Reliq Health Technologies Inc. (RQHTF)
Q2 2023 Earnings Conference Call
March 02, 2023 10:30 AM ET
Company Participants
Lisa Crossley - Chief Executive Officer
Conference Call Participants
Presentation
Lisa Crossley
Hello, and welcome to Reliq Health Technologies Corporate Update. We are going to review Q2 Fiscal Year 2023. Today is March 2, 2023. It is 7:30 in the morning Pacific Standard Time and 10:30 in the morning, Eastern Standard Time. My name is Lisa Crossley, and I'm the CEO of Reliq Health and welcome.
Please review the forward-looking statement disclaimer at your leisure. So I will, in some ways, have some repetitive content in this slide deck simply because we tend to get a number of new investors every quarter. So as a reminder or -- for those of you who aren't necessarily familiar, Reliq is a rapidly growing health care technology company. And we focus on developing innovative virtual care software-as-a-service solutions with a multibillion-dollar health care market, primarily concentrating in the US.
Our iUGO CARE platform benefits everyone in the health care system from patients to clinicians to payers, and we provide comprehensive turnkey solutions that allow clinicians to seamlessly roll out new billable virtual care services. So they generate new revenue right from the very beginning of working with us.
We generate recurring revenue from subscriptions. Our growth is rapid and organic. It's fueled by industry trends. And we have strong margins. We expect to reach 75% gross margins by the end of this year and 45% EBITDA margins. Based on our revenue forecast, as well as our gross margins and the fact that we'll be profitable and rapidly growing later in 2023, we expect that we'll be able to uplist to the NASDAQ.
So the agenda for the webinar, I'll go through some briefly some highlights from the Q2 fiscal year 2023 financials. I'll provide an update on accounts receivable and insurance, which are kind of the two critical points that we discussed on our last webinar in January. I'll go through some shareholder FAQs, and then we'll talk about dates for upcoming webinars.
So the Q2 fiscal year 2023 financials, these are for the three months ending December 31, 2022. So we did see good solid growth in the second quarter of fiscal year 2023, so fourth quarter of the calendar year 2022. We saw increased revenue, increased by over 90% to a little over $4 million, as compared to the three-month period for -- in 2021 or fiscal year 2022. And we increased revenue from the higher-margin software and services sales by 229% and to a little over $1.7 million. So, we are definitely seeing an increase in software and services revenue as a percentage of total revenue, which is what we expect given that going forward, and we do expect that we will ultimately have the vast majority of our revenue coming from software and services as opposed to hardware.
Hardware again, is a leading indicator of software and services revenue. We only sell hardware as part of a contract, where the client is going to have software subscription. So, it's a very good leading indicator of software and services revenue. But certainly, we are primarily a SaaS company, and the hardware is just a component that we provide to clients, so that we can give them kind of that one-stop shop that clinicians, in particular, really appreciate.
The adjusted EBITDA for the last quarter ending December 31 went up by over 1400% [ph] to $720,000 gain as compared to a $48,000 gain for the comparable period in 2021, fiscal year 2022. Revenue for the 12 months ending December 31, 2022, so over the last calendar year increased by over 180% relative to the 12 months ending December 31, 2021. So revenue for the year was a little over $12.6 million. And on the customer front, where we are really seeing some very dramatic growth is in the skilled nursing facility space. So we signed contracts with a client in Florida, who's added 189 skilled nursing facilities and will be this year to the platform. That's expected to bring over 206,000 new patients every year to our platform beginning this year.
We also signed a contract with 15 skilled nursing facilities in California, and that's one client their network and they're expected to add over 12,000 patients per year, every year beginning this year. And again, typically, our revenue from these patients is $60 in the first 30 days, post-discharge per patient and then subsequently $65 per patient per month long term.
So this is a new space for us. We really just entered into this space in Q2 fiscal 2023 for the quarter ending December, and we expect to continue to expand significantly in this space during this calendar year.
So an update on accounts receivable and adherence. I'll just very briefly review this slide, just to remind people that we as a company, took on a lot of responsibility in 2021, early 2022 around onboarding and automating both -- receiving those patients most electronically from our clients and then providing those electronic pre-authorizations to doing the pre-screening through the Medicare and Medicaid databases
And so we -- in 2021, 2022 and kind of nailed the first part of this process flow chart. But where we've seen bottlenecks historically over the last 18 months, 20 months or so is in the adherence time to adherence and on the collection side. So that's where we're really focused for this year.
So our strategy to date, as many of you know, since July 2021, we really focused on leveraging our first-mover advantage and establishing ourselves as the gold standard for virtual care in the United States in particular, around that Medicare Medicaid population, although we are expanding beyond that, certainly.
And we very successfully achieved this goal by focusing on acquiring as many new clients and patients as possible in 2021 and 2022. So that was our real estate grab really getting out there and establishing ourselves as a market dominator. So during this period, we were able not only to sign a lot of contracts and get a lot of new clients. But we were also able to begin collecting data -- patient data that demonstrates the efficacy of our platform in improving health outcomes, reducing hospitalizations and decreasing health care costs.
And we're also able to collect a lot of meaningful data on successful claims reimbursements to our clients by the Centers for Medicare & Medicaid Services. And that data has really been critical to attracting and securing the larger-scale clients. So as an example of the skilled nursing facility networks versus the individual physician practice or home health agencies. So certainly, we will continue to sell to the individual physician practices and home health agencies that will always be an important component of our business, but we expect the bulk of the company's business going forward and bulk of our clients to be these larger-scale networks and larger organizations that represent a much larger number of patients and per clients relative to individual physician practices or home health.
So an update on adherence. In 2021, 2022, we allowed clients to manage the patient adherence on their own. And we did that because clients asserted very strongly, very confidently that they have the necessary resources and expertise to kind of own that piece of the process.
But the data would suggest that in point of fact, these clinicians as one would hope, are so focused on the day-to-day patient care and particularly, given some of the health challenges we've had in the system with COVID and like the RSV and flu, really all of their focus needs to go to that day-to-day patient care in the office primarily.
And so as a result, they were really not able to provide patients with the training and the informally, I'll just call it nagging, that's required in order to get these patients up and running in fully adherence so that they're in the habit, it's established, and then they can essentially, be much more independent going forward, but still able to collect their data at least 16 days out of every month.
So, unless they collect their vitals, at least those 16 days every month, then Reliq can't deliver billable services to the clinicians, because the clinicians are not able to deliver that service to their clients. So they're not able to bill or to claim that they're delivering patient monitoring, for example, unless the patients are adherent or collecting vitals at least 16 days every month.
So we made a number of key changes beginning in January of this year in order to improve adherence and review that time to adherence. So beginning January 1, 2023, all of our new contracts specify that clients must authorize Reliq to contact patients in order to ensure discount.
So our account managers are also working with our existing clients who are on the older contracts to obtain similar authorization. So we need the clinicians to grant us permission to contact the patient specifically for the purpose of training and reminding them to cut their vitals and become adherent.
We updated our software platform to provide timely alert secured managers. If a patient is at risk of non-adherence for given month so our care managers will receive an alert early on in the months if that patient either hasn't collected their vitals, it's collecting them very sporadically, so that we can intervene very early and still ensure that, that month that patient becomes adherent.
And our care management team is able to use our interactive voice recognition technology to through this automated service, provide daily reminders to patients who are non-adherent. And we find that very effective, but for the small percentage of patients who -- that isn't enough for we also can provide live calls from care managers for patients who need that additional adherence-related support.
And one thing I will say as we go into the next slide, it's not an overnight process. It certainly takes a number of months, not just to get an individual patient fully adherent, fully trained and comfortable and into the habit. But it also takes a little bit of time for our account managers to work through the database of our existing clients and secure those permissions from each of them, the authorization to collect -- or to contact rather their patients for this purpose.
So, it's not an overnight thing. I know that a lot of people after the webinar in January were asking sort of a week or two later, is it all fixed? It's not going to be an overnight fix, but it is progressing very definitely in the right direction, and we are seeing some very significant improvements.
One of the things that we've learned that I found very interesting when our care managers started reaching out to patients who are not adherent, so once we contacted the existing clients have gotten permission to contact the patients about adherence, it turned out -- in a large number of the cases, the issue is that the patient had received the hardware, it might have been six or nine months previously. But we're still waiting for a call for their -- from their doctor to teach them how to use the unit or even just tell them, okay, you should start collecting your data. And I'll be checking in on you.
So, there was a little bit of a disconnect between the patient's expectations and the clinicians expectations where the clinicians have kind of thought, that patient will receive the device, they're going to just get started on their own. And the patients thought they really weren't supposed to start until they heard from their clinician.
So just having our care managers reach out to these patients and say, it's hard to start using the platform regularly and then, providing it daily encouragement through the interactive voice recognition, makes a huge difference. So just over the two months as we've gotten started.
And we've seen that with existing clients who've been transitioned over to relic managed adherence, we've seen an increase in adherent patients, so the number of patients in their population that are adherent. And that's gone from 19% with those existing clients to over 70%. So we're well on track to get to over 80% with that population.
And there'll always be sort of 10% of that patient population who, in a given month, aren't able to be adherent because they were sick or they within a hospital, and where they have a homecare visit, which means that Medicare and Medicaid won't reimburse their plan for preventative services for that month. But that's a minority of the patients.
It's probably 10% of the overall patient population in a given month, wouldn't be eligible. And so we would call them non-adherent, even if it's just that there in hospital and therefore, aren't really eligible. But our goal is to get patient adherence. And as close to 90% is possible, certainly, we think, over 80% is a very realistic goal.
So the small number of existing clients who, from the very beginning, have been using our adherence management services instead of doing it themselves do have patient adherence over 80%. So we really have conclusively proven to ourselves that, if we take over the adherence management, we can get that adherence level to well over 80% and so that's certainly why we're doing this work. And why we will continue to move forward with the existing clients, securing those permissions and starting to roll out adherence management to all of the existing clients.
And so we expect to have all of those existing clients migrated over to a well managed adherence by the end of the fiscal year. So a couple of months from now June 30th 2023 and all new clients, so anyone who signed the updated 2023 contracts, those mandate the use of our adherence management service. And all of them are on track to reach that 80% adherence in their patient populations next quarter.
So they are new clients. A lot of them are still just getting started in the last month. But from what we've seen so far and based on our history with managing adherence for clients, we expect it very comfortable we should be able to get them to 80% adherence again, by the end of the fiscal year, so next quarter.
Update on accounts receivable. So as you know, and many of you know, in 2021, 2022, the company was very accommodating to clients. We recognize that it was necessary to provide flexible payment terms because of the challenges they face with COVID and the overall market conditions.
And we did that to demonstrate good faith and to earn a reputation as a real partner to these clients in the health care space. Clients in health care definitely by based on reference. So they want to know that one of their friends has used to you and that they're very comfortable with you. You really do need to establish a reputation as a partner. And so that did result in longer collection times, but we believe it is critical to ensure the long-term success of the company.
So as of January 1st, 2023, our account managers have been instructed to make collections their top priority, and they will only receive their commissions if collections for their accounts are up to-date. As we've already seen a significant improvement in collections just over the last two months, and we expect that our accounts receivable will be current by the end of fiscal year 2023.
So by the end of June, we expect to not have the outstanding accounts receivable associated with software and services. Obviously, as you all hopefully recall for the hardware purchases, where there's a 12 month to 24 month payment plan, and you'll still see that accounts receivable line item. But -- that doesn't mean that those are overdue payments. That means the payment plan is reflected as an accounts receivable, but -- and those are the longer-term accounts receivable, not the current accounts receivable. And so that's a little bit more clearly delineated in our financial statements since the audited financials when the auditors helped us make those changes.
Shareholder FAQ. So we just have a few here today. One of the FAQs that our IR team has shared with me that I hadn't realized what a frequently asked question is, how long are patients typically are on the iUGO CARE platform.
So this is a platform that once you're on it, for your chronic diseases, they're very unlikely to spontaneously resolve. So what that means is that these patients are typically on the platform for the rest of their lives. So once you're on, you're on.
For some patients, the rest of their lives, given that these are elderly patients and they do have multiple very complex clinical conditions. For some of them, they may have a relatively short life span one year to two years after they're onboarded. But for many patients, it's expected to be a 10 year to 15 year period that they'll be on the platform.
For each of our clients, if each of our clinicians are skilled nursing facilities or home health agencies, position practices, typically 5% of their patients will pass away in a given year. But at the same time, they'll have an increase of 13% in the number of patients who are eligible to receive our services and eligible for the clinicians to build for them. And that's really because the population is aging and growing. So every year, you have more patients aging into the demographic where they are eligible to receive our services.
So as a result, the net effect is that for every client we have on the platform we see an average of 8% increase, an 8% increase in the number of patients that are on the platform from that client every year. So even though we do see some loss of patients. And as they pass away, the net impact is an overall increase in the number of patients per client.
And then dilution, I know we talked about this quite a bit, but it does come up consistently. So I'll just iterate and we have turned our focus to account management. Collections are expected to ramp up very significantly between now and the end of the year and then stay current. Beyond that, revenue is also expected to ramp up very significant company this year.
So we expect that we'll be generating very significant free cash by in late 2023 calendar. And as a result, within that time frame, we expect to initiate a share buyback program. And that's to mitigate the dilution incurred in recent years. We certainly did leverage stock options when appropriate for consultants so that we were able to preserve cash rather than having to do as with warrants and some of the other sort of hooks that come along, sometimes with the capital raise.
And this also really has given us great alignment with our consultants where they're very, very motivated to ensure that the company succeeds and continues to grow very rapidly. So that's been very successful for us. But obviously, we as management, our staff, our consultants, our investors, we all would like to see some mitigation of that dilution, and we expect to achieve that through a share buyback program that we'll implement later this year.
Upcoming webinar dates. So, I mentioned in January that we want to have a touch point at least every month with our shareholders. So we'll be holding a webinar on April 12, 2023, provide more details closer to the date. And that will just be to provide an interim update on progress. Hopefully, by that point and I know, we probably won't be completely finished closing out the current quarter, but hopefully, we'll have some firm numbers that I can share at least approximations of to give you a little bit more insight into the progress we're making on accounts receivable and time to adherence. And the quarterly financials for the quarter ending March 31 are due to be filed on or before May 30, 2023. So the quarterly webinar to discuss earnings will be scheduled on or before May 31, 2023.
Thank you very much for joining us. This webinar will be posted on our website shortly. And if you have any questions, please feel free to contact ir@reliqhealth.com and we will work on getting those addressed with as quickly as possible. Thanks again. Take care. I hope everyone has a wonderful rest of your day.
Question-and-Answer Session
End of Q&A
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Reliq Health Technologies Inc. (RQHTF) Q2 2023 Earnings Call Transcript