline health solutions for the second quarter of 2021, which ended July 31, 2021 as the conference call. Operator indicated my name is Jacob Goldberger, joining me on the call today are key Green, President and Chief Executive Officer, and Chairman Board too bad shape.
President and Chief Executive Officer of Abbvie, Streamline Health Company, Randy Salisbury, Chief sales and marketing Officer, and Tom Gibson, Chief Financial Officer at the conclusion of today's prepared remarks, we will open the call for a question and answer session. If anyone participating on today's call does not have a full text copy of our press release announcing our results you can retrieve it from the top.
These web site at Www Dot streamline health dot net or from numerous financial websites.
Before we begin with 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. The 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 of 1995.
And 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 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 of these items as of today.
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. We will discuss non-GAAP financial measures such as adjusted EBITDA and unaudited figures related to our recent acquisition badly.
Management uses these measures to help provide better insight into our financial performance. However, certain items of income and expense are not included in these measures. So these calculations may differ from those which another may utilize in calculating their own non-GAAP measures to help you compare these amounts on consistent terms. Please refer to our website at www dot through might help that net and our earnings release for a reconciliation.
Such non-GAAP measures to most comparable GAAP measures I would now like to turn the call over to Tee Green President and Chief Executive Officer go ahead.
Thank you Jacob and thank you all for joining US this morning and.
In addition to our quarterly report we were excited to discuss our recent acquisition of Abilene as Jacob mentioned today, we are joined bunch of odd shake he founded and grew I believe they will continue to lead that business going forward.
Rod will not be making a regular parents on these calls, but we want you all to hear directly from him about Abilene solutions and his vision for the future. He will also be available for Q&A following today's call.
Our company follows a straightforward formula for revenue growth and that is innovation like our paradigm shifting evaluate or software plus service like our customer success team.
Equals growth.
Plus S equals Jeep.
Regarding our innovative evaluate or solution, we continue to expand its capabilities and improve its features and benefits.
Our customer success team provides support and reviews evaluated as top and bottom line effects on our customers revenue. This service and innovation combination continues to yield growth today, we have a strong stable of reference customers and expanding list of reseller partners and growing number of large well known healthcare providers and ours.
Sales pipeline.
Moving now to our financial results as a reminder, Abilene just not included in these figures.
Total revenue for the second quarter of 2021 was $11.0 million in line with the second quarter of 2020, notably our SaaS revenue grew 59% from second quarter 'twenty 'twenty to 2021 recurring revenue accounted for 84% of total revenue this quarter compared to 71%.
For the second quarter of 2022nd quarter 2021, adjusted EBITDA was a loss of 800.
Dollars compared to an adjusted EBITDA loss of $400000 during the second quarter of 2020.
As of July 31, 2021 we had $23.0 million of cash on hand with no bank debt.
In connection with their acquisition of Avidly, we utilized approximately 13 million of our cash and entered into a $10 million term loan with bridge bank.
We also issued $8 million of restricted stock to the sellers to round out the purchase price at closing.
Our cap table remains clean with only one class of common stock.
Tom Gibson, our CFO will provide additional details about our financials during his prepared remarks.
Over the last two years to streamline team has made significant strides to position our company for growth.
We eliminated our outstanding preferred stock to clean up our cap table cleared the bank debt on our balance sheet down a great fit for our legacy ECM business and successfully raised $16 million in our March 2021 offering.
These achievements put us in a position to complete our recent acquisition of Abilene, a major milestone for our company.
Our leadership team was impressed with Abilene solutions, and we're not the only ones. Some of the largest hospital systems in the nation have embraced average revenue cycle solutions. As a result, the company has enjoyed rapid revenue growth as of June 30th 2021 I believe SaaS AAR our runway.
Run rate was $12.0 million in total revenue for the trailing 12 months totaled pinpoint $2 million, we expect that Abilene SaaS revenue for fiscal 2021 will be more than twice that of fiscal 2020.
By combining abilene with streamlined we have nearly doubled our consolidated revenue move closer to profitability and expanded our portfolio of products and revenue cycle management for all of our customers.
We are thrilled to welcome <unk> shaken the Abilene team to screen, what they have done a tremendous job building a successful business now it is my pleasure to introduce the newest member of our team.
I'd shake the president and CEO of Abilene Streamline health company.
Thank you T. It's a pleasure to have the opportunity to speak with all of you.
I believe the mission is to put an end to lost revenue for our health care providers as those of you follow the revenue cycle management space closely most health care organizations are losing millions of dollars every year as a result of clinical errors and the increasing complexity in coding and billing.
And I believe we've built a suite of revenue cycle solutions borne out of our consulting practice that just like evaluate or help our health care providers to capture 100% of the revenue they burned.
When I had a chance to sit down with tea and better understand his vision I realized I could not have identified a better partner for our company our customers for our employees.
Just like streamlined and I believe we go to market through a combination of direct selling and through partnerships with industry influencing EHR leaders.
Also like streamline our solutions, our EHR agnostic, yet we enjoy a long standing relationship with Cerner, which has helped drive our growth and helps cerner contingent envelope their customers with like minded partners.
Today, we are primarily focused on our flagship <unk> solution, which is an ideal complement to evaluate or.
Rabbi D eliminates revenue leakage before claims are processed by comparing posted charges to clinical information ensuring that our hospitals coding staff have complete and accurate information with which to construct their bill.
Beyond <unk>, we are in the early stages of rolling out additional cloud based solutions for different portions of a healthcare providers revenue cycle I'm sure. This team will keep you apprised of our progress in the market over time.
Today, our solutions and services are utilizing more than 87 hospitals and in every case, we have delivered a significant positive ROI for our customers.
Here at athlete, we are thrilled to join forces with streamlined.
Under <unk> leadership, and I see a bright future for our combined organizations.
Now I'd like to turn it over to Randy Salisbury, Chief sales and marketing officer at streamline health.
Thank you Giovanni and welcome aboard.
I stated last quarter that we believed departmental decision, making was beginning again as the initial difficulties of dealing with the novel Corona virus began to lessen as.
As the number of people receiving vaccinations grew.
This was before the Delta variant became more prevalent and now we're experiencing some decision, making delays again, but mostly in areas of the country that have been hardest hit with new Covid cases.
Many of these health care providers have been forced to suspend elective procedures, which generate a substantial portion of their topline revenue.
Financial uncertainty created by these factors tends to delay, but not cancel evaluate or approvals.
That said, we sold approximately one and a half million dollars or evaluate our contracts in the second quarter of this fiscal year and I'm pleased to report that we just signed a new million dollar evaluate our contract with the North Carolina based health care provider and we're in the final stages of signing another larger contract with them.
Very high profile hospital system in the near term, which is a good start to our fiscal year third quarter.
During the second quarter, we made some substantial additions to our sales and marketing teams.
As our customers continue to experience hardships with staffing accurate coding and more we want to provide support for them through our unique technology. During the third quarter last teach a very senior and successful strategic leader joined our company as senior Vice President of business development.
Lance is a proven and experienced leader in the coatings space. He was instrumental in helping assigned some of our most recent large channel partner agreements.
And on that note during the second quarter, we added two new reseller partners and a third one in the month of August bringing the total number of evaluate our resellers to eight.
During the second quarter. These partners added 10, new prospects to evaluate a pipeline and.
And we added five more just in the month of August.
Our primary objective going forward is to activate the many opportunities these partners represent.
To drive more signed evaluate or contracts.
We also hired a new regional vice president of sales for our Western region.
Our experienced and successful salesperson in revenue cycle management technologies.
With great provider relationships throughout the western United States.
She joined our company because she sees how evaluate or can help hospitals improve financial performance.
And as we discussed on last quarter's call. We expanded our sales development efforts with the addition of two new BD ours or business development Representatives, our new team members are already contributing and securing introductory conference calls.
<unk> new prospects.
And our regional Vice presidents of sales.
Their focus is to open doors and set appointments with executives in the revenue cycle management Department of leading health care providers throughout the country.
As you can tell I'm very excited about the progress we're making in the sales and marketing area. Our goal is to lead an interesting movement to pre bill revenue integrity validation.
And large reseller partners with hundreds of active provider relationships will help us expand our reach and accelerate our sales.
I'll now turn the call over to our CFO, Tom Gibson to review the second quarter's financial results.
In more detail.
Tom.
Thank you Randy total revenues for the second quarter of fiscal 2021 were $11.0 million in line with the prior year period.
<unk> revenue increased a half million dollars or approximately 59% compared to the same quarter a year ago.
Revenue during the quarter was impacted by significantly higher revenue from SAS all.
Set by lower revenue from software licenses and professional services and audit services.
During the quarter.
Second quarter 2021, operating expenses were $8.0 million compared to $5.0 million for the prior year period.
The higher operating expense of $3.0 million is related to nonrecurring transaction expenses higher rates of amortization.
On software development higher rates of stock compensation, and a higher allocation of R&D expenses, not being capitalized as compared with the second quarter of 2020.
R&D expenses grew a half million dollars, primarily due to lower capitalization of development expenses.
As previously reported the company is spending more of its development efforts on the products that will provide growth.
This transition has had an impact on the amount of capitalized development costs in the first six months of 2021.
Loss from continuing operations for the three months ended July 31, 2021, and 2020 totaled $1 million and point $1.2 million respectively.
Loss from continuing operations for the three months ended July 31, 2021 included $5.0 million of income associated with the forgiveness of our cares Act loan.
Net loss for the second quarter of fiscal 2021 was <unk> $1 million as compared to a net loss of $2.0 million.
During the second quarter of fiscal 2020.
Second quarter fiscal 2021 net loss included a $11000 of income from discontinued operations of the company's legacy ECM business, which was sold and closed on February 24, 2020 <unk>.
Compared to $28000 of income from discontinued operations during the second quarter of fiscal 2020.
Adjusted EBITDA for the second quarter of fiscal 2021 was a loss of $8 million compared to an adjusted EBITDA loss of $4 million in the first quarter of fiscal 2020.
The lower adjusted EBITDA is substantially all related to the lower rates of capitalization of R&D expenses.
Moving to the balance sheet as of July 31, 2021, we had approximately $23.0 million of cash on hand, compared to $6.0 million at the end of fiscal year 2020.
Subsequent to the second quarter ended July 31, 2021, we completed the acquisition of athlete.
Inclusive of transaction expenses, the company used approximately $13 million of cash to close the transaction and we closed on a new $10 million term loan facility from bridge bank to finance the deal.
Concurrently.
With closing on our term loan we terminated the existing 3 million dollar revolver, which had no outstanding balance at the time.
The company is not in a position to provide guidance for fiscal 2021 due to the continued uncertainty around the effects of the novel Coronavirus. The company remains focused on continued growth of SaaS revenue.
We're targeting a gross margin for SaaS revenue of 80% and physical 2023.
Currently our SaaS GAAP 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.
In the second quarter and the first six months of 2021, the company achieved gross margin in excess of 80% for SAS after adjusting for amortization of software development costs.
The company is evaluating its consolidated forecast with I believe however, it remains optimistic that the combined entity will reach cash generation by Q2 or Q3 2022.
That concludes my comments I will now turn the call back to Tee Green for his closing remarks.
Thank you Tom with the successful acquisition of Abilene, continuing our focus on technologies to help healthcare providers improve their financial performance sustained growth of our SaaS revenues in two years' worth of strategic accomplishments to successfully position our company to seize market opportunities in mulch.
All areas of revenue cycle management.
Feel confident that streamline is entering a new and exciting chapter.
Today, we have a strong leadership team and talented team members across all departments. Our vision of prebuilt revenue integrity continues to gain momentum in the market and more providers every day or understanding the power of tools like evaluated and rabbi deep that.
So we may continue to be hampered somewhat in the short term by the macro impact of the coronavirus. We are focused on controlling what we can and winning at that every day.
The opportunity in front of us cannot be overstated and I look forward to sharing our successes with you in the quarters to come.
Before we begin our Q&A session I'd like to extend my heartfelt. Thanks to the team members that streamline and apply for their hard work and perseverance during an enormously challenging time.
Their contributions enable us to support our hospital system customers and ensure that they have the tools they need to free up time and resources to provide quality care for the communities they serve.
Thank you all for your support of streamline health and for your support of our vision now I'd like to open the call up to your questions.
Operator.
Thank you Sir.
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Our first question today is from Matt Hewitt of Craig Hallum Capital Group. Please proceed with your question.
Good morning, and thank you for taking the questions first one for me I'm curious if you've had any opportunity to speak to some of the heavily customers get initial feedback from them on you know on what their thoughts are.
Maybe talk a little bit about the cross selling opportunity with evaluate are and whether or not there is any initial overlap do you have a customer that's using both platforms.
Hey, Matt T O.
I'll start that and we can let Randy and javan jumped in as well but.
You know when you look at when you're looking at.
Well, one part of the due diligence process right, yes, we talk to.
I believe customers obviously.
They weren't at static and didn't see.
We probably wouldn't have done this so.
You know the technology, that's being built at Abilene, which you bought you know it started out very much like evaluate a ride it started out as a consulting organization that has tremendous domain knowledge and I think that's where very very powerful software platforms of all from in the revenue cycle is theyre not theyre developed with tremendous core domain knowledge, which that that's.
Really key here with both of these solutions, but you know Rab Ids on the pre closing side and evaluated on the post coating side, but they're both pre bill so it fits exactly where we want to be now in reference to the cross selling.
You are sort of I'd say 83 health systems. So yeah, I mean, that's a big market right in and then vice versa. The robot then you will have opportunities in the in evaluating our customer base and we did have some that are they're using both but there's two different sides of the house.
It's new but right now the two companies or are you know certainly operating independently and we want to continue that and continue to see both of them grow so Randy or Giovanni would you like to opine on any of that.
And you know again this is Randy I'd be just.
Just to say quickly I think one of the upsides math is.
Short of CHS I don't believe we have any combined customers, which is great we have opportunity there John.
No exactly I was going to stay the same thing and I think our customers are kind of really excited for them from a to full perspective.
The ability for us to grow and do more things faster and better.
The on the athlete side and then just a lot of interest just kind of on the evaluate our profit as well too. So we can come away with a holistic approach to helping them with their pre bill activity.
That's great and then I guess shifting gears, a little bit to the partners, having I think you're up to eight distribution partners. Now streamline is and then I believe Scott Cerner is there an opportunity to to bring or AD evaluate or to.
The Cerner distribution agreement or what are your thoughts there.
Well this is Tim again, great question and on.
Evaluating side, just first Randy and team with their new business development leader and Lance seems they've done a tremendous job, bringing on partners that see the evaluate they see the value and evaluated obviously, we want to introduce those partners too.
Rev I D and Abilene team at the right time.
Saying that we also would like to evaluate a platform to be introduced to the cerner teams at the right time, but so you can we certainly see you know being <unk>.
Pre Covid post Covid, all prebuilt part of that mix of the revenue cycle is unique and so this is going to be very attractive.
I believe cerner and others.
Fantastic and then maybe one last one and I appreciate it.
And somewhat disappointing that we've had this spike in adult all and that's maybe delaying some of the the purchasing decisions.
Do you think your pipeline has continued to build throughout this it's not like it doesn't sound like you've lost anyone from that pipeline. It's more just getting people across the goal line. What do you think it is going to be the trigger that that really gets customers to say, okay. We we've done our due diligence, we've we've learned and as much as we possibly can worksite.
<unk>, we're ready to sign a contract is there any one or two things either macro or micro level that you think will ultimately lead to that to those contracts getting signed thank you.
Yeah. This.
And this is to you again, and then I'll turn it over to Randy I just gave you.
I was with the.
Number two got it at a large health system. This past weekend over labor day.
And he says T our beds.
Or are completely full.
And we have people in the halls, and waiting and this delta vantage. So it's a temporary spike I mean, it's there. It's real you can work I don't care, if you're in Cortlandt, Idaho or you know in Georgia.
You're seeing the spike across the board you're seeing it in some areas start to dissipate, which is exciting but you know I think as we announced yesterday with the with the another great health system that has come on board that golf is going to happen.
The timing of that at all I don't know Randy you can give some more insight there because you're dealing with it every day, but in in.
In general our pipeline continues to grow the number of contracts that we're sending out continue to grow.
And you know you just got to get through that that backlog and their legal departments to Randy.
Yeah, I would echo that I would suggest Matt that Ts right, but the volume of deals moving into the final stages, where msas are out there they're looking at them, they're kind of waiting to get approval one of the things that helps from a macro side is the company that Keith and the more we win the more we're going to win so make no mistake.
We use victories in our direct marketing and we go back to prospects in the pipeline and tell them you know.
More and more healthcare providers, just like either whether your epic based or cerner based or matters not to us.
Selecting evaluated and Theyre seeing a positive ROI that messaging kind of helps keep the momentum going and they move up the list of priorities to be signed given that all of these hospital systems have multiple priorities that they're looking at.
Yes.
One man.
Matt I'll add one more thing to that too because you're talking about the macro side of it.
You know one evaluate or it's not a D install is not a conversion.
And every month they don't move forward they know how much money, they're losing so I think I think our sales team has a real advantage when these contracts starting to fall.
What was health system is going to do first I think theyre going to take the easiest route that's going to have the biggest core ROA and that's evaluated.
Got it that's very helpful. Thank you very much.
The next question is from Brooks O'neil of Lake Street Capital markets. Please proceed with your question.
Good morning, guys good questions from Matthew there.
Just two one.
And they have bolstered your bond actually I I was curious Javan your company was for sale.
Before being approached by T and team and then secondly, I'm curious I I can see all the things you bring to streamline I'm curious as you evaluated the merger possibility here aside from the money, which is obviously probably.
Significant.
Are there things you see in the streamline organization or product line or a capability set that you think are going to enhance the growth of your company.
As you looked at your possibilities down the road thanks a lot.
No. Thanks for the question.
Our strategy was really about growth one of the things we were looking at for I believe what is how we're gonna grow how we're going to grow faster and solve the problems that we see in health care. So when you say we were on market. We were still looking for opportunities to do that whether that was through acquisition.
Through our investment and we looked at all of those opportunities we actually we're growing so successfully on our own we decided to go off market, but during those conversations while we were on market, we had spoken to T and the streamline team and really liked their vision. They kind of came back to US again. After we went on an off market and said Hey, we're really interested.
Listed in doing something.
Built that great relationship.
Shared vision and their plans were for growth are just for growth. So that was the primary factor.
Wanted to move forward.
Oh, great. Thank you very much.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Okay.
There appears to be no additional questions at this time I would like to turn the call back to Jacob Goldberger for closing remarks.
Thank you all again for your interest and support of streamline health. If you have any additional questions or need more information. Please contact me at Jacob Goldberger at streamline health got met.
We look forward to speaking with you all again in December when we will discuss our third quarter financial performance.
This.
Today's conference you may disconnect your lines at this time, thank you for your participation.
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