Syra Health Corp. Class A Common Stock (NASDAQ:SYRA) Q1 2025 Earnings Call Transcript

Syra Health Corp. Class A Common Stock (NASDAQ:SYRA) Q1 2025 Earnings Call Transcript May 11, 2025

Operator: Good morning, ladies and gentlemen. And welcome to the Syra Health First Quarter 2025 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Thursday, May 8, 2025. I would now like to turn the conference over to Corbin Woodhull. Please go ahead.

Corbin Woodhull: Good morning, everyone. And thank you for joining us for Syra Health’s first quarter of 2025 financial results conference call. My name is Corbin Woodhull of Hayden IR, and I direct Investor Relations for Syra Health. Joining us on today’s call is Dr. Deepika Vuppalanchi, CEO of Syra Health; and Priya Prasad, Syra’s Chief Financial Officer. At the conclusion of today’s prepared remarks, management will answer questions that were sent to us by investors and other questions we think are relevant to investors as well. Today’s event is being recorded and will be available for replay through the webcast information provided in the press release. I’d also like to call your attention the customary Safe Harbor disclosure regarding forward-looking information.

The conference call today will contain certain forward-looking statements, including statements regarding the goals, strategies, beliefs, expectations and future potential operating results of Syra Health. Although management believes these statements are reasonable based on estimates, assumptions and projections as of today, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties and other factors included, but not limited to factors set forth in the company’s filings with the SEC. Syra undertakes no obligations to update or revise any of these forward-looking statements.

With that said, I would like to turn the event over to Dr. Deepika Vuppalanchi, Chief Executive Officer of Syra Health. Deepika, please go ahead.

Dr. Deepika Vuppalanchi: Thank you, Corbin, and welcome, everyone. Thank you for joining the first quarter of 2025 earnings call today. We value your continued interest in Syra Health and are excited to share updates on our recent performance and future goals. I will begin by highlighting our strong financial performance, followed by an update on our growth initiatives and strategic priorities for 2025. Then I will hand the call over to our Chief Financial Officer, Priya Prasad, who will take you through a more detailed breakdown of our financial results. We entered 2025 with strong momentum following the solid trends experienced at the end of 2024. We are pleased with the successful execution of a strategy that is focused on capturing sustainable long-term growth opportunities.

Q&A Session

In tandem with the continuation of diligent investments in key technological innovation. We delivered total revenue of $1.9 million, reflecting 6% annual growth compared to the first quarter of 2024. This was primarily driven by strong performance in our Population Health business unit, which more than tripled from the year-ago period and represented 65% of total revenue versus the 19% contribution in the first quarter of 2024. A strategic shift remains focused on targeting diversified high-margin revenue streams while we continue to phase-out more RTF Healthcare Workforce contracts. I would like to highlight the strong gross margin trajectory in the quarter, which expanded by 14.6 percentage points to 31.7%. The increase in gross margins was primarily driven by increased contribution from Population Health.

Another benefit in the quarter was increased revenue from milestone-driven projects. However, we remain focused on the strategic shift in favor of more sustainable long-term recurring current contract revenue, which we believe will have a positive impact on our gross margins. Within Population Health, we signed a year-long contract with a major insurance provider to enhance its plans for certain beneficiaries through streamlining of reporting processes, regulatory compliance assurance and the provision of enhanced data insights. We have already initiated our work according to the contract terms and experienced a steady increase in revenues that are estimated to reach $2.5 million by year-end, depending on evolving requirements. Turning to our growth initiatives, during the quarter, we refined our go-to-market strategy and further aligned the incentives of our sales team.

These renewed efforts are focused on private sector, B2B clients and the aim is to drive adoption of Syrenity among colleges and universities, emergency responders, healthcare providers and life science organizations. We are experiencing continued strengthening demand for Syrenity App. In its short lifespan, having only launched late last year, the Syrenity App leverages clinically proven practices within the Mental and Behavior Health space. In line with our strategy of providing accessible support to the millions of people suffering from mental health conditions, during the quarter, we rolled out specialized content within Syrenity aimed at supporting individuals living with post-traumatic stress disorder or PTSD. The new resources include evidence-based coping strategies, guided exercises and expert-led modules to help users improve overall mental health.

Syrenity is still in its early innings, but we are pleased with its initial adoption and are poised to continue to expand upon its use cases. Looking forward at our growth strategy, we continue to evaluate short-term and long-term avenues to expand our presence in both the public and private sectors. We are generating strong momentum with new contracts and contract extensions characterized by long-term commitments and high reoccurrence of reinforcing the durability of our growth. We are currently partnered with Caduceus on a federal contract vehicle. However, the federal agency has not yet issued task orders that align with our services. In parallel, we continue to actively submit bids with LUKE on the MSQ2 vehicle to provide medical staffing services for the defense health agency facilities across the country.

If one of these task orders is awarded, we will notify the market via press release. Turning to recent corporate developments, last month our Board of Directors and executive management team announced a strategic decision to voluntarily delist our common stock from the NASDAQ capital market. The company thoughtfully decided that the delisting was warranted as a strategic pause announced for improved focus on strengthening the core fundamentals while reducing costs associated with the NASDAQ listing. This pause is a proactive measure to ensure the company is positioned to maximize shareholder value and continue its trajectory as a leading healthcare service provider. Following the transition to the OTCQB market, we plan to continue to report our financial results and operate with transparency, just as we are today.

Looking ahead through the continued focus on our expanding sales pipeline, targeting of higher margin revenues and operational efficiencies, we reiterate our commitment to commercial excellence and are confident in our ability to drive continued momentum throughout the business. Moving on to focus on operational excellence, our operational efficiencies drove a meaningful 39% reduction in our operating expenses in the first quarter of 2025 compared to the first quarter of 2024. As a result, net loss for the first quarter of 2025 improved over two-thirds to $472,000, an evolution of $975,000, compared to the net loss of $1.4 million in the first quarter of 2024. We expect these improving trends to continue into 2025. Driving continuously through 2025, we are considering utilizing proven business service vendors for operational support services while emphasizing oversight and quality, aimed at reducing operational overheads.

It’s important to note we have successfully executed on revenue growth despite our recent cost-cutting measures. Now moving on to an update on our business units. In addition to the Population Health contract with a major insurance provider, this business unit also secured a contract with the National Healthcare Organization to continue providing healthcare effectiveness data and information set overreach and support services. This one-year contract extension is valued at $660,000, but combined with previous agreement equates to a total contract value of up to $1.32 million. The extension of this contract underscores the ongoing growth of our Population Health business, a key driver behind our expanding and diversified revenue base. The successful renewal of our contracts aligns with a strategic focus on enhancing the revenue mix by prioritizing high-margin business units.

As part of our revenue comes from state, local and county government budgets, but starting in 2025, the federal government began pausing or cutting a number of spending programs that help fund the agencies and institutions we work with. Because of that, we have started to see delays in new contracts and even some cancellation of earlier proposal requests. These changes and the potential for more cuts are likely to impact how much revenue we bring in and when we receive it, which could affect our overall performance and cash flow in the near-term. In the quarter, our long-term contract with the Indiana NeuroDiagnostic Institute expired, but as a positive offset, we received a year-long contract extension valued at $1.5 million from the same customer with its revenue being recognized in the coming months based on its needs.

Going forward, we are continuing to negotiate with our Healthcare Workforce partners in order to ramp up high-value contracts while intentionally allowing less desirable contracts to expire. Looking ahead, we maintain an optimistic view on our ability to increase our footprint in state and local government contracts. We are also in the initial stages of expanding our business into the private sector through the targeting of companies with staffing solutions and other services. Although private sector wins have not been secure, this aligns with our strategy to expand our addressable market and facilitate care for the broadest possible population. Before handling the call over to Priya, I would like to reiterate our commitment towards leveraging the powerful combination of diversified revenue growth, streamlining of expense management and a refined focus on innovative solutions.

Our collective business units are geared to address the market’s demand for enhanced healthcare delivery and improved health outcomes through our innovative technology products and services. With that, let me turn it over to our CFO, Priya Prasad, to take you through a more detailed breakdown of our financial results and revised guidance. Priya?

Priya Prasad: Thank you, Deepika, and let me add my warm welcome to everyone joining us on this call. The financial results for the first quarter of 2025 are provided in detail within our press release, which we issued earlier this morning and in our 10-Q. Before I get started, I would like to provide a housekeeping item related to the reporting of our business units. In order to streamline operations, we have consolidated our five business units into three core units. For reporting purposes going forward, the Health Education and Training and Digital Health units have been consolidated under the Population Health business unit. Our three core business units now include Population Health, Behavioral and Mental Health, and Healthcare Workforce.

Total revenue for the first quarter of 2025 was $1.9 million, compared to $1.8 million in the year-ago period, representing year-over-year growth of 6%. Growth was driven by our Population Health business unit, which reached $1.2 million, a 261% year-over-year increase. The strong performance of this unit was supported by new contracts and extensions that align with our strategic focus on increased contribution from high-margin business units. Our Healthcare Workforce unit continues to serve as an important unit for Syra. In the first quarter of 2025, the Healthcare Workforce revenue was $655,000, compared to $1.4 million last year. We remain focused on expanding our pipeline of new contracts and extensions while continuing to phase-out agreements with unfavorable unit economics.

Our Behavioral and Mental Health business unit is poised for growth, driven by increased user adoption of Syrenity and increased demand by large B2B employers. We remain focused on improving conversion rates of paid subscribers within Syrenity and are experiencing positive trends as a result of newly enhanced marketing campaigns. Gross profits in the first quarter of 2025 was $589,000, an increase of 97% compared to last year. Importantly, a major highlight in the quarter is the gross margin expansion to 31.7%, a 14.6% improvement over the year-ago period. Gross margin expansion was primarily related to the healthy revenue mix from the Population Health unit, which aligns with our strategic objectives and the phase-out of certain lower-margin Healthcare Workforce contracts.

Total operating expenses for the first quarter of 2025 were $1.1 million, a year-over-year decline of 39% from $1.7 million last year. The decline in operating expenses is the result of workforce optimization initiatives and diligent expense management policies, which are in alignment with our renewed focus on delivering operational efficiency gains. Going forward, we will continue to prioritize investments that will improve our growth trajectory over the long-term. Adjusted EBITDA in the first quarter was a negative $462,000, compared to a negative $1.4 million in the year-ago period. These improvements were largely attributed to the combination of increased contributions from more profitable revenue streams and prudent operating expense control.

Net loss for the first quarter of 2025 was $472,000, compared to $1.4 million in the year-ago period. This significant improvement in net losses represents a reduction of over two-thirds compared to last year and is a reflection of the successful implementation of cost control initiated last year. Net loss per share for the first quarter of 2025 was $0.04, compared to $0.22 in the year-ago period. Cash on hand as of March 31, 2025 was $2.5 million. Turning to our outlook for the full year of 2025, ongoing changes in the healthcare industry driven by reevaluation at the federal government level are impacting funding for many of our key government customers at the state, local and county level. As a result, our visibility into the full-year outlook remains limited at this time.

Based on the uncertain impacts of these developments, we are withdrawing our previously issued guidance for revenue growth and profitability. The company will provide an updated outlook once the impact of these developments become clearer and more measurable. Wrapping up the financials, we remind investors and interested parties that reconciliation of our GAAP results to our non-GAAP results are provided in the tables included in today’s press release. With that, let me turn the call back over to Deepika. Thank you.

Dr. Deepika Vuppalanchi: Thank you, Priya. In closing, we are encouraged by the progress made in the first quarter and remain focused on executing our strategy throughout 2025. Our continued shift toward high-margin, recurring revenue streams, particularly in Population Health and Behavioral and Mental Health, is creating a more resilient and scalable business. With discipline cost management, ongoing innovation and strategic expansion efforts underway, we believe Syra Health is well-positioned for long-term growth and impact. We thank our employees, partners and shareholders for their continued support, and we look forward to updating you on our progress in the quarters ahead. Thank you for your attention. I’m happy to take any questions you may have.

A – Corbin Woodhull: First question is for Priya. Priya, what should we expect from the company now that it’s traded on the OTC markets?

Priya Prasad: The financial community should expect a continued commitment to transparency. We will maintain the same discipline and integrity in our communications and operations that we’ve demonstrated previously. Specifically, stakeholders can expect timely press releases about executed contract wins. We will also continue to share quarterly results and we are committed to keeping investors informed through any relevant filings. Thank you.

Corbin Woodhull: Our second question is also for Priya. Priya, should investors be concerned about the lack of revenue coming from the Indiana FSSA NeuroDiagnostic Institute now that the contract has expired?

Priya Prasad: No, Corbin. While the overall contract has expired, we did secure a one-year contract extension from the same customer valued at $1.5 million, which reflects their continued confidence in our service. The revenue to be recognized will be based on the needs of the facility. However, a strategy of shifting our focus towards higher margin opportunities, specifically in Population Health and Behavioral and Mental Health services, will help offset this loss. Additionally, we are expanding into the private healthcare staffing market, which we believe offers both growth potential and improved profitability. These strategic moves will help offset near-term losses and position us for long-term and sustainable growth. Thank you.

Corbin Woodhull: Our third question, what is the status of the two federal contracts you announced in early 2024? You had mentioned previously only one is issuing task orders. What is the status of the other one? Deepika, I think this would be a good question for you.

Dr. Deepika Vuppalanchi: Thanks, Corbin. We are currently partnered with Caduceus on a federal contract vehicle, though the agency has not issued any task orders aligned with our services as of yet. In the meantime, we are actively bidding with LUKE on the MSQ2 vehicle to provide medical staffing services for defense health agency facilities across the country. If we are awarded a task order, we will announce it via press release, as it could represent significant value for Syra.

Corbin Woodhull: Another question for Deepika. Have the federal-level changes affected your business?

Dr. Deepika Vuppalanchi: Yes. We have definitely felt the impact of federal-level changes trickling down to our core customers, state, local and county governments. We have seen some projects paused, reinstated or even cut altogether, and there has been noticeable delay in RFP awards as agencies navigate shifting priorities and budgets. These changes and the potential for more cuts are likely to impact how much revenue we bring in and when we receive it, which could affect our overall performance and cash flow in the near-term. However, our strategy remains to grow our high-margin revenue businesses and focus on both the public and private sectors. While we continue to remain vigilant on our expenses, we are optimistic about our ability to increase our foothold in state and local government contracts.

Corbin Woodhull: It looks like we’re out of time. Many thanks to everyone for participating in today’s call.

Operator: This concludes today’s conference call. Thank you very much for your participation. You may now disconnect.