Alcidion Group Limited

ASX:ALC

Alcidion Group Limited

ASX:ALC
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$0.066 (-4.3%)
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Forum Topics ALC ALC ThesisUpdate

Pinned straw:
JPPicard
Last edited 6 months ago

I'd like to provide an update on my investment thesis for Alcidion. 

There have been extensive discussions about Alcidion in our community, demonstrating the epic value of Strawman.

Rather than rehashing what's already been said, I want to share how recent developments impact my investment thesis.

Original Thesis Overview: Earlier this year, I outlined my investment thesis in a public article. In summary, the thesis revolved around Alcidion's potential to achieve approximately $10 million in Annual Recurring Revenue (ARR), along with all services revenue, from the NHS. I believed this milestone could trigger substantial cashflow generation, painting a brighter future for the company. 

A punch in the stomach: The most recent quarterly update delivered a significant blow to my thesis. It's not primarily due to the appalling cash outflow. I invest in some companies that are pre-profit, and am wiling to accept I’ll get the timing wrong in many of those. That’s OK. What hit harder was the clear indication that Q2 and possibly Q3 would be underwhelming quarters. Although the company maintained the idea of achieving EBITDA profitability by year-end, it's evident that this goal is now less likely. 

It’s hard because year, I share the belief that many of these challenges are beyond Alcidion's control, stemming from the broader issues plaguing the UK healthcare system. However, the question arises - how many more quarters can I be told the same story?

Conclusion: This situation presents a tough dilemma. My investment in them has taken such a hit anyway that it’s become rather meaningless in my portfolio, but that shouldn’t excuse doing nothing.

I'm willing to grant them a few more quarters to see if the situation improves. However, if there's no notable progress, my thesis will be severely undermined by the time Q4 results are released.
TPI1
6 months ago

I feel your pain! It is really hard to maintain conviction in the face of this. I am holding on to a few things...

A cloud-native, modern, modular EPR capability still makes a lot of sense given reduced IT budgets, reduced hospital staff and sunk/historical IT costs. Incremental add-ons mean faster speed to deployment and faster benefit to clinical staff on the ground. Notwithstanding ALC is not the only provider offering this capability, it is an important positioning the company has taken for some time now.

Revenue may not go up as much as we hoped or as fast as we hoped, but on the other hand it shouldn't drop dramatically or drop at all given previous contracts signed and recurring revenue locked in. This is the upside of these businesses with long lead time on sales, ie. once the sales are locked in they usually have long-term customers with low churn and predictable recurring revenue. Costs can always come down to improve the cash flow/cash position when the company decides it is needed.

Also Department of Defence contract - this is a multi-year, once in a generation contract, again likely to go on for many, many years and over time may result in additional modules/functionality being taken up by Defence, especially given ALC's positioning here as the longitudinal health record platform.

All of this still gives me some hope. And even with a longer time to get new sales and a sustained period of share price pressure, there is always the potential for a takeover from a strategic buyer. The company has working products/solutions being used by many customers so it will have some commercial and strategic value.

Interested in others' thoughts on this too!

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