Streamline Health Solutions, Inc.

Greetings. Welcome to Streamline Health Solutions second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I would now like to turn the conference over to Jacob Goldberger, Vice President of Finance. Thank you. You may begin.

Thank you for joining us for the Corporate Update and Financial Results Review of Streamlined Hope Solutions for the second quarter of fiscal 2024, which was the three-month period that ended July 31st, 2024. As the conference call operator indicated, my name is Jacob Goldberger. Joining me on the call today are Ben Stilwell, President and Chief Executive Officer, and Vijay Reeves, Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question and answer session. If anyone participating on today's call does not have a full text copy of our press release and out of these results, you can retrieve it from the company's website at www.streamlinehealth.net or from numerous financial websites. Before we begin with prepared remarks, we want to be sure we are clear for everyone on the record how certain information which may be provided today as all of our earnings calls should be viewed. We therefore submit for the record the following statement. Statements made on this conference call that are not historical facts are considered to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These are subject to risks, uncertainties, assumptions, and other factors that could cause actual results to differ materially from those we may discuss. Please refer to the company's press releases and filings made with the U.S. Securities and Exchange Commission, including our most recent Form 10-K Annual Report, which is on file with the FCC for more information about these risks, uncertainties, and assumptions and other factors. As always, we are presenting management's current analysis of these items as of today. Participants on this call should take into account these risks when evaluating the topics we will discuss. Please note, Streamline is not undertaking any commitment or obligation to publicly revise any such forwarding statements made today. On today's call, we will discuss non-GAAP financial measures such as adjusted EBITDA and booked SAS ACV. Management uses these measures to help provide better insight into our financial performance, however, Certain items of income and expense are not included in these measures, so these calculations may differ from those which another entity may utilize in calculating their own non-GAAP measures. So if you compare these amounts on consistent terms, please refer to our website at www.streamlinehealth.net and our earnings release for reconciliation of such non-GAAP measures to the most comparable GAAP measures. I would now like to turn the call over to Ben Stillwell, President and CEO.

Thank you, Jacob, and good morning, everyone. So far this year, we've significantly expanded the value we provide to the revenue cycle in healthcare. Expansion comes from product enhancements for workforce automation, identifying financial opportunities, both from the clients we have brought online or expanded our impact with, and identifying the next set of clients to partner with us to get paid for the care they provide. As a result, our pro forma SAS revenue grew 21% during the first six months of fiscal 2024. After excluding the revenues from the client on renewal, we discussed at the end of fiscal 23. During the second quarter, we successfully closed contracts with an aggregate SAS ACV of $800,000. However, we received notifications of non-renewals and renewals at lower rates for contracts with aggregate value of $2.8 million of SAS ACV. So as a result, both SAS ACV, which is the annualized contract value for all agreements currently being recognized, as well as bookings that have not been implemented as of July 31, total $13.6 million, with $10.7 million already implemented. Due to the reduction in Bookstats ACD, we now estimate that we will achieve our adjusted EBITDA break-even run rate of $15.5 million during the second half of fiscal 2025. So with the significant change we experienced during the quarter, it's worth visiting how well our service model is working. The clients who terminated or reduced their contracts with us mostly made their decisions due to the lack of resources available to them. In some cases, that is leading them to outsource large parts of their revenue cycle at a higher cost, and others, it leads them to understaffing these functions and subsequently failing to see potential return. It's an unfortunate dynamic in our market, but also emphasizes the reason our products and service model needs to exist. Our best clients frequently remark how deeply their streamlined counterparts understand their needs and provide them with hands-on education, optimization, and insight. Compared to the outsourced model, this helps leaders take back their revenue cycle and keep the crucial knowledge of their system in-house. When a health system chooses to outsource, the vendors they work with are incentivized to not improve the systemic challenges the health system faces. So we need to continue to invest in the high-quality insights from the data we collect from clients so that leaders are increasingly aware of the value of owning these outcomes in-house. One specific example means mining client remittance data from 835 reports to help solidify the relationship between the ROI dollars estimated before sending the bill to payers with the actual cash receipts, post-payer underpayments, and denials, which is one of the industry's largest challenges. This link, in addition to denials trends, demonstrated coding improvements in collaboration with their CDI departments, create the touch points that resonate with higher-level executives as well as the users and managers. In today's budgetary environment more than ever, health systems have pushed the decisions higher and approval thresholds lower. Our client base contains some of the best health systems in the country and they fully embrace our services model while continuing to ask for more of these insights. Our client success team would classify them as either blessed for having all the resources they need to succeed or motivated in the sense that they know they can use our insights to make the improvements that they need. Our challenge, and ironically the area for most opportunity, is with those health systems who are resource-strained or unmotivated by the challenges they face in today's environment. The clients who opted not to renew this quarter are represented here. The clients who did not renew were largely related to outsourcing all or part of their revenue cycle. This outcome is what we're trying to help our clients avoid. Because when a health system is forced to outsource their revenue cycle, they lose control of their financial health. The one who does not outsource was due to the sell-off facilities, but each of these examples is primarily resource-strained. While they may have had the foresight to acquire our solutions, they have to make unfortunate decisions to reduce expense despite positive ROI. So to help our clients combat the resource strain, we are improving our ability to maintain these relationships long-term. We're creating stronger ties with client management, leveraging our results, and providing actionable high-level insights to ensure our counterparts and their executives clearly understand our impact and what they stand to lose by not engaging with their streamlined solutions. We're developing formalized best practice manuals for charge reconciliation, building an audit program based on the experience of our successful clients so that new clients have a great roadmap to success with RevID and Evaluator. With Evaluator specifically, we're making our in-house auditing resources available when necessary generating enough upside that clients can prove their value and maintain control of their HIM departments. We continue to drive tremendous value for our clients. Rev ID helped a recently go live, identified half a million dollars of mischarges from a single department in just one month of utilization. Not only do we uncover loss revenue, but we help them identify a broken process that would have resulted in significant ongoing leakage. So in summary, our client success model continues to receive accolades from our clients, and we're confident that we are taking the right steps to ensure retention in a challenging environment. On product innovation, we're working to deliver impactful solutions focused on identifying financial opportunities and providing automated workflows to resolve them. The impact of our AI model that we talked about at the beginning of the year continues to create and enhance rules for our evaluator clients exceeding $4 million recently and continues to grow with more rules being deployed and further refined. The model observes coding changes that occurred unrelated to our existing rules. The work started out based on observations with an evaluator and is now expanding to coding changes that occurred outside evaluator from other processes or applications both up and downstream from us. We've also successfully developed the powerful risk scoring engine within Evaluator, and we are looking to bring that to market as an upsell in the near term. Our Go Forward Evaluator roadmap is focused on identifying additional opportunities for impact and operational insights, as I highlighted. We are exploring how we can more directly address payer denials, which have increased significantly in the last two years and are a top priority for hospitals. We anticipate having material upgrades to the system for the identification of the denials before the end of fiscal 24. For RevID, the benefits come mostly from our investments in automation. Thousands of charges occur in a hospital daily, so identifying only those that need attention and quickly allowing users to resolve them is paramount. Our recent development remains focused on usability and backend implementation, while our roadmap includes pattern recognition to automatically assign tasks and improvements to usability. On the growth side of things, during the quarter, I elected to take full ownership of our growth division. While I'm extremely passionate about our clients and products, as hopefully you just heard, nothing is more critical today than us accelerating the rate, which we are bringing in new clients. And therefore, as the leader of this business, I need to live and breathe sales. Over the past decade with the company, I've witnessed a significant shift in the way health systems purchase new revenue cycle solutions. Historically, one-to-one Rep and buyer relationships won the day. Today, health systems decisions are made by committees who expect significant data and references. A relationship may get you in the door, but it cannot close a deal. As a result, we have shifted tactics. Today, the streamlined growth team takes a very analytical approach to our discovery activities, pipeline management, and identification of likely buyers. We have motivated hardworking RVPs who are going deep with prospects, helping them understand the significant results their peers have seen within our solutions through historical data and smart projections. We're also hiring more in the regions that we have not covered that fit that persona of the ones that are successful. We've begun to invest more deeply in targeted high-value marketing, expanding on the success we saw with our bootstrap social media strategy I think many of you saw across sites such as LinkedIn. I expect that, together, This combination of powerful analytics, sales talent, and a renewed focus on marketing will track more healthcare systems to our client community. But our priorities remain. The first, a displacement campaign related to an existing offering in evaluator space where we believe our tool delivers better results at a lower cost. Two, a continued emphasis on our Oracle partnership, which continues to aggressively push RevID. And three, the development of a new and effective channel partner Four, and the last one, beyond new client sales, we can more than double our existing ARR through upsells and cross-sells within our existing client base. We've seen success in each of these areas. We've had a number of positive discovery activities as a result of our displacement campaign. And with the right pricing strategy, I'm confident we will see a win from that channel in this fiscal year. We've had several successful Oracle Go Lives already in fiscal 24, with more in our backlog, and Oracle's been instrumental in a portion of our new bookings and our marketing efforts. We've been presenting jointly with their sales team to additional prospects in their trade shows and continue to see an uptick in the number of prospects Oracle is introducing us to. We've also had successful upsells during the quarter and are working to expand our upsell potential with additional evaluator functionality. Our first enterprise clients, one who added RevID, another who added Evaluator, who both go live with their respective new streamlined solutions during the second half of this year. We'll be excited to share success stories, obviously, once we've had some time to work with these clients after their go-lives. From a sales operations standpoint, we're arming our sales force with enhanced messaging to match with industry priorities and better explain the overall financial impact of our solutions for all prospects to align with the priorities of the C-suite leadership and with VP and director level counterparts. In some cases, clients have brought up our solutions at peer round tables, and we're looking to encourage more peer-to-peer activities in our user base. So healthcare systems need to be able to succeed in the revenue cycle so that they can get paid for the care they provide. We believe it is our duty to develop the products and provide the insights so that they can succeed. And so with that, I'd like to turn the call over to our CFO, BJ Reeves.