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Augmedix, Inc. (NASDAQ:AUGX) This autumn 2022 Earnings Convention Name March 27, 2023 8:00 AM ET
Firm Members
Matt Chesler – Investor Relations
Manny Krakaris – Chief Government Officer
Paul Ginocchio – Chief Monetary Officer
Convention Name Members
Jared Hasson – William Blair
Neil Chatterji – B. Riley Securities
Allen Klee – Maxim Group
Operator
Greetings, welcome to Augmedix Integrated 2022 Fourth Quarter Earnings Convention Name. Right now, all individuals will likely be in listen-only mode. A matter-and-answer session will observe the formal presentation. [Operator Instructions] Please observe this convention is being recorded.
Right now, I will now flip the convention over to Matt Chesler from Investor Relations. Matt, you might now start.
Matt Chesler
Thanks, and thanks all for taking part in right this moment’s name. Becoming a member of me are Manny Krakaris, Chief Government Officer; and Paul Ginocchio, Chief Monetary Officer. Earlier this morning, Augmedix launched monetary outcomes for the quarter ended December 31, 2022. A replica of the press launch is accessible on the corporate’s web site.
Earlier than we start, I’d prefer to remind you that administration will make statements throughout this name that embrace forward-looking statements throughout the which means of federal securities legal guidelines, that are made pursuant to the Protected Harbor provisions of the Non-public Securities Litigation Reform Act of 1995. Any statements contained on this name that relate to expectations or predictions of future occasions, outcomes or efficiency, are forward-looking statements.
These forward-looking statements are primarily based upon present estimates and numerous assumptions and contain materials dangers and uncertainties that would trigger precise outcomes or occasions to materially differ from these anticipated or implied by these forward-looking statements. Accordingly, you shouldn’t place undue reliance on these statements. For a listing and outline of the dangers and uncertainties related to our enterprise, please consult with the danger elements and administration dialogue and evaluation of economic situation and outcomes of operations in our most up-to-date Kind 10-Ok and Kind 10-Q filed with the Securities and Alternate Fee, and comparable disclosures and subsequent experiences filed with the SEC.
Additionally throughout our name right this moment, we might talk about non-GAAP monetary measures, which regulate our GAAP outcomes to remove the impression sure gadgets. You will discover extra data concerning these non-GAAP monetary measures and a reconciliation of those non-GAAP to GAAP measures in right this moment’s monetary outcomes press launch.
This convention name incorporates time delicate data and is correct solely as of the dwell broadcast right this moment, March 27, 2023. Augmedix disclaims any intention or obligation, besides as required by legislation, to replace or revise any monetary projections or forward-looking statements, whether or not due to new data, future occasions or in any other case.
And with that, I’ll flip the decision over to Manny.
Manny Krakaris
Thanks, Matt. Good morning, everybody, and thanks for becoming a member of us. I might additionally prefer to welcome Matt Chesler of FNK IR Augmedix staff, nice to have you ever with us.
This autumn 2022 was one other sturdy quarter for Augmedix because the momentum we noticed constructing within the second and third quarters continued and accelerated within the fourth quarter. We completed an excellent 12 months of bookings and income development with our greatest ever fourth quarter bookings efficiency. We materially expanded our footprint with two current enterprises and skilled continued traction with our different enterprise accounts. When enterprise considerably enhance the variety of physicians, who use our merchandise and we now service greater than a 3rd of all of its physicians as a result of sturdy ROI we ship.
In recognition of the optimistic impression Augmedix merchandise have had on clinician recruitment, retention and productiveness one other main account has leaned in and adopted a coverage to offer Augmedix to all its accomplice positions. In consequence Augmedix will develop to serve roughly 20% of its complete affiliated doctor community. We gained a brand new area of an current enterprise and added a big cohort of medical doctors as a part of that buyer’s initiative to scale back doctor [Indiscernible]. And importantly prime 10 well being system we gained in early 2022 expanded with us within the emergency division, deepening our relationship with that buyer and furthering our penetration of the Emergency Division of Market phase.
Whole income for the fourth quarter was $8.Eight million, representing a 33% year-over-year development price and we exited 2022 with $35 million in annual recurring income. The tempo of our progress hasn’t slowed down in 2023. We signed our largest ever cohort in March and have realized the most effective ever first quarter bookings. There’s a great market alternative in entrance of us and to take care of our momentum, the Augmedix staff is executing throughout our strategic priorities to drive enterprise buyer enlargement, differentiating our AI-driven core platform in versatile product options and intelligently scaling our enterprise mannequin.
We’re creating the broadest product portfolio within the medical documentation area, so we are able to meet the wants of most clinicians no matter care setting or workflow. Our SaaS product Augmedix Go, will straight goal the most important phase of the U.S. clinician market the approximate 50% of U.S. medical doctors that traditionally have used dictations for these medical notes. Augmedix Go is meant to be simpler to make use of and generate higher time financial savings for clinicians than legacy dictation instruments. It is a vital alternative for us and as a pure software program product would be the beneficiary of upper gross margins than our different documentation merchandise, Augmedix Notes and Augmedix Stay.
Along with being simpler to make use of and saving physicians extra time than dictation instruments, Augmedix Go has the additional benefit of capturing and structuring affected person go to knowledge based on the precise necessities of well being programs. And importantly Go offers physicians transparency into how the medical discover created and management as to its content material and feel and look. We consider transparency and management are attributes to doctor worth extremely, offering a way of doctor empowerment and can function essential differentiators relative to Black Field approaches of competing choices. Augmedix Go is at the moment being examined with a handful of clinicians at a significant well being system and we plan to increase this testing within the second quarter and commercially launch Go late this 12 months.
Augmedix Go represents the newest in our persevering with effort to effectuate behavioral change on the level of care at scale that we can assist enhance affected person entry, enhance affected person outcomes and bend the fee curve throughout the healthcare trade. Giant Language Fashions or LLM resembling ChatGPT are dominating the favored press right this moment. LLMs are certainly spectacular fashions that may have a major impression on automating elements of the medical observe. The truth is, LLMs are already integrated in our tech stack and are used along with our different NLP fashions and structured knowledge units to generate medical notes. LLMs are notably helpful in offering speedy summaries and context from transcripts.
Nevertheless, use of LLMs alone right this moment can not produce medical notes that meet the [accurate] (ph) requirements or knowledge construction necessities of our trade. A abstract of the doctor affected person encounter in the identical sequence that the dialog unfolds and which incorporates a number of the inconsistencies that invariably cropped up in such dialog is just not what the trade needs or wants, that’s the reason we use different applied sciences along with LLMs to ship extremely correct and structured medical notes and is a significant purpose why our observe high quality is taken into account so excessive by our prospects. We’re additionally making strong progress in transferring into the acute care setting with extra emergency room and acute care wins. We proceed so as to add options to all our merchandise to make them assist and create worth each in ambulatory and acute care settings.
One other milestone within the fourth quarter with an EHR integration between certainly one of our massive well being system shoppers and EPIC. We now have a number of EHR integrations with extra deliberate within the coming quarters. Integrating inside EHR allows us to ship medical nodes to our prospects even quicker and improves our working effectivity. Lastly, we proceed to make impactful developments with our proprietary observe builder platform in our pursuit of enabling totally automated medical notes. Our machine studying continues to learn from the massive quantity of knowledge about 60,00zero notes per week that passes by way of our platform and we count on growing ranges of automation may have a optimistic impression on our gross margin.
We’re executing on these priorities, investing in product improvement, engineering, gross sales and advertising and stay laser targeted on attaining profitability and self-sustainability as quickly as attainable. The working leverage inherent in our enterprise mannequin is beginning to bear fruit as we understand the discount in our working loss once more quarter-on-quarter as our quantity elevated. We count on that development to proceed all through 2023 and past. Bettering working leverage is a key theme for Augmedix in 2023 as we proceed to aggressively develop our prime line.
In closing, the fourth quarter confirmed a continuation of accelerated prime line development and enhancing working leverage as we made nice progress on our path to profitability. Financially and with respect to our product providing, we’re properly positioned in a really massive and quickly increasing market. We proceed to execute on our strategic initiatives and deal with delivering sturdy development, enhancing gross margin and growing working leverage.
With that, I will now flip the decision over to Paul Ginocchio, our Chief Monetary Officer, then we’ll return with closing feedback. Paul?
Paul Ginocchio
Thanks, Manny. As said, income for the three months ended December 31, 2022 was $8.Eight million, a 33% enhance from the $6.6 million in the identical interval a 12 months in the past. Development was once more pushed by current shopper enlargement, new shoppers, and better development in our notes providing. Greenback-based web income retention for the fourth quarter of 2022 was 126% for our well being enterprise prospects, in comparison with 136% within the fourth quarter of 2021.
The fourth quarter of 2021 was when our NRR metric lately peaked, we count on NRR to stabilize or barely speed up from the fourth quarter. As a lot of you recognize, web income retention measures with a greenback of income at our current shoppers a 12 months in the past, grew into this most up-to-date quarter; contains upsells, enlargement and churn that excludes income from any new logos that we added over the past 12 months. Our sturdy NRR places us on the larger finish of most SaaS corporations.
Common clinicians in service for the fourth quarter of 2022 rose 41%, as in comparison with the fourth quarter of 2021. And compares to a 43% year-on-year development price within the third quarter of 2022. Our two-year stacked year-on-year development price once more accelerated to 104% in 4Q versus 85% in 3Q. We outline a clinician and repair as a person physician, nurse practitioner or different healthcare skilled utilizing both our dwell or observe service. We consider development within the variety of clinicians in service is an indicator of the efficiency of our enterprise because it demonstrates our potential to penetrate the market and develop our enterprise.
Adjusted gross margin for the fourth quarter of 2022 was 46.5% and compares to 47.3% within the corresponding prior 12 months interval, and compares to 45.9% within the third quarter of 2022. The elevated publicity to clinicians serviced out of the U.S. diminished our year-on-year gross margins, partially offset by effectivity positive aspects. We’re happy with the development of gross margins from the third into fourth quarter.
Whole working bills for the fourth quarter of 2022 have been $9.5 million, growing sequentially from $9.zero million within the third quarter of 2022. Non-GAAP working bills, which excludes stock-based compensation and one-time gadgets grew 26%, in comparison with the fourth quarter of 2021, a deceleration from the 28% year-on-year within the third quarter.
Working bills elevated year-on-year, resulting from annual wage will increase, incremental investments in gross sales and advertising as we increase our business staff and prolong our advertising attain, investments within the engineering staff as we additional improve our expertise platform, observe automation capabilities and increase our product portfolio and enhance G&A value resulting from being a NASDAQ listed firm.
Regardless of the quarter-over-quarter development in OpEx, our development in gross revenue outpaced OpEx development, which resulted in a discount in our quarterly working losses for the second consecutive quarter. Adjusted EBITDA [Technical Difficulty] pushed by including again depreciation, amortization, taxes, curiosity, one-time gadgets and stock-based compensation to web loss was a lack of $4.2 million within the fourth quarter of 2022, in comparison with a lack of $3.7 million within the fourth quarter of 2021. Whereas our adjusted EBITDA losses elevated, our adjusted EBITDA margin improved by roughly 800 foundation factors year-on-year.
Importantly, during the last two quarters, we’ve diminished our adjusted EBITDA working losses by 20% or $1.1 million from $5.Three million within the second quarter of 2022 to $4.2 million within the fourth quarter. Wanting on the progress during the last two quarters, our path and trajectory to money movement breakeven must be a lot clearer.
Now turning to an summary of full-year outcomes. Income for the full-year 2022 was $30.9 million, a rise of 40% from $22.2 million final 12 months. Greenback-based web income retention for the 12 months was 128% for our well being enterprise prospects, in comparison with 124% in 2021.
GAAP gross revenue grew 40% to $14 million with a 45.1% gross margin, in comparison with a gross revenue of $10 million with a 45.1% gross margin in 2021. Adjusted gross margin for 2022 was 45.4%, as in comparison with 45.9% final 12 months.
Whole working bills for the 12 months have been $36.Three million, up 32%, in comparison with the $27.6 million in 2021. Non-GAAP working bills, which excludes stock-based compensation and one-time gadgets grew 31%, in comparison with 2021.
Adjusted EBITDA was a web lack of $18.6 million for 2022, in comparison with a lack of $15.2 million in 2021. At December 31, 2022, we had $22 million of money, money equivalents and restricted money. As well as, we had $10 million of incremental liquidity be in our current debt facility. After the FDIC takeover of SVB, we did entry and take down the second time period mortgage tranche of $5 million. In order of right this moment, we nonetheless have $5 million of remaining incremental liquidity by way of the AR line of credit score.
As we achieved the $35 million ARR efficiency metric in our debt facility, our curiosity solely interval on our debt has been prolonged from July 2023 to January 2024, offering us with incremental working runway. Based mostly on our present stability sheet, capital and our expectations of declining money burn, we nonetheless have roughly two years of working runway. Only a fast reminder, the primary quarter is usually our largest money burn quarter of the 12 months resulting from some annual funds and bonuses.
Now transferring to steerage. As a result of sturdy end to 2022 and a robust begin to 2023, we’re offering income steerage of roughly $42 million for the full-year of 2023, implying a 36% year-on-year development price.
Turning to our outlook for the primary quarter of 2023. Given the power of our latest bookings and the well being of our present backlog, we count on income within the first quarter of 2023 to be roughly $9.Three million to $9.Four million. We count on GAAP gross margins to be comparable within the first quarter of 2023 to the fourth quarter of 2022.
Recall at scale, we have indicated that Augmedix Stay gross margins will likely be within the vary of 50% to 55% with Augmedix Notes gross margins within the vary of 55% to 60%. Augmedix Go gross margins will likely be larger than Augmedix notes. Nevertheless, we do not count on any materials income from Go in 2023.
We count on first quarter working bills to be barely larger than the fourth quarter working bills. Importantly the rise in working bills will likely be considerably decrease than the rise in income, which once more reaffirms our inherent working leverage in our enterprise mannequin. We do count on some incremental investments in 2023 and sequential OpEx development within the coming quarters, however that development is anticipated to be lower than our prime line development.
At this level, I might like to show the decision again to Manny for closing feedback.
Manny Krakaris
Thanks, Paul. I’m pleased with our staff’s dedication to allow physicians to see the affected person and never be distracted by the expertise that generates the medical observe. Within the course of, we’re addressing the most important ache factors within the U.S. Healthcare System, doctor burnout, staffing shortages and labor inflation. I might prefer to personally thank the whole Augmedix staff for the sturdy outcomes we delivered within the fourth quarter and over the course of the 12 months.
I might additionally prefer to take this chance to welcome Rod O’Reilly as our new Chairman of the Board. His lengthy tenure, a number of successes in healthcare IT and has in depth trade relationships will little question assist us understand our imaginative and prescient of fixing habits on the level of care to extend affected person entry, enhance affected person outcomes and increase the trade’s monetary efficiency. We stay assured that the necessity for our merchandise will proceed to speed up given the large dimension and unmet wants of the market and the compelling ROI our providing delivered to our prospects. We stay up for 2023 and past and to producing long-term worth for our stakeholders.
Thanks. With that, we are going to now open it as much as questions. Operator?
Query-and-Reply Session
Operator
Thanks. We’ll now be conducting a question-and-answer session. [Operator Instructions] Thanks. And our first query is from the road of Ryan Daniels with William Blair. Please proceed along with your questions.
Jared Hasson
Sure, good morning. That is Jared Hasson for Ryan and thanks for taking our questions and congrats on the entire gross sales momentum. Sure, only one on the steerage, is there a consolation stage there? How a lot of that $42 million outlook is seen to you to remain when it comes to — I suppose, what’s below contract versus what would mirror new gross sales that you simply’re hoping to shut this 12 months. Actually simply attempting to get a way of any, sort of, key variables we should always take into consideration that would drive the precise efficiency in 12 months, type of, above or beneath that outlook?
Manny Krakaris
Paul, do you need to take that?
Paul Ginocchio
Hey, Jared. Sure, positive, Manny, no drawback. Hey, Jared. Thanks for the query. So we exited the 12 months at $35 million of ARR, we had a really sturdy backlog coming into the 12 months. In order that backlog plus the exit ARR of ‘22 gave us actually good visibility into that $42 million. You may see what our first quarter income steerage seems to be like and type of the incremental development of ARR added Q-on-Q and we be ok with that attaining that $42 million.
Jared Hasson
Okay, good. After which I suppose simply as a follow-up right here. Perhaps you talked just a little bit about a number of the massive shopper expansions in latest quarters. I am curious, has any of that momentum been pushed by knowledge sharing the place you are in a position to actually assist programs determine which medical doctors may benefit essentially the most out of your resolution? I suppose simply any shade extra broadly round what you suppose is actually driving the success when it comes to shopper enlargement?
Manny Krakaris
Nice query, Jared. So it undoubtedly has the data-driven method that we use with a lot of our huge enterprise prospects undoubtedly has an impression on the enlargement expertise after we have achieved an preliminary cohort or two with these enterprises. I believe there’s different secular points which can be stimulating demand and particularly demand for our providers. Demand basically is being pushed as you most likely know by physician burnout, staffing shortages, labor inflation, however selecting us particularly to develop is based. I believe on the excessive ROI that we’re in a position to ship to these enterprises. And by incorporating data-driven method, it’s fairly simple for these enterprises to see the impression we’re having on their monetary efficiency.
Jared Hasson
Okay, good. We’ll go away it there and hop again within the queue, however congrats once more on all of the success.
Manny Krakaris
Thanks, Jared.
Operator
The following query comes from the road of Neil Chatterji with B. Riley Securities. Please proceed along with your questions.
Neil Chatterji
Good morning and thanks for taking the questions. Perhaps simply first off, simply curious how the beta testing and any suggestions goes to this point with the preparation for the Augmedix Go launch later this 12 months? And the way you envision that being, sort of, the muse to your enterprise platform?
Manny Krakaris
Hey, Neil, it is Manny. Good query, so it’s beta testing, so we’re — the purpose of that is to get as a lot suggestions as attainable from customers to be sure that after we commercially launch the service, the product that it’ll fulfill the wants of the goal market that we’re going after. To this point, the suggestions has been good, however it’s nonetheless early days. So I do not need to decide to the character of that suggestions aside from it has been productive, and we’re making adjustments and enhancements to the product as we get that suggestions, which is what you’d count on and we’re nonetheless — our timetable continues to be precisely what we had indicated earlier. We’ll go to prolonged beta testing within the subsequent quarter with one other enterprise as properly. And extra deeply with this one specific enterprise that we’re testing right this moment. And all indications are that we’ll be launching it — does the product commercially in the direction of the tip of the 12 months.
Neil Chatterji
Nice, thanks for that replace. And then you definitely did point out the one instance earlier, simply curious should you simply speak just a little bit extra concerning the alternative of increasing extra into the ERs?
Manny Krakaris
Certain. So we went into the ER some time in the past at a West Coast facility simply to sort of minimize our tooth on that, as a result of the workflows as you may think about are very completely different from the ambulatory or medical care setting. And that helped us, sort of, determine the best way to take care of these difficult workflows, as a result of the workflow is just not linear as it’s within the ambulatory setting. And we figured that out and determined to promote it extra aggressively and that effort is starting to repay, and it isn’t simply with a regional hospital on the West Coast, that is with the foremost healthcare enterprises. So we’re actually enthusiastic about that chance.
And it isn’t very properly represented as you most likely know within the digital documentation area, as a result of it is so laborious to do. However we really feel we have cracked that nut and searching ahead to higher expansions inside that phase.
Neil Chatterji
Nice. That is it for me. I will soar again within the queue.
Operator
Thanks. [Operator Instructions] The following query is from the road of Allen Klee with Maxim Group. Please proceed along with your questions.
Allen Klee
Good morning. Two questions, one simply the run price on working bills is what we have been seeing year-over-year for the third and fourth quarters. Is that sort of what you are, sort of, concentrating on going ahead?
After which second on the Go providing, the suggestions you get from medical doctors of — mainly, what would make them change to what you’ve versus Dictaphone? In case you might dig into that just a little extra? Thanks.
Paul Ginocchio
Hey Alan, it is Paul, I will take that first query. I believe as you take a look at year-on-year OpEx development as we get into 2023, it is not going to be on the similar ranges of development year-on-year that we noticed within the third or fourth quarter of 2022. We count on a extra reasonable development price. I hope that is — we’re not going to offer any extra particular at the moment, however you must count on a deceleration in year-on-year development.
And simply earlier than we transfer on to Manny’s query across the relative advantages of our merchandise first, dictation. I simply need to name out that the 1,300 clinicians in service we commented on on the year-end, that was some extent estimate of the variety of clinicians in service on the finish of the 12 months. The 1,246 is the common for the fourth quarter. There are two completely different metrics, I simply need to be sure that everyone’s conscious of that, we do not usually give level estimates of clinicians and repair, however we did at year-end. Thanks.
Manny Krakaris
Sure, Alan, to reply your second query, the target standards that we use to guage the worth proposition for Go are, one, the benefit of use or sorry, the quantity of financial savings in time for physicians it is actually essential that the product is able to saving extra time in making ready a medical observe than a dictation resolution. And second, it needs to be so much simpler to make use of with dictation, there’s a variety of work that needs to be achieved past simply dictating the commentary that you simply want or need to see within the medical observe, there’s a variety of navigational steps that must be taken by the doctor to position particular content material and particular fields throughout the EHR and that’s obviated by our product.
There’s a few intangible standards as properly that we expect are actually essential; one is transparency, which I talked about in our feedback. We’ll expose to physicians how the medical observe is constructed, that is baked into the person interface. And we expect that is essential, it is essential to point out the sausage making to the physicians, in order that they have an appreciation for what the steps are. After which they’ll see the place there’s areas the place they may need to do one thing otherwise than what the fashions are doing.
And that results in the second intangible level, which is empowerment. They’ve the power to regulate the feel and appear and particular content material that they need to see in that medical observe with out a variety of effort, and that is the magnificence of that specific product. And I believe it is our view that many physicians worth that management and transparency. They transcend the extra goal metrics that we take a look at.
Allen Klee
Thanks. Can I ask one different query, do you suppose that in ‘23 that gross margins have their potential to enhance over ‘22?
Paul Ginocchio
Hey, Alan, it is Paul. Good query. Completely. Clearly 2022 was impacted by the upper development of our U.S. Service — excuse me, serviced operations, we’re not going to see that once more in 2023. We may very well see U.S. Serviced clinicians go down as a p.c of our combine. And in order that will likely be a profit to gross margins over time.
Allen Klee
Thanks a lot.
Operator
Thanks. Right now, I will hand the ground again administration for any additional remarks.
Manny Krakaris
Effectively, we recognize everyone coming on-line and listening to our earnings name and we’ll take callbacks later right this moment and tomorrow with these which can be serious about extra in-depth questions-and-answers. Thanks all, and we’ll maintain you posted on our progress.
Operator
Thanks. This can conclude right this moment’s convention. You might disconnect your strains right now. Thanks to your participation.