Oneview Healthcare PLC

Thank you for standing by and welcome to the OneView Healthcare full year 2020 preliminary results announcement. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the ask a question box. I would now like to hand the conference over to Mr. James Stepper, CEO. Please go ahead.

Thank you, Ashley, and good morning to everybody in Australia. Good evening to those joining here in Europe. I'm joined here in our data office by Arnina Darcy, our Acting Interim CFO, and Marla O'Neill, who's our Chief Strategy Officer. Thanks very much for your time this morning. I'd just like to draw your attention as a way to the legal disclaimer at the front of the presentation. And I'm cautious that we have a number of people who are new to the company joining us for the first time today. But let's talk briefly about our vision, which obviously inspires us and our customers. Our vision is to power personalized exemplary care experiences. And having been doing this with some of the leading hospitals in the world for nearly a dozen years now, I think that us and our customers understand that putting world-class technology in the hands of their patients only works if the technology is designed with the care team in mind. And the OneView platform not only personalises the hospital visits to the patients, but provides real-time contacts to the care team and liberates them to focus on delivering world-class care. And never has that been more apparent than in the past four months as our care teams have obviously been under extraordinary stress during the pandemic. In terms of agenda today, I'm going to talk about the year in review for 2020. I'm going to pass across to Niall, who's going to speak to our strategy and vision that he's been so instrumental in driving for many years now, but obviously 2021 is a very important year for the business. Helene is going to talk through financial results and concerns, and then I'll come back and talk a little about the outlook for 2021. So this is a quote. I could have picked any number of quotes along this line, but this one says that the COVID-19 pandemic has put the healthcare industry through the wringer. It's required new ways of working, new methods of communication, new solutions to our problems, and innovative solutions to new problems. And I think that's particularly true. It's been a long time coming, and I think countless other industry entitles have described the pandemic as a watershed moment for the industry that's really going to start to unlock much of the innovation and nurture that has really played the industry. And we believe this new focus on virtual mode of repair is going to help us cross this chasm between nice-to-have technology and must-have technology. And we certainly heard that firsthand from our customers this year who were extremely grateful that they had our platform installed. Not quite here because we've transitioned through the next slide from the folks at Gartner talking about the proportion of IT spending that is migrating to the cloud. The healthcare industry in general has been slow to adopt the cloud. But again, I think you're going to hear from many industry experts that that is in the process of changing and changing quite dramatically. So 2020 was a positive change across all the vaccine metrics. We had 9% growth in live beds. We had 13% growth in recurring revenue. In other words, we actually got our operating expenses down 44% year-over-year following the reorganization that took place in February last year. It's really been a 30-year consolidation. The revenue growth was slowed, obviously, by the impact of the pandemic, which we'll talk about in a second. But of course, I've been a challenge for us to really focus our energies on product development, investing in our next generation platform, some very significant progress, improvements in engineering, which we'll talk about in a second. And of course, it gave us the inspiration to launch our cloud for COVID in April 2019, which has really proved the foundation of the transition that's going on in the business today. So in terms of financial highlights, as I mentioned, recurring revenue is up to $5.1 million. Exit run rate at the end of December was $5.5 million. As I mentioned, we've had some demurries to losing access to hospital sites, both in Australia and the United States, but obviously more prevalent in the United States. That's starting to soar a little now. We have teams on the ground, for example, in California, A couple of hospitals in the US this week have shown some signs of getting back to business. Incidentally, we've reported a high gross margin of 67% this year versus 60% last year due to the change in revenue mix. Obviously, we earned less gross margin on our hardware and installation services and very attractive margins on our software. It would be very pleasing to see that trend. And as I mentioned earlier, we've seen really a laser-like focus on cost control. We've put our optics down across the board and used every available opportunity to do that. And that's had the effect of reducing our cash flow materially. In terms of technology and delivery, we've been through a really significant change in our technology leadership. in August 2019 when our former CTO moved on. And we were blessed to hire two low-cost technology leaders in J.P. Howe, who's our director of engineering, and Declan Bright, who's our lead architect. And they really presided over a very dramatic transition in our engineering processes and capabilities. And J.P., Declan, and I have really been the inspiration and driving force behind our strategy for the transition across the cloud, which is really starting to reap significant benefits. The guys have also embarked on an offshoring project which is delivering great results. They're very fortunate to have a rich talent pool of engineering here in the Dublin market by virtue of the fact that so many US tech companies count Dublin as their European headquarters and that's created a very strong ecosystem of engineering. And that is both a blessing and a curse because the competition for talent is very, very intense and certainly we've witnessed that over the last couple of years. So we made a decision to diversify our capabilities in the Kiev market, which has been highly successful. We now have a team of 14 engineers in Kiev, complementing the core team here in Dublin. It's been very successful because of the time zone. Obviously, we're only a two-hour time zone difference between here and here and I think we've just been a beneficiary of attracting great talent for a very deep talent pool but more importantly retaining that talent at a time when obviously remote work has become the norm and the demand for remote engineering has hardened quite significantly in care but we've had a incredibly successful retention there which I think is a testament not only to the quality of people we've hired but also to vision, which I think inspires them. You're also going to hear from Mel about the transformation of our data platform, which has been a very significant investment we've been making over the last few years, and that's starting to reap real benefits and great operational insights for our customers. We also mentioned the path to ISO 27001 certification, which, for those of you who are not familiar, is an international standard on how to manage I want to call out specifically Richard Ebone, who's our Head of Information Security, and done a remarkable job helping the organisation get ready for that. It's an incredibly important time for us as we transition the cloud and become custodians of private health information and also the time and the prevalence of cyber security attacks to go on the rise in healthcare. This certification is going to bring great discipline to us as an organisation, but it's also going to bring great comfort to our customers. as you move forward. And finally, we've concluded the very familiar investment in our hardware strategy, which is really around bringing best-of-breed Android hardware to market. And this stands for Samsung tablets, WeTech set-top boxes, social mobile own-ones, which allow us to cater for all infrastructure eventualities and provide best-of-breed hardware to our customers. To start the pandemic, we also added three new hospitals in 2020 in what was obviously a pretty challenging year all around. First of those was OU Medical Center in Oklahoma, where we currently have a team on the ground. We began the deployment there. This is a facility that manages 680 beds. In the image on the top left here is their new tower, where we're currently deploying across 247 beds, which is the initial contract. but we're also in discussions to expand to their existing facility. And the photo at the bottom here is just showing the solution in the new tunnel there in Oklahoma. Just before Christmas, we were delighted to win the Children's Health and Medical Center in Omaha, Nebraska. And that is a 145-day hospital, which is currently project mode. We'll look to start deploying during the second quarter of this year. And then finally, our partnership with the Sydney Children's Hospital Network continues to grow in strength. We have had two projects going under at Maryland. The first one is to renew the hardware and move them to our next generation platform at Western Kids, which was our first performance for them nearly five years or over five years ago. We've already got the next gen product at Randall Kids. And again, we are, as we speak, in the midst of deploying in another 145 beds in the central acute services area, which is part of the listening lead development program. So, very enthused by those developments. In terms of our 2021 strategy and vision, I just wanted to reshare what I think is a very important slide from our full suite. which really points to the very material improvement in the management of our cash outflows. And you can see the quarterly trends here. We've seen about a 78% improvement following the re-organization which took place just over a year ago. The market opportunity, I think what you're going to hear from now is that COVID has really, as with all of our lives, it's transformed the way we do business. We've got customers that are looking at new virtual models of care. That's highlighted the importance of bedside technology. It's certainly highlighted the importance of video. And as we transition to a pure SaaS model, we hire new SaaS service leaders in both the United States and Australia, both of whom bring decades of experience selling cloud products to the healthcare sector and their very important relationships. And what I'm going to share with you is the work we've been doing around our partnership strategy and how that's going to help us as we go to market in 2021. So now I want to go back across to you. Thanks, James. So just moving to the go-to-market strategy, the U.S. market is a big market. There's around 6,000 hospitals accounting for over 900,000 patients. Our go-to-market strategy in the U.S. is to keep ourselves small and very laser-focused on around 10% of the market and to work with partners to extend our market reach in the remaining 90%, so that's around 5,500 hospitals. I'm just going to talk to you about the key partnerships we've been working on and why they are important to this strategy. Starting with Microsoft, we've long been a Microsoft partner, and now our move to Azure, the Azure Cloud, certainly aligns us with Microsoft's incentives, and it enables us to fully benefit from the Azure CodeCell program for the first time, which means that Microsoft's sellers, across hospitals and hospital systems in the U.S. market, and more supporters in lead generation and moving opportunities forward towards cloud. We've also been a Samsung partner for a number of years, and our move to cloud now with our multi-tiered products means that we're now able to offer a bundled solution with Samsung via channel resellers, And this is at a scale that wouldn't be possible, you know, with a direct sales organization, and it wouldn't have been possible on a large one-size-fits-all on-prem product driver. And finally, we've partnered with virtual care companies. So James mentioned Caregility and Cloudbreak, who have complementary solutions that can be delivered on the 1B platform. And this is enabling us to offer end-to-end solutions that are critically aligned to customer priorities at this time. as well as driving collaboration and opportunity referrals between our sales team. So just moving to the next slide, and just to talk a little bit more about the Samsung partnership. So Samsung SDSA is Samsung's distributed subsidiary in the U.S. market. They distribute Samsung B2B products, tablets, mobile phones to enterprise resellers. So SDSA are going to be bundling our CloudStart solution along with Samsung tablets and providing this to enterprise retailers that work with large hospital systems in the U.S. And those retailers will then be able to sell those under their existing procurement agreements with those organizations, with 1D then fulfilling on the back end. So this is going to make it easier than ever for new customers to get started with 1D. Cloud Start is the first tier in our new product suite. It's quick to deploy, and a matter of days instead of weeks or months. and offers a basic level of functionality that includes enabling virtual care use cases at the base site, as well as engagements and entertainment use cases. And importantly, Cloud Spark customers can then benefit from an upgrade path to Cloud Enterprise with all the additional functionality and integration that that offers as and when they are ready. So just moving on to talk about peer migration and upsell, the idea of Tier migration is really key to how we can grow the annual contract value of customer accounts. Cloud Start enables customers to get started faster with tablets at the bedside. Because there's no integration to the EHR, we can get a customer live in a matter of days. So a customer might begin with Cloud Start. They might, for example, want to deploy virtual care at the bedside. They might want to deliver digital education to patients at the bedside or entertainment. And then over time, they could opt to move to cloud enterprise, which is the fully integrated, fully featured tier with 2D tablets and touchscreens across the enterprise. And that would then enable them to benefit from additional OneView solutions, so things like our patient concierge and meal ordering solutions. And that's increasing our recurring revenues. So just moving to talk a little bit more about virtual care at the bedside. As James has mentioned, the pandemic has really highlighted the importance of having this communication technology at the bedside. In the absence of this type of technology, hospitals really had to scramble to put very tactical solutions in place to ensure that they could maintain communications with patients who were infectious. and reduce the wound entry and minimize their use of PPE. So our partnership focus has really been ensuring that we can support these customer needs end-to-end and really align to this priority that they have and will continue to have. The part of your casualty to resell their virtual care platform globally Caregility were recently voted as the best virtual care platform in the U.S. by Class, who are a leading healthcare technology analyst firm, and that's based on customer feedback. And the second partnership, then, is with Cloudbreak. Cloudbreak is a telehealth company, and we've partnered to offer their multi-language service to our U.S. customers. So this enables customers to add language services onto the OneView platform for seamless translation for non-English proficients and for deaf patients. and families at the bedside. And these partnerships are really all about helping our customers, their staff and their patients benefit from having this always-on, always-connected technology at the bedside that enables these communication use cases that are becoming critical to the operation of care. So just moving on to talk about the data analytics platform. This is another really, really important innovation that has crystallized in 2020. We've been working on this since back in 2019. And in late 2020, we went live with our third customers who are now able to access their data directly from the cloud via self-service dashboards. This is a really key part of our strategy to help our customers measure and grow their value from the 1G platform. And it's also, we've been going to enable us to create new data-driven product offerings. Because we're aggregating data across our customer base into the cloud, we're able then to offer benchmarking. So this is something that we're going to be offering in the future, that we'll enable a hospitals management team to compare their performance on key metrics to other hospitals in that system so they can see how they're doing against their peer hospitals within their system but also then anonymously for the best work for medium performers in the market and we think this is going to provide a level of granular insights and the hospitals they have today and outside of certain government quality measures and this is really going to help them focus and measure their continuous improvements and quality programs and ultimately drive data ROI from their 1B investments. So our customers are really excited about the data analytics capability and we are as well. We have hundreds of millions of data points in the platform today, and this is growing exponentially day by day to give you a sense of the power of that data asset. And now I'm gonna hand over to Helena, our Interim CFO, to take us through the FY 2020 results and key trends.

Thank you, Noah. There's a short quote there from McKinsey that summarises the rationale behind our decision to go cloud and it basically says that our cloud is cheaper and quicker. So the trends we're seeing coming out of 2020 and into 2021 are outlined here. Most importantly, we are completely focused on our core product and completing our migration to cloud. We have successfully offshored certain engineering capabilities to Kiev in the Ukraine. but we have found that there is a deep talent pool available at lower costs than in other countries in which we operate. Total operating overheads have decreased by 44% compared to the prior year. This is naturally driven by a headcount decrease of 60% since 2018 levels. We now believe we have outlined the cost base of the business going forward. The graph on the left shows the decrease in both people costs and other overheads. The graph on the right shows annualised recurring revenues and continues its upward trajectory. Exiting annualised recurring revenue at 21 December 2020 is €5.5 million. The one-view solution required 9,269 beds at the end of December, with another 2,555 beds contracted and in the process of being installed. The growth rate in live beds is lower than in previous years, due to COVID-19 preventing access to hospital supplies to allow us complete installation. However, the growth rate, especially in 2021 as we catch up on those installations and also transition to cloud. And I present here our 2020 income statement. The current revenue increased by 13% compared to the prior year due to an increase in large beds. Non-recurring revenue was 22% lower than the prior year due to the impact of COVID-19 which prevented us getting on-site to complete installations. It's important to emphasise that these installations were delayed and not cancelled and all affected installations have since been rescheduled. Both stock-up margins increased to 67% compared to 60% in the prior year due to a higher proportion of software revenue which attracted higher margins. Total operating expenses excluding restructuring expenses came to €10.9 million compared to €19.6 million in the prior year, a reduction of 44% resulting in a significantly reduced operation EBITDA loss of €6.2 million compared to €15.4 million in the prior year. The company encouraged restructuring expenses of 1.2 million as it exited the senior living products in 2020 and also underwent a smaller strategic reorganisation in late 2020. The net loss tax was 9.5 million down from 16.9 million in 2019. Moving on to the balance sheet. The group had cash on hand of 6.8 million euro at the end of the year, which reflects the equity fundraise of 8.7 million Australian dollars before call, which took place at the end of the year, and was strongly supported by both existing and new investors. One view is availing of any COVID-19 government support to which it is entitled, and receives a PPP loan, which is fully forgiven in the US, of 434,000 US dollars in 2020, and has recently, as well, obtained a second round PPP loan, which is also eligible for forgiveness. The group also was out of job-teacher assistance in Australia. Turning now to the cash flow statement. The cash flow statement shows net cash at the end of the year, 6.8 million, but also shows the reduced cash burn rate, which is generated by tight cost control initiatives and overall reduced costs. I'll hand back now to James.

Thank you very much. And just a quick update on, for those of you who know the company, where we'll be aware of our pursuits in the aged care space in the last couple of years, and we were disappointed to have to resort to the courts, but we have launched a legal claim in the Supreme Court of Victoria for the collaboration agreement between ourselves and the Egypt Aged Care, and we're seeking damages for lack of opportunity. or reliance on the alternatives and for misleading and deceptive conduct. And the first hearings took place in the court last Friday, and I guess as is traditional, the hearings have been adjourned for a month until the 19th of March. Finally, let me just turn to the 2021 artwork, and you'll be aware that at the time of the chaparral in November, we guided the 2021 ratings with the goals in line with that, expected operating expenses of $10.4 million for the year and with today we're affirming that guidance which would indicate a 40% to 45% revenue growth in 2021. The key drivers there are obviously the move to a full SaaS platform which is expected to shorten sales and implementation cycles and I'm pleased to report we're seeing very positive trends on both the sales cycle and the implementation cycle. Niles' work is putting in place a blue-chip partner ecosystem and I really, it's a gift of honor to know how much time and effort goes into firming these partnerships and finding the right partners and the work that Niles has done over the last couple of years has allowed us to secure some projects that we think are really going to open a lot of new doors in the crucial U.S. market. We know that virtual models of care are certainly a type of mind for healthcare systems. We've included the source of the quotes we shared in the presentation for those of you who want to read more, and I'll give you a sense on the next slide. We also, obviously, are working for very material expansion opportunities with existing customers, some of which have been waiting for the co-accessor box for some time. They're starting to bring that product to market. And we're also incredibly enthused by the new staff leaders that we've been able to hire, and not often that you are able to get your first-choice candidates in both territories, but we were able to do that, and as I mentioned before, both Graham and Eleni bring a very strong pedigree in their respective territories. I'd also say, in conclusion, that the quality of the customer engagement we have with high-profile, certified customers In both, actually, markets, it's never been better, and our bid management team has never been busier. So we're very optimistic about the outcome for 2021. So I'll conclude my remarks there and pass it back to you, Ashley, to see if there are any questions.

Thank you. If you wish to ask a question via the forums, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the Ask a Question box. We will now pause momentarily to allow questioners to enter the queue. Once again, to ask a question via the phones, please press star 1. Thank you. There are no phone questions at this time. I'll now hand back to Mr. Flicker.

Thanks, Ashley. We've got a couple of questions that have come in on the webinar, so let me just take those and turn if I can. The first one is a question asking why not market cloud enterprise as a get-go? And that really comes back to it's a very significant undertaking to lift the very complex integrations we have with the electronic medical record from the get-go. So the decision we took was we thought it was important to get a product in the market quickly, which provided the essentials of the pandemic, which were essentially virtual rounding, virtual visitation, virtual translation. And that allowed our customers to protect their care team by using cloud staff at a high-quality level a video link between the care team and the patient at the bedside or between a clinician from a different location at the bedside. And, of course, we all heard the harrowing stories of nurses who were being asked to broker end-of-life conversations on their smartphones with family members who were restricted from visitation. So we felt the immediate mood was, let's get a product in the market, let's provide that basic functionality. And it was really the feedback that we got from that process that gave us the inspiration to lift the whole product into the cloud. And as I say, without the guidance from Declan and JP, I don't think that would have been possible. But we're really encouraged by where we're at in our journey and looking forward to getting that product out in the first quarter. The second question we had was, are we targeting a reduced loss of $3.4 million in 2021? We're absolutely targeting a reduced loss, the magnitude of which we determined a little bit on what the background looks like, and obviously we've done a lot of work to get our costs under control. So I think the trends are pretty clear on that front. And our final question was, could we please expand on new data-driven product offerings? No, I do feel a little bit more about exactly what we're providing with that solution. Yes, so this will be looking at how we could leverage that data, for example, by taking that concept of peer comparison and really working to develop new solutions and new data analytics and offerings for customers and leveraging that data. I think the really kind of key thing there is, you know, it depends on the scale of data that you have. So really our initial focus is obviously going to be supporting the existing customer base with those data analytics. We want customers to have the data to understand the value of the system. and to drive optimization and their use of the system as well. And then as we grow our customer base and we get more and more data points and more and more hospitals across the markets, that we'll start getting to, you know, what I would call a critical mass of data that would allow us to create those. So we're pretty early in that process, so I couldn't put it down at the moment. But what we do know is that we have data points that are very valuable in terms of operational insight within hospitals, but also experience insight from the patient and family perspective as well. Thanks, Niall. We've got a couple of further questions just asking how soon before we see some traction from the franchise partnership. And Niall, I know you've had a kick-off meeting already. a call this week with the Sunshine Channel partner briefing, which was extremely well received. Certainly the feedback from the channel partners is very encouraging. We expect to see some feedback from that over the coming weeks, but certainly the other invitations are very encouraging. The second question was, you know, what sort of traction do you expect to see moving from Class 5 to Grand Enterprise? I'm obviously sorry to say that, but just so people understand what we mean here is when you say this is being sold as a bundle, effectively a healthcare customer who's buying a Samsung tablet is getting the first year's subscription of Cloud Start included in the purchase of that tablet. And that obviously gives them a chance to get a sense of the experience, get technology in their patient's hands, probably for the first time. And we think that that gives us an opportunity to then engage with that hospital and talk through the upsell opportunities for them going forward. Another question on the WeTech IPTV set-top boxes. They're currently being deployed as we should. We just literally turned down the first... a couple of hundred of those in Sydney for the Sydney Children's Hospital Network. We are deploying a similar number for UCSF in California next week. So we've placed an order. We've got a couple of thousand of those buses already delivered, and we've got 3,000 co-op buses on order, which are due in Q2. No question asking how our new site leaders have been doing. I think they're doing very well, but it's early days. They haven't started on the 7th of December, and only started on the 11th of January. But I guess what I'd say is that they bring a work of experience selling cloud solutions. They bring great contacts, and we're very enthused about how engaged they are. Another question here is just asking if there's any hope of mediation with Regis Healthcare. I think it's too early to determine that. It's just to see how that progresses in the course. I'm surprised to say that we wouldn't have taken action if we didn't know we had a very strong case. Ashley, I think that's the standard of questions we have on the web. If there's any others on the phone, happy to take them.

There are no questions on the phone at this time.

Great. Well, in that case, I'd like to thank you all for your time. And as always, you know where to get in touch with us if you've got any further. Thanks very much. Thank you. Cheers, guys.

That does conclude our conference for today. Thank you for participating you may now disconnect.