Q4 2022 Streamline Health Solutions Inc. Earnings Call
Greetings and welcome to the streamline health fourth quarter and fiscal year 2022 earnings Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please.
Starz zero on your telephone keypad as a reminder, this conference is being recorded it is now my pleasure to introduce your host Jacob Goldberger. Thank you Sir you may begin.
Thank you for joining us for the corporate update and financial results review of streamline health solutions for the fourth quarter and fiscal year 2022, which ended January 31, 2023 as the conference call. Operator indicated my name is Jacob Goldberger, joining me on the call today are Chief Greene, Chief Executive Officer, and Chairman of the Board, then still President 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 these results you can retrieve it from the Companys website at Www Dot streamline health dot net or from numerous financial websites before.
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 it 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 before looking statements within the meaning of the private Securities Litigation Reform Act of 1995. These are subject to risks uncertainties assumptions and other factors that could cause actual results to differ materially from those who may discuss please refer to the company's press releases and filings made with the U S cities.
Ladies 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 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.
Our 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, Bookstaff ACD and unaudited figures related to our acquisition of Natalie <unk>.
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 to help you compare these amounts on consistent terms. Please refer you to our website at Www Dot group 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, Chief Executive Officer, and chairman of the board.
Thank you Jacob and thank you all for joining us this morning.
Following my opening remarks, Vince demo President will provide an operations and sales update.
Followed by a financial update from our CFO Tom Gibson.
As a reminder, on August 16, 2021, we acquired heavily and their financial performance will be included in our GAAP results from that day.
With that I'll get started.
Beginning with the financial overview.
The total contract value of bookings for the 12 months ended January 31, 2023 totaled $26 $5 million.
$22 $4 million of which was attributable to our SaaS products.
An average of $5 $6 million of SaaS total contract value per quarter in 2022.
Exceeding our estimates of $3 million to $5 million of TCE per quarter.
Our booking success is a credit to the strong direct sales channel, we've built and the value our products provide our clients.
Macro headwinds associated with our hospital clients staffing and backlog about eight projects continued to hinder conversion of new bookings to revenue. However.
During the year, we successfully grew total revenue, 43% to $24 9 million and our SaaS revenues increased $4 $2 million or 53% improvement compared to fiscal 2021.
During 2022, we began reporting a new metric booked SaaS ACB.
Which is the annualized contract value for all agreements that are being recognized into revenue as well as bookings that we have not.
Been implemented.
As previously reported as of January 31st books fast ACB was $17 2 million as compared to 10 6 million as of January 31 2022.
Exceeding our previously announced $70 million target.
As of January 31, 2023, we had $6 $6 million of cash on their balance sheet and the balance of our term loan was $9 $7 million we.
We believe our cash on hand is sufficient to achieve positive adjusted EBITDA less capitalized software development in fiscal 2023.
We have access to an additional $2 million of liquidity through our non formula line of credit.
We combined the heavily and evaluate our operations on November one 2022.
Under <unk> leadership, the integration process has moved more quickly than we expected.
Our evaluate here in Abilene software solution share common selling call point.
We have achieved significant cost savings from the integration $1.5 million of which was execute on November one 2022 and was attributable to the elimination of redundant management positions voluntary reduction of executive salaries and certain other contractors.
We anticipate realizing an additional one $5 million of cost savings throughout fiscal 2023 as compared to our models that had the business operating separately.
Looking ahead to fiscal 2023, we expect the continued expansion of both SaaS ACB will be a leading indicator of revenue growth to come.
And then the business will begin to realize strong incremental margins after achieving a breakeven run rate during the second half of the year.
Beyond continued growth from new logos and within our existing relationships, we have identified certain key corporate objectives for our existing business in 2023.
They are in no particular order to add client leveraging both our flagship solutions Rabbi being evaluated.
Domestic base facility utilizing where have I D.
Improved performance from our partner channel.
And achieving a breakeven adjusted EBITDA less capitalized software.
Please note as our SaaS revenues in booked SaaS ACD continued to expand we no longer believe that each individual contract signatures material news.
Going forward, we will no longer press release individual bookings and last week being them significant.
We remain committed to keeping you apprised of our progress against our key corporate objectives and a significant contract signings.
We remain confident in our growth prospects going forward are products and services are part of the answer for our hospital clients and the macroeconomic burdens they are facing today.
Unfortunately for our industry that demand is not enough to guarantee success. Our clients are experiencing a continued hangover effect from the impacts of the Covid pandemic on their hospital operations, which has manifested in our backlog of potential high priority projects. Our team is working hard to ensure they are.
Clearly communicating the impact of our automated prebuilt solutions, which enable our clients to capture and bill accurate wait for all the care they have provided.
This will never this has never been more critical to our industry than it is today and we believe our bookings will continue to accelerate as a result.
We maintain our stated goal to exit this fiscal 2023 with $30 million of book.
SaaS ACD.
With that I'd like.
Ill turn the call over to our President Mr. Ben Stiller.
Thank you Qi.
S T alluded to the integration of Abilene, and evaluate or has proceeded smoothly and.
And I'm grateful to our team members, who have quickly adapted to the rapidly changing teams all while maintaining a high level of service and commitment to client success.
Internally at the team at streamline is working toward five annual priorities, which will support the corporate objectives T laid out and fuel our long term growth.
The first is scaling the RFID and compare technology for growth second increasing our client effectiveness to reevaluate or usability improvements for.
The third is enhancing the service delivery of.
Rob I didn't compare products.
<unk> being doubling evaluate or client outcomes through enhanced rules and.
And five expanding our reach to new logo clients.
Our client conversations remain focused on their increased denial rates and the need for automation within the revenue cycle we.
We recently published a case study of evaluating impact for one of our clients Cooper University Health care, a 660 bed hospital system, which employs 961 individual physician providers.
Cooper found $3 $2 million of financial impact as a result of their use of evaluating which translated to a 16 times return on investment.
The case study also confirmed Cooper's reasons for selecting evaluated it.
In addition to the financial impact the Cooper team highlighted the tools ease of use and are a robust reporting suite.
Their team was able to leverage evaluators results and insights to improve the organization and justify the addition of ftes to optimize future outcomes.
Said differently the organization found that staff empowered by our automated solutions became a net positive for the organization rather than a cost center.
I believe being able to share results like these will provide additional momentum as we work towards the sales related goals, we highlighted earlier.
Within innovation, our primary focus remains on improvements to the back end architecture of our RFID and compare suite.
We are making improvements to those products that will reduce the effort associated with our implementations and improve the user experience.
Easing the burden associated with the implementation of RFID enabled us to recognize revenue and generate customer ROI earlier.
We also continue to make incremental improvements to the evaluate our system as well expanding our rule set and overall, making our solutions more effective.
We are taking some initial steps to incorporate machine learning techniques into how our rules are generated and maintained for evaluating which should help us develop more effective rules and translate to a higher ROI for our clients.
The client centric service organization Redeveloped within evaluate or has been a true differentiator for us in the market.
As I highlighted above prospective clients are actively searching for solutions that are well supported.
We're maintaining our cadence of monthly education, and quarterly executive client meetings to establish the value of the tools we're providing.
Administrative staff within hospitals remain strained and understaffed, especially within their it departments.
This is delayed implementation timing for our solutions and our implementation teams are working hard to ensure that we are never the bottleneck.
On the sales front, we were thrilled to report T. C V. SaaS bookings of $22 4 million for fiscal 2022 above our expected average of $3 million to $5 million for TCP SaaS bookings per quarter.
The achievement of significant bookings growth in fiscal 2022 was the result of the growth team structure, which Amy Subbarao, our chief growth officer established early in the year.
The shifts in our marketing efforts are palpable and our branding refresh was received well by our clients.
Yeah.
And finally, we have spoken in the past about the lead time from contract signature to revenue or the implementation window that has been hindered by competing projects at our hospital clients.
For evaluate or this has been steadily improving we experienced two new go lives in Q4 of 2022, we have four go lives in Q1 of 2023 and have two more slated for early in Q2 2023.
These new implementations will have a meaningful impact on recognized SaaS revenue year over year and on a sequential quarterly basis in fiscal 2023.
Before I turn the call over to Tom I would like to thank all of our hardworking associates, who are supporting our mission to ensure our healthcare provider clients are paid for all of the carriers that they provide.
I'm very excited to lead our talented team and believe strongly that our innovation plus service equals growth formula will yield tremendous results for all of US as we continue to execute and expand.
With that I'll hand, the call over to our CFO Tom Gibson.
Thank you Ben as.
As Tim mentioned in his opening remarks, we acquired I believe on August 16 2021.
All operations of I believe are included in our reported GAAP numbers from that date.
We also provide pro forma numbers that assume we owned avidly from the beginning of the prior year period.
For the year ended January 31, 2023, total GAAP revenue increased 43% to $24 9 million.
For the year ended January 31, 2023, SaaS revenue grew 53% compared to fiscal 2021 $3.4 million of the increase in SaaS revenue was attributable to the acquisition of <unk>.
Total revenue for fiscal year, 2022, and 2021 was $24 $9 million.
Actual and $22 $6 million on a pro forma basis.
We have been impacted by headwinds that face our hospital Qantas hospitals are overcoming shrieking operating margins personnel shortages and significant backlog of Iot projects.
A hangover effect from Covid these headwinds impact our contracting process in our contract implementation timeline, we do not know how long these delays will impact our clients and accordingly, our recognized revenue.
$5.4 million of our annual lives SAS contract value is on the implemented as of January 31 2023.
As these contracts are implemented in the coming quarters, our investors will see strong SAS revenue growth.
Total operating expense was $35 7 million and $28 1 million for fiscal year, 2022, and 2021, respectively.
There is $4 3 million and $3 7 million in fiscal year, 2022 and 2021 respectively, as depreciation and amortization and those operating expense totals.
$12 2 million of the increase is attributable to the acquisition of badly.
The company experience.
Higher severance bonus and travel and entertainment expenses than that of the previous year.
Fiscal 2022 net loss totaled $11 4 million.
Compared to a loss of $6 $9 million in fiscal 2021.
The higher net loss in fiscal 2022 is the result of a full year of Abilene operations as compared with a partial year in fiscal 2021.
Additionally, net loss in the fourth quarter of fiscal 2021 included E $2.3 million.
Income related to a loan forgiveness.
And $1.9 million of income from Abbott lead acquisition earn out valuation adjustment.
Fiscal 2022, adjusted EBITDA was a loss of $3 8 million compared to an adjusted EBITDA loss of $2 million in fiscal 2021.
The higher EBITDA loss can be explained by a full year of I believe operations in fiscal 2022 as compared with a partial year in fiscal year 2021 investments in the architecture of the Abilene technology higher head count and salaries.
Our upgraded sales function and administrative costs, such as performance bonuses and travel and entertainment and physical 2022 as compared with fiscal 2021.
Certain of these costs have been curtailed due to the integration of avidly and evaluate or units.
Moving to the balance sheet as of January 31, 2023, we had $6 $6 million in cash on hand, compared to $9 $9 million at January 31, 2022. The company completed the registered direct offering in the fourth quarter of fiscal 2000.
22, which resulted in gross proceeds of approximately $8 3 million.
Under the Abilene acquisition agreement the company has contracted to provide additional consideration on each of the first 212 monthly anniversaries of the closing date.
The first of these payments were paid in the fourth quarter of fiscal 2022. The payment was made using approximately $2 million of cash and $3 billion of restricted common stock.
Second payment will also be paid in cash and stock and is valued on the balance sheet.
Proximately three $7 million.
This is a map it is estimated that we will pay $1 $5 million in cash the liability is referred to as acquisition earn out liability on the company's balance sheet subsequent to the closing of the Abilene acquisition in 2021, we entered into a five year $10 million term loan with bridge bank.
There was note repayment of turtle term loan required in the first year following the close.
$500000 or <unk> $41667 monthly is required in the second year following the close.
The balance of our term loan as of January 31, 2023 was $9 $7 million as Tee mentioned, we recently expanded our relationship with bridge bank to included $2 million line of credit, which we can draw if necessary.
We believe that our cash on hand is sufficient to achieve a positive adjusted EBITDA less capitalized software development, but we are pleased to have this access to additional liquidity.
As Steve mentioned, we have introduced a new metric that provides an annualized contract value per client agreements that are being recognized into revenue as well as in annualized contract value for quiet agreements that have not implemented we refer to this as our books.
SaaS ATB, where <unk> stands for annual contract value. We believe both sass ACB will provide a proxy for our annual recognized revenue as if all executed contracts are live and recognizing revenue.
Please note that the recognition.
Revenue from our signed contracts is subject to the timing of implementations.
Implementations may sometimes be delayed by clients due to competing projects or be timed after a larger implementation of another system.
Our book SaaS H E. B as of January 31, 2023 totaled $17 $2 million and five $4 million of that booked SaaS ACB was not implemented.
Subsequent to the end of fiscal 2022 as of March 31, 2023 are both SaaS ACB totaled $17 6 million five $3 million of which was unimplemented.
We remain focused on continued growth of SaaS revenue.
On its current cost structure, we believe our overall business will achieve breakeven at a SaaS revenue run rate of $17 million. We achieved this level of bookings in Q4 of 2022 and expect to have this revenue fully implemented during the second half of physical.
<unk> 2023, the company is realizing incremental SaaS gross margins above 80%.
I'm proud of the progress we have made in fiscal 2022, and I would like to commend our staff on their recent success.
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 healthcare providers to proactively address revenue leakage and improve financial performance.
Major steps forward to drive recurring revenue streams.
Better position, our company for growth and to deliver significant shareholder value over the long term.
The alignment has enabled us near term visibility to cash flow without losing momentum and growth or innovation.
Before we begin our Q&A session I'd like to thank the entire streamlined team once again for the hard work and dedication.
Their contributions are essential for us to support our healthcare provider 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 and our vision now I'd like to open the call up to your questions.
Operator.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. 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 you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment. Please all we poll for questions.
Our first question comes from Matt Hewitt with Craig Hallum Capital Group. Please proceed with your question.
Good morning, gentlemen, and congratulations on the strong finish to twenty-three maybe first up I was hoping we could dig in a little bit more on the selling environment you talked about some of the headwinds that you experienced last year.
The hangover from Covid.
Some of the commentary coming out of public hospitals HCA tenant for example.
Appears to show some improvement, particularly on the staffing side the procedure volumes are following suit.
Should we be thinking about that in context of what youre seeing.
Do you expect for those headwinds to maybe.
Beat a little bit as the year progresses, and how quickly do you think that that will translate into improvements in not only the contracting but also the implementations.
Yeah, Matt to hear thanks, Thanks for.
The question and the comments it was.
Eight year, and we're excited about 'twenty three and.
In 'twenty, four but yeah Youre right you pointed out.
Like Tenet for example, right incredible growth.
Revenue exceeding projections and their reports.
<unk> ability exceeding but then on the other side of the camp.
Hospitals going bankrupt. So it's the tale of two cities right in the health care system I do think and I do think well I know right now we're still in the headwinds we still have.
A lot of health systems that are that are still dealing with.
The post COVID-19 stuff and Theyre getting through there.
Their contracts, they're T staffs are still stretched at the implementation still can be delayed.
They're dealing with.
Financial environment, that's a little different now with these health systems in interest rates and what they're having to go through so <unk>.
All of that those points too.
More and more.
I guess tailwind for why they need streamline so.
These are all these are all good things, but they are I do think the first half of this year is still going to be like the back half of last year, it's going to be.
Fighting for tying in the Cfo's office fighting for time, and the General Counsel's Office and then fighting for time.
And the head of that department and so that that's just something.
We have to be better than others one.
Obviously major issues.
Such as revenue, but also staffing so.
Daniel and are planning further on that.
Analysis of historical deals and trying to really determine what the ideal client profile is for screen, one, especially on to evaluate your side. So.
Who's most likely to to lean into the value added solutions.
Yeah. So so those are some of the things that it's over.
Wish I could show you some of the details, but it's more exciting than ever about the pipeline because of the quality of the pipeline if that makes sense.
Absolutely Yep. Thank you and then maybe one last one for me and I'll hop back in the queue as far as gross margins are concerned I'm, a nice uptick here in.
In the fourth quarter.
I think you mentioned that the SAS.
Margins.
Our 80% plus on the incremental.
Implementations, but how should we be thinking about that that lineup total gross margins for the company as you progress through 'twenty three and then maybe as you look out a few years.
I'll, let Tom the details but.
And.
Yeah.
T and Hey, Matt.
Yes. So there is about almost 20% of that that cost of goods cost of goods line is related to capitalized software development amortization.
And so we had about on a normalized cash basis around <unk>.
65.
70%.
On a cash basis going through that as a gross margin.
And you're going to see that continue to expand with volume.
Got it alright, thank you very much and congratulations again on the strong finish.
You bet.
Okay.
Our next question comes from Brooks O'neil with Lake Street Capital markets. Please proceed with your question.
Good morning, everyone I, just wanted to be sure I understand sort of what you're talking about.
<unk>.
Implemented business I think you said $5 4 million booked.
ACD.
It's not been implemented so I assume thats not in the revenue line yet.
Yeah.
Oh Gee, if you don't mind me answering that.
Hey, Brooks How're you doing.
100% correct yeah.
You may have heard and you may have heard in bands.
<unk>.
We had four go lives in Q1, and two that are coming up in early Q2, and so you're going to see that revenue start being recognized into revenue.
On those evaluated deals in 2023, and that's why we talk about the strong growth on that on that revenue line.
Yeah, that's great now.
With that headwind still out there though.
No.
On track.
I mean, there's going to be some implementation delays on those as well so.
They're being sort of.
Continuous process of putting a little more.
More contract in.
In the bucket.
Lamenting.
That contract, but not necessarily touching up in terms of.
A shorter time between contract signing and implementation and revenue recognition, that's the right way to think about it.
With Rabbi D. It's a client by client thing.
You guys are coming to market with in terms of.
I always.
That was going to enable these hospital systems to you.
Revenue and whatnot, but I think I was hearing you say today that automation of the revenue cycle may be resonating better with the hospitals it might picking that up.
<unk> or <unk>.
Am I over reading into your Capex.
It might be overwriting, just a bit Brooks, we we're okay.
Absolutely focused on pre Bill operations, we are the leader in pre Bill operations in fact.
We're beginning to maybe ask questions who's the vice president of pre Bill for the health system side.
Jokingly that preserve dudney right now in health systems, but it should and we will we are the leader in this side of the industry.
And so now you might maybe read a little further into it but it it all it all evolves around automation as well, but on the <unk> side.
Okay. Let me just ask one last thing.
I mentioned the following Cerner helped me to understand what's going on with Cerner, obviously would be integration with Oracle.
That ultimately is going to be a positive for you or is it is that.
Bad debt integration, there side something that slows you guys down for a period of time until they kind of get through.
Well, it's you know the ore.
Oracle's <unk>.
A lot of that I guess, we don't have insight into Oracle strategy right. So Oracle Sharon yeah yeah.
That's something that we really don't influence at all.
So when you look at Oracle Cerner and you look at the Cerner health care strategy.
As it relates to prebuilt initiatives.
That hasn't changed.
In fact, I would say they've gotten more excited coming out of Q T V or with the team about what evaluate or indeed and robot he's already been part of the Cerner plan evaluate or has not so.
Sure.
I don't.
The pre bill side of the Cerner strategy is accelerating and that's good for us.
Great.
Thank you very much for taking my question.
Yeah.
There are no further questions at this time I would now like to turn the floor back over to Jacob Goldberger for 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 contact me at Jacob Goldberger at streamline health I met we look forward to speaking with you again, when we discuss our first quarter and 'twenty financial performance. Thank you.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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