2023-05-31 14:03:02 ET
Reliq Health Technologies Inc. (RQHTF)
Q3 2023 Earnings Call
May 31, 2023 12:00 PM ET
Company Participants
Lisa Crossley - Chief Executive Officer
Presentation
Lisa Crossley
Thank you for joining us. Today is May 31, 2023. Its 12 noon Eastern Time and 9:00 a.m. Pacific Time. This is Reliq Health Technologies’ Corporate Update. I am Lisa Crossley, the CEO. And, this will be an overview of our Q3 financials as well as outlook forward.
Please review the forward-looking statements disclaimer at your leisure and interpret any remarks from today's presentation in that context. For today's webinar, I'm going to provide a brief overview of the Q3 fiscal year 2023 financials, for the period ending March 31, 2023. I'll provide an outlook for the remainder of the calendar year, and then go through some very quick shareholder FAQs and the upcoming webinar dates subsequent to this one.
Overall, what I except to cover during this webinar is fairly brief. As you all know, we made some substantive changes to our business model beginning in January of this year, and the quarter that we're reporting on here, which was two months ago, it ended was really the quarter where we first started to implement those changes. So, not a lot of the progress that we made is reflected in these financials, but will certainly be reflected in future financials.
Let's jump into the Q3 results. So, the highlights for the quarter ending March 31, were an increase in revenue of over 88% to roughly $4.7 million. We also increased our revenue from the higher margin software and services sales by 69% to about $1.8 million. You will definitely see much more significant increases in software sales going forward. This quarter, we were a little bit hampered by the hardware orders that we'll talk about a little more in a little more detail in subsequent slides, but because we had some large hardware orders that were deferred, the software revenues associated with those hardware orders, were also deferred.
As I've disclosed before. And, but you will certainly begin to see much more significant growth on the software side over the rest of this year and beyond. This was our first profitable quarter, and I think that definitely does reflect some of the changes that we've made to the business model. We had a net gain of $731,000 and our adjusted EBITDA has improved by over 2000% relative to the same period last year, and that's primarily just adjusting for non-cash expenses. They're very small, non-recurring expenses in that adjustment.
During the last three months, we certainly made some significant progress on the business development front. We continue to expand the skilled nursing facility space, adding over a 120 new skilled nursing facilities over the last five months, actually, the quarter ending March 31 and subsequent. And we also signed new contracts with some very significant large healthcare organizations, one of which was a large U.S. Healthcare System that operates over 1,200 care centers across seven U.S. states, including the skilled nursing facilities, hospitals, home health agencies, hospice agencies, and primary care clinics. And they have over 10 million patient encounters a year across their network, and they and the other large clients we've signed, do very extensive due diligence before they select a company to be their partner for remote patient monitoring, behavioral health integration, chronic care management, transitional care management, etcetera.
So, it is really a testament to our unique value proposition in this space and to the future potential for this Company. We’ve also signed a new contract with a large U.S. Health Plan that operates accountable care organizations in five U.S. states with over 3,000 doctors and more than a million patients, and this client, in particular, it's our first health plan, but they are also subsidiary of one of the nation's largest providers of hospital and healthcare services, who is also a Fortune 500 company.
So, we really are getting into some of the blue chip clients. And I think it's important to remember that with these very large clients, they like to start out with a phase deployment, I’ve talked about that a lot over the years, and that's very typical in healthcare for healthcare software deployments that they will start small rollout to a specific geography or a specific type of facility or even to a subset of patients from a given facility, and then expand from there.
So, the initial deployments that we've announced with these large clients are relatively small compared to their patient population overall, but they are the first step in phase deployments. So as we have more details, more established implementation plans with these larger clients, we’ll be able to provide updates, but certainly our expectation is that we will see significant growth from these new clients beyond the initial phase. So, what we've announced today is really effectively the tip of the iceberg.
The outlook for the remainder of the year and beyond, as you all know, historically, the Company has been very focused on new business development and capturing market share that real estate grab that we talk about. But as of the beginning of this year, we really expanded our focus to include real significant efforts towards improving profitability and cash flows. I think you can see the improvement in profitability very clearly in these financials.
The cash flows are going to come as collections pickup and certainly so are the topline revenues associated with improved adherence, but I'll discuss that a little bit further in subsequent slides.
As we've disclosed on previous webinars, the Company has $15 million in contracted hardware sales. So we've received orders from clients for $15 million worth of hardware, and we've started shipping the hardware, which is the point at which we can recognize revenue, but the majority of the orders are expected to be fulfilled by the end of the fiscal year. So we'd started shipping in the quarter ending March 31, but the bulk of that revenue will land in the current quarter, which ends June 30.
As you know, hardware sold on 12 month to 24 month payment plans, so we've had some of the initial scheduled payments for the hardware that's already been shipped come in, but we'll see those payments ramp up significantly in the second half of the calendar year, once we've been able to ship all of that hardware in the current fiscal year. And then all of those hardware orders will translate to subsequent software revenue. So, it is a very meaningful order for the Company not just in terms of the hardware revenue, but in terms of the software and services revenue that will follow behind.
Since January 1, Company has been very focused on improving patient adherence by taking over adherence management from clients. And I want to address this particular topic in some detail, because I think there's an expectation in some quarters that when we say we're taking over managing adherence, that we flip a switch and that happens overnight. And that's certainly not the case. We made some good progress in Q1 getting percentage of our patient’s population or client population moved over to Reliq handling the adherence management. But even once we get those patients, it does take a month or two, but most three for us to get those patients on-boarded and, well they're already on-boarded, but comfortable with us managing the adherence and actually start to improve.
So, we do see dramatic improvements in adherence in these patients, once we've taken over managing that piece from their clinicians, but it's not an instantaneous or overnight change. So you aren't going to see much of an impact on topline revenues in the quarter ending March 31, that our results of improving the adherence. You will start to see the impact of the improvements in adherence management in the quarter ending June 30, but where you'll really start to see the significant increases, and the impact on revenues will be in the second half of the year.
So, certainly, it'll be a much more significant impact. It'll have much more significant impact on the quarter that will report or that is ending June 30, but it will continue to improve beyond that. So, the average adherence is expected to exceed 70% by the end of the calendar year.
Adherence levels interestingly appear to be consistently higher with the patients from the larger healthcare organizations than from the individual physician practices. So historically, we have had a customer base that was primarily individual physician practices and home health agencies beginning late last year 2022, we started to acquire more and more of these larger healthcare clients, skilled nursing facilities, accountable care organizations, and other health plans, etcetera. And we find with those groups that they have resources, for example, with the skilled nursing facility, where they will have these patients trained in using the system before they even are discharged, which really helps with adherence levels, but also their performance metrics are so well aligned with what we do as a business that we see more, I'll call it motivation from the larger clients to really work with patients and to commit whatever is necessary in order to ensure that their patient population is adherent.
It's a little bit different from the way that the individual physician practices in the home health agencies approach, RPM and CCM. So, that's to our benefit because going forward, we expect that the majority of our clients will be these larger health care organizations, certainly the majority of patients that we have on our platform will come from the large clients. So, that's going to make it easier for us to improve adherence levels even beyond the 70% level as we move into 2024 and beyond.
Collections, again, I want to emphasize it's something that we put a lot of effort into and that is improving dramatically, but we really didn't start to see the impact of our efforts, the account manager's efforts, until March. So, there's not a lot of collections that are reflected in the financials ending March 31, but you will certainly see a significant impact of our efforts in accelerating collections in the quarter ending June 30. And by the time we get to the end of June, we should have all of our clients caught up on all of their receivable, all of our receivables, their payables. And then going forward, we will be able to keep all of our clients on a regular payment schedule so that they, we don't have that same issue where we have these aging receivables.
Remind everyone that there will always be a portion of our receivables that will relate to hardware that's on 12 month to 24 month payment plans. So, there will always be a fairly large receivable number on our books, but there will be essentially no stale receivables, and/or these very aging receivables that we see around the software and services revenue where clients have needed a little bit of nagging in order pay. And because we are going to be receiving or collecting or have started to collect all of the receivables that are expected by the end of June. We will be in a much better cash position going forward, for the second half of the year and beyond.
Just some very brief shareholder FAQs, we have been getting a lot of questions about Accountable Care Organizations, with ACOs. These are groups of physicians and sometimes other healthcare providers, who aren't necessarily located in the same facility or even in the same city, but they've effectively banded together on a back office basis, to form Centers for Medicare & Medicaid Services approved entity that is compensated based on value.
Now for CMS, value means patients have better health outcomes, and therefore lower health care costs. So, CMS financially incents the ACOs to reduce health care costs by using a shared savings model. So, the ACO members will receive a portion of the cost savings that they achieve for patients. And the best way to reduce costs for these patients is by reducing hospitalizations. That's really where the bulk of the costs for the chronic disease patients come from, these exacerbations that translate to a hospital stay.
Our platform, iUGO Care platform has been proven to reduce hospitalizations and the associated health care costs by over 80%. So, our solutions are perfectly aligned with the ACO's performance metrics, as they are also very well aligned with skilled nursing facilities and many of these other large healthcare organizations.
So, we expect that we will start to see increasing traction with the ACOs now that we've landed our first really very large and multistate ACO. This is not raised. This next point has a question, but it is something that we are asked consistently. So I just want to repeat that we don't expect to need to raise capital or take on debt to fund operations. And we expect to initiate a share buyback program later this year. So, soon as we have sufficient free cash flow, we will pull the trigger on that, because obviously we want to initiate the share buyback at a compelling price point for the Company.
Upcoming webinar, so as I've said repeatedly, I think there will be a lot more meaningful data that will demonstrate the improvements in adherence and collections, but when we close out the quarter that ends June 30, now obviously that's our fiscal yearend. So, we will be issuing the Annual Audited Financials or filing them in October of this year, but we will hold an interim webinar on well, in the middle of July, the exact date will be determined in June, and we'll announce that date in probably early July.
And at that point, I think we'll be able to get a lot more granular with our reporting and sharing the various metrics with all of you, so that it's easier to build your models. I know it's been a bit frustrating, but the Company has been very focused on making the necessary changes, so that the business model going forward really supports and not just the really strong revenue growth, but profitability and strong cash flows.
So, we've needed do that work, and I think we'll be at a point where we have all of the clients moved over to us managing adherence and that will allow us, I think, going forward to provide more details in our reporting [interim] (ph), probably help some of you construct the models that you, I know, like to work on.
And so as I say, we are filing the Annual Audited Financials in October, we'll do this interim progress update webinar in July, but we'll also do a second update webinar in early September, and again exact date is to be determined, but that will provide another touch point between now and when we do file the Annual Audited Financials, so that we can share the meaningful progress that we'll be able to show from here going forward and without having to wait months, and months, and months to file that those Annual Audited Statements.
Thank you very much for joining us. We greatly appreciate your time. The webinar will be available on our website later today, as soon as we are able to get it up which is sometimes in our control and sometimes not depending on the webinar provider, but we will get that up as soon as we can.
So, again, thank you very much for joining us.
Question-and-Answer Session
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Reliq Health Technologies Inc. (RQHTF) Q3 2023 Earnings Call Transcript