M&A Announcement

Jul 26, 2021

Slides

Thank you for standing by, and welcome to the IMAX HS Conference Call on the acquisition of radiology service provider, Remab SIS. All participants are in a listen only mode. There will be a presentation by Doug Flynn, Chairman of IMAX HS, followed by a question and answer session for CEO, Doctor. Hermann Erengo and CFO, Rina Minhas. Presentation is based on slides lodged with ASX yesterday morning. I would now like to hand the conference over to Mr. Doug Flynn. Please go ahead. Good morning, ladies and gentlemen. My name is Doug Flynn. I'm the Chairman of Inex HS Limited. And with me on the call is Doctor. Romain Orango, as CEO of Onex HS and Rina Munoz, our CFO. As Heman is also the Principal Chair of REMAAD, I will leave this discussion, but we'll rely on Hernan for questions at the end. I'll start with an overview of the acquisition. Please turn to Slide 2 of the presentation pack lodged with the ASX yesterday morning. AmexHS will, subject to shareholder approval, acquire Remab SAS for consideration of $8,500,000 with estimated purchase price adjustments, which will be satisfied in cash of approximately $1,400,000 and shares of around $3,600,000 at $1.76 each being the 10 day VWAP to 3 days prior to the announcement. The acquisition represents 6.6x Remap's 2020 EBITDA of $1,500,000 and is expected to be earnings accretive to shareholders. We now have 2020 revenue was $9,000,000 and post acquisition on a consolidated basis, $3,200,000 The difference between these two amounts relates to related party transactions of $4,400,000 in IMAX HSS accounts and $1,200,000 in remap's accounts plus a small foreign exchange difference. And because this is a later party transaction, there has been strict separation of responsibilities of parties, and Doctor. Korango has played no part in the Board's consideration of this transaction. Non executive directors have undertaken extensive due diligence in regard to both the company and commercial due diligence of the radiology market in Latin America. Slide 3 provides you further details about REMAVE. Establishment of Rhema in 2012 predates a reverse takeover of IMXHS in 2018. At the time, the Board involved in the RTO decided not to include remab in the float. Over time, IMAX HS and REMAP have done an increasing amount of business together and had several joint agreements with customers, Taken in line to the practice of outsourced radiology services for major hospital groups in Colombia, RUMAP has shown strong growth. The use of IMXHS software has facilitated Lumo's local radiology and internationally tele radiology in Spain. Slide 4 highlights the key benefits of the acquisition. Access to the database of reports generated by Remap, RMXHS. Radiology is important to the ongoing development of AI tools to expand and enhance our software offering. Similarly, trailing and feedback of new software releases, In particular, user interface and user experience requires direct and easy access to the user body. REMA is profitable, and we would expect the acquisition to be accretive at every level. It is growing and is ongoing solid growth drivers. Importantly, it removes a related party situation and facilitates a path for greater transparency for shareholders. In conjunction with that, we are able to establish a better defined management structure as the REMA management team where we see IMAX HS's radiology managed services. Slide 5 shows you how remap fits into the radiology process. Moving to Slide 6. Remi is well positioned for growth domestically and internationally. There's a strong presence in the Colombian market with a 5% market share in Bogota and has a foothold in Spain. Its high quality radiology team and experience using Remap software means Remap is well placed to expand its presence in Colombia in other countries in Latin America, Spain and the U. S. Slide 7 demonstrates how RouxMab is helping IMAX HS to develop AI capabilities. Developing AI capabilities will provide both parties with a competitive advantage. Access to a growing radiology database with agreement from our clients gives us fast and powerful access for AI training and beta testing for new releases. Slide 8 touches on the future benefits of a combined group. The role of technology in radiology, in particular AI, will increase in the future and benefit both Imex and ReMAb and their customers. Turning to Slide 9. ReMAb acquisition broadens our customer offering in radiology service provision and strengthens our software as a service offerings. Turning to Slide 10. The addressable market for remap in both Colombia and Latin America is huge. And driven by increased demand for remote radiology services due to high setup costs, scarcity of high quality radiologists, turnaround time and price. And moving on to the timetable on Slide 11, we expect to send out the notice of meeting mid August for the extraordinary general meeting to be held mid September. An AGM is required to approve this transaction because this acquisition is a substantial asset and a related party transaction. Related to these matters is an independent expert report. An independent expert report is required to inform shareholders. And this report will be appended to the notice of meeting. Thank you very much. I'll turn it back to the operator to fill any questions you may have. Thank Your first question comes from Glenn with Gliese. Please go ahead. Yes. Good afternoon, gentlemen. I was just curious to get some feedback. The market doesn't seem to like the transaction. Just any comment in relation to what it might be? I think the original approach by The Board at the time when Yateo was established was to put in place a pure play software as a service business. The fact of that is, though, you pretty much always had Some radiology services business in it, and it's had a significant related party issue attached to that. I've had several shareholders comment on that and seeking us to solve that problem at some point. I think this company is going to remain very focused on the software as a service business. The development and deployment of our software remains first in our minds and our first priority. What we do have is integrating businesses in radiology services. And it's profitable. It's growing. And quite frankly, we can do 2 things. We can build that business out and at the same time, continue to grow and BILDA, our software business. Everyone likes to see the shares going up every day. But quite frankly, if our shares go up over the course of the next year, 2 years, I'll be happy with that as we see our software business grow and as our radiology services business grow. So the strategy going forward, if I could just ask a follow on question to continue to develop technology but also the physical radiology businesses? Yes. We're trying to go to we're not changing direction. We're trying to make this clearer for shareholders, provide greater transparency, improve the way in which we're managing this business And not have as complicated a structure as we've had up till now. Categorically, not moving away from our software business at all. In fact, this is going to in my view, this is going to allow us to accelerate it. Thank you. Thank you. Your next question comes from Ian Wilkie with Morgan Financial. Please go ahead. Good day, guys. Just looking at The current performance of this is $9,000,000 in revenues and then strip that out $3,200,000 Can we get an update on the historical performance of Remap, so where has it what sort of the growth have you guys seen over the last couple of years? And then I guess Might be a little bit more detailed, but if you strip out the IME, so the Aquila product from these guys' business. What would it have been? Because I know that the Ime software sort of bonuses of revenue pass through for remap. So can you just comment on that, please? So I'm going to ask Amanda to talk about the growth of Renov over the last 2 or 3 years. It's going to be we declare Some radio I'm not quite sure if you're seeing any of you are seeking the split between Radiology services in the rest of the business, but we declare $4,400,000 in our 2020 accounts related municipal subsidiary contract, and that's the majority of it. But it can be difficult to do a deep dive. We intend to Split the radiology services up from the software business in our full year accounts this year in 2021. But it's difficult to do it on the fly. If Helman perhaps could comment on the growth of doing that over the last Yes, sure, Doug. Well, rimap has been growing well, good evening good morning for everybody. First of all, and hello, Pian. The growing rate for Remap has been significant In the last 3 years, it has been both growing from 'nineteen to 'twenty. There is more or less a 70% growth from 2018 to 2019 was more than 100% growing rate. So it's a company that has been accelerating the growth in the recent years. I think just to follow-up on that, that's Rina here. We do say in the announcement that in 2020, we reported EBITDA up 191 percent and revenue is up 60% on 2019. Yes. Okay. That's great. And second question, do you guys see any synergies between the 2 business? I mean, I know it's sort of a different sort of model, but are there some staffing which can sort of be integrated into the one central area? Anything there? Let me just keep asking that. Let me start by saying we don't see a huge amount of cost synergies. We do see a system that gets synergies on the revenue side. And maybe, Hernan, Could you pick that up and take it from there? Yes. Sure. Well, we think that in some way, we are anticipating the future in the sense of the interaction between technology and radiology practice. We think that currently there are several crossing pathways, but in the future, there will be more and more integration between the two elements. So with this step we are taking, we are probably going a bit ahead in the future in order to have both sides of this integration under our control. In the future, we expect that, for example, the AI will take a significant part of the operational activities of our radiology practice. If this is the case, we have 1, we have presence in both sides and we will be able to take better advantage of it. So the main thing that probably It's going to be positive for us behind all the elements Doug already mentioned is that we are like anticipating which is going to happen in the future. Thanks a lot. And just as a general group, is there any update to your guidance. I know that for a while there you guys were saying EBITDA breakeven on a sort of run rate basis by the end of the calendar year 2021. So stripping out the Remab acquisition if it goes ahead, are you guys still on track To hit those numbers? We plan to do the update at the annual So the last year results, and we'll provide detailed guidance at that time in the same way we Last year, so probably a month early on that Thank you. Your next question comes from Nick Worrall with 708 Capital. Please go ahead. Good day, Doug. Good day, Hammad. You talked about EBITDA in this presentation. What about EBIT? What's the amortization and depreciation schedule, Mike, for this business. And what's the CapEx expenditure profile Looking forward as well, please. And how much is that going to drag on the resources of I and E? Nick, I'm not sure. I might turn to Reena in a moment on your question on Indeed. This business does have some CapEx attached to it. And the models with each client is not the same each time. So in some cases, we have clients who Have their own equipment. In other cases, we provide it. So it's not as CapEx heavy as a typical radiology services business in Australia, but it's not nothing either. So we do have circumstances where we are providing equipment. I think the Everlyte business that's currently owned in Australia by Intermediate Capital Group that has no equipment. If you think of a business like EyeMed, which has its own clinics and all of its own equipment, It's kind of somewhere between those two models. We don't run any clinics ourselves in terms of Having property and equipment in our own clinics, these outsourced contracts from major hospital establishments. So there is some CapEx, but not as heavy as the typical Australian models. Herman, do you want to add to that? No. I just confirmed your statement. In the model, The principal business model for Remab, which is outsourcing, is not always requiring CapEx. Sometimes it happens as an internal teleradiology activity, which doesn't require The purchase of any piece of hardware, sometimes it requires and the degree of Investment in that scenario depends on a case per case analysis, but can go, as you said, from No requirements to CapEx requirement depending on the magnitude. But in the overall, The average of our deals are requiring some CapEx. We have some with no CapEx and some other requiring a more significant portion. Brina, is it? Yes. So Just based on what you guys said, obviously, there is some D and A going depreciation going through the accounts, but the acquisition will still be accretive on the EBIT to Basis. On which basis? Sorry. EBIT. So there is some depreciation going through the account. Not if the acquisition will still be accretive on an EBIT basis? Yes. I would assume it would be. Yes. So there's a bit of depreciation going through there, but not a large amount. Okay. Also in not in the presentation, but in the other accompanying announcement, you talked about Where you referenced there the consolidated revenue of $3,200,000 and EBITDA of $1,500,000 That's So all the EBITDA is coming from non related party transactions. Am I correct in assuming so? Correct. So is that indicative of the sort of margin attached to this kind of business? Say it again. Is that revenue and EBITDA margin, I guess You mentioned what we should expect going forward for transactions through that business? Well, I think that given there is any spectrum of possibilities in terms of the business, Well, it's by all, but in average, yes, it's a reflection of what is currently happening from all the business lines Remap has currently. So we can expect in Averaj, something like this. Okay. Thank you, Alain. Please leave your time. Appreciate it. Thank you. There are no further questions at this time. I'll now hand back to Mr. Flynn for closing remarks. Thank you very much, everybody, for joining this call. We'll try to make this a big success.