Mach7 Technologies Limited

Good morning, everyone, and welcome to the March 7 first half FY25 business update. My name is Françoise Dixon, and I'm Head of Investor Relations for March 7. Today, our CEO, Mike Lampron, will provide an overview of our first half result. We will then open it up for questions, which will be answered by Mike and our CFO, Diana Hearn. If you have a question, please submit it via the Q&A text box at the bottom of the screen. I'll now hand over to Mike for the half one update.

Thank you, Francoise, and welcome everyone to our first half FY25 investor presentation. We're going to take a quick spin through a business overview, discuss our product offerings and some differentiators. Then we'll get right to the first half results. And we'll finish up with some comments on the outlook for the rest of the fiscal year, along with questions that all of you may have. So just to review Mach 7 and sort of our purpose and why we get up every day. We enable exceptional patient care by empowering healthcare providers to make more informed decisions. The intent of Mach 7 is to be able to provide imaging and information data to any clinician when they need it to make decisions on how they treat and diagnose patients. Our offering goes beyond just radiology and towards other specialists. And we do this through an innovative data storage and management solution, along with an image viewing solution. Some of the unique value propositions of our company. We're an interesting sized company. We are a global company, but we're small enough to still have a personal touch. And it's actually a differentiator for us in the US market, the fact that we are a public company, I think actually works to our advantage because our clients have a lot of visibility to our business that if we were a typical entrepreneurial private institution in the US, clients wouldn't get the information they do on Mach 7. That helps give them some reassurance of the stability of the business. And with the size, we're really able to build a personalized service for our customers. And that's something that our clients really appreciate. From a deployment perspective, We deploy in the cloud. We deployed on-prem. We give our users ultimate flexibility. They can use hardware that they've already invested in. They can buy new hardware. They can change out their hardware at any given time. Not only is our model flexible, but our solutions, being independent of one another, offer modularity so that as an institution grows, Those modules may make more sense in the future or they may make less sense, but you don't have to rip and replace technology to either add on or replace. And that's a differentiator. That's the independence. And our customers have said to us that they no longer want to be held vendor captive anymore. So the concept of having independence and giving our customers flexibility so that they can make decisions into the future is a big value add for them and something that's a little unique to our company. From an ongoing perspective, you know, built for the enterprise, again, reiterating the concept that we weren't built just for radiology, we were built for imaging across the enterprise. We are a highly performance solution and we have a very, very strong universal viewer for radiology and for outside of radiology. And we've got great workflow that's enabling both the acute care sector and the non-acute care sector. So multiple sectors, great breadth of offerings and breadth in the sort of the geography of which we cover between the APAC and in North America. The actual offerings that we have, our three central product offerings are on the enterprise data management side. That's our VNA. That's sort of the brains of our solution. That's where all the data management happens. Our enterprise diagnostic viewer, the eUnity enterprise viewer, that's our zero footprint diagnostic viewer for radiology. And then on the workflow orchestration side, we have the communication workflow engine. And that is unique to us. It offers tag morphing, data anonymization, lifecycle management, routing, HL7 workflow rules. Our VNA, along with this communication workflow engine, is different than many other VNAs where Traditionally, VNAs have been behind a PACS solution. So images go from the modality to the PACS to the VNA. Typically with our deployments, it goes from the modality to the VNA, then onto the PACS because our routing capabilities are typically faster and superior to those within a PACS solution. So it's a little bit of a different way of looking at the technology stack. And again, it doesn't matter if it's a QCARE or non-AQ, it's the same technology stack. From a strategic perspective of where are we spending our time, Again, we talked about these pillars pretty consistently. Cloud enablement is where we're spending a lot of time right now on the R&D side along both products. Both products are a little, one product, the Unity products a little further along than the VNA product on cloud enablement, but we're bringing both products towards a native cloud environment, particularly in the Azure and AWS environments from a hyperscaler perspective. On the service and supportability perspective, this is really about continuing to evolve our products and using the innovation of R&D to make our products more deployable, creating templates, creating the ability for us to deploy our product with a bunch of customizations already built in. which will make the product that much easier for the implementation engineers and the deployment team to roll the product out to our customers. Along with that, tools for supportability, proactive support tools are very important to us. Trying to utilize different third-party AI applications for predictive analytics is an important part of what we're doing from a supportability perspective. And on the integration and interoperability perspective, enterprise viewing, enterprise management, enterprise solutions, all of that is to say that no one vendor can do it all. And so whenever the backbone is of an enterprise solution in regard to a hospital in imaging, you have to have the ability to integrate to multiple third parties to make a complete solution. There is no vendor out there who does it all. And that's a really important component to give all of the customers the end product that they need so that they are empowered to make those good clinical decisions. A great example on the interoperability component is our new offering with UnityView. UnityView is a collaboration between Mach7 and NuView. You'll see NuView has several partners, but it's a little unique with us in the sense of this integration with our viewers is truly unique. They have built a work list that's creating a radiologist cockpit, and it's giving radiologists a lot of capabilities that they otherwise haven't had, whether it's from, you know, a lot of the work lists are the same that are out there in regard to their ability to triage, their ability to assign different studies, their ability to have subspecialists. NewView really concentrates also on its ability to really help in the teleradiology format and help with RVU assignments and build in some AI capabilities to take into account availability of radiologists spread across a country, spread across hundreds of locations, and be able to allocate that work. So UnityView is meant for disparate solutions, disparate health systems, whether it's an IDN or whether it's a radiology practice with multiple radiologists spread across the geography. There's a link here where I would encourage anyone to go out and watch the product video. It gives you a great description of exactly how UnityView can help customers. We're getting a lot of great traction on this product offering. And again, just a great example of how we look at interoperability. So as we came to the end of the first half of the fiscal year, we thought it was a good idea to talk a little bit about progress that we've made so far. Broke this up into three categories. We'll talk about the left-hand side here first, the team side. So we've spent some time since the middle of December thinking about how we want to realign our sales team to focus on net new sales and customer success. As we looked at that, when we met with the sales directors within the organization, we realized that close to 50% of their time was being allocated to existing customers. So 50% of their time allocated to the existing install base and not out hunting net new logos, which is a focus of our company. But there's another focus of our company around customer success and customer intimacy as well. So this realignment process really has to do with making sure that we've got the right number of people focused simply on net new and net new only. And then the right number of people who are dedicated to the install base and our customer success and making sure that those clients are happy and that the land and expand model continues to thrive within the organization. So that realignment process is underway for us. And look, it's an ever evolving thing. And right now we think that's the best way for us to have laser focus on two of the really big goals for the business. We finished our investment in our three strategic pillars within the first half of this fiscal year. And at the same time, we've taken a really close look at the business. We continue to take a look, but we have a close look at all of the costs in our business and where we can drive out any operating costs to sort of start eking out more leverage to the business and making more progress towards our recurring revenue, covering our operating expense and working towards better and better profitability. It's an ongoing process, but there is an active costing out initiative within the business at the moment. On the customer side of things, again, focusing on those net new logos, you know, and the conversion of that pipeline, but at the same time, concentrating on the install base, driving sales orders for revenue growth through the install base, right? Two separate components, both contributing to revenue. And then the creation of this customer success team, we used to have what we call the board of standard account management team. And now we've refocused them And we established how we want them to operate. And that's the foundation for our new customer success team that we're building. On the product side, leverage in the investment and product innovation, we want to continue to invest in innovation. And investing doesn't always mean money, right? Sometimes when I talk about investing, it's investing time and energy, human capital towards reaching a goal. It's not always about money. In our case right now, You know, our innovation is going to come from the R&D organization as it stands today, along with the product team, along with feedback from all the services and support organizations and our marketing organization to bring that feedback from the customer to the product team. And we've had a lot of really good positive feedback from our customers on UnityView. And it's getting some good traction from a sales pipeline perspective. So now we'll sort of get into the meat of our results here for the first half. Delivering strong growth in car and ARR and revenue. We've achieved positive EBITDA and NPAD A as we continue to grow that revenue. We have introduced some cost discipline and we're driving towards operating leverage. And in our recurring revenue, made good progress covering our OPEX in the first half of the year. We did that while being able to invest in our people, our processes, our tools, again, driving that growth and innovation. We were able to initiate an on-market buyback program that will start on March 3rd coming up next week. And we remain to have a strong financial position with no debt. And again, with these results, we're reaffirming our FY25 guidance for car revenue growth of 15 to 25%. and OPEX growth, which will be less than our revenue growth, working again towards more profit. So here are the highlights for you. 17.7 in revenue, looking at a 33% on PCP and puts us on track for our FY25 guidance. Again, that 15 to 25% growth. 12.6 in recurring revenue. Again, making good progress towards hitting that goal of having recurring revenue covering our operating expenses, reaching 80% versus 72% PCP. Our car continues to grow at 19%, 31.8. And our ARR is, again, that's an annual run rate of our annual recurring revenue at 25 million, covering right around 80% of OPEX as well at the moment. On the bottom half and the left, 15.8 of operating expenses. That's running us around the 15% growth on operating expenses over last year. And on EBITDA, we have an adjusted EBITDA of $800,000. And we have an adjusted NPAT of $1.4 million if we take away the amortization associated to the client outlook acquisition. And we had closing cash at the end of December. So the end of the first half of 23.6, we did make the statement at the end of January, we had 25.3. So we did see some cash influx there at the end of January versus where we were at the first half of the year. So concentrating a bit on just revenue for a second. Again, good numbers on the revenue up 33% on track for FY25 guidance. Recurring revenue on track with where we would expect to be for the year. Professional services is down a little bit. We'll see that come back up in the second half. And on the capital license revenue, we had a bit of capital licenses. Then again, these capital licenses, it's a little bit of an up and down. We are primarily signing subscription licenses, but occasionally a capital license will sneak in there. So just know that it's always going to happen, but occasionally. And then from a product revenue split, you know, about a 60-40 split in the first half between the V&A and the viewer. So looking at sales orders of 16.2, 49.5 last year was a really big number. So I wouldn't expect for our sales orders for the first half of 25 to be the same as our first half in 24. That being said, we do want to focus on these net new logos. And I will reiterate that we would expect to get three to four net new logos in the door by the end of FY25, just as we said we would. We still believe that that's achievable for us. But we think that focusing the sales team on those net new logos and focusing on customer success is going to get us where we need to go from a sales order's perspective. So a slight adjustment to outperform in the second half of the year. ARR type sales of about 10.1, like I said, predominantly subscription revenue for us. And then on the professional services side, a little bit of a decrease, but expect to see a bigger number on professional services as we go into the second half of the year. And when we're looking a little bit towards profitability, OpEx growth of 15%. Know that there's some targeted investment in our pillars that fell into that, that drove up to that 15%. We invested in software tools and we invested in resources for those pillars. And we think that that's going to help us long-term. So that contributes a bit to that 15% mark. EBITDA, 0.8, showing good improvement over where we were last year, this time last year. And NPAD A of 1.4, again, improved due to the revenue growth and cost discipline. And in showing in absence of the amortization for the acquired and for client outlook, MOC 7 had a profitable half year. Cash receipts increased by 3%. And a lot of that is due to timing. So quarter over quarter, half year over half year, that could change if you're trying to do comparables. And then $23.6 million in cash. And I think what we're really showing here is that we continue to have good cash numbers. We continue to have no debt. We continue to have good revenue growth. And we're really keeping an eye on how we're spending those dollars. Leading us to the cash conversation. And you can tell as you look at that chart that cash has been pretty stable for us. Again, cash on hand of 23.6, had a little over 25 at the end of January. Total receipts, 15.9. Again, slight increase over PCP. Total payments to suppliers increased by 18%. And again, highlighting that this is really where we have the targeted investments in our strategic pillars. These suppliers are generally software providers, either proactive support tools, cybersecurity tools that were important for the business to implement. and professional service automation tools to help us get to a more streamlined deployment process. So some of that is really built around tools. And then we did capitalize some development costs of about a half a million dollars. And again, talking about the on-market buyback announced at the end of January, which will begin on the 3rd of March. So as we think about the outlook and we think about where the industry is, in North America, for sure, we see the landscape continuing to evolve. The acute care and the non-acute care are certainly competing for patients at the moment. And we're seeing a lot of of adjustments there and adjustments in how people are getting paid from the insurance companies. A lot of this behavior is driven by reimbursements and how people are getting paid. And so there's acquisition in there from the provider's perspective that's throwing a little bit more confusion to it. We feel at Mach 7 like that gives us an advantage. We've got a great example throughout our install base of both the acute care and the non-acute care settings. It gives us an advantage over some of our competitors. We've realigned our sales team to really focus on that, focus on net new wins and logos. And that land and expand business, I've talked about it every time I've gotten on these calls, it's super important to us. And having a team that's dedicated to customer support and customer success, making sure that those customers are getting the attention they need, and having us act more as a consultative expert. and helping them as a trusted advisor is more what we're looking to do here rather than trying to sell product to our install base. It's a different feel, and it's a different experience for our customers. Looking ahead, we continue to have a great pipeline. It's robust, it's diverse across regions. APAC region pipeline is growing. Care settings are pretty diverse in our pipeline, and it's pretty diverse in our product offerings between V&A, Viewer, and UnityView. And we remain confident in our ability to execute and deliver value throughout the rest of FY25. And lastly, reaffirming our FY25 guidance, car growth of 15% to 25%, revenue growth of 15% to 25%, non-pex growth, of course, being less than that revenue growth, all of which we feel quite confident in as we look at the first half year results. So with that, Francoise, I will hand it back over to you. And we can open it up to questions.

Great. Thanks, Mike. We have received some questions in advance from Mike Goodson via email, so I'll start with these. Considering Mark 7's investment in bringing customers on board sooner, are there any recently completed or planned deployments where you can demonstrate the return on investment? For example, what was previously a six-month deployment is now expected to be completed in three months?

Yeah, look, a good question for looking for tangible evidence of this. We haven't signed and started a lot of net new projects over the course of the last six, seven months. But what I can use as a metric for this is I can say that Adventist is a client we've had for quite a long time. We've actually bought 13 independent Adventist hospital live in 2024. So in total, we had over 18 go lives in 2024, 13 of which were Adventist go lives. Again, these are all independent hospitals with independent deployments, no commonality amongst them. other than they have the same IDN. So I think those deployments have been going anywhere from, we had one in 45 days, but we've been averaging three to four months. And I think previously we were averaging closer to nine months. So that's the one kind of piece of tangible evidence I can give to that example.

Thanks, Mark. Our next question from Mike Goodson. is, would you please comment on the status of the renewal program in FY25?

Yeah, well, first, I guess our renewal program is not nearly the size that it was last year. Everyone should be aware of that. Last year, we had a massive renewal program. This year, it's much smaller, as you would expect. And we still have about four to six million in total contract value of renewals that we will still expect to get in in FY25. So the renewal program is going well. We have not lost any customers this year. If that's sort of like one of the tertiary questions there, we've not lost any customers and everybody is renewing that we've expected to renew.

Thanks, Mark. Our next question is, when do you expect the RFP to be released for the replacement of the VA's Vistra solution?

Yeah, I wish I knew. The government hasn't really indicated when they expect that to come out yet. I think early and very unofficially. I think we were expecting it to come out maybe this fall in the October, November timeframe. But that's really an assertion by me. That's not that the government has come out with any dates. So, you know, don't hold me to that. But just to give you a really gross idea of timeframe, it could be around that time, but we really don't know.

And our final question from Mike Goodson is, how was Mark Seven's experience at Arab Health recently?

Yeah, you know, I was happy to be at Arab Health this year. I don't go every year. And Arab Health is a really good experience. And, you know, we had several clients that we're working with come by. And we have a really strong relationship with Atlas, who's our partner in the region. And Atlas was terrific. And we were able to organize a lot of different meetings with various different folks from around different countries. And it's just a very diverse group of people that are coming to Arab Health for lots of reasons. I mean, you can look at everything from latex gloves to ambulances at Arab Health. And, you know, imaging is just a small component of the overall healthcare offering. It's really amazing. to see the variety of things that are shown at that show. But for us, it was great. Atlas did a really good job, gave us good space. We had good demos, had a lot of good people walking through the booth. And we feel really good about the opportunities throughout the Middle East. Thanks, Mike.

I'll turn to the live chat now. Our first question, we've got several questions actually from Ian Wilkie. The first one is, can you outline the UnityView business model? Is this a separate new product or an add-on to eUnity?

Yeah, it's a separate product. So the people that would be interested in UnityView are people that have got disparate reading workflow needs, whether that's from an IDN or whether it's from a teleradiology group, people who have the need for When we use the word workflow orchestration, we're talking about a really advanced worklist capability for the radiologist to read from, along with this whole radiology cockpit that integrates the voice recognition and previous reports and other information from the electronic medical record, all into one beautiful package that's in front of the radiologist. to read from studies coming in from multiple different locations. So it's really a separate offering. It wouldn't really be considered an add-on. Although in some cases, somebody that has like eUnity might add on UnityView, but I think we tend to look at it like it's a standalone model right now.

Thanks, Mike. We have a second question from Ian Wilkie. With the finalization of the investment into the three pillars, can you give some feel for second half 2025 slash FY26 OpEx base levels and where you see this going. Also, this program was to deliver 1 million in annualized savings. Was this present in the first half of FY25 or should we see a step down in the second half and beyond?

So I think there's a couple of different topics in there. Um, so, so first of all, um, the $1 million, I think that's being referenced here was in reference to, uh, The innovation work we're doing on the 3d engine and the replacement, uh, we're building our own 3d engine to replace the engine that we're getting through a partner. And that's where the million dollar savings comes from. That's one project that's on target for release here in Q4. And once that's released, we'll get it out to the customers. And that's when we'll start to realize that million dollars a year of savings, we won't be paying the royalty fees anymore to the vendor that we've been getting the 3D engine from. That's one component. In regard to the investment of the two to 3 million and where does that stand? in regard to our OpEx moving forward. Yeah, look, those costs have been incurred for sure. At the same time, we've had costing out initiatives that have happened as well. So it's sort of like a right sizing and alignment of our business. So, look, yeah, you'll see some benefit in FY25. You'll see more benefit in FY26. and um you know we're not guiding to fy 26 yet but but you will see you will see some of that savings in 25 more in fy 26 and and i've and i've always said you know to be to be clear uh i i intend on getting us to the point where you know you're only seeing high single digit opex growth year over year and that's and that's that's opex growth based off of the business growth needs And I hope to get us there as quickly as we can. FY25 will not be that year. You know, FY25 is a year where, you know, again, we've guided to our OPEX growth being less than our revenue growth. You know, our revenue growth right now is, you know, we've guided to 15 to 25%.

Thanks, Mark. Another question from Ian Wilkie. On the 16.2 million TCB and sales orders, Can you break this down into new customers or logos versus renewals?

Yes, we could. I don't actually have the breakdown, though, right now. We didn't break that down for this presentation. But I would say that it is substantially geared towards existing customer base.

Thanks, Mark. Our next question comes from Juliana Salatena. Can you please detail how many sales staff you currently have? And if you intend to grow this number over the year ahead, along with some comments about the size of potential logo wins in calendar 25?

I think I can give you some of that information at least. So we will have two people focused on net new logo growth. We'll have three people focused on the install base. and the land and expand model. We have four people focused on supporting those two teams. We have one person managing the overall sales organization, and we have one person who's geared towards channel management, all of our partners, that sort of thing. That's for the North American market. And in the APAC market, we have two people, a sales director and an architect, sales architect that are dedicated to that APAC market. I think for now, that is the right sized organization within the sales team for the pipeline that we have and for the deals and where the deals are between brand new opportunity to contract negotiations. There's a lot of variation in how much effort each deal takes depending on where they fall in the funnel. And for now, we feel that that's the right size for the business. And as we always have, if we believe that we're going to get better results by growing that team, we will not hesitate to do that. For now, though, we think that's the right size and the right alignment and give people some focus on what they're doing.

Thanks, Mark. We now have a couple of questions from Jenny. The first one is how much or what proportion of the payment to suppliers is related to the three strategic pillars? Now that the three strategic pillars are completed, are there any that are not paid yet? And so what payment to suppliers is expected in the second half of 25 and FY26?

From a percentage of overall vendor payments, I don't know that I can actually give you a percentage on that, but I can say that we've spent about $500,000 towards vendors. are related to these pillars, Aussie. And, you know, that is, you know, substantially completed now. There's no further cash spend related to that. So, you know, I think, you know, from that perspective, we, you know, the only additional spend we'll see are not necessarily related to those pillars, but more related to team growth based off of where the team needs to go for future deals that are signed.

Thanks, Mike. We have another question from Jenny and it relates to the sales realignment. Will the account management team handle the existing customers? How do the costs look like by realign both the sales team and the account management team? When is the net new expected to come?

Yeah, so net new, like I said, three to four net new is still expected for FY25 to answer that piece. On the customer success side, yes, they're managing all of the install base and any of those opportunities that fell within the install base will now be managed through that customer success team. You know, from a... From a cost perspective, there's a bit of cost savings that are saved there just in relation to the fact that customer success managers are not commissioned employees. These are people that are dedicated to customer success and making sure that our customers are being successful with our software. That's their goal. And I think that's the right goal for them. I think that's the right way for them to be thinking and the right way for them to be acting. I want them to be advocates for the customer. I want them to be working with the customer so that they're getting good value from our software and that they're taking advantage of all the software that we have available to the customers. I think that can be better served through that customer success role than through a typical sales role. I'm not sure if I missed another component of that question or if I answered all those components.

I think you covered it. Our next question comes from Andrew Ribeiro. Where are we currently tracking in the class ratings?

Yeah, good question. So best in class came out the end, maybe middle of February, I guess, maybe early middle of February. And we came in, I'm trying to remember by memory, we came in fifth on the VNA. But the one thing I would highlight on that is our actual score went up by 10 percentage points this year from last year. So that was a really good bump. It's just that there's some other vendors that had a bump too. And so we came in fifth there. And then on the viewer side, It was a bit of a tighter race, but we came in fourth on the viewer. Some new names kind of on that viewer list that we've not seen. I think for both the VNA and for the viewer, the universal viewer segment it's called, AGFA was the winner in both of those categories. So, you know, that's not a name that we've seen on that list recently, but they were there this year.

Great. Thank you, Mark. Before handing back to you, I'll just pause a moment in case there are any final questions. We have no further questions at this time, so I'll hand back to you, Mark, for closing remarks.

Yeah, great. Thank you, everyone, for attending. Looking forward to delivering a great second half to the year and look forward to being able to speak with you all soon. So thank you all for your time.