Reliq Health Technologies Inc. (OTCPK:RQHTF) Q2 2021 Earnings Conference Call March 2, 2021 9:00 AM ET
Lisa Crossley - Chief Executive Officer
Good morning and welcome to Reliq Health Technologies Corporate Update. This is the corporate update in which we will review our Q2 Fiscal Year 2021 Financials as well as provide an overview of the company's progress last quarter and subsequent.
My name is Lisa Crossley and I'm the CEO at Reliq Health. And today is March 2nd, 2021. I encourage you to read the forward-looking statements disclaimer at your leisure. And just a reminder that the following presentation is management's best estimates and projections for the company's progress, their anticipated progress going forward.
A reminder for those of you who are long-term shareholders and for those of you who are new to the story, Reliq is a rapidly growing global telemedicine company. We specialize in providing Software-as-a-Service solutions to the community healthcare market. And really our focus is on the chronic disease management sector rather. The company's headquartered in Hamilton, Ontario, and we also have U.S. offices in Florida and Texas since the U.S. is our largest market.
So, the agenda for today -- pardon me -- I'll provide an overview of the highlights from our Q2 fiscal year 2021 quarterly financials, and including obviously the financial metrics, but also some updates on customer traction. And then I'll provide a little bit of an update on the subsequent events that happened in January and February of 2021. So, in Q3 of fiscal year 2021. And I'll provide an outlook for the remainder of calendar 2021, and then we'll discuss the date for the upcoming webinar to review this quarter's financials. So, the Q3 fiscal year 2021 financials.
So, the financials for the quarter ending December 31st, 2020, which is our second quarter of fiscal 2021. Highlights, we increased revenue by 108% quarter-over-quarter for this past quarter relative to Q1 fiscal 2021. And that is in keeping with our guidance to the market that beginning last quarter continuing through the remainder of this fiscal year and through calendar 2021 and beyond. And we anticipate quarter-over-quarter growth in revenue every single quarter going forward.
So, we are definitely at the beginning of a significant upswing in terms of customer traction, revenue growth. And so, this was the first quarter where we're really starting to see the very beginning of building that momentum.
And we increased working capital significantly last quarter from -- up to -- rather from $938,000 at the fiscal year-end. So, June 30th, 2022, just over $2 million at the end of the second quarter. So, December 31st, 2020. And we increased gross margin to 54% last quarter. That's relative to the previous quarter where gross margin was 43% and compared to the comparable quarter in fiscal year 2020. So, Q2 fiscal year 2020 gross margin was 23%. So, this is a significant increase in gross margin, and particularly quarter-over-quarter and year-over-year.
And this is, again, in keeping with the guidance that we provided to the market that we anticipate that gross margin will continue to increase every quarter going forward. And by the end of this year, we anticipate achieving our target gross margins of over 75% and our target EBITDA margins of over 45%. So, these -- based on these metrics, I think we, as a company, very pleased with the progress to date and certainly think that this is a strong indicator of the direction that the company is currently going.
Some other highlights from last quarter. We closed on an oversubscribed private placement that brought in gross proceeds of a little over CAD$3 million. And we do expect that the proceeds from this raise will take the company through to profitability. So next quarter, quarter ending June 30th, 2021, which is the end of our fiscal year 2021. And we expect to achieve profitability by reaching a run rate of approximately $1.5 million per quarter in revenue. So, our current total expenses are roughly CAD$500,000 per month.
Certainly in the individual quarters, we may occasionally have one-off or unusual expenses, but that's our standard expense run rate that we anticipate will be consistent throughout the rest of calendar 2021. And we anticipate that we will be generating sufficient revenue by the end of next quarter, to not only breakeven, and be covering our monthly expenses, but also to be generating free cash and be profitable. So that a key milestone of profitability will be achieved by the end of this fiscal year, which is by the end of the next quarter.
And in terms of the private placement, the criteria that we need to meet in order to force acceleration of the warrants has been met -- or have been met rather. And that would just be that the company has been trading over $0.50 for 10 days, consecutive days. And we do not have any immediate plans to force acceleration of the expiration of the warrants. But just to be clear that that's -- those criteria have been met. And although, we do not -- generally not a fan of kind of forcing conversion of warrants, I think we have warrants in the hands of many very friendly investors.
Should we decide we needed capital? I'm sure we'd be able to and encourage those friendly holders to exercise their warrants, but that's not something that we need to do as a company. We're certainly not planning to accelerate the expiration or to need the proceeds from those warrants in the near future. If the warrants, all of the warrants from the private placement are exercised, the gross proceeds to the company would be a little over CAD$2 million.
Subsequent to the period ending December 31st, 2020, we received a little over 800,000 gross proceeds from the exercise of some outstanding stock options, as well as a small number of warrants. Certainly, given that a lot of the stock options that we've issued to date and certainly the warrants and associated with the previous private placements -- the last private placement are all in the money. And so we're definitely anticipating some additional stock option exercises and possibly warrant exercises beginning this quarter, but also certainly extending through the final quarter of our fiscal year. So, period ending June 30th, 2020.
Yeah. So, what did we accomplish in the last quarter? Well, we had multiple new product launches. And we launched a new service. This is something that's enabled by our care management center, which in layman's terms is our call center. And we launched the iUGO Care Annual Wellness Support Visits Services, or Annual Wellness Visits Support Services. This is the service that helps primary care providers and complete their annual wellness visits.
In that they use both our human care telemedicine platform, and then leverage our staff at the care management center where they're able to conduct a lot of the health histories and questionnaires and things that need to be completed by the patient with the clinician prior to getting the final virtual visit going with the family doctor.
So, we're able to help family physicians and more efficiently move through these annual wellness visits. They are key source of revenue for most family doctors. And a lot of them particularly during COVID were not able to provide their typical annual wellness visits to their patients. So, this is something that's certainly a benefit to patients, but there's also a significant financial benefit to clinicians who use the service.
We also launched three new product lines iUGO Well, which is our first kind of more preventative wellness and mental health and physical wellbeing focused app. We deployed that as many of you know in Australia. And this is a product that we expect will be of particular interest to employer sponsored health plans, not just in Australia, but also in North America and beyond.
We launched iUGO Home commercially. This is the product where we use a watch or a pendant that's connected to our platform. The watch or the pendant is essentially a personal emergency response system. And so, it allows patients to contact emergency services if they have a medical emergency in the home. It also will provide fall detection. So if a patient does fall, their care team will be notified immediately.
The system enables two-way audio communication so that the patient can have a conversation with their care provider if they have any issues. It also provides audible reminders to take their medications. And it's capable of providing an automated geo-fencing based alert. So, for patients who have -- who are at risk of wandering, either outside of their home or outside of an adult daycare or leaving a lockdown ward in or residential care setting, the care providers can be alerted or the family members, if the patients aging in place at home and can be alerted that the patient has left the particular setting, and then the devices can be used to track the patient by GPS and help locate them in a timely manner to help keep them safe.
And then our iUGO IVR product, that's interactive voice recognition, it's automated. And we use that to communicate with patients through automated phone calls to their home. We do those daily to help patients capture their readings. So, whether that's their blood glucose or blood pressure, weight, temperature, or a pulse oxygenation.
This is particularly useful for patients who don't have connected devices. So, if you already have a glucometer or a scale in your home, or even a mercury thermometer, and your physician wants to monitor you using those existing devices, this is a great way for iUGO to connect to that patient and using technology, but without having to replace their devices. So, it's really a question of following our standard mission, which is meeting patients where they are.
And one of the benefits of the IVR technology is that we're able to deliver those phone calls in any language, really. So, whatever patient -- whatever the patient's language of choices, they can receive their reminders and have their vital signs collected through that automated interactive voice recognition technology in their native tongue.
In Q2, we signed multiple new contracts. That would include the contract with the University of Notre Dame, Australia to provide iUGO Well to it's 12,000 faculty staff and students. And we begin onboarding last quarter with the University of Australia -- University of Notre Dame, Australia and onboarding will continue and will accelerate through the rest of this year.
We also signed an agreement -- formed a strategic alliance with iDocsWeb and where they will offer iUGO Care to their over 200 skilled nursing facility clients. That's skilled nursing facilities across the United States. And together those skilled nursing facility, clients discharge over 50,000 patients a year. Most of whom are eligible to receive a combination of our services, including iUGO Care, Remote Patient Monitoring, Chronic Care Management, Transitional Care Management and Behavioral Health Integration.
And that last one, as a reminder is really care coordination between different members of a patient's care team and the community who are managing either mental health condition or an addiction.
We also signed 15 new clients in Central and North Texas, and in Puerto Rico. Typically, those are physician practices or home health agencies. And we provide our iUGO Care to those clients. Typically promote -- a combination of Remote Patient Monitoring, Chronic Care Management and Behavioral Health Integration. And again, we began onboarding those patients last quarter and we continue to accelerate the pace of onboarding every month.
We also signed a contract with a U.S. physician practice to provide our new Annual Wellness Visit Support Services, which we discussed in the previous slide.
Subsequent to Q2. So, in the current quarter, we signed new contracts with a long-term care facility in North Texas to deploy iUGO Home. That was pretty exciting for us, because we developed that product over the last two years. And it's really nice to see the uptake in the market for that product. And I think certainly going forward we're going to see a lot more traction for that particular product line in the market.
We also signed a contract with the physician practice in Maryland, where they're using our interactive voice recognition technology, and they are using it with both English and Russian speaking patients.
And we signed a contract with a U.S. nephrology patient. Nephrology is just the clinical specialty that deals with kidney patients, kidney disease patients. They are using our iUGO Care platform to monitor their chronic kidney disease patients. There's over 36 million chronic kidney disease patients in the U.S. alone. It's an absolutely massive market. And I think this particular contract really validates how flexible our platform is and how comprehensive it is in terms of its ability to provide care management and chronic disease management for a very broad range of clinical conditions.
So, Reliq is really quite unique in the market and it's -- in terms of its ability to manage virtually any chronic condition and that a clinician might want to manage remotely in a patient. So, it's very nice to see the company moving into some of these different use cases and looking at multiple chronic conditions beyond just diabetes, hypertension and congestive heart failure.
Again, subsequent to Q2, we signed a new contract with a care management network in California. So, this is really our first significant foray into the California market. As I'm sure all of our U.S. investors are aware of California is the most populous state in the U.S. and it's therefore an absolutely massive market. In this particular contract, we are working with a group that has over 50 clinics and over 500 physicians. So, there's a very large patient base there.
The network specializes in delivering culturally customized technology enabled health care to senior citizens in the Asian-American community in California. And so, we are fortunate in that our platform was designed to be multi-lingual -- inherently multi-lingual to be able to support that kind of capability. And obviously, it's a technology based solution that works with a broad range of clinical conditions and is able to meet the needs of Medicare, Medicaid, and privately insured patients for this network.
The other sort of big change that the company went through that I think is a key step in our evolution and maturation as a company is that we really started to invest in investor outreach. So, subsequent to Q2, really beginning in January of this year, we began investing in investor outreach programs and certainly investing a significant percentage of my time now on communicating relative story to the market.
I think we've been very quiet for the last two years, because there was a lot of uncertainty in the business, particularly around the global pandemic. We're now at a point where we have a very clear view to how we're going to reach profitability and how we're going to generate $11 million in revenue over the remainder of this calendar year. And so, it's a very good time to be getting back out in front of the capital markets, in front of potential investors and educating them on the company's value proposition and sharing our progress as we move forward here and month-over-month and quarter-over-quarter.
So we engaged with partners out of New York in the U.S. for our U.S. investor relations activities. And they are -- I find them extremely easy to work with, and also very well connected to institutional investors who are kind of a good match for the company at the stage we're currently at. I also think that based on my knowledge of the firm and the companies that they've worked with that there'll be a good partner for us going forward. So, they've proven themselves to be very good at matching the company to the appropriate investor audience for the company's stage of development. So, I think they'll kind of grow with us as we grow as a company, and that'll be very valuable.
Certainly, we've met a number of very motivated, engaged U.S. investors and funds through with them and a number of those funds have established significant positions in the company. So, that's been very, very beneficial.
And we're also working with Wall Street reporter for investor marketing. Even though I think I'm a little bit too old for the social media scene, I think it is really important that we have a presence that is really provides that kind of universal access to the company's story and allows us to share our progress with a broad audience and making calls through reporters has been really helpful in terms of getting us in front of new eyes for the story, which I think is really key too. And actually, achieving the shareholder value that we know we should achieve.
So, our outlook for calendar 2021. We expect sales to reach a run rate of over $1.5 million by the end of the next quarter. So, at the end of the fiscal year June 30th, 2021. At that point, we will start generating significant free cash every month. And we expect, as I've said before, to see continued growth month-over-month and quarter-over-quarter, not just through the remainder of this year, but really for the next three to five years. I think we're looking at a pretty significant growth rate for the company.
I've mentioned this in other presentations, and it's certainly a public knowledge. But at the moment, less than 5% of all patients who qualify for virtual care services, like our platform enables, are actually enrolled in a program or on a platform that provides those kinds of virtual care services.
So, this is a market that when we first entered the space in 2017/2018, there was one billing code under Texas Medicaid for Remote Patient Monitoring, and one under Medicare, the federal program for Remote Patient Monitoring. And over the last three years, Medicare and Medicaid have introduced over a dozen different billing codes that cover not just Remote Patient Monitoring, but other related services like Chronic Care Management, Transitional Care Management, Behavioral Health Integration, Principal Care Management, obviously Telemedicine.
And so, it's a much more profitable business for healthcare providers than it was when we started. And it's also a much more established kind of clinical practice as well. The reimbursement pathways are much clearer now than they were in 2018.
So, we're in a very good position. I think this market is really poised for significant growth, given that tremendous under utilization by the target patient population. And there are over -- well over 75 million patients in the U.S. who have two or more chronic diseases, 37 million of those are covered by Medicare and Medicaid. The rest are covered by private insurance, where they have coverage.
So, there's a huge patient population there, but to date there has been growing, but relatively limited utilization of a virtual care. And because over the last two years, in particular Medicare and Medicaid have really expanded the number of reimbursable codes eliminated a lot of the obstacles that were previously in place, and that would prevent clinicians from accessing reimbursement for these services. And they've continued to increase the size of the reimbursement.
So, when we started the typical healthcare provider would receive a reimbursement of about US$59 per patient per month, if they were using our services. Now they receive a typical reimbursement of over US$315 per patient per month when they're on our platform using our services.
So, there's a very significant incentive for clinicians to enroll patients and certainly, Medicare and Medicaid are also famous for their sticks as well as their carrots. And there are definitely significant penalties associated with having patients’ experienced preventable complications like hospitalizations and ER visits. So, I think the market conditions this year in particular and in going forward are very, very favorable to our business. We believe that this is going to be our breakout year based on the contracts we already have in place. And the implementation plans we have agreed on with our clients.
We certainly expect that the most rapid growth will be seen in the second half of this year. There are definite obstacles to our client base associated with COVID. If you think of it as our business is really working with healthcare providers to prevent forest fires. And what's happened right now with the global pandemic is we're in the middle of a raging wildfire. And so, our clients are not able to focus on a more proactive approach to healthcare when they're really very focused on a day-to-day basis on just saving the lives of patients who have contracted COVID.
And so, as the vaccine rolls out in the first half of the year and gets to all of the frontline healthcare workers and patients over 75, which certainly should in the U.S. anyway, and by the end of June at the latest, we will therefore be removing these significant barriers that currently exist for a number of our clients to implementing our solution. And so that's why we expect very rapid growth in the second half of this year.
We've certainly over the last few months many of our clients come to us and say, we finally see the light at the end of the tunnel. And we're really excited to get started with our iUGO Care. We've been preparing for that very rapid growth and are definitely ready for it.
And we expect to generate revenues of roughly $11 million in this calendar year. So, by the end of December, 2021. And as I've said previously, we expect that that will be at gross margins of over 75% and EBITDA margins over 45%.
And last, but probably also least, the date for our next webinar. We are due to file our quarterly financials for that should say Q3, not Q2. My apologies. For Q3 fiscal year 2021, which is the period ending March 31st, 2021 are due on May 31st, 2021 at the latest. So our webinar will be scheduled for the day after we file, which will be on or before June 1st, 2021.
So, thank you very much for joining us. And we're very excited about what the year ahead holds. And we're very pleased that last quarter was really the very beginning of what we think will be the company's path going forward. So, continued growth and improvement in margins, and continued significant momentum on the customer traction front.
So, we appreciate all of you for participating and being part of the Reliq Health success story. And we look forward to future successes throughout the rest of this year and beyond. So, thank you again for joining us.
End of Q&A