Q2 2024 Streamline Health Solutions Inc Earnings Call

Okay.

Greetings and welcome to the streamline health solutions second quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode.

A question and answer session will follow the prepared remarks, if anyone should require operator assistance during the call. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded at this time I would like to hand, the call over to Jacob Goldberger Director of Investor Relations. Thank you you may begin. Thank you for joining us for the corporate update and financial results review streamline.

Health solutions for the second quarter of 2023, which ended July 31, 2023 as the conference call. Operator indicated my name is Jacob Goldberger, joining me on the call today are Tee Green Chief Executive Officer, Chairman of the Board, Ken Stillwell, President and Tom Gibson, Chief Financial Officer at.

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 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 with air force them into 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 uncertainties assumptions and other factors that could cause actual results to differ materially from these will be 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 participants on this call should take into account these risks when evaluating the topics.

We'll discuss please note streamline health is not undertaking any commitment or obligation to publicly revise any such forward looking statements made today.

On this call, we will discuss non-GAAP financial measures such as adjusted EBITDA and booked SaaS ACB 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 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'd now like to turn the call over to Tee Green, Chief Executive Officer, and Chairman of the board deep.

Thank you Jacob and thank you all for joining US. This morning. Following my opening remarks, our president Dan still will will provide an operations and sales review followed by a financial update from our CFO Tom Gibson.

During 2022.

We began reporting our new metric books as a C V, which is the annualized contract value for all agreements that are being recognized into revenue as well as bookings that have not been implemented.

As of July 31, 2023 book, SaaS, ACB was $17 $6 million as compared to $17.2 million as of January 31, 2023.

We successfully closed new bookings totaling $300000 of ACB.

This was offset by an evaluated client, which notified us of their non renewals during the quarter. He's ACB was approximately $500000.

Dan will discuss these events in more detail.

$14 $8 million of our book SaaS ACB is implemented and contributing to recognize revenue.

We continue to make progress towards our goal of having approximately $17 million of booked SaaS HCV implemented by the end of the third quarter of <unk>.

Fiscal 2023.

As of July 31, 2023, we had $4 $1 million of cash on our balance sheet.

And the balance on our term loan was $9.5 million, we believe our cash on hand is sufficient to achieve positive adjusted EBITDA less capitalized software development.

We have access to an incremental $2 million of liquidity through our non formula a lot of credit.

We combined Abilene and evaluated operations on November one 2022.

Under Dan's leadership, the integration process was smooth and we continued to achieve significant cost savings and operational improvements we are working towards four corporate objectives in fiscal 2023.

One our client utilizing both of our flagship solutions Rabbi being evaluated.

And epic based facility you utilizing Rabbi D.

Improved performance from our partner channel.

And the achievement of breakeven adjusted EBITDA.

We are in discussions with existing clients and remain confident we will close this fiscal year with one or more clients utilizing both rabbi and evaluated.

Similarly, we're in late stage discussions about Rabbi D with multiple epic based prospects.

They're not partner channel, we are focusing only on channel partners that can deliver strong results without unduly diverting the energy of our overall growth.

That's out of alignment in November 2022, we have seen significant cost savings and expect that trend will continue and expect that this approach in combination with top line growth will deliver our profitability and cash flow goals.

The HCI tea industry has experienced significant challenges in fiscal 2023, and we are no different the administrative arms of our nation's health systems are overwhelmed slowing their decision, making and their ability to execute we have seen our sales and client success operations become increasingly consultative and.

More difficult to forecast as a result.

Bureaucracy and understaffed I T Department has significantly slowed our booking and we now anticipate closing fiscal 2023 with $24 million of book SaaS ACB.

To be clear this change in guidance as a result of macro conditions I believe that under the leadership Amy several of our growth team is doing the right things and that our solutions ability to ensure complete and accurate billing prior to the first bill drop is invaluable for our target market.

Our solutions offer a fundamentally better way of processing claims in the front of the revenue cycle.

We are improving at identifying the impact we can have on net revenue billing.

Billing volumes, then now rates an increase in available cash for our prospects. We have seen continued strong demand for our solutions and our sales team really here's the word no.

Our implementation timelines for Rabbit Rabbi D are accelerating which will result in a shorter lag between booking and revenue generation, we maintain our expectation of having $17 million of SaaS AAR are implemented during the third quarter of fiscal 2023.

With that I'd like to turn the call over to our President Mr. Ben still.

Thank you T D.

The integrated streamline team is evolving and is making significant progress towards our annual priorities, which are scaling the RFID and compare technology for growth.

Increasing client effectiveness through evaluated usability.

Enhancing delivery for web IV and compare.

Doubling the evaluated client outcomes through enhanced rules and expanding our reach to new logo clients.

These priorities have allowed our innovation and service teams to become fully integrated and they are close to using one seamless process on all of our products.

Our clients will soon be able to rely on the same world class service set delivery regardless of solution.

Let me expand some on the progress and innovation.

Our innovation team completed the architecture scaling work on RFID and compare it ahead of schedule.

As Tim mentioned this will translate not only into a more efficient implementation process, but also a better client experience.

These solutions are now truly scalable we will continue to make improvements in system integrations, which can further enhance the improvements we've already made.

The team that was focused on the architectural work is now pivoting to more traditional feature functionality development following our roadmap.

Another result of the re architecture is a significant cost savings as the RFID solution has moved to a server less architecture.

I am also thrilled to announce that we have introduced our first AI based tool for evaluating.

This internal solution is being leveraged by our evaluated rules management team.

It is actively reviewing the coding changes flowing through evaluate or that were and were not suggested by our solution and finds patterns that are easily overlooked by humans.

The tool is already identified rules that could represent more than $20 million annualized financial impact across our client base. This could translate into a three to five times incremental ROI for evaluate our clients.

The team is excited about the potential impacts of these AI techniques on our revenue cycle solutions and this is just our first step we plan to continue to research, how and where to implement these new technologies within our solutions and we'll certainly keep you updated on our progress.

Now looking at client service as Tee mentioned, one of our evaluate our clients' notified us during the second quarter, but they do not plan to renew their contract.

This client had undergone significant management turnover and had trouble keeping enough coding and auditing staff on hand over the past year.

This client was still seeing a 10 times annualized return.

They lost staff, we saw their audits dropped to less than a six of the rate they were auditing out in 2021.

We learned quite a bit from this relationship this client joined us prior to the formation of our client success team, which we've made significant investments over the recent years.

Today that team meets with our clients on a monthly basis to ensure they are fully optimized solutions understand the value of the tools, we provide and nurture the client relationships.

We do not expect to see non renewals on a regular basis, but if you are going to expect that we do not have some churn.

Moving to gross we expect that our bookings will continue to be lumpy, but I am very pleased that our solutions continue to be adopted by some of the largest health care providers in the country.

The growth team is leveraging new tools like our ideal client profile, our business impact analysis, which uses quantify with values of future clients to raise their likelihood to buy and be successful client for our solutions.

Overall the growth team has three pathways to success for fiscal 'twenty to 'twenty three.

The direct channel, which we have made continued investments in.

Our partner channel, where we leveraged larger sales forces to influence our resell our solutions.

And lastly, cross selling within our existing client base.

I believe we have the right strategy for each of these pathways.

As Keith said, we're disappointed that the health care market has not recovered from post COVID-19 impacts as quickly as we had anticipated but feel strongly about our growth prospects in fiscal 2023 and beyond.

Before I turn the call over to Tom I would like to thank all of our hardworking team members, who are supporting our mission to ensure our healthcare provider clients are paid for all of the care 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.

At the end of fiscal 2022, the company changed its categories for reporting revenue SaaS revenue is now the headline of our income statement for the quarter ended July 31 2023.

Total revenue was $5 $8 million compared to $6 million during the prior year period.

And for the six months ended July 31, 2023, total revenue was $11.1 million compared to $11 $9 million for the first six months of 2022.

As previously reported the company had a large professional services contract that did not renew at the end of its 2022 physical year. These professional services contracts are not part of the company's core business going forward.

SaaS revenue grew 13% in the second quarter and first half of 2023 compared to the prior year period.

We expect to see growth on the SaaS revenue line in the coming quarters as the company has successfully implemented it solutions.

We maintain our expectation of 30% SaaS revenue growth in fiscal 2023 compared to physical 2022.

Company has approximately $3 $4 million of Unimplemented booked SaaS ACB as of July 31, 2023.

Total operating expense was $8 $4 million during the second quarter of 2023 down 3% compared to $8 $6 million for the second quarter of 2022 for.

For the first half of fiscal 2023 operating expense totaled $16 $7 million down, 6% compared to $17 $8 million during the first half of fiscal 2022.

The lower operating expense was attributable to lower head count associated with the non renewal of the large professional services contract as well as the cost savings achieved through the integration of Abilene and evaluate your business as discussed by T earlier in this call.

Second quarter 2023, net loss totaled $2 $5 million compared to a loss of $3 $3 million in physical 2022.

For the six months for the first six months of 2023 net loss totaled $5 $4 million compared to a loss of $6 $1 million. During the first six months of 2022.

The smaller net loss on lower revenues demonstrates the value of growing our high margin SaaS revenue as compared to the professional services contract that was not renewed.

Second quarter 2023, adjusted EBITDA was a loss of $9 million compared to a loss of $1 $1 million during the second quarter of fiscal 2022.

For the first six months of 2023, adjusted EBITDA was a loss of $2 $2 million compared to a loss of $2 $4 million for the year ago period.

The company expects that its adjusted EBITDA loss will continue to narrow and anticipate reaching near breakeven adjusted EBITDA in the third quarter of fiscal 2023.

Moving to the balance sheet as of July 31, 2023, we had $4 $1 million of cash on hand, compared to $6 $6 million at January 31, 2023.

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 2020 to.

The second payment will be paid in cash and stock and is valued on the balance sheet at approximately $3 million of this amount. It is estimated that we will pay.

One $2 million in cash on November in November 2023.

The liability is referred to as acquisition earn out liability on the company's balance sheet.

The company's accounts receivable was $2 $8 million at July 31, 2023 substantially lower than January 31, 2023, the lower accounts receivable is partially attributable to recently implemented evaluated contracts with performance guarantee.

<unk> that are not invoiced until the guarantee is met.

The company has historically met these guarantees within two to three months of implementation.

The balance of our term loan as of July 31, 2023 was $9.5 million.

As of September one 2023 were in the third 12 months period of the loan and will make $1 million of principal payments over the course of the next 12 months.

We have access to a 2 million dollar line of credit, which we can draw if necessary.

Based on our current forecast, we may need additional financing to fund our ongoing operations without sacrificing future growth.

Our current bank debt of $9.5 million is approximately <unk> five times, our annual recurring revenue or a R. R.

We believe the industry average debt to a R. R ratio for company. Similarly, situated to ours is one to 1.25.

This gives us the $10 million in debt capacity if refinance.

We believe that the venture.

That credit markets are improving and we could successfully refinance our bank debt with a credit facility in the range of 1.0 to 1.25 times a R. R.

On its current cost structure, we believe our overall business will achieve adjusted breakeven.

Add SaaS revenue rate of $17 million, we achieved this level of bookings in Q4 of 2022 and expect to have this revenue fully implemented during the third quarter of 2023.

The company is realizing incremental SaaS gross margins above 80%.

I am proud of the progress this company continues to make and want to commend our staff.

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

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 reoccurring revenue streams that better position, our company for growth and to deliver significant shareholder value over the long term.

While the macro environment remains more challenging than previously expected, we see strong demand for our pre billed revenue cycle methodology and our solutions.

We believe our ability to be self sustaining and generate cash from operations is a significant next step in our lifecycle I am proud of our team for making the necessary changes and executing on this milestone for our business.

Before we begin our Q&A session I'd like to thank the entire streamline team once again for all the 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.

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.

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.

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 while we poll for your questions.

Our first questions come 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 up I'd like to dig in a little bit more on the on the current selling environment. I'm. Obviously, you commented a little bit on some of the challenges that you're seeing I know you had a two and a half year period with COVID-19 weighing on the hospitals decision making process.

Operator: Greetings.

Yes, we started to see this spring we started to see some of the procedure volumes, improving which I think expectations were that you would see some of that increase revenue flowing to software and equipment purchases and whatnot, but what where are we right now I mean, if hospitals are.

Operator: Welcome to the Streamline Health Solutions second quarter, 2023 earnings conference call. At this time, all participants are in a list and only mode. The question and answer session will follow the prepared remarks. If anyone wants to require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Jacob Goldberger: At this time, I would like to hand the call over to Jacob Goldberger, Director of Investor Relations. Thank you. You may begin.

We're seeing a little bit of improvement there, what's kind of what's kind of the gating factor to kind of lift off of that I think many are expecting as we get through this fiscal year for you guys.

Jacob Goldberger: Thank you for joining us for the corporate update and financial results review of Streamline Health Solutions for the second quarter of 2023, which ended July 31st, 2023. As the conference call operator indicated, my name is Jacob Goldberger.

Yeah, Matt. Thanks. This T here.

Jacob Goldberger: Joining me on the call today are T Green, Chief Executive Officer and Chairman of the Board, Ben Stilwill, President and Tom Gibson, Chief Financial Officer. After 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 and not seeing these results, you can retrieve it from the company's website at www.streamlinehealth.net or from numerous financial websites.

Yeah.

Can you hear me okay.

Absolutely.

Okay.

Yeah, you know I mean, the first half of 'twenty three has been fairly slow I think industry wide.

Coming out of the administration's office, when I mean, the CFO and legal.

Those seem to have been.

<unk>, two to fall or or or make its way through the pipeline I think I T. We still have some real struggles you know getting the priority in the in the in the I T Department, but that's even beginning to the thought as well. If you look at Q2, you know we did four transactions, which is really really encouraging there they were smaller.

Jacob Goldberger: Before we begin with the 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 for the statements within the meaning of the private security's litigation reform act in 1995.

They weren't you know maybe average like 138 C V. One of them was with Oracle, though which is super encouraging because you know we had this relationship with Cerner and then we all know what happened and its taken.

Jacob Goldberger: These are subject to risks, uncertainties, assumptions and other factors that could cause actual result to different materially from these 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 10K 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.

Four or five months for all of the the management and the strategy to ship stuff out.

So we're really encouraged with.

In fact, we have like 34 book meetings with the Oracle with Oracle clients and where they are prebuilt technology solution. So that's that's really encouraging we we didn't close.

Jacob Goldberger: Participants on this call should take into account these risks when evaluating the topics we will discuss. These notes, 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-gab financial measures such as adjusted EBITDA and booked SAS ACB. 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 in the other entity may utilize in calculating their own non-gab measures. To help you compare these amounts on consistent terms, please refer to our website at www.streamlinehealth.net and our earnings release for a reconciliation of such non-gab measures to the most comparable gap measures.

We've got seven other deals that are in the kind of target at quarter end. The ACB 600, you know so we didn't get the big ones, but it looks like they are coming through the system and then you look at Q4 and you know the ACP jumped to 900 and so all the things that we've been working towards.

Yes.

It feels like these things are starting to open up well I guess that four are already on the smaller side, but again one of them Oracle. So this is these are good green light for US we're still cautious we do think it's been mentioned that the bookings is going to be lumpy because when we say Oh, you know when we close a million.

Jacob Goldberger: I would now like to turn the call over to T 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, our President Ben Stillwill will provide an operations and sales review followed by a financial update from our CFO Tom Gibson.

H E b deal versus the $250000 H E B deal obviously that's.

That's vastly different but if you look at where the deals in our pipeline that are red lines. I mean, they that are the contractor redline going back and forth between our team and their team.

T Green: During 2022, we began reporting a new metric, Book SAS ACB, which is the annualized contract value for all agreements that are being recognized into revenue as well as booking could have not been implemented. As of July 31st, 2023, Book SAS ACB was $17.6 million dollars as compared to $17.2 million dollars as of January 31st, 2023. We successfully closed new bookings, totaling $300,000 of ACB. This was all set by an evaluated client which notified us of their non-renewal during the quarter.

You look at the back half of this quarter and going into Q4.

Really really really impressive transactions in front of us so not a lot of great press releases from us.

In the last.

A quarter or two but I think those are those are coming again, so we're excited about that.

That's very encouraging thank you and then maybe a separate question. So congratulations on the new AI are jumping into the AI Fray.

Was this a product that was requested by customers was this something that you guys have been working on in and realize that now is the time.

T Green: His ACB was approximately $500,000, dollars. Then we'll discuss these events in more detail. $14.8 million of our book sass ACV is implemented and contributing to recognize revenue. We continue to make progress towards our goal of having approximately $17 million of book sass ACV implemented by the end of the third quarter of fiscal 2023. As of July 31, 2023, we had $4.1 million of cash on our balance sheet and the balance on our term loan was $9.5 million. We believe our cash on hand is sufficient to achieve positive adjusted evada less capitalized software development. We have access to an incremental $2 million of liquidity through our non-formular line of credit.

What is the feedback then I realize it's it's just launch but what is the feedback the initial feedback been from customers any additional color on that would be helpful. Thank you.

Yeah. Thanks, Matt. This is T again, I can let Dan opine as well, but.

You can't go into a customer or a client prospect me without the word being.

Being asked about even if the questioner doesn't really understand what they are asking right. It's in every conversation if you're in technology. We started working on the AI ml technique.

Technology here at stream, well over a year and a half ago.

Defining what we could do how we could use it and so what we've done is we've rolled it out internally and our rules division, so where most of rules and in the world in the health care world or in the North Sea and where are they being written by humans right and so now we're able to introduce technology that table.

T Green: We combined Avalid and Evaluator operations on November 1st, 2022. Under Ben's leadership, the integration process was smooth and we continued to achieve significant cost savings and operational improvements.

Two to find things that were wrong with rules, but also find things that weren't even written by humans and we've just started this process and as Ben mentioned, we've already down $20 million of additional revenue capture for our clients and this is just we just rolled this out in the last month and so clients haven't seen it yet.

T Green: We are working towards four corporate objectives in fiscal 2023. One, a client utilizing both of our flagship solutions, Rev ID and Evaluator. An epic-based facility utilizing Rev ID, improve performance from a partner channel, and the achievement of break-even adjusted evada. We are in discussions with existing clients and remain confident. We will close this fiscal year with one or more clients utilizing both Rev ID and Evaluator. Similarly, we are in late-stage discussions about Rev ID with multiple epic-based prospects.

Not touching it yet it's only our internal teams. So we're kind of eating your own dog food. If you will Dan you want to.

Make any further comments on that.

Yeah, we have set up a little bit with our clients already and so they knew it was coming and it's somewhat intuitive.

The process that we go we go through today is having individuals' do a lot of this research on their own a lot of reporting a lot of data mining on their own and it cuts out that whole initial research staff and gives us a very intelligent findings right off the bat and I think their.

T Green: Within our partner channel, we are focusing only on channel partners that can deliver strong results without unduly diverting the energy of our overall growth team. Since our alignment in November 2022, we have seen significant cost savings and expect that trend will continue and expect that this approach in combination with top-line growth will deliver our profitability in cash flow goals.

The users themselves are internal users are excited about it.

But then our technologists are just thinking and very.

Excited about how that's going to expand into a variety of areas and eventually be client facing and do all sorts of things, but we're already talking about it with current clients are already typing it up with our prospects as well.

T Green: The HCIT industry has experienced significant challenges in fiscal 2023, and we are no different. The administrative arms of our nation's health systems are overwhelmed, slowing their decision-making and their ability to execute. We have seen ourselves in client success operations become increasingly consultative and more difficult to forecast as a result. Increase bureaucracy and under-staff IT departments have significantly slowed our booking and we now anticipate closing fiscal 2023 with $24 million of booked-fast ACV.

That's great alright, thank you very much.

Thank you. Our next question is come from the line of Erin <unk> with Lake Street Capital. Please proceed with your questions.

Hey, Good morning, guys. This is Aaron on the line for Brooks. This morning, So just you.

You know last quarter, you mentioned, a couple of goals towards making.

Making progress towards sort of your annual priorities you know.

Are you comfortable with where you're at in terms of sort of scaling up I D and maybe increasing client effectiveness.

T Green: To be clear, this change in guidance has a result of macro-conditions. I believe that under the leadership Amy Severo, our growth team is doing the right things and that our solutions ability to ensure complete and accurate billing prior to the first build drop is invaluable for our target market. Our solutions offer a fundamentally better way of processing claims in the front of the revenue cycle. We are improving at identifying an impact we can have on that revenue, billing volumes, denial rates, and increase in available cash for our project.

Through the evaluate the usability and you know if we could just get a little bit more color on progress there and if there's sort of a.

Higher priority that you guys are folks you're not going to the back half of the year here.

Yeah. Thanks, Erin this is tee and I'll start and let Ben.

Sure.

Opine as well, but wherever they are major major progress and where we can.

Going into it there was a re architecture that was going to have to be done on the platform.

Not unlike many innovation project as it was it was probably a little larger than we envisioned but.

T Green: We have seen continued strong demands for our solutions and our sales team really hears the word no. Our implementation timelines for Rev ID are accelerating which will result in a shorter lag between booking and revenue generation. We maintain our expectation of having $17 million of SAS ARR implemented during the third quarter of fiscal 2023.

That that tech has been it is it is wrapping up and glad to hear it has ramped up.

To the cloud.

And so it's now a true cloud based platform.

We have I don't know don't hold me to the exact numbers then but what is I think we've lowered our infrastructure cost almost like 40 Grand a month.

Something like that I mean, just major and and now it can scale to the enterprise because everything we everything we've talked about it it has to be in a class that has to be enterprise class and so.

Ben Stilwill: With that, I'd like to turn the call over to our president, Mr. Ben Stilwill. Thank you, T. The integrated Streamline team is evolving and is making significant progress towards our annual priorities, which are scaling the Rev ID and compare technology for growth, increasing client effectiveness through evaluator usability, enhancing delivery for Rev ID and compare, doubling the evaluator client outcomes through enhanced rules, and expanding our reach to new logo clients.

That's been really cool, it's going to increase our velocity and how we tackle future projects on the platform now.

We've actually for the first time, we have a project base roadmap for <unk>. So we know what we're building in every sprint.

You Couldnt do that to you at the architecture ready to do that.

Architecture is ready to go one evaluate or it is enterprise class I mean, it's it's it's an exciting tool that.

Ben Stilwill: These priorities have allowed our innovation and service teams to become fully integrated and they are close to using one seamless process on all our products. Our clients will soon be able to rely on the same world-class service set and delivery regardless of solution.

Is continuing to grow and create opportunities for streamlined so.

Technology wise, the biggest things right now on like evaluate or it's really getting the epic I mean.

Ben Stilwill: Let me expand some on the progress and innovation. Our innovation team completed the architecture scaling work on Rev ID and compare ahead of schedule. As T mentioned, this will translate not only into a more efficient implementation process but also a better client experience. These solutions are now truly scalable. We will continue to make improvements in system integrations which can further enhance the improvements we've already made. The team that was focused on the architecture work is now pivoting to more traditional feature functionality development following our roadmap. Another result of the REAR architecture is a significant cost savings as the Rev ID solution has moved to a serverless architecture.

The epic, but getting.

The defined roadmap for evaluating it's it's really making sure that that two year roadmap that we have in front of US is just continually Ben.

Evaluated with our clients. So we can go really really fast.

On the valuation side so.

You know that that's exciting I don't see anything other than introducing of AI and ml on that platform that that's obviously the biggest thing we've done.

And clients.

We received the benefit of that in the next several quarters, so that'll be cool, but.

Ben Stilwill: I am also thrilled to announce that we've introduced our first AI-based tool for evaluator. This internal solution is being leveraged by our evaluator rules management team. It is actively reviewing the coding changes flowing through evaluator that were and were not suggested by our solution and finds patterns that are easily overlooked by humans. The tool has already identified rules that could represent more than $20 million of annualized financial impact across our client base.

Ben anything specific about these two platforms.

No I think I think you were right on the cost decline.

Go into server less but I think like you said the most important part is.

Chris prospects and current clients don't find the architects yourself two exciting other than it's more reliable.

What they find exciting is that now we're going to start rolling out a lot more features that will affect them.

And then yeah I agree with your comments on evaluating as well.

Great Yeah, that's super helpful and encouraging I'm excited to see the progress there. Thanks for taking the question.

Ben Stilwill: This could translate into a three to five times incremental ROI for evaluator clients. The team is excited about the potential impacts of these AI techniques on our revenue cycle solutions and this is just our first step. We plan to continue to research how and where to implement these new technologies within our solutions and will certainly keep you updated on our progress.

Thank you.

Thank you we have reached the end of our question and answer session. I will now turn the floor back over to Jacob Goldberger for any closing comments.

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

Do you 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 third quarter financial performance today.

Ben Stilwill: Now looking at client service, as T mentioned, one of our evaluator clients notified us during the second quarter that they do not plan to renew their contract. This client had undergone significant management turnover and had trouble keeping enough coding and auditing staff on hand over the past year. This client was still seeing a 10 times annualized return, but as they lost staff, we saw their audits dropped to less than a sixth of the rate they were auditing at in 2021.

Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.

Ben Stilwill: We learned quite a bit from this relationship. This client joined us prior to the formation of our client's success team, which we have made significant investment over the recent years. Today, that team meets with our clients on a monthly basis to ensure they have fully optimized the solutions, understand the value of the tools we provide, and nurture the client relationships. We do not expect to see non-renewals on a regular basis, but it would be arrogant to expect that we do not have some churn.

Ben Stilwill: Moving to growth, we expect that our bookings will continue to be lumpy, but I'm very pleased that our solutions continue to be adopted by some of the largest healthcare providers in the country. The growth team is leveraging new tools like our ideal client profile, our business impact analysis, which uses quantified with values of future clients to rank their likelihood to buy and be successful client for our solutions. Overall, the growth team has three pathways to success for fiscal 2023, the direct channel, which we have made continued investment in, our partner channel where we leverage larger sales forces to influence or resell our solutions, and lastly, cross-selling within our existing client base.

Ben Stilwill: I believe we have the right strategy for each of these pathways. As TSAID were disappointed that the healthcare market has not recovered from post-COVID impacts, as quickly as we had anticipated, but feel strongly about our growth prospects in fiscal 2023 and beyond.

Ben Stilwill: Before I turn the call over to Tom, I would like to thank all of our working team members for supporting our mission to ensure our healthcare provider clients are paid for all of the care 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.

Tom Gibson: With that, I'll hand the call over to our CFO. Tom Gibson. Thank you, Ben.

Tom Gibson: At the end of fiscal 2022, the company changed its categories for reporting revenue. Fast revenue is now the headline of our income statement. For the quarter-ended July 31, 2023, total revenue was $5.8 million compared to $6 million during the prior year period. For the six months, ended July 31, 2023. Total revenue was $11.1 million compared to $11.9 million for the first six months of 2022.

Tom Gibson: As previously reported, the company had a large professional services contract that did not renew at the end of its 2022 fiscal year. These professional services contracts are not part of the company's core business going forward. Fast revenue grew 13% in the second quarter and first half of 2023 compared to the prior year periods. We expect the seed growth on the SaaS revenue line in the coming quarters as the company has successfully implemented its solution.

Tom Gibson: We maintain our expectation of 30% SaaS revenue growth in fiscal 2023 compared to fiscal 2022. The company has approximately $3.4 million of unimplemented foot-fast ACV as of July 31, 2023. Total operating expense was $8.4 million during the second quarter of 2023, down 3% compared to $8.6 million for the second quarter of 2022. For the first half of fiscal 2023, operating expense totaled $16.7 million down 6% compared to $17.8 million during the first half of fiscal 2022.

Tom Gibson: The lower operating expense was attributable to lower headcount associated with the non-renewal of the large professional services contract, as well as the cost savings achieved through the integration of Avalid and Evaluator businesses discussed by T earlier in this call. Second quarter, 2023 net loss totaled $2.5 million compared to a loss of $3.3 million in fiscal 2022. For the first six months of 2023 net loss totaled $5.4 million compared to a loss of $6.1 million during the first six months of 2022.

Tom Gibson: The smaller net loss on lower revenues demonstrates the value of growing our high margin SaaS revenue as compared to the professional services contract that was not renewed. Second quarter, 2023 adjusted EBITDA was a loss of $0.9 million compared to a loss of $1.1 million during the second quarter of fiscal 2022. For the first six months of 2023 adjusted EBITDA was a loss of $2.2 million compared to a loss of $2.4 million for the year ago period.

Tom Gibson: The company expects that its adjusted EBITDA loss will continue to narrow and anticipate reaching near break even adjusted EBITDA in the third quarter of fiscal 2023. Moving to the balance sheet as of July 31, 2023 we had $4.1 million of cash on hand compared to $6.6 million at January 31, 2023. Under the Avalid acquisition agreement the company is contracted to provide additional consideration on each of the first two 12 monthly anniversaries of the closing date.

Tom Gibson: The first of these payments were paid in the fourth quarter of fiscal 2022. The second payment will be paid in cash and stock and is valued on the balance sheet at approximately $3 million of this amount. It is estimated that we will pay $1.2 million in cash on November end of November 2023. The liability is referred to as acquisition earn out liability on the company's balance sheet. The company's accounts receivable was $2.8 million at July 31, 2023 substantially lower than January 31, 2023.

Tom Gibson: The lower accounts receivable is partially attributable to recently implemented evaluator contracts with performance guarantees that are not invoiced until the guarantee is met. The company has historically met these guarantees within two to three months of implementation. The balance of our term loan as of July 31, 2023 was $9.5 million. As of September 2023, we are in the third 12 month period of the loan and will make $1 million of principal payments over the course of the next 12 months. We have access to a $2 million line of credit which we can draw if necessary.

Tom Gibson: Based on our current forecast, we may need additional financing to fund our ongoing operations without sacrificing future growth. Our current bank debt of $9.5 million is approximately 0.5 times our annual recurring revenue or ARR. We believe the industry average debt to ARR ratio for companies similarly situated to ours is 1 to 1.25. This gives us some $10 million in debt capacity if refinance. We believe that the venture-backed credit markets are improving and we could successfully refinance our bank debt with a credit facility in the range of 1.0 to 1.25 times ARR.

Tom Gibson: On its current cost structure, we believe our overall business will achieve a adjusted break even at a SaaS revenue rate of $17 million. We achieve this level of bookings in Q4 of 2022 and expect to have this revenue fully implemented during the 3rd quarter of 2023. The company is realizing incremental SaaS gross margins above 80%.

Tom Gibson: I am proud of the progress this company continues to make and want to commend our staff.

Tom Gibson: That concludes my comments.

T Green: I will now turn the call back to Tigreen for his closing remarks. Gee? Thank you, Tom.

T Green: We continue to enable healthcare providers to proactively address revenue leakage and improve financial performance and have taken major steps forward to drive reoccurring revenue streams that better position our company for growth and to deliver significant shareholder value over the long term. By the microenvironment remains more challenging than previously expected, we see strong demand for our pre-built revenue cycle methodology and our solutions. We believe our ability to be self-sustaining and generate cash from operations is a significant next step in our life cycle.

T Green: I am proud of our team for making the necessary changes and executing on this milestone for our business. Before we begin our Q&A session, I'd like to thank the entire streamlined team once again for all the hard work and dedication. Their contributions are essential for us to support our healthcare providing clients and ensure they have the necessary tools, the free uptime and resources to provide quality care for the communities they serve.

T Green: Thank you all for your support and streamline help in our vision.

Operator: 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 Q. You may press star two if you would like to remove your question, from the Q. For participants using speaker equipment, it may be necessary to pick up your hands that before pressing the star keys. One moment please while we pull for your question.

Matt Hewitt: Our first questions come from the line of Matt Hewitt with Craig Hallam. Please proceed with your questions.

T Green: Good morning and thank you for taking the questions. Maybe first up I'd like to dig in a little bit more on the current selling environment. Obviously you commented a little bit on some of the challenges that you're seeing. I know you had a two and a half year period with COVID weighing on hospital decision making process. We started to see this spring. We started to see some of the procedure volumes improving, which I think expectations were that you would see some of that increased revenue flowing to software and equipment purchases and whatnot.

T Green: But where are we right now? I mean if hospitals are seeing a little bit of improvement there, what's kind of the gating factor to kind of the lift off that I think many are expecting as we get through this fiscal year for you guys. Yeah, Matt, thanks of 23 has been fairly slow. I think industry wide coming out of the administration's office when I mean the CFO and legal. Those seem to have been starting to fall or make its way through the pipeline.

T Green: I think IT, we still have some real struggles. Getting the priority in the IT departments, but that's even beginning to the thought as well. If you look at Q2, we did four transactions, which is really, really encouraging. They were smaller. They weren't maybe average like 130 ACV. One of them was with Oracle though, which is super encouraging because you know, we had this relationship with CERNOR and then we all know what happened.

T Green: It's taken four or five months for all of the management and the strategy to shift those out. They were really encouraged. We have, in fact, we have like 34 book meetings with the Oracle clients and we're there pre-built technology solutions. So that's really encouraging. We didn't close it. We've got seven other deals that are in the targeted quarter and the ACV 600. We didn't get the big ones, but it looks like they're coming through the system and then you look at Q4 and the ACV jumps to 900.

T Green: So all the things that we've been working towards, it feels like these things are starting up and up. Like I said, four already on the smaller side, but again, one of them Oracle. So these are good green lights for us. We're still cautious. We do think it's been mentioned that the bookings is going to be lumpy because when we say, you know, we call it the million dollar ACV deal versus a 250,000 dollar ACV deal.

T Green: Obviously, that's vastly different. But if you look at where the deals in our pipeline that are red lines, I mean, the contract for red line going back and forth between our team and their team, you look at the back half of the support and going into Q4, really, really, really impressive transactions in front of us.

Matt Hewitt: So not a lot of great press releases from us in the last quarter or two, but I think those are coming again, so we're excited about that. That's very encouraging. Thank you.

Matt Hewitt: And then maybe a separate question. So congratulations on the new AI. I were jumping into the AI for a, was this a product that was requested by customers? Was this something that you guys have been working on and realized that now is the time, you know, what is feedback? And I realize it's just launched. But what is the feedback initial feedback then from customers? Any additional color on that would be helpful?

Matt Hewitt: Thank you. Yeah. Thanks, Matt. This is tea again. I'm going to let Dan open as well. But you can't go into a customer or client prospect me without the word AI being asked about. Even if the questioner doesn't really understand what they're asking, right? It's in every conversation. If you're in technology, we started working on the AIML technology here at Stream well over a year and a half ago, defining what we could do, how we could use it.

Matt Hewitt: And so what we've done is we've rolled it out internally in our rules division. So where most of rules in the world, in the healthcare world, or in RCM world, are being written by humans, right? And so now we're able to introduce technology that's able to find things that were wrong with rules, but also find things that weren't even written by humans. And we've just started this process and it's been mentioned.

Matt Hewitt: We've already found $20 million of additional revenue capture for our clients. And this just, we just wrote this out in the last month. And so clients haven't seen it yet. They're not touching it yet. It's only our internal team. So we're kind of eating their own dog food if you will. Ben, you want to make me further comments on that? Yeah, we've hyped it up a little bit with our clients already.

Matt Hewitt: And so they knew it was coming. And it's somewhat intuitive. The process that we go through today is having individuals do a lot of this research on their own, a lot of reporting, a lot of data mining on their own. And it just cuts out that whole initial research step and gives very intelligent findings right off the bat. And I think the users themselves, our internal users, are excited about it. But then our technologists are just thinking and very excited about how that's going to expand into a variety of areas. And eventually, you'll be client-facing and do all sorts of things. But we're already talking about it with current clients already hyping it up with our prospects as well. That's great.

Matt Hewitt: All right. Thank you very much. Thank you.

Aaron Workmear: Our next question has come from the line of Aaron Workmear with Lake Street Capital. Please proceed with your questions. Hey, good morning, guys. This is Aaron. I'm the line for Brooks this morning. So just last quarter, you mentioned a couple of goals towards making progress towards your annual priorities. Are you comfortable with where you're at in terms of sort of scaling the Web ID and maybe increasing client effectiveness through the evaluated usability?

Aaron Workmear: And if we could just get a bit more color on progress there and if there's sort of a higher priority that you guys are focusing on going to the back half of the year here. Yeah, thanks, Aaron. This is Tee. And I'll start my band. Will Pine as well, but Revide, you know, major, major progress. We knew going into it, there was a re-architecture that was going to have to be done on the platform.

Aaron Workmear: Not unlike any innovation project, it was probably a little larger than we envisioned, but that tech has been, it is wrapping up and what I did, it has wrapped up. It's a cloud, and it's now a true cloud-based platform. I don't know, don't pull me to the exact numbers then, but what is, I think we lowered our infrastructure cost almost like 40 grand a month, something like that. I mean, just major.

Aaron Workmear: And now it can scale to the enterprise because everything we, everything we've talked about, it has to be enterprise class, it has to be enterprise class. And so, that's been really cool. It's going to increase our velocity and how we tackle future projects on the platform now. We've actually, for the first time, we have a project-based roadmap for Revide, so we know what we're building in every sprint. You know, you couldn't do that until you had the architecture ready.

Aaron Workmear: The architecture is ready to go. On a value-aider, it is an enterprise class. I mean, it's an exciting tool that is continuing to grow and create opportunities for streamlines. So, you know, technology wise, the biggest things right now on, like a value-aider is really getting the epic, I mean, not the epic, but getting the defined roadmap for a value-aider, it's really making sure that that two-year roadmap that we have in front of us is just continually being evaluated with our clients.

Aaron Workmear: We can go really, really fast on the value-aider side. So, you know, that's exciting. I don't see anything other than the introduction of AI and ML on that platform. That's obviously the biggest thing we've done. And clients are going to receive the benefit of that in the next several quarters. So, that'll be cool. But, men, anything specific about these two platforms? No, I think you were right on the cost decline on going to serverless.

Aaron Workmear: I think, like you said, the most important part is, prospect and current clients don't find the architecture stuff too exciting, other than it's more reliable. And what they find exciting is that now we're going to start rolling out a lot more features that will affect them. And then, yeah, agree with your clients and value-aider as well. Great. Yeah. That is super helpful in encouraging the set to see the progress there. Thanks for taking the question. Thank you.

Operator: We have reached the end of our question and answer session.

Jacob Goldberger: I want to turn the floor back over to Jacob Goldberger for any 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 StreamlineHealth.net.

Jacob Goldberger: We look forward to speaking with you all again when we discuss our third quarter financial performance. Good day. Thank you.

Operator: This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time.

Operator: Enjoy the rest of your day.