Syra Health Q4 2024 Earnings Call Transcript

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March 11, 2025

There are 3 speakers on the call.

Operator

morning, everyone, and thank you for joining us for Cyra Health's Fourth Quarter and Full Year twenty twenty Financial Results Conference Call. My name is Brett Moss of Hayden IR, and I direct Investor Relations for Cyra Health. Joining us on today's call is Doctor. Deepika Bupalacci, Chair and CEO of CIRA Health and Priya Prasad, CIRA Health's Chief Financial Officer. At the conclusion of today's prepared remarks, management will answer questions that are sent to us by investors and other questions we think are relevant to investors as well.

Operator

Today's event is being recorded and will be available for replay through the webcast information provided in the press release. I'd like to also call your attention to the customary Safe Harbor disclosure regarding forward looking information. The conference call today will contain certain forward looking statements, including statements regarding the goals, strategies, beliefs, expectations and future potential operating results of CyberHealth. Although management believes these statements are reasonable based on estimates, assumptions and projections as of today, these statements are not guarantees of future performance. Time sensitive information may no longer be accurate at the time of any telephonic or web class replay.

Operator

Actual results may differ materially as a result of risks and uncertainties and other factors, including, but not limited to, the factors set forth in the company's financial filings with the SEC. Syrah undertakes no obligations to update or revise any of these forward looking statements. With that stated, I'd like to turn the event over to Doctor. Deepika Bupalanchi, Chair and Chief Executive Officer of Syrah Health. Deepika, please go ahead.

Speaker 1

Thank you, Brett, and welcome, everyone. Thank you for joining our fourth quarter and full year twenty twenty four earnings call today. We value your continued interest in Cyra Health and are excited to share updates on our recent performance and future goals. I will begin by highlighting our strong financial performance followed by an update on the growth initiatives and strategic priorities into 2025. Following that, I'll outline the momentum behind our path to profitability.

Speaker 1

Then I'll hand over to our Chief Financial Officer, Priya Prasad, who will take you through a more detailed breakdown of our financial results. 2024 was a transformational year for Cyra Health, marked by the successful execution of the strategic growth initiatives, significant revenue expansion and key investments in technology and innovation. We delivered total value of 8,000,000 reflecting an impressive 45% growth compared to 2023. This was driven by strong performance in our population health, behavior and mental health and health education business units with non healthcare workforce revenues growing 66% year over year and accounting for 26% of total revenues compared to 23% in 2023. A strategic shift towards more diversified high margin revenue streams is supported by sustained market demand for our data analytics, epidemiology services, growing adoption of Serenity and increased demand for training.

Speaker 1

Alongside this, our legacy healthcare workforce business unit continues to perform well with revenues for the full year 2024 increasing 38% to just under RMB6 million. Gross profit margin was 20.7% for 2024 compared to RMB25.6 million the previous year. The variation was primarily due to timing differences between implementations and revenue recognition for certain milestone driven projects. In addition to impacts from specific low margin healthcare workforce contracts that are being phased out. Going forward, we expect the growing share of higher margin revenues in the consolidated mix will have an positive impact on our gross margins.

Speaker 1

From a quarterly perspective, gross margin of 22.7% for the fourth quarter of twenty twenty four compares to 29.7% in the prior third quarter and 23% in the year ago period. The strength of our diversified model and operational efficiencies we are realizing reinforces our optimism for improving margins going forward. Additionally, our strategic focus on high margin offerings has enabled us to further solidify our financial positioning. We are continuing to generate strong momentum with new contracts and extensions, which are long term and highly recurring in nature. As of Q4 twenty twenty four, our RFP submissions equate to a potential $80,000,000 in multi year contract value provided Saira receives 100% of the awards.

Speaker 1

In support of our long term growth strategy, we remain focused on securing contract wins and delivering value to customers while scaling our operations and entering new markets, including federal and global mental health initiatives. We are also seeing continued strength in our demand for Serenity app. Proprietally developed and launched last year, the Serenity App is built on clinically proven practices within the mental and behavioral health space. Initial traction has been strong and as adoption increases, we have strong conviction in our ability to capitalize on its potential to drive growth in the rapidly expanding vendor and behavior markets. Being a subscription based app as Serenity's user base expands, so does our recurring revenue.

Speaker 1

With the combination of diversified revenue growth, cost optimization and a refined focus on innovative solutions, we are confident in our ability to drive continued momentum on a trajectory towards profitability. Looking ahead, through a continuous focus on our expanding sales pipeline, targeting of higher margin revenues, innovative technology product development and operational efficiencies, we reiterate our commitment for excellence in commercial, operational and innovation strategies. Beginning with our prioritization of commercial excellence, we remain committed to expanding our revenue by growing our portfolio of high revenue clients. In tandem with this, we are successfully progressing on revenue diversification with non healthcare workforce generating 26% of 2024 total revenue, a material expansion from the 23% penetration in 2023. This strategy not only improves our margins, but also underscores our dedication to delivering greater value to our shareholders.

Speaker 1

Larger client contracts validate our offerings and enable us to expand our pipeline across a broader base of governmental agencies. Going forward, pursuing larger contracts remains a key strategic priority for our business. Moving on to our focus on operational excellence, similar to what was communicated in the third quarter call, I want to iterate that our recent cost cutting measures have not been detrimental to revenue. As you may recall, in the second quarter, we announced a restructuring initiative aimed at reducing operating expenses. Going forward, we will continue to diligently manage the allocation of capital to enable investment in growth initiatives that drive profitability.

Speaker 1

Our operational efficiencies drove a material 39% reduction in our operating expenses in the fourth quarter of twenty twenty four compared to the fourth quarter of twenty twenty three. As a result, net loss for the fourth quarter of twenty twenty four nearly halved to $504,000 an improvement of $491,000 compared to the net loss of $995,000 in the fourth quarter of twenty twenty three. We expect these improving trends to continue into 2025. In our pursuit of innovation excellence, we are focused on expanding our innovation pipeline to enhance the variety of products and services we provide. This includes the launch of the Certainty mental health app as both a B2B and direct to consumer product.

Speaker 1

Currently available in The United States and India, we plan to expand the availability of the product in lower to middle income countries where mental health is a significant concern. At its core, Serenity is designed to offer effective solutions for mental and behavioral health challenges. Notably, telehealth will be implemented into Serenity, which will seamlessly expand access and improve health outcomes in the behavior and mental health space. This science based app leverages expertise of psychologists, clinicians, suicide prevention specialists, data scientists and AI technologists to deliver customized prevention and intervention protocols. We are already receiving positive indications for Serenity.

Speaker 1

In partnership with Indiana University, we announced positive preliminary results from a six weeks Serenity clinical research study. Data collected from this study shows trends towards lowering depression symptoms among Serenity users when compared to those without access to the app. Trends in overall well-being were also observed among those using the app along with improvements in other measures. Furthermore, we have continued with the development of CyroGuard Drains for AI agents ensuring safe, ethical and compliant AI interactions in healthcare. We also offer Cyrobot, an innovative AI backed chatbot designed to enhance user engagement and streamline healthcare interactions.

Speaker 1

Its pre generated design ensures compliance with regulatory standards making it an effective solution for various healthcare organizations and providers. Building on this foundation, our focus on sustainable growth and a sound financial position guides our continued opportunistic investment in these innovative offerings. Our strategic pillars remain centered around ensuring we continue to surpass our clients' evolving needs and capitalize on emerging market opportunities. Now moving on to update on our business units. In our population health business unit, we were awarded a two year contract with the State of Minnesota as part of its master's contract program.

Speaker 1

The agreement includes an option to extend the term by up to an additional three years with the Direct Care and Treatment Division of the Minnesota Department of Human Services. The program aims to enhance healthcare performance, patient satisfaction and employee engagement within the state specialized behavior healthcare system. We were also granted a three month population health contract with the Jefferson County Department Of Health in Alabama to focus on identifying and addressing health disparities within the district. In Shelby County, Tennessee, we were awarded a one year contract extension with the health department for our team of epidemiologists and biostaticians to continue uncovering disease trends and factors influencing disease, while also addressing its economic impact. With an initial contract extension valued at $450,000 and a one year renewal option in 2026, we increased the combined contract value opportunity to up to $1,300,000 over three years.

Speaker 1

Within our health education business unit, we remain committed to delivering comprehensive large scale health education and training programs that facilitate healthcare workforce development. Health education and training is continuing to gain traction and we expect more material revenue contributions in 2025 from the signing of new training contracts. Notably, we recently secured a training contract with the Midwest based universities to design virtual behavioral health training modules and finalized our contract with the Indiana Family and Social Services Administration, division of disability and rehabilitative services to train our home and community based healthcare providers. Together, these contracts represent a combined ceiling value of $4,900,000 over the next four years. Our health education business unit is dedicated to improving health education for healthcare professionals, patients and providers.

Speaker 1

Finally, our healthcare workforce business unit continues to generate stable revenue having recently won a new contract with the Washington, D. C. Government valued at up to $1,000,000 Additionally, we secured a $1,500,000 contract extension with the Indiana Family and Social Services Neurodiagnostic Institute, a valued partner since 2020. Throughout 2024, we entered into negotiations with our healthcare workforce partners with the objective of retaining high value contracts while phasing out those with less appealing unit economics. We are also in the initial stages of expanding our business into the private sector through the targeting of companies with our staffing solutions.

Speaker 1

Although private sector wins have not been secured, this aligns with our strategy to expand our addressable market and facilitate care for the broadest possible population. Together, these business units underscore Cyra Health's commitment to enhancing healthcare delivery and improving health outcomes through innovative products and services. With that, let me turn the call over to our CFO, Priya Prasad, who will walk through the financial details. Priya?

Speaker 2

Thank you, Deepika, and let me add my warm welcome to everyone joining us on this call. The financial results for the fourth quarter and full year of 2024 are provided in detail within our press release, which we issued earlier this morning and in our 10 K. Total revenues for 2024 were $8,000,000 compared to $5,500,000 in 2023, representing a year over year growth of 45%. Growth was driven by our population health, healthcare workforce and behavioral and mental health and health education business units. For the fourth quarter of twenty twenty four, total revenues reached $2,000,000 a year over year increase of 14%.

Speaker 2

The strong performance in the quarter was driven by a nearly four times expansion in population health, in addition to 17% year over year growth from healthcare workforce. I will now go through each business unit in detail. Within our Population Health business unit, revenues were $1,700,000 for 2024, more than double compared to $715,000 in 2023, reflecting an annual growth of 132%, which was driven by continued demand for public health services from government health agencies. For the fourth quarter of twenty twenty four, population health revenue reached $418,000 a 285% increase compared to the year ago period. Our expert team of epidemiologists, health economists and data analysts coupled with the robust offering within the population health unit continue to be instrumental in driving new contracts and contract extensions.

Speaker 2

Our Healthcare Workforce business unit also experienced strong growth in 2024 with revenues of $5,900,000 compared to $4,300,000 in 2023, an increase of 38%. For the fourth quarter of twenty twenty four, healthcare workforce revenue reached $1,500,000 a year over year expansion of 17%. The increase in healthcare workforce revenue was driven by both new contracts as well as contract renewals and extensions with existing customers. Of particular note is a new contract with the Washington, D. C.

Speaker 2

Office of the State Superintendent of Education. This contract includes several renewal options, which could further expand its lifetime value. Our Health Education business delivered significant growth in 2024 with the revenue of $40,000 compared to $12,000 in 2023. Based on the growing momentum in health training and the signing of new contracts, we expect this unit to deliver continued revenue expansion going forward. Our Behavioral and Mental Health business unit posted revenues of 17,000 in 2024 compared to 13,000 in 2023.

Speaker 2

We anticipate further growth in this business driven by increased demand from larger business to business employers as well as launch of broader features within Serenity in addition to its international expansion. Within our digital health business unit, Cyrobot generates revenue from both maintenance fees and implementation fees. This business continues to evolve and the sources of revenue are gradually shifting from predominantly milestone based implementation revenue in 2023 to more recurring maintenance based revenue in 2024, with this trend expected to continue into 2025. Gross profit in 2024 was $1,700,000 an increase of 17% compared to $1,400,000 in 2023, while gross margins of 20.7% compared to 25.6% in 2023. The gross margin variation is largely due to a shift in revenue mix that included timing differences between implementations and revenue recognition for certain milestone driven projects and a larger portion of lower margin healthcare workforce contracts, which have since been renegotiated and are being phased out.

Speaker 2

In addition, the increased penetration of higher margin non healthcare workforce revenues is expected to continue on a strong growth trajectory and drive improving gross margins in 2025. As a housekeeping item, beginning in 2025, expenses associated with recruitment outsourcing as part of the Healthcare Workforce business unit will be classified as SG and A rather than as cost of goods sold with no impact on our bottom line. Total operating expenses for 2024 were $5,400,000 an increase of 26% compared to $4,300,000 in 2023, decelerating considerably from the 36% year over year growth in 2023. '20 '20 '4 operating expenses were primarily related to upfront investments in the launch of Serenity, which is expected to provide benefits of scale going forward. In addition, we have successfully implemented workforce optimization initiatives that are poised to deliver operational efficiency gains.

Speaker 2

As a result of these initiatives, operating expenses declined 39% in the fourth quarter of twenty twenty four compared to a year ago period. Going forward, we will continue to take a disciplined and measured approach to allocating capital, prioritizing investments that we believe will drive sustainable long term growth. Salaries and benefit expenses in 2024 was $2,700,000 an increase of 19% from $2,300,000 in 2023. For the fourth quarter of twenty twenty four, salaries and benefits declined by 20% versus the year ago period and 9% sequentially driven by our workforce optimization efforts. Selling, general and administrative expenses in 2024 increased 28% to 1,400,000 due to costs associated with being a public company in addition to investments to support revenue growth.

Speaker 2

Based on efficiency gain measures, SG and A declined by 37% in the fourth quarter of twenty twenty four versus the year ago period. Professional services increased a minimum 3% in 2024 to a $606,000 and declined by 28% on a year over year basis in the fourth quarter of twenty twenty four. R and D expenses were $585,000 in 2024, an increase from 240,000 in 2023, driven by the development of new innovative technologies offerings within Serenity, as well as resource allocation for the clinical research study with Indiana University. We are making a large push to attract business to business customers to actualize a positive ROI on R and D spending. In addition to our focus on managing operating costs, we are taking a meticulous and opportunistic approach towards future investments in the continued development of our technology based solutions.

Speaker 2

Depreciation expenses for 2024 were $63,000 compared to $49,000 in the year ago period, reflecting capital investments to expand office space and acquire additional office equipment. Net loss for 2024 was $3,700,000 compared to $2,900,000 in 2023. For the fourth quarter of twenty twenty four, the net loss was $504,000 a significant improvement from $995,000 in the year ago period. The nearly 50% reduction of net losses in the fourth quarter is a reflection of a successful implementation of cost controls that were previously discussed. Net loss per share was a negative 0.5 in 2024, an improvement compared to a negative 0.6 in 2023.

Speaker 2

For the fourth quarter of twenty twenty four, net loss per share was a negative 0.05 compared to a negative $160,000 in the year ago period. Adjusted EBITDA for 2024 was a negative $3,700,000 compared to a negative $2,800,000 in 2023. Importantly, for the fourth quarter of twenty twenty four, adjusted EBITDA improved sustainability to a negative $492,000 from a negative $974,000 in a year ago period. These improvements were largely attributed to prudent operating expense control as well as targeting of more profitable revenue streams. Cash on hand on 12/31/2024, was $2,400,000 Turning to our outlook for the full year of 2025, we are encouraged by the strong trends we experienced exiting 2024.

Speaker 2

Accordingly, we are introducing full year 2025 guidance of low double digit percentage revenue growth. Based on the significant narrowing of net losses, there is strong momentum in our profitability trajectory and we expect these trends to persist in 2025. Wrapping up the financials, we remind investors and interested parties that reconciliation of our GAAP results to our non GAAP results are provided in the tables included in today's press release. With that, let me turn the call back over to Deepika.

Speaker 1

Thank you, Priya. In closing, as we enter 2025, we are building on the strong momentum of the fourth quarter of twenty twenty four with a heightened focus on generating diversified revenue growth in tandem with profitability. We operate in an under addressed segment of the healthcare industry and are uniquely positioned to capture a growing share of a massive target market with an excess of four fifty billion dollars With cost and operational improvements in place, we are poised to capture new opportunities and deliver innovative technology and service driven value for our customers. We remain committed to executing a strategic vision, driving growth and advancing innovation in healthcare solutions. 2025 will be the defining year for Cyra as we have disrupted the status quo of the company to drive targeted revenue growth and sharpen our focus on profitability.

Speaker 1

With Serenity, we have a fully developed product that continues to undergo enhancements through the launch of new features and functionalities within the app that leverage the power of AI. Serenity has the potential to scale globally and we continue to strengthen our position in behavioral health through the active pursuit of strategic partnerships with the state and federal agencies, universities and institutions. Following the adoption and successful implementation of significant cost optimization measures earlier in 2024, Saira will maintain a diligent approach towards investing in sustainable long term growth and value creation opportunities. Our focus remains on expanding our sales pipeline, driving higher margin revenues, advancing innovative technology and optimizing operations. With these strategic priorities, we are confident in the path ahead and look forward to delivering sustainable growth and value creation in the years to come.

Speaker 1

Thank you for your attention. We will now address questions we have received from investors in advance of this call.

Operator

Thank you, Deepika. Let's go to question number one. What was the rationale for filing a mixed shelf for up to $75,000,000 when the company projected a CAF runway of two years as part of this third quarter earnings call? Priya, would you like to take that?

Speaker 2

Thank you, Brett. A shelf allows the company to streamline the administrative tasks associated with the capital raise. It is standard practice to register a large amount on the shelf, allowing flexibility to pursue acquisitions, joint ventures and other strategic initiatives. We have not announced any plans to raise additional capital at this point. Our cash on hand as of 12/31/2024 was $2,400,000 But again, access to capital allows us the flexibility to pursue acquisitions and joint ventures that are complementary to our business and enhance our revenue and profitability.

Operator

Great. Thank you. Next question. Given the current share price, how will the company protect itself from the risk of delisting due to non compliance? Priya, will you take that as well?

Speaker 2

Sure, Brett. Our NASDAQ listing rule 5,500 and fifty(one) requires the company to maintain a minimum of $2,500,000 in stockholder equity for continued listing. Based on our balance sheet, as of 12/31/2024, stockholder equity was $2,900,000 and in compliance with the NASDAQ listing standards.

Operator

Well, as a follow-up to that question, Priya, in terms of the minimum bid price as part of NASDAQ listing rules, how does Cyro plan to address this issue?

Speaker 2

With price, we are addressing this and are exploring various options to regain compliance. At the current time, we do not intend to partake in any reverse stock splits and will instead focus on strengthening the fundamentals and the path to profitability, which we believe will correct the market's perception.

Operator

Great. Thank you. Deepika, can you tell me about the sales of Serenity?

Speaker 1

Yes. We are currently marketing Serenity to employee assistant programs, large employers, universities and health systems. Our addressable market is expanding by targeting direct to consumer channels. And as that user base expands, we will begin to experience additional benefits from recurring subscription based revenue growth. Importantly, we have been talking today about the successful preliminary clinical research study results of Serenity, which showed an improvement in symptoms across all measures for those with access to the app versus those without.

Operator

Thank you. Our fifth question is, tell us about the federal government contracts you announced in early twenty twenty four. Is there any update on the task orders, Deepika?

Speaker 1

We are actively bidding on task orders being issued under one of the two federal contracts announced in early twenty twenty four. We will keep the market informed as these materialize and issue a PR accordingly.

Operator

Great. Well, that's all the questions we had in advance and that concludes our Q and A session for today. We look forward to issuing a press release in between our quarterly earnings calls on contract wins, contract extensions and developments within the company. My many thanks to everyone participating on today's call. We look forward to updating you on our progress again in the next quarter.

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