Company Overview
Forian Inc. (NASDAQ:FORA) is a leading provider of data-driven information and analytics solutions catering to the healthcare, life sciences, and financial services industries. With a robust history spanning over a decade, the company has consistently demonstrated its ability to innovate and adapt to the evolving needs of its diverse clientele.
Corporate History
Forian Inc. was incorporated in Delaware on October 15, 2020 as a wholly owned subsidiary of Medical Outcomes Research Analytics, LLC (MOR) for the purpose of effecting the business combination with Helix Technologies, Inc. (Helix). The business combination with Helix was completed in March 2021 and was accounted for as a reverse acquisition using the acquisition method of accounting, with Forian deemed the accounting acquirer for financial reporting purposes. Helix had previously provided software and analytics solutions to state governments and licensed operators in the cannabis industry, primarily through its subsidiary, Bio-Tech Medical Software, Inc. (BioTrack).
In 2023, Helix completed the sale of 100% of the outstanding capital stock of BioTrack, as well as the sale of its security monitoring business and Argentine subsidiary Engeni LLC. As a result, Helix had no remaining active operations, and Forian no longer provided products or services to the cannabis industry. The results of the Helix Businesses were presented as discontinued operations in Forian's financial statements. Throughout this period, Forian continued to provide analytics solutions to customers within the healthcare and life sciences industries, facing challenges including the financial impact of previous customer losses and data disruptions.
Core Capabilities
Forian's core strength lies in its sophisticated data factory, which aggregates, integrates, normalizes, and cleanses a vast array of data from various sources, including medical and pharmacy claims, electronic medical records (EMRs), laboratory data, and social determinants of health. This robust data platform enables the company to provide its clients with a unique suite of data management capabilities and proprietary information solutions.
Recent Financial Performance
In the third quarter of 2024, Forian reported revenue of $4.7 million, a slight decrease from the $5.3 million generated in the same period the previous year. This slight dip in revenue can be attributed to the lingering impact of customer attrition and the challenges faced by some early-stage clients in securing funding during the current market environment. However, the company's management remains optimistic about the future, as they have observed improved sales momentum and a strengthened pipeline, particularly in the healthcare services and life sciences sectors.
For the three months ended September 30, 2024, Forian generated $4.69 million in revenue, a decrease of $662,160 compared to the prior year period. This decrease was primarily due to lower revenues resulting from the expiration of certain customer contracts and customer attrition due to their inability to complete planned financings, partially offset by new customer sales. The year-over-year revenue decrease in Q3 2024 compared to Q3 2023 was 12.35%.
Cost of revenues was $1.40 million for the three months ended September 30, 2024, an increase of $40,370 compared to the prior year period. This increase was primarily due to higher information licensing expenses related to the expansion of Forian's data sources, partially offset by an adjustment related to the cancellation of an inbound information contract. As a result, gross profit as a percentage of revenues decreased to 70% for the three-month period, compared to 75% in the same period of 2023.
Research and development expenses were $291,960 for the three months ended September 30, 2024, an increase of $27,180 compared to the prior year period, due to higher personnel costs. Sales and marketing expenses decreased by $356,230 to $956,980, primarily due to lower severance, salaries, and commissions related to changes in the sales force composition implemented during the third quarter of 2023, as well as the impact of lower revenues.
General and administrative expenses were $2.82 million for the three months ended September 30, 2024, a decrease of $65,520 compared to the prior year period, mainly due to lower salaries and professional expenses, partially offset by higher bad debt expense. Litigation settlements and related expenses decreased by $315,430 to $1,390 for the three months ended September 30, 2024, compared to the prior year period.
Forian reported a net loss from continuing operations of $204,910 for the three months ended September 30, 2024. The company's Adjusted EBITDA from continuing operations was $185,920 for the three-month period, a decrease of $886,230 compared to the prior year period. This decrease was primarily due to lower revenues and higher cost of sales, partially offset by reductions in other operating expenses.
Strategic Acquisitions
One notable development during the quarter was Forian's acquisition of Kyber Data Science, a trusted provider of advanced healthcare data analytics and machine learning solutions to the financial services industry. This strategic move has expanded Forian's addressable market to include financial services customers, while also bolstering its data science and predictive analytics capabilities. The company believes that Kyber's expertise will be well-suited for its life sciences client base, who are interested in sophisticated pharmaceutical and medical device performance analysis, competitive positioning, and market access challenges.
Financials and Liquidity
Forian's financial position remains strong, with $49.4 million in cash and marketable securities as of the end of the third quarter. During the quarter, the company redeemed $17.8 million in principal and accrued interest on its convertible notes, resulting in an anticipated gain of $0.1 million. This proactive debt management demonstrates Forian's prudent approach to capital allocation and its commitment to maintaining a healthy balance sheet.
As of September 30, 2024, Forian had $49.36 million in cash and marketable securities and $24.37 million in outstanding principal and accrued interest on its convertible notes due in 2025. The company's debt-to-equity ratio stands at 0.91, while its current ratio and quick ratio are both 1.85, indicating a strong liquidity position.
For the most recent fiscal year (2023), Forian reported revenue of $20.48 million, net income of $11.11 million, operating cash flow of $728,820, and free cash flow of $653,330. In the most recent quarter (Q3 2024), the company generated operating cash flow and free cash flow of $764,096.
Performance by Geographic Markets
In terms of geographic distribution, sales for Q3 2024 were 90.70% in the United States and 9.30% in Australia. For the first nine months of 2024, sales were 89.80% in the United States, 1.70% in Canada, and 8.50% in Australia.
Outlook and Guidance
Despite the challenges faced in the third quarter, Forian's management remains confident in the company's competitive position, highlighting its excellent team, agile technology, and robust financial foundation. With the acquisition of Kyber Data Sciences, the company now expects its full-year 2024 revenue to be at the top end of its previously provided guidance range of $19 million to $20 million, while maintaining its adjusted EBITDA within the previously communicated range of negative $0.5 million to positive $0.5 million.
Growth Strategy
Forian's long-term growth strategy involves continued investment in its data platform and the expansion of its product offerings to address the evolving needs of its customers. The company's ability to integrate cutting-edge data science and predictive analytics capabilities, as evidenced by the Kyber acquisition, positions it well to capitalize on the growing demand for sophisticated healthcare and life sciences intelligence.
Risk Factors
Risks facing Forian include potential disruptions to its data supply chain, as demonstrated by the termination of one of its inbound information contracts during the third quarter. The company is actively pursuing alternative and expanded data solutions to mitigate such risks and ensure the continued reliability of its data-driven offerings.
Conclusion
In conclusion, Forian's strategic vision, data-driven expertise, and prudent financial management make it a compelling player in the rapidly transforming healthcare and life sciences information and analytics landscape. As the company navigates the current market challenges, it remains poised to leverage its unique capabilities and capitalize on the growing demand for data-driven insights that drive improved patient outcomes and business performance. With its recent exit from the cannabis industry and renewed focus on healthcare and life sciences sectors, coupled with the strategic acquisition of Kyber Data Science, Forian is well-positioned to drive growth and create value for its stakeholders in the coming years.