Apologies. @seasoning not @GazD

Thanks @Rocket6 for a great post, and @Chagsy - they definitely aren't a sure thing.

So the part that makes me like Alcidion’s product strategy is also the thing that comes with the downside of dilution risk. They are a platform software company, they build interoperable API driven software which is great because it puts them in a really great position to bolt on acquisitions and theoretically integrate extremely quickly (and I feel they’ve demonstrated this well with ExtraMed, I’m waiting to see how this pans out with Silverlink). I’ve seen enough evidence of their software architecture to be pretty confident on that front - the trick for this is for their team to do the due diligence on any acquisitions to make sure that the incoming business can integrate well technically - in this case any acquisition works essentially as a service to other parts of the product and they get strategic value.  

I got asked recently if I thought the Silverlink acquisition was too much - I wasn’t entirely sure then, I’m now of the mind it didn’t cost that much after researching what some other companies were doing to get a foothold in the NHS. Comparing one of the competitors in the UK:

Alcidion paid 55m for Silverlink - added PAS capability and got 12 NHS trust relationships. 

Dedalus paid 612m for DXC - bought a shoddy product that everyone hates (Lorenzo) and got 19 NHS trust relationships, the kicker in this one is in order to service the 19 NHS trusts they also had to buy AGFA healthcare (a business with an EV of 975m euro) in order to get Orbis, do some work on Orbis and then replace Lorenzo with Orbis because it was considered substandard.

Alcidion’s software itself perfectly aligns with something in software design called ‘the strangler pattern', essentially it allows you to replace legacy systems piece by piece in a way that doesn't incur extra risk, delay, or cost and allows you to work around tech debt really easily. Their approach to software makes them bullish as a company.

However, there are things I’m looking for:

• I’m looking for evidence they’re continuing to integrate well with new acquisitions
• I’m looking for evidence they are getting traction in the NHS even in this macro condition, after all with added capability they should be making more deals, if they're not making more deals then they've wasted their money
• I really don’t want to see them acquire anyone during this time unless it comes with some massive upside.

I have a sister who works in NT that I'm pretty sure would come in contact with Miya precision on a daily basis, so I'll see if the next time I talk to her I can get her to tell me about the systems they have at work.

Seems you are all over this @Seasoning

my memory of previous presentations from Kate is that the integration is actually quite difficult and lengthy. Maybe up to 2 years for each client to get the true benefits. And is also labour intensive - the integration that is. . I could be wrong on this point. So all the usual acronyms apply.

if so, this isn’t an easy click a button, add SaaS device, clip ticket, business. And should be valued as such.

speaking of which, integration is the most service-like part of the transaction, I wonder how many staff it takes to perform an integration and if they hit some kind of ceiling of how many integrations they can do in any given year. That'd definitely limit their potential and make it difficult to scale.

@Chagsy  "For me to re-enter I would want to see them convert a couple of Big NHS trusts. Or similar in Oz"

With NSW being comprised of 8 health districts and 2 specialist networks, all of whom run different EMRs (Cerner and Orion being the big two with smatterings of other EMRs for different disciplines mixed in) and the long awaited single statewide DHR announcement imminent, there is a reasonable chance that Alcidion's oroduct is going to be a part of transition, if not in full, but in part.

The big $$$ question is how much of a part.

so at about 10 mins in this podcast Kate gives some indicator of how long it typically takes: 3-6 months integration

https://podcasts.apple.com/au/podcast/the-morrissey-exchange/id1534507868?i=1000521683712

Thanks for that. I’m pretty sure that there is more variability than this. Each integration has its own set of legacy solutions that need to be patched together. From memory, each time they do this it gets easier as the team becomes more familiar with the legacy systems, so it might become less and less of an issue.

I don’t want to sound too negative about ALC - it is very much on the watch list - just want to see it de-risk a little. Moving up the food chain would be one aspect of that de-risking.

@Seasoning, based on their staff expenses, I would suggest lots! The scaling -- or lack thereof -- is definitely a key concern for me. This year we obviously saw an uptick in revenue, basically all of which was offset by cost increases.

I agree with the assertion that if -- and I think it's still a big if -- they are able to succeed and win material contracts many times over, there is lots of blue sky for Alcidion once they are 'in'. Incredible pricing power, sticky software and an unwillingness to change in the healthcare system. But there is a lot of uncertainty in that assertion and obviously no clear guarantee it will eventuate.

@Chagsy it sounds like our main concern/criticism is more or less the same. That is why I made the point about thinking back to 2018/2019, and what investors back then would have forecasted for today. Surely that the business would be sustainably supporting its growth, or close to it, while seeing some signs of operating leverage? I think your comment about de-risking aligns with my current views. I think there are more attractive opportunities out there that aren't diluting at the rate of ALC; that don't have to endure the long and expensive onboarding process ALC does; and perhaps most importantly, are demonstrating scalability in their business model. Pointerra are a possible example of this (my opinion of course), although also aren't dirt cheap at the moment -- but will increasingly appear that way if they bring in a material defence contract. Cogstate is another one -- also trading around 5x p/s, like ALC, but the bang for buck is a much different proposition. With Cogstate, you are buying a business operating in an attractive area, but have also demonstrated scalability in their business model, are spitting out free cash flow and can pay their way. Like I said, a much different proposition. I know which one I would prefer.

Yeah I'm not sure the staffing cost increase was due to them needing more people to integrate, when I looked at their history of job ads and linkedIn I couldn't really find evidence that the new positions and new hires would be doing anything of that nature. I suspect that the massive increase in staff expenses is what I've seen in a number of tech companies where developers are commanding way higher salaries and companies are doing whatever they can to hold onto them or acquire them so they can keep moving.

Definitely see your point about demonstration of scale, they definitely have the potential - do not want to see another Dubber.