Mach7 Technologies Limited

Hello and welcome to Mac7 Technologies' fourth quarter FY21 Business Update. I'm Andrew Keyes and I'm facilitating today's event. Please note the event is being recorded. Shortly you'll be hearing from Mike Lampron, CEO of Mac7. Mike is in Burlington, Vermont, United States. Also on the call today is Jenny Pilcher, CFO of Mac7. Jenny is in Melbourne, Australia. At the end of Mike's commentary, Mike and Jenny will be taking questions. If you'd like to ask a question, please raise your hand in Zoom or send through the question via the Q&A function and I'll facilitate it for you. Hi, Mike. Good evening. I'll hand over to you.

Thank you, Andrew. Hello, everyone, and welcome to the fourth quarter FY21 business update. We appreciate you taking the time to spend 30 minutes with us today. Our fiscal year results will be coming out at the end of August, but we did have some financial highlights that we wanted to give you for Q4 and for the year. We'll go into a little bit of detail on the highlights as well. Despite a tough year with the pandemic for us, we recorded record sales orders this fiscal year of $25.6 million. That's up 95% year over year, and $4.4 million of that was in Q4. We recorded record cash receipts of 21 million. It's up 23% year over year, of which 4.6 million was in Q4. And for the second year in a row, we will record positive operating cash. This fiscal year, we will have 1.2 million in positive operating cash. That gives us 18.4 million of cash on hand as of the end of June and no debt. Our annual recurring revenue run rate is 13.4 million, and that's up 105% year over year. So we're gonna dig into a few of these details. I'm not going to go through the whole release, but some highlights for you. Clearly the biggest highlight is around sales orders. With our orders growth, our customer count is now at 165 customers, 26 of which are both VNA and eUnity viewer customers. Our customer attrition remains really low. It's less than 2%. And we consider our business to be very sticky. We believe the sales orders and the continuation of building our book of business to be a true measure of the company's progress from year to year. We've seen quarter over quarter timing issues. We have some lumpiness that everyone is aware of. We have deals and revenues can be impacted by contract milestones and timing issues. So this past year's success from a sales perspective gives us confidence that we are on the right path and how we position our products and that our success will continue to drive a positive network effect on deals moving forward for this coming fiscal year. And I know that prior to the client outlook acquisition, we discussed a $40 million near term pipeline. As you can tell by this past year's sales orders numbers, we have realized some of those deals, but there's still more in the current pipeline that we continue to work. And some of the deals that we discussed back then have been on hold for the past year due to hospital budgetary concerns. And of course, we have some natural attrition out of that older pipeline as well. However, overall, the pipeline has been completely revamped since we're selling bundled products We're a year post-acquisition. We have new leadership in both marketing and sales. And what I can tell everyone is that our current pipeline, we have no concerns with, and our pipeline is supporting our sales efforts for this coming fiscal year without any issues or concerns on our part. So from a new customer highlight, you'll notice in the release there was quite a few highlights here. I'm not going to highlight all the new customers and expansions that was in our release, but I would like to highlight UVM. We had a recent announcement that we won their enterprise viewer business as an expansion from our V&A contract that we won years ago. Shortly after our announcement, PME announced their win for the PACS business at UVM. And I wanted to just mention a few points about that to make sure everyone heard what the story is there. You know, true to our tagline, which is independence through innovation, we migrated all of the imaging data at UVM from their various facilities onto our V&A. That gave UVM the flexibility to leave behind their old PACS vendors and choose a departmental radiology PACS solution, something that fits their needs and the radiologist's needs. We provide the long-term archive and routing workflow for all six hospitals, and this will be the first opportunity we actually have to integrate to the Visage product. We've also been contracted to provide the universal viewer for the enterprise. This will image enable the EPIC EMR system. So clinicians outside of radiology will use our viewer to view medical imaging. And then the radiologists will use the visage viewer for radiology specific advanced visualization. All things considered, this is a perfect example of how PME and Mach 7 both fit into the imaging segment. And we manage the data in Universal Viewer and PME provides the advanced visualization and radiologist experience. So it actually dovetails pretty nicely together at UVM. I just wanted to highlight that to eliminate any confusion. So moving on to annual recurring revenue, we're now generating 13.3 million of annual recurring revenue. That's revenue that's earned from live annual support contracts and monthly quarterly subscription licenses on an annualized basis. ARR has more than doubled since last year, and we continue to grow as existing customers become fully deployed. Examples like Trinity and Aventis that are not fully deployed yet. This ARR is now covering approximately 65% of our annual operating expenses. One of the questions I'm often oftentimes asked is if we will convert to an all SAS model. And, you know, well, we talk about this, but we continue to address and evaluate our model all the time. Currently, we have many of our largest customers who are very acquisitive. We deal with IDNs. We deal with businesses who are acquiring other hospitals. And as such, they prefer a capital model. They look to reduce operating expenses when they're acquiring a new hospital, just as we would if we were acquiring any business. So they really prefer that capital model. And I don't think that moving to an all SAS model will really help us with that business. But over the last couple of years, we've made progress towards increasing the overall percent of revenue that comes from recurring rather than one-time license fees. We'll stay the course and continue to increase the overall recurring revenue each year. As the market evolves and we see the right opportunities, we will adjust our model. And again, with the intention of continuing to grow our recurring revenue line every year. From a revenue perspective, revenue is more closely linked to cash receipts than sales orders in a given year. We are forecasting results in the $19 to $19.5 million range for FY21. This would represent approximately 15% growth if we normalize the FX rates year over year. We expect to see strong growth in revenue this fiscal year. The expectation is underpinned by the rollout of Adventist and Trinity healthcare contracts. You'll also note that we've had some continued success from a sales perspective recently with the announcement of Advocate Aurora just a couple of days ago. That further buoys our expectation for a fiscal year 22 revenue growth. And further to our commercial success, we have introduced Dave Medaffrey to manage the sales organization, and we have appointed Lisa Thompson as a VP of services. This will help to both ensure our continued sales success and also assist with shortening the cycle between sales orders and the realization of service revenue. So I think those cover the highlights for us with this update, with the Q4 update, and we want to leave plenty of time for folks to ask questions. So with that, Andrew, let's push it back over to you and see what kind of questions we have.

Okay, thanks, Mike. A reminder for all attendees on the call, if you'd like to ask a question, please raise your hand in Zoom and I'll patch you through to the to Mike and Jenny or pop it in the Q&A function and I'll read it out. We do have Scott Power from Morgan's here. I'm just going to, you'll need to unmute your line, Scott. When you do, please go ahead.