Forian Inc. Q2 FY2024 earnings call

• Second quarter was a heads-down working quarter with adding a new large data source and managing macro industry events, revenue was approximately flat but expenses were managed to have positive adjusted EBITDA.
• Financials impacted by early-stage clients having fundraising challenges affecting revenue recognition and industry data supply chain disruptions affecting short-term sales efforts.
• Forian's Data Factory is a sophisticated platform aggregating diverse data; market events caused data flow interruptions but are expected to be temporary, and the company added data sources to fortify products.
• Renewed key contracts with existing clients, revised 2024 revenue outlook to $19 - $20 million and adjusted EBITDA outlook to -$0.5 to $0.5 million.
• Actively looking for corporate development opportunities like partnerships, strategic transactions, or share repurchases, and incurred one-time advisory fees in connection with business strategic review.

In the second quarter, Forian generated revenue of $4.8 million, which is approximately flat compared to $4.9 million year-over-year. The net loss from continuing operations for the quarter was $2.5 million, and adjusted EBITDA was $0.08 million. Year-over-year, the net loss was $1.2 million and adjusted EBITDA was $0.4 million. Revenue contribution details aren't specified beyond the absolute figures.

• Lowered 2024 revenue outlook to a range of $19 million to $20 million.
• Lowered 2024 adjusted EBITDA outlook to a range of negative $0.5 million to positive $0.5 million.

• Two early-stage clients facing challenges in raising external capital, increasing risk of not being paid and uncertainty in recognizing revenue from their contracts.
• Industry adversely impacted by unanticipated disruptions in the data supply chain affecting claims processors, health systems, etc., which affected short-term sales efforts.

Q: When you have data feed disruptions across the industry, do partners reimburse costs or are fixed build costs ongoing?

A: It depends on the circumstance. Contracts have volume metrics with measurement periods, discussions held after the fact, and vendors go out to acquire other sources to offset disruptions.

Q: Talk about the M&A environment. Do you see expectations out there, are you interested, and how do you think about M&A opportunities?

A: Actively reviewing M&A environment. Now public company multiples and private market acquisitions are getting closer to being available and accretive. Prudent not to spend unwisely; some larger VC backed companies not getting expected exits or raises, and had one-time expenses in quarter reviewing market to position for growth and differentiation.

Q: Talk about top of the funnel oriented activity on prospects, is it shrinking, growing, or sideways, and longer-term growth drivers?

A: Longer-term growth drivers haven't changed. Starting to get more RFPs from larger pharmaceutical companies, pipeline growing from that perspective. Process to win initial contract with larger pharma takes time, but pipeline is growing and Forian's name is top of mind, building better relationships with senior people.