AGM 2021

Sep 29, 2021

Slides

Thank you for standing by, and welcome to the IMAX HS Limited 1H FY 'twenty 1 Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer I would now like to hand the conference over to Doctor. Herman Arango, CEO and Co Founder. Please go ahead. Thank you very much. Good morning and thank you for joining us for the presentation of IMXHS First Half FY 'twenty one results. I am Doctor. Herman Arango, CEO and Co Founder of IMAX HS. And with me on the call It's Rina Minhas, our Chief Financial Officer. Turning to Slide 2 of the presentation launched with the ASX this morning. Himax HS is a provider of cloud based Medical Imaging Software Solutions. Our software is fully web and cloud based, includes innovative Artificial intelligence or AI tools and has a lower cost base than our competitors, which enables us to provide attractive pricing to our customers. Turning to Slide 3. We are a leading medical imaging software provider in Latin America and expanding our footprint to larger markets such as the U. S. And Australia. Our software is used by over 2,100 radiologists across 15 countries And is developed by engineers based in Colombia, who now total 38. Turning to the agenda on Slide 4. I will start with providing you with an overview of our first half FY 'twenty one results, and then Rina will cover the financials in more detail. I will then address our strategy and Slide 6 shows that we achieved Good growth across our key financial metrics in the first half of FY 'twenty one, both on a reported and at constant currency basis. Sales revenue of $5,200,000 was 15% higher compared to the prior year and up 25% on a constant currency basis. 94% of this revenue was recurring revenue as we continue to focus on growing subscription revenue. Annualized recurring revenue or ARR was €12,700,000 UP 44 percent versus BCP and 57% higher on a constant currency basis. Our EBITDA loss of €2,100,000 increased by 800,000 compared to last year's number due to investments in sales and marketing and one off costs related to the RIMA acquisition. We are investing in sales and marketing to expand into new geographies such as the U. S. And Australia. With a cash balance of $8,300,000 IMAX HS Slide 7 provides an overview of Aquila Custom, our customized solution for radiology that is target to large customers that require highly Currently, most of our revenue and ARR comes from this product offering. As you can see on this chart, ARR from Aquila Custom was 10,700,000, up 22% versus BCP, 32% on a constant currency basis, representing over 80% of total ARR. Despite the strong growth, decision making among larger operators has been slower than normal as a result of the pandemic. However, we are experiencing renewed interest from larger customers and seeing an increase in imaging volumes. Turning to Slide 8. Our new product offering, Akila in the Cloud, continues to generate strong interest and provide small and medium sized customers With a low cost medical imaging solution that can be accessed remotely. Launched in May 2020, it is a highly scalable business model that is supported by an extensive and growing network of distributor partners. In fact, 65% of Q2 FY 'twenty one Akila and the cloud sales were generated by our partner network. At 30 June 2021, Akil in the cloud has contributed €2,000,000 in ARR based on 84 deals, including 6 in the U. S. And 4 in Australia. Q4 FY 'twenty one was our strongest sales quarter with 24 deals showing that sales momentum is growing. Despite the strong interest in the product, implementation has been slower than planned. We are working closely with our partners to make implementation process more efficient and onboard I will now hand over to Rina Minhas, our CFO, to cover our 1st Half FY 'twenty one Financial Results in More Detail. Thanks, Hernan. I will now run through the FY 'twenty one financial performance of the company, starting on Slide 10. We finished the year with ARR of $12,700,000 which is 44% up versus prior year and 57% higher on a constant currency basis, reflecting continued growth from our customized solutions, both volume growth and new customers and $2,000,000 of ARR from the Aquila in the cloud product offering. The chart shows annualized recurring revenue, which is currently billing as well as ARR, which is yet to commence billing in a lighter shade. Turning to Slide 11, the income statement. I will now run through the underlying financial performance of the company, which excludes costs in relation to share based payment expenses and foreign exchange movements. First half FY 'twenty one revenue of $5,200,000 was up 15% versus TCP and up 25% on a constant currency basis, with recurring revenue contracts accounting for 94% of revenue. The strategic focus on driving subscription revenue growth continued with recurring revenue maintaining a growing trend. Total expenses were up 16% compared to sub half FY 'twenty, reflecting an increased investment in sales and marketing, Expanding operations in Australia and the U. S. And acquisition related costs of £4,400,000 As a result, The group's EBITDA was a loss of $2,100,000 representing a 64% or $800,000 decline versus PCP. Underlying EBITDA was a loss of $1,400,000 versus an EBITDA loss of $800,000 in the first half of FY 'twenty. Interest and finance costs on borrowing were down versus PCP as the prior year results included costs in relation to a related party loan, which was repaid in August 2020. Turning to Slide 12, the balance sheet. At 30 June 2021, the company had net assets of €13,700,000 The company ended the half with cash on hand of €8,300,000 and total debt of $1,000,000 Intangible assets increased during the 6 months, primarily reflecting the continued investment in software development of $630,000 during the period. Borrowings decreased by $600,000 to $1,000,000 due to the repayment of debt during the half. On Slide 13, net cash flow used in operating activities increased by $500,000 versus prior year, Reflecting the increased investment in one off acquisition related costs discussed earlier, net cash used in investing activities included Development cost of $630,000 Net cash flows from financing activities include $1,000,000 from Proceeds from the exercise of options and the down against PCP due to the prior year, including new borrowing facilities. I will now hand back to Hermann to take you through the FY 'twenty one strategy and outlook. Thank you, Rina. Slide 15 shows that the global medical imaging software market is large and growing. The U. S. Accounts for around 40% of the global radiology imaging systems and PACS market, valued at greater than US2.8 billion dollars And Florida alone is 3 times the size of the Colombian market based on GDP estimates. That is why we are targeting overseas markets, particularly the U. S. Akhil in the Cloud is helping us move into new geographies as 85% of Akhil in the Cloud sales Slide 16 outlines the macro trends in the healthcare sector and our strategic priorities. We are well placed to benefit from industry tailwinds and expect growth to come from Our core Latin American markets with our custom offer and multiple verticals, including advanced post processing, AI, Pathology and Osteurologies. Our standardized Akhil in the cloud solution aimed to small to medium sized companies, Expanding into new markets in the U. S. And Australia and continuing to innovate Turning to our 2021 product roadmap on Slide 17, we have a number of key priorities. We are upgrading Kila platform with version 4.0 to provide a broader product offering to potential customers in the U. S. And And have just finished version 3.5, which improves the user experience. We are working on creating the Alula marketplace, the world's first pathology marketplace. We have finished developing other Medical verticals including a dental imaging and the trainer information system, which we are currently testing. Finally, We will use our rapidly growing image library for training and testing AI algorithms. Turning to slide 18. Developing AI capabilities is a way for HHS to remain competitive and to develop its software for the future. Access to a growing Radiology database with agreement from our clients give us fast and powerful access for AI training And better testing for new releases. The number of store images that we use to develop AI capabilities has almost doubled to €940,000,000 reflecting a full year of the KOL subsidiary contract. Turning to Slide 19. Access to our growing radiology database is one of the reasons why we are buying Rima, who provides Radiology Services to call subsidiary and a number of our other large customers. On 26 July 2021, IMXHS announced the acquisition of Rimab Saas for approximately €8,500,000 less estimated purchase price adjustments. This acquisition strengthens IMXHS customer offering and provides a test bed for developing AI tools. It also removes related party transactions and improves transparency. The AGM to approve the acquisition is scheduled for The end of September 2021 with completion expected in October 2021. Next slide is Slide 20, shows a summary of what RimWorld does and some key financial metrics. Slide 21 provides you with a first half FY 'twenty one trading update for Rimac. For the 6 months ended 30 June 2021, Rimav reported revenues of 5,300,000 And EBITDA of €700,000 subject To approval of acquisition at the AGM, IMXH's Q4 FY 'twenty one will include Rimac results from 1 October 2021. The timing currently depends on ASIC's approval. Excluding any one offs, management expects Remap's Q4 FY 'twenty one revenue and EBITDA to be above Q4 FY 'twenty results of $2,000,000 and $300,000 respectively, based on strong renewals and new contract wins. Turning to Slide 22 and the outlook For 2021, we will continue to focus on expanding into new geographies and converting the strong interest in both our Aquila The company is continuing to invest In its capability and growth and is recruiting some senior executives together with an expansion in the numbers of software development and operational engineers, the cost of which will impact the second half. For FY 'twenty one, management expects revenue to be in the range of between €11,500,000 13,000,000 The company guided towards achieving monthly run rate EBITDA breakeven by December 2021. Given the continued investment in growth, there is a risk that run rate EBITDA breakeven may not be achieved in 2021. This guidance excludes Remap's contribution in Q4 and one offs. I will now hand back to the operator to open it up for questions. Thank Your first question comes from John Barrick, a Private Investor. Please go ahead. Hello, Herman. Thank you very much for the and Rina. Thank you very much for those results. Just a couple of things. The color in the cloud, you say there's delays with implementation. Could you just So expand on that a little bit, please. Yes, sure, John. Hello, good morning, and thank you for making the time today. Well, In regards to Killeenbecloud, it's a very disruptive business model in our market. It's something that It has been launched and created by ourselves. And after the after launching the product, we have experienced We have found some issues essentially from the customer side and from the partner side. We are currently very focused on converting the 84 deal signed to date and recognizing more of the ARR contribution As soon as possible, and we will continue to use Akhil in the cloud to expand into new markets. 1 of the Main, well, we are not so happy with the length of time to convert the killing the cow deals into revenue. And we are working intensively in close this gap. But the fact is that we have found is As it happens in a very new and disruptive business model, not very mature that there are several things That we have to adjust. And the main thing is that we have found that sometimes the customer final uses and the partners are not fully prepared for receiving the technology. So after the first half of the first year of Akhil in the cloud, we modified some of the terms and of the processes. And after implementing those processes, we have been experiencing an improvement with reduction in the deployment times And in converting the deals in actual revenue. It's a work in progress, And we need to keep controlling and improving the processes that is going in the correct direction. So it sounds like you're saying it needs to you're finding it needs to be more user friendly. Is it Given that the users aren't particularly technological? No, the issues have been And at the moment of using the technology are happening actually before. And what we have found is that Sometimes the customers have not fully, for example, installed all the modalities of the site. It's a new site and the infrastructure is not completed Or the connectivity is not the ideal or not has not been set up. So most of the issues are happening before implementing the technology. As we Install, everything runs smoothly and with no issues. But the main issue is between Placing the purchase order from the partner and actually installing. And most of the larger proportion of this is coming from Issues related to lack of preparedness from the customer side. So we have been correcting this Doing more presales support, more training for our partners and actually checking with In several moments that the infrastructure is prepared for receiving the technology. Right. Thanks. That's very helpful. So presumably that is actually takes personnel time in order for you in order to do that? Well, the objective of this model is to be as standardized as possible and to be as low touch as possible. In the meantime, we are supporting with our resources and with our own team, all the partners and even the customers In order to solve these initial issues, but the plan is that down the road, This business model should be as automatic as possible. One thing, for example, we have done recently is one of the Sources of the delay was that has been that the customer or the partner doesn't have The hardware for routing the images to the cloud. And we have developed a virtual DICOM router sending the images from the customer to the cloud. And with these kind of things, we are being as low as much as possible low touch, And this is the objective of this business model. But again, in the meantime, we have been supporting with our resources The evolution of this new and it's fair to say very mature business model, but already delivering very good And very promising in terms of the future. Good. Thanks very much for that. Now I wanted to ask something about your FY 'twenty one revenue forecast. So you're Saying 11,500,000 to 13,000,000, but how much of that is ARR? Well, the Mostly, we are in the we have been procuring to deliver Recurring revenue deals. In fact, currently 94% of our revenues from the first half are coming from recurring revenue deals. And obviously, a good proportion of this revenue is the conversion of contracted deals into actual revenues. But on top of that, we have to deliver some new deals. And our preference is if those new deals are, again, recurring new deals. But since the inception of the company, there has been some seasonality in which in the last quarters of the year, There are some one offs. And essentially, it is something that happens as a requirement from the side of the customers on tenders or public or private tenders that require exclusively to propose a one off deal. The plan is to, as I said, to bring as much as possible recurring revenue deals To convert existing contracted and lock in revenues, which are currently under deployment And but it doesn't exclude one offs if there is any public tender or private tender Require in these specific business models. Okay, thanks. And you also say Concerning your EBITDA breakeven that had been predicted for December. You say it may not be achieved If you exclude the Renab contribution, what if what if the Renab contribution were included? Well, currently, what we have and show it in terms of or reported in terms of the Rema, the EBITDA is that in the first half was 700,000 If we are not providing guidance on the remap's revenues for the second half currently, but expecting The same growing rate compared to the previous year, it should be probably 2 times this or a number around this. And in that case, there should be enough correction for our EBITDA In order to be breakeven, I will allow Rina to confirm or to add on top of this, if you can please, Rina. Yes. Sure, Hermann. Yes, I think just John, we haven't given guidance on that, but we have said that in the first half, the numbers And I think we do expect it to be higher than the FY 'twenty EBITDA of 0 point For the last quarter, adding in the contribution from WEMA. So we're basically not providing guidance on with RENAB included. We're subject to an EGM, which we expect at the end of next month and then Completion from 5th October. So when might we get Guidance, I mean, if that if the EGM approves, you were waiting for the EGM to approve to give guidance as to whether No, I don't think we'll provide guidance on including remap at that point. So it'll probably be Potentially after full year results, but that's CBC. Right. Okay. Okay. That's it from me. Thanks. Thank you very much, Jim. Thank Your next question comes from Ian Willkie of Morgan Financial. Please go ahead. Hi, good morning. Look, just one quick question for you. The 22% growth in IRR from the Aquila custom product, There's been no real announcement, sort of, that over the last 6 to 12 months. So is this growth just based on Some smaller contracts dropping through below materiality thresholds? Or is this basically just growth due to Study volumes and existing contracts being rolled and renegotiated higher. Thanks. Yes. Hello, hello, Ian, and again, thank you for making the time this morning. Well, the 22% increase versus This is the AR coming from Aquila Custom has different sources. One of the sources is the increase in the volume of the studies With significant contribution, so there is a 50% increase in the volume of the stories Of the existing customers versus BCP and some of the contracts we have in the kilo accustomed front are fixed rates, fixed Rates and some other variable rates. So the effect is obviously increasing the revenues from the variable Buy all fees or monthly fees in the kilo custom front. But there is also some small wins from the kilo custom front Below the threshold of materiality. And currently, we have 73 customers, which Represents an increase of 30% versus BCP in the kilo custom front. So it's both New customers, several new customers, 30% more customers, but below the threshold of materiality and an increase Of 50% of the volume of studies in the particular custom front, but this is obviously only Causing an effect in the proportion of contracts in which we have viable revenues. It's also important to say that this kind of this business model in terms of cost and currency ratio is representing a 32% increase Yes, versus PCB. Okay, great. Thank you. And I guess the I think before you said that, 85% of new contracts, I guess, are outside of Colombia, is this across the whole group? Or is this mainly for the equivalent in the cloud model of Q3 of service equivalent customers? So The growth that you're seeing now, is that mainly in Colombia? Or is that included in that 85%? Yes. Well, Akila in the cloud has been much more effective in the international strategy for the international strategy. So given it's a standardized and it's low touch, Everything is easier in terms of the process related to the cloud selling, installing, Training. That's why most of the international sales are coming through the Kill in the Cloud business model. But we have done some custom In some of the countries where we already have a strong presence like Ecuador and Peru. Otherwise, across Latin America, U. S. And Australia has been the new contracts we have delivered are for Akila in the cloud. The plan is to keep the geographical expansion using Akila in the cloud to expand the footprint And to have installed base and to have resources in several geographies. And behind Akila in the cloud should go Akila Custom, Growing in the international scenario with the support Aquila in the cloud is doing in advance. So this is part of our strategy and is going in as we expected. Okay. So the idea is equivalent in the cloud and land and expand and then potentially upsell into a custom product as we grow? That's correct. Okay, great. And just probably one last one for me, just an update on Progression into Brazilian markets, if that would be if you have any luck at that. Sure. Yes, well, the Brazilian market is the largest from LatAm, as you're aware, and we have put in several efforts in going into that market. But the fact is that the pandemic has heated severely this country and affecting the whole Commercial environment. What we have done at this point is that we have we are working with partners. We are working with or we're working essentially with partners currently to Soon installing proofs of concept in some of their sites and progressing to that And to having footprint on that geography. A few things in parallel we have done is that We have had presence in some big world shows. America, which is one of the largest Medical devices shows in the world normally taking place in Dusseldorf, Allemania, Germany, sorry, in Dusseldorf, Germany. It has been this year done in Brazil, but it was originally A show that will take place in person, but They decided to make it virtual. So we have done a virtual presence in that show. And soon, there is another one. So the strategy for Brazil is Set up, we have plans. We have been regarding distributors and signing partners. And soon, we expect to have Proof of concept, but the fact is that it has been delayed essentially by the pandemic effects. Okay. Perfect. Thank you very much. And I'll just focus on one last one before I go. Obviously, the currency Is the share of the headwinds as far as the results go? Is there any plans to increase any hedging Across the results, just given the 0.5% of the Colombian peso is quite pronounced. So I mean, aside from growing unit tariffs like the U. S. Dollars, is there any instruments that you guys are looking to deploy Yes, Leon. Well, in fact, one of the key advantages behind The international strategy of Aquila and the Cloud is that we are charging in U. S. Dollars. So everything outside Colombia, Even it is delivered in the Latin American region, coming from a kill in the cloud, We are charging U. S. Dollars, oil in U. S. And in Australian dollars. So In the way we are progressing with the trend we have delivering mostly new deals outside Colombia, we are in some way Correcting or fixing the issues from the exchange rate. The plan is that Well, in the near future, most of the deals have to keep coming even not only again in the cloud. And as I said, most of the Achira custom have to come from different countries to Colombia. And in that way, the Gradual replacement of the currency is going to go in the direction of the U. S. Dollars. Okay. But then with the inclusion of rimaab in there. I mean presumably that's all Colombian paper? Yes. In the case of Rima, these Colombian papers, yes. Okay. And then so what proportion of your revenues are in that Colombia peso PIM2? Rina, can you please give that detail? Because I would say, yes. I would say, yes. I would say, yes. Prop Y and A in general currently. Probably around a month or 80 percent, Amanda. Yes. I think so, yes. Okay. That's all for me guys. Thank you very much. Thank you, Ian. Thank you. Your next question comes from Andrew Lilly, a Private Investor. Please go ahead. Yes. Hi, Herman. Just a couple of questions. Regarding the Remab acquisition, It's not going to be breakeven on EBITDA on the pro form a. Just wondering what the point of the acquisition is then for the Current MX shareholders. Thank you. Hello, Andrew. Well, thank you. Well, the main reasons the acquisition why the acquisition has been done, Well, a few. Essentially, there is some strategic reasons. We have We are bringing access to IME to a significant amount of data for the purpose of the AI, Software Development. Secondly, we are solving some issues related to related parties, We have mentioned in order to well, to have a more transparent, Well, operation of the company. And lately, we think that there is A significant strategic reason behind this, which is that we with the penetration of the AI in the imaging and radiology Practice and in general in the medical imaging practice. We expect in the future That there is going to be less limits between the business of the software For medical imaging and the actual medical practice. And we are like taking a position in advance, which should benefit our strategy. Again, as the Penetration of the technology in the medical practice progresses. You have control over both sides of the value change. We'll deliver significant advantages. In the meantime, is the ideal test bed for all of our probes? Is the ideal way to access the medical data for training AI algorithms. And again, it's solving the related tie in issues and This essentially. And we are not saying that this will not deliver EBITDA breakeven with inclusion of Prima, which we're just saying that we are not providing guidance on that regard. Thanks, Alain. And then just my second question. Looking at the sort of market reaction since this Remab acquisition was announced, you sort of And the stock price is down best part of 20% at times. I was just wondering, is the Board looking to renegotiate The terms of this acquisition, in terms of the cash paid out and the 6.6 times EBITDA multiple looking Quite rich for a private Colombian based business. Thanks. Could I perhaps Hi. My name is Hug Flynn. Hi, Doug. Perhaps the first question will pick that question up. No, we're not willing to renegotiate. I'm not quite sure whether you're aware of the prices that have been When comparing like for like, they have been in the range of 12 to 16 times. And the most recent one was Sale of Everlight by Intermediate Capital Group, which was more than 16 times. That's not the direct comparison. But we are the 6.6% is a multiple of last year's numbers, And we're seeing quite strong growth within that business in 2021. So by the time we get to there, it might be 6.6x anyway. So that's the first point I would make. Secondly, These two companies were significantly intertwined. And In my view, this is the right thing to do from a government's perspective. It's the right thing to do financially. And we are expecting the returns in this business to be very strong over the next several years, and it brings a number of very significant Strategic advantages to the business. The fact that this business was not included when the company was first listed, In my view, it was something that should have occurred from the get go. These two businesses either need to be separated completely or brought together. And the separate completely process Was complicated and in my view, probably not sustainable. And bringing them together, We believe we're going to have a much stronger business than doing anything else. Doing nothing, we didn't believe, was The right answer. So no, we're not renegotiating until occasionally shareholders get them wrong, and we'd like to demonstrate that over the course of the next year. Thanks, Doug. Considering I was the original director that quickly Helped to flip him on and put the deal together. Yes, I'm familiar with the whole history. So I appreciate that refreshment on the story. Very good. Thank you. There are no further questions at this time. I'll now hand back to Doctor. Arango for closing remarks. Well, thank you for taking the time to join us today and enjoy the rest of your day. That does conclude our conference for today. Thank you for participating. You may now disconnect.