Alcidion Group Ltd

ASX:ALC

Q4-2025 Earnings Call

[Kate Quirke, executive]

Okay. Let's get started. Good morning, everyone, and welcome to Alcidion's Q4 FY '25 Appendix 4C and Business Update, which is our presentation, which will cover the 3 months ended 30th of June 2025.

I'd like to begin by acknowledging the traditional owners of the land from which I'm presenting to you today, which is the Wurundjeri people of the Kulin Nation. And the lands from which all of you who are joining me today are residing on, and I pay my respects to their Elders past and present and extend that respect to any indigenous persons joining us on the call today.

I'm also joined on the call by our Chief Financial Officer, Matt Gepp. Shortly, we'll take you through a brief presentation covering the key commercial and financial highlights for the quarter. And then, as always, we will follow that with an opportunity for Q&A.

All attendees will have the opportunity to ask questions at the conclusion of the presentation. [Operator Instructions] And we will answer as many as possible. Any questions that are similar in nature, we tend to sort of combine them. So it's not repetitive in the questioning. And if we do run out of time or we're unable to answer your question on the call and you'd still like it to be addressed, please send it through to [e-mail], and we will seek to address it as soon as possible.

Just a reminder to everyone, the webcast today is being recorded, and it will be available on our website later today. Let's get into it, Matt.

As I indicated in the release that hopefully many of you have read earlier today, Q4 has been a very positive end to what's been a defining year for Alcidion and one where the positive momentum in the business has continued to build quarter-on-quarter. We have demonstrated material progress across all areas of the business. Notably, the deliverable of several new marquee contract sales and customer expansions. We have the accelerated deployment time frames and as demonstrated by the rollout to Hume.

We've had exciting developments on our tech road map for Miya Precision, particularly with the use of AI and the work we've been doing with South Tees but also the continued use of our newest module, our Emergency module, underpinned by a significant improvement in our financial performance.

During the quarter, we signed several contract expansions. And just for clarity, what we mean by a contract expansion, that's the cross-sell or upsell of a new module or product to an existing customer. If we refer to a contract extension, it is generally an extension of the term of the contract to be renewed into further or longer periods.

So during the quarter of note was the expansion of our contract with North Cumbria for the deployment of a modern EPR solution, which will now include our widely adopted clinical communications module. And for those of you who have followed us for a while, you'll remember we would previously refer to that capability as Smartpage.

Additionally, we delivered several financial records in the quarter, including -- and for the year, including our highest quarterly period for cash receipts, which also culminated in our strongest-ever quarter for positive operating cash flow. In line with our continued strong trading, we further upgraded our EBITDA guidance in June with FY '25 EBITDA to exceed $4.5 million, which will be a record result for the business.

We're now seeing real momentum around the Alcidion business, and we're increasingly confident in the value proposition that we have and our ability for our customers to take advantage of that and for that to present and deliver on the opportunity for Alcidion as we move forward.

It goes without saying that the health care system in Australia and abroad is only going to face further strain as the population continues to age. Those patients in care with longer life expectancy are, in some cases, living those longer lives with complex conditions, and that is impacting the health care system worldwide. We firmly believe we've got a very unique solution that is acutely focused on tackling that problem in particular, but also being the platform manner in which we deploy it allows us to continue to grow and expand the capability with each of our customers so that not just patient flow is the focus, but from starting the journey with us in patient flow, they can continue to evolve their use of the platform and tackle many of other challenges that we're seeing in health care at the moment.

Talking a little bit more about the financial highlights, looking at some of those that were outlined in the release this morning. During the quarter, we delivered new sales with a combined total contract value of $6.7 million and approximately 73% of that are recurring product revenue, the rest obviously being implementation revenues that are generally related to the implementation of our products. As I mentioned earlier, most of those were new -- were contract expansions, whereby we either cross-sold or upsell new members -- modules to existing customers.

We finished FY '25 with new TCV sales for the year of $73.8 million. That's up 109% on the prior calendar period, a record for the business and demonstrating that continued validation of our product offering and that go-to-market strategy that we have.

We delivered Q4 customer cash receipts of $22.4 million which also includes that upfront capital license payment from North Cumbria. The strong Q4 receipts helped drive Q4 positive operating cash flow of $7.4 million, which is also a record result for the business in any quarter.

On the costs and cash outflows side, I thought it would be worthwhile to mention a couple of points as they speak to the future periods and worth our shareholders' understanding. Our staff cash costs increased slightly in this quarter compared to the prior few quarters. And that is due to us paying half of the one-off short-term incentive bonuses achieved -- that were achieved during the year. The balance of those will be paid in Q1 FY '26. Previously, the majority of that, if they were payable, would have been paid fully in Q1.

We also have a $4.3 million outflow, which relates solely to VAT and GST tax payments, VAT and GST. They have made during the quarter, so we made those in Q4. And they align to the significant customer cash receipts we obviously collected in that quarter. And those having sometimes in the past being paid in Q1 depending on where they land. So with that payment into Q4, we expect we'll have lower overall payments in Q1 which is a positive for the business as we head into what has historically been a lower billing period for Alcidion.

For the full FY '25 year, we generated positive operating cash flow of $5.8 million, which is a material improvement compared to the negative operating cash flow of FY '24 of $7.1 million. As at the 30th of June 2025, we had $17.7 million of cash and no debt.

Just giving you sort of a reflective view of the quarterly new sales, on the left-hand side, and you'll see we -- whilst we had a very strong Q3 result, pleasingly, over the course of the year, we've steadily signed new customers in almost every quarter and subsequently gone on to expand those contracts in a short space of time. And I'll talk a little bit more about some of those Q4 deals and how they expanded in the next slide.

On the right-hand side, it clearly shows the seasonality in our cash receipts and the material uplift we typically see in the second half of the year, this year, of course, being no exception to that.

As I outlined and mentioned in the opening comments, over the course of Q4, we were pleased to expand several important and long-term customer relationships. At North Cumbria, which is, as many of you will know, our flagship -- one of our flagship EPR deployments, but the most recent. They are deploying the Miya Precision platform with a number of our modules. That contract was expanded to include the clinical communications and task management capability, which was not part of the original contract. And with that expansion, the total TCV for that contract will now exceed $39 million over a 10-year period.

The implementation phase of North Cumbria, which is expected to take around 18 months from beginning to end is going well. The Alcidion staff are working closely with North Cumbria staff and working through that transition process. So we're very happy with how that is progressing along with our other EPR deployments as well. I very pleased to see South Tees going live with outpatient capability in the last 24 hours.

In Australia, we expanded our partnership with the Hume Rural Health Alliance to include additional sites using additional modules. So there is 15 hospitals as part of that deployment, only two of them originally were using the full capabilities of our Access and Command center and Flow capabilities. They have now, due to the success of the first rollout, expanded that contract to take on those modules through all of the hospitals in that region.

You'll recall, we signed Hume in July with the first site being operational by October, which is the fastest ever rollout of the Miya Precision platform. And that capability within our implementation team is really what allows our customers to achieve the value from our solutions really quickly and then position us to then go in and sell them additional capabilities.

We also expanded our relationship with Northern Territory Health, who've been a long-standing customer of Miya, having had the original Miya platform, having upgraded to Miya Precision. They now have taken on an additional product that is actually part of our partner ecosystem. So it's really around messaging -- team-to-team messaging. But it's a really excellent demonstration of how the interoperability of Miya Precision can allow us to bring partners into our ecosystem and enhance the overall offering that our customers are getting and the overall benefits that they're getting from deploying the Miya Precision platform.

One thing I really want to highlight was the way in which we're able to generate those new TCV sales in the quarter. And I mean, the diversification of the sales platform across new customer opportunities and expansion of existing customers, the modular sale versus a new customer taking the platform.

Throughout FY '25, we've achieved a good mix of both of those, which just goes to continually -- continue to validate one of the things that I probably said many times on these webinars and that is that our core value proposition is our ability to deliver a solution that meets the needs of our customers irrespective of their solution requirement or budget. It's a platform with modules that can be interchanged and mixed and matched as the customer needs evolve. And that is something that really places Alcidion quite uniquely in respect of digital health deployment.

As we -- just looking forward, and as we announced in June, we confirm our guidance of FY '25 EBITDA to exceed $4.5 million. Whilst we have delivered several material new contract wins in FY '25, we also continue to progress new and expansion opportunities with increasing momentum. And that makes a lot of sense when you think about it. You -- as you start to build on the number of customers that have the Miya Precision platform, you are building the base from which you can then go and sell additional upsell to customers.

Furthermore, we've got a solid book of Miya implementation projects in play, notably North Cumbria, and Hywel Dda as well as moving through the final stages of NAHLN. Peninsula is ongoing in terms of those deployments. And they will continue on through FY '26, particularly North Cumbria, obviously.

Our full year results will be released on the 28th of August, at which point, we'll give you an update -- we'll provide you an update on the -- both what we've achieved in terms of revenue and EBITDA in FY '25, but also the contracted revenue that we start the year with for FY '26.

So I hope that has given you a good overview of the results for Q4. Apologies for my voice being a little croaky today, I'm subject to some of these winter lurgies that are going on. But I'm very happy now to take any questions, and we have received also a few questions prior to the webinar.

[Matthew Gepp, executive]

Thank you, Kate. Thanks for the update. So look, we've received a number of questions upfront, and I'll go through those first, and we have a flurry of online questions that we'll have to get through as well. So I'll ask the first question that we got early on.

Are you able to provide a detailed update on Hume, NALHN and Bayside? I expected more sales in H2 based on a pretty incredible number coming out of Alfred Health, so an update on the overall market would be appreciated.

[Kate Quirke, executive]

Okay. So first of all, I think we're talking about, yes, deployments. As you can see, we've had significant sales in Q4. They are not individually announceable to the ASX from a value perspective. We operate -- I mean the guidance from the ASX is around 10% of total revenue. So you'd be thinking that our contracts would need to be around $4 million to be able to do that. You can argue sometimes about the strategic nature of it. But typically, we're probably targeting around contracts over $4 million or more. And yet, we're able to achieve significant revenue as we progress.

As you also probably all know, most sales, not all, but most sales, if they're new sales, require a tender process. So that takes some time for our customers to go through those process. We continue to see very positive activity and opportunity in the market. And I'm looking forward to continuing to grow our presence in those markets.

[Matthew Gepp, executive]

Actually, you answered one of the online questions there, which was around the materiality of announcements to the ASX.

The second question we have is how many tender opportunities remain in the U.K. that you believe Alcidion has the competitive edge to win? And what opportunities in different countries are currently being explored? Keep up the good work.

[Kate Quirke, executive]

There continues to be tender activity across all of our markets. The U.K. EPR tenders continue. And whilst obviously, they're getting towards the end of those, there is still tenders in market. And where we believe we've got a competitive position, we will be bidding. That isn't all of them, as I've indicated on these webinars before.

But as you also probably all know, they take a long time to go through the process. We're equally focused on platform opportunities and the continued increasing demand for our technology to assist with patient flow and hospital in the home. We also continue to look at opportunities beyond our existing markets. But it's important to strike the balance appropriately because the U.K. and Australia are very -- continue to be very active in opportunities for us.

[Matthew Gepp, executive]

Thanks, Kate. And the next question we have is regarding some U.K. implementations, recent Board meetings of both Southampton and Tameside NHS Trusts have noted delays in their respective Alcidion implementations. Can you please account for this, especially as our 3-year Southampton contract, signed in December '22, nears its end.

[Kate Quirke, executive]

So UHS deployment has seen a number of delays, most of them not to do with us. They are moving from one system to another rather than from paper to a new system and sometimes that creates more change management needed on the ground. But they're on track to go live early September, and they're already in the process of exercising their extension rights for that. So looking forward to that, being able to report on that probably towards the next quarterly.

Tameside have not had the staff or resources to implement, and that's wholly on them, and we are ready when they are. But sometimes, it is about the priorities in respect of deployment. And that part of it is somewhat out of our hands.

[Matthew Gepp, executive]

Thanks, Kate. The next question is for me, actually. I note in your results that 27% of revenue is implementation, mostly nonrecurring, I assume. Can you give an indication of what percentage of your cost base is associated with implementation and what portion is associated with steady state?

So the first thing I'll say is, so the 27% number relates to the implementation revenue component of the Q4 new sales of $6.7 million, not our whole revenue base. But to answer the question generally, around 15% of our staff base work directly on delivery projects.

I'll go to the next question. Can you provide an update on your U.S. partnership with [indiscernible] as announced on LinkedIn? And if there are any leads or opportunities that have arisen so far?

[Kate Quirke, executive]

Thanks. Well, first of all, [indiscernible] is based in the U.S., but we have really engaged her primarily to focus on a go-to-market strategy for the Middle East where she has done a great deal of work. But we will be using her contacts to identify U.S. opportunities if they arise as a sideline from that. We've only just engaged her. She's working with us initially on the go-to-market strategy, and that will take some time, but very happy with the progress that we're seeing there thus far.

[Matthew Gepp, executive]

Okay. So thank you, Kate. And on to the online questions we're receiving this morning.

Are we starting to see some of the positive impact from the new NHS digital health funding initiatives, even if in the pipeline?

[Kate Quirke, executive]

What we're seeing is a continued commitment in the NHS to digitization. So there are still tenders coming to market. What we're waiting for though, the 10-year plan has been announced, and that's fantastic. It gives us a really good indication of their continued intention to invest in digital. What we're waiting for is phase 2 of that 10-year plan, which is an implementation plan due out in September, which is going to give us a bit more of an indication of where they're going to focus. In the meantime, we are continuing to see activity in the U.K.

[Matthew Gepp, executive]

Okay. We have an Australian-based question here, with WA and Tasmania both looking at EMR solutions, do you feel there has been a recent focus and increase in spending being made available for enterprise health-tech in Australia?

[Kate Quirke, executive]

I think we're seeing an uptick on it. I think we're post -- we had a bit of challenge post-COVID, and there was a lot of constraints on the health care system in Australia in particular, and we're starting to see investment in many different places and WA and Tassie are certainly out to market, but we're seeing a lot of activity in Queensland. I was just up there last week. The budget there is very focused on investment and to tackle very particular areas of which patient flow is one of them. So yes, in short, there is certainly an increased focus on digital health investment in Australia of late.

[Matthew Gepp, executive]

Okay. Thank you, Kate. I think the next question could be for me. Can you please remind us what the quantum of the upfront capital license receipts is for North Cumbria? In addition, what quantum of implementation services, cash receipts were received in the June '25 quarter?

So the upfront capital license is around -- I'll talk in Australian dollars, not sterling, is around AUD 8 million and that was received in the quarter. With respect to the implementation services, implementation is billed based on milestones. And as of the end of June, we had billed around 15% of the total implementation for NCIC, but those milestones will -- continue to be billed as we move through the implementation process over the next 18 months or so.

Sorry, I'm just trying to figure out the question here. What is the status of the EPR decisions of the NHS Trust that Alcidion are involved in the bidding process? I think you've answered that.

[Kate Quirke, executive]

Well, I mean, in reality, I don't know what the status is until such point in time as we are given an indication that we are a preferred provider. If that information is made available to Alcidion that is appropriate for the market to be made aware of, we will do that at the time. But other than that, I'm waiting to give for these processes to go through.

[Matthew Gepp, executive]

Thanks, Kate. Yes, there's another question very similar to that, which I think you just answered. What do you expect the GST/VAT amount will be in FY '26?

Look, it's very much dependent on how much we bill. Keeping in mind, the U.K. has a very high VAT rate at 20%. Australia is at 10%. So the more we bill in the U.K., the more of that we will pay. I think that answers that question.

[Kate Quirke, executive]

It just depends on how much we sell really.

[Matthew Gepp, executive]

Yes. And also, the timing as well when those bills come through.

And I think we've answered all the open questions online. We have actually one more here. Are there any specific product lines or modules that are seeing the most interest, both in the U.K. and Australia. Are there any gaps in the offering that you're looking to fill?

[Kate Quirke, executive]

Good question. I mean in Australia, definitely, there is a focus on Flow, Access and Command, but also the hospital in the home or virtual care, although those ones are a bit slower to take up. So we're seeing a definite focus in this market.

I think it's pretty spread in the U.K. Obviously, it's the EPR. There's a lot of interest in our clinical noting and e-noting capability because the markets are slightly different than the approach that they take. We're seeing significant interest in ED in the U.K. So it's a bit more clinical in nature in the U.K. perhaps than it is here.

[Matthew Gepp, executive]

Thanks, Kate. Look, we have a number of questions asking about forward forecasts for FY '26. I think we will be talking about that at the end of August when we release our full year results. So not the right forum for that one, I don't think.

And then we've got one last question, Kate, which is, in terms of demographics of our business, are we still too heavily reliant on the U.K. and Australia? And are there plans or prospects for business in the Asia regions?

[Kate Quirke, executive]

Thanks. Look, we're evenly spread in terms of where our revenue comes from, sort of half from the U.K., half from ANZ. And we -- but we do remain active, which I think I've talked about in answering some of these questions. Active in those markets. And there's a significant opportunity there that we don't want to be drawn away from.

However, we are looking at Canada and Middle East, as I've indicated, and Southeast Asia remains an opportunity as well. I think we need to be judicious and strategic in what we are pursuing to ensure that we are focused on the very significant opportunity that we have in ANZ and U.K. But we are definitely turning our mind to opportunities in new markets. As I said at the outset, health care is struggling the world over, and we are definitely seeing interest in what we are doing in markets outside those that we currently operate in. So I look forward to that.

I think that finishes our Q&A session for today.

[Matthew Gepp, executive]

Very much, yes.

[Kate Quirke, executive]

Thank you very much for attending. Thank you very much for your continued support of Alcidion. Look forward to updating you towards the end of August with our full year revenue and EBITDA results. Thanks again.

[Matthew Gepp, executive]

Thanks, everybody.