Q3 2021 Streamline Health Solutions Inc Earnings Call

Greetings welcome to streamline health third quarter 2021 conference call at.

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A question and answer session will follow the formal presentation.

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I will now turn the conference over to Jacob Goldberger. Mr. Goldberger, you May now begin thank you for joining us for the corporate update and financial results review streamline health solutions for the third quarter 2021, which ended October 31 2021.

The conference call Operator indicated my name is Jacob Goldberger, joining me on the call today are key Green, our President and Chief Executive Officer, and Chairman Board, Randy Salisbury, Chief 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 any.

Full text copy of our press release announcing these results you can retrieve it from the company's website at Www Dot streamline health dot net or from numerous financial websites.

Before we begin with prepared remarks, I want to be sure. We are clear for everyone on the record how certain information, which may be provided today as all of our earnings calls should be viewed with air Force's name 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.

They're subject to risks uncertainties assumptions and other factors that could cause actual results to differ materially from those discussed please refer to the company's press release and filings made with 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 today just spent on this call should take out these risks when evaluating the topics we love to Scott. Please note streamline health is not undertaking any commitment or obligation to publicly revise any such forward looking statements made today.

Today's call, we will discuss non-GAAP financial measures such as adjusted EBITDA and unaudited figures related to our recent acquisition of badly management uses these measures to help provide better insight into our financial performance. However, certainly items of income and expense are not included in these measures. So these calculations may differ from those which another entity may utilize in calculating their own non-GAAP measures.

That'll be compelled to use my mouth 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 to the most complete GAAP measures.

Now I'd like to turn the call over to Tee Green, our President and Chief Executive Officer.

Thank you Jacob.

And thank you all for joining us this morning.

As we have previously announced on August 16, we acquired Italy, and going forward their financial performance will be included in our GAAP results from that date.

As a company we continue to follow a simple formula for successful growth.

Innovation plus service equals growth.

Our goal is to back up our innovative industry, leading solutions like evaluated and wrap up with.

A world class customer success team to create a community of customers that enhances our potential for long term revenue growth.

Today, our flagship solutions evaluating Rabbi D are leading an industry movement to help our hospital customers capture 100% of the revenue. They have earned for the care. They have provided through revenue integrity validation before bill goes out the door.

Our focus on shifting revenue integrity practices to the front end of the revenue cycle yields significant return on investment for our customers and is driving our rapid SaaS revenue growth.

To capitalize on the significant opportunity in front of US we made key investments in the value later side of our business throughout the year, especially in sales today, we've built out a direct sales force with four high profile regional Vice presidents all of whom have demonstrated a track record of closing deals we are partnered.

Each of these RV piece with a business development represented to open more doors and schedule evaluated presentations with our prospective customers.

The investments into our new RV piece and their BD. Our partners are in addition to our previously announced hiring of Lance seat, our senior VP of business development, who has been instrumental in signing some of our most meaningful channel partner agreements.

The investment we made in sales talent has increased the number of evaluating prospects in our sales pipeline.

As previously announced evaluate or was the subject of a positive report published by Klas research.

A leading health care at T research firm classes of resource that hospital executives used for guidance on what to buy.

The report highlighted the strong capabilities of evaluate her and our customer satisfaction with the technology.

Research conducted surveys with Standalone hospitals, and found that 100% of customers. So very positive outcomes within six months and universally agreed they will buy evaluate or again.

There was high praise for evaluated targeted reporting and robust rule sets as well as streamline his willingness and ability to make enhancements to the system.

We believe well regarded third party confirmation of our innovative products and strong customer service reflects the reputation the streamline is building and the health care community.

But didn't Abilene business, while we plan to make additional investments into the sales team. We are currently focused on the eye and the S functions of our growth equation.

Innovation and service, we recently hired a new technology leader, whose focus will be ensuring that Abilene software remains highly scalable.

The strength in Abilene service function, we added a new service leader, who will be responsible for overseeing its customer success team to ensure the highest level of customer satisfaction.

Moving now to our financial results on an unaudited pro forma basis, assuming we had owned Abilene for the entirety of our fiscal third quarter of this and last year total revenue was approximately $6 1 million.

Up 17% compared to approximately $5 2 million during the third quarter of 2020.

Pro forma unaudited SaaS revenue totaled approximately $3 1 million.

81, and a 1% increase compared to approximately one 7 million during the prior year period.

Moving now to our GAAP consolidated financial results for the three months ended October 31.

Total revenue for the third quarter of 2021 was $5.5 million and 110% increase from the third quarter of 2020.

Notably our SaaS revenue grew 214% from the third quarter of 2022 2021.

Recurring revenue accounted for 71% of total revenue this quarter compared to 75% for the third quarter of 2020.

Third quarter 2021, adjusted EBITDA was a loss of $300000 compared to an adjusted EBITDA loss of $700000 during the third quarter of 2020.

As of October 31st 2021, we had $10 $4 million of cash on hand, with $10 million of debt related to a term loan, which we entered into with bridge bank subsequent to the acquisition of Avalere.

To close the ablate acquisition, we utilized approximately $12 $4 million of our cash and issued approximately $6.6 million of restricted stock to the sellers.

In addition to the closing consideration.

We contracted an earn out over the next two sequential 12 month anniversary of the closing of Abilene that is tied to Italy's performance and includes a combination of cash and restricted common stock.

Our cap table remains very clean, but the only one class of common stock.

Tom Gibson, our CFO will provide additional details about our financials during his prepared remarks.

Now I'll turn the call over to Randy Salisbury sounds great for an update on sales Randy.

Thank you Pete.

Total bookings for the third quarter of 2021 were $2 $1 million approximately $800000 of which was attributable to our SaaS solution.

On the evaluate or sales and marketing front, our primary focus is on moving our evaluated prospects.

Through our selling process from stage one qualified.

To stage for contracting.

During the third quarter, we had three prospects in the contracting stage and we signed one Carolina East Medical Center.

Following that we moved two more prospects into the contracting stage.

We anticipate two of the four prospects in contracting will find deal for valuate or in the next couple of weeks and.

And we're pushing to close the others in January before the end of our fiscal year.

The first two contracts alone would generate enough bookings to meet our quarterly goal of $2 million to $3 million.

Now that we've completed the transformation of our sales force and she mentioned at the outset of this morning's call I look forward to improved bookings momentum.

Our current team of proven consultative sales look like we'll cover each of our four sales territories.

Eastern Seaboard, Great lakes central and western regions.

Each of these regional Vice presidents of sales are supported by a dedicated business development resources to help them mine their territories generate leads and schedule introductory meetings.

And by the way, we're finally, starting to see some in person on premise sales presentations, which we've been asking for most of this fiscal year, but we have not realized since many of our key decision makers and ultimate end users are still working from home.

As a reminder, we target medium to large sized hospital system.

Giving the given the scale of their operations These health care systems experienced.

Staffing and accurate bill coding among other complexities in the revenue cycle, making them ideal candidates for our technologies.

When we go to market, we're able to show potential customers a clear return on investment based on our analysis of their historical billing data in the form of Medicare billing during calendar year 2020.

Our prospective health care provider customers can see for themselves the upside that our solutions deliver prior to making a decision.

Another area of focus for us is building and maintaining a sustainable business pipeline for our industry, leading a body of water technology.

Despite the ongoing difficulties associated with COVID-19, we continue to generate interest in our pre bill coding analysis to listen and we expanded our list of prospects via our direct selling efforts in concert with the business development team.

And we have the great work, our reseller channel partners are doing an expanding roster of vendors or consultants with large health care provider practices.

During the third quarter, our new BD are secured 23 initial evaluated presentations and.

And they did so just in the last two months of the quarter.

Further the reseller partner channel has generated approximately 17 prospects and are opening additional opportunities for our vps in the sales pipeline.

With the introduction of the Delta Varian earlier, this fall and now the threat of the Omicron variant looming.

Many health care providers are still experiencing significant disruption to their operations.

Some cases, including the suspension of high value of electric procedures with the attendant negative effect on their revenue much like other companies, whose business is selling enterprise software to hospitals many of our prospects of delays in decision, making due to the uncertainty related to the top line revenue, which has a significant impact on their budgeting process.

Financial uncertainty created by these factors tends to delay, but not cancel new purchase approvals.

As we continue to increase our prospect count we expect to translate our expanded pipeline into an accelerated rate of bookings.

Normalized environment.

In addition, many of the contracts in our pipeline are on average significantly larger than our historical $300000.

Annual contract value.

These factors considered we remain confident in the long term opportunities ahead of us and continue to target closing $2 million to $3 million of staff diluted per quarter.

The sales team is very pleased with the expanding roster of record to bulk customers.

As mentioned in previous earnings call, we know that as our community of happy customers grows the idea of leading health care providers, joining our movement.

It is easier to envision and an act.

I'm very excited about the progress we're making in the sales and marketing area. Our goal is to lead an industry movement to pre bill revenue integrity validation, we believe that by leveraging our talented teams and large reseller partners with hundreds of active provider relationships will be able to expand our reach and accelerate adoption of our technologies.

I'll now turn the call over to Tom Gibson, Our CFO to review the third quarters financial results in more detail.

Thank you Randy.

Total revenues for the third quarter of fiscal 2021 were at $5 $5 million.

109% increase over the comparable period of last year.

$2 million of the increase as a result of the acquisition of the heavily on August 16 2021.

SaaS revenue increased one $9 million or approximately 214 per cent compared to the same quarter a year ago.

$1 2 million of the increase and SaaS revenue.

Attributable to Abilene.

Third quarter 2021, operating expenses were $9 3 million.

Compared to $4 $5 million for the prior year period.

One $9 million of the increase is related to non routine costs, primarily attributable to the acquisition.

$2 3 million of the increase is related to heavily.

R&D expenses grew $6 million.

3 million of that increase is related to Abilene.

The higher R&D expense is impacted by lower capitalization rates in the third quarter than prior periods.

The value weighted toward the evaluated product.

Loss from continuing operations for the three months ended October 31, 2021, and 2020 totaled $4 $4 million and $1 $9 million respectively.

Loss from continuing operations for the three months ended October 31, 2021 included one $9 million of non routine costs and other expenses of <unk> 6 million each are primarily related to the acquisition of Avalere.

Depreciation and amortization increased approximately $4 million and there was an income tax benefit of $8 million in the press.

Our year associated with accounting for the discontinued operations.

Adjusted EBITDA for the third quarter of physical 2021 what was the loss of <unk> $3 million compared to an adjusted EBITDA loss of $7 million in the same quarter of fiscal 2020.

The improvement in adjusted EBITDA came despite a lower rate of capitalized R&D expenses.

Moving to the balance sheet as of October 31.

2020, one we had $10 $4 million of cash on hand, compared to $2 $4 million at the end of fiscal year 2020.

S. T indicated in his remarks, the company closed heavily utilizing approximately $12 $4 million of cash and $6 $6 million of restricted stock.

Under the acquisition agreement.

Company will provide additional consideration in each of the two annual anniversaries of the closing date.

These will be paid to the sellers in cash and stock.

Our values on the balance sheet as of October 31, 2021 at $11 $1 million.

Subsequent to the closing of the Abilene acquisition, we entered into a five year.

$10 million term loan with bridge bank.

The company maintains its position that the uncertainty related to the effects of the novel Coronavirus on the health care market prevents us from providing detailed guidance.

The company remains focused on continued growth of SaaS revenue.

The company experienced a one time benefit in its third quarter from a customer non renewal and SaaS revenue of approximately $300000.

Further the tremendous growth bar ethylene business will temper honest sequential basis in the coming two quarters.

As a result, the company will continue to report strong year over year growth as it has in this third quarter.

However, we do not anticipate sequential growth in the SaaS.

Revenue line for the following two quarters.

After which we will resume the strong sequential growth the company experienced through the first three quarters of fiscal 2021.

The company continues to evaluate its consolidated forecast with heavily and.

And we are optimistic that the combined entity will reach cash generation by Q2 or Q3 of 2023.

We have pushed our projection of cash generate generation out one year, primarily due to the investments we plan for heavily as well as the company shortfall.

Valuate or bookings through the third quarter of fiscal 2021.

That concludes my remarks, I will now turn the call back to seek rain for his closing.

<unk>.

Thank you Don.

Reflecting on the past year I am proud and impressed with the work our team has accomplished.

Persevering through the macro impacts of the Corona virus showing up every day with a positive can do mentality and maintaining a vision for the long term impact. We can have on the industry has put us in a position to seize the market opportunities ahead of us.

Before we begin our Q&A session I'd like to once again, thank the entire streamline team for all their hard work and dedication during these uncertain times.

Contribution to our central for us to support our health care provider customers and ensure they have the necessary tools 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 up the call to your questions operator.

Thank you well now be conducting a question and answer session.

Like to ask a question today. Please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.

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For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment. Please so we pull for questions.

Thank you and our first question is from the line of Matt Hewitt with Craig Hallum. Please proceed with your questions.

Good morning, and thank you for taking the questions maybe first off regarding the Abilene integration. If you could provide an update on kind of where that sits and more importantly, I think as we look out over the next 12 to 24 months. What is the initial feedback been on the cross selling opportunity are you seeing interest from that Abilene.

Stall base and how quickly do you think you could get some of those customers to sign up for evaluated.

Yeah, Thanks, Matt T here.

Good morning.

The Abilene integration as we mentioned we're focused really you know the whole model you got to have your innovation done correctly that can scale at an enterprise level and you've got to get your service platform. Correct. Then you can really grow so right now in the heavily sad we're laser focused on the innovation side, we knew going into the acquisition there was some enterprise.

<unk> from a scale that needed to be done in the platform and that's what we're working on we also knew that they didn't have a real good service delivery, meaning.

Meaning that we didn't have the right.

Implementation training very similar the way evaluate it once a year and a half ago. So those are the two focuses right now youll see probably middle of next year. Some some.

Some co.

Co effort on the evaluate or sales side in the Abilene sales sides.

Because clearly there's 92 health systems are 92 opportunities on the Avalon.

The athletes have that they don't have evaluated.

You know evaluate or we're at 12 customers now say lesson [laughter].

Huge opportunity so yeah, but I wouldn't anticipate a lot of joint sales efforts until we get on this really nailed down on Abilene side, because you don't want to work.

The worst thing we could do with Avalere does outgrow its capacity to deliver and we're not going to do that.

Understood. Thank you and then maybe just a clarification Tom regarding your your guidance there regarding Q4, and Q1 youre not expecting a sequential growth, but are you expecting the revenues to be essentially flat. The next couple of quarters before then kind of.

Initiating that that ramp that we've been.

<unk> been watching here with the recent past.

Yeah, that's correct Matt.

We're looking at relatively flat revenues in Q4 in particular.

Q1, we have some potential upside from non recurring.

But I'm certainly not expecting growth on the SaaS line on a sequential basis.

Understood. Thank you and then maybe the last one you know as far as some of the investment that youre going to be making from particularly on the software side is that tied to essentially bringing the abilene and evaluate our platforms together.

Or are there some new applications that you anticipate adding to the combined platform. Thank you.

Hey, Matt can you say that one more time I'm, sorry, I had it yeah, yeah. So the R&D.

Investment that you're going to be making is that tied to essentially bringing the abilene and streamlined platforms. Together. So that they can essentially be sold as one core platform or is there some new applications, some new opportunities, where you could add some new apps if you.

We'll do that one or more of the platforms.

Does that mean.

Yes, sure Tom you may have to the dollars that we're investing on each side I'll, let Tom upon them, but as far as the the Abilene side goes at its end and if you think of Rab at the the the flagship.

Application from there and then evaluate are the flagship from the core stream.

Currently in the next 12 months, we do not have a product roadmap with those would emerge we're really focused on what those two apps.

Applications solve for our customers because they are both incredibly valuable and they both have you know they both have a product roadmap that did did certainly stretches the next three quarters.

Not going to do anything other than continue to make those two platforms stronger and stronger at some point down the road. We can evaluate does it make sense to put them together or not.

We haven't made that call yet.

Alright, thank you.

Thank you as a reminder to ask a question today you May press star one from your telephone keypad.

Our next question comes from the line of Brooks O'neil with Lake Street Capital. Please proceed with your questions.

Oh, good morning, guys. Thanks for taking my questions I'm.

Yes, I'd start off by just trying to do.

Digging a little bit more about what you're seeing from your hospital customers related to Covid and just trying to do.

Understand the disruption Youre seeing maybe you could talk about it a little bit more.

By month basis, what's been going on out there and just help us to understand how they're thinking about.

E.

Products like you guys offer in the world that is perhaps being dominated by Covid disruption right now.

Yeah, Thanks Brooks T here.

I think everybody's ready to quit talking about this but you know it is real.

Well you know we're we're we're not unlike any other health care I take it you know.

First things first and that is battling this virus where.

You thought it was behind this delta came across here.

What we're seeing is clearly it impacts decision, making in health systems and in different parts of the country are impacted a bit more than the others. You know if you look at the northeast where we've called in the National Guard in the three states Yeah, we're probably not going to close a lot of contracts. There you know that that's right.

Or could may when you got the National guard coming in to assist your health care facilities buying new technology is not going to happen. That's just a fact however.

The east all the way through the Midwest you know there is that we're not having those type issues and so we're seeing you know we're actually.

Gives me we're seeing contracts.

That had been hung up in legal actually last Friday.

The us they've red light so that's movement right and so that's really incur.

But again when the national guards called in to help the health care system. That's not positive the second thing that you're seeing and in some areas of the country are these these mandated vaccines and helps me.

Mandate for employees to get vaccine right well, 30% of the nursing staff in the United States not vaccinated and so that's a whole another issue I was with a leader of a health system last Sunday and he says T O Monday next well this coming Monday, we're announcing guard health system did you have to be vaccinated, you're not gonna be employed.

He's anticipating.

Hundreds of nurses, that's that can't be good [laughter] right. So right you know those kind of things. They are what they are but the good news is there are parts of the country, where we're starting to see things move so that that's cool but.

And you know if employers are not just health systems you saw probably this morning with Jefferies went back to remote work requiring everybody. We're masking any of their facilities. You know people say these variants aren't real and its not but.

If you're in the health care World you know that it is real and you know that it's going to be a couple of more quarters battling through this stuff, but yeah.

I think there's enough you know.

Finally, there's enough you know we've got six deals that are in this yeah.

Right. There that are exciting we we know these deals have come in I guess is my point Brooks. This is not a well evaluate.

It's just two value is there's two there's too much return on invest it's too easy to install it's just it's just one of those no brainer once we get the right.

And in addition, you know the energy and the health systems. They can move forward. So I'm Super encourage you know so so encourage that we basically rebuilt the entire sales team over the last 90 days I wasn't interested in doing that in the beginning one because there was no reason to go invest in high end sales.

Personnel, if nobody's going to return your phone call.

But we felt like the virus was behind us and so we rebuilt that you know we just brought in seasoned veterans right in their more expensive, but they know how to do this.

You know so I'm.

I guess I'm, probably as excited or more bullish than ever happened at this point on the evaluated.

Well, that's fantastic and I appreciate all that color. Let me just ask one other question I Eh.

Totally understand the comments you made about the best thing.

I believe to bring it up to enterprise capabilities.

And shrimp and the support organization.

What I'd love to hear is just any color as you think about what you've learned in the last whatever it is 60 days 85 days whatever that number is in terms of are you as excited about the overlap and the what I would call I don't know if that's a word but complementarity.

Well between the ABA laid.

What that does at customers its organization and the opportunity ultimately when things normalize and when you get the upgrades done do you think this is going to be a case of one plus one equals three or four.

Still and just give us a little color on what you're seeing there.

Yeah, well first of all that divides the CEO of Abilene and and the team there they're phenomenal I mean, it's everything you could have hoped for and in bringing the company into the stream family said that that alone we're super excited about.

You know there's a there's some several really really large pilots that have started with rabbi D that will we'll be talking about in the future that are just I mean it it's.

It's one plus one equals five or six in my opinion. So yeah, we work we.

Sided.

Again [laughter].

I believe the survey 92 hospitals and evaluated.

Waiters and 12 and Abilene 92.

Top Haas the health systems in the country. So yeah, we're pretty enthusiastic about that.

Great. Thank you very much I'm excited too.

Yeah.

Yeah.

Thank you at this time, we've reached the end of a question and answer session I'll turn the line back to Jacob Goldberger for closing remarks.

Thank you all again for your interest and support of streamline health.

Have any additional questions or need more information. Please contact me at Jacob Goldberger at streamline health Dot net we look forward to speaking with you all again, when we discuss our fourth quarter and fiscal year 2021 financial performance Good day.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Okay.