Reliq Health Technologies Inc.

Good morning and thank you for joining us. Today is May 31, 2022 and this is Reliq Health's Webinar to provide the Q3 Fiscal Year 2022 Earnings Report and A Corporate Update.

My name is Lisa Crossley and I'm the CEO of Reliq Health. Please review the forward-looking statement disclaimer at your leisure.

A brief overview of the company for those of you who are new shareholders, Reliq is a rapidly growing profitable healthcare technology company focused on developing innovative virtual care software as a service solutions for the multi-billion dollar healthcare market. The Reliq iUGO CARE platform was developed specifically to benefit all of the different stakeholders in the healthcare system from patients to clinicians to payers.

Reliq’s comprehensive turnkey solutions allow our clinicians to seamlessly rollout new billable virtual care services and immediately generating new revenues for their practices. The company generates recurring revenue from subscriptions and we are growing rapidly and organically, fueled by industry trends.

We have strong margins and expect to end 2022 with a 75% gross margins and 45% EBITDA margins and we're anticipating a NASDAQ uplisting later this year. For today's webinar we will be going through some highlights from the Q3 fiscal year 2022 quarterly financials and also be providing a little bit of insight into the impact of COVID-19 on operations during this order.

And then we are introducing a new segment of the webinar which is shareholder frequently asked questions, where I will go through the questions that we most commonly received through the IR channels, our investor relations channels. And lastly with clarity for the webinar to review the annual audited financials which will be the next set of financials that we file.

So the Q3 of fiscal year 2022 financials, for the nine months ending March 31, 2022 Reliq increased sales approximately six times to 6.2 million relative to the comparable period in fiscal year 2021 where we had sales of roughly 1 million. So that very clearly shows you the impact as going from a pandemic that was very poorly controlled to a population that's largely vaccinated and much better control over the pandemic overall.

We increased gross margin to 70% for these nine months as compared to 47% for comparable nine-month period in 2021. And we doubled revenues from sales of software and services quarter-over-quarter for the quarter ending March 31st as compared to the quarter ending December 31, 2021.

So as previously disclosed, going forward the company expects the majority of its revenue to come from software and services which tends to be a higher margin line item than hardware sales. So that doubling of software revenue over that period is very consistent with the company's strategy as we proceed.

After adjusting for non-cash expenses including share based compensation and accretion as well as one-time non-recurring expenses, the company's adjusted EBITDA gain for Q3 2022 was approximately 63,000 as compared to an adjusted EBITDA loss of 1.2 million for the comparable period in 2021. Some highlights for the nine-months.

Operationally we signed contracts with 80 new U.S. primary care physician practices with 13 healthcare organizations that were in specialties that included hospice care, nephrology which is kidney care, orthopedics anything to do with muscular skeletal systems.

Essentially long-term care, skilled nursing in point of fact hospital's cardiology and care management. We also signed 16 new home health agencies and three adult medical day cares.

The company remains on track to onboard a total of 100,000 patients by the end of calendar year 2022, so by December 31, 2022 and 200000 patients by the middle of calendar year 2023 at an average recurring revenue of approximately $40 U.S. per patient per month.

And it's important to recall that revenue is recognized two to three months after patients are on boarded, this is because we can't bill for the first month under the Medicare Medicaid rules for these programs and in addition because these tend to be older patients, it typically takes them first two sometimes three months to become fully compliant with the program. So to remember to collect their vital signs on a daily basis and otherwise comply with the rules under that particular virtual care programs that that their conscience can start to be reimbursed.

Additionally, there will be associated non-reoccurring revenue from device sales. While I have always said that we are not a hardware company, we will certainly will never manufacture our own hardware and we don't tend to hold much hardware inventory.

We do have relationships with suppliers that allow us to provide on a just in time basis hardware to our clients who would prefer to buy from us than directly from a hardware manufacturer. So as you have seen over the past few quarters there is certainly going to continue to be a component of the business, a component of our revenue that will come from hardware sales although as we proceed going forward, the bulk of our revenue will come from software and services sales.

So I would like to touch on the impact of COVID-19 on this quarter as well as just briefly the impact of COVID-19 on healthcare market segments in general. So revenue for Q3 for Reliq was definitely impacted by the COVID-19 Omicron variant surge that happened in late 2021 and early 2022 calendar.

Many and I mean many of Reliq’s clients; first, the clinical care providers and patients caught COVID during that particular resurgence. And -- CMS or centers for Medicare and Medicaid rules for virtual care preventative programs like the one supported by iUGO Care, clinicians are not authorized to provide and to bill for virtual preventative care services for the given month for patients who require acute care during the months.

So if the patient has complications from COVID and has to be hospitalized or needs a respiratory therapist or other home care provider to actually provide an in home visit during that month than the preventive proactive care that's enabled by iUGO is not deliverable and not billable during that month. So Reliq is therefore not authorized to deliver iUGO CARE services to those affected patients during the impacted month and the company cannot bill for services that are not delivered because that's Medicare for so we don't that.

As a result, there is definitely some patients who were onboard the platform but who couldn't receive services for some period of Q3 as a result -- some period of the period for which we recognize revenue in Q3 as a result of that COVID surge. In addition, clinical staff who contracted COVID, so both physicians and their supporting clinical staff within their practices and home health agency staff were slower to complete training and other activities that are required after onboard new patients in order for them to bill CMS for delivering preventative and proactive virtual care services through iUGO CARE.

And when these clinicians and clinical staff developed COVID, many of them were quite sick and were not in the office for some period of time and so there were some impacts to revenue recognition as a result of that. Temporary impacts due to that surge.

Overall I think it's really important to take a look at the impact of COVID-19 on healthcare companies in general. And during the pandemic we saw that there were some companies, one market segment that includes companies like Teladoc and in general telemedicine providers who strictly focus on those virtual gazettes.

Those companies benefited very much from market trends during the pandemic including temporary waivers granted by the U.S. government that allowed clinicians to bill essentially virtually any patient for virtual visit as opposed to in office visits in order to reduce the spread of the pandemic.

At coming out of the pandemic those waivers were always introduced as a temporary measure, always intended to be a temporary measure and more and more patients are returning to in office visits versus virtual visits particularly the younger healthier patients. And as a result there's been a drastically reduced demand and drastically reduced funding for the products and services offered by companies in that market segment and we've seen that in the significant markets devaluation of companies like Teladoc in this year.

Companies like Reliq on the other hand form part of a second market segment that includes companies that were constrained by the pandemic. Obviously Reliq’s business during 2020 and most of 2021 was heavily constrained by the raging pandemic but we are now in a position where we see dramatically increased market demand for our solutions fueled by increasing funding from CMS and by increased acceptance and adoption of virtual care by patients and healthcare providers in the community.

So any short term impacts to Reliq from past COVID surges and from any potential subsequent COVID surges will be offset long term by the significant demand created by the pandemic. Funding in addition is expected to continue to grow for preventive virtual care because the data that CMS collected during this period clearly demonstrates a resulting significant reduction in healthcare costs for chronic disease patients when they are involved in these proactive preventative virtual care programs.

And now on to our shareholder FAQ. So, this is really responses prepared as a result of the most frequently received questions and through our various Investor Relations channels.

So the first question I want to focus on is around accounts receivable. So there's definitely I'm aware of confusion around our accounts receivable.

So first point, receivables older than one year as of March 31, 2022 have now been collected, so those are receivables associated with services delivered to clients during the pandemic, software and services. Those were not associated with hardware purchases but with software services rather.

And those services were delivered during the pandemic but we provided very flexible payment terms and payment plans for clients because their businesses overall were so significantly impacted by the pandemic. So we no longer provide those payment plans since they're not necessary and the associated with those as of March 31st have been collected.

For clarity, for hardware sales we offer clients payment plans that allow for monthly payments over a 12 or 24-month period. We do that because we're able to charge a significantly higher price for these devices when if clients pay up front.

This translates to more receivables but it generates significantly higher profits from the hard relying items. While initially as many of you know, I was not too keen on staying in the hardware space and we have identified an opportunity for significant revenue at that very compelling margins at around hardware sales where required by the client.

So as long as that continues to make good financial sense for the company we will continue to offer hardware sales and we will continue to generate revenue from the sale of devices. We will still be maintaining very low levels of inventory of devices and working with our suppliers on just in time provision of devices to clients.

That translates to very limited working capital demands on the company which is key for us. Revenue for hardware sales which are equal to the total purchase price of the device, so if the device is $200, the $200 in revenue was recognized as soon as that device is delivered to the client.

So once the client has taken possession of the devices, revenue is recognized. Revenue is then collected based on that signed a payment plan we have with that client so it will be collected monthly for the following 12 to 24 months depending on which payment plan the client selected.

Increasing device sales will therefore result in increasing receivables. This is not an indication that those receivables are at any risk of not being collected.

This is expected and this is part of the business plan. This allows us to generate revenue from hardware at much higher margins than we otherwise couldn't and you will see consistently increasing receivables as we have increasing hardware sales but that is only a positive and that is not an indication of difficulty in collecting, that is part of the explicit paying plan.

It's important to remember that device sales translate directly into future revenue from software and services. So we during the pandemic and during the early -- it's all hardware, meaning just to fund operations, we no longer sell hardware to clients unless they sign an associated software and services contract.

So the hardware revenue is a direct predictor of future recurring revenue from software and services and therefore is a very positive indicator for the business. To this point the majority of the company's revenues have come from device sales, that's a really important point to remember when you think about receivables.

So going forward by the end of this calendar year and for all future years, the expectation is that the vast majority of the company's revenues roughly 80% will come from software and service sales. So it will be the recurring subscription revenue and 20% or less will come from the one-time hardware purchases.

But to this point the vast majority of the company's sales have come, or company's revenue have come from the sale of devices. So that's why you see a large amount in aging receivables but as we move forward and there's more of a mix that trends more heavily towards software and services, you will see a change in the overall receivables as a percentage of total sales.

So, revenue from software and services is recognized on a monthly basis and is collected monthly in accordance with our standard net 60 day terms. As the software and sales, services sales increase as a percentage of the total sales, so our software and services become the majority of revenues relative to hardware, the outstanding receivables as a percentage of total sales will decrease.

So hardware sales will always result in increasing receivables but that's a positive thing, that's cash that will be collected. Software and services sales will have much, much shorter receivables collection time frames.

So as we move to more of a software and services dominant business you'll see a significant decrease in total receivables outstanding relative to total sales. Are there questions, so obviously we get a lot of questions for patient numbers and I have repeated this message many times but as previously discussed we don't disclose patient numbers for a variety of reasons including those related to our competitors and the information that we prefer to keep confidential from competitors.

There's also as I've previously discussed a definite seasonality around patient onboarding so, we may have a really big month in September and October but then during American Thanksgiving and Christmas you may have reduced numbers and we don't want to provide monthly granularity that's going to provide misleading information to the market and make people think either that we are onboarding in a much higher rate overall than we are when we just had a really good month for a much lower rate overall when in fact that was to be expected for say August when all the clinicians were on vacation. The company does provide guidance and reports, our results in terms of revenue and so that's the information that we provide to the market both in terms of forward-looking and in terms of the way that we report.

Going forward, as we gain more experience in the market and so as the business ages as it grows, it will be possible, I think, for the company to provide more insight into the patient numbers on a quarterly basis as we have more availability based on historical data to predict how seasonality will impact onboarding and also how issues like COVID-19 surges will impact our ability to bill for the number of patients that are onboarded. So as we gather more data, we'll be able to share a lot more data with the market.

But at the moment, we try to only share data that is -- that you're comfortable with as a company and that we feel is legitimately predictable. Other questions we got around partners and customers, so Cognizant.

As we've previously discussed, the company meets regularly with Cognizant's North American sales team, and we jointly responded to a number of RFPs with Cognizant. Our partnership with Cognizant is expected to result in new clients late in the calendar year.

As I said before, Cognizant works with very large clients, insurance companies, managed care organizations, healthcare systems, and those tend to be the kinds of clients that have much longer sales cycles. And I will point out that the Cognizant CEO -- so the CEO of the overall Cognizant organization, not just the healthcare business unit, did discuss Reliq in their quarterly earnings call in February of this year and specifically noted that the partnership with Reliq is anticipated to increase profit margins as well as revenues.

Cognizant's overall business does about $15 billion a year in revenue, their health care business does about $5 billion a year in revenue. So even if you just look at the relationship we have with Cognizant, where we're a client of theirs, where we'll be leveraging their care management services, Cognizant has clearly expressed that they expect us to bring enough clients to their care management division that it will generate meaningful revenue to a company who generates $5 billion a year in their healthcare division alone.

So I think that alone should give you a good sense of the opportunity as Cognizant sees it. Data Soft Logic.

You will recall that they are a network -- a nationwide network of home care agencies or they work with a nationwide network of home care agencies. As previously disclosed, patients associated with the Data Soft Logic contract will start onboarding in June 2022, so tomorrow.

That partnership is going very well. We're not yet sure how many patients will onboard this year from Data Soft Logic but we know that going forward and in calendar year 2023 and beyond, it will be roughly 50,000 patients per year.

And we will provide updates on onboarding with Data Soft Logic as the year progresses. Dilution, so dilution has been a point of contention for many investors.

So I want to get into a little bit of detail around how we think about dilution. So the company's intent is certainly to minimize dilution as much as possible going forward.

And no new stock options were issued to anyone in Q3 fiscal year 2022. Historically, the sales and business development teams were compensated using stock options when the company was very cash-constrained.

They are now compensated through salaries and commissions as the company grows and as our customer base grows and the associated revenue grows. The number of stock options issued annually will be significantly lower in this calendar year and for future calendar years than what it was in previous years, particularly the last sort of two years when we were, as a company, quite cash constrained.

So we will certainly be seeing much less dilution from the issuance of stock options going forward. Going forward, I anticipate that stock options will primarily be issued to new hires on a onetime sort of signing bonus basis.

The company does not anticipate the need for a capital raise to fund operations, as I said over the last 1.5 years or so. And by the end of calendar year 2022, the company expects to be generating sufficient free cash to initiate a share buyback program.

I know that most companies sort of couch that in -- provided that we feel that the company is undervalued in the market but I think from our perspective, one of the best ways to kind of reward shareholders who've really been committed to the company is to reduce that outstanding share count through a share buyback program. Obviously, profits will always be, first and foremost, reinvested into the company to drive additional growth in revenues, but wherever there is additional free cash, I think a very meaningful way to redeploy that cash is in a share buyback program.

So we will keep the market posted on that as we get closer to the end of the year. Other FAQs in terms of the outlook for the second half of the year.

Again, very similar to 2021. We expect the bulk of the company's growth to come in the second half of this calendar year.

That's for a variety of reasons. One is we aren't anticipating the same COVID-19 constraints that we had in the first half of the year that impacted us in terms of revenue recognition in the first half of the year.

So removing that constraint is a very significant driver for the business. Beyond that, we will be having a number of the larger clients that we've previously disclosed come online in the second half of the year who were not online in the first half of the year as well as bringing on new clients.

We continue to accelerate our business development efforts. The sales pipeline continues to grow very rapidly and includes much larger clients today than it did at the beginning of the fiscal year in July of 2021.

So we are expecting very significant growth in the second half of this year. The NASDAQ uplisting, we do get a lot of questions about that.

The company is still definitely intending to uplist to the NASDAQ at the point where that would make sense for the company and its shareholders as a long-term move. And currently, we are still looking at late 2022 as the time frame for the NASDAQ uplisting.

But of course, that's subject to market conditions at the time and input from our financial advisers related to the market conditions. In line with the NASDAQ uplisting topic, I want to provide a little bit of information about the company's long-term outlook and our strategy.

So our strategy is based on creating value for shareholders by building a viable, sustainable business for the long-term. So all of our operational and strategic decisions are made in accordance with that overarching strategy.

And what that means is, could we uplist to the NASDAQ tomorrow? Yes.

Would that likely generate a short-term bump in the share price, which we often see as companies uplist to the NASDAQ? Yes.

But is that likely to be sustainable? No.

So the short-term value of an uplisting to the NASDAQ does not merit making that move. Long term, there certainly will be a point where uplisting to NASDAQ makes very good sense for the company.

And as I say, we think that will be late this calendar year. But we are not going to make a decision to jump on to the NASDAQ at the moment just to provide a short-term bump for shareholders who are looking for a short-term gain.

So health care companies, in general, are long-term investments. The outlook in healthcare tends to be fairly long-term.

This is a business that has really shaken off a lot of the constraints associated with the pandemic. We are very rapidly growing right now.

We expect our growth rate to accelerate significantly going into the second half of the year and beyond. And all of the trends and tailwinds in the space are very favorable to Reliq.

And so we see this as an extremely high-value business that has tremendous potential and that is really undervalued in the market right now. I think we're currently valued at about two times our projected revenue for this year, which is exceptionally low for a growth company in healthcare technology.

So we're very undervalued now, but luckily, we're not raising funds and we understand that while there may be some component of the market that has its doubts, our message to the market is, we're in this for the long run. We're creating something that will have tremendous long-term value.

And if you're concerned in any way, just wait, wait to invest. You don't have to jump in now if you're nervous.

We are going to prove ourselves. And by the end of this year, I think everyone will have a very clear picture of how well we've grown and how strong the demand is for our products and how much growth potential is ahead of the company.

And lastly, our fiscal year 2022 webinar date. So the annual audited financials for this fiscal year, the period from June 1, 2021, to July 1, 2021, sorry, to June 30, 2022, are due to be filed on or before October 28, 2022.

So the webinar will be scheduled on or before October 29, 2022. This past quarter, we made a change where we finally moved all of our finance and accounting to Ontario under CFO, Michael Frankel from Vancouver.

And as a result, we still were kind of down to the wire filing these quarterlies. But going forward, obviously, I can't predict with any degree of accuracy at how long it will take the auditors to turn around the annual audit given that this will be their first time working with the new team, but I am expecting that just having everyone in the same province will result in some efficiencies.

And certainly, going forward for future quarters, we are anticipating that we will be able to move much more quickly in terms of preparing the financials and filing them. Thank you very much for joining us today, and we thank you all very much for your support of Reliq.

Have a great day, and stay safe.