Participants

Deepika Vuppalanchi; Chief Executive Officer, Director; Syra Health Corp

Priya Prasad; Chief Financial Officer, Chief Operating Officer; Syra Health Corp

Presentation

Operator

Good morning, everyone, and thank you for joining us for Syra Health's third quarter 2024 financial results conference call. My name is Robert Blum, and I will be your moderator for today's event. 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 some 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 to 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 including, but not limited to the factors set forth in the company's filings with the SEC. Syra undertakes no obligation 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.

Deepika Vuppalanchi

Thank you, Robert. Welcome, everyone. Thank you for joining our third quarter earnings call today. We truly appreciate your continued interest in Syra Health and are excited to share updates on the recent performance and future goals. I will begin by highlighting our strong third quarter financial performance, followed by an update on the strategic cost-cutting initiatives we have successfully implemented.
After that, I will outline the significant strides we are making on a journey towards profitability. Then I will hand over the call to our Chief Financial Officer, Priya Prasad, who will take you through a more detailed breakdown of our financial results.
In terms of financial metrics, we have experienced significant positive shifts across the board. The third quarter on an outstanding period for Syra Health with revenues growing by a notable 42% compared to the same period last year. This robust performance was driven primarily by our high-margin Population Health business unit, which has seen sustained demand for its data analytics, epidemiology and health equity services, alongside strong contributions from our legacy Healthcare Workforce business, which continues to perform above expectations.
This growth underscores the strength of a diversified business model and the ability to capitalize on opportunities in both established and emerging sectors.
The gross profit margin was 30% in third quarter of 2024 compared to 35% in the previous year, primarily due to the timing of the implementation cycle versus revenue recognition for certain milestone-driven projects. Total revenue experienced an increase of 14.4% and compared to the previous quarter, showcasing a strong growth trajectory.
Additionally, our gross profit margin improved notably, rising by 1,190 basis points compared to second quarter of 2024, reflecting our commitment to operational efficiency and profitability. Additionally, the strategic focus on high-margin offerings has allowed us to drive operational efficiencies, further solidifying our financial foundation.
These gains not only reflect our ability to deliver value, but also support our long-term growth strategy as we scale our operations and enter new markets, including federal and global mental health initiatives.
We are also seeing strong demand for our Syrenity app in the mental and behavioral health space, signaling potential for exponential growth in these rapidly expanding markets. With the combination of revenue growth, cost optimization and our focus on innovative solutions we are confident in our path forward and remain laser focused on achieving profitability in the near future.
We are confident in our growth trajectory and remain focused on achieving profitability in 2025, by emphasizing excellence in commercial, operational and innovation strategies. Beginning with our emphasis on commercial excellence, we have committed to boosting our revenue and enhancing our profit margins by expanding our portfolio of high revenue clients.
This strategy not only improves our profitability but also underscores our dedication to delivering greater value to our shareholders. Larger clients significantly contribute to our bottom line through high contract values, economies of scale and reduced sales and marketing costs. They provide stability and predictability in revenue, create opportunities for cross-selling and enhance our brand reputation.
By serving these large clients, we can drive innovation and develop new high-margin products and services, ultimately reinforcing our commitment to maximizing shareholder value.
Shifting our focus to operational excellence, I want to emphasize that the recent cost-cutting measures have not impacted our revenue production. As you may recall, in the second quarter, we announced a restructuring aimed at reducing operating expenses. Over the past few months, we have made strategic adjustments to our workforce to optimize efficiency and lower costs without compromising our revenue-generating capabilities.
In fact, our net loss for the third quarter of 2024 was a remarkable 69% reduction from the net loss in the second quarter of 2024. These efforts have significantly improved our financial metrics, and we have committed to further stabilizing our operational expense ratio. This enhancement highlights our dedication to efficiency and cost management, which ultimately allows us to allocate more resources towards growth initiatives.
In our pursuit of innovation excellence, we are focused on expanding our innovation pipeline to enhance the variety of products and services we provide. This includes our Mental Health product, Syrenity, which is designed to offer effective solutions for behavior health challenges.
We are also developing Syra Health AI guard rates for chat bots and AI agents, ensuring safe and responsible AI interactions in health care. Additionally, we are committed to deliver a comprehensive large-scale health education programs that facilitate healthcare workforce development.
This dedication not only positions us at the cutting edge of health care industry but also ensures that we are effectively meeting the changing needs of our customers. Bending on this foundation, our enhanced financial position allows us to further invest in these innovative offerings ensuring we continue to meet our clients' evolving needs and capitalize on emerging market opportunities.
Syra has began in 2020 by staffing licensed health professionals and behavior and mental health as a part of our health care workforce capability. Building on our expertise and recognizing the urgent need in this area, we have evolved into a health care technology company with the launch of Syrenity, a comprehensive mental health app and other health care products.
Beyond mental health, our digital health business unit offers Syra bot, an innovative AI-backed chatbot, designed to enhance user engagement and streamline health care interaction. Its pre-generated design ensures compliance with regulatory standards, making it an effective solution for various health care providers.
In our Population Health business unit, we were awarded a contract under the Bipartisan Safer Communities Act, focusing on enhancing mental health services for children and families. This initiative involves conducting a comprehensive assessment of emergency preparedness plans at 8 behavioral health centers in Wyoming followed by tailored recommendations to strengthen their services.
Our Health Education business unit is dedicated to improving health education for both patients and providers. Recently, we secured a $6 million contract with Indiana family and social services administration to train health care professionals in community-based settings over the next 4 years. This initiative includes protium development and the quality improvement plans to ensure consistent competencies among support professionals.
Finally, our health care workforce business unit continues to generate steady revenue, recently winning contracts in Delaware, Florida and Kansas. Together, these business units underscore Syra Health's commitment to enhancing health care delivery and improving outcomes through innovative solutions and strategic partnerships.
I would like to take a moment to highlight that in September, we successfully completed a capital raise generating gross proceeds of $2.1 million. Although this capital raise was not a mandatory requirement for the company, it was executed strategically. We pursue this opportunity to bolster our financial flexibility and further support our growth initiatives. With that, let me turn over to our CFO, Priya Prasad, who will walk through the financial details. Priya?

Priya Prasad

Thank you, Deepika. And let me add my warm welcome to everyone joining on this call. The financial results for the third quarter are provided in detail within our press release, which we issued earlier this morning and in our 10-Q.
Total revenues for the third quarter of 2024 were $2.3 million compared to $1.6 million in the third quarter of last year, representing 42% growth. Growth was driven by our population health, health care workforce and behavioral and mental health business unit.
I will now go through each business unit in detail. Within our Population Health business unit, revenues were $560,000 in the third quarter versus $413,000 in the same period last year, growth of more than 36% driven by continued demand for public health services by government health agencies.
Our health care workforce business unit also experienced strong growth in the third quarter with revenues of $1.6 million compared to $1 million, a growth of 54%. The increase in health care workforce revenue was driven by new customers and contract renewals.
Our behavioral and mental health business unit posted revenues of [$13,250] compared to [$3,668] in the same period last year. We anticipate further growth in this business unit due to the broader availability of Serenity as a direct-to-consumer product. Within our digital health business unit, revenues were [$92,000] during the third quarter, driven by sales of Syra bot.
Gross profit in the third quarter of 2024, was $668,298 compared to $554,541 in the third quarter of 2023, an increase of 21%. Gross profit margins in the third quarter of 2024 was 35% compared to 30% in the third quarter of 2023, attributed to the bulk of the revenue recognition in third quarter of 2023 from the milestone-based implementation of our first digital health product.
Gross profit margins in the third quarter of 2024 was 29.7% compared to 17.8% in the second quarter of 2024. The 1,190 basis points increase in gross margin quarter-over-quarter was primarily driven by cost-saving initiatives and enhanced operational efficiencies achieved by adopting a lean approach and reducing redundancies.
Total operating expenses for the third quarter of 2024 were $1.1 million compared to $897,557 in the third quarter of 2023, but down considerably from the second quarter of 2024, when operating expenses totaled $1.7 million, due to our streamlined operations and optimized workforce initiatives, which we expect to continue.
Salaries and benefits remained flat in third quarter of 2024 versus third quarter of 2023. Professional fees increased 161% due to the cause of running a public company. Selling, general and administrative expenses increased 23% in advance of recent cost reductions. Depreciation expense was [$25,541] compared to [$12,357], reflecting expanded office space and additional office equipment.
R&D expenses were [$34,821], reflecting the continued development of our technology-based solutions. Net loss for the third quarter of 2024 was a negative [$417,535] compared to a negative [$354,376] in the third quarter of 2023, but down a significant 69% since the second quarter of 2024, where the loss was a negative $1.4 million.
Net loss per share decreased to a negative $0.06 in the third quarter of 2024 from a negative $0.21 in the second quarter of 2024. Adjusted EBITDA for the third quarter of 2024 was a negative [$389,000] compared to a negative [$327,839] in the third quarter of 2023. Cash on hand on September 30, 2024, was $2.7 million. The projections indicate an approximate 2-year capital runway. Again, full reconciliations are provided in the tables included in today's press release.
With that, let me turn the call back over to Deepika.

Deepika Vuppalanchi

Thank you, Priya. Building on our impressive growth and strategic advancements, we are poised for continued success in the coming quarters. Our strong performance in high-margin business units has solidified our position in critical factors with increasing demand. With the successful launch of our Mental Health app, Syrenity, we are tapping into expanding national and global markets for mental and behavior health solutions, with the need for innovative evidence-based interventions continues to grow.
Looking ahead, we are committed to driving revenue growth through the expansion of our service offerings and the execution of key contracts in multiple states. The health care workflows and training sectors remain a focus as we deepen our partnerships and increase our presence in new markets.
We are also keen to explore and expand our presence in federal markets leveraging our expertise to meet the growing needs of government agencies focused on health and public welfare. This will further strengthen our portfolio and position us as a trusted partner in large-scale federal initiatives.
Importantly, our ongoing cost-saving initiatives have resulted in a sustainable reduction in operating expenses, allowing us to optimize resources while maintaining high-quality service delivery. We remain focused on enhancing operational efficiency and leveraging AI technology to support long-term growth.
With a narrowed net loss, improved gross margins and the strengthened operational strategy, the company is poised for growth, reporting a solid 2-year capital runway. With these efforts, we are optimistic about the potential to achieve profitability by 2025 and to scale our impact in health care innovation, continuing to deliver value to our clients, stakeholders and communities. I thank you for your attention. I'm happy to take any questions you may have. Robert?

Question and Answer Session

Operator

Thank you to the management team. We have some questions for you. First, what was the objective behind the capital raise you conducted in the third quarter?

Deepika Vuppalanchi

Yes, Robert. The recent capital raise was executed strategically and it was not a mandatory requirement for the company. We pursued this opportunity to enhance our financial flexibility and support our growth initiatives.

Operator

Okay. Great. Next question, can you provide any updates on Syrenity?

Deepika Vuppalanchi

Most definitely. Syrenity is our unique scientifically validated and a comprehensive mental app, which has a dual focus on prevention and intervention. It's one of the many Mental Health apps available where it is one of less than 5% that is based on signs.
Sophisticated algorithms provide risk scores for various mental health conditions and the app also suggests tailored interventions. Syrenity also includes a direct link for suicide prevention where immediate support is needed. The early feedback we have been receiving from our customers, it's been very encouraging, and we are excited about the potential this product holds.

Operator

Okay. Great. And our final question is tell me about your approach to integrating AI in your technology products?

Deepika Vuppalanchi

Yes. Definitely. By integrating AI in our proprietary guardrails technology, we are leading the change in creating AI systems that are not only powerful and efficient but also ethical and transparent. Syra guardrails is an explainable AI framework that ensures AI-generated responses are safe, nonjudgmental and compliant with health care regulations.
Unlike traditional AI, which operates as a black box, our guardrails technology is designed to be transparent and explainable allowing users and health care providers to understand and trust AIS decisions. Whether it's a hospital chatbot that needs to avoid giving medical advice, or an AI journal that must be within regulatory guidelines. Syra guardrails ensures that the AI remains on task and within defined ethical boundaries.

Operator

Okay. It looks like we are out of time. My thanks to everyone for participating in today's call. We look forward to speaking with all of you again next quarter.