Streamline third quarter results
Quality Product Offering and Client Base. For a small company, Streamline’s product offering is well
regarded. Most notably, the company is currently enjoying strong interest in coding and clinical
documentation improvement. This demand is being driven by the government’s mandated
implementation of ICD-10 (October 1, 2015).Streamline's legacy content management system is being
integrated with coding and CDI into one platform, which should improve the company's ability to sell
both products. Finally, while immaterial to date, the clinical analytics offering licensed from Montefiore
has the potential to be a significant driver of long-term shareholder value.
STRM recently announced a reseller partnership agreement with himagine solutions, the largest
healthcare outsourced provider of inpatient and outpatient coders to the healthcare industry. It is
noteworthy that such an important staffing provider to hospitals has chosen to partner with STRM’s
coding and CDI offering. We believe this partnership offers the potential for meaningful revenue
STRM remains in discussions with several channel partners and management believes these
partnerships have the potential to be important contributors to top-line growth in the second of C2016
The company has a strong client base consisting of ~100 hospitals; the most important customer
concentrations are located in the New York metropolitan area, Philadelphia, Texas, Southern California
and the west coast of Florida.
Revenue Growth Expected to Accelerate in C2016 and C2017. With operations stabilized and the right
cost structure in place, CEO Sides is now focusing his attention on driving Streamline’s revenue growth.
The company generated an estimated $29 million of revenue in F16 (January 2016.) Of this total, we
estimate that roughly $25 million was recurring.
Management is focused on driving both direct sales and the partner channel. Sides is looking to hire a
dedicated salesperson to manage the partner channel and to add a few salespeople to build upon the
direct selling efforts. There is a typically meaningful lag (3 to 6 months) between healthcare software
sales and product implementation. Accordingly, while we are optimistic that momentum for STRM will
continue to build in 2016, we are likely to see a more pronounced impact on bookings before we see a
substantial step up in reported sales. Accordingly, we are assuming 10% growth in sales for C2016,
followed by 12-15% growth in C2017. We expect coding/CDI solutions to be the principal driver of
growth in each of the next two years.
Alignment of Management and the Board. Shareholders are fully aligned with management and the
board. Taken together, management and the board directly own an estimated 2.4 million shares or
roughly 13% of shares outstanding. In addition, there are 2.4 million options at an average strike price
of $4.52, 1.2 million warrants ($3.99) that were issued to Noro-Moseley Partners and Great Point
Partners, and three million convertible preferred shares with a face value of $9 million, convertible into
common stock at $3 per share. Excluding Great Point's warrants and preferred shares (Great Point does
not have a board seat), insiders own 27% of fully converted shares outstanding.