Thank you
@meetjoeblack and
@521207126 for raising both these points, they've been interesting to consider. Whilst, given the facts, I disagree, you've nonetheless led us to some useful insights. Cheers.“Alcidion has not seen any growth in the last 12 months (marginal sales helps pay salaries)”:
1. The company is growing (in both good and bad ways) as reflected by multiple metrics: (FY19 - 20 - 21 - 22 - 23)
- Recurring revenue: 7.9 million - 10.4 - 16.3 - 23.2 - 28.1
(257% growth over 5 years; 21% in the past 12 months)
- Total revenue: 16.8m - 18.6 - 25.8 - 34.3 - 40.4
(140% growth; 17% in the past 12 months)
- Cash receipts: 16.4m - 20.5 - 32.0 - 41.4 - 46.9
(186% growth, 13% in the past 12 months)
- Staff numbers: No Data - 115 people - 142 - 170 - 191
(66% growth over 4 years, 12% in the past 12 months)
- Staff costs: 11.9m - 15.6 - 18.8 - 23.9 - 30.3
(154% growth, 26% in the past 12 months)
2. So clearly the company has been growing a lot. But more importantly,
how has this growth impacted ALC's overall financial position?
(FY19 - 20 - 21 - 22 - 23)
- After Tax profit/loss: 0.08m L - 3.0 L - 2.2 L - 4.4 L - 3.6 L
- Annual cash flow (pos./neg.): 2.0 P - 2.6 N - 1.5 P - 1.0 P - 0.1 P
- Cash balance: 3.2m - 15.9 - 25.0 - 17.3 - 14.6
- Shares on Issue (SOI): 800m - 999m - 1000m - 1200m - 1200m
(50% increase!)
- Pre-booked revenue for the year ahead: 11.7m - 12.8 - 15.1 - 31.2 - 33.5
(186% increase)
- Gross Profit: 5.9m (35% of annual revenue) - 15.9 (85%) - 22.8 (88%) - 29.4 (85%) - 34.7 (85%)
- Debt: $0 - 0 - 0 - 0 - 0
These metrics tell a mixed story.
3. The negative: the company's balance sheet has been going nowhere. Cash flow meanders around break even and the cash balance has only grown through substantial dilution (50% increase in SOI!). I expect this to continue unless they can become profitable. Unfortunately, profitability has hovered just out of reach for several years as staff costs slightly outpace revenue growth. The company is essentially treading water, funded by the occasional SPP whilst both selling and hiring a lot.
4.
The positive: they've achieved amazing revenue growth (mostly organic, some acquisitive) and haven't destroyed the company's financials in doing so. I.e. costs haven't exploded far beyond growth or required crushing debt. Rather, there is no debt, gross profit and working capital are in good shape, and the increase in recurring revenue is especially welcome. While the cash flow isn't particularly impressive, they have at least edged CF positive 3 years in a row; that's a small win.)
5.
Conclusion: ALC's mixed performance means they're still 'within reach of the top 8'; i.e. if they can get the cost-revenue jaws to open, the balance sheet will improve quickly. If they can't, then expect more of the same: a meandering mix of some good and some bad metrics, contract announcements that don't move the SP, and the odd CR to sustain an ultimately unprofitable company.
6. I'll just reiterate the huge amount of new shares (400 million) they've issued over the past 5 years to fund operations. Hearteningly, in the recent SPP, management opted to raise a tiny sum of about $5 - 6 million for working capital needs. This amount wouldn't cover the cash burn of Q1 FY24; so it invites an inference that the company sees their financial situation improving soon. Indeed KQ's Q1 presentation and ALC's EBITDA guidance lean into this; Q3 and Q4 are shaping to be key periods. (My amateur back-of-the-napkin guesswork has Q2 being uneventful at slightly CF negative - pure speculation fwiw.) Only time will tell if the aforementioned inference is correct.
“The industry has moved on from Alcidion's model”:
I note the absence of evidence to establish this criticism but I want to engage in good faith (and not in cheap retorts) so let's give it the benefit of the doubt.
Let's think through the above statement carefully. Think about
what would be required for it to be true (i.e. for the industry to have 'moved on' from modular sales)?
1. So across Australia, NZ and the UK, a decent portion of public hospitals and the bureaucracies behind them, plus stand-alone providers (e.g. St Andrew’s in SA, Alfred Health in Vic.), and large private health conglomerates (e.g. Calvary, Ramsay), aged care providers (e.g. Anglicare), and justice health settings (e.g. WA Justice Dept., HMPS in the UK) – "the industry" – has recently and somewhat-simultaneously come to the same decision: "we don’t want modular procurements, we wants all-in-one providers!" What has caused this sudden change? And since when has healthcare moved so quickly?
2. But let's grant the point: okay, so the industry has “moved on.”
Now it wants all-in-one procurements for what exactly? For E-meds/prescriptions? In Diagnostics (histopathology, radiology etc.) For Electronic Patient Records? For patient tracking and bed-flow management? For non-medical logistics (e.g. food services, cleaning, staff rostering)? Or is it that 'the industry' now wants one provider for
all of these functions? Imagine how seismic this shift would be! How has there been no media reporting on such a drastic change in healthcare across 3 Western nations? And why are health giants like Oracle unable to offer all these services; is there anyone who can?
3. The suggestion does not align with human experience. For all those who've received/worked in healthcare services, think of all the providers used for different elements of your journey. Indeed, even where healthcare settings “go with the big providers” – e.g. NSW Health and Epic Systems – the contract stipulates which function/s they are to perform. (Think of the many hospitals that use Cerner for their EPR but purchase additional ALC modules as a supplement; ‘big providers vs modular’ is a false dichotomy, healthcare settings routinely use both simultaneously.)
4. The closest product to the 'all-in-one' concept (as far as it exists), is called an EMR (also known as an EPR in ANZ). By purchasing the Silverlink PAS and combining it with the Miya Precision platform as well as ALC's various clinical modules (e.g. Miya Flow, Noting), ALC is now able to offer this 'all-in-one' service. (Please note, it's not actually an all-in-one service***.) The critiques of the modular strategy and the Silverlink purchase are imperceptive; Silverlink 'upgrades' the modular strategy whereby ALC can now offer clients an 'all-in-one' EMR. Meanwhile, the modular strategy provides a foundation from which to up-sell Silverlink; so clients can buy pieces over time (as has happened in South Tees, the ADF and Southampton). Put simply: Silverlink enables a transition from modular into an 'all-in-one' service (as far as such a service exists):
*** As demonstrated below, even with a PAS, there are still elements missing from ALC's EMR offering. This is hardly surprising given giants like Allscripts, Cerner and Epic face the same shortcoming.
5. ALC’s modular strategy has resulted in 87.4m in sales in the past 2 FYs. (89.9m if you include Q1 sales.) Therefore, the industry’s alleged-decision to move away from a modular approach must have been a very recent one. If one truly believes this then it'd follow that our sales will start to tank as this new anti-modular wave takes hold...if I honestly held this belief then the implications would mean I'd be bolting for the door!
6.
Conclusion: the above discussion - a response to 2 criticisms of ALC that are not compelling - is a red-herring. The original criticisms are a symptom of justifiably frustrated shareholders. But
why is there so much shareholder frustration as to repeatedly evoke underwhelming claims (in their varying forms) over the past year?
What's the root cause?
The elephant in the room, of course, is the much-maligned Silverlink acquisition. Indeed, the dilemma was aptly-described by
@chaddy36 : "Hard to believe 2 years ago we were around 34 cents and looking good. Then we bought Silverlink, promises of a pipeline, and here we are now." So the question is:
Has the Silverlink acquisition merely correlated with - or caused - our SP's demise? I have my thoughts but I've said enough for one day. What do others think?
