Reliq Health Technologies Inc V.RHT.H

My notes from the Conference Call (rough notes....)

[NikhilG92]

CFO notes:

• Adjusted non-cash expenses of $1.2 M (vs revenue of 1.1 M for 2 months). So adjusting revenue for 3 months = 27% profit margin

 
CEO notes:

• No change to targets (hardware shortage has been taken care of)
• Unique circumstances in Texas, economically disadvantaged communities – wanted to use specific device.
• Large hardware order allows the onboarding/manufacturing company to ramp up production / scale up
• Lot of pipeline is in Texas. Since sales team brought on – Michigan, some other American city, AUSTRALIA
• Customers are very sticky – they don’t want to try something new. Patients used to Foracare – want to stick with this hardware. Reliq is hardware agnostic so OK with whatever hardware customer wants to use.
• Give patients and supply chain assurance and ramp-up
• Hardware was the bottleneck (was unexpected since hardware agnostic)
• Not becoming a hardware company, one-time purchase (if rationale to do hardware again then maybe but this is one-time support for customers)
• Lots of capital on B/S – this is good use of capital, able to negotiate a great price from manufacturer given size of order – therefore we’ll get some margin on the hardware (good return over a few months / customers installing and getting reimbursements from GOVT)
• Constrained by customers ability to roll out hardware and sync up – partnered with CareOne to facilitate
• CareOne started out as series of call centers with healthcare professionals / nurses calling to remind take medication / govt noticed call touch-ins weren’t doing good / started cutting down reimbursements / gives opportunity to use their nurses etc staff / they will provide support for customers, training, phone app use, for every patient they get $25 (reimbursed by govt) – total would be $69?
• June – October: hardware delivered, CareOne steps in to do onboarding / previously was constrained to 2k patients per month, no longer constraint / if could do 1 M patients per month CareOne can staff up to that. Expecting significant growth and want to be able to support that from implementation.
• Set up automated claims submissions and electronic stuff to speed things up
• Will speed up revenue collection for future
• Sales team: all over the world, been talking in Australia
• More than doubled pipeline size (+500 K patients). Head of sales been very systematic for developing process for signing / onboarding. Much more robust process now.
• Expect >80% gross margins and >80% EBITDA by end of year
• Have already added sales expenses (which is why G&A went up). Looking to preserve 80% EBITDA rather than spend $___ per quarter.
• No increased operating expenses for rest of year
• Sales team – at a conference had a lot of visitors who have now entered the pipeline, had cold calls from Ohio interested in the company, sales team gets feedback that this is solution needed which doesn’t exist in market.

 
Pre-submitted questions:

• Lots of questions on gross/ebitda margins – they’re standing by their 80% target.
• Taxation – they’ve been thinking about it, $14 M in losses carried forward – taxation wont be issue for this yr but will work with financial advisors for future (structure)
• Impact of 7 additional doctors who joined __ valley healthcare practice – cant speak to customers practice or plan but feel is more clinical providers = more patients which is good
• Pilot in northern Ontario – going well, just applied for a larger grant ($1 M) to provincial govt of Ontario, expanded pilot includes remote monitoring + tele-medicine app, lots of discussions around first nations and rural Ontario (poor access to healthcare).
• Questions on pilot – larger organizations (NHS for example) – were chosen as pilots for great references and experience. Don’t expect to convert these due to size & scale at this time but they refer to other organizations which allows for increased patients
• Contracts – lots of qs on when sign contract / when announce – can’t answer, strong pipeline growing, sales team developed processes of moving leads, hardware shortage resolved soon
• Question around sales team performance – excellent, strong feedback from customers, prospective customers say they’ve been solid
• Fair to describe as software & hardware, do u see more devices. No not hardware provider, software #1 but solutions provider, will work with customers where it makes financial sense (OK to help with procurement for example) as customers may be used to certain devices.
• Getting involved with hardware was the right decision, profitable in short term for excess cash and allowed for supply chain ramp up and onboarding bottleneck
• Hardware deployed immediately when it rolls in
• Do any pre-existing contracts need to be changed (due to hardware) – will be modified to purchase from Reliq instead of hardware provider but not really material
• What happens to system in event of power failure, wifi, cellular failure etc. When hurricane hit Texas last yr this happened for example. Customer required to have ‘plan B’ in place, if no power/cell service – patient has been trained to go to emergency / send nurses / call centre – Reliq not liable for plan B but helps in such events.
• System alerts reliq if hardware offline – notify healthcare providers immediately
• Clarify relationship between Paz (Home-care) and Rio Grande (Tele-medicine & patient monitoring) – no real relationship, both in south Texas. Patient base is separate.
• Why Texas – attractive due to concentration of chronic disease, lots of existing pipeline and potential sales here / looking to move forward with other cities, countries. Most logical = southern US (Florida, Georgia, Mexico). Will be moving outside Texas which has warmed up a lot (keen to move forward and well recognized).
• IUUGO whats it mean - means bridge or connect
• How much R&D moving forward – software company, no R (no research), more D (how to build product). Most expenditure moving forward its all sales and development. Sales -> cost of sales, development -> R&D.
• 1.2 M operating expenses may grow slightly as move forward but not really variable.
• Development – modifying apps, privacy laws,
• Capital raises – ended with healthy B/S so no. If strategic reason (compelling acquisition) then maybe. No immediate need for capital
• Stock based compensation moving forward – not like this Q, sales team, development side and implementation side grew and got stock-based comp. Non-recurring at that level.
• Existing clients – how much can they grow their practices – cant really comment but Paz has been growing via using IUUGO, able to grow 30% as a result (!!!), working hand in hand with customers to help them with expansion.
• Private payers? She mentioned Berkshire/JP Morgan deal, any big insurance conglomerate would look for service. Expectation that it will come but is just gravy (no idea on timing or anything)
• Any new bottlenecks? No

 
Q&A:

• Beacon securities: did u disclose wht revenue was for March (month couldn’t report): 12k patients at time so 6k US.
• A/R – what is this: all from Paz, CMS reimbursements.
• Automated claims / submissions – moving forward, 30-60 day receivable period normalized. Moving forward automated claims submissions.
• Any rejections for claims / audits / any delays in reimbursements: sometimes documentation required for new billing codes, back-end documentation required so slight delays but moving forward automated – collecting and documenting information automatically.
• Hardware side – larger groups pay right away, smaller groups go through reimbursements so cause 30-60 day A/R
• CareOne – how big is team, do they have people in Texas, do they plan on hiring locally?: They’re large, HQ is in south Carolina but call centers in southern US (Georgia, florida) – enough boots on ground in Texas and in any other state. Also a rapid growth company, been adding a lot of staff over last couple years. Much larger than Reliq and have more capacity. Good fit.
• Onboarding: newest contract (Rio Grande) – telemedicine mainly, moving forward starting now, will report on this in future. No hardware constraint on this one. Why was Rio deployment delayed – when sales brought on, they were focused on the hardware shortfall.
• Pipeline – is hardware for current clients? No not fully, some for future customers. Supply allows for comfort for prospective customers.