The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
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For anyone wanting to get more info on California progress, there was a product demo a couple of weeks ago which has now been uploaded to Youtube;
https://www.youtube.com/watch?v=4o_gljVrbW0
53mins to 1hr 22 is the Kooth 'Soluna' section.
Accompanying slides are here from 37 onwards; https://cybhi.chhs.ca.gov/wp-content/uploads/2023/12/11292023_Virtual-Services-Platforms-Webinar.pdf
Much to be encouraged / excited about, particularly how heavily involved the youth have been in the design & feel. The feedback from the 2 individuals on the call was excellent & it does genuinely look like a really impressive resource.
Yep, it looked unlikely this time yesterday but all of the previous delaying tactics were abandoned and they got everything approved & signed. Given the timing of the Lane Johnson LinkedIn post I suspect Kooth were aware of the likely outcome & are ready to roll.
That’s good news. If they hadn’t passed the budget this week there was talk they might not meet for another 3 months as a leaky roof needed fixing. Hopefully we’ll get a good RNS before year ends now.
Thanks for the update. Thats Pennsylvania sorted so hopefully we will get more info on future opportunities.
The linkedin post was very interesting and does highlight the good position the Co is in given the requirement for such services which will only grow.
As you say , the future looks very interesting for this company.
Thank you again, ShearClass. Your awareness of things State side is quite extraordinary and so helpful. I imagine that news re Pennsylvania will be forthcoming very soon now.
This Linkedin post a couple of days ago is also worth reading; https://www.linkedin.com/pulse/congratulations-kooth-ambassador-lane-johnson-his-nomination-5gqqc/
"Over the coming weeks, I’ll be sharing more about the work Kooth is doing in Pennsylvania and beyond. The response to Kooth’s services has been incredible - from parents, teens, educators, and government representatives. But, for now, I’ll say this: Lane Johnson’s influence is just beginning. "
Combine that with a 1 in 10 usage rate reported in the half year results and things look very bright indeed here
The final parts of the Penn budget were signed off overnight, which as per the October investor meet company Q&A should result in the finalisation of our Penn contract in Q4...
https://www.penncapital-star.com/government-politics/shapiro-signs-final-budget-bill-after-late-night-votes-in-the-pa-legislature/
https://local21news.com/news/local/pennsylvania-budget-fiscal-code-education-code-governor-josh-shapiro-speaker-joanna-mcclinton-senator-pittman-education-improvement-tax-credit-criminal-justice-reform-child-tax-credit-december-14-2023
Watch from 5hr 27 mins onwards of this Kansas legislative research department meeting on 6th October;
https://www.youtube.com/watch?v=mP5hZSgppCo
Verbal confirmation that Kooth have partnered with Aetna in Kansas and are working through app implementation for a state wide rollout...
Also, may have been a slip of the tongue but Erin Davis (Kooth VP Government Relations) refers to 'Kooth Therapeutics', which I've never heard mentioned before.
'Kooth is the gold standard model of care for personalised, proactive and accessible digital support'
@Nortel, agree on public bodies being frustrating, however once you are integrated the competitive moat is huge so it will be worth it!
Kansas appears to be the perfect setup; Kooth are working with a huge Medicaid company which will provider many advantages, one of the most important being credibility in front of government. The questions asked by legislature were very positive, there appears to be a genuine desire to find solutions.
As I posted a few days ago, Aetna are present in 17 US states so a rollout beyond Kansas would seem inevitable post a successful implementation (and may already be happening).
Thank you, ShearClass, for your customary well-informed and interesting comments in your last 2 messages. They are very helpful and reassuring. I am in for the long term (usually when I say that, it is case of a short term (problematic) holding becoming a long term holding, but not this time!) and I am so impressed with what this company is both aiming to do, to help those with mental health problems, as well as has achieved to date.
Hi ShearClass
Thanks for posting the links , very helpful.
The big frustration for the company will be the inevitable delays that occur when dealing with public bodies and funding. Nevertheless , patience will be rewarded here as i believe the risks associated with public funding being pulled or kicked into the long grass are less relevant here.
Hopefully the next couple of months will see significant updates on their progress.
Another bit of research that's worth mentioning is regarding Medicaid, as per this line of the placing proceeds RNS from July;
"piloting Kooth with Medicaid to support youth in low-income families;"
Linking back to this post from October; https://www.linkedin.com/posts/janesbrown_such-a-pleasure-to-offer-novel-digital-solutions-activity-7118186301169831936-IKVg?
Jane Brown works for Aetna Better Health, which is part of $100b market cap CVS Health, listed on NYSE
They work across 17 US states proving Medicaid services; https://www.aetnabetterhealth.com
Each health insurance plan provides access to certain services, which are listed here; https://www.aetnabetterhealth.com/illinois-medicaid/whats-covered.html
Piloting Kooth with Medicaid via what I believe is Aetna / CVS provides the first step towards potential integration of digital mental health support across some or all of those 17 states.
They already have offices in Chicago, Kansas & Pennsylvania, so it certainly looks like they are setting up for big things...
Hi Uh-oh, if you go onto investor meet company and listen / watch the last 2 presentations then you'll get a far better idea of where they sit. However, they confirmed in the October meeting that the California contract is self funding - they are receiving ~£12m up front this year to cover hiring, product R&D spend etc. Once the contract formally commences they'll almost certainly be paid in advance so cash should never be an issue.
FYI there was a CYBHI public webinar on Thursday evening which confirmed everything is on track, a recording is here; https://cybhi.chhs.ca.gov/event/public-webinar-december/
This is the portal at present; https://calhopeyouth.org/ , obviously we can't download the app as it's only available in those 2 counties pending full roll out in Jan. However, the fact it's been live since late August significantly de-risks things IMO. Kooth US headcount on Linkedin is now up to 114 from around 15 earlier this year, so hiring appears to be going very well indeed.
The £10m raised in July + the additional £6m they held prior is for supporting US growth ex. Cali & Penn. I.e. Medicaid system work, new research studies, lobbying etc. Mid teen EBITDA margins (no debt) and FCF by the end of next year and a hint at dividends beyond that (not sure that's necessary at this stage), tell you where this could head should things go as hoped.
Hi Nortel,
Glad to see some activity on here & others on the same page re. valuation / drift. On Pennsylvania, it's all waiting on the school codes budget being signed off, the schools mental health budget is all tied up in a larger bill which came oh so close to being signed off 3 weeks ago but was amended at the last minute by Democrats. This is the bill in question;
https://www.legis.state.pa.us/cfdocs/billinfo/bill_history.cfm?syear=2023&sind=0&body=H&type=B&bn=301
Media coverage; https://www.penncapital-star.com/education/fight-over-tax-money-for-private-school-tuition-snags-education-funding-bill-again/
The funding confirmation is on page 73 of the bill itself and confirms that each Penn school district can apply to receive $100k funding support (there are 500 states, so $50m total, unknown what the Kooth expansion will cover, pilot was 30 states @$100k / $3m total);
https://www.legis.state.pa.us/cfdocs/legis/PN/Public/btCheck.cfm?txtType=HTM&sessYr=2023&sessInd=0&billBody=H&billTyp=B&billNbr=0301&pn=2326
Senate is back in session this week so fingers crossed they can get it done this time...
I too think a NASDAQ or NYSE listing will follow at some stage, primarily because they'll need to reward their US employees with stock options in USD. If they can nail Cali, Penn + a couple of additional states & get on board with Medicaid policies then I think they'll be ready to push the button.
Hi ShearClass. May I just pick your brain on costs for Kooth. Obviously, the company raised a good amount of cash a few month ago and there has since been a lot of expenditure, especially on recruitment in the U.S. However, with the size of the California contract and there being a good chance that Kooth will secure a potentially lucrative contract for the State of Pennsylvania, is there not a worry that Kooth is simply so small and it will need a lot more cash than has been raised recently because the last thing that the company will want is for problems to mount about roll-out etc, with potential fines or whatever might be written into the contracts if Kooth does not deliver what it has promised?
Am with you on this one. The scourge of AIM when there is no newsflow and stocks drift without any thought to what their position is. Certainly an opportunity for people to get in at the previous (premium) placing price.
Pennsylvania seems to be taking a little longer but there has been nothing to suggest any issue here. California kicks in from Jan 1 which is a material gamechanger. 6 months ago the Co talked about consolidating current position and not being distracted by New York or North Carolina. I don't believe for a moment that is the case now given California is up to speed and good to go live as expected.
For me this stock is simply the wrong price which will become evident in 2024.
While i never subscribe to noise around where Co's should be listed etc , i can't help but wonder with the large and growing US exposure , what this would look like if listed on Nasdaq.
Oh so quiet here as there has been a gap between RNS'd news which inevitably causes a few under researched PI's to sell &hardly anyone seems to be in the habit of doing detailed research...
There should be a very positive 12 months ahead here, note that the next 3 sets of financial statements are set to show significant growth;
Full Year 2023 revenues of at least £34m vs £20m in FY22, giving growth of ~70%
H124 is when California kicks in, full year forecasts are for £67m, so if this is equally weighted then H1 will show YoY growth of ~180%.
Full year 2024 will then show a further 100% growth on FY23
Add Pennsylvania into the mix + at least 1 additional state + a potentially significant uplift in the UK with a labour government & £100m revenue could happen fairly quickly.
To be trading at just 1.5x FY24 revenue seems crazy, a re-rate to just 3x would see shares double in value and still be cheaper than most AIM listed SaaS companies, nevermind those listed in the USA.
Strong buy IMO and look forward to the next news that lands.
Whilst we continue to await Penn finalising their budget (the $100m Mental health budget has been agreed), here Scott McKenzie, manager on the [WS] Amati UK Listed Smaller Companies fund discusses his investment in Kooth
https://www.fundcalibre.com/the-bright-side-of-bleak-opportunities-in-uk-smaller-companies
Cheers Acuere, yes California is key right now. Once that is up and running they can focus on the opportunities elsewhere.
Great to see that BGF are aggressively buying up shares & have near doubled the £3m they took in the July placing. Cannacord have been indiscriminately selling down holdings across LSE shares, presumably due to fund outflows. That overhang is likely to be what caused the pull back from the £3.80 highs - fingers crossed we can exceed those levels before year end & smash them out of the park in 2024.
Great stuff as usual Shearclass.
Hopefully Penn will finally sign off on their budget soon and then Kooth contract can be confirmed.
In last Investor Meet, they were very keen to say focus is all on successful delivery of California ahead of 1st January launch. However they have mentioned NY and N.Carolina in the past as targets. And from that Brain conference it’s obvious that they have support in Kansas and Illinois, where they already have offices. They also mentioned that 30 states looking at mental health investment.
Add in the potential to licence out the 18 non-English language versions. Future looks very bright if California is a success and they sound genuinely confident now that it will be.
Further good news from Penn a couple of days ago. Interestingly, it's directly in line with the thoughts of the Brain Capital panel video which I shared earlier re. aligning all stakeholders behind a single unified vision;
https://www.governor.pa.gov/newsroom/governor-shapiro-signs-executive-order-streamlining-mental-health-substance-use-disorder-efforts-to-improve-accessibility-across-the-commonwealth/#:~:text=The%20Executive%20Order%20creates%20a,health%20and%20addiction%20care%20services
“Across Pennsylvania, I’ve heard from students, parents, providers, and so many others who have told me about the growing challenges of dealing with mental health challenges and substance use disorder, which are so often intertwined,” said Governor Josh Shapiro. “It’s time we deliver the help so many Pennsylvanians are asking for. This Behavioral Health Council will be led by a seasoned expert, Dr. Christina Finello, who will spearhead the development of an action plan that will transform the health care delivery system to meet the real needs of Pennsylvanians. For the first time, our Commonwealth will have a senior leader in the Governor’s Office whose full-time job is to focus on this specific work and reach across all levels of government to improve our mental health and recovery services.”
"The Council builds on the Governor’s commitment to improving mental health services following major wins in the 2023-2024 budget that increased investments to restore full funding to county mental health programs and created a line item to invest $100 million to fund mental health resources in our schools."
The $100m line item is almost certainly where Kooth's contract will come from, however there is no telling exactly when it will arrive. Sometime in Q4 though, as per the 2nd October investor meet company...
This is a must watch for anyone interested in Kooth - part of a series of videos uploaded from the 19th September UN Brain Capital conference in New York;
https://www.youtube.com/watch?v=68jODbvL878
The whole video is worth watching, but particular call outs are;
At 25 mins it's disclosed that there is a desire to launch Kooth as a state wide service in Kansas & Illinois. Excellent discussion on the current situation & a clear passion to integrate digital services ASAP.
The speaker posted further on this yesterday on Linkedin; https://www.linkedin.com/posts/janesbrown_such-a-pleasure-to-offer-novel-digital-solutions-activity-7118186301169831936-IKVg?
"Such a pleasure to offer novel digital solutions that have the potential to impact so many Kansan kiddos suffering mental health crisis as early as possible. Great partnership from Erin Davis and the entire Kooth Digital Health (North America) team to develop a state wide vision for early mental health needs identification."
Also from 9 mins Aaron Kaufer, Pennsylvania state rep, talks about how it took years to get to the point of signing the Kooth pilot last October & rather than wait to sort out medicare & insurance, they took money from the state general fund to fast track availability so it could be accessed immediately. I can't imagine there will be long to wait for an expanded Penn contract, particularly given that the pilot usage levels were significantly above expectations at 1 in 10 of the available population.
Underpinning a lot of the panel discussion is the California scheme & how it's a shining example of what needs to happen elsewhere. Kooth really do appear to be a cornerstone of mental health revolution which has bipartisan support.
If we weren't in the midst of a raging bear market on AIM then I reckon shares would be trading at >£5, the progress they have made since the 2020 IPO @£2 is huge.
Also great to see BGF up the stake that they took in the July funding round;
https://www.bgf.co.uk/bgf-backs-kooth-to-support-us-expansion/
They took £3m @ £3 each, so have added a further 175k shares since.
Simon Blackaby, investor at BGF, commented: “Kooth is a great example of a high-quality business with a proven business model, a significant recurring revenue stream, and now, international growth potential. We have a strong conviction in the management team’s ability to execute the step-change in the scale of the business, following the recent US contract win, which is a clear demonstration of Kooth’s credibility and expertise in its field. This is an exceptional achievement for a UK-based business which has purpose at its core, and we’re delighted to be playing a part in its continued expansion.”
Paul Stevens, head of quoted investments at BGF, said: “Kooth is a great example of the type of publicly-listed SME that we are keen to support—one that has delivered strong progress over recent years and is now looking to deliver significant scale, both in the UK and internationally.”
Just under the £3 placing price looks like a very nice place to add, especially in light of the CEO buying £20k worth of shares at £2.96 last Thursday. I'd suggest this means the Beta test which launched on 31st August in 2 Cali counties has got off to a positive start...
The most recent CYBHI quarterly update from 14th September contained quite a bit of detail from Rachel Mackie on the app & rollout from 39 mins on; https://www.youtube.com/watch?v=x0Bydlc3FpQ
I also note that LinkedIn headcount for Kooth North America has exploded from ~15 in mid July up to 58 as of today, with dozens of posts from new joiners expressing their huge excitement at joining the journey. All very positive.
Many more roles are still being recruited for; https://www.paycomonline.net/v4/ats/web.php/jobs?clientkey=CA518AACD06747D958404929D26FA686#
Overall, it appears execution risk has decreased quite considerably since the contract award in July. The product appears to be 90% of the way there & the hiring process is going well.
If they can win another couple of states then I think its very feasible to see this becoming a mid cap (>£300m valuation) in the medium term.
Taken a small initial position this morning (1k) bang on the placing price.
Growth prospects look v good. US expansion. Lack of competitors. High margins. Operational leverage kicks in next year.
JOHCM: Kooth en route to £100m annual recurring revenue
JOHCM’s Mark Costar tipped digital mental health and wellbeing company Kooth (KOO) to reach £100m annual recurring revenue and said its valuation is way off its potential.
Costar holds the Citywire Elite Company in his £227m JOHCM UK Growth fund and in a recent update noted Kooth’s ‘transformational contract win in California’ after it was awarded a £146m contract with the US state to provide digital mental health services to its six million 13-to-25-year olds.
‘As a reminder, this relative minnow on the UK stock market was selected in a competitive process involving 450 potential providers,’ Costar said.
‘In our opinion, the business is on a pathway to £100m annual recurring revenue in the long-run and a market valuation that still pales compared to its potential.’
Costar also noted that the company ‘raised growth funds at a premium to the prevailing market price’.
The shares retreated 2.6%, or 8.7p, to 320p on Monday.