Good morning, everybody, and welcome to Alcidion's results presentation for the six months ended 31st of December, 2022. My name is Hannah Howlett, and I'll be hosting the webinar today, stepping in for Kerstin Wahlqvist, our former Investor Relations Manager, who unfortunately had to leave Alcidion due to personal reasons. Before we begin, I'd like to acknowledge the traditional owners and custodians of the various lands on which we work and meet today, and to pay my respects to the elders past, present, and emerging. I extend that respect to Aboriginal and Torres Strait Islander peoples who have joined us on the call today. In terms of format, Alcidion's Managing Director, Kate Quirke, will talk through a short presentation which will be followed by a Q&A at the end
Also joining us on the call is Matt Gepp, Alcidion CFO, who will cover off some of the financial results, along with our U.K. Managing Director, Lynette Ousby, who is joining us today in Australia as she's here this week for planning. The Alcidion Chair, Rebecca Wilson, is also with us. All participants are in listen-only mode. However, should you wish to ask a question, please do so using the button Q&A facility on the bottom of your screen, and we will endeavor to answer as many questions as possible. With that, I'll hand over to Kate, thanks very much.
Thanks, Hannah, and welcome everyone to the call. As Hannah mentioned, I'll walk through a summary version of the investor presentation that was lodged this morning, covering the Appendix 4D results, along with an update on activities and outlook. Given our requirement to lodge a 4C, I'm aware that some of what we cover today will have already been provided to you a few weeks ago, but we have the added advantage of having Lynette joining us on the call today, and she will speak directly to the opportunities that we are pursuing in the U.K. market. Matt will take you through some of the financials in more detail later in the presentation.
I don't wanna steal all his thunder, but at a high level, H1 2023 was a very positive one for Alcidion and continued the momentum we've obviously been building in the last few years. First half revenue was AUD 19 million, up 48% on the same period last year. If you exclude the impact of the Silverlink acquisition, which we did in late December 2021, revenue was up 22% organically, which is a strong result for the business. Our recurring revenue grew 58% compared with 25% for non-recurring revenue, with the larger recurring growth being supported again by that Silverlink acquisition, which generates highly stable and repetitive recurring license fees.
The gross profit margin remained stable at around 86%, which as many of you'd be aware, our gross margins are made up of the very strong 90%+ margin we make on our own business, alongside some of the margin which will be lower for a third-party provider, where we're providing the medications management solution, for example, from Better. Underlying EBITDA was a loss of AUD 1.1 million for the half. A significant improvement compared to the AUD 3.2 million loss we incurred in the first half of 2022, FY 2022. Although we've still got some work to do, obviously, around EBITDA improvement as we move into a positive EBITDA and positive cash flow, this is demonstrating our shift towards not only being EBITDA positive, but also our ability to start demonstrating that operating leverage.
We retain a strong cash balance with AUD 11.9 million and no debt at the end. Sorry, backwards. I thought before we got into the depth of the financial highlights, I'd just call out some of the operational highlights for the half as we continue to execute on our modular strategy, which, both myself and Lynette will talk about in a little bit more detail as we go through the presentation. In the first half, we delivered new sales with a total contract value of AUD 18.6 million, of which we expect to recognize, around AUD 5.5 million of that in this financial year. Driving those new sales was AUD 8.4 million contract extension we signed with Leidos for the delivery of the Health Knowledge Management System to the Australian Defence Force.
That was additional modular upsell and additional expansion of the use of our solution in more settings. If you combine that with the initial contract, the total TCV now of that is AUD 31.7 million over 5.5 years. It's a really strong validation of the value we are bringing to that overall project. Also keeping in mind that that's just the first 5.5 years. We certainly would be very strongly confident that that program will be successful and continue to be used well beyond that. There's extensions to renew that right up to another further 15 years. In the UK, we signed an initial three year deal with University Hospital Southampton for nearly AUD 3 million to implement Miya Precision as the foundation for a broader EPR platform.
Although the initial TCV value is below our materiality threshold from an announcement perspective, it is a very strategic contract for us, and we're very excited about it because it provides further validation around the strategy we are deploying into the U.K. It demonstrates that the Silverlink acquisition is actually allowing us to be competitive and actually play in that EPR market, which is what was a requirement of having that patient administration capability. Further to UHS, during the first half, we signed several other contracts for additional Miya Precision modules, notably our Flow module at both Bolton and Derby. Given the challenges facing hospital wait times, which I'm sure you've all heard about overcrowding, inability to move people out of the hospital setting into other lower acuity settings.
The modules from Miya Precision around Miya Flow, Miya Access, and Miya Command are really a very strong part of our go-to-market strategy at this point in healthcare's evolution. We now firmly consider ourselves to be the leading provider of this functionality in the U.K. And this was one of the key reasons that we originally liked that ExtraMed Flow solution. We now have three customers who have upgraded from the ExtraMed Flow product, and that was all that product did into Miya Precision, giving us that base from which we will hopefully be able to upsell more modules to build out the EPR opportunity. During the period, we also renewed another Silverlink contract for three years, demonstrating sort of the stickiness of that contract of that acquisition.
Whilst we often talk about new contract wins, I know that that's a very important part of what we do, I think it's really important to actually really focus on the successful deployments and implementations that we've had and the value and the benefits that that is actually demonstrating to our customers. At the end of the day, healthcare likes to buy proven solutions that they can talk to other customers about the value that's being delivered from those.
Being able to work alongside customers and assist them to implement their products in an effective, efficient way, and importantly a collaborative way, is really helping us to build on a long-term relationships where that modular upsell becomes more and more possible as those relationships are strengthened through us actually delivering what we say we will do. In Australia, Alfred, a group of hospitals have recently gone live with Miya Precision using Flow, Access, and Command, and that was won as a competitive tender. With the Alfred being one of the larger teaching hospitals in Victoria, that makes them a really key reference site for us.
Importantly, it demonstrates that we are really deeply integrated in the information that we are bringing from the Cerner electronic medical record in the Victorian State Patient Administration System. It's a valuable reference site to show what can be done in this state. The project with Leidos continues to roll out on schedule. We've made several completed and addressed and delivered on time several milestones with that project. Excitingly for us, we're actually learning a lot and creating new opportunities out of the additional software capabilities that are being developed. I've just had the sales and marketing team across the whole business together this week. They're really excited certainly about the new capabilities that are coming out of that program of work.
I'm gonna hand over to Lynette now to talk a little bit more about the U.K. Deployments and the benefits we're delivering there.
Thanks, Kate. I'll go as slowly as I can because I am getting regular feedback about my very northern English accent can sometimes be hard to follow. I'm very aware of it. Good morning, everybody. As Kate said, we've had a run of very successful go lives in the last six months in the U.K. These have been really important to our strategy because we needed the reference ability as the Frontline Digitisation Programme picks up pace. Focusing on South Tees first, we've now got our EPR reference ability in the U.K., as I said, extremely critical. South Tees are now our main U.K. reference site and will be hosting a number of our prospects, customers over the next few weeks as part of that Frontline Digitisation.
What we have also done with South Tees is benchmarking, so understanding the impact that our software is having on clinicians and the information coming out of that trust is now starting to emerge. For example, very recently, they have fed back that the capturing of allergies at the point of care has increased from 56% to 100% compliance, giving the clinicians the information that will make the treatment faster and safer for the patients that they're looking after.
At East Lancashire, we have successfully deployed Miya Precision with our Flow and observation software alongside Cerner, which is the first deployment of its kind here in the U.K., therefore unlocking a new market for us, here in the U.K., where we can complement an existing monolithic EPR to level up the digital maturity of that trust to achieve higher HIMSS levels. Back to you, Kate.
Thanks, Lynette. I'm actually gonna hand over to Matt now, so that he can take us through in a little more detail the financial results in the first half.
Thanks, Kate. Thanks, Lynette. Welcome back to Australia. Thanks to everyone who's joined us today for Alcidion's half year results presentation. We were pleased with the result that the business delivered in H one, and these were in line with our expectations. We delivered new TCV sales of AUD 18.6 million in the first half. That was a solid result. With AUD 16.8 million of those sales coming in H two. Nearly a third of that is able to be recognized in the current financial year. We saw a significant improvement in the profitability of the business, having delivered a AUD 3.2 million underlying EBITDA loss. In the prior year, we saw a AUD 2.1 million turnaround to deliver a AUD 1.1 million EBITDA loss in this current half.
The improved EBITDA, you know, very simply, is a result of revenue growth outpacing the growth in our cost base, with half-on-half revenue increasing 48% and the cost base increasing by 24%. We're beginning to see real improvements in operating leverage, and that's demonstrated in the numbers, with staff costs in the current half representing 76% of revenue, compared to 91% in the prior year, and non-staff OpEx, which came in at 15% of revenue, compared to 18% in the prior year. It's worth noting that staff costs were up 23%, but excluding the additional costs from the Silverlink cohort of about 12 staff, the organic increase in staff costs was around 14%-15%. Importantly, that's, you know, under the rate of our organic revenue growth of 22%.
Other OpEx was 54% higher than the prior year. It's a large percentage increase, that's off a fairly low base. It's an AUD 700,000 increase from the previous half. We've seen general inflationary pressure here, much of that increase is attributable to increased travel activity in H1 versus the prior year, as our teams start to attend more local and international conferences again, you know, as seen by the 38% increase in our marketing costs. Moving on to the revenue dashboard. On the top left here, we can see the revenue, the half-on-half revenue, for the last five years. This is the strongest first half growth in revenue the business has seen. With the exception of FY 2021, we typically see H1 revenue slightly behind the previous year's H2 revenue.
As you can see, H2 revenue has consistently outperformed H1 revenue for the last four years. That's largely due to the sales momentum from the first half compounding with H2 new sales. Moving to the bottom left, there's been a marked increase in recurring revenue in this half, which now makes up nearly three quarters of our revenue. Kate mentioned earlier, this is driven by the inclusion of a full six months of the Silverlink PAS revenue, which is made up of very stable recurring license fees. On the right, we can see the geographic split of our H1 revenue. The U.K. contributed 46% of the group's revenue in H1. Quite an improvement on the 34% it contributed in the prior year, first half.
Importantly, you know, both regions saw solid growth versus the prior year, with the UK growing just over 100% half-on-half and the ANZ business growing 20% half-on-half. Excuse me. Moving to the balance sheet. We ended the period with AUD 11.9 million in cash in the bank. Receipts were a bit slower than we anticipated at the end of December, as we talked about in the quarterly 4C webinar. That was due to timing of the period, and a lot of that was caught up early in January. We are comfortable with the debtors and the working capital in the business at this stage. The most notable movement in the balance sheet was the decrease in the deferred revenue or the unearned revenue.
That dropped from AUD 4.9 million-AUD 9.1 million. That's a result of the huge amount of implementation work that the team did during the half, and it was not unexpected at all. That's it from me on the balance sheet, so I'll pass back over to you, Kate.
I'm just trying to get myself off to the next slide. Thank you very much, Matt. We've talked a lot about our modular strategy. I think I've touched on it a bit today, but I've certainly talked about it on other calls. I wanted to spend a few moments of the presentation today while we've got Lynette here, to give you our big picture view of where we're looking to take the business over the next several years, particularly in relation to the opportunity we currently have in the U.K. Thanks, Lynette.
Thanks, Kate. This illustration should not be used as fact. The numbers that you see on here are for illustrative purposes only, but are there or thereabouts. We have been very keen in the U.K. over the last two years to ensure that the market that we're creating for ourself is not in one lane. We call it keeping out of our lanes and not staying in our lanes. We've ensured that with the Frontline Digitisation Programme and the money that's been invested in EPRs, absolutely we can now play there because of Silverlink. What we also focus on is other routes to market alongside that EPR funding as well. This is a demonstration of a very normal deal here in the U.K. Moving from left to right, we will have a module in an ICS.
An ICS is an integrated care system made up of all care settings. We could have an observation module in there. We could even just have Smartpage. Excuse me. What is happening in the ICS is a convergence strategy where they are being encouraged to use incumbent solutions as you spread through the ICS rather than bring new products into that ICS. We've got very good coverage across our ICSs. Using this as an example, Trust one has a module, then Trust two takes the module, and Trust three then takes the module. Ultimately we have the Holy Grail, which is the ICS orchestration layer, which is also a new play for us because of the way that we have positioned ourself.
As I said, this is a very normal route to market, but not our only route to market, which is quite unique in the U.K. Onto the next slide, please, Kate. Again, just focusing on that modular strategy and why it puts us above our competition, in my opinion, is this is a deal that has happened here in the U.K quite a few times now. As Kate talks about, we have a challenge in the NHS, and it is very similar to the challenges you're facing here in Australia around flow and ensuring that you can move patients out to the right, to the correct setting. We've got a bed blocking issue.
We have partnered with a number of customers who had specific funding to resolve a flow or an emergency department challenge, and we were able to work with that customer to help them solve that challenge with a number of our modules, which you can see on the left-hand side. What we then do is take the opportunity to contract quite differently with that customer. As they move through their challenges or their evolution in their digital strategy, we have a rapid contracting vehicle to help them and work with them. What you've then seen in phase two is that we will layer on, because Miya Precision is already in there's a lot of effort already expended at the trust in terms of the deployment. We can then turn on the modules depending on what challenges they're trying to solve.
Phase 3 completes their EPR with a Patient Administration System potentially going in last if that's what they want. A PAS last strategy to complete the EPR is again really positive in the U.K. market because Miya Precision is building up all the intelligence around the patients as the deployment moves forward, so the PAS switch does not feel as dramatic as it would if we'd have gone with the PAS first. A very unique approach to a modular deployment. Kate's just trying to really set me off course. This is a mirror image of a number of deals we've done in the U.K. Back to not staying in our lane, we can do new modules into new sites. We can do full EPRs, we can do PAS. We've got a lot of flexibility.
What that also enables us, because we don't provide all of the modules, we've created a whole army of partners that support our strategy as well. Partners that would normally get ripped out in a maybe a large monolith, they back us in this model as well, so we have really successful integrations with other partner products as well. Yeah. Thanks, Kate.
That's a good point. Thank you, Lynette. If we look forward, and I'll give you an opportunity to ask Lynette some questions at the end. If we look forward, we start the second half with contracted revenue of AUD 32.9 million that is able to be recognized in this financial year, plus a further AUD 1.1 million of scheduled renewals. AUD 34 million, without if there are no further sales. Obviously we would expect to see those. We're not seeing any shortage in the number of opportunities and as we've mentioned several times on the call, we believe that the modular strategy is one that positions us really well to maintain a strong sales momentum and not rely solely on our opportunities coming from one particular segment of the market.
In saying that, though, I think we have to recognize and acknowledge the pressure on the U.K. NHS system at the moment, along with all of healthcare. In particular, not only that, they've had some bit of political turmoil towards the end of last year. We are watching closely how fast these procurements go. They are a little behind where their stated plan had been, but we are now seeing those procurements start to roll out. We also have a situation where the modular opportunity is in play as they have funds available to expend, to address flow and so forth. We're keeping a watchful eye on it, but feel quite optimistic about how things are progressing now.
As we've previously advised shareholders, we are looking to be underlying EBITDA and cash flow positive for FY 2023, having stated ahead that certain procurement guidelines need to meet our expectations. The quantum of that profit may be impacted by, you know, the additional travel and, you know, inflationary components that Matt alluded to. Again, that will depend on how much revenue we can book in terms of new deals in this half. That concludes our presentation for today. Thank you for your attendance and I'm very happy to take on questions. Hannah is gonna moderate those for us.
Thanks, Kate. Thanks, everyone. We do have a few that have come in. Again, if you would like to ask a question, please do so using the Q&A button on the bottom of your screen, and we'll try to answer as many as possible. One here is, you previously mentioned that you're looking at expanding into other geographies, perhaps India or North America. Is there any progress on this and what is the current view?
I think, as I probably stated on the quarterly a month or so ago, we are in what I call the research phase. We certainly have been to India. We were at Arab Health. We were at a U.S. health conference at the end of last year looking at the strategy for entering some of those markets. There are many different ways in which you may choose to enter a new geography, and I've probably talked about them all at some point or other in terms of could be partnering, could be direct entry. In some cases, it may be acquisition. I would say we're still in the research phase.
I do not expect that we'll be entering any new geography in any significant way in this financial year, but we certainly continue to have aspirations to do so at the right time.
All right. Thanks, Kate. There's one here actually that's for Lynette. It says: Lynette mentioned in one of her slides about rapid contract vehicle. Can she explain what this means and if it is similar to the contract signed with the University Hospital Southampton, where the initial total contract value was GBP 2.8 million over three years?
Hmm.
Which-
Very sharp that you noticed that, Peter. Yes, that is an exact example of what has happened with UHS, Derby and other customers that we have. Generally what we now do on a module contract is always offer the options to take other modules from us as their digital strategy evolves. Yes, that's how we have contracted with the UHS. The value that you see is, yes, if they exercise all of those options, to the time that we think they would exercise those options, that would be the value, yes.
All right. Thanks, Lynette. There's one other here. You mentioned before about the current challenges that the NHS is facing. You mentioned procurement. What is, if any, changes to the lead time in securing sales now in the NHS? How do you find that things are speeding up or slowing down because of the disappointment that has been seen with the digitization process?
Yeah. We did hit a bump, when we got to our third health secretary in a month, just towards the end of last calendar year. The Frontline Digitisation Programme I'll talk about first, which is the GBP 3.6 billion investment into frontline digitization. You've probably seen a report very recently that talks about the NHS not digitizing enough, and this is the biggest digital investment the NHS has ever made. We did hit a three-month delay from when we thought the procurements were going to start because the funding had to go back to the new health secretary for approval. That's all in the public domain.
What the NHS England have done to compensate for that is come out with some clearer procurement rules for those EPR that actually shortens that cycle back to where it would be. We eventually will pick back up. As Kate said, the procurements have now started to come out. Procurements were probably expected in December are now coming out, so we felt the three-month delay. With modules, we're not seeing that delay the same. Who we deal with is changing. You know, we don't necessarily deal with a CIO at trusts anymore. We might have to transact at an ICS level, which is good for us because we're trying to converge. That has changed.
That has caused some delays because that is an emerging structure with the ICSs, but that's starting to settle down now. I think if we were just in the EPR space, we'd be experiencing some significant lags as those procurements go through. Because we have the module offering, we can go in and fix different problems. As Kate said, flow is a huge focus in the U.K. at the moment. We're able to ensure that that product's got referenceability, we can deploy it quickly. I believe we're the market leader for flow in the U.K. As the news evolves around how they want to fix flow before our winter pressures again, we watch that with a very keen eye.
All right. Thank you very much, Lynette. There's one here, the Republic of Ireland, is that considered part of the U.K. per Alcidion's operations, or is it not serviced by Alcidion at all?
Sorry, you just cut off. Did you say Ireland?
The Republic of Ireland, yeah.
We don't service Ireland at all. Plus, they've just done a quite significant Epic deployment. It might be as their digital strategies evolve, we will, and we'll see how we can complement the Epic offering. No, not at this time.
All right. Thank you. another one is: Are we participating in this South Australian RFP for their health digital program? If not, are there any other RFPs that we are participating in?
Well, we're actually participating in a lot of RFPs. For obvious sort of competitive reasons, I wouldn't like to announce which RFPs we are going for. Suffice to say, we are on all tender notifications, and our sales team look at every RFP that is put out in healthcare and look at how Miya Precision may address the requirements of that RFP.
All right. Thanks, Kate. One other here. There's actually a few that are quite similar, so I'm gonna bundle them together. It is: What is the revenue contribution expected to be for Leidos going forward? Is it expected to grow at the same levels?
That's in H2, I think.
Yes. Yeah.
There's a very specific question, I think, Matt, around, what's the revenue contribution from Leidos in H2, if you know that at the moment. I know you'll know it if you looked into your numbers somewhere.
Well, look, I, look, I know what we think. There's a lot of dependencies there in terms of the implementation timeline, so I don't really wanna get into forecasting H2. Leidos revenue did contribute AUD 4 million in H1, and it will definitely be a material contributor to our revenue in H2. Probably not as high as AUD 4 million, to be honest, because there were license fees in H1. I'd rather not give a specific number right now on that one.
Well, I say we count, that revenue in the contracted revenue figure we've already given as the total revenue figure, on the assumption that we're going to deliver on all of the milestones.
All right. Thanks, Kate. There's one final question for now. It's on staffing costs. We saw that staffing costs increased, 23%. Is this expected to continue, or are we now, in a good place?
Matt?
You want me to answer that?
Yep, you can do that.
Look, I, you know, I touched on this when I was talking about the P&L. You know, we did have quite a big increase in OpEx versus the prior year, and that was partly due to the Silverlink staff coming on board and being in for the full six months. You know, we do have hires still that we'd like to make in the half and we'll weigh up, you know, those hires with how our revenue flow or our sales flow is going during the half. Look, you know, we're always looking to hire new staff. Probably won't be at the same pace as it has been previously. You know, we just have to weigh it up with our sales pipeline.
I might confirm that it definitely won't be at the same pace.
Okay.
Yeah. I think it's fair to say that a lot of the Silverlink contribution to the increased staff cost. I had said in all my previous calls that we still had roles we hadn't filled because there was some difficulty in filling some roles, particularly as IT resources became very challenging to find. We are getting close to having filled all of those roles now that it's, you know, increasingly more easy to attract talent in the tech market. I certainly will see, I know we will see that increase in staff leveling off now as we scale the business and continue to see greater operating leverage as we go forward.
All right, thank you. We do have one more as it happens. South Tees was one of the first reference sites to procure the full suite of Miya Precision platform. Is anyone able to provide an update on how things are tracking along, including maybe some customer feedback or challenges that you've seen?
Well, I'll take that, Kate. Is that okay?
Yeah.
I did touch on implementation in the slides, but I'll go into a little bit more detail. South Tees is going very well. We have really embedded ourselves as a partner with South Tees. They perceive us as a partner, we perceive ourselves as a partner. And we've entrenched with the clinical and operations teams there. Miya is now live and has been for some months. EPMA is fully rolled out across 3 hospitals now. As I said, they are a reference site. They're hosting a large cohort of our potential customers, or hopeful customers over the next few weeks.
What we also have an advantage of with South Tees is that the leadership team there have often come from other trusts who've used other EPRs, so they're able to give our potential customers some real insight into why we are better than the ones that they've had experience of before. That's not just from a product perspective. They talk very highly of how responsive we are as an organization. They've hit some challenges recently, and we needed to pivot in terms of the deployment program to support them on those challenges. They do talk very highly of our responsiveness. I did touch on the allergies, the impact that that has had.
We're getting that kind of feedback with benchmarked VTE assessments, which they have to be 100% compliant on, which they now are because of Miya. We are slowly gathering the data now around medication errors and the impact that we're having there, and feedback that we're getting from a trust that is supporting the Smartpage rollout at South Tees or Lancashire Teaching. I'll just touch on that 'cause they're helping with South Tees rollout as well, is that the Smartpage implementation by Alcidion has saved two hours per clinician per shift. In an NHS that is striking, that has got a resource issue, that impact is gonna be significant at all of our trusts now that are rolling out Smartpage.
What we'll start to share is the statements coming out of our customers, in particular South Tees, of the impacts that we're making. It's a very positive deployment, very positive relationship. They are very happy to host our pipeline customers as references.
Thank you very much, Lynette. All right. That concludes the portion, the Q&A portion of this webinar this morning. If we were unable to answer your question, please do email me directly. My email address can be found on the bottom of the announcement, and I will come back to you as quickly as possible. Kate, do you have any closing remarks before we go?
Firstly, I'd just like to say that the sorts of things that Lynette just said about two hours per clinician per shift is the reason Alcidion and the team at Alcidion do what they do. It is really about making a positive impact on the lives of patients, and we've just spent time together, you know, sharing some of those stories and reiterating that. I hope that you as shareholders feel that same pleasure in being part of something that is making such an impact and a very purposeful impact on a market in our lives that all of us at some point or our families will have had to interact with.
I wanna thank you for your ongoing support, and the support that you're providing to Alcidion, and your interest, and, I look forward to keeping you updated on our progress. Thank you.
Thank you, Kate, and thank you everybody for joining us this morning. Goodbye.