Forian Inc. (FORA) Q1 2020 Earnings Report, Transcript and Summary

Good day and welcome to the Helix Technologies Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] It is now my pleasure to turn today's conference over to the CEO, Zach Venegas. Please go ahead, sir.

Good afternoon and thank you for joining us today for the Helix Technologies Q1 2020 earnings call. And we hope that you’re all safe and well. Mirroring our 2019 annual report, our Q1 2020 was the strongest quarter in our Company's history and we are very excited to review last quarter's performance. We reached critical strategic and operational performance objectives to include largely completing the strategic and operational integration and turnaround of the BioTrack THC unit, accelerating the rollout of our data products, and substantially growing our sales and market share organically, while simultaneously improving operating margins. I'll turn it over to our intrepid CFO, Scott Ogur, to read the required disclosure and connotations. Scott?

Thank you, Zach. This presentation may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934. Forward-looking statements describe future expectations, plans, results or strategies and are generally preceded by words such as may, future, plan or planned, will or should, expected, anticipate, draft, eventually or projected. You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward looking statements as a result of various factors, risks that we may not realize the anticipated benefits of acquisitions we may make or plan to make and other risks identified in the Company's 10-K for the fiscal year ended December 31, 2019, and other filings made by the Company with the Securities and Exchange Commission. Zach?

Thank you, Scott. As usual, to begin our review, let's start by looking at our mission statement. The mission of Helix Technologies is to provide clients with best-in-class critical infrastructure services through a single integrated platform, which enables them to run their businesses more safely, efficiently and profitably. In line with that, our 2020 objectives to support that mission are: number one, to continue to improve our operating performance and reach profitability, which is clearly happening quarter-by-quarter; expand our data offering by bringing our newest product Cannalytics Beacon, [ph] a sales enhancing data service to the market by 420; fully rolled out Helix Core into all state markets; expand our Delaware Hemp wholesale market into other states; continue to drive sales growth across all of our verticals; navigate the current COVID-19 pandemic in a proactive and rational manner; and continue to stay ahead of the negative outcome cascade rolled; and to improve Helix's capital formation and capital markets capabilities with increased investor outreach and emphasis on market communication. Now that we've established the why and the how, let's move to the operational results for Q1, which were, despite the emergence of the COVID-19 epidemic, outstanding, with significant advancement of our 2020 goals. Some examples were: Number one, the near completion of the operational turnaround of the BioTrack THC unit, resulting in dramatic improvements to be outlined by our CFO in our financial and operational performance. Two, expanding our data offering by bringing our newest product Cannalytics Beacon to the market by 420, which did occur on time and to standard. We further delivered additional growth in our Cannalytics unit which Garvis Toler, our Head of Data will highlight. And three, the full integration with Dama Financial, which gives our clients another option to seamlessly integrate a fully compliant banking solution into their operations and further expands our services ecosystem. I will now turn it over to our CFO, Scott Ogur to run through the financial impacts of these operational and strategic successes. Scott?

Thank you, Zack. In the first quarter of 2020, we generated revenues of $4.55 million, as compared with $3.37 million the prior year for an increase of 35%. This is yet another record quarter of revenues for Helix. Reflected sequential growth of 6% and represents an annual revenue run rate of more than $18 million. Gross profit was $2.29 million versus $1.45 million in 2019's first quarter, a 58% increase. Gross margin was 50% as compared with 43% in the prior year. We reported a loss from operations of $3.4 million as compared with $2.6 million in the prior year's first quarter. Our adjusted EBITDA, which excludes stock compensation and other noncash expenses was negative $79,000 in the first quarter of 2020 versus negative $1 million in Q1 2019, validating our efforts in the push to get Helix into the black on this cash flow metric during this calendar year. Looking at another cash flow measure, cash flow from operations were negative $362,000 in Q1 2020 versus negative $1.2 million in 2019's first quarter, a 69% improvement. This was a further 35% sequential improvement from the Q4 2019 cash flow from operations of negative $556,000, and again compares quite favorably to other ancillary service providers, some of whom are burning the same amount of cash from operations in an average week. On a segment basis, the two primary business segments are security guarding and monitoring; and software. The security guarding and monitoring business had revenues of $1.6 million in the first quarter of 2020, a 32% increase from the comparable period in 2019, driven by our client growth in California. The gross profit in Q1 2020 from this business line was $278,000 as compared with $264,000 in Q1 2019. This business line grew in the face of the COVID-19 pandemic late in Q1 and beyond, as many of our clients required additional security personnel to handle curbside pickup. Focusing on our larger and higher margin software business now. In the first quarter of 2020, this business line generated revenues of $2.8 million, as compared with $2.1 million in the prior year, or 30% year-on-year growth. Software gross profit was $1.96 million in Q1 2020, up 49% from the $1.31 million gross profit in Q1 2019. Software gross margin was 70% for the second straight quarter and up 8 percentage points versus 62% in Q1 2019. Recurring commercial revenues at BioTrack experienced 8% sequential growth in Q1 2020 and 40% growth year-over-year. As most of you know, this is a crucial metric for software companies. I'd like to point everyone to our 10-Q where we provide segment reporting results. I'd highlight the software business unit, which showed a loss from operations of $253,000. However, included in this GAAP figure was $1.09 million of depreciation and amortization. So, the adjusted EBITDA of our software business in Q1 2020 was positive $780,000 or 28% EBITDA margin. The management team has worked very hard with the current BioTrack business unit heads and employees to get to this point. And despite being the industry leader, we will not stop working to drive continual improvement of this business. We'd now like to take a moment to have Garvis Toler, our Head of Data, highlight Helix's Cannalytics product and what we've achieved so far Garvis?

Thanks, Scott. As we've been discussing, the Cannalytics data suite of products and services has been a continued strategic focus as we move forward in 2020. And we're encouraged as investors and wider market participants begin to fully recognize data’s increasing importance for both our government and industry clients. This has never been more apparent than in the first quarter of this year, during which the industry was forced to adjust to an incredibly dynamic environment, understanding changing customer behavior, inventory flow throughout the supply chain, and shifting regulator reactions has given Cannalytics clients an edge as they seek to operate more effectively. In the first quarter, we surpassed well in excess of 100 clients across the U.S. and allowed them to use business intelligence insights to not only stay afloat, but to unlock new opportunities to serve their patients and clients in new and creative ways. As Zach mentioned on the last call, we have been in development on an additional data service which allows our clients in specific geographies to take advantage of technology designed to attract new customers and increase sales. In the first quarter, we delivered Cannalytics Beacon to its first clients and the early feedback has been overwhelmingly positive. Within our ecosystem, we have a tremendous total addressable market for data, both the end users as well as third party data consumers. Leveraging just a small percentage of our existing network could dwarf our nearest competitor in this space. It is in this easily and infinitely scalable ecosystem that we see our greatest potential to drive shareholder value. We will continue to build new capabilities into the Cannalytics product suite as well as develop relationships with high quality partners to extend the power of the Helix platform. By some estimates, cannabis industry participants have planned to spend over $500 million on data and technology over the next 12 to 18 months. And Helix is certainly well-positioned to win a meaningful share of this market. Back to you Zach.

Thank you, Garvis. In conclusion, I'd simply like to recognize the market-leading performance of the Company. Our operating leverage is clearly evident in our results, and we continue to create strategic value for our clients and real business value that we feel strongly is still overlooked by the Company's stock price. The leadership team is taking direct steps to address what we feel are the causes of that mispricing, and we hope to report success in those areas on our next earnings call. In closing, I'd like to thank, as always, our employees whose perseverance and skill are evident in this firm strong performance. We look forward to continuing to lead the market in operational performance day in and day out, and hope that you all remain healthy and safe. We'll now take some questions.

[Operator Instructions] We'll take our first question from Dave Author. [Ph]

Yes. Hi. I have a question for Zach or Scott. When are you going to stop selling shares into the public market and flushing share price down the toilet? I guess that it was like 210,000 insider shares sold in the last month by Scott and Zach and who else was it? It is three of them. You're just flushing the share price right down the toilet. And then, you claim that the market is mispricing it, but you're the one that's crashing it.

So, thank you, Dave for your question. This is Zach Venegas, the CEO. So, there's a couple of points I'll make right off the bat, and one is your totals are incorrect. That's one. And the second point is, simply over the five years since Scott and I have founded the Company, we retained more than 98% of our total shareholding. So, that has nothing to do with where the share price is right now. And so, there's been a 10b5 program in place for very small shares of insiders over time, but nothing in the magnitude that you've been talking about, that you just mentioned. You're miscounting the amount of shares that are getting done, because you're not reading the reporting -- the reports correctly. But, in any case, what I'll say is that miniscule amount of shares compared to the total overhang of millions of shares are coming from non-insiders over the last 7 months is the main driver in our view of the stock prices decline. So, that's the answer to that. It's saying a couple of hundred thousand or shares over five years is driving the stock price down is absurd. So, that's the answer to that question. And so, I'll -- with that I'll answer the next question in the queue, which is, what our long-term plans for data? And are the revenue streams outside of the business intelligence tool? So, the answer to that is absolutely, we're currently in fairly advanced discussions with a number of different third-party data aggregators and utilizers us to drive increased levels of usage and revenue for the product. What we want to see is obviously where the greatest bang for the buck, so to speak is, for the data product beyond the business intelligence. And as we mentioned, we also are begin to focus on revenue driving data tools for our underlying tools for our clients. And then, I have one other one that was written in here. And that's around liquidity and the convert. So, it essentially is -- the question is when -- why did we take converts that are now resulting in low stock price sales? And when will we focus on improving our liquidity position? And the answer to that is simply, sort of in the hindsight mode, it looks like the converts that we did are at a low price, but at the time, the market was even tighter than for capital than it is now. And we didn't want to make any substantial sales of equity at a very low or very tight price. And so, we did just the bare minimum to keep operations going, so we can continue to do the turnaround and produce the results that we just produced over the last two quarters. And we're already seeing substantially improved offerings of finance that we hope to report positively on in the Q2 call. And then, in terms of liquidity, again, since we're not burning much cash, we're not in a position that others are where they have to raise massive amounts of money to stay alive. That's not our position. We have a strong operating business with strong operating leverage and our business model isn't fundraising. So, we're comfortable where we are, and we'll continue to improve the liquidity position as we move towards profitability. Is there another phone question?

[Operator Instructions] We'll take our next question from Jeff Miller. [Ph]

A while ago, I read that Vicente Fox had joined the Board. And I was curious if he was still on Board and what his role is in the Company?

Great. So, I’ll answer that. This is Zach again. So, we answered this one also on the last call, which is to say. So, he is on Board and we're going to continue to evaluate his role going forward, simply because as you know with the global pandemic and a few other things Latin America hasn't come on line as fast as we thought this time last year. So, we'll continue to evaluate all the Board memberships and who adds the most bang for the buck again, so to speak, and at what time. And so, we'll make appropriate announcements when necessary.

And there are no further questions on the line at this time.

All right. Well, thank you very much everyone for dialing in, and we hope that everyone continues to stay safe and sane. And we look forward to the next -- we're looking forward greatly to the next quarter's earnings call as well. Thank you for your time.

This does conclude today's program. Thank you for your participation. And you may now disconnect.