Friday, November 8, 2013

What's Going on at Authentidate?

Disclosure: Long ADAT. Please read our full disclaimer.

We are long term investors in Authentidate (Nasdaq: ADAT) and are one of the company’s largest shareholders.  It’s a healthcare technology company with strength in telehealth (remote patient monitoring) and a suite of software solutions that take manual, paper-heavy processes (eg discharge, referrals) and make them digital.  We think this is the future of healthcare—using technology to drive down costs by cutting errors and saving time. 

Our big takeaway from ADAT’s last conference call is that things are moving in the right direction.  Since they reported year-over-year top line growth of 51% the stock has been moving higher, up 14% so far.   Here are a few snippets from the call.

Authentidate's telehealth systems allow patients to be monitored from the comfort of their own homes

On the pipeline
“We continue to see increased interest in all products and services from potential customers and other interested parties. This is reflected in a number of RFP’s that we are currently involved in . . .”

On their competitive advantage
“ . . .there are not many products that are FDA approved and the bigger institutions . . . seek assurance through the FDA approval of devices. We are one of a few devices that are approved in the telehealth space and we think that gives us tremendous lead time advantage  . . .”

On their business model in telehealth
“We largely model our business off the recurring revenues, so we have taken the razor/razorblade model in the telehealth space.”

On M&A in their sector (Medtronic [NYSE: MDT] paid $200 million cash for a competitor)
“Recently there was a major acquisition in the telehealth space, we had Medtronic acquire Cardiocom and we expect to continue to see that type of activity simply because of the size of the market and the speed at which it’s moving. I don't think the bigger companies themselves are going to try to develop all their capabilities.”

On their sole-source opportunity for HIV patients at the VA
“. . . our company has started to enroll patients in the pilot program for the VA’s HIV patients. . . . After the pilot is completed, we expect that the HIV telehealth program will be made available for VA HIV patients nationwide. . . . for a recurring monthly subscription fee for each [patient]. . . ”

On the non-government side of the business
“Moving beyond our business with the federal government, we made progress in the private sector as well.  Our Inscrybe Hospital Discharge solution is starting to gain traction and we have a number of RFP’s outstanding for this solution. We expect several of them to finalize over the next few months or so . . .”

On the capital raise and Series C conversion
“These transactions have significantly strengthened our balance sheet . . .”

On the Department of Veterans Affairs, a key customer
“We feel very good about the relationship that developed between ourselves and the VA, and we think we will execute better as we go forward.”

On the growth opportunity with existing customers
“We only do about 10% of our existing base of customers’ transaction[s]. . . . We would expect that target rate to grow to about 70% to 80% . . .”

Transcript credit: You can read the full transcript of this call and many other earnings calls—for free—at