Thank you, operator. Joining me today are Manny Krakaris, Chief Executive Officer of Augmedix; and Paul Ginocchio, Chief Financial Officer.

This afternoon, we released financial results for the quarter ended March 31, 2024. We've posted a copy of the press release and an investor presentation on our website at augmedix.com.

We will begin our call with prepared remarks to be followed by a Q&A session. This call is also being simulcast and will be archived on our website.

Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Any statements that relate to expectations or predictions of future events, results or performance are forward-looking statements.

They are based on our current estimates and various assumptions and involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied. Accordingly, you should not place undue reliance on these statements.

For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors and Management's Discussion and Analysis in our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission, and similar disclosures and subsequent reports filed with the SEC.

Also during our call today, we will discuss non-GAAP financial measures, which adjust our GAAP results to eliminate the impact of certain items. You will find additional information regarding these financial measures and a reconciliation to GAAP measures in today's press release.

This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 13, 2024. We disclaim any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements whether because of new information, future events or otherwise.

And with that, I'll turn the call over to Manny.

Thanks, Matt. In the first quarter, Augmedix grew revenue by 40%, generated an NRR of 143% and achieved higher gross margins.

Financially, our quarterly performance was solid and in line across the board. There was also a quarter full of activity across the organization as we introduced our AI products and scaled our organization to aggressively pursue the growing opportunity in front of us.

There are several observations worthy that occurred during the first quarter.

First, we have made Augmedix Go generally available in both the ambulatory setting and [indiscernible] the industry's only provider that offers fully automated generative AI-powered medical documentation products in both care settings. Augmedix Go [indiscernible], in particular, has really resonated with health systems.

It is opening doors for us, and we are encouraged by the early feedback and interest.

Second, for Augmedix Go in the clinical setting, we are participating in a growing number of large pilots.

Third, we further broadened our product portfolio with the launch of a premium generative AI product called Augmedix Go Assist. At the discretion of the commission, the draft note is simultaneously delivered to an Augmedix medical documentation specialist [indiscernible] quality assurance and makes any necessary edits [indiscernible] for clinician sign-off.

Augmedix Go Assist is already generating strong early interest in customers due to its attractive mix of price and efficiency.

Fourth, we have been and continue to work side by side with our strategic partner, HCA Healthcare, to calibrate and optimize our AI products. Our pilot program with HCA Healthcare has done well.

They are now readying for a wide deployment of Augmedix Go across their [indiscernible]. We expect this to be meaningful to our revenue growth.

Finally, we are well underway with putting the proceeds of our November 2023 capital raise to work by expanding our commercial and technical teams. We have completed approximately 6% of the hiring plan we put together before the November 2023 raise and expect to be substantially complete by the end of summer.

As I look at what we are doing in the industry around us, it is clear that we are generating an increasing amount of interest with new and existing customers who are evaluating our products. Our previously announced Go pilot with a Fortune 100 health care company is progressing well.

We have another Go pilot with a second Fortune 100 company that is also progressing well. There are additional conversations with that company that could lead to a deeper partnership.

And we just launched Augmedix Go Assist, and it has garnered significant attention and we are already piloting it with 3 of our largest clients.

At the same time, it is clear that health care organizations are proceeding methodically as they evaluate a number of AI options across the industry. These range from fully automated AI-only solutions for many encounters to less automated higher-cost solutions with trained personnel involved to deliver a more accurate medical note and ancillary services that further deburden clinicians for an important subset of encounters.

Organizations are prioritizing these evaluations while trying to strike the right balance of low-cost automation and higher-quality offerings. The upside is market adoption is growing at a faster rate than we anticipated.

As the industry is deeply engaged in its evaluation of new documentation solutions, since the last earnings call, we have observed an increase in interest broadly in the market, but a slowdown in their purchasing commitments of established solutions such as our live products. Accordingly, we are adjusting our full year revenue outlook.

I would like to address some developments over the last months that have led us to this decision. We are continuing to sell cohorts of new live users, although not at the level that we had previously expected as a few health systems that slowed down their expansions with us as they evaluate AI products.

Importantly, we still have numerous clients adding live users as evidenced by our high NRR just not at prior levels we have seen in recent quarters.

Secondly, a couple of our larger health systems have chosen to transition some of their Augmedix live users to the lower-priced Go Assist product. It's a clear indication that Go Assist is resonating with existing customers and bolsters our confidence that it will help us grow our ARR with customers over time.

But near term, it results in lower current year revenue expectations at these accounts. Vendors that are AI only or those who are built on human intervention only will suffer as customers want a variety of options to meet them where they are today and where they want to be in the future.

We have products that address their current needs as well as what they anticipate over the next few years.

Finally, as large organizations carefully evaluate their options, revenue scale-ups are being extended as large organizations transition from pilots to wider and longer-term commercial deployment. This has been factored into our guidance.

The net result of these developments is that we are booking a higher percentage of our revenue from AI-based products, which carry a lower ARPU but a higher gross margin in our established products. Our company's transition from a tech-enabled service company to a SaaS AI-first company with human Copilots is coming even faster, which we believe will ultimately deliver higher value for our shareholders.

Despite the reduction in our revenue growth trajectory for 2024 relative to our prior expectations, I'm as confident about Augmedix's prospects as ever. We offer health systems the most comprehensive portfolio of documentation products in the industry.

Our products are based on over 10 million patient encounters that we have documented for some of the largest health care systems in the country, including HCA and CommonSpirit, which leverages the latest AI technology we have developed in-house and with partners such as Google.

Our market experience is a powerful durable advantage compared to single point solution, new entrants creating a robust moat around our business. Our broad-based offering give our customers unrivaled flexibility and value.

Customers of Augmedix can choose the right option for the encounter or the doctor or the setting. They can toggle between offerings on the fly.

For routine patient encounters, Augmedix Go, our fully automated AI documentation solution would be the right choice. For more complicated encounters where a clinician is pressed for time and prefers not to interact with the EHR, Augmedix Go Assist activates documentation specialists to review the note for quality assurance and make any necessary edits before clinicians sign off.

But for more complex encounters and/or needs for additional services, Augmedix Live ensures the most accurate note and provides access to a virtual extension of the clinician [indiscernible]. Our competitors cannot match this capability, and we are convinced we will ultimately emerge as one of the industry's winners because of it.

We expect to see customers move beyond the decision to use a one-size-fits-all documentation solution and instead focus on a portfolio of documentation products that optimally fits each workflow, care setting and encounter. Augmedix is perfectly positioned to address this shift.

Generative AI tools are capable of doing much of the heavy lifting when it comes to medical mode documentation. That's why we're harnessing AI in our solution.

However, generative AI in isolation is not sufficient to produce accurate and comprehensive medical notes consistently in many specialties and patient encounters. We have already seen frustration with AI-only solution and that generates opportunity for us as customers will need to find the right balance of automation and human intervention.

Augmedix has built an unrivaled depository of domain knowledge over the last 11 years related to clinician workflows and medical data set. This knowledge has enabled us to address multiple care settings, serve more than 50 specialties, provides clinical decision support to the point of care at the right moment and deliver structured data that positively impact customers' operational efficiency as well as downstream activities such as billing.

These key points of differentiation provide us significant moats around our business. The recent industry events have reinforced my confidence in Augmedix.

With that, I will now turn the call over to Paul Ginocchio, our Chief Financial Officer, then I'll return with closing comments. Paul?

Thank you, Manny. Let's review the quarter's financial highlights.

Revenue for the 3 months ended March 31, 2024, was $13.5 million, up 40% from the $9.6 million in the first quarter of last year. Growth was driven by the adoption of live and notes by existing customers.

Gross margin for the first quarter of 2024 was 47.1%, as compared to 45.6% in the first quarter of 2023 and 49.3% in the fourth quarter of 2023. This 150 basis point improvement year-on-year in gross margin percentage was mainly driven by our growing scale and efficiency and also by our strategic initiative to ship U.S.

service clinicians to outside the U.S.

The sequential decline was due to temporary costs that we incurred in our overseas operations related to the move to a new building in Bangladesh and a onetime optimization initiative in India, although the impact to gross margin in the quarter was slightly less than we had anticipated. We expect gross margins to be closer to fully recovered in May.

Total operating expenses for the first quarter of 2024 were $12.7 million, up $2.2 million compared to the fourth quarter of 2024. As we talked about in the November 2023 capital raise, we're going to add approximately $9 million to annual expense on top of the previous plan, largely concentrated in additional sales and engineering talent, and we are executing on that plan.

In fact, we're roughly 60% complete with our hiring plan.

In terms of profitability, our loss from operations increased to $6.4 million from $5.1 million in the first quarter of 2023 due to the additional hires post the November capital raise. Adjusted EBITDA was a loss of $5.1 million in the first quarter of 2024 compared to a loss of $4.3 million.

Cash flow from operating activities was an outflow of $8.2 million in the first quarter of 2024 compared to an outflow of $6.2 million in the first quarter of last year. As of March 31, 2024, we had $37.3 million of cash and cash equivalents as compared to $46.2 million as of December 31, 2023.

Our weighted average share count for EPS for the first quarter was 53.1 million common shares and prefunded warrants outstanding. Assuming all other warrants outstanding are net exercise in all our employee options and SARs, they are fully invested [indiscernible] exercised, we would have approximately 56.0 million shares outstanding currently.

Now moving on to guidance, which is based on our current expectations and reflective of the factors arising after the last earnings call that Manny described earlier. For the second quarter of 2024, we expect revenue to be up slightly sequentially from the first quarter as customer expansions are being offset by the product mix changes Manny spoke about earlier.

We expect GAAP gross margins to increase from the first quarter of 2024 by 50 to 100 basis points.

For the full year of 2024, we expect to generate approximately $52 million to $55 million of revenue. This compares to our prior expectation of $60 million to $62 million.

The change in full year revenue guidance, which is $7.5 million at the midpoint is primarily a result of two developments that we observed following our last earnings call. Lower expectations for live bookings and current live users moving to Augmedix Go Assist.

As Go and Go Assist recently launched, their ramp-up is still in the early stages to offset the impact of these 2 factors.

As we have previously stated, we anticipate Go revenue to be modest during the first half of 2024. We do expect Go to have a positive contribution later in the year and then contribute more materially in 2025.

Approximately 80% of our change to our revenue guidance relates to Augmedix Live. We now expect to exit 2024 with a higher percentage of our revenue related to our AI products, Augmedix Go and Augmedix Go Assist than our previous expectations.

We continue to anticipate total GAAP operating expenses to be in the mid to upper $50 million range in 2024. We still expect to exit 2025 at operating cash flow breakeven before net interest expense, we have sufficient runway to get there.

At this point, I'd like to turn the call back to Manny for closing comments.

Thank you, Paul. Our industry is in the process of adopting new technology, generative AI at an unprecedented pace.

This is a reversal of the health care industry's history of latent technology adoption. The pendulum has certainly swung to the other extreme.

We welcome this change and it will accelerate the proliferation of solutions such as those offered by Augmedix.

In their hot pursuit of generative AI solution, we believe many health care systems will discover a disparity between the promise of gen AI and its actual performance for a meaningful portion of patient encounters. For this reason, we offer a range of products that meet customers where they are today and where they want to be tomorrow.

I am confident about our market positioning and look forward to continued progress in our push to lead this market. I appreciate the dedication of our team and the support we received from our customers and shareholders.

Thank you.

With that, I'll turn it over to the operator for questions.

Paul, first, a quick clarification for you. You mentioned 85% of the roughly 12% guidance reduction in sales is due to Augmedix Live.

Is that the movement from Live to Go? Or is it just lower bookings?

I just want to make sure I fully understand that.

Yes. 80% of that change is due to both lower bookings and the move from Live to Go Assist.

It's -- those 2 account for the 80%.

And then what's the remainder, I guess, if the two things you called out are kind of the majority of it, what else is there that's bringing the guidance down?

We're also now assuming a faster migration of notes, which is the sort of more established product to Go Assist in that price point that ARPU is lower. And so that's the remaining 20%.

Got it. I just want to make sure.

And then can you talk a little bit about how quickly clients can make that conversions. I'm curious if something that comes up upon renewal or if it's monthly or if you just allow them to kind of move that ad hoc, so what kind of visibility you have on that potential transition?

Sure. Ryan, depending on the contract for a vast majority of the contracts, they have a 90-day ability to make that migration.

And of course, we're going to do what's right for the customer and maximize their ROI and not try to optimize our revenue near term with decline. We're going to optimize the ROI for the customer long term because we want to obviously make -- keep the customers happy and do what's right for them.

So we're trying to obviously do what's right for the customer.

So we have a sort of 90-day visibility on migration from live to notes -- or sorry, Go Assist.

Just to add to that, sorry, Ryan. From notes to Go Assist as well, there's a couple of transitions.

Okay. And then how are you thinking about the cash burn in investments?

It sounds like you're not making any changes to that despite the headwinds you're seeing here that were unexpected. So I think one of the questions will just be related to the cash burn and related to the investments you're making in the market and your conviction in your ability to get to that cash flow breakeven number.

So can you dive a little bit deeper on all those elements for us?

It's a good question, Ryan. So right now, as we both pointed out during the prepared remarks, we've completed about 60% of the hiring that we had planned to complete.

And we're going to calibrate very carefully the rest of those potential hires in relation to how the market reacts to our product offerings and the pace at which they adopt the new products. So we're not going to be blind to this.

We're not going to be dogmatic about our previous hiring plan. And we'll make whatever adjustments are necessary as warranted by market conditions.

And Ryan, we did see mid-50s to high 50s, so that gives us -- that range gives us some with room to begin with. And then obviously, we'll make adjustments as needed.

I was wondering if you could give us a little bit more color on decision delays or maybe it's too soon? Are you seeing it go for a typical like length?

Is there a certain win rate? Or you think we're sort of too soon in this process to really have good visibility on that right now?

Elizabeth, good question. I think there's a couple of factors going on here.

I think there's been a rush to try AI solutions from a variety of providers. As you probably know, there are 42 companies in this space right now that are offering generative AI medical documentation solutions.

So there's a lot of noise in the market and a lot of trials that are ongoing.

And I think until those trials kind of run their course, providers are going to be somewhat reluctant to commit wide scale to any one particular solution or vendor. It would be kind of risky to do that in my view and based on discussions I've had with some customers, to commit at this early stage.

And so there -- we're in a period of trial and the companies -- the vendors are trying to demonstrate their capabilities and prove that they could deliver on the promise of those product offerings and providers are going to be evaluating them. And until they complete that evaluation, I don't expect that there's going to be massive large adoptions of any particular solution.

Okay. That's helpful.

And maybe to -- over to sort of like a relative [indiscernible] the quarter. The HCA ramp, how are you guys thinking about that as it goes?

Is it kind of like ratably across the year? Are there certain [indiscernible] that we should consider as we're thinking about that contract starting off?

Well, the plan was and still is to deploy the ED solution, Go ED across their entire enterprise. I think it's roughly 184 hospitals.

So that's the plan. The pace at which is going to depend on a few things.

One, of course, is when they greenlighted to start the mass adoption, part of that is dependent on them make sure they've got the right change management programs in place at each hospital to accept this. And the other factor is their transition from [indiscernible] HR to expand.

And that's something that will likely have an impact on our pace of deployment within HCA's ER departments.

We don't have a great deal of visibility on how quickly expense is going to be deployed across those 184 hospitals. I know that HCA wants to have it happen as soon as possible, but they're not in complete control over that.

Meditech has a lot to do with it. And my sense is that right now, the target is to have that happen sometime in the fall.

But again, I don't have precise details on when exactly which hospitals are going to be deployed are going to be transitioned from [indiscernible].

Got it. That's helpful.

And maybe one last one for me. In terms of the 2026 EBITDA number, is that the expectation still similar given what you were just saying about the OpEx?

Or are you sort of less or no?

Elizabeth, it's Paul. 2026 EBITDA number, I didn't quite understand that.

Yes, like in terms of being like having to be profitable in 2026, is that still sort of on the table? Or you say that not to at this point?

Sure. If we're exiting 2025 at cash flow breakeven, then 2026 EBITDA would be at breakeven or slightly positive.

This is Aaron on the line for Brooks. I'm curious now that Go Assist has been launched, you had some commentary, but how do you sort of see the customer adoption sort of developing during the remainder of the year here?

Well, we've gotten some really strong requests from some of our bigger customers for the product. So we feel pretty good about its prospects.

And these inbounds are coming from some of our biggest customers. So we're very encouraged by the initial signals we're getting from the market for that particular product.

And I think it's in reaction to expectations that were set perhaps unrealistically high for the pure AI products that are being offered by some of our competitors. So we feel that we're very well positioned to take advantage of that disparity between those expectations and reality.

Aaron, the great thing about customer interest in Augmedix Go and Augmedix Go Assist is that it just opens up a much wider segment of their physician population than we had access to before, and that allows us deeper penetration and obviously, ultimately, better revenue over time.

Great. No, absolutely.

That's very helpful. And then just kind of wondering sort of your engagement, what does that sort of look like with other large health systems around [indiscernible].

And I guess how significant has that changed, in particular with Go, but also your other key products as well.

Well, as I mentioned before during a prior question, there are 42 companies that are in this space now. So there's a lot of noise in the marketplace.

And our job is to make sure that our voice is heard above all the clutter. What we have going for us, of course, is 11 years of experience in this sector, more than anybody else.

And we've got relationships with 10 largest health care systems in the U.S.

So we have a good presence. People know about us.

We have credibility with partners like Google and HCA as opposed to the vast majority of these other companies that are trying to get into the space. So that's helped us kind of rise above the clutter and we're getting good at bats, I'd say today relative to where the situation might have been 6 months ago on these early pilots.

We heard there are some new AI laws introduced to Connecticut and Utah. Can you help us understand the impact of the AI loss on adoption of Augmedix services?

And do they have different degrees of impact on Augmedix Live and Augmedix Go if you have clients in that space?

Yuan, thank you. That's a good question.

Yes, we are familiar with the initial draft of regulations that are coming out. And it's important to draw the distinction between what we do, which is provide clinical decision support from what the regulations are trying to cover, which is clinical decision-making.

So we are not classified as a clinical or medical device, which would fall under those regulations. We provide support in the form of information to help clinicians make decisions.

That's a very important distinction that we adhere to very -- in a very disciplined fashion so that we do not fall under those regulations.

Got it. And maybe a clarification here.

So how long does it take for customers to evaluate this medical documentation services. You may have touched on this, but what have changed in the last 3 months for them to look into other offerings at the same time?

Well, it's a good question. And it varies as you can imagine, across the board.

It depends on how centralized the decision-making is within a particular enterprise. Some health care enterprises are very centralized.

Others are very decentralized. And so there's many points of decision-making that occur in the decentralized organizations.

And you could have situations where -- and I think this is going to be representative of the market going forward, where you'll have multiple vendors within the same large enterprise. That will not be unusual, especially considering the fact that virtually everybody in our space is a single point solution provider with the exception of Augmedix.

So to the extent an enterprise requires more than one type of solution, we have a decent chance of being in that solution mix.

Got it. And then a follow-up here is on the visibility of this [indiscernible] customers.

When can we get some clear picture, the customer will come back to Augmedix or customers will make the decision on which services they will choose?

Yuan, it's Paul. First, we're -- our own customers are just switching products from the higher ARPU product Live to the more AI-based product Augmedix Go Assist.

We're also seeing a number of our health systems slow down on the additional investment in live as they evaluate other AI products. So maybe that's exactly what you're asking about.

I think in a period of 3 to 6 months, they'll try out our AI product, other AI products and then determine what their product mix looks like going forward. I think during this period of AI pilots, Live is just being held and not further investment made.

Once we get beyond the pilot and health systems have more information about the capabilities of just pure AI versus AI and humans and live, I think then we can see what the product mix will look like on the other side. And I think there's still a place for Live to grow, it's just going to have a different mix than we had in the past.

If I'm a Live user, why would I stick with Live versus switching to Augmedix Go Assist? And then what's the relative price difference for the customer?

I know you can't say exactly, but just kind of roughly.

Allen, it's Manny. Good question.

So the motivation for a clinician to stay with Live is because Live has a much more impactful or is much more impactful to the doctor's daily life.

Number one, it will deliver the highest quality note possible simply because its synchronous in real time. And therefore, any ambiguities that occur during the ambient conversation which is the only input that's available for a pure AI solution, that limitation doesn't exist with Live.

So you get immediate response to any ambiguities that might occur during that ambient conversation that gets reflected in the medical note. So the medical note is a very high quality, number one.

Number two, the fact that there's a medical documentation specialist attached to the clinician means that the clinician can rely on that medical documentation specialist for ancillary services that are not available with a pure AI solution. And those services include orders, referrals, coding suggestions and some nudges in the form of clinical decision support.

So there's a lot more that comes with Live than you can possibly get with a pure AI solution.

And the price differential between those products is substantial. The live solution, the ARPU is roughly $2,400 per month per doctor.

And for the pure AI solution or the one that has Go Assist, for example, they're going to have ARPUs anywhere from $300 to $600. So there's a big, big difference, big drop in price if you don't need that full-time human support.

Okay. That's helpful.

And then I think I heard you say that you thought revenue might be up a little sequentially in the second quarter. But then we're basically starting from that lower base going forward is where, I guess, the impact is going forward for the second half.

I guess that's the way to think of it?

Yes, Allen, it's a good way to think about it. Remember, because we have the 90-day notification, most of the -- any transitions from live to notes are going to largely happen in the back half of the year.

So we'll see a little bit of an increase, maybe 1% or 2% from the first quarter into the second quarter. And then thereafter, it may decline Q-on-Q.

Wait, I'm sorry, you said that, that 3Q -- did you say 3Q might be down versus 2Q?

If you look at the guidance range, 3Q versus 2Q could be down.

Yes. As customers transition from higher ARPU products to lower ARPU products, that's a natural occurrence in the numbers.

And it's just the shift in that product mix will have that happen.

Okay. I got it.

Our goal to offset that is obviously to penetrate those clients deeper, and that's the plan.

Paul. I'm just thinking about the math here a little bit and your confidence to still get to the bogey of cash breakeven into '25.

And -- so -- and then just looking at the math here with the ARPUs. You -- there is a growth rate that we can think about that -- I mean, it's not that you're not growing Go Assist right now.

That's not the $7.5 million delta. It's the mix shift in both cases.

And so I'm thinking I end up in terms of the EBITDA loss this year kind of in the same place on that kind of revenue delta. Is that a good way to think about it?

We're not guiding to EBITDA [indiscernible]. I think you're generally in the right ballpark, but we didn't guide to that, but I think that's not a bad way to think about it.

Remember, we said we're going to exit 2025 and cash flow breakeven. We can still have an adjusted EBITDA loss -- and obviously, we have good working capital fundamentals.

So we can be a little bit loss-making on adjusted EBITDA and still be cash flow breakeven as we exit 2025.

And then just one quick one on the quarter itself. Higher revenue per clinician, was that mix?

Yes.

So just a little bit more Live?

A little bit more Live in the first quarter, correct. Yes.

Okay. And then, Manny, at HCA, any sense of how the clinical adoption will go...

Yes. We're optimistic.

We're in there discussing just that with their team today. So if you recall from the HIMSS Conference back in April, I was on a panel with one of the point people from HCA, along with -- one of the executives from Google Cloud's business unit.

And the person from HCA was very positively inclined and enthusiastic in his support of our product across the board. And so just a lot of encouraging comments that I think have been made are public.

So you can look into that panel conversation and hear for yourself, how they feel about the company, Augmedix and our products.

Thank you, operator. Thanks, everybody, for participating in this earnings call.

We will keep you updated with any relevant information as it becomes available to us. Thank you, and I appreciate your support.

Bye.