Company Interview / An eye on the earnings prize in FY25

Key points:

Alcidion sees an annual revenue decline yet a rise in recurring revenueAlcidion wins notable contract with North Cumbria, UKFY25 aims for EBITDA positivity with a strong revenue forecast

Kate Quirke from Alcidion reports that Alcidion sees an underlying adjusted earnings loss of $3.4 million for the full year, with revenue down 8% to $37.1 million. Despite challenges in the UK market, annual recurring revenue is up 6%, signalling ongoing growth.

Kate highlights the positive outlook for the new government in the UK, which may present opportunities for digital solutions in the NHS. Alcidion recently achieved preferred provider status for North Cumbria, a significant ten-year contract worth around $30-$40 million.

Kate expresses optimism for FY25, with Alcidion targeting EBITDA positivity. The company starts the year with $28 million of booked revenue and aims to keep costs under control while expanding its market reach.

Full unedited transcript below:

0:11

Another company reporting today. Alcidion underlying adjusted earnings loss of 3.4 million for the full year revenue was down 8% to $37.1 million, and Lydian says it started FY 25 in a strong position and expects to recognize $28 million of revenue for the next year. And here's a look at its share price intraday. And to get us across the detail CEO Kate Quirk is joining us now Kate welcome back to Oasis. Thank you so much for joining us. Thank you. Revenue is a bit of a miss in terms of consensus. But it did come in line with your recent guidance which was provided back in July. So down 8% year on year. What and why?

0:57

I think if you look at consensus, consensus numbers were quite widely spread, and EBITDA certainly came in close to the widespread of consensus. We have had some challenges in respect of market conditions, in terms of the procurement activity that was expected, particularly out of the UK, and that's been pretty widely, um, reported and on on from us since really probably about Q1, um, of, of that last financial year. I think the really good news coming out of that is that actual annual recurring revenue was up 6%. So you know that as a as a marker of us continuing year on year. And if you look at the graphs we posted in respect of how the revenue has grown year on year, you'll see some of those lumpy year contracts might be down, which is an impact of the of the NHS lack of activity. But the annual recurring revenue coming up is a pleasing trend. Yeah. So RR is sort of the holy grail. We've talked many times about the lumpiness of some of the revenue coming through to our

1:57

city, and so referencing the UK in particular. And the NHS knowing that there's a new government in the UK. Is that. How is that going to work?

2:07

Look, so far all the noises are very positive. We recently announced a very significant, um, preferred provider status for North Cumbria, a large trust in the UK. You know, we expect that to be a ten year contract, around 30 to 40 million. And that was announced after the change of government. This government, certainly as they were in opposition, made all of the right sounds about the NHS and the challenges that it's experiencing and how digital was a really critical factor in respect of addressing those challenges. So I'm optimistic that as they come through, you know, getting their feet under the desk, so to speak, they're doing a particular review at the moment called the Lord Darzi Review of the NHS. I think the digital is going to feature in how they're going to address some of the challenges the NHS is facing. Got it. So I'll sit in front and centre hopefully for that. I understand in this result that you're targeting to be EBITDA, EBITDA positive in FY 25. So can you flush

3:07

that out for a bit? Um, how are you going to get there? What are we looking for in terms of the metrics to reassure us that that's going to happen? Yeah, certainly. Look, we recognized as we went into sort of towards the end of Q2 and Q3 of this last financial year that we were coming under pressure from a revenue perspective. Uh, in terms of the work that was going through in the NHS, we also had completed some fairly large pieces of work that were around implementation of our systems, particularly that large contract with the Australian Defence Force. So we actually took the step to reduce the cost base at that time, to bring it more in line. Um, and to recognise that we were coming off one of those that that very large project. So we sort of enter, we leave Q4 with the sort of annualized run rate of costs of around 36 million. Now, if you look at where we're starting this year, we've got 28 million of booked revenue already before we sign anything else? We've got the North Cumbria contract, which we're currently in the process

4:07

of finalising the negotiations for, and expect that project to start in Q3. And then you look at the the sort of revenue revenue we do on an annualized basis, which, you know, averages out between 8 to 10 million. And you'd expect that's a fairly comfortable position for us to look at EBITDA positive in the year ahead. Okay. And also, I mean, how do we look at costs and how that will help, um, you know, meet these milestones in the coming year. So we took around 6.4 million of annualized costs. So the business in in respect of staffing, predominantly some of the operational expenditure has also been pulled back as we're coming through from that scale, um, scale up phase we were in, which was really about getting our systems and processes in place. And, uh, the kind of things that allow us to do things more efficiently. We've done a lot of that over the last couple of years. So I'm very comfortable with the cost base that we have. Uh allowing us to continue to deliver. We had a lot of deployments in the last 12

5:07

to 24 months and with reference ability now, you know, solid across all of our markets with some of those large projects under our belt, we can start to see leverage from that annual recurring revenue continuing to come in with that, all of them entailing us, uh, committing people to do implementation work. And so when you're providing this outlook, I mean, what's giving you the confidence in terms of market activity that that these milestones will be met?

5:37

Well, I think the good news that we had towards the second half of last financial year was the uptick in activity of tender activity and the amount of, um, opportunities that were coming to market to look for, uh, solutions such as ours. We signed, uh, in the first month of this year, a new contract with Hume Regional Health Alliance in Victoria, which was an alliance of 15 hospitals that will be putting our platform in as a um, as a digital health platform across that way, followed quickly by North Cumbria, and there are a lot of tenders that are moving now through that to that selection process. So we're confident that we've got the cost base right. Right. We start with a very strong recurring revenue base. Uh, and, you know, we're anticipating that, you know, revenue will come through. And some of those tenders will, uh, land for us in this year. And then if you look at the forward projection we have at this point in time, around 130 million of, you know, booked revenue able to be recognized in the forward next five years. And, you know, five years is sort of how

6:37

we measure it in terms of, um, looking at forward contracts. So we've got a really strong financial profile going forward as well. And most of that 130 million is, in fact, you know, recurring revenue that doesn't require us contributed a lot of, um, effort in actually to receive it. Okay. So yeah, sticky contracts once you get them annual recurring revenue and new contracts importantly in the forecast. So what's the big challenge for you right now, Kate. And running And

7:05

Look, I think, you know, settling down when you take a reasonable amount of cost out of, out of the company, you need to sort of reset the way you're doing things. I think most of us l citizen would say we're running, you know, a pretty efficient, uh, lean but effective organization at the size we're at at the moment. So we've taken the last couple of months to get ourselves ready for the year ahead. But I think we're all very optimistic and actually ready for new customers to come our way, as well as continue to support the ones that we have. Um, yeah. I think the challenge is really is about, um, ensuring that we take the opportunities that come our way. And, and of course, you know, market activity and economic activity is out of our hands. So we just need to be really mindful of what is going on in those markets. Also looking to new markets, uh, if we can spread the opportunity to a wider geographical area, then, you know, we have more total addressable market to go after, and that will continue to be something that I've

8:05

put some focus on in this coming year.