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?