Oneview Healthcare PLC

Good afternoon and welcome to the OneView Healthcare H1 2020 interim results webinar. On the line we have OneView CEO James Fitter to begin today's presentation. If you have any questions, please leave them in the Q&A function located at the base of your screen. All questions will be addressed at the conclusion of the call. I'd now like to hand over to James to begin today's presentation.

Thanks, Greg, and good morning to everyone joining in Europe and good afternoon to everyone joining in Australia. I hope you're well. Joining me here this morning in Dublin is Helena Darcy, who is our interim chief financial officer, whilst John Kelly is on medical leave, and Niall O'Neill, chief strategy officer and director of product. Thanks very much for your time this morning. So let me just talk through the agenda this morning. We've got a number of people on the call who are new to the company, so we're just going to spend a couple of minutes just reminding everyone what our solution and business model looks like. We'll then get into the company update, operational and financial performance, how recent developments are affecting our strategy and outlook, and then of course the summary financial statements. So in terms of our solutions, our vision, as I think most of you know, I think this kind of speaks for itself, is to power personalized exemplary care experiences. And this has never been more important. Obviously the pressure that healthcare workers have been under as a result of the pandemic means that any technology solution really has to be focused on providing an exemplary care experience for those that are caring for patients. So the way we think about the problems we're solving, we're obviously very focused on patients, families and care teams, all of whom need a better experience. We need to see that technology is seamless, it's providing the tools to enable more effective delivery of care. IT teams obviously want technology that's built for the enterprise, reliable, flexible and scalable. We've done an awful lot of work over the last couple of years to make sure that we are capable of delivering to the very demanding needs of some of the most sophisticated healthcare systems in the world. And to that end, we're very privileged to count amongst our clientele three of the top 20 recently rated hospital systems in the United States and in Australia, some of the highest profile providers in the Australian market. So when we think about our solution, I just want to start at the base of this chart and work upwards, but obviously we are a care experience platform. To date, all of our customers globally have deployed our solution on-premise. And whilst that's worked extremely well to date and obviously has been really a choice of our customers, the pandemic has really exposed the benefits of cloud and We, as I think most of you know in this call, have begun the journey through what we call Cloud Start. We're going to talk a little bit about today is how we're thinking about moving forward to deliver our full platform through a cloud solution. Sitting on top of the platform, we develop our own apps known as our clinical apps team. And that team is based in Australia and focused very much on the Australian market. And this really provides access for care teams for our Australian customers to manage a lot of their workflow on the OneView platform. And in the most pronounced example in Australia, our largest Australian customer hosts over 19,000 daily logins a year on the OneView platform. So I think that gives you some sense of how ingrained we are in their models of care and how important we are in terms of delivering that. And then, of course, the transition to Android, which has really consumed us for most of the last two years, is allowing us to host third party apps and content on the platform. And that, of course, gives all of our customers the ability to really leverage the power of the platform in the room. So just a couple of visuals. I think most of you will be familiar with the personalization for patients. This is a sense that the UI Importantly, the UI can be branded in enterprise settings. For example, we can have a different look and feel within a system. For example, at BJC in St. Louis, we have a very different look and feel for their children's hospital than we do for their adult acute hospitals. And engaging and informing patients is obviously very, very critical. Being able to provide notifications is an important part of the care journey. As far as the care team's concerned, on the right-hand side, you can see the dashboard for our clinical apps, which obviously uses a red, amber, green traffic light system to alert the care team as to tasks that are outstanding or open. And on the left-hand side, we're just showing for the first time a preview of what we're calling our self-service data platform, which is allowing customers to get real-time information around utilization of the system. And whilst the customer has been anonymized in this case, this is actually real data for one of our American customers showing the very significant increase in meal order usage in the bottom middle chart. You can see the growth in meals being ordered online. This functionality is going to allow customers to utilize the data platform, which is hosted in the cloud, to provide detailed analysis by hospital, by ward, by meal type in this case, and obviously break that down on a monthly basis. So we've spent an awful lot of time trying to make sure that we're providing operational insights and very proud of the work that's gone on in terms of providing that information going forward. Our business model is a subscription-based software model, which is a price per bed per day. We're obviously providing proprietary hardware at this time, and that's been a a challenge for the business to get to where we are today, but it's a very important step forward because sadly, Android is really built for the consumer, not for the enterprise, but we've been able to identify two very important partners that are helping us navigate. We'll talk a bit more about that going forward. Our contracts are typically three to five years. And obviously once we're within the enterprise, we obviously have important jobs to work with our partners to deliver further value and upsell the platform moving forward. As I think we've shared in the past, market penetration, the market is still low, estimated by HIMSS analytics in the States is still being less than 20% of US hospital beds. So just turning to the first half results, So the key highlights are that we have continued to expand our live footprint with live beds up 30% year over year to just over 9,000 live beds. We still have just under 2,000 beds that are contracted not yet installed. We'll talk about the path of those shortly. Recurrent revenue is up 21%, so slightly lagging the beds as they go live. Obviously there's a slight delay in the revenue recognition. And we also had a short term impact to total revenue due to some projects that were delayed in the second quarter. Importantly, we do, however, have very good visibility around the rest of the year. And we're guiding that total revenue growth will be in the range of 40 to 50% higher in the second half as recent contract signings and currently project work is delivered between now and December. We're seeing improved operational performance metrics. We've reduced our cash-burning cost bases, as you all know, and we've seen no material impact on churn. We've seen very significant progress on our product development program, which we'll talk about shortly. And the investment in our next generation platform is starting to deliver meaningful results, and particularly for a number of customers that have been able to demonstrate a very marked improvement in our support model. as we've moved to the microservices architecture, which was obviously a key tenet of that program. So operating expenses, as you'll see on the right, are down 38% year over year. So let's just talk about the impact of COVID-19. Obviously, sales momentum and implementations have been negatively impacted. We had some supply chain delays associated with the new hardware coming out of China, which has obviously delayed delivery of that to market by between three and six months. And healthcare systems were obviously fully focused on delivery of care rather than investing on new IT projects. And I think that's a perfectly understandable scenario. From a BAU point of view, we've had a seamless transition to remote working, which we're very pleased with. So business continuity hasn't been a problem. I think one of the real highlights was how we could work with existing customers to enhance their capabilities on the platform. So our position has really been to reach out to all of them and say, you know, how can we better leverage the technology you have in the room to protect your staff and provide virtual rounding and virtual care. We've been able to do that almost universally across the platform, which has been extremely well received by our customer base. And I think now obviously different parts of the world are in different stages of the pandemic, but it's very clear to us that this whole episode is forced healthcare systems to think about their models of care and how can we use telehealth more effectively. And I think it's, from our perspective, we see this as a seminal moment where having technology in a room is much more valuable in the new world than it was previously. Just in terms of recent successes, we've had new contract wins with the Central Acute Services Building, which is a new development between Westmead Children's and Westmead's Adults Hospital in Sydney. We've had contract renewals at UCSF Mission Bay in the University of Iowa, and importantly at Epworth Healthcare. We signed the Oklahoma University Hospital, a new logo for us in the United States. And importantly, although while small, we've received our first purchase order from New South Wales Health for our cloud solution. And that is very encouraging, which we'll talk about a little bit more shortly. So just drilling slightly deeper into the numbers, recurring revenue, we've seen growth of 21%, as I mentioned, year over year. We have seen some impact, as I mentioned, in terms of delays to deployments where hospitals, unsurprisingly, are restricting access for healthcare IT vendors to hospital facilities. We are seeing a higher margin revenue mix, so gross profit margins have improved to 70% and a half from 54% in the previous corresponding period, reflecting that higher proportion of software revenue. As I mentioned earlier, we've seen a very significant change in our cost base, improving our EBITDA loss for the year by nearly 49%. And reduced cash burn are obviously reflecting that in the first half of this year and the first quarter of this year, we were still carrying the cost of our aged care engineering platform and also the redundancies that were associated with that. And as I mentioned earlier, in terms of revenue diversification, we're now live across 55 hospitals across four countries. Next slide, page 16, is just showing the growth in annualized recurring revenue through time, so obviously a steadily improving trend there. On the cost side, we have refocused on our core revenue generating product, We've made a very successful diversification of our engineering resources. We began a program last October to expand into Kiev in the Ukraine. Police report that's gone extremely well. It's given us a number of benefits, the primary one being that the talent pool is just much broader and much deeper in the Ukraine. We're in a very competitive environment here in Ireland. We continue to see US multinationals investing in Ireland. Most recently, Amazon have announced they're hiring another thousand IT professionals in Dublin. That obviously puts pricing pressure in the Dublin market. It leads to scarce resources, and they're paying salaries that we're unable to compete with. So I think we're really pleased with the results to date, and I think that's been an important step forward for the company. Our headcount is now down 60% from peak, but 40% as a result of the reorganisation that we previously announced earlier this year. In terms of business pipeline, this will be a chart that you're familiar with. You can see at the bottom of the chart that the live beds number has grown considerably to 9,068. That number would have been higher, not to the impact of COVID, obviously. We have another nearly 1,800 beds still to deliver under existing contracts. And as we've spoken about before, the expansion opportunities, the 6,679 beds, those are beds with existing U.S. customers that we're not currently contracted with, but obviously are primarily, I should stress, are beds that are COAX-enabled. So the delivery of the COAX set-top box is going to dramatically expand our opportunity to do business, not just with existing customers, but with the market in general. And by most estimates, Neil, Nearly 60% of US hospitals are still Co-Ex enabled. In terms of our strategy going forward, it's really about making it faster, easier, lower cost for our customers to implement. If I think back to our early generation Windows platform, when we look at the hardware and licensing costs associated with that, we've made enormous leaps forward already with Android And the transition now to cloud is going to take even further pressure off and dramatically reduce total cost of ownership by, we estimate, close to 30%. We'll obviously continue to make our platform more valuable by enhancing the value proposition. We're going to talk a bit about some of our partnerships around virtual care. We see that reducing the sales cycle and providing opportunities for upsell. And in terms of operational complexity, as I mentioned earlier, As we transition to our next generation platform on Android, we're seeing a much more stable architecture and much lower support burden for our customers. So just dive a little bit deeper into the cloud solution and its genesis. Obviously, we heard immediately from customers that access to hospitals was going to be challenging, that staff weren't going to be able to get access to site. that we would be unable to deploy on-prem software updates and we needed to get to a sort of remote management solution. So we worked very quickly and collaboratively with NYU to develop a product that we could deploy out of the box. And for those of you who had the time to hear the feedback, we've really, I think our partnership with NYU has moved to a new level. For those of you who had a chance, there's a link to the recent webinar that Mike Manero from NYU provided some first-hand feedback on the solution. And this really accelerated, demonstrated our ability to move quickly, solve the urgent needs of our customers, and again, I'll defer to Mike for the feedback on that. So that's obviously given us the prompts to think about how do we migrate our entire platform to a cloud solution, so what we've delivered to date, is what we're calling Cloud Start, which is available today. It's on Android tablets. It's not integrated with EHR. It's associated with a particular room. It provides the ability for us to host enterprise apps such as Zoom or Microsoft Teams, Cisco Jabber, which allows the care team to communicate directly with the patient in a given room. But now we're moving to a more exciting phase of that project where we can expand that integration to the television, the all-in-one through the WeTech set-top box, which is cloud advanced and ultimately we want to get to full integration with EMR where we can provide the same level of functionality that we're providing on premises today, providing integration into educational content where we actually are able to personalize the experience for the individual in that room. So very important step forward. What we're hearing and seeing from our customers around the world is that obviously as elective surgery has been canceled, they're under intense financial pressure. We're already seeing a downsizing of IT resources at some of our customer sites. So moving to a fully hosted solution is going to take pressure off them not just in terms of the outside-the-room infrastructure they require, but also the burden on IT staff for our customers. So this is just a bit of a refresher on the new generation devices. On the top right-hand side, you can see the all-in-one device, which we're developing with Social Mobile, which will be the first and, to our knowledge, the only 22-inch GMS-certified device of its kind in the world that is a healthcare-grade device. And that is scheduled for delivery just before Christmas of this year and will be ready for deployment to customers in the first quarter of 2021. And the set-up box is the fruits of our partnership with WeTech in Portugal, where we've just completed the testing phase for the IPTV version of that device. We've already placed an order for 2,000 of those based on existing demand we have from existing customers. We'll be deploying the first of those in September, October this year at UCSF, at Oklahoma University, and for an Australian customer as well. So very excited about that partnership. And the second iteration of that is the co-ops device, which is going to unlock those expansion opportunities, which is scheduled for delivery in February. As I mentioned, partnerships are obviously something that we see a great opportunity to leverage our very privileged position at the patient's bedside. And we've been working for nearly the last two years with folks from Caregility, very impressive organization in New Jersey in the United States, where they are able to provide an end-to-end healthcare specific iConsult app initially on the tablet but soon to be on the television as well. We see great synergy between our organizations. We have really enjoyed getting to know them and we think the value they can bring around virtual sitting where they're deploying pan and zoom cameras in patient rooms gives us a great platform to expand the capabilities for our customers, but also to get to know some of their customer base as well. So a very important step forward for us in terms of the US market. As I mentioned, we're obviously transitioning our customer base. We have a number of customers still, a very large number, 68% still on our Gen 2 legacy infrastructure. We're in the process of migrating all of them to Gen 3. And as I mentioned earlier, we've been able to see very tangible benefits in terms of the support metal. Most importantly, the hardware burden is 60 to 70% less than it was when they first deployed the system on Windows. So we've been able to address that and I think provide much more stable and open platform for our customers going forward. So finally, just on the second half outlook, as we mentioned, we've got scheduled projects that are pointing to revenue growth of between 40 to 50% in the second half of this year versus the first half. We're obviously continuing to examine the cost base with the determination to more closely align our fixed costs with our expected recurring revenues in 2021. That's an ongoing journey and obviously we've been through a significant reduction in force to date. I just want to say a very huge thank you to all of our staff, many of whom have obviously been carrying a lot more burden than they were prior to the reorganisation. But I'm incredibly proud of the way they responded and delighted to see the progress that we've made as a company during this difficult time. The delivery of the WeTech set-top box is obviously going to enable that expansion business that I referred to. Transition to cloud we see is absolutely key driver of shortening the sales cycle. I think everyone understands how challenging the sales cycle is in enterprise healthcare. We are really encouraged by the feedback we're having around our cloud product. We're encouraged by the conversations we're having with our major customers, many of whom are also accelerating their own journey to cloud. So I think there's a very strong synergy between our ambitions and our customers' ambitions. And most importantly, I think we feel like we're really positioned to deliver innovation at scale as we move forward. And we unsurprisingly are working with our financial advisors in Australia and the United States as we foreshadowed in the 4C to strengthen the balance sheet. And we look forward to being in a position to update the market on that in the very near future. So I'll just jump through to the financial statements. I don't think we need to go into too much detail. I think most of them are covered in the operational highlights, but I just draw your attention to detailed income statement, balance sheet and cash flow that are at the conclusion of the document. And with that, Greg, I might pass it back to you to see if we have any questions.

Thank you, James. If there are any questions, could attendees please put them into the Q&A function on the bottom of the screen and the presenters will address them. Again, if there are any questions from any attendees, if they could put them into the Q&A function and our panelists will address them. James, if there's no questions at this time, I'd like just to hand back to you, maybe to close the meeting.

Thanks, Greg. And look, please feel free to email any questions if you have any follow-up. Thank you all for your time, much appreciated, and we look forward to speaking to you again shortly.