Craneware plc

uh thank you very much for joining uh the craneware interim results for fiscal 26. uh just to remind everyone uh craneware uh produces software for hospitals across the us uh for uh their operational and for financial performance uh improvement um it's been a very positive uh first half to the year for us uh like everybody i think um there's been lots of dynamism and lots of change through the course of the last eight months or so that has been both very exciting and something that i believe that the company has dealt with very successfully coming through there that has left us in both a financially strong position with 184 million of arr continuing with a greater than 100 percent nrr long-term relationships with our customers on average five years with some of our top 10 actually significantly exceeding 20 years in what is now 27th going on to our 28th year of business circa 90% of our revenue is recurring we are profitable we generate cash and we've had a very positive first half performance not just from a financial perspective but particularly from an operational perspective as well next slide please so just reiterating that I think strong performance and momentum continued momentum through the period both strong financial performance uh with good key progress uh across our key metrics uh good sales performance uh which has include both competitive wins and competitive takeouts which will will cover in a few slides time and then um by uh continuing to evolve and grow our product set and acceleration in our time and a continued growing total addressable market for the company as well. Next slide, please. Thank you. So I mentioned very strong sales performance in the period and a positive both expansion wins, but also new hospital wins and new pins on the map as well. we grew our new hospital wins to 12% from about 2% of our new sales in the equivalent period last year so grew that to 12% and mainly through a mix of competitive wins where both in head to head in various different RFPs for some of our point solutions But again, taking out point solutions in competitive takeouts and replacing them with the Trisis platform and then building upon that with other wins. And obviously the importance of that is that then becomes future expansion sales, which made up 88% of our sales as we went forward. some of the examples from that really come from all areas of the of the business and from various different areas the first that we've we've highlighted there was a five-year business of pharmacy suite win with a large standalone hospital that was looking at that stage to consolidate down on their on their vendors our second one was a critical access hospital where the the um hospital itself saw a a midwest rural hospital was looking to then increase the amount of transparency and their understanding of the data that they held uh within their organization thirdly listed here is one of the examples as is there and one of our 340b takeouts and wins that one there for a mid-size health system that was suffering from operational delays with 340b and a very poor capture rate from 340b and recognized from both referrals and and from customer uh references uh coming through uh that we could do a better job for them and uh we we started that off on a three-year contract coming through and then the last one was uh on another competitive takeout which was across uh medication formulae but also adding in um uh are committed to take out in our charge master space and in our with our tri-state supplies assistant as well uh again updating and modernizing systems as we take them as we take them forward i think it's important to say that also with our new sales wins we then also had a very positive retention rate with our customers with across all metrics that being significantly above 90 percent next slide please um there's been a lot made of ai particularly in the in the in the last uh a couple of months uh and i and i think i'd just like to highlight from here uh some of the the strengths of both the business and some of the successes that we've seen and also my own personal view that ai rather than being the death of sas is actually uh the uh the acceleration of sas and uh the ability for organizations like us to uh more fully and uh and better uh developer software offerings for uh for our customers and do that at pace and do that in an an environment that is completely secure for them uh as well uh so the combination of um all the the items that we believe that are important uh for success for the future is one we already have scale we're in an uh uh about 40 percent of uh us hospitals um we have a reputation so we have earned trust with our customers with winning the class award for for the 15th time for our charge master crisis charge master products in there we've got that significant amount of expertise we're embedded into our customers workflows and functions already and we drive a significant return on investment for our customers as we go forward if you mix all of that then with our technology partnerships and our long-term work with ai we then get a very custom and very quick productivity and additional productivity going forward for that which then allows us to continue to advance that and continue to move our software forward a faster pace i would argue than anyone else and i'll come on to specific examples from that and we're often asked about are we worried about that that disruptor in the bedroom using ai and trying to generate software equivalent to ourselves and we would argue that actually um no um just as the disruptor in the bedroom has embraced ai all of our developers have embraced ai um greater than 80 percent are regularly using uh github uh co-pilot and then the remainders are using various other tools supplied to us through the microsoft platform that allow them to be far more productive in their day-to-day jobs but let's not kid ourselves that currently ai is not generating enterprise grade software ai is able to generate some very interesting routines but unfortunately is not grading stuff that is qualifying for high trust that gives security and a solid platform for an enterprise grade solution to be able to move on to that uh on mass um and that combined with then our ability with our 200 million plus patient records and the data from the 40 of those customers being able to utilize that to test our software um and to qa our software gives us real hope and real uh well gives us real uh uh strength and trust in our ability to keep ahead uh of the of the marketplace with our with our offerings um we've seen that through uh accelerated productivity gains um those accelerated productivity gains have given us new products they've set our products and been able to advance our products so our products have not stayed static uh during uh the course of the last year uh hence the the awards that we've won through there as well and taking that forward and that's giving us the really strong confidence that we can stay significantly ahead of any potential disruptive competitors coming into the market of which we currently still are not seeing anyone from there. We go to the next slide, please. um i just want to touch a little bit on 340b because there's been a lot of changes in the the 340b market through the course of the last eight months as well um a real evolution that came in and was introduced by uh the government body uh hersa uh um um back in uh midway through the the period the last period um which was to introduce a pilot program uh for a rebate model for select drugs to be able to trial this out this was launched in i think in september of uh approximately september of last year or announced in september of last year um and uh the the uh the reasons for this were pressure from the drugs companies uh looking for change within the 340b program i think i want to continue to underline the 340b programs a critical role in keeping hospitals and particularly rural and disproportionate share hospitals open um drug spend in the us has massively increased in in recent years since 2010 um there's been probably an additional uh almost a doubling uh an additional 200 billion dollars spent on drugs in uh by uh health care uh in the in the in the us a significant amount and that is continuing uh to grow and shows no sign of let up At the same time, drugs companies have taken probably some of the strongest margins out of healthcare. Drugs companies average margins are north of 20% when the average hospital margin for a not-for-profit is between 1 and 3%. so a significant uh difference in where uh profitability is going so there is definitely something wrong in the equation with regards to to uh drugs purchases in the us uh going through drugs tend to be one of the largest expenses that hospitals actually face coming forward and the quickest growing expense that they face as well behind just their labour costs going through from there yet the 340b program is actually a very efficient way of being able to manage some of that increase in cost particularly for those that most can't afford it across the across the us if we combine this with the political situation whereby hospitals themselves are the largest employers in just about every state um you get a triple whammy effect of hurting hospitals hurts the electoral and the political landscape as well and so despite the move in these evolutions there is a real need for a program uh like 340b being in u.s health care and we uh uh believe that there will be something like this around for for a long time the rapid introduction of the the 340b rebate pilot program despite it subsequently uh being halted and paused so that they could re-look at that pilot and relaunch that pilot again um is a good indication of the evolution that companies like ourselves and any companies in the space have to be able to deal with and have to be able to uh uh develop around in in order to benefit and for our customers to continue to benefit from the program our next slide please very pleased to see that actually in this we were the only uh software vendor that was able to deliver a true integrated solution in time for the original kickoff date which was the first of january within this and that was in response to the the pilot and being able to take this forward so utilizing ai tools utilizing our data sets utilizing the talent the expertise and specialist knowledge within our within our teams across the organization we're able to mobilize that and produce a brand new product of enterprise grade ready to be able to roll out and to be able to sell to our customer base and and also be ready for that first of january kickoff unfortunately with the the pause on that that did mean that we had a little bit of a double whammy coming through uh and i know when craig gets into the financials uh he'll he'll be able to uh to demonstrate that uh but a little bit of a double whammy of that coming through and that with the pause in that we not only had to take all of the revenue out from uh the sales of the brand new product with regards to to rebate but on top of that we also had to pause the conversion of our shelter program from transactional revenue into ARR into long-term revenue because some of that revenue was obviously associated with the drugs that were coming out and the change of the 340b program coming through and so until we get a bit of certainty on on the the remodeling of the three the rebate 340 program and the rebate pilot program we won't be able to do that ar transfer coming through so that that allows for our arr to be a little bit uh soft coming through on that uh next slide please brilliant thank you keith uh and good morning everyone well as keith just chatted you through it has been a busy and eventful half and that's not just for us but for our us hospital customs as well

Through these next few slides, I will hopefully demonstrate how our annuity SaaS model, coupled with the investments we've already made and continue to make, have delivered another period of healthy performance. So let's get on with it. The headline metrics themselves. Revenue grew 6% to $105.7 million. That's flowed its way through to double digit profit growth, demonstrating the operational leverage that exists within our business model. adjusted eva dark increasing 10 to 33.4 million dollars and delivering a 32 margin the top end of that range of 30 plus or minus one or two percent we have guided to uh through all these years we continue to increase our adjusted basic eps that grew 16 to 58.7 cents up from 50.6 cents in the prior period alongside this despite the impact that keith has just talked to we have grown our annual recurring revenue that now stands at 184.2 million dollars and that's up from 177.3 million dollars this time last year throughout all this we have maintained our core financial dividend disciplines that you've come to expect from us Our 12 month operating cash conversion at 85% and we've continued to reduce our bank debt, reducing it by 26% to $23.4 million. So the headline messages, growth, margin expansion, EPS up double digit and less debt. We've done all this whilst delivering strong cash generation and strengthening the balance sheet. I move to the next slide, please. So in addition to the current year results, this slide shows the five-year trend for our key P&L metrics. As you can see, there's a consistent step up over time, and that's the whole purpose of our model, long-term sustainable growth. Revenue has moved from just over $80 million in the first half of 22 to $105.7 million a day. Our adjusted EBITDA has grown from $23.7 million to $33.4 million and continually delivering above 30% margins. We've seen a similar growth in our EPS. This steady sustainable growth is driven by our multi-year contracts, our high customer retention and our net revenue retention. This is also coupled with our ability to expand within large health systems, large and small health systems, as they roll out tricers and our 340b offerings. Ultimately, we are building long term value on top of high quality foundations. Can I move to the next slide, please? On cash, there are a few moving pieces here worth just working our way through. On the face of it, on the balance sheet, our cash and cash equivalents show $40.9 million at half year. but there was 30.3 million dollars of cash in transit and that relates to the customer monies we manage and we receive that in twice every month last year inevitably that money came in just before december 31st this year it was 5th of january well that was the first monday back at work uh so 5th of january but to get a true light for light comparison you have to add the 30.3 million dollars in when we do that we deliver a cash balance of 71.2 million dollars that's effectively flat against the 72.2 million dollars this time last year i've already mentioned whilst we've moved to a full rcf we've continued to pay down our bank debt that now stands at 23.4 million dollars down from the 31.6 million dollars this time last year our operating cash conversion at 85 percent is slightly below that internal target we set ourselves between 90 to 100 percent But if you go back historically, this level of seasonality is not unusual. We often see hospitals slow down cash payments as they run towards December 31st themselves, their own year ends. We monitor this as we start to see our cash collections pick back up in January. We've definitely seen that happen and February has been a particularly strong month. So no concerns over the full year target of 90 to 100%. this cash conversion has allowed the board to increase its interim dividend once again so we're now proposing a 15 pence per share interim dividend up 11 on last year and absolutely maintaining our progressive dividend policy so we're funding investment reducing debt and returning more to our shareholders all of that is from internally generated cash can i move to the next slide please So here we look at the core foundation of our long term growth, our recurring revenue. The bar chart on the left shows contracted recurring revenue in the year at the end of the period of $87 million, effectively flat on the $87.9 million a year ago. However, Our non-recurring revenues, our platform revenues, have more than doubled to $14.6 million. That's from $7.1 million this time last year, and that's driven by the large part by shelter. Keith's already mentioned how we couldn't actually take the 340B shelter revenue and call that recurring in the period. Remember, our platform revenues strategically are designed to become recurring. We start by recognising revenue as it's invoiced. once we see a stable pattern of usage and billing we recategorize into arr the uncertainty the rebate program and its announcement and then postponement caused we have decided prudently to make no changes relating to shelter in any part of our ar our arr so a large portion of that shelter revenue is classified as non-recurring platform revenue and we've already mentioned none of the rebate licenses we sold in the period have been included as ARR either. That has given us the 4% ARR growth compared to the 6% revenue growth we saw in the period. Also on this side, you can see that our ARR is continually progressing. We started with $171.4 million. We're now sitting at $184.2 million. that's supported by an nrr figure of 103 customer retention of 90 and continued expansion of our six crisis optimization suites can i turn to the next slide please excuse me to our detailed income statement already mentioned the three primary measures but on top of this it would be absolutely remiss of me not to mention the statutory measures profit before tax of 29 basic eps up 38 Our R&D spend is our investment in ourselves, and we continue to invest in ourselves. We've increased our R&D spend by 13% to $29.8 million, of which we've capitalised $8.4 million, or 28%, very much in line with our 25% to 30% guidance we've given. The slight increase on the level of capitalisation to last year reflects the mix of products. we've moved several substantial tricis and 340 billion initiatives from proof of concept into full development these include our ai enabled solutions that keith will talk to in the next couple of slides and our 340b rebate project that whilst on hold will deliver value in future periods we continue to apply our take tight kind of tight controls to capitalization that i've described in previous years we have an absolute focus on future economic benefit If we continue down our P&L below EBITDA, EPS has benefited from lower net finance costs as we continue to deliver the balance sheet. You combine that with an effective tax rate of about 23% and we've delivered incremental growth of 16% on our EPS. So we're not just growing our business, we're converting that growth into earnings per share for our shareholders. I can move to the next slide please. balance sheet. Our balance sheet remains a strong software company balance sheet. The biggest change in the current period has been the completion of our share premium reclassification exercise. as a reminder what we did here is through court approval we got the share premium and merger reserves moved to retained earnings effectively moving them to distributable reserves giving us over 330 million dollars of go forward distributable reserves that gives the board far greater flexibility in its future capital allocation decisions from a banking perspective we continue to enjoy really good relationships with all our lenders our consortium of five banks and we've got significant headroom in our covenants if i could move to the next slide please so bringing it all together let's have a look at our capital allocation Our business model, our strong balance sheet and high levels of cash generation all combine to give us a really solid financial foundations and clear future revenue visibility. With these factors, we're able to fund innovation that drives our own growth, keeping R&D at approximately 25% of revenue and focusing on priority areas where we see clear demand and strong ROI. we've got over 175 million dollars potential firepower in available facilities that again gives us added flexibility and options to move quickly in the future we've continued to deliver shareholder reserve returns we have our progressive dividend policy so over the four and a half years shown if you take our dividends and the limited share buybacks we've done to date we have returned over 66.1 million dollars to our shareholders on top of this today we're also announcing our intention to do a further 25 million dollar share buyback and there'll be more details on that to follow When you combine all this with our high levels of ARR, our strong NRR and our independent ownership positioned in the healthcare IT marketplace, we believe we're well placed to support our customers as they navigate the evolving US healthcare landscape, execute on the considerable opportunity we see ahead of us and all this whilst delivering for our shareholders. So with that, I will say thank you and I'll hand back to Keith.

next slide please and one more so one of the things that i think we want to make sure that is is remembered is that there are three very strong catalysts for growth within the business first of all is our existing uh customers and providing them more on the platform to deliver roi for them that then allows us to continue to grow as well and and drives our success as i've already mentioned and we'll go into a bit more detail we've got two new products launched uh that will be launched next week at the hymns conference which i'll i'll move on to um and uh and and all of our new wins that we've had this year are further expansion opportunities uh going forward into the future uh we don't forget that other part of the market i mean there is 12 uh 60 of the market although we are we are tackling that and we are growing that we are still uh see it that uh an opportunity for us to have our software in all us hospitals and that's that's something we continue to go through um the uh ongoing competitive wins and competitive takeouts uh is very encouraging uh that uh that is uh that long-term aim is uh very much achievable and then lastly is is adding on to uh the platform itself and providing new sources of uh return on investment for our customers and our customers success will result in our success uh as we go forward from here And so adding new products on and continuing to develop of which we do believe that AI is a huge catalyst for and a huge enabler and a huge productivity tool for us as an organization. um we're often asked uh with the 25 of r d spend is should we be reducing that and our argument is no because what we're actually seeing is we're seeing opportunities to create even more products that uh are to the benefit of our customers that will uh be monetized uh in the future and and will allow us to continue to accelerate our growth um so adding to the platform is a is a very strong uh part of of what we can continue to do um next slide please So I mentioned three different areas of expansion for us and major increases in our crisis capability and this is one of the features that I believe that AI is really strong for SaaS companies that already have pre-existing offerings is not only analyzing exactly what our customers truly want from all of the feedback and all the information that we get from them but then designing products in conjunction with them that we can then take back to them in rapid fashion in a very similar way to the way that we were able to do with our 340b rebate program on top of that we've increased the capability and continue to bring forward the capability of our our tricis assist offerings um in our charge master space and across the across the platform uh we've added agent tech capability and platform level uh orchestration within there to really have uh uh scalable uh agent integration so so the whole piece is all kind of coming together uh in there on top of that we're able to build uh application specific ai tools uh that come through um the first being our tricis labor and productivity uh a product uh with ai capabilities that allow predictively uh for hospitals to manage uh their workforce uh uh at a web at a sorry at awards level offering and to be able to take that forward there and give them true visibility in that with massive benefits to productivity within the hospital freeing up clinical staff's time away from administrative duties into being able to care for patients and providing a far more stable and predictable scaling system which is which provides a better work-life balance for for the teams involved in the in in the hospitals themselves and then on top of that next week at hymns and uh we will also be uh launching um our reimbursement intelligence products and that's where we allow hospitals utilizing the power of ai to be able to manage contracts uh to be able to understand these very complex pair contracts bump that up against their their internal data and be able to not only leverage those contracts and negotiations with insurance companies and pairs but also make sure that they're getting paid what they are entitled to be paid from those contracts as well and to be able to make sure that they understand and they keep on top of the management of those contracts is going forward so both of those two new capabilities resulting in new product lines which add to our time and our expansion opportunities within our existing customer base and next slide please so with the launch of those uh two new uh major solutions and more to come through the course of this uh calendar year as we continue to be able to uh create products that will matter for our for our customers um capitalizing on both uh on on the the hymns conference which is next uh next week uh the global uh health information management uh systems uh society conference and working with our partnership for with microsoft on that both appearing on their stage and them appearing in our booth and doing work with us in our booth on our go-to-market strategy with them and our co-marketing with them and then continuing to leverage the strength and the power of the tricis platform to provide really unique customer insights to delight and grow our customer base we truly believe that by making our customers happy by supporting our customers through and through the navigation of this evolving landscape and in healthcare uh through here that that is where we will find our success as well and that's where where our focus and the focus of my my team is all is all based on uh next slide please and so just pulling that all together uh some really unique strengths under underpinning the future of uh our revenue and our and our growth acceleration uh we've got that strength of arr um our nrr in the in the in the period uh coming through and adding to um our overall uh expansion uh story uh we've got continued opportunities in the market as the market continues to evolve that creates new opportunities for new applications to sit on top of the of the platform and for new partnerships to be formed for us to work with other vendors uh with the data that we have to be able to provide real value on behalf of our customers and for our customers disciplined capital allocation from the group and from the board as Craig has discussed and then continued innovation alongside those powerful partners to make sure that not only do we stay ahead but we accelerate and continue to accelerate ahead in not only this AI journey but the next wave of SaaS enabled by AI productivity both for ourselves but also for that productivity for our customers so that our customers each individual user becomes more productive as well and all of that means that the opportunity continues to be even greater ahead despite the fantastic success that we've had in the first half of the period and we continue to see that acceleration in growth coming in the near