Q1 2022 Streamline Health Solutions Inc Earnings Call

Hello, and welcome to the streamline health solutions first quarter 2022 earnings conference call. At this time, all participants are in a listen only mode.

Question and answer session will follow the formal presentation, if you'd like to be placed in the question queue. In advanced. Please press star one on your telephone keypad, if anyone should require operator assistance. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded its now my pleasure to turn the call over to Jacob Goldberger director of.

Relations. Please go ahead.

Thank you for joining us for the corporate update and financial results review of streamline health solutions for the first quarter of 2022, which ended April 32022 as conference call. Operator indicated my name is Jacob Goldberger, joining me on the call today are Tee Green, President and Chief Executive Officer, and Chairman of the Board, then still will president and CEO of evaluating solutions.

Javad Shake President and CEO of athletes solutions, and Tom Gibson, Our 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 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, 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. These are subject to risks.

Ts assumptions and other factors that could cause actual results to differ materially from those who may discussed. 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 just depends 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 ACA.

Abbvie 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 entity may utilize in calculating their own non-GAAP measures that when you compare these amounts I 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 comparable GAAP measures.

I would now like to turn the call over to Tee Green, President and Chief Executive Officer.

Thank you Jacob.

Thank you all for joining us this morning.

Following my opening remarks, Ben Stilwell, President and CEO of evaluating solutions, which about shake president and CEO of Abilene solutions will be giving updates on their respective businesses.

Followed by a financial update from our CFO Tom Gibson.

As a reminder, on August 16th 2021 we acquired I believe and their financial performance will be included in our GAAP results from that date.

With that I'll get started.

Beginning with the financial overview of fiscal first quarter 2022 we ended the quarter with $8.9 million in new bookings.

$8 million of which were SaaS bookings.

This made our first quarter of fiscal 2022 the best SaaS bookings quarter in the company's history.

The strong bookings results was highlighted by a 10 year agreement for I believe it's industry, leading automated charge reconciliation solution.

Rabbi D. This.

Was the first successful Rabbi D sale completed under our bar Green.

Agreement with Cerner as opposed to our contracting directly with Cerner clients.

Disagreement is an outlier in terms of length of contract as compared to our historical contract terms. However.

However, adjusting for the single 10 year agreement to a typical three year agreement, we still sit within our quarterly guidance of 3 million to 5 million of bookings.

First quarter of fiscal 2022.

Well, we can't predict when other large signings like this may occur we are encouraged by the outcome and what it means for potential additional contracts of this magnitude to drive upside in future periods.

Overall, we are seeing operating conditions within acute care hospital systems, improving as Covid impact lessons and expect continued success in bookings going forward.

We maintain our expectation that our bookings performance will be on average in the range of $3 million to $5 million per quarter throughout fiscal 2022.

Moving now to our GAAP consolidated financial results for the three months ended April 32.

Total revenue for fiscal Q1, 2022 was $5.9 million, 101% increase from fiscal Q1, 2021.

Notably our SaaS revenue grew 141% year over year.

On a dollar basis recurring revenue increased 1.7 million or 76% from the prior year period.

We have successfully grown our recurring revenues despite the difficult sales environment. Our industry has experienced for the past two years because of the Covid pandemic.

On a pro forma basis total revenue for Q1, 2022 increased 7% and SaaS revenue increased 5% from the prior year.

Revenue growth on a pro forma basis is dependent on the timing of bookings and go lives. The company expects year over year pro forma revenue growth to accelerate by the end of this fiscal year.

First quarter 2022, adjusted EBITDA was a loss of $1.7 million compared to adjusted EBITDA loss of $700000 in first quarter of fiscal 2021.

As of April 30 of 2022 we had $8 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 Abilene.

Our cap table remains claim it's the only one class of common stock.

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

Both Abilene and evaluate or continue to improve the innovation and service functions of their respected businesses Abilene is driving significant booking wins with new and existing clients through at Cerner relationship.

And the business is maturing rapidly under <unk> leadership.

Evaluate or has made rapid progress as well over the past nine months, we have made investments to extend evaluate or reach to the professional fee environment and in its direct sales force and leadership team. In addition to inpatient and outpatient. The company is now testing evaluate is used in the physician space primarily.

Early for acute care health care organizations that code for certain positions.

Under the leadership of evaluating new Chief growth officer industry veteran Amy separate and with been Stillwell, our CEO and President we are confident that these investments will begin to yield results in the second half of 2022.

I'll now turn the call over to Ben to provide an update regarding evaluated.

Dan.

Thank you Kim and good morning.

The value of this first quarter was defined by continued efforts to innovate, while making strides to provide industry leading client service.

In the quarter, we implemented new features into the VAT administration to address our clients' pinpoints, including staff shortages rising patient volumes rapid changes of case mix and concerns with data security.

Additionally, most notably we recently entered into a beta phase for a professional fee evaluate our offering.

It's a critical addition that allows our clients to centralized coding practices and reporting across a larger spectrum of health care settings.

Whereas the first vendor to provide all three modules inpatient outpatient physician billing on a prebuilt basis for auditing using advanced rule set.

Our evaluate herself pipeline continues to see growth both in the number of unique hospital logos and then the size of each contract.

Many of the contracts in our pipeline today are on average larger than our historical $300000 ACD.

As Tim mentioned, we expect bookings growth to accelerate in the second half of the year as the effects of the sales team transformation comes to fruition combined with growth in our reseller partner channel.

And as announced earlier this year any several has joined our company to lead the growth effort from a value added solutions.

In the short time, he's been with US we've already seen noticeable improvement in access to deal flow as well as progress in all stages of prospect discussion.

We believe that her extensive relationships and industry expertise will have a meaningful impact on our bookings our bookings in the near term.

During the first quarter, we began visiting our clients onsite and we're sitting invites for live visits from prospects as well.

It's a promising sign that hospitals are beginning to work through their backlog of projects that they deferred during the COVID-19 pandemic.

From our business declines and prospects have become clear the hospitals are facing headwinds from their project backlogs and a shortage of both clinical and professional staff.

Our key to success will be approaching these health care organization with solutions that reduce or eliminate the effort required to achieve the financial outcomes are software provides.

We believe that path will include successfully combining our software solutions with our coating and audit services teams.

I will now turn the call over to President and CEO of Abilene Chubachi to provide a business update for ethylene.

Thank you Ben and good morning to all.

As we stated on last quarter's call our largest existing clients increased their usage of box solutions to eight nuclear facility early in the first quarter of fiscal 'twenty to 'twenty two.

Since then we have achieved several milestone contract finding so.

The first was with an eight hospital Cerner EHR base health system in Michigan, but he mentioned earlier.

Finding accentuates the strength of our partnership with Cerner, which continues to bear fruit.

Most recently, including an agreement with our first medicine like E chocolate really demonstrating how how the EHR agnostic nature of Rabbi D allow for broad scaling in our business development activity.

So as a reminder, I will focus for 2022 is to improve the innovation and service components of our business setting the stage for a rapid future growth.

With that said the growth opportunity in 2022 lies in expanding our footprint with existing contracted clients.

Further we have an exhaustive list of opportunity through our largest channel partner firm. We have successfully worked with turn up to build our existing client base on pipeline.

Within our sales process, we plan to leverage rat bodies, proving ROI and satisfied client relationships to drive bookings and revenue in fiscal 2022.

Just like he batteries later, we see opportunities opening up the impact from Covid retreats within both our direct and partner channel.

Pardon channels.

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

Thank you Giovanni.

Total revenues for the first quarter of fiscal 2022 were $5 $9 million and 100.

<unk> and 1% increase over the comparable period of last year.

$2.6 million of the increase was attributable to the acquisition of Abilene on August 16 2021.

SaaS revenue increased $1.7 million or approximately 141% compared to the same quarter a year ago.

First quarter 2022, operating expenses totaled $91 million compared to $5 $4 million for the prior year period.

$3 $1 million of the increase was related to the acquisition of Avalere.

Company increased it spend and innovation during the quarter by approximately $500000. This increased spend was utilized to deliver several critical enhancements and is not expected to remain at these levels for the entire year.

Further the company saw the full impact of its investments in the quarter for its reformed sales function and travel resumed to a nearly pre COVID-19 level.

Loss from continuing operations for the three months ended April 32022 was $2 $8 million compared to loss from continuing operations of $2 $5 million for the three months ended April 32021.

Loss from continuing operations for the three months ended April 32022 included $90000 of non routine costs and other income of approximately $500000.

I'm merely related to the acquisition of Avalere.

The income of $500000 was a direct result of a valuation adjustment on the acquisition liabilities that were set up and the athlete opening balance sheet.

Adjusted EBITDA for the first quarter of fiscal 2022 was a loss of $1 $7 million compared to an adjusted EBITDA loss of $700000 in the same quarter of fiscal 2021.

The higher adjusted EBITDA loss can be explained by the investments made by the company in innovation and sales during the first quarter ended April 32022.

Moving to the balance sheet as of April 32022, we had $8 million of cash on hand, compared to $9 $9 million at January 31, 2022.

The company completed the acquisition of Abilene, utilizing approximately $12 $5 million of cash and $6 $5 million of restricted stock at closing.

Under the acquisition agreement the company will provide additional consideration on each of the next to 12 monthly anniversaries of the closing date.

These would be paid to the sellers in cash and stock and are valued on the balance sheet at approximately $8.3 million.

These liabilities are referred to as acquisition earn out liabilities and our estimate of the present value of the future amounts it will be paid in both cash and restricted common stock upon the anniversary date of the acquisition.

Subsequent to the closing of the Avalere acquisition, we entered into a five year $10 million term loan with bridge bank.

There is no repayment of the term loan required in the first year following the close.

$500000 is required in the second year, following the close which equates to $41667 monthly.

Beginning in September 2022.

The company maintains its position that the uncertainty related to the effects of the novel Corona virus on the health care market prevents us from providing detailed guidance. We are targeting an average go forward SaaS booking pace.

<unk> of $3 million to $5 million of T. C V per quarter for 2022.

The company is well positioned to achieve its target bookings in 2022.

Streamline remains focused on continued growth of SaaS revenue going forward, we expect SaaS revenue to resume the strong sequential growth that the company experience through most of fiscal 2021.

The company continues to evaluate its consolidated forecast with the heavily as noted on our previous update we are optimistic that the combined entity will reach cash generation by Q3 2023.

That concludes my review I will now turn the call back to Tee Green for his closing remarks.

Thank you Tom.

We continue to enable health care providers to proactively address revenue leakage and improve financial performance and have taken major steps forward to drive diversified recurring revenue streams and better position our company for growth and to deliver significant shareholder value over the long term.

Uh huh.

The integration of Abilene into the streamline health family has been smooth and the product innovation and dedication to our health care partners remains a priority and strength across the company.

Before we begin our Q&A session.

I'd like to thank the entire streamline team once again for all their hard work and dedication.

Their contributions are essential for us to support our health care, providing clients 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.

Our vision.

Now I'd like to open the call up to your questions operator.

Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he'd like to move your question from the queue for participants using speaker equipment, it may be necessary to pick up here.

Handset before pressing star one one moment, please while we poll for questions.

Our first question today is coming from Matt Hewitt from Craig Hallum Capital Group. Your line is now live.

Good morning, and thank you for taking the questions and congratulations on the strong bookings in Q1, maybe starting there.

I know you said that the 10 year contract wasn't a whole layer, but I'm wondering if you could provide a little color on what drove that length of contracted it from a decision standpoint, and whether or not you're seeing on average or longer contract lengths are in the pipeline.

Hey, Matt Tee Green. Thanks for the question Yeah, it's exciting to buy the company to see you know 10 year long term contracts.

We started out with kind of three years as our average we've been pushing for you know that the five year. The 16 months in the 10 years, obviously that that's the home run, but I don't think we're I'd love to see a lot more of those maybe we will do the way Cerner has taken the deals direct but you Bob do you want to comment on this.

Yeah, I can add some commentary so I think that kind of speaks to just the partnership and kind of.

Piggy back off of some of the Cerner agreements as well too. So if there's a client that signing larger cerner deal and in this case I think they were the client signing a 10 year deal with or we were able to kind of piggyback off of that and obviously as that Steve mentioned, that's not the norm, but those are the things that we're going to try to get some more advantages out of jumping on the back of that.

But he was like Cerner.

That's great and then I guess since you you know that the dimension of Cerner. They were just acquired by Oracle and I'm. Just curious if you know what you anticipate.

Change in relationship or is there any opportunity under the new management that you could see maybe a heavily become a greater priority or quite frankly, even open up an opportunity for evaluate or.

Well I think and his team at one that [laughter] Oracle, probably well I know they don't even know who we are [laughter] the grand scheme of things, but the the Cerner executive team remains intact from everything we know our relationship on the Oh.

The athletes had will continue to grow and prosper and just a few weeks ago. We introduced the cerner team to the valuation side of the business. So that is a new process. It will take some time, but we don't anticipate anything changing for us as it relates to the acquisition.

Understood and then maybe one last one here and I'll hop back into the queue, but you you touched on the hospital spending environment, a little bit obviously its been a challenging environment. The last couple of years. It sounds like it may be starting to improve a little bit you're actually able to get in and meet with your potential customers and existing customers face to face, but you've had a lot of contra.

So I've been kind of trapped in limbo over the past year in particular and I'm. Just curious how those are progressing now that things appear to be opening up a little bit. Thank you.

Yeah, Thanks, Matt T again.

Yeah, I mean R R.

The travel spend is an interesting data point right there.

Hospitals and health systems are inviting.

Our teams back in and so that that's very encouraging we have you know we've had a number of contracts.

And that limbo of legal and you're starting to see those pick up we're starting to see contracts.

And Red line going back and forth and so that's encouraging but I'd also.

0.2, we have.

Hmm.

New contracts me and ask for.

So you know I would anticipate that that continues.

But that looks to be the the.

Case, you know across the country, but hell.

Health systems are getting back to work.

Got it alright, thank you very much.

Thank you Mac.

Thank you. Our next question is coming from Kyle Boser from Lake Street Capital. Your line is now live.

Great. Thanks, so much for taking the question maybe L I F.

Then a question and evaluate our business so of course in the auditing stage Covid claims in particular on.

On a post spin basis have been largely off limits got it.

That'll open up but for the time being.

Hiatus for that hospital to be able to kind of manage their cash flow being time, but I'm just kind of curious within your clients. How has auditing COVID-19 related claims bad prebuilt basis in other words.

Has there been a higher error rate associated with these types of claims as opposed to the kind of traditional nine called the claim.

Yeah. That's a great question. So I think early on.

Obviously, there was a big spike in the claims all at once and the education that the cutters had was kind of it felt like live.

Live learn them basically and so a solution like ours, that's great because we got roles in their right of way to to help them catch the things that the cutters, you know frankly haven't been able to get them trained down yet and but we saw that taper off pretty.

Pretty quickly and so these days, we still get a lot of.

Flagged encountered but we're finding that either the cutters you know, it's pretty straightforward for the cutters or they're catching it and.

And it could a review level as opposed to needing something that's specialized that has this sort of specialty rules, we still see it as a yeah something that's present on a lot of the specialized cases that we do see but for most part of the Covid coating itself has improved drastically and now we're back to.

Getting used to the deferring.

Demographics, I'll say that that are coming in and helping cookers and auditors catch those instead.

Got it I appreciate that and then maybe following up so.

Ben you provided a little bit of color around the sales team transformation of course hiring Amy is helping to kind of lead the growth effort and increase the deal flow and industry relationships et cetera.

Can you just talk a little bit more.

And it's about kind of the key differences between the current sales operations versus before the transformation and maybe in particular.

A little bit more granularity about how.

How does the new team is going to be.

More successful going forward.

Yeah.

Sure. So Amy comes from a much larger organization. She has been very successful there and I think what she's been able to learn there is a lot around the art and science of selling them I think the the prevalence of our or the importance of our sales operations going forward and metric based and if we look at account based marketing we look at them.

Making sure that we monitor sort of the metrics earlier on as opposed to just the the large contracts that are later down the pipe I think that's where she is making.

Significant amount of impact and so making sure that the reps have what they need as far as inbound opportunities and things like that so just that sort of experience from a large organization and knowing what works and then obviously the connections that she brings to our organization.

Sure No I appreciate that and maybe lastly, port T or Tom.

The lights here.

We anticipate reaching cash generation during Q3 of fiscal 'twenty three and can.

Can you remind me are you able to kind of pin that to a certain revenue number.

Yeah go ahead Tom.

Well the way we're looking at it is weak and it just our cost we have certain triggers on our costs that we can pull and so we're able to achieve that with or without our projected revenues over.

Got it.

Okay.

For all the update and for taking my question I'll jump back in queue.

Thanks Kyle.

Thank you we've reached end of our question and answer session I would like to turn the floor back over to management for any further or closing comments.

Thank you all again for your interest and support of streamline health. If you have any additional questions or need more information. Please feel free to contact me at Jacob Goldberger at streamline health Dot net.

Speaking with you all again, when we discuss our second quarter fiscal year 2022 financial performance Good day.

Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.