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Beamtree (BMT.ASX) : 1 Pager
A recent cap raise, and a recent cornerstone distribution contract; are the winds blowing?
This week’s 1 pager spotlights healthcare software provider Beamtree. In their own words, Beamtree is “The Australian company setting new standards in healthcare data to improve quality, safety and efficiency around the world”.
Let’s dive in.
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Beamtree became a little more complex over the years from acquiring a number of different software solutions to get to where it is today.
Essentially, they provide decision support and data insights solutions to help hospitals, pathology, and primary clinics globally.
Given a large part of Beamtree’s revenue is sourced from its RippleDown product, let me explain how this one works.
Every arm of medicine works on patterns.
Rippledown looks at current data hospitals have, looking for patterns in that data.
Once it observes enough of the same pattern, it turns the pattern into a rule.
It then documents that rule so it can be used in future.
Then, at the point of diagnosis, it applies these rules to a current diagnosis.
Here’s an example:
Someone comes to the hospital and is diagnosed with diabetes.
Rippledown offers the standard treatment for a newly diagnosed patient.
Then it looks specifically at the patient’s unique scenario; if they are pregnant, the treatment is changed.
If high-blood pressure is found; then the high blood pressure script is applied to change the treatment once again.
This allows doctors to work more efficiently, and reduces the chances of errors.
If you want to learn more about how Beamtree’s 4 primary products work, the best way I’ve found is to look at their 2 min video summaries on their vimeo page.
Two recent compelling events make now a good time to pay closer attention to Beamtree.
Capital Raise. The first happened at the end of May: they raised a $5M round. They had been telling the market they were sufficiently funded to reach cashflow breakeven, but the cash cushion wasn’t very thick.
This round (for which new shares were issued on 5th of June), should bring the company’s cash closer to $8 to $10M range. This should offer investors more confidence that now, they might be fully funded to reach cash independence.
I personally think a risk of a future raise remains. They’ve historically burned about ~$2.5M / Quarter. At this pace 1 year of runway doesn’t seem like that much.
A recent cornerstone distribution contract. On the 16th of December 2022, Beamtree told the market it had reached an agreement in which Abbott would be distributing Beamtree products globally. This is significant because of the reach of Abbott; which holds a strong presence in many countries which were largely outside of Beamtree’s reach.
The agreement is extremely favourable to Abbott; for contracts above $300K USD, Abbott retains 60% of the revenue. This should indicate to us that Abbott has got good reason to be promotional about Beamtree products.
What needs to happen
#1 - Growth needs to accelerate. In my humble view, we need to see growth scale upwards.
The Abbott contract tailwinds needs to start adding more incremental revenue to every quarter, and this doesn’t appear to have materialised yet.
Also, recent acquisitions need to show proper synergies, otherwise, we’re no better off. The company’s stated goal of reaching $60M in ARR by FY26 is only possible with growth rates in the 30% to 40% range.
Let’s look at recent ARR growth:
At the moment, there’s no evidence yet that growth velocity is accelerating. The last 4 quarters all added an equal $0.9M of ARR. Evidence would be shown if ARR started to move upwards of $1, to $1.5M to $2M additions per quarter.
#2 - Cashflow breakeven needs to be reached.
We read in the capital raise paperwork: “Importantly, the capital is also sufficient to allow the company to deliver cash flow positive returns by the end of FY2024”
This is especially important for Beamtree given the claim in their half-year report: “At the end of December 2022, Beamtree has a cash balance of $5.4m which is expected to fund the business operations until it is cash flow positive”.
Hence, we need to start seeing evidence that now they can get there. The upcoming full year results in a few months should provide a bit more colour on how they’ve progressed against this goal.
Beamtree have got these nice tailwinds going for themselves, and would semingly be helped by a large Total Addressable Market (TAM), but also operate in what I judge as an increasingly busy space. Many will notice the similarities between theirs, and Alcidion’s value proposition. Research into both companies shows their products are quite different, and also targeted to different segments of healthcare.
Still, healthcare Informatics and AI-based decision support tools are multiplying. Ultimately, I see this as a great trend for patients.
Let’s see how Beamtree go in the next 6-12 months. If they reach these set milestones, I will revert back with a full deep-dive in 1 year.
Whilst this post sat in my scheduled drafts,wrote a more polished piece on them (link here). Have a look at that one if you’re keen to read more on them.
Previous 1 Pagers
Felix Group (ASX:FLX) : 1 Pager - June 2023 - Link here
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