Streamline Health Solutions, Inc. (NASDAQ:STRM) Q1 2024 Earnings Call Transcript June 12, 2024
Operator: Hello and welcome to the Streamline Health Solutions First Quarter 2024 Earnings Conference Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It’s now my pleasure to turn the call over to Jacob Goldberger, Vice President of Finance. Jacob, please go ahead.
Jacob Goldberger: Thank you for joining us for the corporate update and financial results review of Streamline Health Solutions for the first quarter of fiscal 2024, which was a three-month period that ended April 30, 2024. As the conference call operator indicated, my name is Jacob Goldberger. Joining me on the call today are Ben Stilwill, President and Chief Executive Officer; and BJ Reeves, Chief Financial Officer. 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 company’s website at www.streamlinehealth.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. We therefore submit for 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 Security Litigation Reform Act of 1995. These are subject to risks, uncertainties, assumptions, and other factors that could cause actual results to differ materially from those 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 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, representing management’s querying analysis of these items as of today, participants on this call should take into account these risks when evaluating the topics we will discuss. Please note, Streamline 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-GAAP financial measures, such as adjusted EBITDA and booked SAS ACV. 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.streamlinehealth.net and our earnings release for reconciliation of such non-GAAP measures to the most comparable GAAP measures.
I would now like to turn the call over to Ben Stilwill, CEO.
Ben Stilwill: Thank you, Jacob. Good morning. So far this year, we have significantly expanded on the value we provide to the revenue cycle in healthcare. This expansion comes from product enhancement for workforce automation and opportunity identification from the clients we have brought online or expanded our impact in identifying the next set of clients to partner with us to get paid for the care they provide. As a result, our pro forma SAS revenue grew 22% during the first quarter of fiscal 2024 after excluding the revenues from the client non-renewal we have addressed at the end of fiscal 2023. Booked SAS ACV, which is the annualized contract value for all agreements currently being recognized, as well as bookings that have not been implemented, has grown to $15.9 million as of today, with $13.1 million already implemented.
We remain confident in implementing the remaining backlog and achieving an adjusted EBITDA breakeven run rate during the second-half of this year. And we’ve achieved this with a more efficient operating model while improving product functionality, servicing our existing clients, and adding new clients. Now to discuss our product innovation. We continue to deliver impactful solutions, focused on identifying financial opportunities to providing the automated workflows to resolve them. In April, we mentioned the initial impact of our AI model to create new and enhanced rules for our clients. This has only continued to grow, with more rules being deployed and further refined. The model observes coding changes that occurred unrelated to our existing rules.
That work started out based on observations within eValuator and is now expanding to coding changes that occurred outside eValuator from other processes or applications, both up and downstream from us. Recently, we also debuted My eValuator, a full refresh to the eValuator user experience, which has improved client satisfaction and usability. Looking forward, our eValuator roadmap focuses on identifying additional opportunities for impact. In addition to continued utilization of AI to enhance rule development, the eValuator roadmap is focused on novel methods to enhance the financial impact and operational insights we can provide with the existing technology. Our RevID application benefits the most from our investments in automation. Thousands of charges occur in a hospital daily, so identifying only those that need attention and quickly allowing users to resolve them is paramount.
Our recent developments focused on usability, while our roadmap includes pattern recognition to automatically assign tasks, improvements to usability. Moving to our service model, which a Kansas City based client recently called “the gold standard” for a partner-vendor relationship. Our client services team provides hands-on education, optimization, and insight, putting revenue cycle leaders back in the driver’s seat while bolstering the impact they receive from our solutions and cementing our relationships. For example, on the evaluator side, we drove $1 million of impact in one quarter for a 700-bed hospital. Our insights enabled the facility to identify and replace a poor outsourced coding resource. Meanwhile, a seven-facility system replaced a legacy on-premise technology solution with eValuator, resulting in a significant operating expense reduction in more than $4 million of financial impact.
This same client saw a more than 10% improvement in coding accuracy rates. On the RevID side, a recent implementation at a 65-bed facility resulted in more than $1 million of incremental net patient revenue in just 90-days, finding significant charges in an array of departments, including the ED, radiation, and nursing. This implementation was completed in less than three months with just an hour of Chemoliv client IT time. Another RevID client recovered more than $7.5 million of net patient revenue across a 670-bed, five-facility health system in a 12-month period. In addition, that client saved more than 600 hours of work effort associated with the manual charge reconciliation process that RevID replaced. These examples, and many more like them, are what give us confidence that we can help our clients succeed.
We will continue to develop the service model to put our clients in the driver’s seat. With impactful solutions and a gold standard client services model in place, we know our attention needs to sit squarely on attracting more healthcare systems to our client community. To-date, our stated priorities have been, one a displacement campaign related to an existing offering in eValuator space where we believe our tool delivers better results at a lower cost. Two, a continued emphasis on our Oracle partnership, which continues to aggressively push RevID, and three, the development of a new and effective channel partner; four, and the last one, beyond new client sales, we have significant potential for upsell and cross-sell within our existing client base.
We’ve seen success in each of these areas. For example, we have had several recent go lives at sites procured via the Oracle channel. We announced a new client via this channel last month. And we’ve been presenting jointly with their sales team to additional prospects at trade shows. And we’ve seen an uptick in the number of prospects that Oracle is introducing us to. In the first quarter, we also announced client deals for facility expansions in an enterprise client where we sold eValuator to a RevID client. There’s still substantial opportunity here, enough to actually double our revenue base from this channel alone. And from a sales operations standpoint, we are arming our sales force with enhanced messaging to match with industry priorities and better explain the overall financial impact of our solutions for all prospects to align with the priorities of their C-suite leadership and with VP and Director level counterparts.
But I want to expand on that financial impact and alignment by talking about our grand promise. I believe, we believe that the healthcare systems should be able to own their financial health. Today, our biggest conceptual competitors are ignoring the process or outsourcing the functions. In either case, the hospital lacks the information and workflow to systemically address issues with revenue integrity brought about by an incredibly complex reimbursement system. Healthcare systems need to be able to succeed in these revenue cycle functions, so that they can get paid for the care they provide. We believe it’s our duty to develop the products and provide the insights so they can succeed. With that, I’d like to turn the call over to our CFO, BJ Reeves.
BJ Reeves: Thank you, Ben. Total revenue for the first quarter of fiscal 2024 was $4.3 million, as compared to $5.3 million during the first quarter of fiscal 2023. The change in total revenue was attributable to previously announced client non-renewals offset by successful implementations of new SAS contracts. SAS revenue totaled $2.7 million and $3.2 million and represented 63% and 60% of total revenue during the first quarter of fiscal 2024 and 2023 respectively. As previously reported, the company had a SAS contract which did not renew toward the end of its 2023 fiscal year. On a pro forma basis, excluding the revenue recognized from that client, SAS revenue grew 22% in the first quarter of fiscal 2024 versus fiscal 2023.
Total operating expense was $6.6 million during the first quarter of fiscal 2024, compared to $8.3 million for the first quarter of fiscal 2023. The lower overall operating expense was the result of the company’s previously announced strategic restructuring and was primarily reported in SG&A and R&D. We also saw lower costs associated with our professional fees and software licenses in line with lower overall revenue from that portion of our business. Historically, we experienced higher expenses during our first fiscal quarter, due to administrative expenses associated with our audit and annual shareholder meeting. We project a sequential decline in expenses during the second quarter of fiscal 2024 and do not anticipate significant increase in operating expenses for the duration of the fiscal year.
We continue to make investments to improve our technology, including the development of enhancements, such as the My eValuator update, continuing development, and expansion of applications for the AI technology we have leveraged to generate additional content and improvements related to the automation and usability for the RevID solution. First quarter fiscal 2024 net loss totaled $2.7 million, compared to a loss of $2.9 million in the first quarter of fiscal 2023. The relatively static net loss, despite lower revenue, was the result of improvement in operating expense offset by increased cash and non-cash interest expense, as well as the non-cash valuation adjustment expense of $24,000, compared to a valuation adjustment gain of $364,000 during the first quarter of fiscal 2023.
Adjusted EBITDA for the first quarter of fiscal 2024 was a loss of $0.7 million, compared to a loss of $1.3 million during the first quarter of fiscal 2023. The significant improvement of adjusted EBITDA is the result of the company’s focus on the growth of its SAS revenue solutions, as well as significant cost savings achieved through the previously announced strategic restructuring. As Ben mentioned, our current booked SAS ACV, including our recent announced wins, totaled $15.9 million, and we continue to expect that we can generate persistent positive adjusted EBITDA above a $15.5 million SAS run rate. Currently, $13.1 million of our booked SAS ACV is implemented, and we anticipate we will successfully implement and achieve that $15.5 million run rate during the second-half of this fiscal year.
Moving to the balance sheet, as of April 30, 2024, we had $4 million of cash on hand, compared to $3.2 million at January 31, 2024. During the quarter, we executed private placements for gross proceeds of $4.5 million. Total debt, including our senior term loan and notes resulting from the private placement was $12.5 million and we had no balance on our $2 million revolving credit facility as of April 30, 2024. Looking forward, as we continue to execute in fiscal 2024, we anticipate growing revenues on relatively static expenses, achievement of persistent adjusted EBITDA profitability, and significant improvement in our use of cash for operations. That concludes our review. Operator, please begin the question-and-answer session.
Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Matt Hewitt from Craig-Hallum. Your line is now live.
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