Alcidion Group Ltd
ASX:ALC
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Alcidion Group Ltd
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Welcome to Alcidion's Q4 FY '23 webinar presentation for the 3 months ended the 30th June 2023.
Before we begin, I'd like to acknowledge the traditional owners and custodians of the various lands on which we meet and work today. I pay my respects to their Elders past, present and emerging. I extend that respect to Aboriginal and Torres Strait Islander peoples who are on the call with us today.
So today presenting, we have Alcidion's Chair, Rebecca Wilson; Managing Director, Kate Quirke; and Chief Financial Officer, Matt Gepp. Kate will take us through a presentation covering the commercial and financial highlights of the quarter, and there will be a Q&A at the end. [Operator Instructions] If we run out of time, please send me an e-mail, and I'll come back to you as quickly as possible. My contact details are on the bottom of the announcement that were out this morning.
So with that, thanks again for joining, and I'll hand over to you, Kate.
Thanks, Hannah, and welcome, everyone, to the call. As Hannah have mentioned, I'll walk through a summary of the Appendix for [indiscernible] the business update that we launched with the ASX this morning. At the outset, let me say, we're very pleased with the results that we've achieved in Q4.
We've had a record quarter of cash reset, which resulted in positive operating cash flow, not just for the quarter, but in fact, more importantly, for the whole financial year. This was 1 of our key targets that we set ourselves for the year. So I'm very proud of the work that the team has done to be able to deliver on this result.
In Q4, we also delivered new sales across all modules to both new and existing customers. And that has helped to contribute to a strong revenue growth over the course of FY '23. While I am touching on revenue in this presentation and in the release today, it's worth noting that the full year revenue and EBITDA are obviously subject to audit, and we will report more formally on the full year's results in later in August.
So just having a look at the financial highlights initially. During the first quarter -- sorry, during this quarter, which is actually the fourth quarter, I've already got my head wrapped around the quarter that we're in. So during the fourth quarter of FY '23, Alcidion secured $7.3 million of new sales with $2.3 million of that recognizable in FY '23. The total new sales for FY '23 were $29.9 million, with $9.9 million of that to be recognized over the course of the year and the rest obviously in FY '24 and beyond.
The FY '23 revenue is expected to be around $40 million. Approximately 75% of that revenue has been derived from products with around 30% coming from services. Q4 cash receipts were the strongest on record, with $17.6 million. We subsequently delivered positive operating cash flow for the quarter of $6 million. We have a strong cash position of $14.6 million as of the end of the 30th of June with no debt, and the cash balance is 32% higher than it was at the end of Q3.
These very strong cash receipts have delivered FY '23 cash receipts of $46.9 million, which is up 13% on the prior corresponding period and demonstrates the strong and consistent commercial growth of the business over the course of that -- of the financial year.
The operating cash flow for the full year is positive $0.2 million, and we're very comfortable with the current cash levels being able to support ongoing operations as the costs have stabilized as they have over a number of quarters, and we expect that to be maintained. And final earnout of the Silverlink acquisition is now complete.
Looking at the trends, as you can see by the various graphs that we've got here that given the length of contracts we signed and the size of those contracts being very different depending on whether the customer is purchasing all modules, some models and so forth, you can see that cash receipt can be lumpy over time. And as a result, the quarterly numbers do not always reflect the business performance from 1 financial year to the next, and it is really important to be able to look at it across the course of the financial year. This quarter, we delivered $7.3 million in new sales, and that came across a number of new customer contracts. And it comprised 59% or $4.3 million of recurring product revenue, and $3 million of nonrecurring services revenue, which includes the revenue associated with implementing our products as well. Of that $7.3 million, $2.3 million will be recognized in FY '23.
As I pointed out on the last quarterly update, Q4 was expected to be our strongest quarter of the cash receipts this year, and with $17.6 million, we have instead had our highest quarter of cash receipts to that ever. The cash receipts for FY '23 were $46.9 million, which as I said a 13% uplift on the prior year FY '22.
Pleasingly, the level of engagement with prospective customers continues to remain high, and the increasing referenceability of our Miya solutions, both in the U.K. and here adds to the confidence in the outlook that we have for Alcidion through FY '24 in terms of new sales and continuing on this positive trajectory.
I thought I'd take the time also to give you a bit of an update on the business throughout the quarter and the things that we have been proud of. At an operational level, we have had some long-term customers that have been around since the early days of Alcidion when Miya was first developed to what we refer to now as legacy Miya. Northern Territory Health and Western Health have been running that solution for some time. MidCentral has been running the earliest release of Miya Precision since 2017.
In 2017, we released Miya Precision, new version fully cloud-enabled and cloud native developed. And it has been very pleasing during the course of this quarter to get all our sites updated to the latest version of Miya Precision. And the reason that's very important, not the least of which it reflects the ongoing referenceability and value that those customers are getting from Alcidion and our products. But it also allows both customers to now buy or purchase as needed or as they have interest in the additional modules that we continue to keep developed from Miya Precision, the most recent being the EV module -- emergency department module that has been released. But also it benefits Alcidion in that it allows us to improve our performance margins and our ability at capacity as we only need to support 1 platform, and we're no longer required to support those legacy solutions.
During the quarter, we renewed another 2 Silverlink PCS contracts at Royal Wolverhampton and University Hospital Dorset. Since acquiring Silverlink in December 2021, we now renewed 4 contracts from multiyear periods which is a key validation point, I think, for the embedded nature of PCS with our customers. And also the opportunity that it gives us in expanding our product offering as we are able to confidently enter into tenders to the large EPR contracts. We're heading a patient administration system is a manager requirement. And we have seen some early success with the contract that we signed with 1 of the trusts in the U.K. at the end of Q2, which allows them an option to take PCS at a later date.
We're seeing more and more of this engagement with customers where they are purchasing Miya Precision as a platform and the initial modules and then creating contractual vehicles that allow them to purchase other modules over time, as and when their budget and needs allow. I don't think that's a very positive thing for us because we're starting to see people convert and buy additional modules, 1 and 2 quarters after the initial contract as we have seen happen in Q4.
Just on this point, it is important to clarify that as we go forward, and I think I said this before, we will not necessarily announce the string of large APR type contracts with all modules included from the asset. Our sales strategy is 1 of looking at how we enter this as I indicated, in a modular nature, and we've had significant success with it recently as we progressively upsell and add modules into the engagement.
We will, I believe, see that electronic patient record engagement in the U.K. start to come to fruition through Q2, Q3. That program of work, as I indicated previously is delayed. And it was actually formally announced this week after the U.K. government released the annual Infrastructure and Projects Review program, which they do every year. They indicated they were not on track to have a full APR at all by 2025, and that would be more likely be up to 2026, and that lines up with instinctively with what we're seeing and certainly where we're seeing the trust in the process of procurement at the moment.
Lastly, I'd like to touch on our work with Te Whatu Ora, which is the new -- the name for the Health New Zealand body. We have not heard a lot out of New Zealand in the last couple of years as they have done what has been a significant restructure. But it's very pleasing that during the year, we signed a master services agreement with Te Whatu Ora for Smartpage, which allows those hospitals that do not have Smartpage yet to purchase Smartpage directly from that agreement without having to go to market.
One of our customers we've recently published on our website, that's a bit of a case study and a story about the success that Nelson Marlborough has had with the rollout of Smartpage for clinical communication. Smartpage is an electronic communication task management solution that helps improve communication between departments without always having to rely on phone calls and historically, pages. And following that implementation, there's been some really positive feedback from the clinical staff about how much time it saves and how better they're able to service their patients through having information available on their phone rather than relying on a small number of letters in a page and having to phone around. And as a result, My Page has now been rolled out to the nonclinical departments across Nelson.
And it is these positive case studies and stories that what makes us at Alcidion very proud about the impact our solutions are having in health care. It also demonstrates tangible value to our customers that other customers look to when they're thinking to make decisions about where they spend money to improve their ability to deliver health care.
As we move into FY '24, we will continue to take to market the strategy that we exercised through FY '23, where we have the opportunity of taking the modular cells, so very much focused there on addressing some of the really crucial needs in health care around resource challenges. We know that we do -- there are not enough nursing staff or clinical staff available post pandemic. Most studies around the world indicate that we are unlikely to ever have enough to meet demand and that we will probably operate at around 25% less capacity than we will need. So the health care system is really looking at ways to be more efficient about the flow of patients to look at how they manage those patients through the system. And we are obviously ideally positioned for that with our flow assets and command capabilities.
The Miya Central solution that we have been continuing to build out, creating an operations center that allows other partners to enter into our ecosystem like we announced with Olinqua to again broaden the information that's available to hospitals as they are challenged with their management of resources. And, of course, continuing very strongly into the NHS with our response to not only the electronic patient record opportunities, but a very strong push in that market around flow and bed management as well. And we've just recently seen funds earmarked for that, that they want to address between now and the weather pressures time frame that occurs in the NHS in our summer.
So as I mentioned, we have $33.7 million in contracted and scheduled revenue to be recognized in FY '24 before we make any other sales in FY '24. And that visibility over this year and the next years, that really allow us to focus our resources to capitalize on the upsell and cross-sell opportunities we have.
The cash receipts from Q4 are our strongest to date. And even in the absence of announcing would someone consider major contract wins, we have been able to deliver attractive growth from existing customers and those new customers that are entering into the Miya Precision opportunity through purchasing 1 or 2 modules initially, and that's very much what we have been seeing through the Q4 sales.
This highlights the strength of the modular strategy. We were able to win a customer with 1 module and then work closely with them to upgrade on sales over time. And it will -- that will remain a core part of our overarching growth strategy for FY '24. The cash position is healthy. And so we enter FY '24 in a very strong position.
That's really all I wanted to cover off today. I am very happy. I'll stop sharing, and perhaps we can look to questions, Hannah.
Thanks so much, Kate. We do have a few that have come in. Starting from the top, so it says you have pretty sizable staffing costs of 29 million. How many staff do you currently have? And what do you expect the staffing costs to do from here?
We have just under 200 staff. I think it might be 192 or 193 at this point in time, and give or take a few at any point in time, there might be a couple of roles vacant. We expect those costs to remain steady as we enter into FY '24. And we expect for the sort of revenue growth that we've demonstrated over the last few years that we can maintain that trajectory with that type of staffing and operational cost.
Of course, where we win a couple of large EPA contracts, we might look at some increase in delivery staff to support that, but of course, that would be recurring. There will be revenue associated with that. So very comfortable at the moment that the operating costs are about where they need to be for us to start to deliver on that additional growth.
All right. Thanks so much. We have 2 on the partnership with Olinqua, so I'm going to combine them. And 1 is, is Olinqua departing from the Microsoft Health platform? And when do you think you may start seeing revenues from this product?
No, Olinqua is a solution that we'll be tapping into our operational capability, providing information to the LCDN platform. So they will still continue to do what they are doing.
The partnership with Olinqua is strategic in nature and that it expands the opportunity our customers will have to use Miya Central as a an operations center, where not only will they look at the clinical data and bed management data that Alcidion provides, but Olinqua can provide information about security systems, nurse call systems, cleaning facilities and so forth. So we're looking to bring strategic partners in that can roll in the offering. That means that our customers will look at Olinqua, and vice versa Olinqua customers will be interested in what Miya Precision has to offer them.
All right. Thanks very much. Are you aiming for the company to achieve impact profitability and positive free cash flow in FY '24? And if not, when do you think that will happen?
Look, I'm not going to get any into, I think, the FY '24 kind of forecast and positioning. We'll do that as part of the annual -- as part of the release that we'll do in August, and position where we're heading. Obviously, our aim will be continue to move in that positive direction because as I've said, the costs are leveling out, and we are expecting revenue growth to continue on this positive trajectory. That being said, if there are at any point, something that we're going to do from an investment perspective like moving to new geographies so forth, that would be something that we would identify and call out so that people would be aware of that. So I will sort of give more information and color to that at the full year. But as I said, operating costs are bottomed out, and we are continuing in this type of revenue growth.
All right. Thank you very much. Are all Silverlink payments now finalized, or are there other performance payments to come?
No, they are all formalized now and complete.
Can you give a breakdown by region of the $7.3 million in Q4 sales?
We don't typically do that. We will, at the full year, give a breakdown of what the by region of the full year sales.
All right. Thank you. Interesting 1 here. Can you please define or clarify what pipeline means when you refer to it in webinars? Does that pipeline encompass all opportunities that Alcidion could potentially submit tender proposals for, or opportunities that you have already submitted tender proposals for?
So pipeline for us refers to all opportunities that we've launched within our system where we have submitted a proposal or a tender to a customer. Not all are competitive. In fact, we win at least half our business from existing customers, direct awards or framework contracts where the requirement is to convince the customer to proceed and not necessarily to be somewhere else. So items in the pipeline are converting all the time and being replaced with new opportunities. So my comments and pipeline have been in reference to the range in value and diversity of the opportunities and have sets us up well to continue to deliver quarter-on-quarter even when large deals such as the U.K. EPR program and not moving as anticipated.
Just a few more. Are you seeing bigger competitors moving into your space, e.g. Oracle taking over Cerner?
No, I haven't seen a lot of change as a result of our taking over Cerner, to be fair. I think the large players are struggling with the increasing pressures on health care and their ability to justify the sort of costs that Cerner and Epic are requiring to roll out their solutions. So no, quite the opposite. In fact, we are seeing that Cerner and Oracle certainly in our geographies are being far more challenged than they have ever been before by players like ourselves.
One final one. It's actually kind of 3 questions in one. But are you able to provide more clarity on what is specifically causing the delays in the U.K. procurement because of the NHS? And do you think that those will rectify anytime soon?
Look, as in all things, they're multifactorial. There is, first of all, resource challenges across health care, so they don't have as many people to deploy to actually get the procurement processes moving. There was like a lot of activity from a political nature in the first half of the financial year in the U.K. with changes to Prime Ministers and Chancellor of the Exchequer and adjust, delay the allocation of the funds to the trust. My understanding is the trucks now have those funds. They needed to have those funds in order to proceed with procurement. The procurements are now moving. Those trusts that have received funds will have to expand those funds by the 31st of March.
Right, sorry, we do actually have a few more that are coming in now. Can you please clarify what portion of the pipeline is typically new customers versus existing customers? I think they mean in percentage terms.
Yes, I don't have that allocation, and I don't typically break the pipeline that way. For us, I think we look at all of them as being opportunities that we wish to pursue. And I'm very happy if it comes all from 1 component or even if it's spread over the rest. So I can't hear that sort of off the top of my head.
All right. And then 1 final one, I think what percentage of new sales for Q4 were from contract renewals and existing customers.
I do not have that off the top of my head either. I think it came from a large number of contracts, and there was a combination of both new and existing customers. And I don't know, Matt, if I said 50-50, I might find that I'm off kilter on that, but...
Yes, it's not 50-50. I was just thinking -- yes, we didn't have a very high renewal number at the end of Q3. So the most it could be is like 0.5 million to 1 million.
That's right.
It's largely new customers -- sorry, new sales, I mean.
New contracts, yes.
Well, that's all the questions we have for today. If you do have one or we haven't addressed your question as [indiscernible] you'd like. Please do, again, send me an e-mail and I will come back to you.
Before we close the call, Kate, do you have any last remarks?
No, I mean, as I said at the asset, we are pleased with the Q4 results. And given the headwinds we've experienced in the U.K. with the NHS program, we're very pleased with the revenue that we've been able to achieve and the growth of the business. The business is very well placed in terms of scale and operational stability to really hopefully reap the rewards of a very strong FY '24.
And I'd like to thank the shareholders for their continued support and the Alcidion team and the Board for the work that they continue to do to deliver for our shareholders.
All right. Thank you very much, Kate. And thank you, everybody, for joining us today. And we look forward to updating you with more news as and when it comes out. Thank you.
Thank you.
Goodbye.