INVENTURUS KNOWLEDGE SOLUTIONS LIMITED — Call Transcript 2025

Jul 9, 2025

July 9, 2025

BSE Limited National Stock Exchange of India Limited The Listing Department The Listing Department Phiroze Jeejeebhoy Towers Exchange Plaza, Plot No. C/1, G Block, 25[th] Floor, Dalal Street Bandra Kurla Complex Fort, Mumbai 400 001 Bandra (East), Mumbai 400051 Maharashtra, India Maharashtra, India BSE Scrip Code: 544309 NSE Symbol: IKS

Dear Sir/Ma’am,

Sub: Transcript of Conference Call – “IKS - Partnership with and Investment in WWMG”.

This is in reference to our letter dated June 30, 2025, regarding the schedule of the Conference Call, and our letter dated July 3, 2025, regarding the submission of the presentation and audio recording of the said Conference Call.

Pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, please find enclosed the transcript of the conference call held on Thursday, July 3, 2025, for the “IKS - Partnership with and Investment in WWMG”.

The said transcript has also been uploaded on the Company’s website and can be accessed through the following link:

https://ikshealth.com/ir/sebi-disclosures/conference-call-transcript-IKS-Partnership-with-andInvestment-in-WWMG-Jul03-2025.pdf

This is for your information and records.

Thanking you.

Yours sincerely,

For Inventurus Knowledge Solutions Limited

Sameer Digitally signed by Sameer Shashikant Shashikant Chavan Date: 2025.07.09 Chavan 15:55:12 +05'30' Sameer Chavan

Company Secretary and Compliance Officer Membership No. F7211

Encl: As above

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“Inventurus Knowledge Solutions Limited Conference Call”

July 03, 2025

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MANAGEMENT: MR. SACHIN GUPTA – FOUNDER AND CHIEF EXECUTIVE OFFICER MS. NITHYA BALASUBRAMANIAN – CHIEF FINANCIAL OFFICER MR. SARANSH MUNDRA – HEAD OF INVESTOR RELATIONS

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Moderator:

Ladies and gentlemen, good day and welcome to the Inventurus Knowledge Solutions Limited Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal the operator by pressing star and then zero on your touch phone.

Please note that this conference is being recorded. I now hand the conference over to Mr. Saransh Mundra, Head of Investor Relations. Thank you and over to you, sir.

Saransh Mundra:

Thank you. Thank you so much. Welcome everyone to this special conference that we have organized to explain our rationale behind the investment in an MSO with Western Washington Medical Group.

I am Saransh Mundra, Head of Investor Relations. Before we proceed, I would like to start with a safe harbor statement as always. As part of our prepared remarks and during Q&A, we may make certain statements which are forward-looking and may involve uncertainty. IKS does not take any responsibility to update such statements and your discretion is warranted while making any investment decisions. With that, I will hand it over to Sachin. Sachin, over to you.

Sachin Gupta:

Hi, thank you, Saransh. Hello, good morning, good evening, everyone, depending on wherever you are joining from. Excited to chat with you today about what I think is going to be a very pivotal and exciting milestone in our journey at IKS of enabling better, safer, more efficient care.

I will dive into the specifics of the opportunity in a minute. The way I would like to conduct this conversation is I just want to set a little bit of the backdrop of the environment that led to the strategy that created this opportunity. Then we will talk a little bit about the specifics of the opportunity to the extent that we can, and then in about 15-odd minutes, I should have finished all of that, and then we will turn it over to you all for specific questions so that we leave enough time for questions.

So with that, just to sort of reset a little bit on the backdrop, I am going to talk about two aspects of the backdrop, one, the macro US healthcare backdrop, and the second, what was IKS doing while this backdrop was playing out, and then we will take it from there. So look, as you have known, as I have said multiple times, this is as difficult a time to be a US healthcare provider as there has ever been. Why do I say that?

Because I think it is one of the only industries in the world where we see that reimbursement when adjusted for inflation is declining. If you look from 2001 to 2024, actually Medicare reimbursement, which becomes the benchmark for driving all other reimbursement for physicians, has grown only nearly 10%, whereas costs have grown by 54%. So when you adjust for inflation, what you will see over these 20 years is that reimbursement has declined.

And this is evidence across all specialties, so it is not that some specialties are alien from this macro trend, which obviously puts a lot of operating pressure on these provider groups, and that is obviously one of the most fundamental pieces of our business model, that the industry that is

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most important in solving for the cost and quality predicament, cost quality and access predicament in healthcare, is also the one under the most economic pressure.

And that is where our platform turns out to be one of the major solutions that can drive sustainability. And obviously in this backdrop of declining reimbursement when adjusted for inflation, one of the things that we observed over the last few years is there are three macro trends that are emerging, that are becoming more and more evident as we talk. So Saransh, if you can move to the next slide, please.

What are these three macro trends? First, as you know, over the last 15 odd years, there were two or three manifests of physician aggregation that played out in the industry. And the reality is, physician aggregation was not created just to create economic value for the physician, but it was created so that it could solve the fundamental problems in US healthcare.

What were those problems? Cost of care, quality of care, access to care, and hopefully as one would aggregate, it would have an impact on operating cost as well. And so we just took a step back and evaluated, even as 69% of America's physicians today are employed in some shape or form, either by hospital systems or corporations, how has that played out in terms of solving for the fundamental challenge of cost, quality, and care?

And the reality is, the metrics suggest that we haven't necessarily, these physician aggregations haven't been able to dent cost of care in the right direction, i.e. overall cost of care hasn't necessarily come down. Quality of care hasn't improved dramatically. Access certainly hasn't improved.

And operating costs, which was the most natural improvement that you would see as these guys would aggregate, hasn't really played out. It's been more or less flat. So the motives of physician aggregation haven't really delivered on their promise, even as physician aggregation has played out to the extent of 69%.

Second, the other holy grail that we were all counting on in the US healthcare market to deliver reduction in cost and improvement in quality of care was when reimbursement would shift from quantity-based fee-for-service reimbursement to value-based care where reimbursements get attached to the relative cost and relative quality of care delivered.

And the fact of the matter is, after a lot of huffing and puffing and many of us saying that valuebased care is the answer to all the ills in US healthcare, the reality is it hasn't quite played out. Medicare Advantage, which is the most popular manifest of value-based care, has not been able to quite deliver to its promise.

And there are two levels of reducing cost and improving quality in MA, or in two levels of economic success in Medicare Advantage. One is the premium that you get for lives that you take risk on can be optimized through better differential diagnosis capture, which is also known as risk coding or HCC coding. And with the latest regulation from CMS, which is now about 18 months old, I guess, version 28, the reality is there is no more opportunity to create better premiums on risk lives through better risk capture.

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That opportunity is somewhat limited because we're no longer risk-adjusting several diagnosis conditions. And the second opportunity was to build total cost of care infrastructure to improve quality of care and reduce cost of care. And most aggregators didn't really invest in building this total cost of care infrastructure because everybody was just focused on improving the premium and producing MLR from those lives based on that.

And so really, as version 28 kicks in and premiums take a hit to the extent of 12% to 18% once it's fully manifested, I think value-based care isn't really quite playing out the way it was supposed to. And then the third macro trend I think that's really important is, in general, why does healthcare IT exist? It exists to serve the healthcare provider universe. And yet, I have never seen a situation where there is so much dissonance between the value creation that has happened between a community that exists to serve another community. Basically, what I'm saying is healthcare IT has ended up creating a lot more value for itself than for the healthcare providers for whom it actually exists.

You know, and so why do I say that? One, if you look at healthcare provider margins for whom healthcare IT exists to serve them, healthcare provider margins are low single digits, if that. You look at healthcare IT margins, of course, when it's run right, can be well north of 20%-25% EBITDA, right?

We look at valuations about $45 billion of equity has been invested in healthcare IT over the last three-odd years. And the average multiple at which that has been invested is a 60 PE multiple. And for when you look at provider entities, again, for whom healthcare IT exists, you know, their multiples are 12-13 times earnings.

So there is a great level of dissonance. And then when you survey the value that healthcare IT has delivered, most buyers in the provider organizations will say that it hasn't quite lived up to its promise. So there are these three macro trends that were playing out as we were thinking about how does IKS continue to position itself for success going forward in what is still a very, very large opportunity from a care enablement platform perspective to delegate the chores so that they can focus on their core.

Now, juxtapose these three macro trends. Saransh, you can move forward to a couple of more slides. With what was going on in IKS, if you can move to the next slide. What IKS has been doing over the last sort of 18 years, if you think about it, we've been humbly building a platform that in the backdrop of those three macro trends that I just described, our platform actually humbly has been chugging away, plugging away at delivering real value to the healthcare provider aggregations.

And that value is captured broadly across four dimensions. We're able to reduce the cost of operations. We're enabling better quality of care because the physician-patient relationship improves and the engagement between the physician and the patient improves. We are constantly expanding capacity and access to care. And we are slowly but surely starting to dent the total cost of care, especially through our value-based care features.

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So when you look at it in the backdrop of several challenges in physician aggregation and healthcare IT, here's a company that is humbly plugging away and actually moving the needle in these very important dimensions of healthcare improvement. And oh, by the way, has been doing all these things in a way where the financial outcomes of these healthcare providers improve very, very dramatically.

Over the years, what we have evidenced, if you go to the next slide, is that at the confluence of implementing all the 16 features of our platform, we're able to improve, give or take, if these features are employed sort of incrementally over a period of time, we're able to improve the economics of our provider clients by, give or take 900 basis points as a percentage of their revenue.

Again, I'm talking about EBITDA expansion of 900 basis points after paying for the cost of IKS’s platform. And that is achieved through these three dimensions of we're helping them capture revenue properly on the care that they're delivering. We're helping reduce operating costs and to improve clinician efficiency and delegating all these chores, we're creating time that actually improves clinician productivity and converts that into revenue.

So across these three dimensions and after paying for the platform, they're evidencing somewhere between 850 and 900 bps of value creation. And remember, for an industry that barely even has 850 to 900 bps of operating margin in the first place, that can start to be very attractive.

And then what we've discovered in through platform deals is when our customers are implementing our platform in a more holistic way, where they're not incrementally implementing our features, but are taking the platform as a whole from the get-go, that value creation actually compounds further due to synergies and the compounding effect of one feature on another to the extent of 1,100 to 1,200 bps.

So, in an industry where healthcare IT is failing to deliver to its promise, while creating a lot of value for itself, where provider margins are under so much pressure, because the relative decline in reimbursement, here is a platform that is fundamentally transforming the economics of these businesses while making an impact on the Holy Grail goals of reducing cost of care, improving quality of care, improving patient engagement and improving access to care.

So, when we include the operating environment, what started to become clear to us is that we should perhaps take a step back and really figure out how to accelerate IKS's proliferation of our platform into these provider aggregations. And to do that, we took another view at, so what has IKS's journey looked like over these last 17 or 18 years? And if you take a step back, we started off as an RCM company back in 2007.

By about 2012-13, even as we were delivering transformative RCM value on the back office, it became evident to us that we should swim upstream and take on chores, not just from the back office, but all the way from the front office and into the exam room. That's when we created a more comprehensive care enablement platform that started happening in 2013-14 timeframe.

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So if you call the RCM back office as IKS 1.0, and the emergence of our care enablement platform that delegates all the features, all the chore features from the physician environment, let's say we call that IKS 2.0, at some point over the last couple of years, it started becoming evident to us that we should start taking baby steps towards IKS 3.0 to drive true adoption of the platform and long-term sustainability of healthcare.

And that's when we conceived this idea of IKS 3.0, which is we will still at its core be the platform implementation company that brings the full breadth of this platform to the providers. But now we would venture into start taking ownership, taking baby steps towards ownership of the outcomes that we are promising for providers. Because one of the biggest challenges providers have reported is that healthcare IT vendors come and give us a set of widgets.

Those widgets, then we are left to our devices to create value from those widgets. And in order to help solve that, we said if we also started building transformation capabilities where we don't just leave our customer with the platform and the 16 features, but we participate with them in actually creating value from the features, then suddenly there is an opportunity here to really start becoming a unique transformation enabler for healthcare providers.

And it's with that thought process that we started defining IKS 3.0. Then the question became what would be the manifest of engagement mechanisms by which we would actually co-own the outcomes that we need to create for the providers, for them to realize the value of this 900 to call it 1,100 bps as a percentage of their revenue, which as you can imagine is highly transformative for an industry like this. And as we came up with trying to figure out what those engagement models are, at a high level, we basically came up with three models.

One, where for absolutely leading provider aggregations within their specialties, we would contemplate structures where if they adopted our entire platform, so think about some of our large clients like a radiology partner, which is probably six or seven times greater than any other radiology aggregation in the world. Or think of another recently announced client like a GI Alliance, where they are the largest, absolutely largest aggregator of GI in the world, certainly in the US, but in the world, and are now owned by Cardinal Health.

So for such market leaders, if they commit to the full platform, not only would we bring the benefits of the platform to their P&L, but we would consider JV type structures that will allow for us to then convert or leverage the success of our platform in their very large install base, to then bring that as a proof point to the remainder of that specialty in the industry, and together co-own some of the outcomes or some of the profits that we would create from that industry.

So that was one of the manifests of the strategy of allowing our very large customers to help us co-create the GI manifest of the Care Enabling Platform or the radiology manifest of the Care Enabling Platform, and then participate in the spoils of that creation as we bring that platform to the radiology industry or the GI industry or what have you, right? So that's one type of strategic upstream alignment with our customers.

The second was the type of alignment that you saw in a deal that we announced a few months ago, which so far seems to be going well, is Palomar Health, where we said to our customers,

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we have so much confidence in the value that our platform can create that we will actually underwrite our performance for you. And in some cases like Palomar, we actually advanced some of that underwriting to them.

And of course, if you're going to underwrite some of our performance, we'd also create nonlinearity for ourselves where we share a much bigger part of the upsides that we deliver beyond the threshold that we are underwriting. And then last but not the least, which is today's conversation, is in some cases, selectively, we will even consider investing in actually growing the provider aggregation where we are implementing our Care Enabling Platform.

Because if you think about it, if our platform achieves its promise of creating those type of differential economics, alleviating physician administrative burdens, getting physicians and their clinical teams to practice at the top of their training, reinstating the sanctity of the physicianpatient relationship and driving better patient engagement, then it actually starts to become a huge differentiator to enable growth of that provider aggregation that our platform is enabling.

And so, in a few cases, we'll selectively pick the right cultural groups where we might make investments from our balance sheet into that provider aggregation, thereby creating a long-term perpetual relationship with them in which we can actually grow that group because now it becomes highly attractive to others in the market. And as we grow, we actually now participate in two pools of economics.

One, the basic pool of economics that gets created in our P&L through the implementation of the platform in that provider group. And two, obviously, the economics that are now getting created in the provider group as it differentially aggregates successfully in a market where aggregations haven't necessarily played out to their potential.

So those are the three models of aligning our outcomes with our customer outcomes and how that could become a differentiated strategy going forward that still proliferates IKS 2.0 and the implementation of a platform, but actually locks that into very long-term relationships and creates another pool of value that we can start to participate in going upstream with our customers. So that was the thought process behind IKS 3.0.

And after having done one or two manifests each of the other constructs, we are now embarking into this relationship with this medical group called Western Washington Medical Group, which is a group in the Pacific Northwest in Washington State, just outside of Seattle. It's a little less than $100 million in revenue.

They have about 100-odd clinicians in addition to APPs, predominantly fee-for-service, but baby steps in the world of value/risk. And what we have essentially done is we have created an upstream relationship with them at a pre-money valuation of about $18.4 million, where IKS is investing about $17 million in an entity that we are going to co-own called the MSO, which is a Managed Services Organization that will have a perpetual contract to provide all the services that the medical group needs to exist and operate outside of actually delivering care.

So the delivery of care by the physicians is still the ownership of the Western Washington Medical Group. Everything outside that, back office, front office, administrative functions like

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payroll, finance, all of the clinical support needed through medical assistance, nurses, front office staff in the clinics, the end-to-end infrastructure needed to support these clinics will be owned by the MSO entity. And so that was the structure that we created through which this investment would be made.

And like I was saying, with a pre-money valuation of 18.4 million, we're investing about $17 million and will own about 48% of this MSO. The Western Washington Medical Group and its physician shareholders, who are the only shareholders of this group, will own about 52%. And the way the revenue of the medical group will be split is that about 37.5% of the revenue from the top goes to the Western Washington Medical Group doctors in order to pay for their compensation for delivering care.

And about 63%, give or take, of the revenue share comes to the MSO. And this 63% is spent largely in all the costs that are needed to be incurred to support the practice, part of which becomes the IKS Care Enablement Platform. So part of this is also a deal between the MSO, which is a newly formed entity in which we've invested, and IKS, an arm's length relation between those two, where IKS's entire Care Enablement Platform is manifested and is provided to the MSO so that the MSO can enable the physicians.

And through our initial modeling, working with the doctors over these last 6 to 12 months, it became evident to us that such a structure enabled by the IKS Care Enablement Platform could produce very attractive growth and economics from that growth for the MSO entity that we would be investors in. So now we're basically through this structure creating two pools of economic value.

One pool of economic value is the traditional margins that IKS gets on its P&L from the implementation of this Care Enablement Platform, which continue to grow as the doctors grow in the medical group, which is where all of this money is being invested, by the way, towards physician growth, physician compensation guarantees.

We are not investing any capital to cash out physicians. One of the things that's very different here in our environment is that a lot of these provider aggregations work in a way where when private equity comes in, they cash out the providers based on a certain valuation upfront, or they income scrape from their future earnings, create a valuation from that income scrape and cash out part of that valuation. We were very clear that in order to drive alignment, no party is getting cashed out.

We are going to invest all of this capital in growing physicians. And growth in physicians will also lead to better concentration for our ability to take risk. And so we will also actually embark on risk-based contracts over a period of time.

There's about 70,000 plus lives, senior lives without counting agents that are available in that geography. So we hope to take on intelligent and thoughtful manifests of value-based care risk that will also create economics in the MSO that we will get to participate in. So that's the fundamental structure that we have created.

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And our simple discipline was one, let's not cash out physicians. Second, have upstream alignment with the physicians through the MSO entity. The MSO is the perpetual provider of all of the infrastructure needed to provide support to the physicians. The Care Enablement Platform is necessarily manifested as a part of the MSO. So the legacy IKS care enablement platform goal is achieved.

And then both parties together grow this business significantly over a period of time. And our other discipline was that we're obviously traditionally used to a healthy return on equity type of economics from all the investments that we made. And so we were very clear that our Proforma should enable us to create very healthy ROEs from this investment that we are doing in the physician group. And we feel like based on our modeling, we should be able to achieve that.

And as a testament to that possibility, we also wanted to align my remarks by sharing humbly a set of data that talks to some of the strategic investments that we have made over the years, and how those ROEs have played out for us. First of all, first and foremost, each and every one of these investments was strategic in nature, just like this Western Washington Medical Group investment is strategic in nature. Each of these were, why were they strategic? Because they allowed us to take a feature where we hadn't yet developed our technology, white label that feature from the company that we were investing in and embedded in our platform so that our platform remains complete, even as we build a feature out on our own. And there's been three such investments that we've made over the years. One is Lightbeam Health, which is a population health technology.

The other is Sift Medical, where it was a denial prevention and prioritization technology. And the third is the more popular company Abridge, which is a clinical documentation ambient AI technology. All three of these, of these three, we've already replaced two of these entirely with our own technology that we've built.

In Lightbeam's case, we have not yet built that full technology, and we're in the process of building that technology. But nevertheless, we wanted to at least put out for you all how those three investments have performed. And these investments give us the humble courage of conviction that as we play out this Western Washington thesis, you know, and by the way, I just want to clarify, the ROE numbers in these are certainly not indicative of the type of ROE we are expecting from Western Washington.

These are just to indicate that so far our track record has been half decent when we've made strategic investments, first and foremost, as it relates to using those technologies in our platform, and then secondarily, also the financial value that they've created over the years.

So again, I'll wrap up quickly by saying, this is a very exciting and strategic pivot for IKS where we are now solving for a real issue in the industry that is stifling physician aggregation by partnering with them upstream in creating a differential set of economics to not just by providing our platform to them, but actually owning the change that is needed from the platform to produce the outcome that it can deliver.

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You know, I think this pivot makes us even more attractive and even more stickier in the value that we can create for our provider aggregations going forward. And it really makes us now a strategic transformation partner in the industry from being a potential enabler of strategic transformations.

And so again, very excited to report this development and really looking forward to continuing to talk about how this performs over a period of time. With that, I'll pause for a second and turn it over to people that have questions.

Moderator:

Management:

Moderator:

Ruchi Mukhija:

Thank you very much.

Before we open it up for questions, I just have this one request that we keep the questions strictly related to the deal. We will not be able to take any questions regarding the prior quarter and we will talk to you about it when we report our results. We can open it up for questions now.

Certainly. Thank you very much. We will now begin the question and answer session. Our first question comes from the line of Ruchi Mukhija from ICICI Securities. Please go ahead.

Congratulations on the JV. I have two questions. So IKS has been a capital prudent entity as it has evolved over the years. Now, over the last nine months with the Palomar deal, $16.5 billion, $17 million here, we have put capital to use. Sir can you talk us through how these transactions changes the capital construct for the business? That's question number one.

Second, what kind of payback period and profitability do we have or do we expect from the JV?

Sachin Gupta:

Okay. Thank you, Ruchi, for the question. I appreciate it. So our core has always been conservative from a capital deployment perspective. And I think relative to the type of capital deployments that are happening in healthcare IT today, like I said $45 billion over the last four years, you will find that we will continue to be fairly capital conservative over a period of time.

A couple of principles that I tend to use as we think about capital is you will not find us, I won't say ever, but very easily resorting to a structure where we are deploying capital in a manner where it's equity dilutive to our shareholders. So that's one of our principles is we don't like to get ourselves in a position where we are leveraging shareholder equity to generate capital that we then want to deploy to bulletproof our growth. So that's one.

Second, I think in terms of even debt as an instrument, as you've seen, we've been very conservative even on our debt, even for the Aquity deal. At its peak, we had about $117 million of net debt when we had taken that on. As you've already seen from the last quarter's numbers, that debt is down to nearly half.

And if you look at just our last quarter's EBITDA as a percentage of that EBITDA, we're hovering somewhere around 0.5, 0.6 times EBITDA. So I think we generally tend to be relatively conservative. We will take strategic opportunities like these where, for example, think about it, this creates a deal structure where we are locked in into perpetuity, into a position aggregation that is going to be growing fairly rapidly.

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So it's a 30-year contract between the MSO and the physician group to start with, with five-year renewable terms post the 30 years. So when you think about the longevity and the predictability of revenue and margins that this creates from our platform, it actually makes the investment a little bit of a no-brainer.

And that is a good detour to the second question you had is what are our expectations on returns from this? That was also one of the reasons why we put out some of the ROE metrics in the past. But our general thinking is that, one these constructs should generate greater growth and margins in our traditional care enablement platform business.

And in addition to enabling that, the economics that it creates purely on the investment should always be in the range of our historical ROE that we've delivered. And that number historically has been, in fact, even north of 30%. But my thinking is that we definitely want those ROEs to be North of 20%. So that's generally our guiding principle. Don't get over-leveraged, don't dilute equity. Invest in constructs that provide more predictability, faster growth to our core business at the traditional margins. And the ROEs from the investments are comparable to sort of what the overall business has delivered in the past.

Ruchi Mukhija:

Sachin Gupta:

Got it. Sachin, also, if you could talk about the strategic continuity. We saw like two such large transactions with evolving capital structure in nine months. How would you think about the pace of this kind of transaction? Would you now take a pause and consummate these two large ones before we prepare or chase more such opportunities in the market?

You know, Ruchi, the way to think about it is this. These opportunities are generally not easy to create and they take a lot of time to construct. So we obviously created these two opportunities pretty much over the last 15 months or 18 months and now they've come to fruition.

The simple answer is there are a whole bunch of criteria that we go through before we feel like we want to do one of these deals. As long as those criteria are being met, we will be open to such structures because I think the value creation is dramatic. Our first lens will be, can we execute to create the value.

That is always the first lens that we put these structures through. So my first lens will still be, if we do another deal, can we execute the two that we've already executed? Some of the other large customers that we have signed up over the last six to nine months that we've announced publicly and others and still take on one or two more.

If we feel that we can execute successfully to them, then we'll put it through the other lenses of, are we still staying prudent on our capital structure? We're not diluting equity. We're not taking leverage that over leverages us. And our definition of leverage is very traditional relative to perhaps some other equations that I've seen.

And so first, can we execute? Second, does it still stay within the constraints of the availability of capital that we might have? And third, does it still promise to generate the type of ROEs that we are comfortable with? And if a deal meets all of those three criteria, then obviously we'll selectively play out on those. So I don't want to give future guidance around it, but we'll continue to be strategic in which ones we take on over a period of time.

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Ruchi Mukhija:

Sachin Gupta:

And last bit here, it's a new, I would say, area of intervention with MSOs. Now, could you help us what kind of protection or hedge we have in case things doesn't work out the way we planned?

Yes, that's a good question. Actually, the beauty of this perhaps is that it's not a new area. Think about what we've been doing. We have been enabling other MSOs with our platform to deliver the value. The challenge that a lot of these customers have had is they often don't have the capabilities in-house to effectively leverage the value, effectively create the value from the platform.

So we're just going one step up and saying, now we will not just provide the platform, but we'll actually help you implement the platform effectively from a change management perspective. So it's actually not necessarily a brand new area that we are venturing into. It's really an upstream extension of what we were already doing. And in the process, participating in the economic value that the platform imminently creates.

So I think, of course, there will be some new unknowns that will come our way and we will learn from those. But I wouldn't say that this is a whole new area that we are necessarily venturing into. It's really a more upstream pivot to participate in the upstream value and align our outcomes with our customers.

Ruchi Mukhija:

Moderator:

Srinath V:

Sachin Gupta:

Thank you and all the best for the JV.

Thank you. Our next question is from the line of Srinath V from Bellwether Capital. Please go ahead.

Hi Sachin. Assuming 60 or 70 million top line for the MSO, what kind of revenues would IKS make for our care enablement platform that we provide to the MSO, just to get our understanding of the size of the opportunity, not as a shareholder, but as a platform provider?

Yes. So thank you for the question first of all. I think while we won't be able to reveal the specifics of the numbers. One way to think about it is at the full manifest of the platform from any customer, like multi-specialty medical group customer, the IKS revenues tend to be somewhere between the say 10% to 12% range of the customer's revenue.

That's the way to calibrate on the customer's total top line revenue. In this case, the top line revenue is whatever it is close to 100 million. So that's the way to think about it. Now, why a range of 10% to 12%? Because it also depends on the specialty mix, the nuances of some of the features being implemented or not being implemented. As we go from upside only risk to full risk, more features get implemented.

But generally, I would say the full wallet potential is somewhere between 10% to 12% of the customer's revenue for our platform, for any customer. Obviously, we probably can't reveal the specifics of the numbers for this. But suffice to say that we structured the deal in a way where the full platform is manifest and obviously at a pricing between IKS and the MSO that allows for the realization of traditional IKS margins on P&L.

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Srinath V:

Perfect, perfect. Also, would it be fair to assume since we own the MSO that all the 90 physicians of Western Washington would use our whole suite of products from get-go? Because in our previous relationships, there is a scale-up period as we impress upon the physicians to use our suite of products. Would it be fair to assume that since we own the MSO, that shouldn't be the case?

Sachin Gupta: That is a fair assumption. In fact, that's a very important construct for the deal, right? And so all applicable features, and I say applicable features because one of the features of the 16 for valuebased care, which entails success in full risk, that feature might take some time to implement because they don't have any full risk contracts in value-based care yet.

So as we build out full risk contracts, that feature might play out over a period of time. But the idea here is as fast as we can implement the entire platform, obviously, the doctors will be using that full platform. Srinath V: Perfect. And last, to get a broader understanding, our pricing has largely been outcome-based. And therefore, in this particular construct, as we own the MSO, so if outcomes are significantly better than what was agreed upon, would we be entitled to some bonus or some revenue structures as a platform provider, or that would largely only flow as a shareholder of the MSO? How would that work out if we actually deliver better than expected? Sachin Gupta: Yes. So, as you said, a large part of those upside economics would flow into the MSO where we own 48% and potentially might end up owning more in the future. A large part of those upside economics will flow into the MSO, but there'll still be some upside economics being captured directly into IKS. Srinath V: Got it. And that would get dividend out to us, or how do we kind of get to those cash flows just to get a broader understanding? Sachin Gupta: Yes, that would be the typical mechanism where the excess earnings of the MSO are, after factoring in for some reserves that you want to build in the MSO, get dividend out over the years. Because obviously, that creates upside for the physician shareholders as well. Srinath V: Perfect, perfect. Just last one on Palomar, especially from the PPT. You've said that if the complete suite of platform is put in, 12% of business is a kind of upside potential for customers. So, as we've seen this being implemented in Palomar, are you seeing these kinds of benefits for the physician group there, given that probably we've been implementing it for 6 months or 3 months? I just wanted your broad views on that. And thank you.

Sachin Gupta: At Palomar, we are in the process of still implementing certain features. A large part has been implemented. Some are still being implemented. But from the features that have been implemented, I can tell you that the performance so far is turning out to be better than we had modeled. So, we continue to remain optimistic about the value creation opportunity at Palomar.

Srinath V: Thank you. I'll get back to the queue.

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Moderator:

Srivathsan:

Sachin Gupta:

Thank you. Our next question comes from the line of Srivathsan from Avendus Spark. Please go ahead.

Yes, hi. I had two questions. One is as a part of this, you would kind of expand into areas which so far the platform is not taking care of. So, any specific areas you would do, any specific areas you would use a plug-and-play partner, just want to get your thoughts on that. Second, an extension of this is the incremental development or capabilities you build, you are free to cross sell, upsell at IKS level, or is it has to be sold only from the MSO level? I have a follow-up on this and then I'll come to it.

Yes. I'm not sure I totally understood the second part of your question. So, maybe I'll request you to repeat it. But in the first part of your question, yes, I mean, right, so far, we haven't necessarily contemplated any additional features that would need to be implemented outside of our platform.

And so, we don't need -- we haven't yet identified the need of any subcontracting or other technologies that need to be white labelled into the platform. But as the need arises, we obviously have the flexibility of doing that as operators of the MSO, and as obviously owners of the IKS platform, we will do that on a need based basis.

But right now, our first step is really to manifest the full features of the platform and generate the pretty large cost savings and revenue upsides that we have modeled in our proforma. That'll be our first mention. But yes, we have the flexibility where needed to use any subcontracted technologies or services that will be necessary. But we haven't quite envisaged any yet. Sorry, can you repeat the second part of your question?

Srivathsan:

Sachin Gupta:

No, the second question is only contingent on the fact that if you're expanding the product offering the service suite, then can you resell it to others? So, if it's not as much expansion, then the scope for or the need for resell also…

No. So actually, you know, obviously, the other opportunity that this creates is that it becomes a live lab for the continued evolution of our platform, right? And so, irrespective of this deal, we were working on some other features, which we constantly are. And with this deal, part of the expectation that the doctors have and the part of the expectation that the MSO has from the doctors is they will actually engage in co-creation of additional features that they will benefit from and that then IKS can include in its care enablement platform in the future.

So, and also keep in mind that this medical group operates on Epic. And so, this will also give us the opportunity to dive deeper into how to integrate with the Epic EHR more effectively across features and build new features that are further complementary to what Epic already does, right?

So, yes, there will be some co-development that will be emerging from this. And, you know, obviously, we'll be the benefactors of this. So, another byproduct benefit of this deal is that now we get a live lab to manifest our whole platform and continue to develop features in a live environment, which has always been the ethos of IKS.

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Srivathsan:

Sure. Just one last question. Is there any tailed risk that you see in this whole thing, right? And pardon my ignorance. Is there any insurance, given health care insurance-related cost that this MSO takes, which can sink the whole thing if there is a class action suit against the hospital or the MSO, etcetera? I just want to understand any tailed risks that you could conceive of.

Sachin Gupta:

That's one of the reasons why we were very careful in structuring this, right? We structured this in a manner where we did not take on any clinical decision-making responsibilities in the MSO. It's an administrative support entity, call it a special purpose vehicle or something that has gotten created, and that's where we want equity.

The medical group that is actually responsible for care delivery and clinical decision-making around care delivery, obviously, is the party that would be liable in situations like that. And they obviously carry the medical malpractice liability insurance to cover themselves appropriately from that perspective. So, I think based on the way we've structured this, I don't necessarily foresee any fundamental risk around that.

Srivathsan:

Sure. One last question. Apologies. Going by the numbers broadly, right, about one-fourth of the business of the MSO would be an area where you have extreme expertise, but the residual three-fourths is an area where so far at least you don't have very explicit expertise. Just wanted to get your thoughts. Is that something you would want to build up or it will be the existing team that will run and it's not an area where IKS will be actively involved in?

Sachin Gupta:

Yes, look, I mean, this is a fully functioning operating entity today, right? It's just that we are carving out those functions into the MSO. And so, they today have a fully functional operating infrastructure that has been supporting these practices for the last 30 years and that infrastructure works well.

So it would not be our intent to go and disrupt that infrastructure, but it has been agreed upon with the medical group leadership, part of which, by the way, the way this deal is structured is all the administrative functions leadership that used to run the medical group in absence of this entity will actually now transition to this entity as its employees and leaders, right?

So obviously, those people are fully capable of taking this forward, but we have also agreed with them that as IKS comes in, to the extent that we find opportunities for efficiency in some of those traditional functions, be it IT, be it payroll, be it back office, front office type stuff, we'll together embark on realizing those efficiencies. But I think it is important to realize that those functions work well today, they're just getting transitioned from the medical group into the MSO.

Srivathsan:

Thanks a lot, Sachin. All the best.

Sachin Gupta:

Thank you.

Moderator: Thank you. Our next question is from the line of Nilesh Jain from Astute Investment. Please go ahead.

Nilesh Jain:

Hi. Thank you for the opportunity and congratulations on this deal.. My first question is, I wanted to understand the structure much better, given they were already existing clients and in last

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quarter, we announced that we are selling them the entire breadth of platform. And now we are entering a JV where we are selling the same platform.

So how does the entire structure differ in terms of opportunity when we are directly selling it and or selling it through a platform through a JV? If you can help me understand it much better. Yeah.

Sachin Gupta:

Yeah. I mean, I think in the end, the fundamental difference is that one, as a part of this, they are already committed to all the features of the platform that are applicable, number one. And number two, the only difference is earlier, there was one set of economics that we would get from it, which is the economics we get from the implementation of the platform, the revenue that IKS gets from it and the margin that IKS creates in it.

Now, we get to participate in a second set of economics, which are around the value that the platform creates on their P&L. And we have the opportunity to participate in about 62.4% or whatever that number is of that value through the MSO. So I think what it's essentially doing is one, it is for want of a better term, mandating the use of the entire platform.

Second, that capital is helping grow the medical group in a manner that it would not have traditionally grown at a pace that it would not have traditionally grown. And third, the economics that are getting created from the implementation of the platform on their P&L and the growth that is going to happen on their P&L, we get to participate in a part of those economics through the MSO structure. Does that help, Nilesh?

Nilesh Jain:

It helps, it helps. Just to follow-up to that, given you've entered into a transaction with them, do you see this as a trend being developed where more physician groups would be open to directly enter into a partnership with you all or you think it's going to take time?

Sachin Gupta:

Our instinct, the reason why we're doing this is essentially that we believe that this creates a model that is very attractive for other physician groups to either participate in a structure like this where they decide to become clients of this MSO that we're launching, which could probably be in that geography. But I think it creates a structure that will get many, many physician groups very excited about the prospect of what this model can create.

So yeah, I mean, one of the big reasons we're doing it is because our belief is that this will start to create a model for sustainability in US health care while achieving that quadruple aim and creating a set of economics by which physician aggregation can be successful. So yes, the whole hope around this is that this model creates a structure that is very attractive over a period of time.

Nilesh Jain:

Okay. Thank you so much and I wish you all the best.

Sachin Gupta:

Thank you.

Moderator: Thank you. The next question is from the line of Sandeep Kothari from Eastlane Capital. Please go ahead.

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Sandeep Kothari:

Sachin Gupta:

Yeah, hi, Sachin. Just a question on how to think about the capital deployment going forward. Is it essential to deploy capital to be able to sell the entire suite of platform or now you have some reference clients and selling the platform as it is to the rest of the physician group so your customer base of 500 becomes easier or this capital deployment is case in point and wherever you see opportunities for further upside, how to think about the whole thing?

I think the answer is both. I think we should see more deals as a proliferation of the full platform as a result of the proof that will be generated from deals like Palomar, deals like Western Washington, deals like GIA, et cetera, right? So obviously we should see more momentum and I actually believe that we might see more momentum even from the perspective of this new aggregation model that we are creating with Western Washington Medical Group.

I will just say that we will continue to be more -- and continue to be careful about one, our ability to execute at the pace at which these opportunities are coming. Second, about our ability to do these in a manner where we do not breach our general conservative constraints of use of capital that we have kept for ourselves and where we do that, we are very confident of generating ROEs that are attractive over a period of time.

So I think that is as much as I can say because I do think this should be -- these type of deals will create more activity in both of these streams, pure arm's length organic transactions for full platform and potentially a lot of deal flow in these more aligned type of constructs.

My belief is that our first play more and more will always be guaranteeing outcomes versus participating upstream because when you participate upstream like we are doing, we also have to think of things like, is there a culture fit between the physician leadership of the group and us? Will they be truly committed to operating as efficiently as we want to operate for an MSO type entity? So there are other nuances that come into a deal structure like this.

So I think these deal structures, even though deal flow might be significant, we will be more selective about these types of deal structures. But anything that we do will always go through the lens of can we execute effectively and are we still being conservative about the source of capital and the return on capital?

Sandeep Kothari:

Sachin Gupta:

Understood. And just to follow-up to that, what do you think about the two parts of the businesses, selling the platform as a service provider versus participating like this? I know you mentioned execution risk, which you will keep in mind, but how different it is, how about the management bandwidth and how the whole culture of your organization and how you think about executing on both separate pieces sort of stand?

Yeah. So just to be clear, the way we think about it is that our traditional sales engine, which we are continuing to grow, has the mandate to sell the platform at an arm's length before, right? So that's all that the traditional sales engine will focus on. They are not -- they don't have the mandate to go and try and create upstream alignment deals, certainly not of this nature where we'll be making investments.

Sometimes we will be able to sell deals where we are guaranteeing some outcomes. These type of deals where we're going all the way upstream and aligning more strategically and making

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investments are generally created by the management themselves, i.e. me, Joe, our Chief Growth Officer, Pete, maybe our CEO, a couple of other people.

And so that's the way to think about it. Our traditional sales engine is still driving the traditional motion of full platform sales and/or land and expand platform developments as an executive leadership team where we selectively look at more strategic constructs. And that will naturally also then get reflected in the number of deals getting done in each of the two spheres.

Sandeep Kothari:

Understood. Thank you.

Moderator: Thank you. The next question is from the line of Ruchi Mukhija from ICICI Securities. Please go ahead.

Ruchi Mukhija:

Hi, Sachin. Here, why IKS don't have majority ownership or majority stake?

Sachin Gupta:

So it's a good question, Ruchi. And I think, this is just a moment in time. I would not rule out the possibility of IKS eventually having a majority stake. Just know that we structured the governance of this deal in a way where we have protective rights for all what we call important decisions, right?

So even though we don't own majority right now for anything that is materially consequential, we have those protective rights as a 48% shareholder.

And the Board has been structured in a way where we have three Board members. They have three Board members. Western Washington Group does. And then we have an independent Board member as the seventh. So I think even though we don't have majority, I think we've secured ourselves in a way where there will be for any material consequential decisions, we are able to at least have a say.

Ruchi Mukhija:

And the capital that we have infused in this entity, what would be immediate use as you see?

Sachin Gupta:

The immediate use is physician growth. So we obviously want to increase their primary care physician base because that primary care physician base then becomes more of a feeder to the specialists in a fee-for-service model and then actually allows us to take on more value-based care constructs or contracts from Medicare Advantage and the like.

So primary use of capital is in physician growth. And then associated with physician growth, there will always be capex associated with expanding clinic facilities, etc. So those are the two primary uses of the capital infusion, which then obviously gives growth to the top line and the bottom line resulting from the top line.

Ruchi Mukhija:

Just to clarify, the capital will stay in JV or it goes to Western Washington Medical Group?

Sachin Gupta:

So technically it has to go to Western Washington Medical Group, because that's where the physician recruiting and the clinic expansion happens, but it is routed through the MSO.

Ruchi Mukhija:

Okay, understood. Thank you.

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Moderator:

Thank you. We will now take our last question from the line of Srinath V from Bellwether Capital. Please go ahead.

Srinath V: Hi Sachin. Any timelines on the scale up of the care enablement platform to the MSO? Would it be like within the next month or so or there's a process of the implementation?

Sachin Gupta:

No, typically these implementations, the way to think about the full platform implementations is somewhere between 3 to 6 months. That's the way to think about how long the full platform implementation takes. We obviously always push for closer to 3 months, but in some cases, depending on what is happening in the physician environment, it can be up to 6 months. So just not necessarily just for this deal, but for all full platform deals, that is how one should peg the implementation timeline.

Srinath V: Perfect. While I understand the MSO is, has current working operations, would like to understand if you have a particular action plan in mind for the cost lines outside of the care enablement, you know, in maybe some of the administrative functions of HR and Finance, to get offshore or what is your broader thought on the cost lines outside the care enablement platform?

Sachin Gupta:

So it's the same as anything else. It's to be as efficient as we possibly can. And whenever we can use technology, wherever we can use globalization to drive efficiencies, we will absolutely do that. And that is why I was saying that for these type of deals, it's very important that there is a meeting of mindsets with the physician leadership as much as there is a financially compelling piece.

And here we feel like we are fully aligned on what is the best trade-off between efficiency and still being able to deliver a world-class customer experience first and foremost for our patients, and then certainly for our physicians and the clinicians involved. And so there'll be obviously some decisions we'll be making over a period of time that attempt to achieve that trade-off.

Moderator:

Thank you. I would now like to hand the call over to the management for any closing remarks.

Sachin Gupta: Yes, so I would just say that, again, a very exciting step in our journey of enabling better, safer, more efficient care. We will continue to talk about it. And I just, on an ending note, I'll repeat the five strategic themes that we are executing on for our business. I had mentioned them in the last earnings call.

I will continue to reiterate those on every call so that we're able to put in perspective what we're executing on. First, we will continue to take our platform to becoming more of AI-led and AInative so that we can go from the model that we'd started with, which was human-led, tech-inthe-loop, to tech-led, human-in-the-loop, to eventually becoming autonomous through technology and some of the features.

We continue to stay focused on the last phases of effectively driving the value from the acuity acquisition, both from a cross-sell perspective and getting the margins to an optimum place. We continue to solve the predicament of still wanting to be number one, two, or three in each of the

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16 features of our platform, even as we're emerging as the only company that has the full manifest of the platform and the breadth of the platform.

We're continuing to focus on a differentiated go-to-market strategy for different segments of the market. For example, continue to proliferate, land, and expand in the large health system segment. Of course, there'll be some platform deals that come about there as well. And really, then, the go-to-market on the other segments, the private equity-owned segment and the independents, will continue to be full platform.

And then last but not the least, we will continue to take steps towards becoming more and more of an outcomes company enabled by our platform versus a company that just provides the platform and stops there. Because I actually believe that that will create over a period of time a very differentiated moat if you can execute successfully to it.

So today's news was more in the fifth dimension of these five strategic pillars that we are executing on in a business. And I look forward to continuing to report our progress and talking to you all again soon. Thank you for your time.

Moderator:

Thank you. On behalf of IKS, that concludes this conference. Thank you all for joining us, you may now disconnect your lines.

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