Syra Health Corp. (NASDAQ:SYRA) Q4 2023 Earnings Call Transcript March 25, 2024 9:00 AM ET
Company Participants
Ben Shamsian – IR
Deepika Vuppalanchi – CEO
Sandeep Allam – Executive Chairman and President
Priya Prasad – CFO
Operator
Good morning, ladies and gentlemen, and welcome to Syra Health Fourth Quarter and Full Year 2023 Financial Results Conference Call. At this time, all lines are in a listen-only mode. [Operator Instructions] This call is being recorded on Monday, March 25, 2024. I would now like to turn the conference over to Ben Shamsian. Please go ahead.
Ben Shamsian
Good morning, everyone, and thank you for joining us for Syra Health’s fourth quarter and full year 2023 financial results conference call. Joining us on the call is Dr. Deepika Vuppalanchi, CEO of Syra Health; Syra Health’s Executive Chairman and President, Sandeep Allam; 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.
Finally, I’d also like to call your attention to the customary safe harbor disclosures 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 that these statements are reasonable based on estimates, assumptions, and projections as of today, these statements are not guarantee of future [Technical Difficulty] Time sensitive information may no longer be accurate at any time telephonic webcast replay. Actual results may differ materially as a result of risks, uncertainties, and other factors including, but not limited to, the factors set forth in the company’s filings with the SEC. Syra undertakes no obligation 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.
Deepika Vuppalanchi
Thank you, Ben, and welcome, everyone. I’m pleased to discuss with you our 2023 financial results and our 2024 outlook. 2023 was a transformational year for Syra Health as we successfully completed our initial public offering and began trading on the NASDAQ. 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 for our partners and 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 stand to meaningfully benefit from this trend.
We had important achievements in 2023 that will positively impact our business going forward. We significantly expanded our customer geography from our home state of Indiana to 17 states currently. We also diversified our revenues beyond our legacy healthcare workforce to digital health, population health, and health education. In 2023, our non-healthcare workforce business units grew 250% and accounted for 23% of our total revenues versus just 6% in 2022. We made substantial progress on the technology front with the launches of Syrenity, SyraBot and CarePlus. Furthermore, we strengthened our balance sheet to allow us to achieve our growth objectives. Our efforts in the past months have set the stage for accelerated growth in 2024 and beyond. We are excited about our pipeline of contracts and expect revenue growth to expand meaningfully in 2024. We now expect 2024 revenues to be in the range of $9 million to $11 million, reflecting 64% to 100% growth versus 2023. Strong growth in 2024 is expected to come from our population health and healthcare workforce business units coupled with continual growth from our Behavioral & 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.
In late 2023, we also announced our expansion into the federal government space with the launch of our new government solutions business unit. We successfully secured a partnership for a significant federal government contract in recent months and expect further opportunities going forward as we continue to bid on federal government business. We have a dedicated in-house RSV team to ensure appropriate opportunities across government agencies are timely tracked and quality proposals are submitted. As we continue our expansion, our talent pool and infrastructure will grow to support the breadth and depth of our services.
I would like to now turn it over to Sandeep Allam to speak about our business units in more detail.
Sandeep Allam
Thank you, Deepika. I will begin with our population health business unit. Population health is experiencing the fastest growth in the near term, growing more than 125% in 2023, and we expect continued strong growth in 2024. In recent months, we have won contracts with public and private organizations in multiple states, including Texas and Indiana. For instance, we recently were awarded a contract worth $660,000 with the National Healthcare Organization to provide healthcare effectiveness data and information set outreach and support services essential for fostering positive health outcomes and reducing cost. We have research scientists and epidemiologists who are conducting research studies tailoring federal programs for use at the state and the local levels and utilizing our population health data insights up for mining data for information to inform public policy. Our solutions in data collection and analytics are highly sought after by state and local governments as well as private organizations, including health insurance and pharmaceutical companies. These predictive analytics help stakeholders create policies as well as make decisions on allocation of research and development dollars.
Next, we expect our healthcare workforce business unit to resume strong growth in 2024, driven by strategic collaborations and adaptable staffing approaches. In recent months, we have been successful in securing contracts with state and local organizations in multiple states, including Ohio, Minnesota, and Virginia. For instance, in 2023, We signed a $4.75 million contract with Washington DC’s Department of Behavioral Health to support its mental health initiatives, including its supported employment program and comprehensive psychiatric emergency program. We recruit experienced physicians, nurses, and allied health professionals for long-term fixed contract positions at government and private provider networks, payer organizations, and other healthcare facilities across the country.
Moving on to Digital Health. This business unit is our most innovative business unit where we blend technology and innovation to develop a range of digital health solutions centered on prevention, improved access, and equitable care. Digital Health began to generate revenues in the third quarter of 2023, driven by sales of our SyraBot product. And SyraBot is a human-centric chatbot solution that offers 24/7 AI-powered conversational customer support through a chat and providing personalized health information, benefit and treatment information for individuals to stay informed and involved in their care. In 2023, we also launched CarePlus, a specialized electronic medical record system tailored to small and mid-sized healthcare organizations to enhance operational efficiency, affordability, and elevate patient care.
Now on to Behavior and Mental Health. We deem this business unit as the area with the highest potential for revenues in the long term. 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 our own licensed therapist. In 2023, we launched Syrenity, an AI-backed mental health product for employers, payers, college, and universities, offering support for the mental health of their employees, health plan members, and students. With its evidence-based approach, Syrenity is designed to identify and prevent the progression of negative factors that can influence an individual’s mental health by offering an AI-backed diary, targeted assignments, symptoms monitoring, education, and timely interventions.
Finally, our Health Education business unit continues to win new and repeat business. We were just recently awarded our third training by Maricopa County, Arizona. And our journey in the Maricopa County began with health equity training, followed by foundations in the public health training, and soon we will deliver cultural and humility training to their public health officials and community members.
With that, let me turn it over to our CFO, Priya Prasad, who will provide additional details on the numbers.
Priya Prasad
Thank you, Sandeep, and let me add my warm welcome to everyone joining us on this call. The financial results for the full year are provided in detail within our 10-K, as well as within our press release, which was — we issued earlier this morning. For the full year, 2023 revenues were $5.5 million compared to $5.6 million in 2022, representing a 2% decline. Strong growth in the digital health, population health, behavioral and mental health and health education business units were driven by new contracts as well as sales of SyraBot.
I will now go through each business unit in detail. Within our digital health business unit, revenues for full year 2023 were $515,000 driven by sales of SyraBot. The digital health business unit had zero revenues in 2022. Digital health revenues in the fourth quarter were $384,000. Within our population health business unit, 2023 revenues were $716,000 versus $318,000 in 2022, growth of more than 125%, driven by demand for our epidemiology services. Within our healthcare workforce business unit, revenues were $4.3 million in 2023 versus $5.3 million in 2022. Fourth quarter 2023 revenues were $1.2 million compared to $1.9 million in fourth quarter of 2022. The decline was due to the subsiding of the COVID-19 pandemic. Based on contracts on hand, we expect healthcare workforce to resume strong growth in 2024.
Behavioral and mental health and health education business units combined had revenues of $25,000 in 2023 versus $39,000 in 2022. Gross margins for the full year of ‘23 were 25.6%, a 670 basis point increase versus 2022. The increase in gross margins was due to the mixed shift from healthcare staffing services to population health and digital health services that carry better margins. Total operating expenses in 2023 increased 36% to $4.3 million compared to $3.1 million in 2022. Salaries and benefits increased 50% compared to 2022 due to increased operations and added office personnel to support the company’s IPO process and growth of the company. Professional fees declined 43% compared to 2022 due to decreased reliance on outsourced professional services in connection with the prior period audit in preparation for the company’s IPO.
Selling general and administrative expenses increased 97% compared to 2022 due to increased operations. Research and development expenses were $240,048, reflecting the development of our technology-based solutions. Depreciation expense was $48,771 compared to $14,849 in 2022, reflecting expanded office space. The net loss was $2.94 million in 2023 compared to a loss of $2.12 million in 2022. Adjusted EBITDA in 2023 was negative $2.8 million compared to a negative $2.1 million in 2022. Again, full reconciliations are provided in the tables included in today’s press release.
Our cash balance as of December 31, 2023, was $3.3 million. As mentioned earlier, we expect revenues in 2024 to be in the range of $9 million to $11 million, representing a 64% to 100% growth. As a reminder, this guidance does not include any potential revenues from Caduceus Healthcare with regards to the recently announced Federal Influx Care Facilities contract.
With that, let me turn the call back over to Deepika.
Deepika Vuppalanchi
Thank you, Priya. Our technologically advanced and innovative solutions are primed to meet the unmet needs of the healthcare industry, especially in our focus areas of behavior and mental health, digital health, and population health. As we chart our course for 2024, our priority remains to drive growth across our business units while prudently managing our cost structure and balance sheet. The evolving needs of our partners coupled with the transformative potential of the solutions, positions us favorably to capitalize on emerging opportunities and deliver sustained value to our shareholders. Our pipeline of future contracts has expanded in recent months, and we expect to announce contract wins as they are solidified. Utilizing a 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 we will now be happy to answer any questions. Ben?
Question-and-Answer Session
A – Ben Shamsian
Thank you to the entire management team. We have some questions for you. First, with regards to your outlook of $9 million to $11 million in 2024, what is your visibility into those numbers? And is there upside to these estimates?
Deepika Vuppalanchi
Yes, we see upside in these estimates as a press release that we issued earlier this morning mentions as well. These numbers do not include any revenue from the Caduceus Healthcare contract, which we are anticipating, and it doesn’t constitute any revenue from any other federal government contracts we may win yet this year.
Ben Shamsian
Okay, great. You recently announced that you’re a subcontractor of Caduceus Healthcare with regards to the Federal Influx program, it’s worth about $75 billion. Can you provide some details on this contract in terms of the timing and your expectations?
Deepika Vuppalanchi
Syra Health announced a partnership with Caduceus Healthcare, where Syra Health will serve as a subcontractor to Caduceus, who is the prime contractor for this award from the Federal Department of Health and Human Services. Syra Health anticipates involvement in the contract from our healthcare workforce, mental and behavioral health, and health education business units in support of the Federal Influx Care Facilities which provides care for unaccompanied migrant children. Syra Health expects to win task orders from the contract and announce them as they are received.
Ben Shamsian
Okay, thank you. The growth in population health has been really strong. What is driving that business unit?
Deepika Vuppalanchi
There has been increasing demand for our population health services driven by our epidemiology and health equity services. We have a talented team of expert epidemiologists and research scientists who are performing data collection and analysis and program evaluations in order to help improve the health of specific communities or entire populations.
Ben Shamsian
Okay. It looks like we are out of time. My thanks to everyone for participating in today’s call. We look forward to speaking with everyone soon again. Thank you.
Deepika Vuppalanchi
Thank you, Ben.
Operator
Thank you. And ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.
