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Operator
Greetings, and welcome to Forian's Inc. Second Quarter 2023 Financial Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal comments and webcast. Participating today from Forian are Max Weigod, Executive Chairman and Chief Executive Officer, and Michael Vesey, Chief Financial Officer. Before we begin, I would like to remind you that management's remarks today may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements due to a variety of important factors, including those discussed in the risk factors section of the company's annual report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 30th, 2023. Estimating financial performance accurately for future performance is difficult as it involves assumptions and internal estimates that may prove to be incorrect and is based on plans and circumstances that may change. There is therefore a significant risk that actual results could differ materially from the outlook provided today. Any forward-looking statements made on the call today represents the company's views as of this date, and the company undertakes no obligation to update them except as required by law. Words such as estimate, projected, expect, anticipate, forecast, plan, intend, believe, seek, may, will, should, future, propose, and variations of these words or similar expressions or versions of such words or expressions are intended to identify forward-looking statements. These statements include, but are not limited to, statements regarding future growth, anticipated performance, and prospects. Today's presenters were also referred to certain non-GAAP financial measures on our call, such as adjusted EBITDA, which the company believes may be important to investors to assess its operating performance and should be considered as Supplement 2 and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of the comparable GAAP metric can be found on today's press release and webcast, both on which are available on the company's website. Those numbers are unaudited, and any statement regarding the company's anticipated performance may be subject to change, including as a result of risks discussed in the risk factors section of the company's annual report on Form 10-K filed with the SEC on March 30th, 2023. Today's call and webcast is being recorded. A copy of the recording webcast as well as the full transcript and copies of today's press release and SEC filings will be available at forient.com forward slash investors. I am now pleased to introduce the company's Executive Chairman, and Chief Executive Officer, Max Wycott. Sir, you may begin.
Max Weigod
Thank you. Good afternoon, everyone, and thank you for joining us. After the close today, foreign reported fiscal 2023 second quarter results. Our second quarter results reflect success in executing against our long-term strategy. As I stated last call, We are now operating as a healthcare-focused enterprise that has been able to strategically navigate the headwinds of a challenging macroeconomic environment. Forian delivered another quarter of strong operational results with 36% organic year-over-year revenue growth and reached adjusted EBITDA breakeven ahead of schedule. Today, I'll share some highlights from the second quarter and speak to a couple examples of how our solutions are used and then Mike will provide details on our financial results. In the second quarter, Forian delivered strong operational and financial results. Forian's total second quarter revenue was $4.9 million, which as noted, represents 36% year-over-year growth. Our net loss for the quarter was 1.1 million, and our adjusted EBITDA from continuing operations was positive. $100,000, reflecting consistent and continued improvement from previous quarters. I am proud of the team's work in delivering these solid results and hitting the adjusted EBITDA break-even milestone as we executed on our growth plan despite a challenging macroeconomic environment. As previously reported in the first quarter, we still saw some pending budgets and discretionary spending in longer sales cycles. 4M's growth has been fueled by our expertise in delivering high-value information solutions to our healthcare and life science customers. Our market-leading data assets in our Kronos Data Lake power solutions ranging from clinical trial development and execution to post-launch commercial analytics to real-world evidence. I'll share a few examples of how our customers are leveraging Kronos to improve their business performance. Given the extraordinary cost of bringing a drug or FDA-approved device to market, life science manufacturers and CROs need actual information to size and quantify market opportunity, optimize trial protocol design, test protocol feasibility, identify and select optimal trial sites, and conduct Phase IV post-market surveillance studies. Kronos supports all of these use cases. Life science companies spend tens of billions of dollars each year on marketing to physicians, consumers, and health plans. Upon approval and launch, 4M delivers commercial analytic insights, including innovative provider targeting and segmentation solutions, marketing measurement and optimization, market sizing and market share assessments, and market access analytics, including drug pricing and assessments of prior authorization, and pre-certification requirements that impact patients' access to therapeutics. In terms of real-world evidence, Kronos maps longitudinal patient journeys on over 300 million de-identified patients in the U.S., uncovering insights such as healthcare product and service use, drug efficacy and safety, patient compliance and persistence to therapy and healthcare economics, and outcomes research. Real-world evidence is the foundation upon which life science companies understand how their products are being used, by whom, and to what effect. It is essential for their development in testing of hypotheses for new drug development, expanding usage to new indications, improving the efficacy, safety, and value of a product or service in the real world. In addition to life science companies, Kronos delivers valuable insights to providers and payers interested in developing efficient, high-quality provider networks, tracking patient leakage to competitor health systems, quantifying high-value referring providers to steer patients to their facilities, and understanding the dynamics of healthcare delivery and service use across the systems of care. Our customers appreciate our deep understanding of healthcare data our solution engineers continue to develop and deliver innovative high-value products from Kronos. In addition, we are beginning to leverage the growing generative AI market's attention to healthcare. Increasingly, our customers are enabling artificial intelligence solutions trained on Kronos. By doing so, our customers are gaining greater insight into their products, their customers, and the dynamics of a rapidly changing marketplace. As the momentum in AI continues, we believe there will be more opportunities to empower clients with more specific data solutions uniquely suited for training advanced AI models uncovering unique insights that improve the healthcare delivery system, support the development of new therapeutics, and improve patient outcomes. Finally, we continue to improve our balance sheet. As reported, after the end of the quarter, a customer of Forian in which we held an equity interest was acquired, and as a result, Forian received approximately $5.9 million of cash proceeds in consideration of all of its equity interest in the customer. Forian may receive additional earn-out payments in 2025 and 2026 in an aggregate amount of up to approximately $3.6 million if certain conditions are met. The additional cash, proceeds, and operational improvements put Forian in a strong position. We intend to use the net proceeds for general corporate purposes, including business expansion, deleveraging, or the financing of possible acquisitions. Overall, Forian delivered another solid financial and operating quarter, along with the milestone event of reaching adjusted EBITDA break-even. Our revenue growth, improved margins, and cash flow resulted from a committed team executing at a high level, and we look forward to further growth in the quarters to come. I will now hand it over to Mike to go over our financial results in more detail. Mike.
Mike
Thanks, Max. Today, I will provide an overview of 4N's financial results for the quarter ended June 30th, 2023. As previously disclosed in our SEC filings, 4EN completed the disposition of BioTrac on February 10, 2023. Through this transaction and the previous dispositions of our ingenious security-grade businesses, 4EN no longer provides software solutions to the cannabis industry, representing a strategic shift which has a significant impact on operations. Accordingly, we have accounted for the operations of the disposed-of businesses as a discontinued operation effective with our first quarter in 2023, and if reclassified previous reported operating results on a consistent basis. My discussion today will reference comparative results for our continuing operations for the quarter ended June 30th, 2023, unless noted otherwise. The press release issued today presents 4AN's financial results on a gap basis. As in prior quarters, we have also reported adjusted EBITDA, which management uses as a measure to track the performance of the business. As noted, the press release and these presentation materials include a detailed reconciliation of adjusted EBITDA to net loss. Our consolidated revenues of $4.9 million for the quarter were up $1.3 million, or 36% compared to the same quarter last year. The growth in revenue over the prior year was driven by both new customers and increased revenues from our existing relationships. The majority of our information contracts provide for continuing information deliverables to our customers over a multi-year period, providing a predictable recurring revenue stream on a going forward basis. Net loss from continuing operations for the quarter decreased 2.9 million from the same quarter last year to 1.1 million. The decrease in net loss was primarily driven by a decrease in loss from continuing operations of 2.4 million partially offset by changes in other income items such as interest, income, and taxes. The improvement in loss from continuing operations resulted from the $1.3 million of revenue growth discussed above and a $1.1 million reduction in costs and expenses. The decrease in costs and expenses was primarily due to lower G&A and research and development expenses resulting from the streamlining of our operations after the divestiture of BioTrack. Adjusted EBITDA from continuing operations, which excludes stock-based compensation, depreciation, amortization, and certain other non-recurring items, was positive $0.1 million compared to negative $2.5 million in the same quarter last year, demonstrating the operating leverage in our streamlined business. We expect our capital-efficient business model to allow us to continue to leverage these investments we made in our infrastructure with a low level of incremental expense growth relative to revenue growing forward. As noted earlier, a reconciliation of our net loss to adjusted EBITDA, along with an explanation of the reconciling items, is included in today's earnings release. Turning to our balance sheet, we ended the year with $41.2 million of cash and marketable securities and $25.5 million in convertible notes with no maturities prior to September 2025. It should be noted that these amounts exclude approximately $12.4 million of additional proceeds due from the sale of investments which will be received in future periods. In July 2023, we received $5.9 million in consideration for a minority interest we held in a customer that was acquired. We may receive additional earn-out payments up to $3.6 million related to this transaction if certain criteria are met. Additionally, we will receive monthly payments totaling $6.7 million related to the sale of BioTrack through February 10, 2024, providing additional liquidity to pursue our growth objectives. Our healthcare information revenues were $16.4 million in 2022. We expect 2023 revenues to be in the range of $20.5 to $22.5 million, reflecting an increase of $25 to $35 7% over the prior year healthcare information revenues. We expect continued improvements in our net loss and adjusted EBITDA as we continue to leverage our infrastructure, achieving a positive EBITDA contribution in the second half of 2023. And with that, I'll turn the call over to the operator who will open the line for questions.
Operator
Thank you. To ask a question, simply press star 11 on your telephone and wait for your name to be announced. To withdraw the question, please press star 11 again.
spk01
Please stand by while we compile the Q&A roster.
spk03
One moment for our first question.
Operator
And it comes from the line of Bruce Goldfarb with Lake Street Capital Markets.
Bruce Goldfarb
Hi, uh, thank you for taking my call and congratulations on the quarter and the growth. Um, so last quarter, I just have a few questions last quarter. You characterize your client spending and attitudes as conservative. Is there any change in their posture through the end of July?
Max Weigod
No, I, we, I think it's the same as the first quarter from that perspective.
Bruce Goldfarb
And then please discuss the environment for winning new logos versus expanding with existing accounts.
Max Weigod
Sure. And this is Max Wygod. Once we land a client, it usually takes a little bit of time for us to show the value and the expertise we have with our data products. And we've been seeing that a lot of some of the larger clients out there have incremental brands or incremental opportunities where they're starting to add on new SOWs and new opportunities. The format is still the same, mostly multi-year recurring contracts. For new clients, our brand recognition is starting to get better as we really focused on being a healthcare information company. We've done several conferences, and we will continue to do that to build awareness around the 4N brand. So as we indicated with our guidance, we expect the growth to continue throughout the remainder of the year, and we expect that both in the combination of new clients as well as upsells.
Bruce Goldfarb
Thank you. And then... Are you currently adding new employees, and if so, in what areas?
Max Weigod
Sure. We're pretty well fit with our current employee base, but we're always looking for solid engineers and solid sales individuals. Those are the two areas of focus. As we mature as an organization, we'll grow more in marketing and other areas to raise our awareness. but we feel pretty well situated with our current base.
Bruce Goldfarb
And then lastly, you guys have a sizable cash balance. Is there anything that you guys would like to have on the M&A front? Any type of technology?
Max Weigod
We're looking across the continuum. I think there's opportunities to potentially get other like businesses that have recurring data licenses, I think scale helps in this industry. So we're looking at opportunities in that space, as well as we're starting to produce internally elementary SaaS offerings for different clients, such as providers. As we look down the road, if there's incremental technologies that are really dedicated and leverage healthcare real-world data, those might be opportunities for us, but we're staying opportunistic and we aren't reaching as we're just at the point where we're building cash in the organization organically.
Bruce Goldfarb
Great. That's all my questions. Thank you and congrats on the quarter.
spk01
Thank you.
Bruce Goldfarb
Appreciate it.
spk01
Thank you.
Operator
And this will conclude the Q&A and the forum conference call. Thank you all for participating and you may now disconnect. you you Thank you. you you Thank you. Greetings and welcome to Forian's Inc. second quarter 2023 financial results conference call and webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal comments and webcast. Participating today from Forian are Max Weigod, Executive Chairman and Chief Executive Officer, and Michael Vesey, Chief Financial Officer. Before we begin, I would like to remind you that management's remarks today may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements due to a variety of important factors, including those discussed in the risk factors section of the company's annual report on foreign for the year ended December 31st, 2022 as filed with the SEC on March 30th, 2023. Estimating financial performance accurately for future performance is difficult as it involves assumptions and internal estimates that may prove to be incorrect and is based on plans and circumstances that may change. there is therefore a significant risk that actual results could differ materially from the outlook provided today any forward-looking statements made on the call today represents the company's views as of this date and the company undertakes no obligation to update them except as required by law words such as estimate projected expect anticipate forecast, plan, intend, believe, seek, may, will, should, future, propose, and variations of these words or similar expressions or versions of such words or expressions are intended to identify forward-looking statements. These statements include but are not limited to statements regarding future growth, anticipated performance, and prospects. Today's presenters were also referred to certain non-GAAP financial measures on our call, such as adjusted EBITDA, which the company believes may be important to investors to assess its operating performance and should be considered as supplement two and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of the comparable GAAP metric can be found on today's press release and webcast. both on which are available on the company's website. Those numbers are unaudited, and any statements regarding the company's anticipated performance may be subject to change, including as a result of risks discussed in the risk factors section of the company's annual report on Form 10-K filed with the SEC on March 30, 2023. Today's call and webcast is being recorded. A copy of the recording, webcast, as well as the full transcript and copies of today's press release and SEC filings will be available at forient.com forward slash investors. I am now pleased to introduce the company's Executive Chairman and Chief Executive Officer, Max Weigart. Sir, you may begin.
Max Weigod
Thank you. Good afternoon, everyone, and thank you for joining us. After the close today, Forian reported fiscal 2023 second quarter results. Our second quarter results reflect success in executing against our long-term strategy. As I stated last call, we are now operating as a healthcare-focused enterprise that has been able to strategically navigate the headwinds of a challenging macroeconomic environment. Forian delivered another quarter of strong operational results with 36% organic year-over-year revenue growth and reach adjusted EBITDA breakeven ahead of schedule. Today, I'll share some highlights from the second quarter and speak to a couple examples of how our solutions are used, and then Mike will provide details on our financial results. In the second quarter, 4M delivered strong operational and financial results. 4M's total second quarter revenue was $4.9 million, which as noted represents 36% year-over-year growth. Our net loss for the quarter was $1.1 million, and our adjusted EBITDA from continuing operations was positive $100,000, reflecting consistent and continued improvement from previous quarters. I am proud of the team's work in delivering these solid results and hitting the adjusted EBITDA break-even milestone as we executed on our growth plan despite a challenging macroeconomic environment. As previously reported in the first quarter, we still saw some pending budgets and discretionary spending in longer sales cycles. 4M's growth has been fueled by our expertise in delivering high-value information solutions to our healthcare and life science customers. Our market leading data assets in our Kronos Data Lake power solutions ranging from clinical trial development and execution to post launch commercial analytics to real world evidence. I'll share a few examples of how our customers are leveraging Kronos to improve their business performance. Given the extraordinary cost of bringing a drug or FDA approved device to market, Life science manufacturers and CROs need actionable information to size and quantify market opportunity, optimize trial protocol design, test protocol feasibility, identify and select optimal trial sites, and conduct Phase IV post-market surveillance studies. Kronos supports all of these use cases. Life science companies spend tens of billions of dollars each year on marketing to physicians, consumers, and health plans. Upon approval and launch, 4M delivers commercial analytic insights, including innovative provider targeting and segmentation solutions, marketing measurement and optimization, market sizing and market share assessments, and market access analytics, including drug pricing and assessments of prior authorization and pre-certification requirements that impact patients' access to therapeutics. In terms of real-world evidence, Kronos maps longitudinal patient journeys on over 300 million de-identified patients in the U.S., uncovering insights such as healthcare product and service use, drug efficacy and safety, patient compliance and persistence to therapy and healthcare economics, and outcomes research. Real-world evidence is the foundation upon which life science companies understand how their products are being used, by whom, and to what effect. It is essential for their development in testing of hypotheses for new drug development, expanding usage to new indications, improving the efficacy, safety, and value of a product or service in the real world. In addition to life science companies, Kronos delivers valuable insights to providers and payers interested in developing efficient, high-quality provider networks, tracking patient leakage to competitor health systems, quantifying high-value referring providers to steer patients to their facilities, and understanding the dynamics of healthcare delivery and service use across systems of care. Our customers appreciate our deep understanding of healthcare data. Our solution engineers continue to develop and deliver innovative high-value products from Kronos. In addition, we are beginning to leverage the growing generative AI markets attention to healthcare. Increasingly, our customers are enabling artificial intelligence solutions trained on Kronos. By doing so, our customers are gaining greater insight into their products, their customers, and the dynamics of a rapidly changing marketplace. As the momentum in AI continues, we believe there will be more opportunities to empower clients with more specific data solutions uniquely suited for training advanced AI models on covering unique insights that improve the healthcare delivery system support the development of new therapeutics, and improve patient outcomes. Finally, we continue to improve our balance sheet. As reported, after the end of the quarter, a customer of Forian in which we held an equity interest was acquired, and as a result, Forian received approximately $5.9 million of cash proceeds in consideration of all of its equity interest in the customer. FOREIN may receive additional earn-out payments in 2025 and 2026 in an aggregate amount of up to approximately $3.6 million if certain conditions are met. The additional cash proceeds and operational improvements put FOREIN in a strong position. We intend to use the net proceeds for general corporate purposes, including business expansion, deleveraging, or the financing of possible acquisitions. Overall, Fordham delivered another solid financial and operating quarter, along with the milestone event of reaching adjusted EBITDA breakeven. Our revenue growth, improved margins, and cash flow resulted from a committed team executing at a high level, and we look forward to further growth in quarters to come. I will now hand it over to Mike to go over our financial results in more detail. Mike?
Mike
Thanks, Max. Today, I will provide an overview of 4AN's financial results for the quarter ended June 30th, 2023. As previously disclosed in our SEC filings, 4AN completed the disposition of BioTrack on February 10th, 2023. Through this transaction and the previous dispositions of our ingenious security grade businesses, 4AN no longer provides software solutions to the cannabis industry, representing a strategic shift, which has a significant impact on operations. Accordingly, We have accounted for the operations of the disposed of businesses as a discontinued operation effective with our first quarter in 2023, and have reclassified previous reported operating results on a consistent basis. My discussion today will reference comparative results for our continuing operations for the quarter ended June 30th, 2023, unless noted otherwise. The press release issued today presents 4A and financial results on a gap basis. As in prior quarters, we have also reported adjusted EBITDA, which management uses as a measure to track the performance of the business. As noted, the press release and these presentation materials include a detailed reconciliation of adjusted EBITDA to net loss. Our consolidated revenues of 4.9 million for the quarter were up 1.3 million, or 36% compared to the same quarter last year. The growth in revenue over the prior year was driven by both new customers and increased revenues from our existing relationships. The majority of our information contracts provide for continuing information deliverables to our customers over a multi-year period, providing a predictable recurring revenue stream on a going forward basis. Net loss from continuing operations for the quarter decreased 2.9 million from the same quarter last year to 1.1 million. The decrease in net loss was primarily driven by a decrease in loss from continuing operations of 2.4 million, partially offset by changes in other income items such as interest, income, and taxes. The improvement in loss from continuing operations resulted from the 1.3 million of revenue growth discussed above and a 1.1 million reduction in costs and expenses. The decrease in cost and expenses was primarily due to lower G&A and research and development expenses resulting from the streamlining of our operations after the divestiture of BioTrack. Adjusted EBITDA from continuing operations, which excludes stock-based compensation, depreciation, amortization, and certain other non-recurring items, was positive $0.1 million compared to negative $2.5 million in the same quarter last year, demonstrating the operating leverage in our streamlined business. We expect our capital efficient business model to allow us to continue to leverage these investments we made in our infrastructure with a low level of incremental expense growth relative to revenue going forward. As noted earlier, a reconciliation of our net loss to adjusted EBITDA along with an explanation of the reconciling items is included in today's earnings release. Turning to our balance sheet, we ended the year with 41.2 million of cash and marketable securities and 25.5 million in convertible notes with no maturities prior to September 2025. It should be noted that these amounts exclude approximately 12.4 million of additional proceeds due from the sale of investments which will be received in future periods. In July 2023, we received 5.9 million in consideration for a minority interest we held in a customer that was acquired. We may receive additional earn out payments up to 3.6 million related to this transaction if certain criteria are met. Additionally, we will receive monthly payments totaling 6.7 million related to the sales bio track through February 10th, 2024, providing additional liquidity to pursue our growth objectives. Our healthcare information revenues were 16.4 million in 2022. We expect 2023 revenues to be in the range of 20.5 to 22.5 million, reflecting an increase of 25 to 37% over the prior year healthcare information revenues. We expect continued improvements in our net loss and adjusted EBITDA as we continue to leverage our infrastructure, achieving a positive EBITDA contribution in the second half of 2023. And with that, I'll turn the call over to the operator who will open the line for questions.
Operator
Thank you. To ask a question, simply press star 11 on your telephone and wait for your name to be announced. To withdraw the question, please press star 11 again.
spk03
Please stand by while we compile the Q&A roster. One moment for our first question.
Operator
And it comes from the line of Bruce Goldfarb with Lake Street Capital Markets.
Bruce Goldfarb
Hi, thank you for taking my call and congratulations on the quarter and the growth. So last quarter, I just have a few questions. Last quarter, you characterized your client spending and attitudes as conservative. Is there any change in their posture through the end of July?
Max Weigod
No, I think it's the same as the first quarter from that perspective.
Bruce Goldfarb
And then please discuss the environment for winning new logos versus expanding with existing accounts.
Max Weigod
Sure, and this is Max Wygod. Once we land a client, it usually takes a little bit of time for us to to show the value and the expertise we have with our data products. And we've been seeing that a lot of some of the larger clients out there have incremental brands or incremental opportunities where they're starting to add on new SOWs and new opportunities. The format is still the same, mostly multi-year recurring contracts. For new clients, Our brand recognition is starting to get better as we really focused on being a healthcare information company. We've done several conferences, and we will continue to do that to build awareness around the 4N brand. So as we indicated with our guidance, we expect the growth to continue throughout the remainder of the year, and we expect that both in the combination of new clients as well as upsells.
Bruce Goldfarb
Thank you. And then are you currently adding new employees, and if so, in what areas?
Max Weigod
Sure. We're pretty well fit with our current employee base, but we're always looking for solid engineers and solid sales individuals. Those are the two areas of focus. As we mature as an organization, we'll grow more in marketing and other areas to raise our awareness. But we feel pretty well situated with our current base.
Bruce Goldfarb
And then lastly, you guys have a sizable cash balance. Is there anything that you guys would like to have on the M&A front? Any type of technology? Yeah.
Max Weigod
We're looking across the continuum. I think there's opportunities to potentially get other light businesses that have recurring data licenses. I think scale helps in this industry. So we're looking at opportunities in that space, as well as we're starting to produce internally elementary SAS offerings for different clients, such as providers. Um, as we look down the road, uh, if there's incremental technologies that are really, uh, dedicated and leverage healthcare, real world data, um, those might be opportunities for us, but we're staying opportunistic and we aren't reaching, um, as we're just at the point of where we're building cash in the organization organically.
Bruce Goldfarb
Great. That's all my questions. Thank you. And congrats on the quarter.
spk01
Thank you.
Bruce Goldfarb
Appreciate it.
spk01
Thank you. And this will conclude the Q&A and the forum conference call.
Operator
Thank you all for participating, and you may now disconnect.
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