Syra Health Corp. Class A Common Stock (NASDAQ:SYRA) Q1 2024 Earnings Call Transcript

Syra Health Corp. Class A Common Stock (NASDAQ:SYRA) Q1 2024 Earnings Call Transcript May 12, 2024

Syra Health Corp. Class A Common Stock isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, everyone and thank you for joining us for Syra Health First Quarter 2024 Financial Results Conference Call. Joining us on today’s call is Dr. Deepika Vuppalanchi, CEO of Syra Health and Priya Prasad, Syra’s Chief Financial Officer. At the conclusion of today’s prepared remarks, management will answer some questions that were sent to us by investors and other questions we think are relevant to investors as well. Today’s event is being recorded and will be available for replay through the webcast information provided in the press release. I’d also like to 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 Syra Health.

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 webcast replay. Actual results may differ materially as a result of risks, uncertainties and other factors, including but not limited to factors set forth in the company’s filings with the SEC. Syra undertakes no obligations to update or revise any of these forward-looking statements. With that said, I would like to turn the event over to Dr. Deepika Vuppalanchi, Chief Executive Officer of Syra Health. Deepika, please proceed.

A smiling healthcare professional, treating a patient with the PLEX platform.

Deepika Vuppalanchi: Thank you, Christine and welcome everyone. I am pleased to discuss with you our first quarter 2024 financial results and the 2024 outlook. We are off to a great start in 2024 as we return to a strong top line growth. Revenues in the first quarter increased 47% and we exhibited growth across majority of our business units. The multiple contract wins that we announced in recent months are translating into revenues in 2024. As such, we are confident in our 2024 revenue guidance of $9 million to $11 million, which is largely based on contracts in hand and pending implementation. Strong growth in 2024 is expected to come from our population health and healthcare workforce business units, coupled with continual growth from our behavioral and mental health, digital health and health education business units.

We have been successful in securing sizable contracts in these areas in recent months and expect further opportunities going forward. This is an exciting time for Syra Health as we embark on fulfilling our promise to continually push the boundaries of mental health solutions, explore new frontiers in digital health, and remain dedicated to our pursuit of a healthier population. Our goal is to become a leader in healthcare solutions and to expand our operations by leveraging our established success, which we have achieved in key geographical areas to drive growth nationwide. The areas of mental and behavioral health are gaining a lot of attention and the public and private sectors are allocating increased resources in solving this crisis. We are pleased to offer meaningful solutions to this crisis.

We remain on track to significantly grow our business units and diversify our customer geography. We are currently operating in 19 states, a major achievement since the inception of the company just 3 years ago. We also diversified our revenues beyond our legacy healthcare workflows to include digital health, population health and health education, which grew over 330% and accounted for 19% of our total revenues in the first quarter of 2024 versus just 7% in the first quarter of 2023. In late 2023, we announced our expansion into the federal government space with the launch of our Government Solutions business unit. We continue active engagement with fiducial healthcare and anticipate providing case management services, healthcare staffing along with behavioral health services and education in support of the federal influx care facilities.

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Q&A Session

We have a growing pipeline of federal government business opportunities as we continue to grow our federal sales team and nurture partnerships with business entities focused on delivering and implementing federal government projects. Looking out beyond the immediate timeframe, we are most excited about a suite of technology products, namely Syrenity, SyraBot and Care Plus. Syrenity is our flagship and proprietary healthcare product that can be securely deployed to customers for the prevention and treatment of mental and behavioral health issues. Syrenity is available for use by universities and colleges, large employers, payer organizations and provider networks. SyraBot is a human-centric conversational AI-backed platform that offers 24/7 customer support.

SyraBot provides personalized health information and benefit and treatment information for individuals to stay informed and involved in their care. We are currently deploying SyraBot to a large managed care organization in Indiana and we anticipate similar customers in the near future. Care Plus is an easy-to-use and affordable electronic medical records system, tailored to small to midsized healthcare organizations to enhance operational efficiency, minimize errors and elevate patient care. We believe that these products can be catalyst for negligible revenue and margin growth was higher. I would like to now speak about our business units in more detail. I’ll begin with our population health business unit. In this business unit, our solutions help our customers create healthcare improvements for entire populations of individuals at the state and county levels.

We conduct data analysis and develop solutions from a health equity lens to help improve health equality and access to care. Utilizing advanced and predictive analytics, we help stakeholders create new health programs and public policies. We also conduct health readiness assessments and ensure emergency response preparedness. Population health is experiencing very strong growth in the near term growing 215% in the fourth quarter. In the recent months, we have won contracts with public and private organizations in multiple states including New Jersey, Tennessee and Indiana. We were recently awarded a contract worth $660,000 per year with a national healthcare organization to provide healthcare effectiveness data and information set commonly known as HEDIS outpace and support services expansion for fostering positive health outcomes and reducing healthcare costs.

We also announced a 1 year $480,000 contract from the Indiana Department of Health to administer public health and healthcare readiness assessment. Under the agreement, Syra Health public health experts will be evaluating how existing hazards and risk impact public health, public health infrastructure and behavioral health within the state of Indiana. Part of the agreement also includes identifying the greatest risk to public healthcare system of Indiana as well as identifying where the Department of Health and its local partners should focus their resources to create a healthcare network for all Indiana residents. Moving on to healthcare workflow, we continue to expand this business unit with contracts in additional states by providing experienced physicians, nurses and allied health professionals at government and private provider networks, payer organizations and other healthcare facilities across the country.

Our healthcare staff ensures continuity of care and help fill gaps left by healthcare burnout. Healthcare workforce grew 28% in the first quarter and we expect this business unit to continue strong growth in 2024, driven by strategic collaborations and adaptive staffing approaches. In recent months, we have been successful in securing contracts with state and local organizations in states, including Arizona, Indiana, Missouri, Nebraska and Virginia. For example, we secured a healthcare workforce contract in Missouri for providing temporary medical services across this entire state. Revenue from the contract will be determined based on the number of positions and the duration. Moving on to digital health, this business unit is our most innovative, where we blend technology and innovation to develop a range of health, digital health solutions, which are centered on prevention, improved access and affordable care.

Digital health generated revenues of $92,000 in the first quarter of 2024 driven by sales of SyraBot product which was launched in the third quarter of 2023. SyraBot is a human-centric chatbot solution that offers 24/7 AI-powered conversation customer support. SyraBot provides high quality responses in up to 200 different languages and holds a large knowledge base for customers with a large volume of data or information. All of our digital health tools utilize AI technology for predictive analysis and we continue to use AI to shape procedure efficiency and personalization. Now, on to behavioral and mental health, we take this business unit as the area with the highest potential for revenues in the long-term. The statistics provided by the National Institute of Mental Health explained star reality of the mental health landscape in America.

It’s not just numbers. It’s a reflection of the millions of people’s lives impacted by mental illness. With more than 1 in 5 adults in the United States living with the mental illness, it’s evident that mental health concerns affect a significant portion of our population. In this business unit, we focus on preventative mental health and treatment. We offer a variety of products and services to promote mental and behavioral well-being, including telehealth and their own licensed therapies. In 2023, we launched Syrenity, our AI-backed mental health products for employers, payers, colleges, universities offering support for the mental health of their employees, [indiscernible] and students. Developed to fill the gap in behavioral and mental healthcare, Syrenity focuses on preventing a mental health crisis by providing psychological evaluations and AI by diving for continued monitoring of mood, mental health assessments, personalized wellness plans, cognitive behavior therapy, guided meditation sessions and real-time reporting for cracking of progress or for providing insights to the therapist.

We recently hosted Syra’s Mental Health Solutions Day to spotlight Syrenity and their commitment to working with non-profits that are destigmatizing mental health. We are currently negotiating contracts with private organizations that are interested in utilizing Syrenity for their workforce. Last moth, our research study protocol for Syrenity was approved by Pearl Institutional Review Board. The research study will be conducted by third party university researchers and practicing psychologists who will enrol approximately 300 people with moderate to severe depression. From the services side of Behavioral & Mental Health, in late December we announced that we had been awarded a contract with the Mississippi Department of Human Services to provide Behavioral & Mental Health services for the Oakley Youth Development center and other locations as directed by the Mississippi Department of Human Services.

We have a similar concept in Camden County, New Jersey, where we provide Behavioral & Mental Health assessments for police officers in support of their fitness for duty. We also continue to provide competency attainment services to the Indiana Department of Child Services for vulnerable youth charged with delinquent tax. Our health education business unit continues to win new and repeat business. We are just, we were just recently awarded our third training by Maricopa County, Arizona. Our training in Maricopa County is again with sales equity training followed by foundations in public health training and soon we will be delivering cultural humanity training to their public health officials and community members. We were also awarded a 5-year contract from the Sedgwick County Health Department in Kansas.

As part of the agreement, Syra will provide overdose data to action trainers to first responders and save space community organizations in Sedgwick County. And finally, I want to speak about our U.S. business unit that in federal government solution, our business begins with state government contracts and we knew now expect to offer these services to federal agencies as well. Earlier this year, we announced that we had been selected as a subcontractor for a contract awarded to Caduceus Healthcare by the Federal Department of Health & Human Services Administration for Families and Children Office of Refugee Resettlement, Medical staffing and support. With the federal team in place, we are anticipating more awards in the federal government space.

With that, let me turn it over to our CFO, Priya Prasad, who will walk through the financial details. Priya?

Priya Prasad: Thank you, Deepika, and let me add my welcome to everyone joining on this call. The financial results for the full year are provided in detail within our press release, which will be issued earlier this morning and in our 10-Q. Total revenue for the first quarter of 2024 were $1.7 million compared to $1.2 million in the first quarter of last year, representing a 47% growth. Growth was driven by healthcare workforce, population health and digital health. We will now go through each business unit. Within our digital health business unit, revenues were $92,000 during the first quarter driven by sales of SyraBot. Within our population health business unit revenues were $232,000 in the first quarter versus $74,000 in the same period last year, growth of more than 213% driven by demand for our epidemiology services.

Within our healthcare workforce business unit, we returned to growth in the fourth quarter, posting revenue growth of 28% to a $1.4 million. The increase in healthcare workforce revenue was driven by new customer acquisitions and additions to our existing contracts. Based on contracts on hand, we expect healthcare workforce to continue strong growth in 2024. Behavioral & Mental Health, and Health Education business units combined had revenues of $11,000 in the first quarter versus $3,000 in the first quarter last year. Gross margins for the fourth quarter of 2024 was 10.2% compared to 12.4% in the same period last year. The decrease in gross margins were due to the mix shift as healthcare workforce, which carries lower margins returns to growth.

Total operating expenses for the first quarter increased 76% to $1.6 million compared to $921,000 in the first quarter of 2023. Salaries and benefits expenses increased 61% year-over-year to support general business growth and sales. Professional fees declined 18% compared year-over-year, due to the decrease in legal and other professional costs as the company completed its IPO process in the fourth quarter of 2023. Selling, general and administrative expenses increased 87% year-over-year, due to increased operations. Research and development expenses were $277,000, reflecting the development of the technology based solutions. Depreciation expense were $13,000 in the first quarter of 2024 compared to $12,000 in the fourth quarter of 2023, reflected expanded office space.

The net loss was $1.4 million for the first quarter compared to a loss of $786,000 in the same period last year. Adjusted EBITDA for the quarter was negative $1.4 million compared to a negative $763,000 in the first quarter of 2023. Again, full reconciliations are provided in the tables included in today’s press release. Our cash balance as of March 31st, 2023 was $3.2 million during the first quarter, we received roughly $815,000 as some points were exercised. We are maintaining our outlook and expect revenues in 2024 to be in the range of $9 million to $11 million, representing a 64% to 100% growth versus 2023. As a reminder, this guidance does not include any potential revenues from any federal government contracts. With that, let me turn the call back over to Deepika.

Deepika Vuppalanchi: Thank you, Priya. Our technologically advanced and innovative solutions are trying to make the unmet needs of the healthcare industry in key areas of behavior & mental health, digital health and population health. As we shared our goals for 2024, our priority remains to drive growth across all the business units, but preventing managing, our cost structure and balance sheet. The evolving needs of healthcare coupled with the transformative potential of the solution conditions are favorably to capitalize on emerging opportunity and deliver sustained value to our shareholders. Our pipeline of future contracts has expanded in recent months and we continue to pay for multiple opportunities across state and federal governments and the private sector.

We expect to continue to announce contract with as they are solidified. Utilizing our strong balance sheet, we are expanding our RFP and business development teams as we intend to replicate our current projects with similar customers across the country. I appreciate everyone’s participation on the call today and then I’ll be happy to answer any questions. Christy?

Operator: Thank you to the entire management team. We have some questions for you with regards to the outlook of $9 million to $11 million in 2024. Can you speak about the timing of these revenues? Are they mostly back half weighted? Priya?

Priya Prasad: We’re happy to reiterate our financial guidance over $9 million to $11 million for 2024, which is about 64% to 100% increase over our 2023 revenues. We do expect the majority of those revenues to be reflected in the last half of this year due to the implementation cycle of our customers.

Operator: Thank you. You’ve been successful in winning a lot of contracts. What do you attribute this success to, Deepika?

Deepika Vuppalanchi: Yes, Syra Health has an experienced team of scientifically driven healthcare and technology professional and their dedication to excellence, illustrated by our comprehensive suite of innovative services and technology solutions. Our success is evident in the number of contracts we have successfully secured and the continued revenue growth.

Operator: Thank you. The growth and population health has been strong. What is driving that business, Deepika?

Deepika Vuppalanchi: Yes, we are skill at conducting gap analysis to determine what our customers are seeking, driven by accomplish team of epidemiologists and research scientists we are experiencing strong demand for our epidemiology services. Students work, we are shaping the strategic framework of organizations for improving healthcare and we are evaluating state and county programs to improve the health outcomes of the entire communities.

Operator: Thank you. It looks like we are now out of time. My thanks to everyone for participating in today’s call. We look forward to speaking with each of you again.