Q2 FY 2026 Appendix 4C and business update for the three months ended 31st of December 2025. Before we begin, I would like to acknowledge the traditional owners and the land from which I'm presenting to you today, the Wurundjeri people of the Kulin Nation, and the lands from which all of you are joining me today. I pay my respects to their elders, past and present. I also extend that respect to all Aboriginal and Torres Strait Islanders who have joined us on the call today. I'm also joined on the call by our Chief Financial Officer, Matt Gepp .
Morning.
The plan today is to take you through a presentation covering the key financial and commercial highlights of the quarter, which will then be followed by Q&A. All attendees have got the opportunity to ask questions at the conclusion of the presentation. And if you would like to ask a question, please use the Q&A function at the bottom of your screen, and we'll aim to answer as many of those as possible. We did ask for some questions ahead of time, so we have received a few. Any questions that are similar in nature, we may combine them to avoid repetition. And if I've addressed any of them in the body of the presentation, I won't necessarily ask them again as questions.
If we do run out of time and I'm therefore unable to answer all your questions, please send it through to investor@alcidion.com, and we'll seek to address as many of those as possible after the call. As a reminder, the webcast is being recorded and will be available on Alcidion's website later today. Into the presentation. This quarter, we continued with the positive momentum that we started in Q1. We delivered material contract wins, expansions, and renewals, and also successfully deployed our solution across a number of new sites. It was very pleasing earlier in the quarter to announce the expansion of our contract with Leidos, which is a flagship contract for us, and that expansion was part of the comprehensive healthcare knowledge management system that they procured from us probably three and a half, four years back.
The project's known as JP2060, which is being implemented for the Commonwealth of Australia, specifically to support the Australian Defence Force. This is the third contract expansion from the original contract, and we'll see Alcidion take a broader role within the consortium, adding, and I'll touch on that a little bit more later, but really we're adding more clinical capability and extending the environments in which we operate as well. Last week, post the Q2 period, we announced that we've been selected as the preferred provider to University Hospitals Sussex NHS Foundation Trust, or UHS Sussex for short. That's for their new electronic patient record solution. Whilst, as has been indicated in the releases, contract negotiations are still underway, we expect the TCV for that to be at least AUD 35 million.
That will be subject to the number of modules that are taken and the contract period, AUD 35 million at this stage. We're in discussions with them for an initial period of seven years. This contract with Sussex will be our third EPR contract, adding to the North Cumbria and South Tees EPR contracts, and it has the potential, based on current expectations in the discussions, to be the largest U.K. contract to date for Alcidion.
We have secured several other extensions for existing contracts, and that continues to help support that contracted recurring revenue position that we're continuing to build strongly. In addition to the new sales, we also achieved successful deployments at a number of sites, but very specifically and strategically at Hywel Dda in Wales, and I'll touch on that a little bit later, and that adds to a number of go-lives that we had in the first quarter.
As it stands at the end of the second quarter, we will have AUD 43.1 million as a minimum of contract revenue for FY 2026 able to be recognized, which is 40% over the same period last year, noting that that figure doesn't include any contribution from the Sussex contract nor any other sales which may occur in the second half, and given the confidence we have in our revenue position, we've refined our financial guidance for FY 2026, and I'll talk about that a little bit later in the presentation. Moving through the slides now and looking at the financial highlights in a little bit more detail, during the quarter, we signed new sales with a combined total contract value of AUD 15.4 million, the majority of which related to that contract expansion with Leidos.
Approximately 62% of the new sales relate to recurring product revenue, with the balance relating to services, almost entirely of which is product implementation or implementation specifically for the Leidos contract expansion. So that is a higher percentage than we normally see for product implementation compared to prior periods. But it does relate to the nature of the engagement we have with Leidos, where they engage us to work fairly heavily with them during that deployment phase. As shareholders are probably aware, the Leidos contract is a Miya Precision deployment servicing the needs of the Australian Defence Force, who have some unique requirements that go beyond the acute hospital environment. We provide them the longitudinal health record, and this contract expansion is expanding the capacity of a clinical nature.
As I mentioned earlier, at the end of the second quarter, we have AUD 43.1 million of contracted revenue, which reflects both the sold and renewal revenue that we expect to recognize over the course of FY 2026. It doesn't include any potential revenue contribution from Sussex or any other new deals that we sign. The Q2 cash receipts from customers were AUD 8.5 million. We delivered an operating cash outflow for the quarter of AUD 1.9 million, which is small overall and largely reflects the year-end timing factors that happen when you hit December. It's consistent with our expectations. By timing factors, I mean in the month of December, we typically have a large debit balance with cash collections ending up falling either side of that year-end.
And that's impacted by people who, whether people are working, it is often impacted as to where the 31st of December falls in the space of a week. And so we actually have collected AUD 8.8 million of the debtors in the first week or two of January. So it's really a timing situation and something that is very consistent with Alcidion's cash collections. As shareholders would also know, we have very few, if any, bad debts, and we usually collect all of our cash or debts within the 30 days, if that's what the contract stipulates the payment terms to be, which most of them do. Staff cash costs remain well controlled, with the staff costs for Q2 up approximately 3.7% on the same period last year, which is largely in line with inflationary costs and salary increases.
As of the end of the quarter or at the 31st of December, we had AUD 14.2 million of cash and no debt. Further to the comment above, at the end of Q2, we had a large debt ledger of approximately AUD 10.7 million, of which around AUD 8.8 million of cash has already been received in January so far and will continue collecting that as the weeks into January progress. We've already covered a lot of this information and what I've said so far, but I think it's always helpful to graphically present this information and maybe highlight a couple of areas in particular. On the left-hand side, the quarterly new sales, the AUD 15.4 million we delivered of TCV in Q2 was modestly up on last year, but more importantly, it's added materially to the recurring revenue position for FY 2026 and beyond, therefore.
Then on the right-hand side, this reflects the seasonality in our cash receipts and demonstrates fairly graphically the material uplift we typically see in the second half of the year. The AUD 8.5 million cash receipts we delivered in Q2 is roughly in line with prior years. And given our debt balance was AUD 10.7 million at the end of Q2, we'd expect Q3 cash receipts to follow a similar upward trend to what we've seen in prior years and as is depicted in the graphs here. As I mentioned in the opening comments, the primary driver of the new sales in Q2 was that AUD 12.3 million TCV contract expansion for our Leidos contract with ADF, pointing out that that's for the remaining 2.8 years of the 1st five-year commitment of that contract. It is a 5 + 5 + 5 contract.
So we would expect, as things are running, that we would see a renewal of that coming up as well, and therefore the value of this will continue to expand to the minimum that we will see from it. The TCV runs for the remainder of that original contract period and will add approximately AUD 2.5 million in ARR into that, but there are potential extension options out to 2036, including the recent expansion that we've just had. That JP2060 contract now has an ARR in excess of AUD 5.5 million. And given the length of that project, it really underpins the financial stability of the Alcidion business well into the future.
It was the 3rd expansion, as I said, to the original contract with Leidos and continues to demonstrate the depth and breadth of Miya Precision platform across a number of care environments, not just the hospital environment, but also our ability to continue to expand contract value over time through adding in additional modular sales. And of course, as shareholders would be aware, we continue to add to the modules that we are developing and releasing to the market. And ED is a really good example of one where we have, in the last couple of years, developed a new module that is quite deep in functionality that is already live in two sites in the U.K., is part of the rollout of this expansion, but also a lot of interest from others in respect of that module.
Post the quarter end, we announced Alcidion had been selected as the preferred provider for University Hospitals Sussex for their new EPR solution. They are one of the largest NHS acute trusts in England. They cover seven hospitals and provide hospital and community care for over a million people in that region. Similar to our other EPR partnerships with North Cumbria and South Tees, it is a flagship contract for Alcidion, further establishes our credibility in the U.K. market as both a comprehensive full suite EPR provider, but also being able to provide that modular approach to what we're doing and to layer the Miya Precision platform over existing EPRs as well. The contract negotiations are still underway. I mean, they're just really kicking off.
We expect the TCV to be at least AUD 35 million, and that will be subject to any increase that will be subject to the modules taken. There were some core modules and some optional modules. They'll probably remain optional modules if they don't become part of the initial contract, but we are just really commencing off those more detailed contract negotiations with them. It was a competitive tender, and we're really looking forward to continuing that relationship with Sussex, which started a number of years ago as we provided them our Patientrack solution. It's important to note that whilst our relationship with them is very strong in respect of Patientrack, there are hundreds of people involved in the evaluation of EPRs, and it is done in a very strict manner of scoring.
And so effectively, we have been scored above the others that we competed for in respect of that. At this stage, we're targeting to finalize that contract early in the start of Q4 and to begin deployment very soon thereafter. Based on that timeline, we would expect to recognize a significant portion of revenue in this financial year upon the execution of that contract. During the quarter, we renewed our long-standing relationship with NHS Lanarkshire in Scotland for a further three years, and we will continue, we're going to continue to deliver Miya Observations and Assessments into that environment, which is previously known as Patientrack. While it doesn't meet the material disclosure for ASX, and obviously, as our revenues increase, that material disclosure increases.
The TCV for Lanarkshire is over AUD 1 million, and it plays an important role in maintaining our referenceability while we continue to grow the long-term contracted ARR or recurring revenue base. We also renewed several smaller contracts in both the U.K. and Australia, as we do on a quarter-by-quarter basis. Similar to Q1, our delivery teams have continued to be kept very busy rolling out the solutions that we've been selling, and it becomes about as a result of the ongoing sales momentum.
The most significant of those deployments was in Wales, where we went live with Hywel Dda with Miya Flow, Miya Precision, and also Miya Observations and Assessments . This is our first site in Wales, and we're very excited to see the success of this. We think it positions us very well to demonstrate to the rest of Wales the value that we can bring into that market.
Q3 is looking even busier in respect of deployments. We've got several very key go-lives scheduled in both the UK and Australia. Looking forward, as of Q2, we have approximately AUD 43.1 million of contracted and scheduled revenue to be recognized. This is up 40% on the same period last year and is already 6% higher than the full revenue for FY 2025. As I've already noted, the figure doesn't include any potential revenue contribution from Sussex. For FY 2026, we expect to deliver EBITDA and operating cash flow at least in line with what FY 2025 delivered. Further upside is anticipated, subject to finalizing the Sussex contract and the timing of any other new or expansion contracts in the second half that may occur. Consistent with prior years and the guidance I just mentioned, the second half is historically a stronger period for customer receipts.
And as a result, we'd expect an uplift in customer receipts compared to the first half and therefore continue to be confident of being cash flow positive. We remain confident in the progression of several new and expansion opportunities across ANZ and UK as we become increasingly more referenceable, and every go-live that we have strengthens the value proposition that we can demonstrate to potential customers and existing customers. Again, thank you for your continued support and interest and for attending the webinar today, and I am very happy to take questions at this stage.
Thanks for that, Kate. We've had a number of questions come in before the webinar, and we have a number that have come in during the webinar. Not surprisingly, a lot of those questions are around UHSX, so I'll deal with those after we've taken these ones.
The first question is, and it was a much longer question when it came in, but we're going to summarize it at a high level. Can you provide clarification around Alcidion's strategy in relation to NHS Integrated Care Systems, otherwise known as ICSs, and how Miya Precision is being positioned at a system-wide level?
Look, Miya Precision's well placed at an ICS level. We can assist at an ICS level to integrate the trust-level patient data and EPR data, and we can do it across multiple EPRs. So we're really well and quite uniquely positioned in that we could sit across an ICS that had an Oracle Cerner and a Nervecentre deployment, for example, and we could consolidate that data into a single view for the ICS.
I think where we're at at the moment is that we've yet to see how the shake-up in the ICS role will impact decision-making in relation to digital, but it's certainly a very strong thematic for us in terms of that market. But we are seeing a consolidation of ICSs into regions and looking to see what they're going to be needing at an ICS level, but it is definitely an opportunity for us.
Thank you, Kate. Has there been any indication from South Tees that they intend to exercise their EPR expansion options or to include new modules, or are they waiting until the North Tees EPR has been selected?
We haven't had any recent expansions with South Tees. We've been continuing to finish deployment there, keeping in mind that they've already bought a large number of our modules.
There are some they haven't bought, but if we signed an expansion, it would be reported in the quarterly update unless it met the ASX material reporting disclosures threshold. So yeah, I mean, I think we'll keep the market updated if any of those new or modular expansions come up for Tees or any of our other customers.
Thanks, Kate. The next question is, noting Alcidion does not disclose which EPRs it tenders for, are you able to advise roughly when EPR invitations to tender will be released by Dartford and the various Hampshire and Isle of Wight ICS trusts?
Interesting. I commend people's attention to detail in terms of the trusts and where they're at. It's very difficult for me to comment on the plans of trusts in relation to when they plan to release tenders or if they plan to.
We are at the end of a funding cycle, a four-year funding tranche that was the Frontline Digitisation Programme , and there is a new round of funding that's been announced that comes into effect from the next financial year. And the trusts at this point in time will be engaging with NHS England in relation to how they access that next tranche of funding, what the business cases need to be, and so forth. So we can't really know when they'll actually release documents and what the scope of those will be. Obviously, we continue to talk to all our potential customers, but they are really not; it's not only up to them. They do need to understand where the funding streams are going to come in respect of NHS England allocation.
Thanks, Kate. A couple of questions on new jurisdictions. First one is Canada.
Where is the Canadian consultant aiming to land into Canada, Western or Eastern Canada? Which specific hospital systems are you targeting? Which trade shows are you attending? Is the consultant on a success fee for landing hospitals? When will investors know more?
Look, Alcidion has continued to work with our consultant on the ground, and the first part of that engagement was to establish what the market opportunity and focus for Miya Precision would be in the Canadian market. And we have established there are opportunities to deploy specifically Miya Precision to address patient flow challenges in the Canadian market and similar challenges to what we see everywhere in healthcare. Nick White, our Head of Marketing and Partnerships, is working very closely with the consultant. He's done a number of trips to Canada.
We have a workshop conference session that we're running in March in Ontario, and we will be attending e-Health again in Halifax, which is in Halifax this year in June, and so I'm happy with the progress we're making in respect of understanding the market opportunity, starting to talk to health systems over there. We are very much targeting those that are using EPRs or already have deployed EPRs, as opposed to some of the jurisdictions there that have just started perhaps to deploy an EPR, similar to what we would be doing in the Australian market. As in all our sales deals, there are incentives related to closure of deals in both the Canadian market and the Middle East where that is to happen.
Good segue, because the next question is about the Middle East.
Are there any updates on the UAE and Saudi Arabia markets following Adam and Jayne's trip in October and November? Did the discussions with Core Transformation break down, or are they continuing?
Discussions in the Middle East are progressing. We're in a conversation at the moment with a number of potential partners, which is how you need to go to market in that region. And really, our focus at the moment has been assessing two things. Is there a market opportunity? And we have established there is a market opportunity and need for patient flow in that region. And the next was to look at the potential partners. And there are a number of possible partners, and it's really important to do due diligence on those partnerships and who is going to best represent Alcidion in that region.
That's really where we are at this point in time in relation to the Middle East. Adam is going back there in two weeks to continue those discussions.
Okay, so on to the live questions, and just bear with me because there's a lot of them around UHSX, and I just want to try and summarize them. I think there's three questions well summarized by the first one. How will you resource UHSX? Do you need to hire more people? Are you able to win another EPR project, or will that put a strain on the business?
We'll resource Sussex predominantly from the existing capabilities. We may add one or two into the UK. We may add another into the support environment when they go live.
They won't be live for another year or so, but it will be sort of marginal in terms of incremental cost to the business. We are moving into the first phase of go-live at North Cumbria. So the whole idea is that you can move these teams through these deployments. Were we to win another one right now? I mean, it really depends on timing. The answer to that question as to whether I need additional staff depends on what we've got on deck at this point, at a particular point in time, and the shape of what those deals look like.
Thank you, Kate. Regarding the comment that UHSX could be the largest contract to date. Are you referring to it possibly being larger than NCIC, which was AUD 39 million, plus the AUD 6.8 million MediViewer expansion?
I guess when you really let's talk about the North Cumbria, it was 10 years. So Sussex is seven years. So if you played it out for 10 years, it would be in excess. But I really can't give a lot more detail on that at this point in time. I've tried to give a minimum indication because I think it's important for shareholders to know. When I have more information to share that is solid in nature at all, I will definitely share that with the market. But I expect it to be a very, very significant contract for Alcidion.
Thanks, Kate. So I'm not sure if we can answer this. I'll ask it. How much would you expect the implementation revenue for UHSX to be out of the AUD 35 million? And then the balance divided by, say, seven years would be the ARR?
Look, it's very difficult to answer, but just to give you at a high level, I would probably say look at the construct of the NCIC contract, which we had shared, because it's going to be very similar in terms of I think they will prepay. I don't know this 100% sure because I do not have a contract, but I think they will prepay the annual license fee for seven years in an upfront payment. Then the rest, then there'll be a payment for implementation in NCIC. I think that was about AUD 2 million of the total was implementation, and that was recognized over 24 months or will be recognized over 24 months. And the rest was the ARR spread over the 10 years.
So I think if you looked to that and tried to allocate it in a similar way, that's the most information I can really accurately give you at the moment.
Thanks, Kate. Is it fair to say that the wording of your outlook commentary sounds stronger? For example, does the wording of potential new contract wins, which may occur over H2, reflect an increased confidence of the conversion of your sales pipeline?
I mean, I wouldn't read anything more into it other than what I've said in respect of we are confident in the progress. We're confident in where we have indicated guidance at the moment. As we get more certainty on the size of Sussex and the timing of other contracts, we will continue to update the market in relation to that.
Thanks, Kate. I think I'll answer this question.
When does the company project to be regularly cash flow positive? So what I'll say is that the company has delivered positive cash flow every year since FY 2021, with the exception of FY 2024. We delivered a material positive cash flow of AUD 5 million last year, and we've just guided today that we expect to be as good or better. So with the exception of FY 2024, we have been pretty regularly delivering positive cash flows, not quarter to quarter, because as you see, our first two quarters are typically slower than our last two. But I think we're there on a regular basis now. Okay, I'm going okay. So there's a couple more questions for me. When does the company expect to be generating positive NPAT? So we did deliver positive NPAT in FY 2025. We delivered our maiden positive NPAT of AUD 1.7 million.
And another kind of technical question, briefly. What is Alcidion's cash flow purchases? So I think you're referring to the admin line in the cash flow. So outside of marketing, staff costs, direct costs, and GST/VAT payments, which we disclose separately in the 4C, other purchases would include software expenses, cybersecurity costs, internal hosting, plus the usual corporate costs such as insurance, listing costs, accounting, tax, and audit, etc. So that's kind of the main makeup of that other line in the cash flow. Sorry, all right. We have an AI question, Kate, which I think is for you. Congratulations on recent achievements. Could you share some insights on how Alcidion is supporting the adoption of AI in product development, implementation, and foreseeable impacts on the business going forward?
Thanks for that.
Look, of course, like all companies, we are heavily focused on how AI can certainly help us in the business. So we are using it very deeply in respect of our requirements, development, and testing. So within the business, we're using it. In terms of our product, we announced in the last year, we released two or three additional modules that are focused on using AI across the Miya Precision platform. They were Miya AI, they were Miya Scribe, Miya Summary, and I think there's a third one, the Miya AI service, which allows people to use the data in Miya Precision and deploy their own AI, or not their own, but necessarily maybe some third parties. So we're really consciously working to support the healthcare environment to use AI effectively.
Of course, that has to be balanced when you're actually talking about our customers with the safety and ethical considerations of deployment of AI. So we're actually doing a lot of deep work with both Google and with South Tees on this, and pretty exciting to see some of the opportunities that are coming to market in respect of that.
Thank you, Kate. All right, so we're on the last question now. I'm going to combine two questions here. So the first question is, I'm keen to understand the competitive landscape. And within that, I think you'll answer this anyway, Kate. How is the market for Miya Flow sorry, how is the Australian market for Miya Flow progressing?
Look, we've got different competitors in each region depending on what we're selling.
That is actually the unique opportunity that Alcidion has, that we are a data platform and that we have a range of modular applications which can expand on and continue to expand on those. ED or emergency being a really good example of that. That enables us to compete with Nervecentre in the U.K. as an EPR provider, Telstra Health and TeleTracking as patient flow providers, task management and communication where the customer wants mobility and clinical communications. So because of the unique way in which we've built it, which is a platform so that the data in the first place is standardized, we can then focus on using that data to enhance clinical experience and improve the efficiency in healthcare delivery through this modular development.
And the platform such as Miya Precision really gives us significant flexibility in terms of the opportunities we have to compete and the various markets in which we can take that capability.
Thank you. And we are at time and also at the end of our questions.
All right. Well, thank you very much. If there are questions that we haven't got to or you had some that you were thinking about at this point in time, please send them through to investor@alcidion.com, and we'll endeavor to get you responses. Thank you very much for joining today. Obviously, we're very pleased with the positioning of where Alcidion is at the moment. The Leidos contract expansion was a very significant win for us.
Moving on from that with Sussex, plus a number of the other opportunities that we're continuing to sign and convert, it's very pleasing to see where the business is positioned at the moment, and I thank you for your continued support.
Thanks, everybody.