Forian Q2 2023 Earnings Call Transcript

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August 10, 2023

There are 4 speakers on the call.

Operator

Greetings, and welcome to Forianz, Inc. 2nd Quarter 2023 Financial Results Conference Call and Webcast. At this time, all participants are in a listen only mode. A question and answer session will follow the formal comments and webcast. Participating today from Forian are Max Wygoth, Executive Chairman and Chief Executive Officer and Michael Vesey, Chief Financial Officer.

Operator

Before we begin, I would like to remind you that management's remarks today may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward looking statements due to a variety of important factors, including those discussed in the Risk Factors section of the company's annual report on Form 10 ks for the year ended December 31, 2022, as filed with the SEC on March 30, 2023. Estimating financial performance accurately for future performance is difficult as it involves assumptions and internal estimates that may prove to be incorrect and is based on plans and circumstances that may change. There is, therefore, a significant risk that actual results could differ materially from the outlook provided today. Any forward looking statements made on the call today represents the company's views as of this date, and the company undertakes no obligation to update them except as required by law.

Operator

Words such as estimate, projected, expect, Anticipate, forecast, plan, intend, believe, seek, may, will, should, future, propose and variations of these words or similar expressions or versions of such words or expressions are intended to identify forward looking statements. These statements include, but are not limited to, statements regarding future growth, anticipated performance and prospects. Today's presenters will also refer to certain non GAAP financial measures on our call, such as adjusted EBITDA, which the company believes may be important to investors to assess its operating performance and should be considered as supplement 2 and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of the comparable GAAP metric can be found on today's press release and webcast, both of which are available on the company's website. Those numbers are unaudited, and any statements regarding the company's anticipated performance may be subject to change, including as a result of risks discussed in the Risk Factors section of the company's annual report on Form 10 ks filed with the SEC on March 30th 2023.

Operator

Today's call and webcast is being recorded. A copy of the recording, webcast as well as the full transcript and copies of today's press release and SEC filings will be available at forian.com/investors. I am now pleased to introduce the company's Executive Chairman and Chief Executive Officer, Max Weigart. Sir, you may begin.

Speaker 1

Thank you. Good afternoon, everyone, and thank you for joining us. After the close today, for an reported fiscal 2023 second quarter results. Our second quarter results reflect success in executing against our long term strategy. Forium delivered another quarter of strong operational results with 36% organic year over year revenue growth and reached adjusted EBITDA breakeven ahead of schedule.

Speaker 1

Today, I'll share some highlights from the 2nd quarter and speak to a couple of examples of how our solutions are used, and then Mike will provide details on our financial results. In the Q2, Forian delivered strong operational and financial results. Forian's total 2nd quarter revenue was $4,900,000 which as noted represents 36% year over year growth. Our net loss for the quarter was $1,100,000 and our adjusted EBITDA from continuing operations was positive of $100,000 reflecting consistent and continued improvement from previous quarters. I am proud of the team's work in delivering these solid results and hitting the adjusted EBITDA breakeven milestone as we executed on our growth plan despite a challenging macroeconomic environment.

Speaker 1

As previously reported in the Q1, We still saw some pending budgets and discretionary spending and longer sales cycles. Forium's growth has been fueled by our Our market leading data assets in our Cronos data lake Power solutions ranging from clinical trial development and execution to post launch commercial analytics to real world evidence. I'll share a few examples of how our customers are leveraging Cronos to improve their business performance. Given the extraordinary cost of Bringing a Drug or FDA Approved Device to Market. Life Science Manufacturers and CROs need information to size and quantify market opportunity, optimize trial protocol design, test protocol feasibility, Identify and select optimal trial sites and conduct Phase 4 post market surveillance studies.

Speaker 1

Cronos supports all of these use cases. Life science companies spend tens of 1,000,000,000 of dollars each year on marketing to physicians, consumers and health plans. Upon approval and launch, Forium delivers commercial analytic insights, including innovative provider targeting and segmentation solutions, Marketing measurement and optimization, market sizing and market share assessments and market access analytics, including drug pricing and assessments of prior authorization and pre certification requirements that impact patients' access to therapeutics. In terms of real world evidence, Cronos maps longitudinal patient journeys on over 300,000,000 de identified patients In the U. S, we are covering insights such as healthcare product and service use, drug efficacy and safety, It is essential for their development and testing of hypotheses for new drug development, expanding usage to new indications, improving the efficacy, safety and value of a product or a service in the real world.

Speaker 1

In addition to life science companies, Cronos delivers valuable insights to providers and payers interested in developing efficient, high quality provider networks, Tracking patient leakage to competitor health systems, quantifying high value referring providers to steer patients to their facilities in understanding the dynamics of healthcare delivery and service use across systems of care. Our customers appreciate our deep understanding of healthcare data. Our solution engineers continue to develop and deliver innovative high value products from Cronos. In addition, we are beginning to leverage the growing generative AI market's attention to healthcare. Increasingly, our Customers are enabling artificial intelligence solutions trained on Cronos.

Speaker 1

By doing so, our customers are gaining greater insight into their products, for customers and the dynamics of a rapidly changing marketplace. As the momentum in AI continues, We believe there will be more opportunities to empower clients with more specific data solutions uniquely suited for training advanced AI models uncovering unique insights that improve the healthcare delivery system, support the development of new therapeutics and improve patient outcomes. Finally, we continue to improve our balance sheet. As reported, after the end of the quarter, customer of Forium in which we held an equity interest was acquired. And as a result, Forium received approximately $5,900,000 of cash proceeds in consideration of all of its equity interest in the customer.

Speaker 1

Forium may receive additional earn out payments in 20252026 in an aggregate amount of up to approximately $3,600,000 if certain conditions are met. The additional cash proceeds and Operational Improvements put Ford in a strong position. We intend to use the net proceeds for general corporate purposes, including business expansion, deleveraging or the financing of possible acquisitions. Overall, Forion delivered another solid financial and operating quarter, along with the milestone event of reaching adjusted EBITDA breakeven. Our revenue growth, improved margins and cash flow resulted from a committed team executing at a high level and we look forward to further growth in the quarters to come.

Speaker 1

I will now hand it over to Mike to go over our financial results in more detail. Mike?

Speaker 2

Thanks, Max. Today, I will provide an overview of Forian's financial results for the quarter ended June 30, 2023. As previously disclosed in our SEC filings, Forian completed the disposition of BioTrac on February 10, 2023. Through this transaction and the previous dispositions of our Ingenie and Security grade businesses, Florian no longer provides software solutions to the cannabis industry, representing a strategic shift, which has a significant impact on operations. Accordingly, we We've accounted for the operations of the disposed of businesses as a discontinued operation effective with our Q1 in 2023 and have reclassified previous reported operating results on a consistent basis.

Speaker 2

My discussion today will reference comparative results for continuing operations for the quarter ended June 30, 2023, unless noted otherwise. The press release of the business. As noted, the press release and these presentation materials include a detailed reconciliation of adjusted EBITDA to net loss. Our consolidated revenues of $4,900,000 for the quarter were up 1,300,000 were 36% compared to the same quarter last year. The growth in revenue over the prior year was driven by both new customers and increased revenues from our existing relationships.

Speaker 2

The majority of our information contracts provide for continuing information deliverables to our customers over Net loss from continuing operations for the quarter decreased $2,900,000 from the same quarter last year to 1,100,000 The decrease in net loss was primarily driven by a decrease in loss from continuing operations of $2,400,000 partially offset by changes in other income items such as interest, income and taxes. The improvement in loss from continuing operations resulted from the 1.3 primarily due to lower G and A and research and development expenses resulting from the streamlining of our operations after the divestiture of BioTrac. Adjusted EBITDA from continuing operations, which excludes stock based compensation, depreciation, amortization and certain other non recurring items was positive $100,000 compared to negative $2,500,000 in the same quarter last year, demonstrating the operating leverage in our streamlined business. We expect our capital efficient business model to allow us to continue to leverage these investments we made in our infrastructure with a low level of incremental expense growth relative to revenue going forward. As noted earlier, a reconciliation of our net loss to adjusted EBITDA along with an explanation of the reconciling items is included in today's earnings release.

Speaker 2

Turning to our balance sheet. We ended the year with $41,200,000 of cash and marketable securities and $25,500,000 in convertible notes with no maturities prior to September 2025. It should be noted that these amounts exclude approximately 12 point up to $3,600,000 related to this transaction if certain criteria are met. Additionally, we will receive monthly payments totaling $6,700,000 related to the sale Biotrach through February 10, 2024, providing additional liquidity to pursue our growth objectives. Our Healthcare Information revenues were $16,400,000 in 2022.

Speaker 2

We expect 2023 revenues to be in the range of $20,500,000 to $22,500,000 reflecting an increase of 25% to 37% over the prior year Healthcare Information Revenues. We expect continued improvements in our net loss and adjusted EBITDA as we continue to leverage our infrastructure, achieving a positive EBITDA contribution in the second half of twenty twenty three. And with that, I will turn the call over to the operator, who will open the line for questions.

Operator

Thank you. And it comes from the line of Bruce Goldfarb with Lake Street Capital Markets.

Speaker 3

Hi. Thank you for taking my call and congratulations on the quarter and the growth.

Speaker 1

Thanks Bruce.

Speaker 3

So last quarter, I just have a few questions. Last quarter, you characterized your client spending and attitudes as conservative. Is there any change in their posture through the end of July?

Speaker 1

No. I think it's the same As the Q1 from that perspective.

Speaker 3

And then please discuss the environment for winning new logos versus expanding with existing accounts.

Speaker 1

Sure. This is Max Weigand. Once we land a client, it usually takes A little bit of time for us to show the value and the expertise we have with our data products. And we've been seeing that a lot of Some of the larger clients out there have incremental brands or incremental opportunities where they're starting to add on New SOWs and new opportunities. They can the format is still the same, mostly multiyear recurring contracts for new clients.

Speaker 1

Our brand recognition is starting to get better as we really focused on being a healthcare information company. We've done several conferences and we will continue to do that to Build awareness around the Forian brand. So, as we indicated with our guidance, We expect the growth to continue throughout the remainder of the year and we expect that both in a combination of new clients as well as upsells.

Speaker 3

Thank you. And then, are you currently adding new employees? And if so, in what areas?

Speaker 1

Sure. We're pretty well fit with our current employee base, but we're always looking For solid engineers and solid sales individuals, those are the two areas of focus. As we mature as an organization, we'll grow more in marketing and other areas to raise our awareness, But we feel pretty well situated with our current base.

Speaker 3

And then lastly, You guys have a sizable cash balance. Is there anything that you guys would like to have on the M and A front? Any type of technology or?

Speaker 1

Yes. We're looking across the continuum. I think there's opportunities To potentially get other like businesses that have recurring data licenses, I think scale helps in this industry. So we're looking at opportunities in that space as well as we're starting to produce internally elementary SaaS offerings for different clients such as providers. As we look Down the road, if there's incremental technologies that are really dedicated and leverage healthcare real world data, Those might be opportunities for us, but we're staying opportunistic and we aren't reaching as we're just At the point where we're building cash in the organization organically.

Speaker 3

Great. That's all my questions. Thank you and congrats on the quarter.

Speaker 1

Thank you. Appreciate it.

Operator

Thank you. And this We'll conclude the Q and A and the Forian conference call. Thank you all for participating and you may now disconnect.

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