Reliq Health Technologies Inc. (OTCPK:RQHTF) Q2 2020 Earnings Conference Call March 3, 2020 9:00 AM ET
Lisa Crossley - Chief Executive Officer
Conference Call Participants
Welcome to Reliq Health Technologies’ corporate update. Today is March 3, 2020 and this is a review of our Q2 quarterly financials as well as an update on subsequent events. My name is Lisa Crossley and I’m the CEO at Reliq Health.
A reminder, this disclaimer is at the beginning of all of our presentations, there may be statements in this presentation that constitute forward-looking statements. Please interpret them within the context of this disclaimer.
A reminder for those of you who have been part of these webinars before and a little introduction for those you that haven’t, Reliq is a healthcare technology company, a software-as-a-service platform. We’re headquartered in Hamilton, Ontario, Canada and we have U.S. offices now in Florida and in Texas.
The webinar agenda for today, first I’m going to go through some highlights from our Q2 fiscal year 2020 financials, so that would be from October 1 to December 31, 2019. I’ll go through a quick review of some of our new contracts that we’ve already disclosed. I’d like to review some of the behavioral health billing codes to provide some context around the contract we announced yesterday. I’ll review our call center support services because they are a really key component of our business model as we move forward, particularly with the larger accounts. We’ll provide an update on guidance and then very briefly touch on the date for the next quarterly update webinar.
For the Q2 fiscal year 2020 financials, the highlights are that revenues increased by 56% over Q1 fiscal year 2020. The company came very close to hitting cash flow positive, but there were several significant one-time expenses, in particular payment of some substantive outstanding legal fees from the litigation that was concluded in July of 2019, but those fees were still outstanding in Q2 fiscal 2020, so we paid those off, and some outstanding contract development fees, so that accounted for higher than projected expenditures but will not be an ongoing or recurring issue.
Subsequent to the quarter ending December 31, 2019, we received gross proceeds of just under $1 million from option exercises by employees, consultants and contractors, and we certainly continue to be very grateful for this support of our employees, consultants and contractors, and I think it’s really a validation of the value proposition that those who work most closely with us are exercising their options and are investing their funds directly into the company.
In terms of our capital needs, I know that’s always a point of concern for our shareholders, and I’ll just reiterate the company does not expect to need to raise funds in order to reach profitability this year. We have assets with a fair market value of over $2.8 million - those are the ForaCare D40g biometric monitoring devices, and those can be sold at a profit independent of our subscription fees for the iUGO software platform at any point if we need to sell them in order to finance operations.
I’ll also just make a quick note that that inventory that we have on hand is currently a very significant competitive advantage for the company given the current global concerns over manufacturing shutdowns and border closings in China, where most of these biometric devices are made, not just the ForaCare devices but most of the biomedical monitoring devices on the market do come from Asia and supply has become a bit of an issue in some cases for certain companies, but that’s not an issue for us, and we have strategic agreements and partnerships in place with various device manufacturers to ensure security of supply for our customers going forward, irrespective of any global events that may occur. Those new contracts are likely to consume--to need a lot of that inventory that we have on hand.
In keeping with the company’s strategy, we have always intended to expand throughout the U.S. as well as beyond, but specifically to focus on clients with larger patient populations, into the tens of thousands and beyond. The reason for that is obviously that it’s one sale into one in a management team, one set of decision makers gives you this very large patient population that we can onboard. The trick with getting into some of these larger clients is you really have to have established yourself in the market as a trusted software solution provider, so we were able to secure these contracts largely because of the work that we’ve done primarily in Texas with our existing customer base, where we really generated conclusive, definitive data that shows that patients have better health outcomes and healthcare costs are reduced as a result of reducing ER visits and hospital admissions and readmissions through the use of the iUGO Care platform, so being able to provide these very large clients with references from sites that have been using the platform for several years now is really critical to gaining the confidence of these big clients, and it’s something that’s a big competitive advantage for Reliq in that any new entrant into the market is still going to need those several years of history in order to gain the confidence of those larger potential customers, so that puts them already several years behind us. We really do still have a very significant first to market advantage.
In order to secure these larger scale contracts and prepare for go-lives in this March and April, so we went live yesterday with one client and another will go live in April, and we’ll talk a little bit more about that in detail in a minute. We did redirect a number of our resources away from Texas, which is where we had the largest client base, although the clients themselves tend to be relatively small, and we really needed to borrow those resources to get that call center up and running and to work with the clients to spec out what they were going to need from the solutions we were providing for them and develop the implementation plans and get ready for a go-live that happened yesterday. We borrowed a lot of resources from our Texas team, but normal operations will resume in Texas next quarter, and we go forward will be in a better position to fund further expansion of staff and to train new staff and really ramp up more quickly without borrowing from Texas as we begin to generate more significant revenue and more significant profit, which will certainly come later this year as we move forward.
These are the three big clients or contracts that we’ve recently signed, recently announced. As you all know, we did add a number of customers in Texas in Q2 fiscal year 2020, as well as in this quarter, the current quarter, as well as in other areas, other geographic areas. But the larger scale clients are the ones that we’ve only recently been able to announce, although we’ve been working on them for several months.
The first one is Comprehensive Partners, and they are going to bring us over 25,000 eligible Medicare patients across Florida who will be on-boarded onto our platform and will be using RPM and CPM services. Our go-live with them was yesterday. I really enjoy working with this client. They’re very, very committed to delivering best-in-class patient care to patients in a home setting, and they’re very keen to scale up and on-board as quickly as possible, so we have been working very closely with them for a while now to prepare for the go-live and subsequent implementations and deployments.
Another key new contract we have is with Blum Telehealth, so through Blum we are gaining access to 50,000 eligible Medicare patients who are currently receiving care through rural health clinics and better qualified health centers. These are throughout the State of Louisiana, and they will be on-boarded onto our UGO care platform using our CCM, or chronic care management platform as well as our behavioral health integration modules. We will go live with those physicians and their patients in April of 2020, so next month, so imminently, and it will be our first foray into the behavioral health integration space, which is really rapidly expanding and has some very significant funding advantages for clinicians, and we’ll talk about that in a little more detail in a minute.
Another new contract that’s really interesting for us and a significant scale is MaxMD. MaxMD is a leading U.S. company in the secure healthcare data space, and where they really shine and have a lot of very unique products is in the interoperability space. When you’re working with hospitals, outpatient facilities, health departments, with the payors, and those can include the private insurers as well as Medicare and Medicaid, you’re working with a lot of different, complex, often relatively unwieldy clinical information systems, so MaxMD has developed interoperability technology that allows them to essentially communicate with these very diverse systems and to provide meaningful data not just to clinicians, but also to the payors who can then look at a patient in a very holistic way, look at all of the data that’s been collected around that patient from all different clinical settings, and say these are the patients who need more of our case management services and these are the patients who are doing well under their current model of care. That allows payors to really devote resources and budget to the patients who need them, and essentially provide a triage of sorts to patients to identify those who need additional support and case management so that they can have better health outcomes and reduce healthcare costs
Partnering with MaxMD, they are a very large company that has a significant customer base. They are in every state and in Puerto Rico. If you look at their website, they have a page where they show a map of the United States and all of the areas where they have deployments, and it’s basically a very crowded map, so it’s really a very unique and significant opportunity for Reliq to be working with MaxMD and be able to offer our solutions for remote patient monitoring and chronic care management to their clients. It allows us to plug and play with these very complex legacy systems, which gives us access to very rich data which we can share with the clinicians, and it also gives us an opportunity working with MaxMD to get in front of all of these different hospitals, outpatient facilities, health departments and payors and demonstrate the value of our platform to actually help reduce costs and improve health outcomes for the patient populations in question. It’s a very big partnership for us that gives us access to a very, very significant customer base, and we’re very excited to be working with MaxMD.
Behavioral health, just to give a little context again to the press release that we issued yesterday, behavioral health integration is essentially a concept whereby a clinical team can enhance standard primary care by adding additional services for patients who are receiving behavioral treatment and who may have mental health or addiction issues or other behavioral health issues. Essentially it’s introducing care management support for those patients, so regular, ongoing support, and regular psychiatric interspecialty consultation, so really ensuring communication between all of the members of the patient’s care team, both the physical health and the behavioral or mental health members of that team.
Often there can be breakdowns or disconnects in terms of communication amongst those care team members, and tends to lead to patients not taking their medications or patients developing addiction issues and substance abuse issues, and ultimately those can lead to very poor health outcomes, and therefore this kind of coordination can have a really significant impact on health outcomes and behavioral or mental health outcomes, as well as really reducing healthcare costs associated with those ER visits and inpatient admissions that are often found in the improperly or inadequately managed Americans who have--not just Americans, but patients with mental or behavioral health conditions.
Our new iUGO Care behavioral health integration module, or BHI module allows clinicians to leverage [indiscernible] for Medicare and Medicaid services billing codes for general behavioral health integration services and for what they call psychiatric collaborative care model services, or COCM for short. Essentially, as I say, this is really just about improving communication between the different members of the patient’s care team, the physical and the mental health care team, as well as ensuring more continuity of care for these patients out in the community, so they’re continuing to have engagement with the appropriate mental health professionals as well as the physical health professionals team and ensure that their conditions are properly managed. For the clinicians, this really does help improve patient care and they can see the impact on health outcomes for these patients, but it also will generate substantial new revenues for their practices through these billing codes.
A quick review of the billing codes - I know this can be very boring, but just to give you a sense of the additional revenues that are represented by behavioral health integration and the COCM, or psychiatric collaborative care model services, care management model services. There are four billing codes. One is for the initial psychiatric care management, so that’s basically the initial consult, and that is reimbursable at USD $152 per patient one time. Then there’s an ongoing psychiatric care management billing code, and that’s approximately USD $129 per patient per month with the option to add an additional 30 minutes per month of psychiatric care management where appropriate for that particular patient. Those services in particular are provided by psychiatric professionals, so that might be a social worker or a psychiatrist or other clinical professionals who are trained in the provision of psychiatric care management services.
The general behavioral health integration care management services, which are covered for 20 minutes a month at USD $48 per patient per month, are typically provided by a resource in the primary care practice, so it might be that physician or it might be one of his clinical associates who work within the practice, but the bottom line is the reimbursement levels here are very significant and certainly at least comparable to the kinds of reimbursement we see for chronic care management and remote patient monitoring. This is an area that we expect will be a significant growth space for Reliq, and certainly we anticipate adding new clients in this space as we move forward and demonstrate the value of our BHI module.
The call center services, there’s been some confusion over what exactly the call center will do. Very simply, the call center will do whatever the clients need it to do, but the call center really is the critical component to the solution as far as the larger scale clients are concerned. They really want to be able to offer support services like patient engagement, so having someone at the call center call the patients if they aren’t collecting their readings, so we call that becoming non-adherent. In a lot of the states, reimbursement is related to the level of adherence, so if the patient is not collecting their readings on a regular basis, having someone call them could have a really significant impact on their level of adherence. The call center can also be used to remind patients to take their medications, which again has a very significant impact on health outcomes, and it can be used to help onboard patients, to help train patients and the clinical care team, so there’s a lot of different services that can be offered through the call center. It’s a very inexpensive department, if you will, for us to operate, so it’s not a significant cost center for us but it is a significant revenue generating center.
The support services provided through the call center will generate revenues of up to USD $52 per patient per month, and that’s in addition to the standard monthly subscription fees for our software-as-a-service. It really is a very significant additive service and revenue generator, and it’s been very, very well received by these larger clients, and really in many cases without the call center, we could not have attracted the larger scale clients. It’s been a really critical competitive differentiator for us and a competitive advantage, and something that’s been extremely well received by the larger clients.
An update on guidance. As we move forward with these different modules - the CCM, RPM, BHI, all of the different acronyms, and as we work with larger clients who are also using some of our services in addition to the software, and as we begin to work with some of the payors directly, which we anticipate ultimately that’s a likely outcome, we end up with a big mix of revenue models, so going forward rather than reporting patient numbers, we’re going to report revenue because that level of revenue or that amount of revenue generated per patient varies very, very significantly depending on the payor and the type of services that we’re providing.
We are moving into essentially a new phase that we’ve been preparing for and certainly targeting for the life of the company to date, which is working with these larger scale clients, and I certainly think that’s the direction the company will continue to go in as we move forward. As we start working with these clients and begin onboarding with the first large scale client this month and moving to the next large scale client next month, we will be getting more and more data about how quickly we’ll be ramping up with each client and any additional services that they might require that we’ll add on. We’re going to provide detailed guidance once we feel we have more granular data available to us on which to base the guidance.
We will be providing detailed guidance with respect to revenues and margins, EBITDA, all of that beginning next quarter, but generally speaking we expect that our revenues will increase by 50% to 100% each quarter through the end of this fiscal year, but where we really expect to see revenue growth accelerate significantly is in fiscal year 2021, which begins July 1, 2020, so we’re not too far off from that point.
The Q3 fiscal year 2020 webinar date, we are working with our new auditors, KPMG, to get them through their review of the fiscal year 2019 audit file and then the quarterly financials. It is a lot of work for a new auditor to come in and review the previous financial records and get up to speed and begin their review of the quarterlies, and ultimately take on the annual audit, so that work is progressing well. They’ve certainly been very good partners for us and have really been very value-add, and we are really enjoying working with KPMG.
Part of what we’re aiming for with KPMG is to get our financials out sooner. It may not happen in the next quarter in that we have to get them out sooner than usual, just give them the time that they need to turn around their review, and so we’ll maybe get there for the next quarter and then the quarter beyond that, we’ll start looking to significantly accelerate the pace at which we’re able to produce and have them reviewed, have the financials reviewed. For now, we’re seeing that the Q3 fiscal year 2020 financials, we know they’re due on or before June 1, so we’ll certainly be filing them on or before June 1 and then the webinar will be at the latest the morning of June 2, but possibly earlier if we’re able to accelerate that pace. We will certainly keep people posted.
Beyond that, as I think I’d said before, some of these larger contracts took a little longer to get signed and then for press releases to be authorized than we’d maybe hoped, but that pace is starting to pick up, so as we move forward, when we have material news that we’d like to share with our shareholders, obviously we’ll issue the news releases where there’s an opportunity to provide more detail, more color and more context. We will be scheduling webinars independent of these quarterly webinars just as a way to provide that background and context to our investors.
That’s about all we have for this last quarter. It’s been extremely busy, and I’d like to say thank you to everyone on the Reliq Health team for working 24/7 on all of these new contracts and leads, working with our new clients and helping to build the team and the infrastructure to support this evolving business model, which we think is really a very positive step forward in the company’s evolution. I appreciate the patience of our shareholders and, with everyone else, I hope the market is able to stabilize a little bit in the coming days. But I think we’re all very, very excited about where the company is going over the next quarter, over the rest of this year, and we look forward to sharing updates with our shareholders as we are able to, and we’ll continue to do that on a regular basis.
Thank you very much for tuning into the webinar, and we’ll speak to you all again soon.