Thank you, Françoise. Good morning, everyone, and thank you for joining us. Mach7 has now delivered four consecutive quarters of positive operating cash flow. We have grown ARR 8.5% in constant currency, and we are just a few weeks away from showing a new product suite at our biggest conference, RSNA. I am delighted to be here with Shawni Hadfield, now officially our CFO. Shawni, so good to be able to drop the word interim. We have strengthened our foundation, and our recurring revenue base is growing. We are also broadening what our technology can do for customers and innovating, creating new modules. Today, I will show you how we are putting this together into a stronger foundation from which to work. Standard disclaimer about forward-looking statements, dollar figures are in Australian dollars, and the quarterly financial information that we are sharing is unaudited.
Now, for those of you who do not know us, Mach7 software helps healthcare organizations to store, view, and share many types of medical images. We are connecting those images closely to the clinical work and the electronic health record while keeping customers in control of their data, something that will be more and more important in a future in which AI plays a greater and greater role. The simplest way to say what we do is we complete the patient's picture with the patient's pictures. We have several opportunities in front of us to address medical imaging more broadly than just radiology, and to extend across many more image types and specialties. From pixel to point of care, we are helping clinicians see a more complete picture of the person that they are caring for.
Now, we will start off with the financial results, and then I will come back to how do we grow, what are we building, and what is next for Mach7. Shawni, handing over to you to take us through this quarter's financial results.
Thanks, Teri, and good morning, everyone. I will take you through our cash flow results for the September quarter by covering the main numbers and what is behind them. Prior comparative period, or PCP, is comparing to the same quarter last year. It is worth noting that the Australian dollar has strengthened against all of our functional currencies over the last year. So where it is relevant, I will quote growth in constant currency, which shows the underlying movement without the exchange rate effect. I will start with the big headline. We generated AUD 0.3 million of positive operating cash flow this quarter. In the same quarter last year, we used AUD 3.7 million. This is our fourth quarter in a row of positive operating cash flow, which Mach7 has never done before.
It's also the first time in our history we've been positive in a first quarter, despite this being a traditionally low-volume quarter for annual billings. Customer receipts were AUD 7.3 million for the quarter, up 58% on AUD 4.6 million last year, reflecting both growth and improved billing and customer collection. Operating payments were AUD 7 million, 17% lower than a year ago. We're now a quarter past the FY 2026 restructuring, and the cost base has held while we've increased what we spend on product development. This quarter, we capitalized AUD 0.7 million, up from AUD 0.3 million a year ago. We've increased our investment in the Flamingo modules Teri will talk about shortly, as well as modernizing our existing products. If you added that spend back into operating costs, we'd be close to breakeven with a small outflow of AUD 0.3 million.
On the same basis a year ago, the outflow was about AUD 4 million. So the improvement is real, and it comes from two places, more cash coming in and less going out. This slide pulls the key numbers together. We closed the quarter with AUD 19.3 million in cash and no debt. That's up from AUD 18.9 million a year ago, and down AUD 0.6 million from 30 June. Three things moved cash in the quarter. Operating cash flow added AUD 0.3 million. Capitalized development used AUD 0.7 million. And because we hold cash in offshore currencies, the stronger Australian dollar reduced the reported value of those cash balances by AUD 0.3 million. This is a foreign exchange translation impact, not a cash outflow. Cash receipts of AUD 7.3 million reflect growth of our customer base across recurring revenue, capital, and professional services. It also reflects the work the team has done on billing and collections.
Some of you will remember that receipts in this quarter last year were lower because of timing, and we flagged at the time that some of our older administrative processes had delayed annual invoices being processed and paid. We fixed those processes during FY 2026, and payments are now coming through when they fall due. Most of the reduction in operating payments was in staff costs, which came down from AUD 6 million to AUD 4.7 million, noting that a portion of this decrease relates to the R&D payments sitting in investing cash flows rather than operating. Administration and corporate costs also fell from AUD 2 million to AUD 1.2 million. These savings come from the restructure we did in FY 2026. Our ARR run rate The annualized value of subscription and support fees from customers who are live was AUD 23.5 million. That's up 8.5% in constant currency.
The growth came from existing customers expanding and from new customers like UnityPoint and AMRADNET going live. CARR, which adds contracted revenue that isn't live yet, was AUD 25.3 million. That's down 7.4% in constant currency. The majority of that decline is driven by the Veterans Health Administration ending its NTP project. So in summary, receipts are growing, costs are holding at the lower level, and we're putting more into product development. With AUD 19.3 million in the bank and no debt, we're funding increased innovation investment from our own resources. Teri, back to you to talk us through the growth opportunities.
Thank you so much, Shawni. That financial discipline is fundamental to building a sustainably profitable company, and I'm really proud of how much we've continued to build while yet bringing our operating costs down. Almost a year ago, I first shared From Archive to Architecture, our strategy, and I introduced the concept of Flamingo. Since then, we've reshaped our leadership and operating model, we've overhauled and improved how we support our customers, and we've utterly transformed how we build our software. Through all of that change, our team has kept delivering for our customers while developing a broader portfolio that I'll walk you through shortly. We are seeing early results. Service is faster and better. Existing customers are expanding, and new customers are going live, contributing to a high-quality recurring revenue base. Shareholders want more signed contracts and faster revenue growth. So do I.
The rest of this presentation is about how we're going to get there. Our growth engine connects innovation to problems customers will pay to solve. We're pursuing opportunities that we can win with today's products while developing new ways for customers to buy from Mach7 and expand with us. The order here follows the clearest routes to revenue. We start with customers already using our products. Closer conversations are uncovering needs beyond simply growing imaging volumes. Listening to those needs and involving customers in development builds trust, it strengthens our role as a partner, and it helps us create capabilities that our customers value. We're also engaging with potential new customers with products that we can deliver today. A clear roadmap enables customers and prospective customers to understand how their Mach7 innovation partnership can benefit them more over time. Flamingo adds more than just new modules for sale.
It also offers an easier buying approach. We are hearing that organizations can benefit from Mach7 technology long before they have the funding or ability to manage a traumatic rip-and-replace project like a full new PACS. We can also sit alongside another vendor's PACS, which gets Mach7 into accounts where a full replacement isn't yet on the table. Flamingo is designed to let us address specific workflow problems alongside the technology that a customer already owns. This then gives us an opportunity to sell additional modules over time within a broader customer base. For shareholders, the opportunity is to earn more recurring revenue from each customer relationship and reach new customers through smaller initial purchases. We're building the business so that revenue can grow, but of course, grow faster than our costs.
Electronic health record integration and advisory work add another route. We're developing opportunities in specialties such as endoscopy, point of care ultrasound, where connecting images to clinical work can create both demand for software and for services. We're pursuing these opportunities directly and through partners with a clear focus on converting qualified opportunities into revenue-generating projects. We tie every development decision to a reason customers buy. Differentiation has to show up in functionality. How easily can customers adopt it? What does it take to run it? We've increased our development output significantly since our Chief Technology Officer, Brian Wehrle, joined us about six months ago. We're modernizing our imaging stack, including eUnity and our imaging data platform, while also developing the new Flamingo capabilities. Capitalized development investment this quarter was about 2.5 x the same quarter last year.
That investment supports a growing and broader portfolio. AI-assisted development with automated testing and engineer review is now a core part of how we build, and it also ensures our software is validated, robust, and safe. Development capacity and quality have to advance together. Direct customer involvement helps us make better decisions about what to build, and it's a differentiator in and of itself. Customers love to see development previews and provide input. But another subtle benefit is that developers become far more connected with the clinician and even the patients impacted by the development that they do. They build better software when they've met the people that use it. Here's what we're building with Flamingo. We're developing five connected capabilities around a common core. Foundation provides key underlying tools and infrastructure, including modern connection mechanisms for complex imaging ecosystems at a lower cost.
Storage manages imaging data across on-premise, cloud, and hybrid environments. This also is a differentiator for us, as many vendors offer only cloud or only on-prem options. Worklist is the layer that brings the radiologist day together. It organizes studies, priorities, and workflow into a modern workspace, connecting the data we store, the orchestration that moves work through the system, and the eUnity viewer where images are reviewed and interpreted. Customers are telling us this capability is increasingly strategic because it can reduce workflow friction, it improves productivity, and gives them more flexibility in how they design their imaging workflows. This enables our customers to experience more of the end-to-end workflow within Mach7, increasing both the value we deliver and the breadth of opportunities that we can compete for.
Sonar is a new monitoring dashboard that shows IT teams how the imaging platform is performing and where attention is needed. Flow moves images according to customers' rules, reducing manual handling involved with getting the images where they need to go and the way they need to go. The Flamingo suite modernizes our imaging data platform and adds capabilities that customers are able to buy as individual modules. We're developing these five capabilities that work together or in different combinations depending on the customer's needs. We plan to demonstrate these next month at RSNA, our biggest industry trade show, and our early adopters will be able to start installing these new modules early next year. We're building Flamingo to save customers time and to save them money. Our differentiation starts with choice.
Customers can buy the capability they need, add it alongside existing technology, and keep control of their data. They can start with orchestration without purchasing the full archive. We've already won a new customer that way. But think about the cost of clinicians switching between systems throughout the day, or IT teams moving images by hand with stacked up, disconnected work queues, images locked in proprietary systems not connected to the EMR. These are real problems pervasive in our industry, and worklist and Flamingo Flow are designed to reduce those burdens. Sonar can also replace separate monitoring tools that customers pay for today. These give the buyer a clear business case for Mach7. We're developing these capabilities very closely with our customers. We've held numerous worklist feedback sessions, and Sonar has an early adopter and a development partner.
Listening helps us get the practical details right, and when customers see their input shaping the software, we build trust and we deepen their engagement. That brings us to the larger opportunity that I see for Mach7. Can't resist a few animals in a presentation, and the butterfly in the right corner emerging here is the best picture for where Mach7 is today. A metamorphosis, a massive change that can produce something with radically different capabilities. Our people have been rebuilding this company from the inside out. How our teams work, our culture, how we engage with our customers, how we turn ideas into functioning software. The major reset is largely behind us, and we are now building more consistent growth on a much stronger operating base.
Our next steps include demonstrating those new modules at RSNA, getting them into live use, and turning those customer experiences into references that drive further sales. Four large customers are lined up as early adopters, and we are poised to feed the Mach7 loop. Think about the patient's experience. It can include radiology, an endoscopy video, even a wound photo the patient took on their smartphone. These images originate in different places, even different systems, yet they're all part of the picture of the same person. Connecting them to the electronic health record and specialty workflows helps clinicians see that whole person. Organized, accessible data with clinical context becomes a necessary foundation for a future that uses AI more and more. We build from imaging expertise and established customer relationships, and Flamingo lets customers adopt new capabilities progressively.
Our ambition is to provide the imaging data foundation that healthcare organizations can build on across all different types of images. That opens a broader market and more room to grow with the customers that we already serve. We are building Mach7 to grow profitably by doing more for the customers who rely on us. I know our shareholders want to see that translate into stronger and more consistent sales. Sales is a top priority, and our pipeline is growing. A solid foundation of technology and service is critical in this industry. Driving a culture in which the team is building, innovating, and deeply connected to the customer will support my often repeated line, "Everybody sells." Every reliable, feature-full release, every customer problem solved, and every support experience that goes a step beyond what the customer expects. These all help us earn the next sale.
I want to thank our team for the dedication and commitment to building a strong and growing Mach7 future. There's been a lot of work behind this quarter, and it's already showing up in receipts, in ARR, and in customer expansion. Shawni and I would be happy to take your questions. Thank you.
Thank you, Teri. Just a reminder, if you have a question, please submit it via the Q&A text box at the bottom of the screen. We did receive a question in advance via email, and it is from a shareholder, [Mr. Chan], and I will read it out now. "FY 2026 demonstrated a substantial cost reset and three consecutive positive operating cash flow quarters. What are the three quantitative or operational milestones you personally believe Mach7 must achieve by June 2027 for shareholders to conclude that the turnaround is genuinely working?
Happy to answer that. We have a lot of focus on specific three things, so it aligns with what I look at every day. The first, recurring revenue. I want our ARR progressively up with no quarter where it falls back. It is less to me about total revenue, as we have reported a mix of capital services and recurring revenue over time, and that mix is shifting to more recurring revenue. That is to me because the most healthy growth comes from a predictable high-quality recurring revenue stream. The second, new customers, new relationships. New customer projects from outside of our current base will add energy to our team and show the market that Mach7 is a solid choice. Growing inside the base is strategic and it is important, but it does not show that proof point that new buyers will choose us.
This is a big area of focus for us. The third, new module adoption. By June, I want to see several customers running new Flamingo modules. This shows that our customer engaged and rapid development is hitting the mark, creating differentiators and a strategy that will fuel more and more commercial growth, both within our current customer base and also to help attract new customers. All three of these really fit together, and all three are key achievements to show that the reset worked and the strategy is solid. I will comment, of course, it almost goes without saying, that we endeavor to do this while still maintaining good cost control, ROI rigor in our spend, and driving those top priorities of winning sales, but also continuing to engage with our customers in a way that drives delight.
Thanks, Teri. Our next question comes from [Andrew Gracie]. "Operating expenditure was significantly lower in the second half of FY 2026, while the company is capitalizing more research and development in the first quarter 2027. Broadly, what should we think of OpEx and capitalized R&D for the 2027 fiscal year?
I'm going to hand it over to Shawni to—
Thank you.
—take a whack at that one.
Absolutely. Thanks, Teri. Happy to answer that. We are not giving guidance at this point, but what I will reiterate is, like we said in the presentation, the OpEx cost base has held through quarter one, and we expect a lot of the savings that we have achieved through FY 2026 to hold through this year. Our R&D capitalization is based on our existing R&D team with increased productivity driven by our new CTO and AI. In this quarter, as we mentioned, we've experienced a 4.4 x AI-enabled productivity gain. Our developers have deeper customer engagement that directly drives their development, ensuring that we develop solutions that the market wants and achieves the ROI expectations. We're becoming a more innovative business, and this year, R&D is focused on Flamingo and modernization of existing products.
We're increasing our R&D, and we don't expect that to drop. So we're kind of expecting this level of R&D capitalization to continue for FY 2027.
Thank you, Shawni. Our next question comes from [Deanna Mitchell]. "Could you please comment on the outlook, ARR versus CARR? There is healthy growth in ARR, but CARR is down." So that's the first part. I might let you answer that part first, Shawni, and then there's a second part to the question I'll come back to.
The CARR being down quite a bit on the last quarter was the removal of the NTP project, which we disclosed and talked about previously. That was quite a significant project for Mach7, and so had quite an outsized impact on our CARR. As we go through this year, particularly with the new modules coming out and the pipeline, which is growing, we would expect that CARR to increase. That's what we would sign through new contracts. The ARR continues to grow from what we have signed previously and gotten that converted into ARR. But again, as we say, we're not giving guidance at this point.
The second part of [Deanna]'s question is, "Could you comment on the sustainability of cash collections? Are they one-offs or lumpy items?
Through the processes that we undertook in FY 2026 to restructure some of those older administrative processes, the sustainability of the cash collection is reset and fully sustainable. Saying that, we do have lumpy cash flow. We have an annual billing mechanism, and so the cash flow comes in depending on the cadence of that billing as to where it falls in the financial year. As we look to bring new customers on, we renegotiate what that payment term looks like. For example, some of our newest new customers that we have signed up, they are paying us on a quarterly basis as opposed to an annual basis, and that should give us more of a smoother cash flow over time.
Thank you, Shawni. Our next question comes from John Hester, and he asks, "How are you incorporating AI tools into the new product suite?
All right. AI is a big driver in the future for our industry, and we want to ensure that we are not just chasing after it, but we are creating a foundation in which AI can become enabled by what Mach7 does. So Flamingo being a modular vendor-neutral architecture, it is built for AI enablement for our customers. Orchestration and routing, cloud migration, EMR integration, a lot of this is necessary plumbing for our customers to be able to leverage AI across a more comprehensive set of data on the patients. We have engaged with some of our customers related to the concept of making the data democratic. There are vendors that charge for access to data, or you have access to only a portion of the data.
When I mentioned the fuller context of images outside of radiology, for example, is something that our customers are very interested in terms of being able to provide either AI that they create themselves with their own foundation models, an interesting trend across some of our bigger customers, but also in leveraging existing third-party tools. We are talking with several of the leaders in the industry, related to both diagnostic AI and workflow AI, and even engaging with Epic on how AI is integrated into the workflows in which imaging plays a critical role in showing the fuller patient picture.
There's other things that we're going to share at RSNA. I'm going to encourage any of you that want to dig in more on the cool new things coming up to watch our AGM and updates coming in the future because there's more AI work that we are doing.
Thank you, Teri. We have no further questions at this time, so I'll hand back to you for closing remarks.
All right. It's been quite a quarter. It's been a great quarter. I really want to thank our shareholders for your support. We have really strengthened the foundation of this business, and now our job is to turn what we're building, and we are building, into growing our recurring revenue and providing lasting shareholder value. I am absolutely confident because I see our people solving problems that customers are willing to pay for, that there's clear benefit to our customers, technology that saves them time, saves them money, and that's what excites me the most. I also know you need to see that progress in revenue in results, and we have more to prove, and I have a team that is determined to do just that. Thank you.