This meeting is being recorded. We're gonna do Alcidion's results for Q3 FY 2023. This is for the period ended 31st of March 2023. Before we begin today, I'd just 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 their elders past, present, and emerging. I extend that respect to Aboriginal and Torres Strait Islander people who have joined us on the call today. Today on the webinar, we have Alcidion's chair, Rebecca Wilson; Managing Director, Kate Quirke; and CFO, Matthew Gepp. The structure of the webinar will be a presentation by Kate to cover off the operational, commercial, and financial highlights, followed by a Q&A.
All participants today are in listen-only mode, but if you would like to ask a question, please do so using the Q&A button at the bottom of your screen. We will endeavor to answer as many questions as possible, and if there are some similar questions, we will group them together. If for some reason we do not manage to get to your question, then please send an email to me, Hannah Howlett , or the investor at Alcidion email address, and we'll come back to you as soon as possible. Thank you very much. Kate, I'll now hand over to you.
Thank you, Hannah Howlett . Thank you everyone for your time this morning. As Hannah Howlett mentioned, I will walk you through a summary version of the investor communications that were lodged with the ASX this morning, covering the Appendix 4C for the third quarter, along with an overview of our commercial position and outlook, and then be happy to answer any questions thereafter. During the quarter, Alcidion secured AUD 4 million of new sales in Q3, with AUD 2.1 million of that recognizable in this financial year. The new sales comprised AUD 2.7 million of recurring product revenue from new product sales, which is around 67% of that, and AUD 1.3 million of non-recurring services revenue, which includes product implementation related to the deployment of our solutions.
At the end of the quarter, we had AUD 36 million of contracted revenue expected to be recognized in FY 2023, with a further half a million of scheduled renewal revenue from existing customers expected to be converted to contracted revenue in FY 2023, which is 14% up on the prior corresponding period. The Q3 cash receipts were AUD 10.4 million, delivering a small negative operating cash flow of AUD 800,000, and we retain a strong balance of AUD 11.1 million as at the 31st of March with no debt.
The company have generated cash receipts for year to date of, which is nine months of AUD 29.3 million, up 7% on the same period last year, which illustrates the strong conversion capability we have in respect of turning revenue into cash by meeting our contractual milestones in terms of delivery of our projects and solutions to customers. We remain confident of the positive operating cash flow continuing of achieving positive operating cash flow in Q4. Given our strong contracted and recurring revenue base that we already have, we're comfortable with the current cash levels and them being able to support our ongoing operations. To break that down into a little bit more detail, as I said, we generated new sales of AUD 4 million.
The company expecting AUD 2.1 of that to be recognized as revenue by 2023. With the split there being 67% of it being product revenue, at 33% related to services to implement product. The cash received from customers was AUD 10.4 million, with a negative operating cash flow of AUD 800,000. Important to note, cash expenses were consistent with Q2 at around AUD 11.3 million. We expect that our cost base will level out as we go forward from this point. In terms of cash receipts, I talked about that being AUD 29.3 million year to date, and we expect those cash receipts in Q4 will follow a similar growth trend to previous years. Expect a strong Q4 in respect of cash receipts.
As I indicated earlier in the call, we stand at AUD 36 million of contracted revenue expected to be recognized in FY 2023, with the further AUD 0.5 million of scheduled revenue from renewals from existing customers, which we will convert in this year. You may remember that was around AUD 2.9 million at the beginning of the year. We have converted the majority of those contract renewals that were planned for re-signing and reconversion, conversion this year. You can be confident in that additional AUD 500,000. Obviously, that's without any further sales being made in this quarter that could contribute to contracted revenue. Based on the current debt of balance and already signed contracts that we are working on and delivering, Q4 is forecast to be the highest quarter of cash receipts for the year.
When you couple that with the stable cost, cash cost base, it's expected to result in positive Q4 operating cash flow, which will improve the overall cash position. As I indicated in the business update when we released it this morning, we remain very confident about the outlook for Alcidion. However, I did point out in that release that with current delays in procurement timing, specifically around the EPR and the NHS procurement program, which is outside of Alcidion's control, these timing delays may have an impact on revenue that we'll be able to recognize in this financial year, and therefore will have a subsequent impact and we may not be able to deliver the positive EBITDA for FY 2023 as intended. We do currently have the strongest pipeline in our history, and we are getting extremely positive feedback from our solutions.
As such, the outlook for Alcidion remains strong and positive. Well, there are several opportunities progressing positively through the pipeline. The impact of this longer sales cycle, which in most cases is actually caused by staffing issues across healthcare worldwide, but particularly in the NHS, combined with the strikes that we've been seeing. As a result of the impact of the longer sale cycle may challenge you to achieve near that positive EBITDA in FY 2023, which are considered to be a short-term impact and fully expect contracts to continue, rolling along as envisaged, in terms of our investment and strategic belief in the NHS, for Alcidion.
The level of engagement, which is very important, from prospective customers, continues to remain high, and the increasing reference ability of our Miya solution continues to add to our confidence in the outlook for Alcidion. In the last few days, one of our flagship customers in the NHS went live with the last component of the EPR deployment in Miya, which is e-noting. Basically this is taking that last paper, the actual documentation that doctors and nurses do across a patient's stay, taking that paper into a digital environment and supporting them in that process. This is an area which many legacy EPRs have been low clinician acceptance for, and there are documented studies that have been done about legacy EPRs contributing 30% to increased workload from an administrative burden.
Our team has actually been up with this customer in the last few days on a site visit for a reference site visit. We are extremely positive about what we're hearing and the impact that it's having on the day of doctors and nurses. Nurses have quoted that Miya Noting has saved them 45 minutes on their shift on the first day of use. For the first time ever, they've left work on time. The junior RMOs completed their ward rounds 30 minutes early, came together for a coffee to collaborate around some of their patient status. This is the first time that this has happened since they started at the trust. In an environment where we have doctors and nurses striking because of their working conditions, this is a real-world impact our solutions are having.
I can say hand on heart that this is feedback that you will not hear generally when doctors and nurses start using a new electronic patient record. We're asked to document on a, ironically, a whiteboard, their feedback as they've been going through using the system. And some of the feedback we've had is, "I've had more time to care today since noting went live. It's already saved me an hour today. Can someone please check my work? This all seems too easy." We will be publishing and sharing this incredible feedback, and the customer is certainly very happy to act as a reference site for us.
I think that is very important for us as we continue to look at conversion of the pipeline through the latter part of this financial year and into FY 2024. It's fair to say the challenges facing healthcare are real and here to stay. Across the world, the issue of not enough staff to treat the current and emerging population needing healthcare is real, and these issues will be sustained. It's not a post-COVID issue. We are never going to have enough staff to deliver healthcare, the way we do it today, especially as we're getting an increasing demand on that healthcare requirement. I recently heard the U.S. Assistant Defense Secretary, who's responsible for the health of all U.S. Defense personnel, which means he looks after about 7 million participants, which is about the size of Victoria and South Australia combined.
He is responsible also for the support in the digital rollout there. He spoke about digital health need to address two of the key challenges that face healthcare today, and that is for increasing efficiency of patients because of the staffing issue and in supporting new models of care ways of treating patients. This is exactly where Alcidion is focused. We look at the ways to increase the flow of patients by presenting information and data about what's holding up the process of discharge. What is it that patients are waiting for before they can actually return home? By providing solutions like e-noting that actually reduce the burden of administration and allow more time for care, and of course, by supporting new models of care, such as virtual care and what we've been doing at Sydney Local LHD.
I'm very proud of the impact the technology is making, and I look forward to taking it to more and more caregivers across the globe. Thank you for your time, and I'm very happy now to hand over and take your questions.
Thank you very much, Kate. We do have a few questions that have come in on the chat here and in advance on the email. I'm just gonna read them out. If anybody does want to ask a question, please use the Q&A button at the bottom of your screen. Okay. We noticed that you have given your customer names in your announcement. How will we be able to?
That is true, one of the removing the individual names is at a customer request. They do not wish to have the amounts of money or the contracts that they're signing necessarily publicized in such a way. Obviously, where we have a contractual disclosure requirement that is, you know, 10% of our revenue, so around three and a half million dollars TCV and more, we will of course announce those as required. What we're gonna do going forward on a quarterly basis is to identify additional new module sales and the value of those module sales and where they're landing from a geographical perspective. I think that will provide the information that is required whilst at the same time protecting the privacy of our customers.
All right. Thank you very much. How long do you expect the delays in procurement timelines to continue, and what will be the ongoing impact on EBITDA?
It is very difficult to say exactly what the timing will be. Obviously, as I said, staffing issues are difficult to say. What we have seen in the NHS in particular is the largest program of work of this kind ever. It's, you know, GBP 2 billion is being invested. It is across the country looking at different components that they need to build an EPR or full EPR procurement. There are processes that they need to go through, starting with the business case, moving into an RFI and RFP demonstrations and then through to contractual negotiation. You need staff at all phases. You certainly need them to complete the business case. We are seeing some of the delays as just purely about access, particularly at a time when a lot of staff striking.
We got opportunity at all stages of procurement process and more and more being released. To give you an indication of one of the more similar delays, we've just, you know, responded to one RFP that's probably 12 to 13 months behind what published frame was. They're all at different stages. There are. I certainly don't expect it to be 12 or 13 months before we start to see some of these contracts come through. I think it's obviously gonna be with us through the next 6 to 12 months. I don't think that's gonna have any impact on overall progression of Alcidion on the new EPR coming through different contracts, but also across other businesses as well.
All right. Thank you very much. okay. It says, "Can you speak to the strong pipeline? How do you measure your pipeline now compared to.
About the pipeline, very good incentive. Strongest pipeline can be made a number of ways. The three things I think that are important are overall value, and you would expect the pipeline value are and actually plan to be sort of near contracts in place that would have a significant impact in the overall. We have that. Also the number of opportunities. We have a significant increase in the number of opportunities, and quality of those opportunities in terms of their progression through the pipeline. Thirdly, and something that I think is extremely important is that we have those opportunities spread across not only EPR, the NHS, but virtual care opportunities. Opportunities for flow, and bed management, opportunities for smarter clinical communication. We have more city and more opportunities to go to market.
You cannot build a great. That's a measure. The strongest pipeline is both in quality and the breadth of opportunities.
Thanks very much. I think this one may be for you, Bec. Does management and the board have a drive and a commitment to achieving profitability?
Thanks, Hannah. Well, we've certainly declared that throughout this full year, and we certainly see the value to our shareholders in reaching that profitability. It certainly remains an important metric for us. As I said, Kate has been very transparent in communicating that at the start of this financial year. Absolutely the intention that we would be able to meet that if it's after a breakeven point and then going beyond that certainly remains a focus for the board. As Kate's outlined today, you know, we are at a point in time where timing obviously has a real impact in our ability to be able to convert some of the contracts that are in the advanced stages of negotiation this side of June 30.
Certainly the team is working really hard to get as many of those, locked in. You know, certainly our aim remains, to be, you know, a profitable, resilient, diverse business going into the new financial year.
All right, thanks very much. My final question, it said, "It's good to hear some of the good feedback from staff, but have you received any negative feedback at all? What is the process of improvement for those bugs?
My goodness. Because, you know, normally you would say, "Yes, of course." I genuinely have not heard about that from a user perspective. What I think we hear is what more can we do? What more how can we, you know, speed up pace of, you know, further development, moving into new areas? And certainly some of them being with the likes of the Victorian Health Agency around building command centres that allow them to manage the, not only the flow of patients, what's happening with their ambulances, what's happening with, from an operational perspective, bring that together into a centralized area. I think these are some of the areas we wanna continue to further develop feedback. There isn't a particular area where I say screaming out, say, you know, this is causing or issues.
It's more about how we can continue with the role.
Okay, thanks very much. Just want to follow on from a question a few times. It says, "For existing business, what does typical average contract timeline look like?
Don't actually have typical contract time. Although you can say historically contracts have been 3 years-5 years in terms of post-contract. If you're meaning what is the typical procurement cycle, again, that will be quite different depending on the size of the contract. You can understand for the EPR program in the NHS, instead of using the framework contracts, for example, which we've been on for a number of our products and has fed procurement, we wanted to make this a fairly even playing field for everybody, so that all EPR providers are getting the same opportunity to respond. As a result, that has lengthened those time frames. Where we've been able to speed up the process around things like selling Miya Observations or Miya Flow directly, sometimes see those procurements go 3 months-6 months.
These EPR program procurements at this stage are looking to be, you know, 6 month- 9 month type engagements.
Okay.
I haven't answered that because I wasn't sure if it was procurement or a contract that you were after.
That's okay. How is it and what is being done about this?
It depends on the contract that. I can't point to instances that we've lost in a head-to-head tender. We have been extremely successful, but not a lot of our business to date has actually been done by tender. It's done, some of it via this contract, if we're talking about the U.K. We have not lost in a head tender. We have had two customers that I can think of at the moment that have moved to implement as an EPR who had been using our Patientrack solution, one in the U.K. and one here. Because Epic requires their customers to implement predominantly or fully integrate all of their modules, we have in that instance seen Patientrack replaced.
I wouldn't call that necessarily losing to a competitor, and I haven't given up long term the fact that we can happily coexist with putting the Miya Precision platform on top of Epic as similarly as we do with Cerner in a number of sites around our geographies. The issue that we are talking about at the moment has got nothing to do with losing to competitors. It is purely about the timing.
All right. Thank you very much. What are your cash expectations for Q4?
I'll let Matt answer that one.
Thanks. Like case presentation, we made now from cash receipts quarter, for the year except to Q4 last year, where we picked up to AUD 14 million. It's a very confident in getting cash flow for Q4.
Thanks very much, Matt. I've got a few about the Australia and New Zealand market, so I'll combine these. It is, how are things progressing in Australia and New Zealand? Are there any current opportunities for digital management in retirement homes?
Yes, I'll answer that one second. So Australia and New Zealand, again, when I talk about PAC growth, that equals heard before about New Zealand being a bit of a dry well for us in the last 18 months while they have completely reorganized their system over there. I'm pleased that in this quarter we signed our first contract at a national level with Te Whatu Ora, which is the name of the one Health for New Zealand healthcare. That's fantastic. I hope that's an indication that activity and contracts in New Zealand will start to flow again. Having said Australia terms from a staffing perspective and kind of a bit of a post, what do we do after this kind of two years of activity?
We're very focused in Australia on virtual care and on patient flow and obviously challenges addressing both efficiency and new models of care. We were recently headlining a virtual care conference in the last week or two, presenting what we're doing within the Sydney Local Health District. And our work, of course, flow with Northern Beaches Hospital in Victoria about to go live a new version, starts to really solidify our referenceability market as well. Very pleased with the progress in Australia and New Zealand. Although again, it's possibly been slower than we would have anticipated due just purely to timing and staff.
Thanks so much. How is Alcidion going to take on larger contracts that seem to be held by the incumbents? What is the point of difference in the Miya software versus Epic or Cerner software?
Good question. In respect of I think I touched on it when I was talking about the feedback from South Tees. We position ourselves as a modular EPR. The speed to value is one of our differentiators, is that you can start to implement our modules very quickly and get response out of that. One of the things that came out of the South Tees absolutely fascinate and speaks to the staffing issue that we're seeing emerging in healthcare, is the limit of the small number of FTE that they have actually had to deploy to get to where they are. I understand that it's seen to be sort of a third of what some of those larger EPRs are actually requiring in the NHS.
As you marry staffing challenges with an ability to deploy more quickly and more readily, then the business case of what Alcidion is doing starts to become compelling in that market. I think that's a key differentiator. The other is the ease of use. Again, it comes out as feedback from South Tees. We have very much taken a user experience first approach to this. Our founder, always very focused on ensuring that we support clinical care and the way clinicians deliver it. I think that's gonna demonstrate increasingly as we deploy things like e-noting. I think also our key market is not to displace Cerner and Epic. We are in fact focused on winning those EPR opportunities that are more interested in maintaining the investment they've already made.
Not in certainly saying let's replace Cerner or Epic they've made. What we have demonstrated, and are continuing to do so is our ability to sit on top of Cerner and Epic and provide some of those better clinical workflows and clinician experiences on top of those existing platforms. That is, I think also a significant market opportunity for us.
All right. Thank you very much. I think another one here for you, Matt. It says, "Staff costs are approximately 72% of your revenue. Is there a point where staff costs come down or is it likely to continue to be a major expense?
One of my favorites, Beth, actually. Staff cost is 72% of revenue. It's something that we track and at 72% it's about as low as we've seen it in the past. Staff costs in total are not expected to come down. The relationship in staff cost and revenue though, should come down in the future and that goes to our efficiency as a business, being able to generate more revenue from less staff. No, the number won't come down. You know, we're not looking to cut back on staff. The goal is to grow the revenue and have the staff in place to deliver it.
I want to just add to that, you know, we are very focused on these being timing issues, and that it's important from referenceability perspective, that we are able to deliver contractual commitments to customer and have the staff base in place that has successfully deployed these contracts. If we were to reduce staff at this point, and then in two or three months time actually need to be moving into a phase, that would be very short-sighted of us. The only reason for us to cut costs and staff would be if we had no confidence in the future contract revenue for Alcidion in the U.K.
Okay. Thank you. This is kind of, linked to that question and it says, "How focused is Alcidion on cost control? Is anyone's job is to ensure there's no accidental wasteful spending?
Well, I think that's everybody's job, certainly in the senior leadership team and myself. We run a, what I would consider a very lean organization in respect of how we the sort of success that we've been able to distribute from customers' feedback. It is important to maintain cost and do maintain a focus on cost. Sign-off of all travel needs to come through me. Sign-off of all headcount needs to come through me. People cannot actually hire any people without it being in the budget. I think we're very focused on it across our whole organization. Having come from a privately owned company, before I came into Alcidion, I understand, you know, the importance of striking the right balance between cost control and ensuring that we can grow the business.
We are certainly in a way wasteful in what we do.
Okay. Thank you very much. I'd be interested to hear how much of our customization is rigid or required by customers once they.
We don't provide individual software customization, so one version of it, equally across all the customers in all our geographies. We don't even have separations for the U.K., Australia and New Zealand. We usually provide where possible tools. We're very focused on being in what's called a low-code environment so that the customers can actually build their own form in Miya Noting, in terms of the data that's being presented. We certainly do not do customization unless it's something that is going to be of value to the whole of the customer base and to deploy it across whole product.
Okay. A financial one here. Matt says, "AUD 5 million in delayed receipts too, didn't help give cash flows. Are there any disputes from invoicing?
I don't recall the AUD 5.6 million of delayed receipts in Q2. We did to the January. 'Cause around the AUD 1 billion last week nothing in Q3 and in Q4. I would normalize cash quarter. I think the AUD 5.6 million, That's not there. I don't recall that.
Thanks very much. What are you expecting your to recap?
I think we should just, as we did accordingly, humans to learn today, we are, you know, very confident that you support ongoing operations in terms of the cap rates.
Okay.
Operations.
Thanks so much. How is the implementation progressing?
It's progressing as planned. As anticipated, milestones are being met. I expect our things to go live for the whole of the next couple of months. It's.
Right. Okay, this one is from the same gentleman who asked about the client. He said, "Without discussing specific numbers, are you able to give out a percentage number of how much bigger the pipeline is this year versus the same time last year?
I don't have information at hand. I mean, we could but I have that information. It is significantly larger.
Okay. No problem. Thank you very much. Alcidion was able to integrate primary care electronically with the NHS.
Yeah.
All right. How long is the quick delivery time to meet the first revenue recognition milestone from the contract is signed, especially in the U.K.?
Typically very short because the first contract milestone is usually implementation of the software into our environment and customer access, and then usually, often within the month of the contract being signed.
Further to a previous question as well, if you've got a customer that uses an alternative provider such as Epic and you integrate into them, do you see that as an additional risk that you may lose the customer entirely?
I mean, obviously, it's a potential that we keep a mindful watch on. Typically, the people that buy Epic are the very large, health engagements, such as in the U.K., it's Cambridge, Manchester and some London sites already than the Cerner. And they're not typically the ones using Patientrack, although Manchester were. I see less of a risk. I think they're much more the current Patientrack sites are much more opportunities for us for the Alcidion platform from a modular perspective. However, it is worth noting that East Lancashire , which is about to go live with Cerner, which is part of the NHS Lanarkshire, have in fact required that Cerner integrate to Patientrack. They chose Patientrack. They weren't even an existing user of Patientrack. They chose Patientrack as their nursing, observations or Miya Observations and assessments module.
We are integrating to Cerner in that engagement and that is due to go live in June, and I think will be a brilliant ref.
Okay. The one, and I think it's related to this, it says, you mentioned South Tees early on, and it's a great example of the efficiency that Alcidion bring. Do other hospitals recognize this and are able to use South Tees or other sites as a reference to display the best?
Absolutely. I must say that all sites that South Tees have all said South Tees have been very positive. The reference visit was being held this week. In fact, the person who leads the EFIA program for the NHS, so I was very happy that he was there to see this positive feedback. We have a number of other sites, not just the South Tees, who act as reference sites for us as well, not only in the U.K., but through in Australia.
Okay. Also there's a clarification from an earlier question about the typical contract timeline. The it was referring to the average or typical length of contract rather than the procurement process.
On an average, say, five years.
Okay. We have one final question, and it says, "How do you see your solutions interfacing with and being efficient to aged care, hospital patient transfer and care loop?
Yeah. One that we're very mindful of and watching. One of the things, There's two key contributors to discharge blockage or bed block, where people are not being able to be discharged, apart from normal things that go on in a hospital, and that is waiting for aged care and waiting for NDIS care. The ability to integrate with some of the aged care providers and home care providers, and be able to see, streamline that move, that flow of patients from the hospital setting into those types of engagements, is excellent.
I think that the capacity to do that integration is there now long term, I also think that the virtual care or monitoring of patients, in the home could also potentially be extended into monitoring in aged care facilities where they do not always have the depth of clinical expertise that the hospital may have. I think there's lots of opportunities to better integrate what we're doing with the aged care sector.
Thanks for that, Kate. We have one final question. It says, "Have you released any guidance on the approximate revenue level you need in order to profitability?
I'm not releasing guidance. I suppose multiplying out the operating expenses by four would have been an indication of that.
All right. Thank you. That's all the questions for today. If anybody else does have a question, please send us an email. We'll come back to you as soon as we possibly can. Kate, do you have any final remarks before we close?
Other than to thank my fellow colleagues on the call for attending today. To thank you, shareholders for your continued support. I remain open to respond to any questions that you have. I hope we've been able to address those appropriately today. Thank you for your continued interest and support of Alcidion.
Thanks very much, Kate. Thank you everybody for joining us this morning. Bye-bye.