Thank you all for attending today. We might get started, given it's just past our allotted time, and most of our attendees are joining the meeting. It's Alcidion's presentation of our Appendix 4C Quarterly Cash Flow and Business Update for the Third Quarter of the 2022 Financial Year. This update was released on the ASX this morning, and today, our Alcidion CEO, Kate Quirke, will take you through the numbers and the accompanying business update. My name is Kaye Hocking. I'm Director of Marketing and Partnerships at Alcidion, and I'll moderate the call today. The layout of today's session. Kate will provide a short presentation, and we'll have some time for questions at the end. Please log your questions using the chat function in the bottom bar of the Zoom window.
Thank you also for the questions logged prior to the call. These will be addressed at the same time at the end of the session. Joining us on the panel today is Matthew Gepp, our Chief Financial Officer. He will also be available for questions during the session at the end. We will post the recording of this session later today, so the information will be available for you there. Given that, I will pass over to Kate. Thank you.
Thanks very much, Kay. And thank you to everyone for joining us this morning. I'll get straight into it. We have had a strong third quarter, and I'm very pleased this morning to take you through the business update that was re-released alongside the Appendix 4C numbers that we released this morning. As I said, it was a very strong quarter. We delivered positive operating cash flow in Q3 once you take into account the AUD 1.6 million. Sorry, it's a positive operating cash flow of AUD 1.6 million once you exclude the settlement of the one-off M&A costs related to the acquisition of Silverlink. As many of you have probably seen, during the course of the quarter, Alcidion's announced several new contract wins and renewals with UK customers, including new Miya Precision customers.
We've had upsell of additional modules of Miya to existing Miya Precision customers. We've had renewal of Silverlink contracts. Subsequent to the quarter end, we also announced an upgrade of ExtraMed, an ExtraMed customer to Miya Flow. Again, another new Miya Precision customer. These contracts from the U.K. perspective demonstrate the benefits of the recent acquisitions alongside our growth strategy. Here in Australia, again, subsequent to the quarter, we entered into a new AUD 5 million five-year agreement to upgrade the Northern Territory to Miya Precision, with additional options to sell further modules over time on top of Miya Precision. Initially, they're taking Miya Flow, which is in line with what they were using on our previous version of Miya.
They have also opted to take Miya Access and Command, which looks at bed management across the territory, and then an option to add on another additional modules over time without needing to go to procurement. This active start to the calendar year demonstrates Alcidion is executing on our strategy to attract new customers, upsell additional modules and upgrade existing customers to Miya Precision. You know, all of those contract wins that we've announced demonstrate those elements of our strategy. As I indicated on the last call, there were a number of opportunities in the U.K. that were going through their procurement process, and some of these have now been converted, as has been evidenced by some of those announcements. The pipeline continues to strengthen both in the U.K. and in Australia and New Zealand.
To take you through in a little bit more detail, the quarter results, as announced today, highlight, as I said, the execution of our strategy with new sales to customers for Miya along with their renewals and upgrades to existing customers. You can see that well demonstrated throughout the financial highlights, particularly when you look at the new sales for the quarter and the year to date new sales, taking into account that year to date new sales are for three quarters only and don't include anything that we announced subsequent to Q3 closing.
If you look at from the new sales perspective for the quarter, for this quarter alone, they were equivalent of AUD 12.5 million in total contract value, with about AUD 4.3 million of that able to be recognized in this financial year. The new sales comprised 74% of that, or AUD 9.2 million was recurring product revenue and AUD 3.3 million or 26% non-recurring services revenue, which includes revenue that we get for implementing our products, which obviously every sale we make there is a component of, services related to implementation and integration of data into our platform. Three new contracts and two renewals, all material, were announced, and they contribute to that new sales figure.
It is worth noting that Alcidion material contract announcement threshold does increase as our revenue increases, and therefore, not all contracts signed during the quarter are actually announced in the way those contracts were. With those new sales, that takes the total contract value of new sales year to date up to the end of Q3 to AUD 42.9 million, which is 93% up on the prior year TCV sales. 62% of the new sales relate to recurring product revenue and 38% to non-recurring services revenue. It also includes AUD 4.4 million of revenue that came to us as a result of the acquisition of Silverlink.
Just important to note there that the contract with the Commonwealth department had a fairly sizable chunk around AUD 10 million related to services that are to be recognized over the first three years of the program of work, whereas the license fee will be recognized over five. As at the end of the third quarter, we have AUD 31.7 million expected to be recognized this financial year. The revenue at this point that we with no further sales would be able to recognize would be AUD 31.7 million. But there's still a quarter of sales to go, and we would normally expect some of the sales in the first quarter to contribute to revenue in this financial year. That's 28% up on the prior calendar period.
There's also a further AUD 1 million of scheduled renewal revenue expected to be converted to contracted revenue and considered part of the FY 2022 revenue. If that's converted, obviously that would take that to around AUD 32.7 million without any further new sales. Really that puts, you know, contracted revenue just shy of AUD 33 million with the, as I said, the possibility of new sales to contribute further to that revenue. Obviously, the amount that new sales contribute when you get to the final quarter depends on how the contract is structured and when that contract is signed. Turning to cash and the flow of cash. The Q3 operating cash outflow was AUD 400,000.
However, when you exclude the settlement of the M&A cost related to the Silverlink acquisition, we actually generated AUD 1.6 million of positive operating cash flow. On a year-to-date basis, Alcidion's operating on a negative cash flow of AUD 2.3. If you remove the M&A costs, we are currently cash flow break even, which is where we have indicated we expect to finish the financial year as well. Please note that we have allocated the costs related to M&A activity in the Appendix 4C in the actual document. That we've actually allocated the cost to line 3.7 in the Appendix 4C, and that is historically how we allocated them. On reflection, they're more accurately allocated to line 3.4, which is transaction costs related to the issue of equity.
It makes no difference to the overall numbers, but it would, I just wanted to clear up any suggestion that we have any debt, 'cause we don't. That could be indicated by looking at those costs at 3.7. In future, we will move those to the line 3.4, where they more correctly sit. Cash receipts from customers in Q3 were AUD 11.1, which is the highest quarter of receipts for this financial year. The total year-to-date cash receipts of AUD 27.5 million is 23% ahead of the cumulative cash receipts at the same time in the prior year. Our cash balance at the end of the third quarter was AUD 17.5 million.
Noting that subsequent to the end of the quarter, we did pay out AUD 2.6 million to the Silverlink vendors in relation to the first of two earn-out conditions being met. That was announced to market at that time. This, these graphs are in the business update. And you can look at them in more detail at your leisure. It gives you a greater view, obviously, of the trends in terms of how the business is performing. The trends across the board are all moving in a positive direction. You can see we're ahead of the PCP numbers in new TCV, in cash receipts, in contracted revenue. We've got a healthy cash balance and a strong and continuously developing pipeline.
Please note, it is worth noting, when looking at these that I think I just touched on it before. The non-recurring revenue year to date is higher than the prior calendar period, and that's really related to that Commonwealth contract having a very significant services component, which is absolutely fantastic for us. It's allowed us to work very closely with the members of that consortium and to be paid to do it, to ensure the absolute success of that program of work. It's all product related revenue. But it does mean that there is a slightly higher non-recurring component than we have previously seen. Moving a little to operational highlights. It has been a very busy quarter for us, a very significant in terms of announcements that we've made.
All of them demonstrating to different degrees how Alcidion is executing on our strategy. I'll just touch through them because I think, hopefully, I can touch on what is important about each of these contracts, and why they're contributing to, you know, a very overall positive momentum for Alcidion. We had the five-year contract with NHS Tayside to implement Miya Observations and Assessments, which are, you know, modules aligned to Miya Precision. What's important is the contract continues to expand our U.K. presence. It also expands yet again our presence in Scotland. It's the third health board in Scotland that will implement Miya Observations and Assessments following the delivery of very positive.
Of those of you who have seen, certainly some of the feedback and the results of the studies coming out of Lanarkshire, will see the really positive impact that our solutions are having in improving patient safety and patient outcomes. This contract's important 'cause it continues to demonstrate that, our opportunity and our ability to execute on a land and expand strategy by using modules of Miya, to establish a position in either a country or in a trust and then further develop, that position. We look now to how we can continue to expand that opportunity throughout Scotland. We also signed a five-year contract with Herefordshire and Worcestershire, which is really interesting. That was for Miya Flow. Just one of the key modules of Miya Precision.
It's the first community and mental health trust that has purchased Miya Precision. It is actually one of NHS England's Global Digital Exemplars. Some of you who have been following our story for some time will understand that the U.K. identifies some sites as exemplars. When they're by choosing to procure our technology through a competitive tender, they have indicated that our flow solution is an excellent choice in the market, an excellent choice for community and mental health. You know, again, this is an entry point for Alcidion to demonstrate the applicability of our solution in the mental and community health trusts, of which there are around 100 on top of the 145 acute trusts that we've been dealing with, predominantly to date. It's a new Miya customer in England.
We then had the five-year contract with Dartford and Gravesham, which expanded the use of Miya modules. They are the first to procure Miya Emergency, which is actually a new Miya Precision module, and it's the first module to come out of the merging of the Silverlink and Miya capabilities. Silverlink has capabilities in ED from an administrative perspective and Miya from a clinical perspective. We're bringing those capabilities together to produce a new module, Miya ED. This was contracted alongside one of our solution partners. Again, we don't believe that Miya Precision needs to develop every capability in order to provide an alternative modern modular electronic patient record.
In fact, it makes a lot of sense where there are niche providers of deep clinical solutions like anesthetics, like medications, for us to partner with them and use our highly interoperable platform to integrate that data into the electronic patient record or longitudinal health record. That's what we're doing with Provation. This is important because the agreement expands Alcidion's relationship with Dartford. They were the first trust to implement Miya in the U.K. Now they're the first to implement Miya Emergency, and that adds to other modules that they've acquired since that first contract as well, which was for diabetes management and for Miya Memory, our mobile solution. Again, demonstrating how Alcidion is executing on that strategy.
We also signed two renewals with existing Silverlink customers, Moorfields Eye Hospital and Liverpool Heart and Chest, for the use of PCS for a further three years. Again, providing further validation of Silverlink's long-standing position in the market. It delivers, you know, stable recurring revenue to us, as we continue to build out our mobile, our modern modular EPR. Subsequent to the end of the quarter, we also signed some additional contracts that again, I think, continue to demonstrate our execution. We had a five-year contract with East Lancashire Hospitals NHS Trust. They are already users of Miya Observations and Assessments. They were also existing users of the ExtraMed Inpatient Flow Manager solution, and that solution's actually been used at East Lancashire Hospitals NHS Trust for about a decade.
They will represent another first customer from the ExtraMed portfolio to choose to upgrade to Miya Flow. Again, demonstrating our ability to upgrade the customers acquired via that ExtraMed solution and create greater opportunity once Miya Precision as a platform is implemented, that we can continue to sell additional modules. The other thing really interesting about East Lancashire is that they are deploying the Cerner Millennium electronic patient record. This is a perfect opportunity for us to demonstrate in the U.K. how we interoperate and can add value around those sites that have already chosen to go with a provider such as the Cerner EPR solution. Then most recently, we signed a five-year contract with Northern Territory to upgrade to Miya Precision and deploy Miya Flow, Access and Command modules across the five main hospitals in the territory.
This upgraded solution will support flow of patients. You've heard me talk on a few of these calls about how important the flow of patients is in healthcare today. Every time I pick up a newspaper, there's something in there about ambulances being ramped and not being able to get into ED departments being overflowing. This capability to bring data together and look at what's preventing patients from moving through the healthcare system is really important. It is fantastic and very exciting after many years of Northern Territory being a customer of ours, that they are choosing to implement an upgrade to Miya Precision and put that over the top of their clinical record.
You know, we'll continue to see very positive results, I believe, out of the work in the Northern Territory. Also during the quarter, we announced three key staff appointments, two based in the U.K. and one in ANZ. All three of the positions, though, are focused on accelerating our market growth. In March, we announced the appointment of Florian Stroehle as Director of Strategy and Business Development. He's actually based in our Auckland office, so the first time we've had a member of our team that's looking at business development based in Auckland, and that is really exciting for us. He's gonna be leading business development across Australia, New Zealand, and any new emerging markets.
Florian has many years of experience in healthcare information technology, both based in New Zealand, but also on a global scale. We're looking forward to the skills that Florian will bring to our team. We recently appointed Steve Leggett as Head of UK Strategic Markets. He's gonna be really focused on the opportunity of the modern modular EPR in the U.K. He has come to us after 17 years at Cerner, so he has a very strong background and experience that we're already seeing how that skills and knowledge contributes to our team and our business development and our sales execution in that market. Dr. Paul Deffley is joining us as the U.K. Chief Medical Officer. He has already started with us.
He's really gonna be looking at how he supports the growth of the U.K. business from a CMO perspective. Many of you will know our founder, Malcolm Pradhan, who is the Chief Medical Officer for Alcidion and drives a lot of the vision. He's gonna work really closely with Paul to be able to grow our capacity and ensure that we're able to take our message into the U.K. Market effectively. Just pointing out that all of those appointments are in line with the expected budgeted expenditure for this financial year. You can see from this update, it has been a very busy quarter with a lot of progress made. During the quarter, many of you will know I made my first trip to the U.K. in two years.
It was fabulous to meet with current and prospective customers and to spend some time with our team, who have grown significantly during that time, so there was a lot of new faces for me to meet also. We also attended our first in-person trade shows in both the U.K. and Australia, which were extremely successful and continue to help us build the pipeline. I think, whilst we were very excited to see new and potential customers, they were equally excited, I think, the opportunity to get back to that kind of connection and networking. I tend to be back visiting the U.K. before the financial year is out, so we can continue with the momentum that we've established as we've come out of the pandemic.
Thank you all for attending today and for your continuing interest. I'm very happy now to move to the Q&A.
Thank you, Kate. We've had a few questions come through, so I'll just work through those in turn. We just had a question about whether what's the position regarding the EBITDA as for the end of the financial year?
Yeah, as we've continued to say, we're still looking at break even EBITDA for the financial year, excluding M&A costs, obviously. It would be underlying EBITDA. Obviously, there's still some of the year to play out. Provided that everything falls this side of the year, we expect to look at that underlying break-even position.
Okay. I guess along similar lines, where do we anticipate that the year-end revenue will be when we account for the Lancashire and Northern Territory health contracts? Were those contracts heavily front-loaded?
We don't give guidance on where the revenue is gonna land because obviously there will still be some contracts that we are working through. At this stage with just shy of AUD 33 million anticipated in revenue that we expect to recognize we're obviously will fall close to consensus at least but we're not in a position to give you know a forward forecast at this point.
Thanks. The next one's a product question and a bit of a double-barrel question that we had from two attendees. What's the status of the technical integration between Silverlink and Miya Precision? And in a related question, what's the status of moving Silverlink PCS to the cloud?
Well, during the quarter, we were able to demonstrate Silverlink working alongside Miya Precision to potential customers with Silverlink deployed in the cloud. Now, that's for demonstration purposes. I think there's still work we would wanna do before we deployed that into a production environment, but certainly work is well and truly underway. As I said, we have now sold our first module that is in fact a combination of the capabilities of Silverlink and Miya Precision. Work is progressing and very happy with the status of that today.
Great. Next question's just asking for an update of our involvement in the JP2060 project that was mentioned in the webinar in January and what about further information on the status of that.
I think what I can say about that is the project is progressing really well. We're working with other consortium partners to deliver the requirements. The project's up and running. We have not as yet had the federal government make a formal announcement about the allocation of that contract and the members of the consortium. Now that we are in a caretaker period, we understand that that's unlikely to occur until after the election is finished. We continue delivering on the project. It's going well. We're happy with it. We look forward to the day that we can give you more detail.
Thanks, Kate. The next one's about Alcidion's listing on the U.K. Digital Marketplace. Our four primary products are listed there. The question is about whether this provides any significance in terms of the procurement process in the U.K.
Look, yes. Look, all of these, it's very similar to being on a framework contract. They all help you to speed up procurement in the U.K. We like to be on as many of these types of marketplace engagements or framework engagements as we can, that our products, you know, meet the requirements so that when we do come across customers that wanna procure our solution, they can do it with via a mechanism that makes it easier and speeds up the process. All of these sorts of announcements are very positive.
Great. Related, I guess, to procurement in the U.K., we were talking and mentioned the impact that COVID has had on the procurement process. Has that eased since the first half of the FY 2022?
Yeah, I think so. I mean, it's hard to know 100%. My feeling is that we're operating under fairly normal circumstances now, and that's probably only been in the last month or so. There's less of that, "Oh, my, I don't have a solicitor available to work on a project because they're seconded into another department or so forth." We keep an eye on it, but things are operating fairly well at this stage.
Great. The next one is a little bit more about market sectors across the healthcare, I guess, environment. Are Alcidion targeting an expansion into settings that are similar to hospitals such as whether aged care or nursing homes?
Look, we keep a very open mind on aged care and nursing homes. I think I've said this before, our longitudinal health record that we're deploying in this Commonwealth program, I think could equally be applicable in the aged care sector. The really interesting thing for us and what we're watching and why we haven't gone massively invested into this area is that we're waiting to see what comes out of any funding initiatives to support digital health in aged care. Because at this point in time, it's a market that is very tight in terms of expenditure in that area and haven't really embraced digital as a way of transforming it. We certainly think we've got a position there at the right time.
Okay. This next question relates back to the key staff appointments that were shared in the presentation with congratulations. The question is, are we planning any more growth on the team in the near term? How are we finding access to talent and the rising costs?
Thank you very much. Look, we have still got some roles that are not filled, that are part of our plans for this financial year, but not many now. We're getting pretty close to where we had anticipated being. We're obviously going into looking at the next phase of what we do, but we certainly don't have planned any significant increase in costs across the board. There will be some pockets where we may wish to recruit to deliver the various components of our actual operating plan. In terms of access to talent, I think we're doing extremely well. I think Alcidion's stories, Alcidion's positioning in the market, the success we're having, is actually translating into our ability to attract talent.
We're certainly continuing to look at our employee value proposition and how we position ourselves as an employer of choice. In terms of the rising costs, to be honest, I think I'm seeing it level off a little bit. Anyone that's interested will see in the Australian Financial Review today. They published the rolls for PwC and Accenture because they're now publishing their salary bands. I think it's really interesting to be able to actually see that information in the market now openly and to understand where people are positioned. I'm very comfortable with where we are at the moment and how we're attracting our talent.
Okay. Just on a slightly different tack, about currency. Both pound sterling and the New Zealand dollar have lost value against the Australian dollar this year. A question about whether we hedge our currency risk.
I'll give that to Matt. He loves these questions.
Yeah. Thank you, Kate, and good morning to everybody who's joined us. Yeah, it's a good question, especially with the Aussie appreciating, I don't know, 6% in the last two months. You know, there's two elements of that. There's the transaction risk and the translation risk. I'm not gonna get too techy here, but yes, absolutely, we hedge our transaction risk for material transactions. For example, when we you know raised money in Australia for the Silverlink acquisition, and we took out foreign exchange contracts to remit those funds to the vendors in the U.K. Translation risk is a little bit more complicated. You know, there is an element of natural hedging on the U.K. balance sheet. I'm gonna focus on the U.K. because, you know, compared to the U.K., New Zealand is fairly immaterial.
We are actively working with our bank at the moment as we budget for 2023 to put in place procedures to mitigate any further appreciation of the Aussie dollar.
Thanks, Matt.
Thank you. The next question, it's provided us with a multiple-choice answer, so bear with me as I read through it. When you say that Alcidion expects to finish the year cash flow positive, do you mean cash flow positive excluding acquisition costs or cash flow positive for the final quarter or actually cash flow positive for the full year?
Cash flow positive excluding M&A costs for the year.
Okay. Thanks, Kate. Hopefully that's clear in that respect. I think we are now coming to our last question, which is just a request for an overview of our approach to ongoing research and development of our product suite.
In relation to what? Sorry.
It's just, could you explain Alcidion's approach to ongoing research and development of current and possibly new product?
Okay.
I'm guessing the power lines, certainly.
Okay. Well, I'll just answer it how I read it then in the sense that, obviously, we continue to develop our product. That much is obvious in the sense that we are releasing new modules, selling new modules, and so forth. That is consistent. How do we decide where and what is important? Obviously, that's a combination of our market intelligence, when we hire people like Florian and Steve and Paul Deffley, they bring to us a great deal of market understanding in terms of what our customers are looking for. Obviously, we also talk to our customers. We spend a lot of time engaging with them.
We have our internal team who are keeping an eye sort of on industry trends, the sorts of things that are happening globally and where we believe health is heading. It's a combination of all of those in terms of where we're heading. We have our product roadmap. That product roadmap is well debated, and a lot of people have input into that. We keep it fairly agile in terms of what's important to us at any given time.
Thanks, Kate. Just as I said, that was the last question we have on the list. Two more have popped in, so we might call them the last two as well then too. The first one is: how does inflation impact the business, and how do you approach new contracts from a pricing point of view?
Well, of course, for a business like ours, where we're not commodity-based, where we're selling long-term contracts that obviously have the ability to increase those contracts in them, increase the costs year on year, so nearly all of them will have either a CPI or a labor percentage factor that we can actually add each year based on what is actually happening. We hedge the impacts of that quite well, and we take that into account. Obviously, we keep an eye on pricing for any other long-term major shifts. While there has been pressure on tech industry salaries, I don't think that we're seeing that being so significant at the moment that we'll have to radically change our prices to our customers, but we keep an eye on it.
Okay. yes, as is the case when you say that's the end, we've had a couple more come in. One of them is: Do we have any plans in the short to medium term to expand to other geographical areas?
Look, we are open to it, and you will probably, if you picked up, Florian's role is not just business development in ANZ, it's also to look at emerging markets. So we're keeping an eye on the opportunities. We obviously put you know determined expansion into new geographies on hold during COVID. We still believe the opportunity in the U.K. and what we have here is very significant. We don't wanna be distracted from that at this point in time. But we are certainly starting now to actively consider new markets. That might be a good one to finish on, do you think, Kaye?
I think it wraps everything up very nicely. Yes. Thanks, Kate. Thank you everybody again for attending today. Please note, as we said, the recording of this session will be posted for you to view later today.