I have been a bit annoyed by not having transparent information from Alcidion lately.

Case 1: No explanation of revenue going backward.

So at the end of Q3 FY24 they had sold & renewal revenue to be recognized in year = 37.4m

and then in Q4 they announced, new sales of $5m and 0.9m recognised in FY24 so that brings 37.4+0.9 = $38.3

At the start of FY24 they had $33.7m to be recoginsed and in FY24 they said they added total $6.2m in sales to be recognised in FY24, so technically, revenue should be $39.9m

I can understand if there is some issue and the customer is pulling back or delaying but I couldn't find any explanation in the report - What is the meaning of starting the number of $28m for FY25 that they have given - How can I confidently say that it will be recognised in this year? No idea

So I can only assume that, this reduction in revenue is on top of the things we can see slipped in FY24

On top of all this, the following - They didn't mention during acquisition capital raising - Just cherry-picking information to present to Investors I feel

Bit annoyed.

Alcidion (ALC) reported this morning, and I did think this one would've made it onto SM by now given the following - that bloody firehose is almost about to be turned off.

There's a bit to digest with this one.

For those that want a quick glance, highlights are as follows:

• FY24 revenue of $37.1M and Underlying EBITDA loss of ($3.4M);
• H2 Underlying EBITDA loss of ($0.6M), assisted by reduced staff costs in H2
• Q2/Q3 reset of cost base now delivering annualised cost savings of $6.4M
• FY24 operating cash outflow of ($7.1M), with a H2 positive operating cashflow of $4.3M
• FY24 new sales of $35.3M, with $6.2M recognised in FY24
• Milestone new contracts and extensions further validating Alcidion’s long term value proposition
• As of August 2024, $28.0M of contracted and renewal revenue able to be recognised in FY25, excluding any revenue contribution from North Cumbria contract once finalised
• Run-rate EBITDA breakeven at ~$36M1 of revenue; targeting EBITDA positive in FY25
• Continued increase in market activity with opportunities progressing into the selection stage of the procurement cycle
• ~$130M of contract and renewal revenue able to be recognised from FY25 to FY29, excluding upside expansion from existing contracts or impact of North Cumbria contract
• Cash balance of $11.8m and no debt as of 30 June 2024

Media Release can be found here, for those that like big text and numbers (like me) - preso is here.

Biggest surprise is Revenue has reversed about 8%, largely attributed to a reduction in Capital Licenses and Product implementation. This probably also explains why Gross Margins are up (marginally) - they had to put one positive on the Exec summary.

Good to see Operating Cash Flow positive for H2 (FY24), however, doesn't appear this is sustainable, yet...

We knew costs had blown out prior to contract wins - appears they've addressed this: "Responding to the delays in customer procurement cycles, we reduced the cost base resulting in approximately $6.4m of annualised cost being removed in late Q2 and Q3. The reduced cost base, combined with winning new contracts, resulted in a material improvement to our cashflow in Q4 with the reduced Q4 cost base expected to be maintained heading into FY25."

I'm going to jump to the juicy stuff (IMO) and lets take a look at the outlook. There is (already) $28m contracted and renewal revenue able to be recognised in FY25, this does have a few assumptions baked in regarding current and newly issued contracts. Based on current cost run rate for the end of FY24, the EBITDA breakeven is $36m of revenue - which they appear to be expecting.

Would love for them to be targeting to be cashflow positive, but there is some trust to win back here, so maybe that's why the bar is a little lower.

They've also wet your appetite by advising market activity is increasing, which may also explain their 10% increase in marketing spend.

Takes a bit more to build my confidence and trust back with ALC, so I'm hoping to see some more contract wins and extensions in the near term (3-6 months). If they do get some of these coming through and pick up in H2 next year then who knows, maybe they will exceed expectations, which at present are quite low.

Held.

Chart Update 20th Aug 24

I think we are going to see a drop soon down to between 0.44 - 0.50. While they had some good news recently, it will still take some time before it turns into contracts. They should be releasing their books full year soon and I feel the news of Alcidion being HNS prefered software has already been priced in.

FWIW this from RBC (Royal Bank of Canada)

Alcidion Group Limited

4Q24 Activities Report - Softer FY24 Revenue Guidance, Subdued 4Q New Sales

ASX: ALC | AUD 0.08 | Sector Perform | Speculative Risk | Price Target AUD 0.10

Sentiment: Negative

Our view: ALC's 4Q24 new TCV sales was slightly below our forecasts, albeit the company achieved a record high in customer cash receipts which was above our expectations. Net operating cashflow turned positive from last quarter, but was below our forecasts due to higher than historical R&D costs. Management guided FY24 revenues to be slightly below RBCe and Consensus forecasts, with higher recurring revenues than we were expecting. Overall, a weaker result comprising a few misses across the top-line, new sales and operating cashflow

Key points from the 4Q24 activities report:

• ALC achieved 4Q24 new sales with TCV of $5.0m (vs RBCe $7.0m) with $0.9m to be recognised in FY24 (~18% of 4Q24 TCV vs ~48% in 3Q24)
• Operating cashflow was $5.6m (vs RBCe of $8.2m, and -$1.3m in 3Q24). This was supported by record high customer cash receipts of $18.6m (vs RBCe of $12.6m) which was up 5% vs pcp, combined with the realisation of cost savings initiatives which reduced staff costs to $6.3m (vs $8.1m in 3Q24). However, this was offset by increased R&D costs to $2.7m which sits above previous average R&D spend ~$1.1m
• FY24 revenue is expected to be $37m-$37.5m (vs RBCe $38.4m, Consensus $38.9m), comprising ~74%/26% recurring/services revenues (vs 70%/30% in FY23)
• With the UK elections now over, management are starting to see FY24 tender activity move through the selection processes and are pleased with the progress of several opportunities in both the UK and ANZ. Management is also optimistic for FY25
• ALC's cash balance was $11.8m (vs RBCe $14.2m, and $6.5m in 3Q24)

DISC: Held in RL & SM

Alcidion released 4th Q update this morning, My initial thoughts

• Staff cost is looking much better now. ( Good for the upcoming period with lower cost base)
• Management reported new sales for FY24 at $35.3m but chose not to highlight them in the graph like in every 4Cs so far doesn't sit well with me. ( It would be better to show the graph as it is rather than hiding it)
• 

Well it wont happen immediately but it does sound positive.... $30-40M over 10 years. Turning the boat around slowly?

ALC north cumbria July 24.pdf

Nessy

Held

Bull case? Well its playing exactly how it should be so far. Im in the whole on this one from way back. To be honest Im pretty disappointed on this stock. So if Im to start working it again it will just be a token stake at the moment. I just dont trust it. Anyway heres the chart.

Chart Update Wed 17th July

Interesting Talking Healthtech podcast with Alcidion: https://www.youtube.com/watch?v=HsifU_PsSXY&t=53s

Chart Update Mon 1st July

Another words, I dont know. News seems ok however I need to see the market jump on board before I add to my devalued share holding. My Av. holding is way above here as I enetered this stock green (not with envy either) and plan on digging myself out of the hole this position is in. Over all I think the company has a future or a take over (not so good).

Note wave 4 down. It went way lower than my rules allow. This next wave could technically be a wave 5 to finish off however Im also in favour of it starting a wave 1 again after the 5 waves down it just took for my so called w4. This is why I dont enter anything until I see the larger waves 1/2 and how they play out. I usually say "take this with a grain of salt" however this time I'll give it a "bucket of salt".

Getting ahead of myself, but if the UK change government that could have implications to the NHS.

So i'm now watching:

1. If any positive changes to NHS or NHS related funding
2. If Alcidion is positioned to ride any tailwind.

Bull Case? We'll see.

Up 20% today on 6x average volume with no news.

Have any subscription/stock picking services made a recommendation?

If it's a sign of an impending announcement, this is most welcome.

Daniel Sharp, ALC Director bought 250,000 shares.

Sounds like a lot but outlay was ~$13k, didly squat, similar to Kate's outlay.

On the back of Kate buying, has this been a Board-wide action to shore up confidence by having each director purchase SOME shares, I wonder?

This feels like another half-hearted, no conviction purchase. Better than zero, thats for sure, but doesnt quite move the dial for me.

Discl: Held IRL and in SM

CEO Buying

CEO Kate Quirke 

·      On market trade 1,000,000 Shares ($46,671) 23 April 2024

- $28,600 ($0.047) 

- $18,071 ($0.045)

Giving Kate Quirke Total 48,561,285 share. At today’s price of $0.048 her shareholding is valued at $2.33m. Giving her total of 3.6% ownership of Alcidion.

Ok, so there's some cause for optimism in these results.

You can read the ASX announcement here, but the key points are:

• ALC has $37.4 in contracted and scheduled renewal revenue for the first 9 months of the year -- up 2% on pcp. And there's almost $3m in additional revenue to be recognised this year from new sales made during the quarter. Ok, so the revenue growth will look tame compared to previous years, but it should be positive and it should also deliver improved margins now they've reduced expenses by about $6.4m annually (hopefully not at the expense of future growth).
• Q4 (historically the best quarter, which is a pattern ALC expects to continue) will enjoy the full benefits of cost cuts, and the business is expecting to be cf +'ve in the second half.
• They have $6.5m in cash and said they have "adequate funds"
• Cash receipts down a little on pcp, but up 17% on the preceding quarter and there's $12.9m due from debtors (last year it was $7.3m)
• Basically cash flow b/e on an underlying basis, when you remove redundancy costs.
• Continued to sign up new trusts, which as Kate says help build their "referencability"

Despite the drop in the pace of growth -- which seems more to do with the industry environment, rather than the business itself -- the company is still moving forward. Maybe they lose some marks for ramping costs up too fast (although that's always easier to know in hindsight), and maybe they'll handicap themselves with less resources going forward, but the bigger picture thesis doesn't seem broken to me. Although i'd rethink that if they couldn't get back to higher rates of growth, or they lag on a relative basis next to other players in the NHS.

Last year shares were on ~4x sales, now they're on 1.5x. So i'm happy to keep my holding for now (about a 1.7% weighting).

This may have been commented on before but something I overheard in the hospital today….

Hunter New England health district is upgrading their current paper based system (not a typo, yes it’s paper in 2024) to an emr provided by Epic. Not necessarily news worthy to alcidion other than that alcidion provide a services within Sydney LHD and from what I heard today, this new system from epic will be trialled in HNE prior to a state rollout.

Just an observation really. And I’m not sure if the service alcidion provide to Sydney LHD is an emr or a patient flow portal/ eHealth as it was introduced for the COVID virtual care center they operated

Following @mikebrisy 's notes, I did a bit of googling to try to get my head around ALC's NHS opportunity. Some notes to add to the pot which was interesting for me, but may be old news for others:

• There are currently 215 NHS Trusts (googled "number of nhs trusts in england")
• A total of 189 trusts have now introduced new EPR systems, meeting the UK Govt's 90% target by end 2023 (189/215 = 87.9% but lets ignore the % for a moment!)
• Therefore 26 Trusts have yet to introduce new EPR systems
• The next target is for 95% of trusts to have an EPR in place by March 2025. The remaining hospitals are expected to go live the following year. https://www.ukauthority.com/articles/nhs-england-hits-national-target-for-epr-roll-out/ (there are many articles, carrying plus minus the same story, stats etc)
• "NHS England is investing £1.9 billion to support hospital trusts to either adopt a new or improve their existing systems. Last year it spent over £400 million to support 150 NHS trusts, and a further £500 million is due to reach trusts this year" (which @mikebrisy has pointed out, there HAS BEEN spend activity)
• To hit the 95% March 2025 target, 204 of the 215 Trusts must have an EPR in place by Mar 2025, so 15 more to go-live in the next 12 months, then 11 Trusts from Mar 2025/2026
• Because the budget is both for new and improvement of existing systems, that STG500m must fund 15 new Trust implementations and presumably, improvements to EPR systems in some portion of the189 trusts that already have EPR's
• There was a STG700m budget cut in 2023 which is presumably the driver to push out the end date to 2026 (and possibly beyond) . HSJ had the following article July 2023 which I could not access, other than the headline:https://www.hsj.co.uk/technology-and-innovation/digitising-all-trusts-by-2025-unachievable-after-700m-cut-government-admits/7035234.article

May 2022 Article below - behind a paywall, managed to dump this out before the super-quick free trial cut me out. While dated, of interest is the list of 27 Trusts, who at May 2022 do not have an EPR. This number coincidentally lines up with the 26 Trusts which need to implement an EPR in 2024-2026 from above, which we can infer from the Nov 2023 announcement.

Essentially, the list of 27 Trusts below, plus minus, is the remaining universe for ALC to implement an EPR in the next 1-2 years. We do not know which of these Trusts ALC are bidding for/chasing and we do not know the contract size of each Trust.

I think I am going to use the list of Trusts below and work out where each Trust is in the procurement process. Kate mentioned that there is quite a lot of transparency in the NHS Procurement process, so theoretically, we should be able to find out the procurement status of each trust that has at least started the procurement process. Each of the 27 Trust which awards to someone other than ALC in the coming months means there is one less Trust for ALC to win. This then puts a bit of a boundary around trying to define the NHS universe that ALC is chasing and how big the remaining opportunity is likely to be.

Would be good if everyone could post any EPR-related updates to the 27 Trusts below as the list must narrow in the coming months.

For me, this extra bit of information more or less lines up with what Kate has been saying, but I previously had no numbers against which to evaluate the extent of the opportunity/ies, the procurement and budget issues and ALC traction.

In summary:

• There has been budget cuts which has impacted the procurement processes and pushed out the overall Govt EPR timeline to 2026
• 26-27 Trusts need new EPRs, 15 by Mar 2025, 11 by "sometime 2026" - this is ALC's maximum possible uiverse
• Each award of these remaining 26-27 Trusts to anyone other than ALC, reduces ALC's maximum universe - this gives us a reasonably finite boundary against which to monitor ALC's contract success and momentum over the next 12-18M
• If 15 Trusts need to go-live by Mar 2025, the fastest EPR implementation that I can google was 5-6 months and the STG500M budget unlocks soon, ALC contract wins need to be rolling in by 4QFY24/1QFY25 and implementation must start 1QFY25, 2QFY25 at the very latest
• If ALC's contract traction remains muted in the next 3-4 or so months, it would mean that ALC's opportunity shrinks to the last remaining 11, by which time, the show could well be over ...

-----------

https://www.hsj.co.uk/technology-and-innovation/revealed-the-27-trusts-still-without-an-electronic-patient-record/7032511.article

Almost 30 NHS trusts do not have comprehensive electronic patient records amid a renewed push by government to get electronic systems into all NHS hospitals, according to HSJ research. A total of 27 trusts - across 20 integrated care systems - reported not having EPRs in place when asked by HSJ (see box below). While some of these may use smaller-scale electronic systems in individual departments, several trusts continue to rely on largely paper-based patient records.

NHS England is also pushing for ICSs to reduce the number of EPRs within an ICS to help data flow more freely between organisations when needed and saving time for clinicians who do not need to learn how to use different EPR systems.

Miriam Deakin, director of policy and strategy at NHS Providers, said getting EPRs into trusts was a “significant task” and added it will be “challenging” for the NHS to meet the government’s target. 

HSJ asked every NHS trust in England if they have an EPR, and – if not – whether it was currently procuring an EPR.

Although 28 trusts told HSJ they did not have an EPR — representing around 14 per cent of all trusts (excluding ambulance trusts) — HSJ understands that NHSE believes the number of trusts without adequate EPRs is between 35-40.

The regulator is thought to be aiming for trusts to be using EPRs which would achieve a level 5 HIMSS rating, which is an international standard for hospital IT. It is not known how many trusts’ EPRs would achieve a level 5 rating currently.

Several major teaching hospitals are among the 28 trusts which told HSJ they do not yet have an EPR.

This includes Liverpool University Hospitals Foundation Trust, Nottingham University Hospitals Trust, and Norfolk and Norwich University Hospitals FT.

LUHFT said it was currently procuring an EPR as part of a national programme launched last year to improve EPR procurement. In 2019-20, the trust pulled out of its EPR procurement after naming Intersystems as preferred provider. 

NUHT said it was using “elements” of one EPR and had “plans to purchase the remaining elements in the next two years”, while NNUH is working on an joint EPR procurement with Queen Elizabeth Hospitals

All the trusts are outside London except Barking, Havering and Redbridge University Hospitals Trust and the Royal National Orthopaedic Hospital Trust.

Rory Deighton, acute lead at NHS Confederation, said trusts’ efforts to roll out EPRs quickly and effectively have often been “hampered by inadequate levels of available capital funding”.

He said the upcoming NHS digital health plan should “commit to providing leaders with the necessary support to roll out comprehensive EPR systems”. 

Every trust which responded to HSJ’s questions said they were either in the process of procuring one, or developing a business case to secure funding in order to launch a procurement.

Several trusts indicated plans to run joint procurements for EPRs or align themselves with other trusts in their ICSs.

For example, University Hospitals Plymouth Trust said it was “working with our ICS colleagues, and under the leadership of the ICS, to set out our case for a future EPR for UHP and the wider system”.

Another trust, Stockport FT, said it had “started activities to progress with this key digital ambition for the organisation, working with our ICS, regional and national colleagues”.

Two trusts in Cheshire, Mid Cheshire Hospitals FT and East Cheshire Trust, said they had run a joint electronic patient record procurement and had chosen Meditech as their preferred provider.

The government has sought to get trusts to use electronic patient records since the early noughties, but its flagship programme to deliver this in the 2000s — the National Programme for IT — failed to incentivise trusts to adopt EPRs amid questions over their quality. 

Ms Deakin, NHS Providers’ policy director, said procuring and implementing an EPR is “expensive and time consuming, but trusts know it carried real potential benefits for patient care and safety”. 

She added: “Trust leaders know that it’s vital to get EPRs right but they are delivering this while overstretched staff are working flat out to tackle backlogs and deliver care to patients as quickly as they can.”

An NHSE spokesman said: “The NHS is focused on supporting local care systems so that 90 per cent of trusts have an EPR in place by December 2023 in line with the long-term plan ambition.”

Earlier this week staff raised patient safety concerns after four hospitals in Manchester suffered a “total IT failure”. 

The trusts which told HSJ they lacked an EPR

•  Doncaster and Bassetlaw Teaching Hospitals FT
•  Worcestershire Acute Hospitals Trust
•  Mid and South Essex FT
•  Royal Orthopaedic Hospital FT
•  Northumbria Healthcare FT
•  South Tees Hospitals FT
•  Torbay and South Devon FT
•  University Hospitals Plymouth Trust
•  United Lincolnshire Hospitals Trust
•  Dartford and Gravesham Trust
•  Barking Havering and Redbridge University Hospitals Trust
•  Royal National Orthopaedic Hospital Trust
•  Queen Elizabeth Hospital King’s Lynn FT
•  James Paget University Hospitals FT
•  Norfolk and Norwich University Hospitals FT
•  Queen Victoria Hospital FT
•  Robert Jones and Agnes Hunt Orthopaedic Hospital FT
•  Stockport FT
•  Northampton General Hospital Trust
•  Sherwood Forest Hospitals FT
•  Nottingham University Hospitals Trust
•  Royal Cornwall Hospitals Trust
•  North West Anglia FT
•  Airedale FT
•  Mid Cheshire Hospitals FT 
• Liverpool University Hospitals FT
•  East Cheshire Trust 

Source: Information obtained by HSJ

Source Date: April and May 2022

From <https://www.hsj.co.uk/technology-and-innovation/revealed-the-27-trusts-still-without-an-electronic-patient-record/7032511.article> 

My notes from this arvo's chat with Kate Quirke, ALC CEO. Have rearranged the notes into logical headers as a lot of ground was covered in the call.

My Thoughts Reflecting on the Call

• Institutions are still backing ALC - Aust Super and new Substantial Holder, Salter Brothers Emerging Companies took a 5.11% stake 2 days ago.
• Walked away from the meeting not feeling that there has been permanent or structural change and that today’s challenges appear “transitional” (for 12-18M) rather than permanent. 

@nerdag 's bullish thinking is increasingly resonating. Salter Brothers clearly acted on this.

The only way forward is up (by how much is another question altogether), with a base revenue position of ~$120m over the next 5 years anchoring the viability of ALC. This does not feel like a $0.00 company at all, which is the max loss from here.

Might actually be a very good time to average down - buy when everyone else is fearful. It feels like we are in peak pessimism mode now on what FEELS like a transitonary problematic period.

Discl: Held IRL and in SM

-------------

Summary of Meeting

• A mixed feeling of “defiance” and “resignation” is the feeling I walked away with
• Defiant - ALC is clearly going through a rough patch, as is every other competitor, but Kate remained clear and had high conviction that there is a lot of growth ahead once ALC gets past the current NHS challenges - she flagged another year
• Resignation - doing all they can within what is controllable, will need to be patient for the NHS spend to be unlocked, resigned to the negativity in the meantime, weathering it as best as it can

Overall Challenges

• Confluence of micro and macros issues, compounding each other
• Challenge is acknowledged and FY2024 will not be a good year
• All competitors face the same pressures as everyone is impacted
• Another year to run, after which ALC’s focus will move from Tier 0 hospitals to the more matured Tier 2 hospitals

Downsizing

• Taken $6m out of the cost base
• Comfortable with executing the downsizing now as the focus in the last 18M was on developing repeatable processes as ALC scales, which is bearing fruit with the downsizing

R&D

• R&D has not been sacrificed with the downsizing as - resources to support the ADF contract reached end-of-delivery, creating capacity post downsizing

Cash Position & Cash Forecasting

• $120m of contracted revenue in the next 5 years, business is now rightsized
• Have the ability to forecast cash flow pretty well, very little bad debts
• Expect to sign more contracts
• Capital raise was an “insurance policy” prior to downsizing
• Cashflow positive target will be met after incorporating the cost of downsizing redundancies

UK NHS Activity

• Significant uptick in tender activity
• Budget is severely constrained this year to recover from Covid spend, budget for the next year is looking to be in catch-up mode
• As ALC’s buyers are government buyers, they are driven by/guided by what spend is permitted
• Buying cycle is long as ALC is focused on meeting the needs of Doctor’s and Nurses to increase their efficiency as their primary objective, not the Patient’s needs (who benefit from better service from the NHS)
• The NHS is still a key ALC revenue stream:
• Very significant growth opportunity in a sizeable market funded by the government
• Sale of additional modules to existing NHS customers
• Largest employer in the UK
• Good launch pad to other countries eg. Canada

ALC Platform Competitive Advantage

• ALC’s platform & modular approach allows it to position against the current “moment in time EPR focus” as well as the changing NHS focus over the years - ability to mix and match modules to solve healthcare problems
• ALC has, and will continue to detect emerging trends in healthcare challenges and build the platform response early - the Silverlink acquisition and integration into Miya precision allowed ALC to position itself to solve the current EPR challenges that the NHS is facing
• Have already built in AI into the ALC platform for many years and will continue to incorporate elements of AI

M&A

• A lot of increased M&A activities/opportunities, but is not ALC’s focus at the moment, still very much focused on organic growth and demonstrating the value from the ALC platform
• ALC is at a reasonable level of scale already, presently

Competition

Nerve Centre in the UK

• Main ALC competitor in the NHS, a small company based in the Midlands and is doing well in the UK
• ALC is more focused in the North of the UK
• Nerve Center is only now just building a Patient Admin module - need a proven reference case in NHS tenders
• ALC has the advantage of a ready-to-go platform and has modules in areas where Nerve Center does not

Telstra Health in Australia

• “Copying” ALC
• Is trying to be all things to all people - still trying to work out its unique proposition
• Acquired a lot of companies, has a different architecture, different technology stack

Other Opportunities Discussed

• Management of Medications - lots of localisation and legislative requirements required, EPR players in Australia already have a module for the large hospitals, remain open to this
• Aged Care - very poor state of IT, but profit margins in the sector are too thin to make investing worthwhile

On Hindsight

• Would have executed downsizing earlier but they had to find the right balance against the then-reality of NHS moving at pace - classic IT company conundrum
• Would have combined Silverlink and Miya solutions earlier
• Better marketing of the business and value proposition and would have spent more time in marketing to counter the massive marketing teams that ALC’s competitors have (their competitors are also laying off people)

Qualifier: Bull case from these levels.

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02778239-3A637559

No real surprises in this announcment. Staff cost cuts were already in the pipeline, and there is "4m pa of additional cost savings" to come - I'll be very interested to see what these costs are and no doubt more will be said today.

At 1x sales, costs now coming under control, and arguably sector tailwinds with cashstrapped public health services in the Western world being reluctant to commit to a full EMR replacement, and the very not implausible chance of acquisition by one of the bigger players at these prices, the only thing pushing the price down now is sentiment.

A few contract wins, the timing of which is unpredictable, and Alcidion will be back above 10c soon enough.

Biggest sign to watch for is whether management put their money where their mouths are and start buying substantially on-market once the blockout period expires on 1 March, then I think we'll have found a floor for the price. If they don't, then that will be a red flag.

I was nursing a 75% paper loss IRL at these levels, and am confident enough to risk a bit more averaging down my buy-in price, with the upside outweighing the downside risk at the current price.

Beleaguered $ALC reported their 4C this morning, with the investor call later this morning (I won't be able to attend so will have to catch up with the recording)

ASX Announcement

Their Highlights

• Q2 new TCV sales of $21.8M; $0.7M expected to be recognised in FY24
• Signed $23.3M South Tees contract extension for an additional 8 years (to 2033 with 2 years remaining on current contract) for Miya Precision Electronic Patient Record (EPR). Further options to extend out to 2038 and add further Alcidion modules which if taken would result in a total TCV of up to $54M over the next 15 years
• FY24 contracted revenue at end of Q2 of $35.5M, up 4% on pcp
• Sold & renewal revenue over the next 5 years (excluding FY24) of $126M
• Q2 cash receipts of $8.7M; up 28% on pcp, resulting in an operating cash outflow of $3.4M. Debtor balance at end of Q2 of $7.3M (PCP: $5.6M) which included $3.9M from a major customer which was collected in the first week of January 2024
• During Q2, raised $5.4M via Placement and SPP to ensure maximum flexibility and maintain a strong balance sheet to execute on market opportunities and drive revenue growth
• Cash balance of $7.9M and no debt at 31 December 2023, strengthened further following receipt of $3.9m in early January 2024

My Analysis

2023 was a horrible year for the company, and investors voted with their feet with the SP down almost 2/3rds and the SPP component of the capital raising towards the end of the year essentially shunned by investors.

My usual 4C Cashflow picture below tells the story - no discernible growth trends, a growth stock currently becalmed with the sails flapping in the breeze. I've added the TTM picture for operating CF over a longer timeframe, so you can more clearly see the adverse inflection over the last 12-18 months.

Within all the bad news there is the good news of the South Tees renewal - previosuly announced. We don't know the full terms of the deal in terms of margin; however, this is a high gross margin business, and such a long term contract with the potential to deliver average annual revenue of $3.6m over 15 years and act as a flagship reference case. The South Tees procurement team will have struck a good deal, you can be sure.

The blame on slow procurement is placed squarely on the customers, which I am not sure is totally justified. I have previously published a sample list of recent NHS deal announcements. Product and Sales Capability are two other factors in the mix, and there has to be question-marks on both.

Kate is turning her attention to managing costs, which she has to do. Taking direct control of the UK team by not replacing the MD is a significant step, and she'll have a tough year directly running a microcap operating on two sides of the globe. But that is the work to do, as it is a fight for survival now.

My thesis is broken, and I should exit. However, with the SP on about 1.2x expected FY24 sales there is every chance that some wind might be blown back into the sales. One or more material sales deals, which are as ever said to be in prospect, even a decent upsell to an existing customer would be positive catalysts. There is also the prospect of M&A - not a reason to hold on its own - but $ALC has to be on someone's shopping list at this level.

So, I am not going to shoot myself in the foot by exiting today. My position is small (RL now only 0.5%) and the damage is done. I'm a grumpy HOLD.

Alcidion are an acquisition hungry company, they don’t really develop their products - they acquire them. We’ve seen this over the last few years with Silverlink and ExtraMed - if you scan back through their news stories on their own website you almost never see product announcements. 

I think the last update I saw was some time (years) ago with them upgrading Miya.

The acquisitions are a mix of bolting on capabilities and buying their way in the door to relationships, their lack of new contracts makes me think this part of healthcare tech is extremely sticky in general, and maybe Alcidion’s products aren’t any more sticky than anyone else's. It also means they have to take a lot of calculated risk on acquisitions that might not work out.

Alcidion dilutes like it’s free money. It hurts shareholders. Their most recent dilution was the most puzzling of all to me - a historically lumpy business blindsided by its own lumpiness. It feels like poor planning. They seem allergic to taking on debt - maybe that's a good thing? but raising at 7 ish cents when they've been sold at 33 cents in the past? ouch.

As others have mentioned based on my update on their last year's hiring - this is both a positive and a negative in my mind. It’s great they still have the growth focus, but they don’t have the momentum to back it up. They had this amazing year in 2022, then essentially fell off a cliff in 23. 

Lastly, Alcidion’s geographic focus is incredibly UK dependent (yeah I know Leidos is in there, but look at the amounts in the UK), getting in with Alcidion means you’re strapping yourself to the clusterfuck rocket going on in the UK to do with the NHS - I’ve posted in the past there’s a couple of podcasts you can listen to, to get the general vibe of the state of things up there and it ain’t pretty. 

Now you could argue that junior doctors in the NHS getting paid the equivalent of a supermarket checkout person up there is an opportunity for digital healthcare to smooth things over, or you could potentially look at it as there not being enough money to go around - despite the massive TAM being bandied about.

Disc: I hold IRL and in SM

Notes from contracts/renewals 

• In red i've marked what appears to be contracts that lapsed without renewal, 
• in yellow contracts that are up for renewal/extension this year.
• I couldn't figure out what was actually different from the second Leidos announcement in May 2022 to the first in December 2021 so I just omitted it.
• The sheer concentration of renewals and new contracts in the UK apart from Leidos in Australia shows they’re highly concentrated in the UK
• They have a concentration risk with 2 clients Leidos and South Tees, but while larger, their contracts are also much longer than others.
• March/April seems to be by far the biggest time for contract wins, closely followed by November/December.

Note:

Dates on this aren't exact, they're the month of the announcement.

*EDIT* I've updated the date formats to be DD-MM-YYYY as the default format was American and misleading.

One pattern i've seen in tech companies that don't want to let employees go (first hand) is they stop replacing people that leave, and they cease or severely restrict hiring.

I was curious if I could spot anything on the wayback machine with careers at Alcidion that might hint at something that might have surfaced the trouble they were having late last year.

There are a bunch of snaps dating back to 2020. Keep in mind that these snaps are not the exact point in time when the change occurs in the website, but just a coincidental point at which wayback machine chooses to index the page. At Alcidion's peak of hiring in 2021-2022 they had something close to 16 job ads open at one point. At their lowest point, September 28th 2023 they had 0 job openings.

So let's look at LinkedIn and see what we can find out about recent hiring at Alcidion in the last year

First of all, LinkedIn thinks you're a bot if you open 149 profiles quickly.

• Alcidion have been hiring a tonne in the last year. More than the careers page would have you believe - I guess they got internal referrals or people contacting them with applications.
• It seems like Alcidion generally fills positions really fast.

Since January 2023 Alcidion has hired:

• Multiple business analysts (3 at my count)
• Testing and test automation leads (I wouldn't usually expect to see testers or writers being hired by a company in trouble, that being said given its healthcare tech - test automation is a bit more critical than your typical software product).
• Marketing content developer
• Project managers
• Security analysts
• A director of marketing
• Data visualization specialists
• etc etc (probably more, but I got sick of LinkedIn challenging me with logins and finding the people again).

At my last count before LinkedIn decided get in my way, there were 18 new hires in the last 12 months.

So what did I learn?

• Unfortunately, Careers page history isn't really a proxy for anything.
• Opening 149 profiles and looking at the history is tedious, I really need to look into a quicker way to aggregate new hires of the last 12 months.
• If Alcidion is struggling, their hiring practices don't appear to show it.

From the SPP doc:

And the results / closure:

From Fintel & Nasdaq

Alcidion Group (ASX:ALC) Price Target Decreased by 31.25% to 0.11

The average one-year price target for Alcidion Group (ASX:ALC) has been revised to 0.11 / share. This is an decrease of 31.25% from the prior estimate of 0.16 dated October 31, 2023

The price target is an average of many targets provided by analysts. The latest targets range from a low of 0.08 to a high of 0.14 / share. The average price target represents an increase of 53.70% from the latest reported closing price of 0.07 / share

What is the Fund Sentiment?

There are 6 funds or institutions reporting positions in Alcidion Group. This is a decrease of 1 owner(s) or 14.29% in the last quarter. Average portfolio weight of all funds dedicated to ALC is 0.00%, a decrease of 30.59%. Total shares owned by institutions decreased in the last three months by 18.66% to 922K shares

DISC: Held in SM & RL

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.

Well the details of the SPP were released ...

https://www.marketindex.com.au/asx/alc/announcements/share-purchase-plan-announcement-3A629872

The SPP aims to raise up to $1.0M via the issue of up to approximately 13.33 million fully paid ordinary shares (‘SPP Shares’). The SPP is not underwritten

Alcidion’s existing eligible shareholders will be the given opportunity to subscribe for a maximum of $30,000 per shareholder in SPP Shares at the same offer price as the Placement of $0.075 per SPP Share

Given that you can currently buy the shares on market for less than the SPP price ...

I wanted to have a look at how the NHS is progressing in its digitalisation stratgy.

So I teamed up with my new buddy Bing Chat Enterprise to generate this list of 40+ accouncements for EMR systems from over the last two years. These are much bigger investments that for $ALC's products. The contract sizes range from about GBP8m right up to GBP50m. (I have not personally verified the whole list, however, a sample do check out.)

I note that the 2023 list is shorter (pro rata) than 2022.

I wondered though, with so many decsions being taken on big EMR platforms, whether that may be one issue for $ALC for the following reasons:

1. The EMR is a big financial commitment, In the run up to making it and in the aftermath, spending on other systems many be squeezed
2. In the run up to an EMR procurement decision, it may be hard to get management to take decision on patient flow and other solutions. This could be for reasons including: attention focused on EMR bundles of functionality (which may obviate the need for $ALC investment) and questions of inter-operability
3. Both in the run-up to and aftermath from an EMR decision, human capacity in the NHS Trust will likely be focused on the success of the EMR. $ALC may be struggling for attention, in some cases.

So, an alternative hypothesis is: "$ALC is reporting slow decsion-making on new contracts, because the systems attention is elsewhere?"

Here is the AI-facilitated list (enjoy)

• September 2023: Bradford Teaching Hospitals NHS Foundation Trust selected Cerner as its preferred supplier for its new EMR system.
• August 2023: Alder Hey Children’s NHS Foundation Trust awarded a contract to DXC Technology to deliver its Lorenzo EMR system.
• July 2023: Nottingham University Hospitals NHS Trust signed a contract with System C to implement its CareFlow EMR system.
• June 2023: University College London Hospitals NHS Foundation Trust selected Epic as its preferred supplier for its new EMR system.
• May 2023: The Royal Marsden NHS Foundation Trust signed a contract with Civica to implement its Cito EMR system.
• May 2023: Lancashire Teaching Hospitals NHS Foundation Trust selected Cerner as its preferred supplier for its new EMR system.
• April 2023: Surrey and Sussex Healthcare NHS Trust selected Cerner as its preferred supplier for its new EMR system.
• April 2023: Imperial College Healthcare NHS Trust extended its contract with Cerner to implement its Millennium EMR system across its five hospitals.
• March 2023: Barnsley Hospital NHS Foundation Trust awarded a contract to DXC Technology to deliver its Lorenzo EMR system.
• March 2023: Manchester University NHS Foundation Trust awarded a contract to Allscripts to deliver its Sunrise EMR system.
• February 2023: The Hillingdon Hospitals NHS Foundation Trust signed a contract with InterSystems to implement its TrakCare EMR system.
• February 2023: Oxford University Hospitals NHS Foundation Trust signed a contract with Epic to implement its EMR system across its four hospitals.
• January 2023: St George’s University Hospitals NHS Foundation Trust selected Epic as its preferred supplier for its new EMR system.
• January 2023: Liverpool University Hospitals NHS Foundation Trust selected Cerner as its preferred supplier for its new EMR system.
• December 2022: Royal Berkshire NHS Foundation Trust awarded a contract to System C to deliver its CareFlow EMR system.
• December 2022: Guy’s and St Thomas’ NHS Foundation Trust extended its contract with Cerner to implement its Millennium EMR system across its three hospitals.
• November 2022: North Bristol NHS Trust signed a contract with Allscripts to implement its Sunrise EMR system.
• November 2022: Sheffield Teaching Hospitals NHS Foundation Trust awarded a contract to InterSystems to deliver its TrakCare EMR system.
• October 2022: Barking, Havering and Redbridge University Hospitals NHS Trust extended its contract with Cerner to implement its Millennium EMR system across its three hospitals.
• October 2022: King’s College Hospital NHS Foundation Trust signed a contract with Epic to implement its EMR system across its four hospitals.
• September 2022: Luton and Dunstable University Hospital NHS Foundation Trust awarded a contract to Epic to implement its EMR system across its two hospitals.
• September 2022: Mid Yorkshire Hospitals NHS Trust selected Cerner as its preferred supplier for its new EMR system.
• August 2022: East Sussex Healthcare NHS Trust signed a contract with Civica to implement its Cito EMR system.
• August 2022: Great Ormond Street Hospital for Children NHS Foundation Trust awarded a contract to DXC Technology to deliver its Lorenzo EMR system.
• July 2022: Dorset County Hospital NHS Foundation Trust selected Cerner as its preferred supplier for its new EMR system.
• July 2022: Birmingham Women’s and Children’s NHS Foundation Trust signed a contract with System C to implement its CareFlow EMR system.
• June 2022: Chelsea and Westminster Hospital NHS Foundation Trust awarded a contract to DXC Technology to deliver its Lorenzo EMR system.
• June 2022: East Lancashire Hospitals NHS Trust selected Cerner as its preferred supplier for its new EMR system.
• May 2022: Portsmouth Hospitals University NHS Trust signed a contract with InterSystems to implement their TrakCare EMR system.
• May 2022: Royal Free London NHS Foundation Trust extended their contract with Cerner to implement their Millennium EMR system across their three hospitals.
• April 2022: Cambridge University Hospitals NHS Foundation Trust selected Epic as their preferred supplier for their new EMR system.
• April 2022: Leeds Teaching Hospitals NHS Trust awarded a contract to Allscripts to deliver their Sunrise EMR system.
• March 2022: University Hospitals Bristol and Weston NHS Foundation Trust signed a contract with Epic to implement their EMR system across their two hospitals.
• March 2022: The Newcastle Upon Tyne Hospitals NHS Foundation Trust extended their contract with Cerner to implement their Millennium EMR system.
• February 2022: South Tees Hospitals NHS Foundation Trust awarded a contract to System C to deliver their CareFlow EMR system.
• February 2022: Northumbria Healthcare NHS Foundation Trust selected Allscripts as their preferred supplier for their new EMR system.
• January 2022: The Royal Wolverhampton NHS Trust signed a contract with Allscripts to implement their Sunrise EMR system.
• January 2022: Royal Cornwall Hospitals NHS Trust awarded a contract to System C to deliver their CareFlow EMR system.
• November 2021: University Hospitals Birmingham NHS Foundation Trust signed a contract with Cerner to implement their Millennium EMR system across their four hospitals.
• November 2021: Norfolk and Norwich University Hospitals NHS Foundation Trust awarded a contract to DXC Technology to deliver their Lorenzo EMR system.
• October 2021: County Durham and Darlington NHS Foundation Trust signed a contract with Civica to implement their Cito EMR system.
• October 2021: Barts Health NHS Trust secured £12m of funding from NHS England and NHS Improvement to invest in a new EMR system and selected Cerner as its preferred supplier.

Note: I don't have an up to date number, but there of the order of 200-250 NHS Trust in the UK, so this is a minor but significant fractoin of the whole.

There are multiple risks i see fundamentally and sentiment vise.

1. Management ability and willingness to reduce cost of business is minimum- and happy to raise capital at distress price to fund delayed contracts

2. Kate mentioned that procurement approach has changed for EMR and it went into tender process and not every NHS trust going in FY24.

3. Risks are two fold now, probability of them winning the contracts x probability of them winning in required timeframes till balancesheet allow to fund employees.

4. Management and Boards ability to navigate potential difficult macro environment.

5. There were no high hopes for Q2 and Q3 results - sentiments isn't going to turn anytime soon

I would have preferred them to reduce the cost base somehow instead of dilution. History of dilution is very poor...makes it difficult to increase any KPI per share

I just sold my shares at loss and will come back at higher prices once i have confidence that it is self funded.

Wow! This has become wealth transfer machine from shareholders to employees.

Management decision not to reduce staff cost even after delayed contracts is costing balance sheet and shareholders.

$ALC in a Tading Halt pending annoucement of the Capital Raise.

There is a call later this morning on the 4C Quarterly, which is yet to be released.

I can't attend, so hoping to read reports from other StrawPeople.

Not sure why a CR is required, as they had $14m at end of June, and cash flow generative. It's hardly an opportunistic raise given the SP!

So presumably there is an acquisition on the horizon?

Interesting.

Disc: Held in RL and SM

ALC commentary: 9:00-11:31

https://ausbiz.com.au/media/walkers-software-stocks-to-watch-ansaradas-quarterly-boost-felixs-deal-expansions?videoId=32535

Claude Walker gives some handy commentary in the lead-up to ALC releasing its Appendix 4C Cash Flow Quarterly Report on Oct. 31st.

I agree with: ALC needs to become profitable and the UK contracts need to come through for the share price to start climbing out of the doldrums.

Disc: Held IRL & SM

https://www.talkinghealthtech.com/podcast/386-what-is-a-fhir-event-platform-vivek-krishnan-alcidion

Alcidion Wins HTN's Communication Tool of the Year Award

Dear Shareholders,

We are delighted to share the exciting news that Alcidion has been honored with the prestigious "Communication Tool of the Year" award by HTN (Health Tech News). This recognition showcases our commitment to innovation and the transformative impact our solutions have had on healthcare communication and patient care. This award is a testament to the outstanding collaborative efforts of our teams at Guy's and St Thomas' NHS Foundation Trust and Lancashire Teaching Hospitals NHS Foundation Trust.

Before Smartpage's introduction, healthcare institutions, like Guy's and St Thomas' NHS Foundation Trust, relied on paper-based processes and pagers. These antiquated methods led to inefficiencies, a lack of accountability, and ultimately poorer patient care outcomes. With the implementation of Smartpage, our technology has empowered healthcare professionals by providing them with a fast, reliable, and contextual messaging system, complete with two-way closed-loop communication and comprehensive task management capabilities.

The impact of Smartpage has been profound, with benefits that include:

• Full visibility of activity, enabling staff to prioritize and respond quickly to deteriorating patients.
• Reduction of unnecessary interruptions, leading to improved patient care.
• Easier clinical collaboration and real-time data insight.
• Better integration and operational efficiency.

Lancashire Teaching Hospitals, another esteemed partner, adopted Smartpage across both clinical and non-clinical services and witnessed an average of 60 percent of daily jobs activated within five minutes, showcasing its effectiveness in a real-world healthcare environment.

Smartpage is currently live within nine NHS organizations, with plans to expand to other trusts and develop their time-saving software.

We are immensely proud of this recognition and grateful for the unwavering support of our shareholders. This award reaffirms our mission to drive positive change in healthcare through innovative technology, and we look forward to the continued journey of improving patient care.

Read full Article Here

Thank you for your ongoing trust and support.

Sincerely,

Team Alcidion

In the episode of Talking HealthTech, Kate and Martin ( Founder of Olinqua) discuss how their partnership can reduce hospital wait times and overall make things more efficient and Why this is the right time for this partnership.

https://www.youtube.com/watch?v=SDjGrXj5KYU

Doing research to figure out Alcidion's chances of winning NHS contracts for EPR. ( Putting all the info that I can find here and then will see how it all relates and figure out chances - That's the idea anyway!!)

https://www.digitalhealth.net/2023/07/epr-frontline-digitisation-target-declared-unachievable/

https://www.digitalhealth.net/2023/04/what-to-expect-from-epr-transitions-in-2023-and-beyond/

https://www.digitalhealth.net/2023/04/us-firm-cerecore-brings-its-emr-implementation-expertise-to-the-uk/

https://www.uhsussex.nhs.uk/news/early-market-engagement-for-electronic-patient-records-epr-solution-procurement/

https://www.digitalhealth.net/2018/10/hancock-tech-revolution-mandatory-open-standards/

https://htn.co.uk/2023/08/25/news-in-brief-neonatal-epr-launch-in-calderdale-new-funding-for-tech-enabled-care-qualification-in-scotland-patient-support-websites-in-london-and-more/

Alcidion reported its FY23 report

Revenue:

Receipt from Customers

Expense

Operating Cash

No. of Shares

My view:

In the absence of an NHS contract, Alcidion currently looks like a slow growth company. However, I get a sense that Alcidion has significantly hired in anticipation of NHS contracts and because of those contract delays, expense has grown fast compared to revenue.

In one of the calls, Kate mentioned that it would be very shortsighted of her if she started cutting costs and suddenly had NHS contracts and struggled to find the resources to fulfill them.

Although Alcidion hasn't performed that poorly in the absence of NHS contacts - However, I anticipate there will be significant pressure on Alcidion's share price for some time because one of the co-founders ( Ray Blight) seems to be selling his portion after his resignation. He resigned on 30 June 2021 and also Alcidion's previous CFO Collin MacKinnon who retired last year is selling down his portion. ( Highlighted yellow in the screenshot below).

So If Alcidion wins large NHS contact sometime in the next 6 months, that will provide significant liquidity for them to get out ( if they completely want to) and then there will be more buyers than sellers hopefully.

On top of the favourable NHS progress, there is likely to be reason for optimism closer to home. For those of you who don't know, there is an announcement imminent in NSW with the single digital patient record coming.

https://www.ehealth.nsw.gov.au/solutions/clinical-care/electronic-medical-records/sdpr

Rumour has it that EPIC is the contract winner - all the American staff in Canberra for the 2022 implementation of EPIC there were quite open with NSW being the next job for them. The successful candidate is still officially unannounced.

With 15 LHDs and 3 specialist networks in NSW, each of whom already run their own implementations of an EMR with Cerner and Orion the two most common systems and nobody in NSW using EPIC, it's hard not to think that this would not result in some flow through to Alcidion as there is a need it bridge the past and future.

Given the interest in Alcidion recently there seems to be a lack of update on competitors.

Oracle has rebranded their Cerner Acquisition.and put NHS on the front page

https://www.oracle.com/healthcare/

I think Oracle will be very hard to dislodge. My logical thinking therefore is Alcidion could be an acquistion target.

But it won't be Oracle as they have already found their "dance partner" with Cerner.

In the meantime for many of you it would be good idea to go through the Oracle website. Maybe go through all the other competitors too which there are probably many.

On the flipside, I don't think Oracle has managed to dislodge the dominance of Xero with their Netsuite offering. So maybe there is still some hope. However Xero had a big headstart over Netsuite. Oracle also likes a "big bang" approach on deployments compared to ALC's future strategy.

ALC is on the watchlist but I think I need to see a bit more consistency on some metrics and get them to highlight more on the advantages over the incumbents. Maybe someone with more background and time here should do a SWOT analysis on their products versus competitors and do a kind of Gartner "Magic Quadrant". Also at this market cap with so many competitors I'm seeing better value elsewhere with better competitive advantage.

Fantastic comments from the crew already. Here's one of the best things I reckon:

Just over $1M in volume. Liquidity is coming back baby.

I agree with @NewbieHK and @Remorhaz that the $ALC result today was a postive.

I'll skip the usual summary of results and analysis and focus instead on an assessment of my usual CF trend analysis and take a look at contracted revenues. The common thought process I am bringing to all of my small caps that are approaching inflection is: "now that costs are under control and also now that we are seeing the organic growth engine exposed, is the revenue growth and operating leverage strong enough to make this an interesting investment?"

First some general observations:

• The selling of incremental modules approach appears to be working.
• The mix of renewals and new contracts is good.
• NZ appears to have reached a possible turning point. No point writing too much, as it is the size of an Aussie State, but worth a mention. Kate has commented before on the slow progress in NZ, because they have been impacted by the consolidation of District Health Boards into a consolidated structure. This kind of reorganisation plays havoc with IT procurement decisions because of all the energy that is consumed in the internal reorganisation. So I am sure they will be focused on trying to get a roll out of the module that is in place in one of the former DHBs. And after that more modules? Eventually, the new organisation will kick into action and start making decisions. (I have three members of my extended family working in the NZ health service, and the staffing pressures are as real there as in Aus and UK.)
• The key message of "we're saving clinicians time", be it doctors, nurses, or orderlies will resonate strongly with decision-makers, given the perennial staffing pressures in all markets.
• They are building strong "reference cases". This is important because public health services are not in competition with each other and openly share good practices, and coalesce around common solutuions. $ALC are doing a good job on social media with this, as others here have observed.
• Costs appear to be reasonably under control, with Kate setting clear expectations for FY24.

Now to the analyses.

1. CF Trend Analysis

Above is the usual CF analysis. I usually prefer to focus on FCF, but because of the acquisitions within the 8Q window I am going to focus on OpCF. (Although, you can see that absent the Silverlink earnout, $ALC is solidly in the exploitation phase with minimal capex.)

Previously, I have shown the trend lines over the entire dataset, but I am increasingly using the last 8Q, as above, because I think that is a better reflection of the impact of management efforts in the more recent capital constrained environment.

If you compare the above chart, with earlier editions, the good news is that the slope of the OpCF line is increasing significantly. Obviously, the very strong most recent Q helps a lot.

Given the high Q-on-Q volatility it would be wrong to say that the last 3Qs shows a positive trend. So, I won't say that! But the longer term trend is there. Again, I'm not going to show the FCF trend line, as the one-off Silverlink impact renders this meaningless.

2. Analysis of Contracted Sales and Revenue

In lieu of an explicit outlook, I've noticed that in each Q4 report, Kate gives a statement of how much of the contracted revenue is expected to be realised as revenue in the following FY.

So, in the graph below I compare that component of the CR (denoted as "CR(Q4-1)FY") with the revenue or the forecasted revenue from the FY (denoted as "Rev FY").

Above each blue bar (the CR), I plot the % of how much of the next year's revenue is already contracted.

You can see that over the last 3 years, it has been 69% (2021), 58% (2022) and 71% (2023), yielding and an average of 66%.

For FY24, I have used these %'s from the previous years with $33.7m of CR to be recognised as revenue in FY24 to project a range of forecast revenue outcomes for the FY24.

These revenue projections equate to FY23-FY24 revenue growth rates ranging from 19% in the low case to 45% in the high case, with a mean of 28% revenue growth.

This is where I have to write "past performance is no guarantee of future performance" and indeed, with a constant sales force going in to FY24, you might expect being at the lower end of the range to be more likely. It might even be lower (all things being equal) because a constant level of incremental sales represents a progressively declining % increase of each year's base.

However, if $ALC lies anywhere on that range, and provided costs can controlled as Kate has indicated, then we should expect FY24 to be both significantly cash generative at the OpCF and FCF levels.

(OK. I'll stop there and put my inner analyst back in the box).

My Key Takeaways

Overall, the $ALC analysis indicates that the company is passing through the CF inflection point. Given the very large Q-on-Q variations, it is important to take today's positive result in its wider context, and I think Kate's measured and qualified delivery did justice to that.

However, in the UK (and to a lesser extent in NZ), the health systems face particular head winds. In the UK the NHS is widely perceived to be in crisis. I have lived in the UK for 20 years and much of my business network and extended family live there today. At a personal level, I am aware of stories that show the system to be under stress, subject to industrial unrest and suffering from political interference. Kate made reference to these headwinds, and again to her great credit was very balanced in how she tells the story.

$ALC's continued progress despite these headwinds is encouraging. My only issue, is in the case of the UK, there is no end in sight.

I am considering increasing my position in $ALC. With the SP at 25 x EV/EBITDA(FY25), it is sitting between $M7T (12) and $VHT (38), and my current position size indicates a higher risk rating than it deserves. One to mull over, and I will likely wait until Monday, when $M7T reports. There's enough data now that it might even be time to build a DCF. Now there's a cheery thought.

Disc: Held in RL (0.9%)

for those interested in the Olinqua tie up--looks incremental, Australian ED's

https://olinqua.com/alcidion-and-olinqua-partner-to-reduce-record-hospital-wait-times-that-cost-australian-lives/

Some notes after watching the business update presentation (thanks for sharing @Remorhaz )

• Record quarter for cash receipts -- $17.6m, which account for 37% of the total cash receipts for FY23
• Positive operating cash flow for quarter and the full year -- FCF +'ve for the quarter. (this was promised at the start of the year)
• $40m in revenue (unaudited) for FY23 -- approx. 17% increase on prior year
• $14.6m in cash with no debt. Cash balance up 32% since Q3
• Costs stabilised. Expect no major changes. Staffing levels seem appropriate given growth expectations.
• Silverlink earnout now complete
• Level of engagement with prospects remains high
• All legacy Miya contracts renewed and upgraded (shows how embedded products are, and also makes upsell & integration of additional modules much easier. Also there's less support work required -- ie less cost)
• New sales of $7.3m for the quarter was ok, but unlike cash receipts far from a record. Some delays to EPR work in the UK likely having an impact here. Kate said sales will often be modular and staged.
• Already $33.7m of contracted and scheduled renewal revenue expected to be recognised in FY24 (this time last year that figure was $28.3m, so a 19% lift). A good reminder of how much visibility there is in this business.
• Kate didnt give guidance on what NPAT would look like in the current year, but said they expected continued strong revenue growth and stable costs -- so hopefully we should see a decent net margin start to emerge. At the very least, it seems they will be self-funding going forward. BUT things like geographic expansion or other investments could change that. More "colour" will be presented at the formal FY results

In general. I really like Kate's style. She's a straight shooter and I think she and the team are generating some tangible results in a sector that is notoriously slow and bureaucratic.

It seems Alcidion has been quietly going about its job and slowly accumulating sales. The highlight seems their ability to continue to make sales and increasing cross sell opportunities even with the NHS digitalisation process taking place at a slower than expected pace. As a holder I am feeling a lot more reassured today that the CEO Kate has the ship moving in the right direction.

https://www.alcidion.com/wp-content/uploads/2023/07/ALC_Q4_FY23_Quarterly_Activities_Report_and_Appendix_4C.pdf

Seems like some sort of process is starting. I am not an expert but wording suits ALC.

https://www.uhsussex.nhs.uk/news/early-market-engagement-for-electronic-patient-records-epr-solution-procurement/

Alcidion announced today that it had signed two Silverlink PCS contract renewals.

Along with this signing, these two contracts also trigger the earnout payment of A$2.8m agreed upon during the acquisition.

An interesting new update is that their current cash on hand is $15.6m Which is $4.5m more than the last disclosed figure as of 31 March 2023 in their 3Q 4C.

So two months of 4th Q have passed and their general expense of Q is ~11.5m so I think it indicates to me that 4th Q receipt will be in the vicinity of ~$15m.

So if we exclude this $2.8m payout, their FY23 operating cash outflow will be roughly 2m or thereabout.

Essentially, if it manages to sign a few big NHS contracts by the end of FY24, the Probability of them being cash flow positive in FY24 is very high.

sentiment currently for this business is very low.

Seems like the perfect setup for better performance compared to the index in my opinion for the next 2 years.

Another director buying Alcidion

$55k

In the background, I noted several very positive accolades for Alcidion on LinkedIn:

• Diane Carter, Digital Programme Manager at South Tees Hospitals NHS Trust mentioned: “Significant work went into the analysis of existing forms and developing what was required for the new #digitaljourney and I'm pleased to say it's been an incredible success! Huge well done to the whole team, thank you to Alcidion for their amazing and reactive support (as usual)”

• “I can say hand on heart that the tech support we receive from Alcidion is by far the best we get from any of our software suppliers. All your staff are an absolute pleasure to work with, knowledgeable and an asset to your company. They should be recognised and congratulated for their exemplary work.”

- Elli Chapman, Applications Specialist, North Cumbria Integrated Care NHS Foundation Trust

Full post: Commented on them alongside 4 other reports in my Substack this week.

Rebecca Wilson

·      3 May 2023

Direct 250,000 price $0.097 per share ($24,250)

Straw significantly edited as there were some errors in the earlier cash flow figures, now corrected.

Text also updated following the presentation Q&A and some observations added. Apologies for what is now a very messy straw ... but accuracy is important!

Figure 3 added to show the quarterly new sales from the presentation.

@Valueinvestor0909 has picked out the key issues.

Based on Q2 FY23 report we were all expecting at least $2m (edited from $3m) of the cash receipts (** see below comment) to be due to the late payments in the previous quarter. So the reported receipts of $10.446m are really only c. $8.5m (edited from $7m) from the quarter, so meh.

Also, Q3 Sales are unimpressive, - the graph wasn't in the 4C release, but is included in the presentation. (Edited out my earlier comment, throwing shade at Kate for not reporting this metric!) I've included it in Figure 3, below.

Taking a step back, I've updated my usual 4C Cashflow plot (Figure 1). And because $ALC is lumpy from Q to Q, I have plotted the same data in a trailing 12 months (TTM) format.

Basically, $ALC is running hard to stand still - there being no significant trend now in OpCF since the Silverlink acquisition.

I'm hanging on because Kate appears to be controlling costs well, and the UK implementations are providing reference sites. It should be expected for these implementations to take time, given the long sales cycle. So I am holding for now, but I think another year or so, and the strategy needs to start delivering operating cash flow growth.

** Comment:

During the Q&A today, one investor asked about the "late $5.6m receipt", to which the CFO (correctly) replied that the questionner was mistaken. He then clarified that there was a late payment of $2m in Q2 and, because some payments in Q3 were also received late, that Q3 receipts could be considered "normal" (swings and roundabouts argument). This confused me, because if this is true, why did they make a song and dance about it in Q2. Doesn't it just mean that a portion of payments falling due towards the end of the Q will always risk falling into the next Q?

CFO was adamant that Q4 will be the strongest receipts of the year. This is also in the release, so that indicates to me that >$13m Q4 receipt is in the bag. Given that the cost base is stable and investments are dialed right back, this means they will likely have a final Q that is OpCF and FCF positive.... provided they get paid ;-)

Key Takeaway

Management are trying very hard to get the most out of each quarterly report, for example, to achieve the (now abandoned) promise of being EBITDA positive this year. Personally, I think they are trying too hard to put a positive gloss on their communications. Now I don't believe Kate and her team would mis-state the facts, but they need to be careful with the spin, as it is easy to trip yourself up over time. For example, it is fine to talk about NHS staff shortages and strikes. But we all watch the news, and that is a characteristic of the market they are playing in. It is a fair headwind countering the tailwind of the drive to digitally emable the NHS.

I am observing a pattern in several tech holdings that, when sales and receipts in the quarter fall off the growth trend, there is a tendancy to talk about timing of payments, slow sales cycles, delays in renewals, and the strength/growth/record nature of the pipeline. (Examples from $3DP, $EVS and $ALC). As investors, we only have to wait 13 weeks to see if the story plays out so, thank goodness for the 4C and quarterly reporting! Equally, it is important to recognise that 13 weeks is a short period of time and the lumpiness from quarter to quarter can be very significant, as Figure 1 shows. It is as important not to over-react to one bad quarter as it is to over-react to one good quarter. Whatever the fair value of $ALC, I don't believe that today's result warrants a 10% markdown. Of course, using a cricket analogy, for every over that you don't hit the target run rate, it means more boundaries are needed in subsequent overs to stay on target overall.

Figure 1

Figure 2

Figure 3

Disc: Held IRL and SM

Alcidion released Q3 cash flow and commentary.

I was looking for Cumulative new sales graph which is obviously missing. ( Edit : I will take this as missed by mistake rather than intention as I could see this graph in presentation that was delivered in zoom meeting)

From Q3 FY22

From Q2 FY23

Another issue I find that, It advised the market in Q2 following,

I would expect Q3 to be huge if $5.2m of Q2 is delayed and landed in Q3.

FY23 EBITDA positive will not be achieved.

The only shining light is :

EDIT:

Kate seems a very open and transparent CEO and knows what she is doing. This is more of a confidence in management to deliver what they say. When Kate says that they is delay in NHS contracts - I am more inclined to believe her rather than be cynical.

I will hold my position because of strong and capable management

@Seasoning I have been looking at the same question. Silverlink acquisition closed on 16th Dec 2021.

So staff costs in 1H22 are essentially pre-Silverlink at 11.814m (cash costs).

In 2H22 staff costs were $12.196m (up from $9.641m or 26.5% from PCP). So, I take that as the approximate Silverlink impact.

Now looking at 1H23 over 1H22, we have $14.47m over $11.814m or +22% - slightly less than you might have expected given Silverlink in a zero inflation environment. There will be early overhead synergies. So if you then consider wage inflation, its actually a very reasonable result.

In summary, I don't see any issues with the increase in staffing costs.

Disc: Held IRL and SM

I was going through stuff from their presentation for potential questions for todays meeting and I realized something about staff costs in this screenshot. If the impact of silverlink staff was just 2 weeks contribution, what's the full contribution in a half? Does this mean the staff cost increase we're seeing is not the full picture and they're actually much higher? or am I reading this wrong.

Just got off the call.

Opportunities:

• The foothold into Victoria with the Alfred (a teaching hospital), from my knowledge Alcidion hadn’t really ventured into Victoria before.
• Proven integration with Cerner - may open up other opportunities
• Full Alcidion suite with South tees now serves as a reference to others.
• Tailwind with current poor staffing in hospitals in the UK market

Risks:

• They keep buttering us up with 'political turmoil,' to be fair to them it has been a bit of a revolving door there so I'm willing to give them the benefit of the doubt - but it shows you how sensitive they are to the UK in their success

A note I made about their strategy:

If you're wondering about their acquisitions - The ExtraMed acquisition has value at 'Phase1,' Silverlink at 'Phase 3'. I find that interesting because they've said that having PAS capability was how they'd land customers - but this looks like more in the expand part.

About increased costs

It was said on the call that it was a combination of wage inflation, and the Silverlink staff being on for more than 6 months. They said they don't intend to hire like they have in the past - but are looking to fill certain positions. So according to them we shouldn't see the staffing costs increase as drastically as it has.

It was framed as a percentage of revenue, and in that framing it doesn't look as bad, but it's worth noting the increase in marketing costs that was also there.

Just putting this here now. My initial thoughts is it's pretty meh, and I feel like they're really trying to focus you on the revenue while glossing over the increased costs.

The recording of the Q2 FY23 Business Update webcast is now available online

https://vimeo.com/793957357

Some of my notes:

One thing I noted from the 4C was they said -4.5 mil operating cashflow due to receipts not coming through at the right time. When someone asked a question in the update - they said they expected half of the 5m outstanding in receipts was expected to go through - so they still would've been negative. Weird to write that on the presentation and either way it would've been negative operating cashflow.

Another thing mentioned on the call, not particularly new info was the importance of Silverlink in them winning the contrast for the exemplar University hospital South Hampton, and the number of modules chosen at this location. Having a presence at one of the digital exemplars is a big deal due to this being a proving ground of success and the potential of it being used as a template for the rest of the roll out in the UK. There was also a bit of expansion in existing customers and extension of contracts.

A number of tenders are up and not entirely just for EPR, but many of the other offerings that Alcidion has, another thing to watch with Alcidion over the year.

Lastly, Kate mentioned that the NHS digitisation strategy had some delays due to various political issues in the UK - but the deadlines are still the same - so it will be interesting to see how this plays out.

Alcidion Historic Capital Raises – Raised $91.6m since February 2016, current market cap of $177.5m ($0.14 closing price today)

·      December 2021 – Raises $55m, $43.4m Institutional, $11.6m Retail at $0.25

·      April 2021 – Raises $18.4m - $15.4m Institutional, $3.0m Retail at $0.32 per share

·      November 2019 – Raises $16.2m Institutional at $0.18 per share

·      February 2016 Backdoor listing IPO raises $2m at $0.031

Alcidion Past Acquisitions

·      December 2021 – Silverlink Software - £30.0M (A$55.5M), with a further £3.0M (A$5.6M) subject to earn- out conditions being met  - one of the largest and few remaining specialist Patient Administration System (PAS) providers servicing the UK NHS market. https://www.asx.com.au/asxpdf/20211207/pdf/453wnjclj8q22z.pdf

·       April 2021 – ExtraMed - £5.3M (A$9.6m) cash – a leading UK NHS provider with a 20+ years track record specialising in providing patient flow management software. https://www.asx.com.au/asxpdf/20210415/pdf/44vkm3v1vy36jz.pdf

·      April 2018 – MKM Health and Patientrack – Initial payment of A$12m with A$10m satisfied by the issue ALC shares and A$2 million payable in cash. A further contingent consideration of up to A$4 million payable in 12 months in ALC shares. MKM Health is a leading provider of IT solutions to healthcare providers across Australia and NZ and UK based Patientrack is a world leading supplier of healthcare software. https://www.asx.com.au/asxpdf/20180424/pdf/43tfk0r6z2k3kq.pdf

·      Dec 2017 – Oncall systems Ltd – upfront cash NZ$750K (A$680K) plus performance milestones second component was capped at maximum additional payment of NZ$2.25m (A$2.0m) made up of 40% cash and 60% Alicidion shares – leading provider of a cloud based; clinical communications suite known as Smartpage https://www.asx.com.au/asxpdf/20171206/pdf/43pykzhvl88ymy.pdf

Inside Ownership                   Ordinary Shares    % ALC Issued         Net Value at $0.14      

Malcolm Pradhan                   134,582,403                10.61%                         $18.84m

(Was Director & Chief Medical officer retiring AGM Nov 2022)

Raymond Blight                      92,678,438                  7.31%                          $12.97m

(Co-founder, Ex-CEO)

Katie Quirke (CEO)                  47,561,285                  3.75%                         $6.66m

Rebecca Wilson (Chair)           1,662,489                    0.13%                        $0.233m

Simon Chamberlain (Board)   517,308                       -                                   $0.072m

Victoria Weekes  (Board)        160,000                       -                                   $22,400

Daniel Sharp (Board)              328,572                       -                                   $46,000

Total                                        277,490,495                21.88%                        $38.85m

Alcidion extending partnerships, additional $8.4m. Proof that the software gaining momentum.

Through a family contact I had the opportunity to speak to someone who is a part of a team managing IT systems at a hospital that uses Alcidion. I mentioned that it sounds like they have some interesting systems at the hospital and if they’ve worked with something called Miya. While this person was not a health professional - it turned out they were part of the team that worked with Alcidion on the hospital side and said Alcidion were a really pleasant vendor to work with, who took the time to sit down ask questions and listen, as opposed to vendors like Oracle, and as a result they’re going to see something going live in the next few weeks (I’ll be keen to hear how that goes!)

While this doesn’t really change a whole lot for me regarding Alcidion, it’s good to hear that they’re taking the time to manage their relationships with the teams they need to work with where it sounds like other bigger players just throw their weight around.

From the Coffee Microcaps Technology Conference:

Day 2 (09/11/22) included presentations from SP3, ALC, SPZ, SYM, & AVA

Youtube link to Alcidion's presentation by Kate Quirke

Takeaways from the Investor presentation

• Current turmoil in UK doesn’t necessarily put the digitisation programme at risk or that spending to the NHS has been impacted.
• They have seen it impact the speed at which negotiations are progressing.
• Seeing the Silverlink acquisition paying off with opening up pipeline for sales and making them competitive in areas they wouldn’t have been able to be. It’ll still take time to demonstrate the value.
• Consolidated NZ Health is now 4 main regions, and they are positioned well with relationships for this.
• No indication of a pullback in digitisation programme with NHS, If anything they are seeing less inclination to spend on the large electronic medical record providers.
• On there being a possibility of Miya being used outside Healthcare Kate did mention that she wouldn’t discount adjacent areas (such as with the ADF, and with aged care).
• Larger contract sizes are generally taking longer to sign
• Coming out of an accelerated growth phase that required expenditure to build the business, now they’re looking at levelling out that expenditure.
• FY23 and beyond, As they increase revenue you’ll see a larger portion of that revenue demonstrated as bottom line profit.

Latest digital health project to enhance decision making across Australian hospitals - October 28 2021

I found this article googling around the internet about Miya precision. Not sure if this is old news for others following Alcidion.

The summary: The Digital Health Cooperative Research Centre is doing research to evaluate and improve clinical decision tools across Australia, it's a 3 year collaboration between Sydney LHD, eHealth NSW, Queensland University of Technology, and Alcidion.

"Their project will make use of Alcidion's Miya Precision system to identify priority areas where decision support tools will add value. The platform, which consolidates data from various systems such as EMRs, is currently being used by the Royal Prince Alfred Hospital and Wagga Base Hospital. "

I think it could potentially be a big deal for winning government contracts, my partner deals a lot with government as part of a not for profit, and having peer reviewed studies behind you helps a lot. Of course, it depends on whether this research ends up finding decision support tools like Miya adding value.

Just going through Annual report and few things stands out

Given around 50% of Alcidion's revenue comes from the UK and recent macroeconomic happenings - I've been trying to learn a bit about their foothold in the UK.

I noticed that Alcidion had landed some NHS Foundation trusts, South Tees was a recent one, as was East Lancashire.

I had the question: How does a NHS foundation trust differ from other NHS trusts?

I found this old Guardian UK article to explain: https://www.theguardian.com/society/2002/nov/13/health.theissuesexplained

They are described as "sort of halfway house between the public and private sectors," where they do get some level of financial and managerial autonomy. An NHS foundation trust is typically one considered to be held to a higher standard and larger than other NHS trusts.

Next question was: How many NHS foundation trusts are there in the UK?

There are 145 authorised foundation trusts in the UK, 99 of those are acute. So of the 138 acute NHS trusts that Alcidion are targeting, 99 of them are foundation trusts.

Which are considered the best NHS trusts?

There's a site that ranks them: https://top100hospitals.co.uk/

South tees is in there at number 87. East Lancashire was 37.

Why do I care about this? well, if Alcidion are helping the best ones - this might help them win more contracts.

For those that aren't ranked highly, if Alcidion meaningfully changes their ranking here over time - then that might also be a positive sign.

The NHS Acute global digital examplars

There is no date on this NHS page - but there are a number of NHS trusts selected to be considered the most 'digitally mature,' In 2020, Alcidion won their first digital examplar contract with Taunton and Somerset NHS Foundation Trust, 6 of these use Cerner, 1 uses Epic with 1 'fast follower' using Epic. Still looking into who has contracts with the others.

Why are these important contracts? "Each Global Digital Exemplar has selected one (or occasionally two) trusts to partner with to accelerate their digital maturity. In some cases, this will be sharing software or a common IT team. Others will adopt standard methodologies and processes. Fast followers are supported by NHS England funding and will enable Global Digital Exemplars to establish proven models that can be rolled out across the NHS more broadly."

Meaning a contract here has the potential for a two in one.

A little tidbit on the financial well-being of NHS trusts

I also found some recent coverage from the HSJ, a UK based publication and podcast on health, a few of their recent reports speak of the threat to the NHS given economic factors. One interesting one was: The NHS’s £18bn rainy day fund. The TLDL of this report is that essentially they threw buckets of money at the NHS during the start of the pandemic, but many trusts didn't actually spend said money - so were encouraged to do some 'creative' accounting to hold onto the money, so the economic conditions in the UK may not hit those NHS trusts for a while.

I guess we'll get a good look in Alcidion's next half.

I found this article on Nature that gives an overview of CDSS's, pitfalls and opportunities. I found it useful to help understand the positioning of the Miya platform a bit better without the bias that comes with a company's own statement.

https://www.nature.com/articles/s41746-020-0221-y

@Seasoning @Marsdrix, I think you need to look at what Miya offers to see that it isn't a direct competitor to Orion, Cerner or Epic, because it isn't solely an EMR.

Miya can be a full EMR, but that's not what it's key value proposition is. It's in integrating the datapoints from various legacy systems (many of which are nearing 40 years old) to aid in patient flow and clinical decision making.

One of my jobs is in a health service that uses Miya Flow, and as I understand it was considering adding on more Miya modules to integrate a mind bending hodge podge of clinical systems. In the end, this service has decided to throw it all out and start again with Epic.

Counterintuitively, this is excellent news for ALC. Why? Because you have 30+ years of patient data already stored on the existing EMR, which needs to be available and integrated into any new platform, and there is only one real player in this space.

With NSW Health moving to a single digital health record in the near future (a little birdie tells me that a decision is imminent, but won't tell me who the frontrunners are), Alcidion's offering is, in my view, going to be in very high demand across the largest health service in Australia. Similar issues exist across the developed English speaking health world, so the runway is a long one.

The biggest risk to Alcidion at the moment is not competitors, it's from Governments choosing to tighten belts too much.

A little tightening is OK, and probably favourable for Alcidion, because the cost of chucking out an old EMR to move to new one is huge, not only in capex, but in retraining a huge workforce that has become accustomed to a way of doing things. They can save by not investing in a new EMR, and just keep the legacy ones going with new bits on top for a little longer. And longer. And longer still.

To give you a sense of how expensive an EMR investment is, guess which private hospital operator has large numbers of its hospitals still using largely on paper based records for most of its services? Ramsay Health Care. Why? RHC want some guidance on what the Federal Government's digital health strategy is going to be before committing the money to it. And they haven't had that for 15+ years.

The mind boggles that in 2022, I am using Epic and Alcidion modules in one public ervice, Cerner and Orion in another public service, and pen/paper in the most profitable private service.

@Marsdrix that would be amazing.

I overlooked Epic. Quick look: present in at least 8 NHS trusts. Seems to have organic growth unlike Dedalus (who ill put my research in detail in the next few days as I’ve spent a lot more time looking at them).

So far I feel like Dedalus and Epic are the most likely threats to Alcidion, of the three ALC appears to have the most share of NHS trusts so far, but the other two just have so much money behind them and massive presence in multiple countries. The other competitors seem too far behind to catch up to these 3.

How likely is it for the winner to become a standard? Is this an environment where one becomes the absolute winner or is this an environment where multiple winners are possible?

Some related articles for Epic:

https://www.digitalhealth.net/2021/10/speculation-of-epic-deal-with-nhs-england/

https://www.digitalhealth.net/2022/07/two-nhs-trusts-go-live-with-epic-electronic-patient-records/

Thanks for your great work and analysis @Seasoning.

I’m not sure Epic are in the UK, but they are in Australia and America. Epic are a private company that produces an excellent Electronic Medical Record (EMR). There are useful communication features like messaging between treatment teams, through computer and smartphone app, with patient info attached and being able to see the name and contact number of the nurse taking care of a patient. Many things that anybody outside of medicine would just expect our systems can do.

My understanding is some of Alcidion’s software has a fair bit of this capability, but I need to check more. The positive for Alcidion is that it brings a lot of this functionality with their non-EMR offerings. Hospitals using Cerner or other EMR’s can get the functionality of those communications etc without (inconveniently) transitioning to the more expensive Epic.

Cogstate says their greatest competitor is a person sitting across from the patient with a pen and paper test. In many hospitals, especially more rural ones, Alcidion’s competitor is nurses and doctors sitting on Microsoft word or excel. Junior doctors across the world without these systems come in 30 minutes early to update the list with where all their patients physically are in the hospital. Even pre-Covid all you needed was somebody to order a few flu swabs one afternoon to make it musical fucking beds and the whole list needed to be reordered. Once I was in an under-resources backwater hospital we missed a patient for three days!

I have some time off after 7 night shifts in a row and one of my plans for it is to somehow get a demo of Alcidion’s products. If IR can help me I’ll get back to fellow straw people with the experience and if they are helpful.

I have been trying to get a rough look at the competitive landscape for Alcidion, primarily in the UK.

It seems like Alcidion’s competition are companies that do a single piece of the many pieces Alcidion offer.

A good place to start felt like ALC’s most recent acquisition (Silverlink), they’ve obviously identified a need to focus on an area (EPR) - so it made sense to look at what the landscape in that area looks like.

I found a list of accredited EPR providers here (it’s not the most recent, it’s from 2019 - I noted that Silverlink isn’t present on this list).

https://www.england.nhs.uk/2019/08/nhs-launches-accredited-suppliers-for-electronic-patient-records/

I need to do a deeper dive into each of these when I get the time - so this is only a surface level look and there are probably some of these you could rule out. Some other thoughts I had while quickly checking these companies were whether or not contracts signed with NHS trusts with some of these were necessarily mutually exclusive for Alcidion. Competitors with full service products obviously would, but if these competitors only offered a single piece - would that necessarily rule out Alcidion signing a contract? I’m not sure. Mainly I just wanted to have a brief idea of who the companies were and how many NHS trusts they had signed - since that appears to be the main place of opportunity for Alcidion in the UK.

The list was:

Allscripts, Cerner, DXC, IMS Maxims, Nervecentre, Meditech, TPP, System C

Oracle Cerner - The big dinosaur, Oracle products are usually slow moving beasts, and probably the one all the other Healthcare tech are disrupting. Tangent: if you ever want to see why Xero is so loved, google Oracle Netsuite.

I couldn’t quickly find information on how many NHS trusts use Cerner, however, there’s no shortage of signs of a product with quality problems. 

https://spectrum.ieee.org/uk-coroner-fingers-nhs-computer-system-in-toddlers-death

http://pediatrics.aappublications.org/content/116/6/1506

https://www.healthcareittoday.com/2014/03/12/cerner-agrees-to-pay-106m-over-allegedly-defective-software/

DXC (NYSE:DXC) - 19 NHS trusts - a spinoff of Hewlett Packard Enterprise - Lorenzo patient record systems.

https://investors.dxc.com/investor-relations/default.aspx

Meditech (Private, US Based) - 5 NHS trusts

https://ehr.meditech.com/

IMS Maxims (Private) - 3 NHS Trusts

https://www.imsmaxims.com/about-us

Allscripts (NASDAQ: MDRX)- 3 NHS trusts

https://www.healthcareitnews.com/news/black-book-ranks-top-ehr-vendors-regions-across-globe

Nervecentre software (Private, UK based) - around 3 NHS trusts

https://www.esht.nhs.uk/2021/03/17/emergency-departments-go-paper-free-with-introduction-of-new-digital-patient-system/

TPP - (Private) - around 9 NHS trusts

https://tpp-uk.com/

System C - (Private) - 2 NHS trusts

https://www.systemc.com/about-us/

I’m curious if anyone else has looked into competitors / found a good list of who Alcidion is up against and where?

*edit*: dxc sold off Lorenzo to the Dedalus group. Ill be looking more into them next as they seem like a pretty credible threat to Alcidion

@rh8178 I think it’s more a matter of what it would cost them if they didn’t acquire EPR capability, given the aggressive push toward digitisation in the NHS - not having a key capability that is battle tested could leave the opportunity open to global competitors and this stuff in healthcare appears to move pretty slowly - if someone else gets there first and cements their position it's going to be bloody hard for Alcidion to make up that ground, so to stretch the metaphor a bit further - you wouldn’t want to have a tailwind and no sail to push you forward.  

On the surface, it could look like Alcidion were in it to get 12 NHS trusts, and I do think that’s still a small factor at play here, but not key to the strategy. I think the fact that Silverlink had been tried and proven for EPR in multiple NHS trusts is the part that they likely wanted. It’s one thing to have EPR capability, I think the social proof is important for future contract wins.

I think Silverlink is probably too small to make a meaningful impact on its own (there are 12 personnel on LinkedIn and 1-2 specialists in integrating with NHS systems), but if Alcidion manage to integrate them well, it’ll be pretty key to their growth over the next 3 years in the UK.

So to answer your question, purely on numbers it looks expensive - but having proven and tested solutions that tick all the boxes is going to be really important moving forward and I’m not exactly sure what price that is worth.

Nice piece of digging @Seasoning - I think this stock is intersting. A question maybe for you - do you have a view on the price paid for Silverlink? Based on extrapolating the numbers disclosed in the note - it looks like it cost just under 30x NPAT? That seems like a lot unless Silverlink is growing really fast...

Just to clarify the sell by Kate was not actually her but the company she owned a stake in @Seasoning. I think some of those websites incorrectly scrap data e.g market index. So her portion was actually $509k

Refer to ann 18/05/2021

Melbourne, Australia – Alcidion Group Limited (ASX: ALC) board has today been advised of a change in

shareholding by several directors, two of whom are substantial shareholders.

MKMS Investment Pty Ltd <MKMS Investment Trust> (MKMS) has sold all the 11.48 million ALC shares

that it held through a broker managed on-market transaction. The sale of shares was undertaken at

$0.34 per share.

MKMS is an entity owned by the five former owners of MKM Health to manage MKM Health’s

investment in Patientrack, both of which were acquired by Alcidion in 2018. MKMS is no longer an

appropriate investment vehicle for the individual parties involved and is therefore being dissolved,

requiring the sale of its interest in Alcidion. The unit holders of MKMS include current and retired

employees of Alcidion, who each continue to hold significant individual shareholdings in Alcidion. Kate

Quirke’s interest in MKMS equated to 1,497,557 million shares, representing approximately 3% of her

shareholding. Ms Quirke retains a cumulative total of 46,561,285 shares.

Simon Chamberlain, a non-executive director, has acquired 295,000 shares at $0.34 as part of the MKMS

managed sale.

Ms Rebecca Wilson and Ms Robyn Morris (spouse of NED Raymond Blight) subscribed for further shares

in the SPP, receiving 15,327 and 93,750 shares, respectively after having their original applications

scaled back in a manner consistent with other SPP applicants. Ms Wilson now holds 1,517,924 shares in

Alcidion.

In accordance with the ASX listing rules, relevant change in Director and Substantial Shareholder

disclosures will be released as appropriate.

Rebecca Wilson, Alcidion Chairsaid, “The sale of MKMS shares to Simon Chamberlain along with several

institutional shareholders further reflects the strong underlying support for Alcidion and assists in

maintaining an orderly market as the MKMS structure is dissolved. All of the underlying unit holders in

MKMS remain significant shareholders in Alcidion, with everyone excited by the growth opportunities

that lie ahead”.

From my last exploration, I wanted to know more about the people working at ALC and their breakdown of software engineers and designers - the people capable of either running the systems or producing new products. What’s their average tenure so far? Do they have a period of mass hiring anywhere?

Alcidion - 142 employees

CTO (10 years), promoted 1 year and a bit ago after 4 years as the head of data analytics. He had a background with AlfredHealth working as a Corner specialist, Cerner is an electronic medical record database.

Head of engineering (7 years) - has been in the position for 1 year and a bit (similar timeline to the CTO), previously worked for 7 years as Software Development manager for 7 years at Alcidion, background in what looks like consultancies.

Technical architect (15 years) - 3 years as architect, was a devops engineer for 7 years, and software engineer for 8 years before that all at Alcidion. 

Previously I was curious about the structure of their teams, people self-title on LinkedIn but it looks like we have a couple of delivery leads/engineering managers, and one product manager. The distribution of these seems reasonable enough for an outsider looking in.

Development and design team:

23 software engineers + 1 devops engineer

1 specialist mobile app developer

1 specialist front end developer

4 QA specialists

2 designers 

Tenures

Of the 23 software engineers - 10 have been at Alcidion longer than a year, half of those have been there longer than 2 years. 13 have been hired in the last 12 months. I noticed there was some shift in a lot of jobs around about that time for Alcidion. So many hires in that period could be them ramping up for something, or replacing people that moved on during the pandemic.

Potential for teams

Given the number of production staff, if they were to follow a Spotify model (https://www.atlassian.com/agile/agile-at-scale/spotify) of 6-12 individuals per team - they could probably field about 3-4 teams for developing new software.  

Takeaways

So how do I feel about Alcidion’s technical capabilities as an outsider looking in? I think this exploration has increased my confidence in the org. They have a reasonable amount of seniority in their engineering, some really long tenures are in there, however, the last 12 months of engineering hires feels like they could put themselves at risk of growing too fast and incurring technical debt if they don’t have the systems in place to protect against this, and we wouldn’t see signs of that for a few years (but I’ll be on the lookout for those kinds of mentions in glass door).

Given just about every software company (and a wide range of other industries) have issues hiring and retaining people at the moment, I was curious what sort of environment and sentiment there might be amongst the employees, and more specifically the developers at Alcidion - given they're essentially the core engine for growth here. I usually take Glassdoor with a grain of salt - you tend to get the extremes as with any review site and there’s always the chance that someone from the company is boosting the score with false reviews.

In this case there aren’t a huge number of ALC reviews compared to other tech companies, however, from the small sample size we’re looking at around 4.2 star compared to something like Atlassian 4.7, or Microsoft 4.6

One thing that stood out was a few mentions of praise for the tech stack.

I thought hmmm, how can I find out about their tech stack? Usually the careers page is a good start, however there wasn’t enough there for me to get a full picture. So I thought, I can probably use the wayback machine (https://archive.org/web/) to look at snapshots of their career page over the years. https://web.archive.org/web/20220601000000*/https://www.alcidion.com/careers/

My takeaways from their job ads (forgive me I’m trying to piece together a 1000 piece puzzle with about 50 pieces): 

• Strong focus on security - a number of job ads with a variety of security levels in the company. I like this for some obvious reasons, but most of all Health data is one of the most sought after types of data for hackers.
• It took them around 1 year to fill a Senior back end developer role in 2021 (ouch, we’ve had similar experiences in the past year)
• Signs of advanced distributed systems design - I noticed in their stack they use RabbitMQ for messaging and there are a number of mentions of micro services. This means they’re probably building decoupled systems, which hopefully means less tech debt (although that’s no guarantee).
• Front-end stack appears to be React with Typescript, looks like an expectation of Node (probably for tooling). I don’t see any mentions of older technologies, I’m not sure if that’s because they don’t want to mention the shame in their job ads or they’ve just taken good care of things over the years and been consistent. Anyway the positive I see in this is that they’re likely making use of building more modular component based front-ends with React, and Typescript means they have essentially a bit of documentation built into their front-end which will help developers pick up pieces of functionality more easily. Again, this is no guarantee but it's a good sign.
• They appear to heavily use Microsoft Azure over AWS - this tech choice doesn’t really matter that much except that there are probably a lot more developers familiar with AWS than Azure.
• I noticed a good mix of back-end technologies from C#/.Net core/Java/Node.js.
• It looks like they had a heavy focus on Android App development earlier on in 2020 using Google Web tools but wanted to build out the capability of IOS with Swift.  
• I saw they’re using ElasticSearch (distributed search and analytics engine), Postgres SQL (good for data warehouse), and MS SQL server (A pretty standard choice). These seem like appropriate choices for the kinds of problems they are solving. 
• I’ve seen Alcidion mention AI/NLP/Machine learning a few times so I was a little surprised not to see Python/Scala or any of the other popular programming languages for this type of thing. This might be because I’m looking at a limited subset of job ads. *EDIT* - LinkedIn solved this one for me - they have an AI specialist who works in C++
• *EDIT* I did go back to the job ads and see mentions of at least a moderately mature design system, which could translate to more efficient production. Also mentions of actual user research are a good sign (you’d be surprised how many organisations just wing it when approaching design).

Anyway, the picture I painted from the job ads I read was a pretty positive one - on the surface at the very least it sounds like a good mix of technologies. It looks like potentially process wise from glass door reviews they might have some pains. 

When you read this one:

The disgruntled developer above makes me wonder what their team structures look like. If I were going for a job there I'd definitely be wanting to ask as many questions as I could to surface this.

• Buy - Price 0.145 - $23,200 - Victoria Weekes (board member) - 06/09/22
• Buy - Price 0.26 - $41587 - Victoria Weekes (board member) - 23/12/21
• Buy - Price 0.255 - $49524 - Simon Chamberlain (board member) - 23/12/21
• Buy - Price 0.34 - $100,340 - Simon Chamberlain (board member) - 17/05/21
• Sell - Price 0.34 - $3,903,632 - Kate Quirke (MD) - 17/05/21
• Buy - Price 0.13 - $195,000 - Kate Quirke (MD) - 28/09/21
• Buy - Price 0.119 - $29,750 - Rebecca Wilson - 12/03/20
• Buy - Price 0.138 - $137,500 - Kate Quirke (MD) - 11/03/20

Was the big sell off by Kate Quirke ever mentioned anywhere? Did Kate think the stock was overvalued at 0.34?

I was going through their financial report and noticed that in the last year the ownership mix has changed.

Based on the report - it looks like ALC are at about 20-21% insider owned now, a change from last year where they were closer to 28-29% insider owned.

The breakdown of ownership of insiders:

• Malcolm Proudhan - 10.61% (Cofounder)
• Raymond Blight - 7.34% (Cofounder)
• Kate Quirke - 2.19% (MD)
• Colin McKinnon - 0.7% (Board)
• Other board members add up to about 0.1-0.2%

The biggest shareholder is JP Morgan now.

Disc: Held on SM and IRL

(Edit: Fixing broken link)

Alcidion is holding a webinar next Wednesday, July 27 at 11am AEST to discuss its latest quarterly result.

If you are interested in attending, use this link to register:

https://us06web.zoom.us/webinar/register/WN_mzmtG2o_S1SUan4lef_Unw

Just had a chat with Kate from Alcidion who is at the ASA conference in Melbourne.

A couple things of interest:

She reiterated that their customers are hyper defensive. In fact, any funding squeeze tends to be good as they force hospitals to increase efficiency.

Cash flow positive and very comfortable with the balance sheet.

She's quite excited about recent wins and how they should be able to increase penetration with these clients.

Good momentum with sales.

Alcidion reported a net cash outflow for the 3rd quarter of $0.4m, although this was impacted by the settlement of M&A costs from the Silverlink acquisition. Excluding that, Alcidion saw a net inflow of $1.6m. Full results here.

In terms of customer cash receipts, the picture is pretty pleasing on a year to date basis:

But, of course, expenses have also increased. Here's a chart from Claude Walker to give you a better picture of the cash flow history (this includes the Silverlink M&A costs). Note that cash receipts for the 3rd quarter are below where they were in the previous corresponding period.

For the quarter, the company reported $12.5m in new sales TCV (total contract value). $4.3m of this will be recognised in this financial year. So far in FY22 (ie. the first 9 months) Alcidion has generated $42.9m in new TCV, of which $12.9m will be recognised this year. That's a 93% lift on the same period last year, and over 4x where it was in FY20

All told, it's a decent result, with a lot of new sales won so far this year. A slowdown in quarter cash receipts, when compared to the previous corresponding period, isn't great but may just be timing issues (hard to tell).

The balance sheet is in good shape, and with around -$0.5m in free cash flow, and over $17m in the bank, there's no urgent funding requirements. Indeed, barring a major acquisition you'd have to expect the business should be self-sustaining going forward.

No guidance was given, but I'm thumb sucking around $33m in FY revenue -- that's a 27% lift on FY21. Based on that figure, shares are on a forward P/S of 7.5x. That bakes in a decent amount of growth.

Alcidion Investor Newsletter - April 2022

The beginning of the new year has brought both new faces and new customers to Alcidion. In particular, I am pleased to welcome Florian Stroehle to the leadership team as Director of Strategy and Business Development along with two new additions to our UK team in Steve Leggett (UK Head of Strategic Markets) and Dr Paul Deffley (UK Chief Medical Officer). I look forward to working with them all as our team and product offering continue to grow.

From new partnerships to extensions of current agreements, I am extremely pleased by the momentum of deals which have been finalised by our team in recent weeks. Dartford and Gravesham NHS Trust were the first NHS site to procure Alcidion’s new Miya Emergency module alongside new partner Provation®’s anaesthetics module iPro. NHS Tayside are the third Scotland based board to implement Miya Observations, a milestone that recognises the benefits of the solution realised at NHS Fife and NHS Lanarkshire. We welcome our first community trust in Herefordshire and Worcestershire Health and Care NHS Trust who will deploy Miya Flow, the foundation module of Miya Precision. Contract renewals for use of the Silverlink Patient Care System (PCS) solution were signed with Moorfields Eye Hospital and Liverpool Heart and Chest Hospital – existing customers gained as part of the Silverlink transaction. Congratulations to our UK team for continuing to develop our relationships across the NHS.

With the new year has come the return of in-person conferences in some regions and we welcomed the chance to catch up with colleagues and customers at the Australasia Institute of Digital Health (AIDH) Digital Health Summit in Melbourne in February and Digital Health Rewired in London in March. These conferences provide Alcidion the opportunity to present the latest releases and products to the market and we look forward to the return of further opportunities as the year progresses.

On a personal note, I have recently joined the board of ANDHealth in the role of Non-Executive Director. ANDHealth is Australia’s leading provider of accelerator, incubator and commercialisation programs for digital health technology companies. As someone who has participated in ANDHealth’s programs and international delegations, I strongly support the work of the organisation and the demonstrable impact it delivers to CEOs and executives at all stages of digital health commercialisation and look forward to what we can achieve together.

We are looking forward to returning to our offices this year noting that we have implemented a hybrid model where our staff can balance their in-office and working-from-home time so that we remain engaged and effective.­

Sincerely,

Kate Quirke

Managing Director

Alcidion H1 FY2022 Results Investor Webcast

Now available on Vimeo: https://vimeo.com/680677024

$30.4M of new contracted sales in the half resulting in contracted revenue able to be recognised in FY22 increasing to $27.1M, up 25% on the prior corresponding period (pcp)

 H1 FY22 revenue of $12.9M, up 16% on pcp

 Gross profit of $10.9M (85% gross profit margin), up from $9.8M on pcp

 Underlying EBITDA loss of $3.2M, is in line with management expectations given planned investment in growth

 Milestone $23.3M contract with the Commonwealth of Australia as part of Consortium led by Leidos Australia

 Material contracts signed with Sydney Local Health District, Queen’s Hospital Burton and a 3- year extension for support and maintenance with Royal Derby Hospital

 Acquisition of Silverlink PCS Software Ltd, positioning Alcidion to deliver a cloud-native, modern and modular Electronic Patient/Medical Record (EPR/EMR)

 Cash balance of $18.9M as at 31 December 2021

Alcidion’s Group Managing Director Kate Quirke said, “The first half of financial year 2022 was a transformational one for Alcidion, and a significant step in our goal of becoming a leading global healthcare technology and informatics company. In December, we signed the largest contract in the Company’s history and completed the acquisition of Silverlink, which will enable us to compete alongside global vendors with a cloud native, modern and modular EPR offering”.

“Despite challenging conditions across our markets, we strengthened and grew our business, securing new sales with total contract value (TCV) of $30.4M. This included the major healthcare IT contract with the Commonwealth of Australia which is now underway, and we look forward to delivering the foundational component, the longitudinal health record. While significant in both size and duration, as our first Commonwealth contract the opportunity also demonstrates both the scalability and capability of Alcidion’s solutions to address the challenge of integrating care across all healthcare sectors.”

“The Coronavirus pandemic and the uncertainty it creates continues to challenge healthcare providers worldwide, with increasing COVID case numbers impacting staffing levels and placing pressure on hospital waitlists, particularly in the UK market. I am currently in the UK meeting with both customers and our team and I am amazed and very grateful for the incredible work everyone continues to deliver every day.”

“While COVID has certainly influenced the speed of procurement and contract negotiation, we are pleased to see an increase in opportunities for Miya Flow, which allow our customers to realise early benefits and add other Miya Precision modules over time. The feedback in response to our acquisition of Silverlink has been very positive and our customers are increasingly understanding the power and value of the combined offering.”

Disc: Held

Documenting the reason I am participating in the rights issue:

·       High price for the business, but justifiable in terms of value to ALC. Silverlink lacks growth as a stand alone business but offers significant growth to ALC as a combined offering.

·       Integration looks to be a good fit in terms of both the additional features but also technical compatibility, fully accretive in terms of product offering.

·       Large benefits available from market penetration provided with existing Silverlink customers but also expanded offering increases the TAM for ALC in UK market.

·       Appreciate the reason for the discount of the offer (urgency and time of year), like that they are putting existing shareholders first which largely mitigates the dilution and value loss from the discount.

This was my conclusion having watched the webinar and read the great straws from @composer as well as reviewed my valuation but have not updated it.

Disc: I own ALC

Soft Q results for ALC. I think the next 3-6 months are key to upholding the thesis, with Kate setting clear expectations, as follows:

“Growing Pipeline: Pipeline continues to develop with several sizable opportunities now entering the contract negotiation stage which has provided a heightened optimism about the broader opportunity for Alcidion, particularly in the UK market. Increasingly seeing the potential to cross/up sell our products to existing customers.”

Add to this the expected finalisation of the ADF contract before year. Confirmation of this will be a catalyst.

I would not be surprised to see SP weakness today, so will initiate a SM position to match my RL one.

Alcidion has expanded its existing agreement with Sydney Local Health District in regard to the Miya Precision remote patient monitoring system.

Originally established in July 2020 to manage covid home patients, it has now been expanded to include remote monitoring of patients with acute diverticulitus (a gastrointenstinal condition). This add $1.8m in total contract value over the next 3 years.

It's not huge -- boosting revenue by about 2% per year -- although its a good validation of the product (I'm assuming they would extend the contract if clinicians didnt find it useful) and it underscores the expanded use case potential for Miya among existing customers.

Full ASX announcement here.

Here's the Arichlife coverage of Alcidion Q4 quaterly results.

TL:DR

- free cash flow positive already in 2021 (but note lumpy cashflow)

- upcoming profitability in FY 2023, roughly breakeven Fy2022

- price is more expensive than historically (ie more investor optimism)

Valuation detail attached is for the base valuation, an explanation of assumptions below.

Base valuation is what I am going with, Bull & Bear IV provide sensitivity context:

Bull: $0.63 (FY30 sales of 136m, NPAT 59.6m)

Base: $0.30

Bear: $0.15 (FY30 sales of 54m, NPAT 12.2m)

Assumptions:

·         Sales of 25m in FY21 growing at 6-7m a year lead by the UK which overtakes ANZ sales by FY26 with steady penetration into public health in both regions.  The need to implement the product puts a resourcing cap on the rate of growth, hence the almost flat line dollar growth assumption.

·         Margin improvement as recuring product income increases from 56% in FY20 to 88% by FY30 with gross margins increasing from 88% (H1 FY21) to 92.5% in FY30 but also helping reduce Opex% from 99% to 45% over the same period as service costs included in Opex drop as a % of sales.

·         Opex increases significantly in FY21 as already flagged and seen in H1 results, but as management have advised this scale up is mostly one off, so I have allowed for a 15% increase in FY22, 10% in FY23 then 5% going forward.

·         EBITDA% I expect to be negative in FY21, but positive from FY22 onwards, reaching 48% by FY30 due to operating leverage on software revenue.

·         Capex is light and I expect this to continue (R&D is expensed).

·         Share count growth of 10% for FY21 to account for the capital raise and options then 2%.  Further raises for acquisition I expect to be EPS accretive so have ignored.

·         Risk: I have not discounted for risk due to the strong cash position and clear support from capital markets to provide cash and customers to buy the product.

·         Future Opportunities: I have allowed for a 20% uplift in valuation for opportunities around growth of the product portfolio and margins via new acquisitions and product development.

In general, I see my valuation as conservative, even the bull valuation could be well under the opportunity ahead of ALC.  However, with a lack of clarity around product specific revenues, margins and user KPI’s it is very hard to put any substance behind higher levels of revenue growth.

I own ALC but have an order in to half my position at 50c.  I would buy again if it dropped to 20-25c or below and intend to hold the company for a long period base on currently available information

Strong growth driven by organic sales; Completed ExtraMed acquisition

Highlights:

•  Positive net operating cash flow of $2.8M for Q3 FY21
•  Strong organic growth adding $4.8M of contracted revenue in Q3, of which $3.0M will be recognised in FY21
•  Contracted revenue to be recognised in FY21 (excluding ExtraMed acquisition which occurred after Q3 end) of $24.7M at end of Q3 ($15.9M recurring + $8.8M non-recurring)
•  Selected as preferred provider (as part of a Consortium) for a major healthcare IT project to capture data and support clinical decision making across the Australian Defence Force with potential Total Contact Value (TCV) of approximately $21M over 5.5 years
•  Expanded UK market presence via acquisition of ExtraMed, a leading provider of patient flow management software for hospitals in the UK
•  Cash balance as of 31 March 2021 of $15.3M, with a net increase of approximately $6.6M to be received subsequent to the end of the quarter resulting from net proceeds of the capital raise (Placement + proposed Share Purchase Plan (SPP)) less payments relating to the acquisition of ExtraMed

Disc: I Hold

ALC is currently holding a SPP at 32cps, the closing date of the SPP is planned for 5:00pm (AEST) on Wednesday 5 May 2021, unless extended. Alcidion reserves the right to vary the closing date without further notice. 

Further to their announcment of Investor Presentation~Aquisition of ExtraMed

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02363825-3A565332?access_token=83ff96335c2d45a094df02a206a39ff4

they have also announced

Alcidion and consortium partners selected as preferred provider for Department of Defence contract

• Alcidion, as part of a Consortium, has been selected as the preferred provider for a major healthcare IT project to capture data and support clinical decision making across the Australian Defence Force
•  Alcidion will provide the Longitudinal Health Record via its Miya Precision product
•  Potential value of contract to Alcidion of approximately $21M over 5.5 years
•  Subject to final negotiations and Commonwealth funding approvals, final contracts expected in calendar Q4 2021

Also they have a webinar at 11:00 today

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02363845-3A565344?access_token=83ff96335c2d45a094df02a206a39ff4

MD Kate Quirke's presentation for the ASX Small and Mid-Cap Conference this week can be viewed on YouTube.

Worth a watch for anyone interested in their Miya Precision product and the UK opportunity.

Watch here

Alcidion saw a 36% jump in first half revenue to $11.1m, with gross profit up 38% due to an improved margin.

Revenue already contracted for FY21 is $21.7m, already 17% above FY20 full year result.

The business is right on the inflection point of break even, reporting an EBITDA loss of $0.9m. And with the fixed costs base now largely stabilised, we should see a big improvement on this front in coming periods. (although some new costs added in H1 will have a full half's impact in the full year results)

Cash receipts were strong up 17% and the business now has $12.5m cash at the bank.

Doubling that latest sales numbers, you get a P/S of around 11.

All told, the business has good sales momentum, a solid pipeline of opportunities, attractive economics (when at scale), and conditions seem to be returning to normal post covid.

Results announcement here

Disc: held

Alcidion's latest quarterly results are encouraging. The details have already been posted (thanks mmff), but i have added a few thoughts after listening to the conference call:

• Ongoing push from NHS to digitise is a strong tailwind, and ALC's ability to leverage existing systems without a full rebuild is an appealing option.
• Inbound inquiries are growing. New sales hires performing well.
• Dealing with covid challenges, and indeed the situation has helped underscore the value proposition 
• Cost base to stabalise in coming quarters with widening operating margins expected thereafter
• Quarter would have been cash flow positive except for a $3m South Tees payment that was received on first business day of Jan (i.e. a timing issue)
• Cash position strong
• revenue growth will depend on timing of sales -- expect some lumpiness as big contracts are secured.

I think ALC should be able to recognise ~$30m in revenue for FY21, which would put them on a forward price to sales of ~6.7. This doesnt seem ambitious for a business with a long runway and that is growing the top line at such a rapid rate. 

Highlights:

• $12.6M revenue added in Q2, 163% up on the prior quarter and 260% up on pcp (Q2 FY2020)

• Revenue of $21.7M able to be recognised in FY2021 as of Q2 FY2021 (i.e. 6 months remaining in the year), already 17% greater than FY2020 full year revenue of $18.6M

• Further $23.0M of sold revenue to be recognised out to FY2026

• Milestone $11.3M five-year deal with South Tees Hospitals NHS Foundation Trust for Alcidion’s full suite of products and services including Miya Precision & Better’s OPENeP

• Strong cash reserves of $12.5M as at 31 December 2020, strengthened by further receipt of $3.0M in early January 2021 relating to the South Tees contract

• Other significant contracts signed or announced in Q2 FY2021:                                          o NextGate – expanded reseller partnership to include UK and Ireland                                          o NT Health – program management services contract extension                                        o ACT Health – contracts for further integration services o NSW Health – extension to Child Data Hub (CDH) technical services contract

Alcidion has signed its largest ever deal for the Miya Precision product, worth $9.5m over 5 years. The vast majority of which represents recurring revenue. 

The deal is with the South Tees Hospitals NHS foundation trust. 

More than half of the contract value is to be booked in the current year, which takes locked revenue for FY21 to $20.2m, with 7 months of the year still remaining. Alcidion booked $18.6m in all of FY20.

Aside from the financials, this is a very positive step in my opinion.  It represents further evidence of traction in the UK market, as well as provides an important reference site and social proof.

ASX announcement here 

Alcidion's full year results came in pretty much as expected. 

Good to see the solid growth in recurring revenue, a healthy cash balance and some resilience in the face of covid.

Alcidion has a great product offering, important reference sites and good sales momentum. There's a big opportunity as healthcare goes digital, and they seem well positioned.

The company did stress the increased ramp up in investment needed to seize the opportunity. Scaling up began in earnest at the start of this calendar year and they expect the expanded cost base will start to stabalise during FY21.

This will delay cash flow breakeven, but I think it's a necessary investment. There's big first mover advantages when sectors are undergoing structural shifts. Not that the spend is guaranteed to deliver good results, but it's really unavoidable in my view.

On some rough numbers, assuming steady gross margins, it looks like ALC will not hit profitability until they get to close to $30m in sales -- which is likely a few years away.

They have over $15m in cash, and have a current operating cash burn of $2m pa, so they should be able to sustain themselves for a good while.

I still think $50m in sales by FY25 is possible, but with most of the growth in the second half of the period.

Anything can happen with the market price short term, but i think Alcidion remains a good bet for those working to a 3+ year timeframe

Alcidion's results were ok, with record cash receipts and cash flow positive for the qtr. $15.9m in cash at the bank.

FY revenue is expected to come in between $18.4-18.7m (up ~10% from FY19), and with $12.8m of contracted revenue already locked in for FY21. There's roughly another $4.5m locked in each year through to 2025.

For a business on >8x sales, it's really not enough.

$3.7m in contracted revenue was added over the quarter, double the same time last year. Over the past 12 months they've added around $14m -- but this is over multi-year contract periods.

It's great to be start starting FY21 with $12.8m already locked in, but remember that they started FY20 with $11.7m. Not all sales are recurring (~75% are), so there's still a lot of work to be won.

Still, i think that's possible.

With an expanded presence and resources, they should hopefully be able to build on the sales won last year -- especially given the covid tailwind. $6.8m in sales were added to FY20's starting position. If we assume $10m in new sales added for FY21, we'd get full year revenue of $22.8m in FY21 -- about 20% top line growth. 

$50m in sales by 2025 would require this growth to be sustained over that period.

Definitely achievable, but I wouldn't want to bank on more than that for valuation purposes.

ASX release here

Not huge news, but Alcidion resigning ACT Health for a further 2 years (in a deal worth $1.3m) for its patient management system is nice to see.

However, when the contract was last exteded in 2018 (see here), it was worth $1.27m for 2 years. It'd have been nice to see Alcidion increase the cost more (especially given the likely platform improvements over the last 2 years), or have bundled in other offerings.

So it's good that their solution is proving sticky, but would have been a very strong signal if they could have charged more. 

11/2/20

Alcidion has announced a further $1m in sold revenue since the end of the 2nd quarter, taking the total sold revenue so far in FY2020 to $15.4m. This compares to the $16.9m that was recorded in all of FY19.

The presentation also reiterates the size of the market opportunity, the increased investment in growth and the recently strengthened balance sheet. 

See here

No major new insights this quarter in temrs of the broader, long-term narrative.

Business remains well placed, it seems, to continue strong growth, especially with an apparent pick up in the uk market. However, increased investment in development, sales etc have seen cash outflows increase (and will continue to next quarter). 

The business has already total confirmed revenue of $15.4m for the full year (compared to $16.9m total last year). Alcidion has $17m in cash and term deposits. 

Alcidion's 4C quarterly cash flow statement, ending Dec31 2019, highlights:

• $3.5m worth of contracts sold in Q2
• $1.8m cash outflow
• $17m in cash & term deposits
• $15.5m in revenue already recogonised for FY20 (last year $16.9m total)
• Recurring revenue up 22.7% over the year
• Q3 cash outflows to worsen as company invests in development, sales and marketing.

4C here