Hey folks, thank you so much for joining our next session. We have the Veradigm team, and we have the full team here today to go through and tell us more here at the Barclays Global Healthcare Conference. We have Dr. Shih-Yin Ho, who's the Interim CEO. We have Lee Westerfield, who's going to give a very brief disclosure statement. And we have Will Manidis, who's brand new, and he is the co-founder and CEO of ScienceIO, the acquisition they just made. Lee, take it away with the disclosure.
Thank you, Stephanie. And thank you all for joining. I'm Lee Westerfield, Interim CFO. Shortly we'll start with a fireside chat with Dr. Yin Ho and Will Manidis, then in about 15 minutes I will turn to the podium to make remarks about our financials. First, a disclaimer: we'll be making forward-looking statements during the presentation and the Q&A. These statements are based on current expectations and involve a number of risks and uncertainties that could cause our actual performance to vary materially. We undertake no obligation to revise these forward statements. With more information or future events, please refer to our press release and SEC filings for more information regarding risk factors that may affect our performance.
Thank you much. Let's level set the backdrop.
Sure.
It's been a weird year.
It has been.
It's been a weird year. But you're, you're in the seat now, and you have seen some pickups in the financial restatements process. You have seen a delisting. Could you give us just some quick color about the progress that's been made, what's left to go, and, and if a relisting is the goal?
Here's our goal: is to go for a relisting. Yes, we did relist a few weeks ago. But because we missed the deadline on our restatements, it's an ongoing process we don't have full control over because we have an audit process going on. But we fully are working very hard to get back to a relist. I don't know if Lee has anything he'd like to add.
I'll make some remarks in a few minutes on the relisting effort, but it's constructive and underway.
All right. Well, Will, you're new to the stage. I don't think the audience has had any opportunity to hear from you before. Can you tell us a little bit more about kind of your path here?
Sure, totally. I started my career at Foundation Medicine, that is, cancer diagnostics company. It was commercializing the data assets that Flatiron Health originated through their OncoEMR products. And so we took genomics information, we took clinical information, we merged those together and sold them to Pharma. That was an incredible business. I am so grateful to have learned there. And we scaled that from zero to $hundreds of millions in revenue in a very short amount of time. The fundamental flaw in that business is the huge amount of human labor it took to go from the messy, unstructured notes that doctors generate to high-quality, real-world information that's ready to go for a Pharma analysis.
When we sold to Roche in 2018, 2019, I made the decision to walk away alongside my co-founder to start a company focused on building safe, large language models that can take unstructured healthcare information, structure it, and get it ready for real-world evidence analysis. We were deep on that journey when Veradigm approached us, and we found the mutual opportunity of working on the Veradigm data set too much to. We couldn't turn it down.
When I look at your history, I see someone who's founded a few different companies. Can you tell me pitch to us why you think you're a Veradigm person longer term?
I mean, Veradigm's been a resounding moment, right? It's a fundamental reorientation of the company around its data assets, right? This is an old company. We have been in market in with mature products across payer, provider, and life sciences, but we've never oriented around products before, right? The ability to come into Veradigm and start this new business unit in our AI center of excellence, build high-quality data assets that can be sold to Pharma, touching markets we've never touched before, very much a zero-to-one motion. And that's what attracted me to it.
To be transparent, the market has been a little bit more mixed on their views of the acquisition, right? So I'd be, I'd be curious on your take because you guys have been so enthusiastic about the deal, and you even talked about how the board's on board, and, you know, all three of you are very jazzed about it. Tell me what we're missing.
This is actually a really great moment. This is a really pivotal moment if you think about it. We are sitting on the largest, richest data set, clinical data set representing over 209 million patients. We have data rights that go far back that allow us to be able to do work on this data. And more importantly, we're actually the only organization that owns our own large language model, our own LLM, because of this acquisition. It's giving us full control over the way we teach that model. And because of how we can teach the model, train the model, and on our own data, we have the ability to create much more accurate information, much more research-ready information. And from our perspective, it actually creates a competitive advantage for us. It's really quite exciting.
It allows us also to reorient us a little bit, what Will was saying, reorient the organization completely around data. By reorienting around data and data capture, we not only get to support the customers that we have, we have the ability to support our customers in even ways that maybe they may not have realized. We can also use these large language models to support their user experience while at the same time actually enriching the data that we have, that we can actually generate structured products from and that are very useful for real-world evidence research and even eventually for clinical research.
Now, I'm probably the dumbest person on the stage, so explain with cycle 5. You don't have a revenue model yet.
We do have a revenue model.
Huh.
Yeah.
ScienceIO.
We'll have products in market this year.
This year.
We're already preselling this year.
Can you tell me about the preselling, or tell me about the revenue model, or the deployments in your partner clients so we can at least have some broad strokes of what this looks like?
We're already beginning to have conversations with biopharma companies. We're already having conversations about the fact that we're sitting on the most diverse data, that really represents American health because of our footprint. We actually don't just cover sort of centers of excellence or areas where there's high concentration of people. We actually cover rural areas. We cover areas with a great deal of diversity. And that data's probably the most useful data that everybody wants. The FDA has been pushing for diversity. Pharma companies have also been needing to find this information. We're about to structure it up in a way that's actually useful for, ready for analysis, whether that is for a real-world data analysis or real-world evidence analysis, whether that's an external control arm.
There are many different things that they can possibly use this information for, but we can also tailor it and do it very quickly. I think that's what makes this very exciting.
I would add the excitement we're seeing from Pharma is incredible, right? Like, real-world data has really plateaued outside of oncology because of the incredible cost it takes to prepare these data sets. Oncology is a very narrow slice of the whole pie of health. We can scalably originate data sets for any disease area that's covered in our patient population. For Pharma, that means dozens of things that would block them historically, from speed of analysis to speed to enroll to increase the cognitive diversity and recruitment. All that's been taken away with a product that previously was unpurchasable.
There are numbers, folks, in the room.
Yeah.
Is there any broad strokes you can give us on how you're pricing for this, how many initial conversations are told again for signing, and can you decide the revenue opportunity?
Maybe the way I can answer that question is the fact of how do you do a data sale. So when you do a novel data sale, they usually begin with a few pilots. But what's more important is you aim to be able to provide consistency of that data, like a pipe. And when you do it that way, you go for long-term subscription, recurring revenue type of contracts. And so you don't go for just a year. You go for several years in a row. And again, a large part of it is because you take a research orientation around it and about what you want to track over time. And so you use that in the way of scoping an offering into the marketplace.
I would also just add a unique distinction here is our ability to sell multiple products within both pharma companies. It's not like we're just an oncology data provider or just a cards data provider. If you look at our patient population, it mirrors the totality of what's happening in pipelines today, which means you can imagine a world where you're selling multiple SKUs at premium pricing to a single development organization inside of Pharma. And that's exactly what you need.
Let me try asking this another way. Is there some metric you will hold yourself to to sell and measure success for this deal in the first year?
Yes. We will be talking about hybrid, about when we're out there with customers, talking about what's possible, about sort of the responsibility of using large language models in the way that we have to produce the kind of data accuracy that they're looking for. There's a lot of interesting conferences that we will be speaking at. We will have product out this year.
When will we start seeing more consistent revenue streams? I think you'll look into the next year, into 2025. You'll start seeing this largely because revenue is a lagging indicator. A large part of what the excitement you'll see in the front comes from people wanting to experiment with us, with people who will, with companies who will want to publish with us, talk about what they're basically finding. I think that is really going to be more the mark of where things are going to be picking up. And then you'll sort of start to see that excitement, and that excitement will start to translate. It may be also by the end of the year we can also show some books. That may be another way to look at it.
Now, Leah, I know I promised you some time for your slides when we have 10 minutes in. Go. You're up.
Okay. As you learned.
We made some announcements this morning. We weren't able to publish on it because of.
Want to speak to those now?
Yeah. Let's hear about the announcements. Tell us what's going on with guidance.
Thank you very much. Well, as many of you will have read most of these in 8-K filings this morning. We released guidance for 2024. I'm going to walk you through our outlook on the coming year. But for Veradigm, we see 2024 as a year to reset, reinvest, and renew our growth. Over the next 10 minutes, I'll share with you three topics that are our assessment of ourselves, of the current state, where we're investing, and guidance. I do want to make one further important commitment to you all. We aim to reestablish your confidence in Veradigm. Our intention is to come forward to you on a regular basis, even as we work through the audit filing issues, and return to you with regularity, business updates, financial performance, reporting, to the extent that can be permissible.
I aim to keep you informed, and we aim to keep you in front of you: sort of self-assessment, the state of Veradigm. Situationally, we have been delisted. We remain public. MDRX trades OTC on the expert desk. We are on the road towards a relisting on NASDAQ. Our audit is prolonged. About timing, the question many will ask are asking by when. What I'll say on this topic is our auditor and my accounting team and professionals alongside are working cooperatively and diligently with our auditor. The activity that is, is in review spent multiple years. It's a significant scope to test and respond thoughtfully. We entered into the listing healthy by most standards. We are the rare exception for a delisted name with healthy fundamentals. When I look at our profile, I want to highlight four points. We carry ample liquidity.
Our internally available sources of net cash stand at $140 million approximately. We have ample cash on hand, for those that are closely watching if we need to repay our convertible bonds. Continued, as I say, carry net cash of $140. We remain consistently profitable on an EBITDA and free cash basis. In EHR, we retain scale advantages that are quite stabilizing to our recurring revenue and strategically our advantageous data, which Will and Jenny have been speaking about. It's internally and network sourced. And this crucial point, in effect, we are paid to collect and capture health data, the health data that supplies our data intelligence growth opportunities reinvestment in 2024 and future growth. Thank you. 2024, as I mentioned, will be an investment year. Investments are focused on in two primary areas, in growth and foundational strength. First, on growth and profitability.
The initiatives planned this year canvass all three of our market pillars with new and improved products. For provider, we're modernizing our EHR focused on cloud deployment, internally named Project vNext. For payers, new payer gap closure offerings under the brand internally of Project Firebird will be deployed in the second half of the year. We will add new Veradigm Payer Insights and Life Sciences' new AI data intelligence. The impact, the impact will potentially drive revenue and margin expansion lastingly over time. While I look at our foundational initiatives, these are a second set of initiatives for investment this year. These intend to stabilize our audits and reporting, sharpen the forecasting at all levels within our business operations, enhance sales productivity, and most of all, simplify the complexities of our customer experience. It's under a brand of internally branded as Project Atlas.
What, in fact, are we doing? We're implementing new information systems company-wide, centrally, and most importantly, with a new centralized ERP coupled with end-to-end process change in 'cash'. This is important. The impact is potentially pronounced. We anticipate gains in productivity, especially in the area of simplifying contract management. Guidance and outlook, last but importantly. Our guidance for 2024 and then our outlook out through 2026. About revenue, on a GAAP basis, we see 2024 in the range between $620 million and $635 million. That's up, modestly up, by 1%-3% from midpoint for earlier 2023 estimates. Drilling into the business segment. So provider segment, we see that business holding flat in revenue year-on-year. Well, payer and Life Sciences are rising in the upper single- to low double-digit range.
Drilling a little further into the provider business and its financial planning, we anticipate that the recent churn will be more than offset by a ramp-up of Practice Fusion's revenue cycle services and by the recent purchase of CoHealth. Meanwhile, the growth areas of payer and Life Sciences arise from payers' clinical data exchange and from Veradigm Payer Insights. And the outlook, 2026, acceleration in revenue growth, approximately a 10% acceleration from the 1%-2% range. We've just 1%-3% range we've just discussed. And the three drivers behind that are all fused by AI, AI data intelligence driving real-world data in Life Sciences, AI improving further modernization in EHR for providers, and also value-based care elements for payers. All of that growth profitability. Our Adjusted EBITDA in 2024, we again see here in a range of $104 million-$113 million.
At the midpoint, that's a margin of 17%. That, that itself is down year-on-year. So that merits explanation. I've been speaking about our investment initiatives. Inside of those investment initiatives is a temporary OPEX that collectively subtracts 2% from our margin, EBITDA margin, as estimated this year. We expect that temporary OPEX bonus to unwind during the fourth quarter. And that sets the stage for 2025 and beyond to see margin recovery and expansion. And what about that expansion out to 2026? We are anticipating potential to add 3-5 percentage points to our adjusted EBITDA margin from this year's level. And that strikes me as conservative in this important regard because that 3%-5%, including the recovery of the 2% from the temporary OPEX bonus.
Remainder, that is to say, additional margin expansion out to the year 2026, is derived out of the collective advancements in AI data intelligence revenue models. Those sorts of models are much higher margin than our base businesses. In summary, we stand on a solid bedrock of net cash, uniquely internally sourced health data. In a year where investing in critical areas for growth and foundational systems set the stage for productivity and margin expansion. We anticipate in near future years accelerating revenue growth, lasting margin expansion, each again lifted by AI data intelligence applied in health technology markets. Thank you.
I've got some questions on that. So let's move that slide up. You have 2024 Adjusted EBITDA. It includes $12 million of that temporary OPEX, but $50 million below consensus. Can you help us bridge that?
Well, I can't speak for the consensus, which I have if I've been closely observing, has not really been strictly formed over the last couple of months, while we've been in radio silence with investors other than speaking at J.P. Morgan. But I can speak to the change year-on-year from 2023 to 2024. The $12 million, as you're referring to on the slide, constitutes the 2% I've been referring to as temporary bonus of OPEX expenses. That is comprised of two important areas. One is, staffing augmentation in our accounting in order to be able to set the stage, foundational strength, return with consistent audit and reporting performance. And secondly, the OPEX portion of Project Atlas, implementation of these systems. Additionally, we have acquired ScienceIO. And we have, other areas of routine expense expansion in 2024.
So even if we added that back, I guess we do, it'd still be, like, a high teens margin profile, right, like for like?
That's accurate. Yes. Yes. We would do 17% after all of the investment activity, 19% will normalized, and anticipate margin expansion in future.
So is all the margin compression ScienceIO plus investment that we just haven't been kept up to date with?
There are offsets, correct. There are offsetting costs, productivity and cost savings that have been woven into our budget for this year as well.
All right. We have time for maybe two questions left. Let me, let me go on that. So how are you dual tracking making these investments while also maybe shoring up your financial position and your reporting stuff?
Well, we wouldn't be able to do it without forecasting a strong net cash position and profitability. So you begin with the profile of the economic model that we stand with today. Net cash is a better place than net debt. And that net cash is more than ample for our needs. The second is focusing on areas where our product development and coupling with go-to-market across all three pillars, Jenny and Will have been discussing that for a bit, is one track facing the customer. Meanwhile, the corporate track focuses on the remediation of the audit and implementation of centralized ERP.
So tell me how you're splitting up your usual time?
Things on offense. I'm on defense.
That's a good way of putting it. So a large part of my time is spent tremendously on where our customers what they need and what they're looking for, also on the idea of us basically going forward and bringing a lot of our AI capabilities and fusing them into our organization. There is a bit of integration that we have to do. But more importantly, we also want to put out a set of really exciting health intelligence products this year. So that's a large part of my time spent in that direction.
With that in mind, so you're talking to a lot of new clients. You're trying to feel out what the products could be in the market. For your new sales positioning, how important is it to be a standalone public company?
I think that it's actually a good thing that we're a standalone public company. If you think about it, our ability to reach more people is there. It's also people we're also the only EHR vendor who's actually out there as a public company. And what's really exciting about that is we're about to transform in front of everyone too into something really exciting because we are not only EHR. We have also covered payers. We cover Life Sciences. We now also have our own LLMs so we can produce health intelligence products. So now we're sort of shifting in this direction. I just think that's probably something we can do quite well.
All right. That's really all the time we have. Thank you so much.
Thank you.
I appreciate you coming out.
Thank you so much, Stephanie.
Thank you very much.