Thank you for standing by, and welcome to the Pro Medicus PME Full Year Results Briefing. All participants are in listen only mode. There will be a presentation followed by a question and answer session. Please enter it into the Ask a Question box and click Submit. I would now like to hand the conference over to Doctor.
Sam Bucht, CEO. Please go ahead.
Good morning, everybody, and thanks for joining us for this results briefing. As most of you know, Pro Medicus is a healthcare a IT company specializing in enterprise imaging and radiology information systems. We work in 3 Melbourne, our corporate headquarters Berlin, our R and D center for visage products and the U. S. Where we have an office In San Diego, where we our biggest market and staff located throughout the U.
S. That travel towards clients. I think the important thing is We are a technology focused company with over 40 software engineers and support staff. In terms of our product set, We have 2 products, VisageRIS, which was our core product before 2,009. It deals with all the practice management, billing scheduling for large radiology corporations.
The key market for that product is here in Australia. And on the right, VISAGE 7, which is the clinical desktop that radiologists use to call up, Enhance, manipulate and diagnose images electronically. In terms of the results, I think we're very pleased that all of our headline numbers headed in the right direction. Revenue despite quite significant currency headwinds We're still up 19.5% and profit after tax over 33%. I think the other Pleasing numbers were the cash and investments, now just a touch under $62,000,000 up forty 2% and the company remains debt free.
As a result, we have increased our dividend this year, so $0.15 I shared fully franked, including the half year, so the full year amount was $0.15 So all in all, we felt that Pretty much all of our key metrics are headed in a positive direction. In terms of Setting ourselves up for the year and for future years, 'twenty one was the biggest year in terms of new sales in our company history. Just prior to the beginning of the year, we had won the Northwestern deal in Chicago, but starting after that, clearly, 6 Key deals, 5 in Europe and 1 in sorry, 5 in the U. S, sorry, and 1 in Europe, With a number of key academics plus a mixture of non academics such as MedStar and Intermountain. So By any measure, it was our busiest year, most probably the busiest sales period in our industry in total.
In terms of where we sit, this is an interesting slide. There is a bake off called Best Hospitals U. S. News every year. And on the left, you see where the various clients landed in the top 20.
As you'll see now, we have 9 out of the top 20 Using our products, over double our nearest competitor. So certainly, we are making an impact in some of the most well known hospitals and health systems in the U. S. In terms of the revenue splits, many of you have seen this bar chart 4, I think the key thing is that on the right hand side in the orange pink, the transaction revenue Grew and in numbers grew even more. As I said, we had some tailwinds with currency, which have now abated to some degree.
The total revenue in pretty much all of the sections increased during the year. We've put in a new section to show the Archive migrations, which is the work we do when we get an archive contract in transferring the data from the previous system to our system. So we're now showing that revenue separately, and that came in largely from MedStar and Intermountain that not only took our view, but also took our archive. In terms of the operational model, again, we think it is proving that it is a very good model for us. It is very fine grained.
We have the minimums which underpin our contract value and that's how we announce the contracts. And I think the important thing as the client grows, So do we, because we charge for every additional test that they do. I think the key figure on this slide is that the Forward revenue increased from, I think, around $270,000,000 when we last announced it to $320,000,000 This is a 5 year window. So if a contract is 7 years, the final 2 years are not taken into this account. And I think it just shows the growth of our base as we add each contract on top of the ones that we have already in place.
As mentioned, we had a 16% year on year increase in terms of transactions. It would have been 28% on a constant currency basis. We also believe the Q1 was Mildly impacted by the tail end of COVID, the trough that occurred in exam numbers was really around the March, Full time frame in 2020. But towards the end of the year, we still weren't quite where we were pre COVID, but we were getting closer. So there was That first quarter in particular was less than the normal 100%.
But pleasingly, we were able to make not only that So delta up, but obviously, increased transaction numbers in a positive way from there. We are telling the market We expect this growth to be a step change or a step growth in FY 'twenty two. We now have Northwestern, NYU, MedStar and others that were implemented in the last fiscal year will particularly towards the end, We'll now give 12 months of revenue each of those, which will be quite material because they're quite large implementations. And we also anticipate Additional revenue coming from those sites coming that we've already announced in the first half, Intermountain, which is large, 2 UC campuses in New Vermont. So that plus growth in existing clients, we are seeing organic growth across the industry has returned.
There is some M and A Where our clients are acquiring smaller sites and all that adds to the mix. And then I think the other area of upside is, as Clients adopt our new products, particularly OpenArchive and Worklist. They are also transaction based. So we will see them contribute to the Total of transactions going forward into FY 'twenty two. In terms of professional services, many of you have seen this slide, it is Project Planning, Training and Implementation.
I think the new point on this one, the data migration as part of an archive Sale, which we've showed in the bar chart of revenue, those fees are once off, whereas All of the other professional services are spread evenly across the life of the contract. So more of an annuity style Revenue rather whereas data migration is a once off. In terms of operating leverage, Clearly, this is an important thing for us. I think we have proved that the offering is highly scalable. Our revenue has increased significantly more than any of our cost base.
We do not have CapEx. We don't sell hardware. It's a software only model, a true SaaS model. Training and installation from the time that we signed the contract is all charged as professional services. So we believe it's a the business has high operating leverage and the margin has continued to grow as the footprint increases.
We did have a significant step up in the margins in the first half that has continued into the second half. We believe some of that is because of reduced cost pace, because of COVID less travel conferences being virtual Rather than in person, and some of those costs will come back, but we still believe that we will be able to maintain our margins higher than they were This time last year. So somewhere in between where they are now and where they were this time last year, but clearly that needs to play out still. In terms of COVID, we were able to transition to work from home 100% in all jurisdictions in mid March 2020, we have been operating at 100% capacity globally. Our sales and marketing efforts continued throughout.
And As I said, we had our busiest sales period ever. I think a lot of that's got to do with the thinness of our technology that we're able to Demonstrated very readily through the Internet in large scale demonstrations and in full diagnostic quality. And I think That sets the tone for a lot of the opportunity going forward because clearly there's a lot of work from home. Radiologists had to pivot back in March, April last year. And even though the U.
S. Has come back in most parts Near normal in terms of on-site presence, it's never quite got back to the full on-site presence that it used to be, much like most of the industries here. So Being able to work from home on demand seamlessly on demand is a huge plus. And as I mentioned, exam volumes are now back At or in some cases above pre COVID levels. So all in all, we were not impacted negatively by COVID other than Few months when exam volumes dropped, that was more around the March, April timeframe, but now it's Back to business as usual.
In terms of our product set, VisageRIS, as mentioned, this is used by Largely in Australia, we do have some clients in Canada use it. It is a highly localized product. The key thing for us is it is progressing well. We are progressing well with our 2 key contracts with Healthcare Imaging Surfaces used to be primary Healthcare and EyeMed. Since we last updated the market, the Helius rollout is now complete.
So that's fully up and running and that's a transaction based model. We are seeing some upside in the EyeMed Contract, because of their M and A and growth, increased market interest in some new opportunities. So We clearly believe in risk in Australia, we are the undisputed market leader, so that's a good position to be in for that product. In terms of visit 7, many of you have seen this slide before. It's what makes us, we believe, The best and most differentiated product in the market, the 3 key tenants of number 1 in speed, functionality and scalability.
And I think With the implementations that we've done even over the last 12 months, I think this proves these 2 these 3 Key differentiators between us and others. One of the things that is driving a change in the market, and we are seeing increased Interest and people changing their systems. Many of you would have heard me say this is the massive explosion in data, The new imaging equipment creating larger and larger data sets, and that trend is continuing unabated. And the traditional methodology of legacy systems compress and send where they take the file, compress it as much as they can, send it Down the network to a pretty beefy workstation at the other end that has a lot of software on it that then That methodology is now cracking at the seams because The files are just getting too big regardless of the type of network that institutions have. We on the other hand use a streaming technology.
The files go from the modalities to a back end server that in new real time does all the rendering and 3 d production and we just stream the pixels. So It literally is an on demand service even over consumer grade Internet, and that's one of the key things that lets radiologists work from anywhere, including from home. They cannot tell the difference between being in the office and being at home, and that's on consumer grade Internet. And I don't believe any other product can actually offer that. In terms of the opportunities we won, some of these slides have been out before, but I think a few key things, the last Two points at NYU Langone.
That implementation was complete on time in June 2021. They're 100% live. We did say at the time we won this contract that we would be setting up a new R and D hub in New York and that is going ahead. We were able to navigate around COVID restrictions in such a way that our people from Berlin or the person from Berlin is able to go to the U. S.
And that will start Later this month, so that project is going ahead and will be very exciting for us. In terms of LME Clinicum, we won that deal in October, and the implementation was completed in December 2020. So we will receive a full half of revenue, although this is slightly different model to the transaction based one, But the revenue from this deal will be spread across the 5 years, and we will receive a full year's revenue from this in 2022. Zwanga Pasirri, this was an existing client. They renewed a 5 year contract, so that was another key renewal for us.
Then MedStar Health. And MedStar is an interesting one. It's technically, it's called an IDN, a non academic, I think, interesting for a few reasons. 1, it was The first client to take all three Pizzazz products, that is our new work list, our viewer and our archive, And it's 100% cloud based. We think it's most probably the largest PACS implementation, 100% cloud based, Arguably anywhere in the world.
And that implementation was completed towards the end of June, 1st week of July. And so again, we will receive a full 12 months revenue coming into FY 'twenty two. Intermountain Healthcare, the largest Healthcare assist provider in the Intermountain West region, Utah, it's based out of Salt Lake City in Utah. Again, multiple products, Viewer and archive, and that is slated for implementation in the September, October time frame this year. And then University of California, which we announced in February, this will be a staged implementation, A large five campus implementation cloud based and the first sites will be done in the first half of this year.
So 2 of the 5 We'll be staged in this first half and then another 2 in the second half of this year and one about 12 months to 18 months, 12 months away from now. So that's all going on track. And the last one, which is University of Vermont, That will be done in this coming half. So effectively, We've had an interesting time in terms of implementations. We think one of our strengths is the ability to implement quickly.
We OSU was our first 100% remote implementation last August. We have now developed a highly optimized Hybrid model, which is a mixture of on-site and remote, and we believe this has been a key differentiator. And certainly, I think we've been able to prove With the next slide that we were able to keep up our implementations despite changing restrictions because of COVID in different jurisdictions. So as mentioned, Ohio State in August was our 1st 100% remote, Northwestern in May of this year was on-site, NYU Lagoon was 100% remote and MedStar Hybrid where we had a team on-site plus a team remote, And we believe that is most probably the model we will use. It's the most optimized model going forward.
And it's worthwhile mentioning that there are a number of other smaller sites We did in background over this period. So in terms of implementations, it was by far our busiest 12 months ever. Just moving forward, one of the key factors we think that supports our pricing model, which is at a premium price, It's that we have a proven ROI, and I think it's not just in terms of financial ROI, but certainly proven Superior clinical capabilities, which for these institutions is critically important. There is a this is a slide talking about a certain way of looking at implants In the Uroturn on the bottom here, Eric Pepin says some packs, as you're mentioning, you're able to do this. It takes just a 2 seconds because in most other systems, it could take minutes.
And I think this is a perfect example of clinical ROI. Moving forward, the growth strategy, again, we believe we've delivered on this and it's been consistent. We have expanded our footprint. We have had existing clients grow their transactions. Our new product offerings, particularly archive and worklist, Starting to kick goals, we did have a second major sale in Europe and we are leveraging our R and D capability, which I'll show in just a minute.
Pipeline, and we often get asked about this. Clearly, we had a lot of opportunities in the pipeline about a year ago. Those opportunities we've been able to To contract, but pleasingly, we've had a number of new opportunities come in as well and there were opportunities that were in the pipeline over the last 12 months That have continued to progress. So we're very happy with not only the size, but also the mix of opportunities in the pipeline going forward. I think things that will help us in terms of size of sale will be the newer products like Visig Open Archive.
And as we said, 3 of the recent sales were both Viewer and Archive, and we think that will be a trend that will continue. Not everybody will buy archive from the get go, but we are seeing an increased number, which is positive. Worklist, our newest product, as I said, we've had this in production in some smaller sites. The first Large scale clients go live with it was MedStar and that's been very successful. It Can be implemented on premise or in cloud.
And I think the important thing is it provides us with flexibility for those clients Like Medstar, just wanted to deal with 1 vendor. We were able to do it by having the Workplace component, and I think We are seeing it more and more in the mix with opportunities in our pipeline. Enterprise Imaging, the ability To move the product outside radiology, we are progressing with that. If there was any of our initiatives that maybe got Put a little on the back burner because of COVID, this was the one, but we are starting again with some of our academic clients. We don't yet have a material implementation across the whole hospital.
But again, we believe we are progressing in the right direction with this. And we're hopeful within the next 6 to 12 months to make some more headway in this regard. Visage in the cloud, I won't go into it too much, but clearly, we see this as a huge strategic advantage. We are 100% cloud native. A number of our opportunities, recent ones, are cloud based.
As I said, we already have large implementations in there. UCs, Intermountain, UVM will all be cloud based. And certainly, we're seeing a lot more cloud focused RFPs Coming through on opportunities where cloud is important to these large scale operations and the fact that we already have a number of large clients fully implemented, We think we'll stand us in good stead with those. Finally, I'll finish off with AI and the accelerator. Most of you many of you would have seen this.
It is a unique end to end solution, and it supports both research and production. It is based on our Visage 7 technology. It's a sandbox version of it. We do offer this 2 key academics. And the main thing is, as its name implies, it allows them provides the glue for these academic institutions To be able to take concept to product in a fraction of the time that would otherwise occur.
So we see it as part of an ecosystem. We have an open API that will allow our 3rd party envisage develop algorithms to work Inside the Visage View rather than as a separate product that's not integrated, and we are looking at joint development and commercialization opportunities. Here's our team that leads our AI research, Malte Westerhoef, who's one of the co developers I'm founders of Visig Imaging, co developer of the platform Detlef Starling, who is the other co developer and Ming Duling, who Based out of Yale, but is looking is our clinical research manager in North America, and we will be building that team further given that we have got Some new agreements. So in addition to the work we've been doing with Yale, we did sign 2 very important Collaboration agreements, 1 with NYU Langone and recently with Mayo Clinic, the one for Mayo is for all of their campuses, Rochester, Phoenix, Arizona and in Florida. And finally, Proof that the AI accelerator works, we developed our 1st diagnostic AI algorithm in conjunction with the breast imaging team at Yale.
It provides an on the fly and virtual real time assessment of breast density. We did receive It was previewed at RSNA 2 19 as works in progress and we got FDA approval in 2021 February. It is implemented in one of our academic clients and we're just assessing how and when they use it and then we will be looking to offer commercially to other clients. So we see that particular project as a model for future AI development. Finally, This occurred last week.
It shows the new world order. It's the HIMSS conference in Las Vegas Was meant to be in February got postponed, and I only show it because we did get registrants, but it is strange at a conference to see everybody All wearing face masks, and I think that will be the same for the RSNA later this year in November. And on that, thank you all and open it up to questions.
Thank Your first question comes from Peter Michellbroek with Select Equities. Peter, your line is open.
Hi, guys. Sorry about that. I just want to ask about renewals. I think Sutter was sort of Due for renewal at some stage, but obviously, they had difficulties. Just want to see if there's any update there and also Any of the other ones?
Which ones are coming up for renewal this year?
Yes. Look, Sutter is still progressing. We have made Good progress with them. As you mentioned, they got particularly badly hit by not only COVID, but by bushfires and everything else. So we Decided to give them some breathing space.
That opportunity is a closed door discussion with us. It's not gone out to market. And we're hopeful to have something within the next few months, but it could be earlier than that.
Right. And which one are the ones are up for renewal this year, sorry?
Allegheny was the other one that was due during the quarter and that has been renewed.
Right, okay. Can I just ask, you've made particular comment around just how busy you have been in terms of the implementations and sales obviously, But particularly in terms of the implementations, has it actually required any additional staffing To do that and also the other part, what with people sort of tied up on the implementations, does that impact the Sort of the R and D or the rest of the business at all?
The answer is the we've not hired specifically for any of these implementations. So I think the answer for that is no. It hasn't we haven't just gone out and hired 5 or 6 people. I think we've hired 1 or 2, but that's That normal sort of cadence that we do every year. Clearly, there has been a big R and D effort in all the work list It's the 1st major implementation on 1st cloud, but it hasn't prevented us from continuing with other projects and some of the IR work And also the product releases.
So I think we've gone through it incredibly well and the fact that we've got 4 out of the 7 already behind us. Even with COVID and there were some juggling around that Working out and we've optimized our capability to deliver remotely. And as I said and in our Sort of in the interviews, we've developed this hybrid model, which we actually think, even in a post COVID world, would most probably be the most optimized. So It just makes it more efficient again, but no, we've just hired the normal amount over the last 12 months.
Okay. And finally, just on the enterprise imaging sort of opportunity there, appreciate that that's still, as you said, sort of It was sort of a little bit on the back burner, etcetera. But I mean, how should we be thinking in terms of the sort The size of an enterprise imaging sort of opportunity versus just the sort of radiology, I guess, in general terms.
Look, it depends on the department. So if they do department by department, some are bigger, like cardiology is roughly 25%, 30%, depending on hospital Of radiology? So it depends which one you get and what the institution's focus is because some of them are Better known for one area than another, and clearly that would be bigger a bigger opportunity. We it's hard to tell because a lot of this is Photo and video are reflected light. Most institutions don't know how many images they've got because these are just taken not as part of A sequence of an order as we call it, they're taken just as the patients present.
So it's a little hard to tell, but we think if you had everything other than radiology and outside pathology, it would Beyond that an additional 30% to 50% depending on the institution. Right,
great. Okay. Thanks, Sam.
Your next question comes from Sarah Mann with Moelis Australia.
Hi, Sam. It's David Mann stepping in for Sarah Mann. I just have a couple of questions. Firstly, a lot of the hospitals had a tough year financially with the elective procedures Being delayed, have you seen any impact of how some hospitals are thinking about new spend on technology, For example, slowing down of sales cycles. And then just following up on that, have you seen any of your hospital customers, especially the larger and better capitalized, Being opportunistic in the M and A front to acquire some of these impacted hospitals?
And if so, what kind of volume up have you seen, if any?
Yes. Look, on the first one, we haven't seen an impact. As I said, the exam numbers, which is the metric we charge on, It did go down in March, April last year because people didn't know what to do with COVID. Everybody was literally just shut down everything. But Thankfully, it reopened up fairly quickly, and we have seen pre COVID numbers, in some cases, even better.
And when we looked at them, some were in the early part a little bit of catch up for the tests that weren't done during the shutdowns, but we are seeing organic growth Back and it's quite healthy. So, at least the groups that we deal with, we haven't had that hasn't been an impact. And clearly on the sales cycle, it's been the opposite. We've had our busiest year ever, and all of that was in COVID. So I think from our perspective, if anything, COVID has been a bit of a tailwind.
In terms of the smaller ones, yes, look, there has been some M and A. It hasn't been major that but all of that would help. I can't really quantify it other than we do see The big always buying some of the smaller ones, and we saw that the previous year. We saw it with Carl. We saw it with Mass General.
To us, that's all positive because we get those additional transactions, but we see that business as usual. But we haven't had one where there was this massive M and A where it would add 60% or 70% to our volumes, but we live in hope.
Perfect. That's great. And then just one last question. With the RSNA moving online last year, I'm just trying to get a better feel for how you expect it to look this year and how we should think of marketing costs versus an OE?
They've said it's in person, but 100% for sure. Unless something changes, We think marketing costs will come back. It won't be as much as previous years because we won't send as big a team. There will be restrictions, face masks, they've said no vaccinations don't come. So we expect the crowds maybe to be a little bit more focused, maybe not as many Europeans As we would otherwise get, but yes, look, some of that expense will come back and that's why we think The 63% margin EBIT margins will most probably come back a bit, but we don't think it will go back to what it was pre COVID.
Perfect. Thanks.
Your next question comes from Josh Tanakos with Berenjoey.
Hi, Sam and Clayton. Hope you're well. Just a quick question On your cloud product, I'd love to get a little bit more context around out of the pipeline and RFPs, just how many of them are discussing public Cloud deployment as an option. And maybe you could give some comment post the recent HIMSS conference around where the competitor set are In terms of their current cloud capabilities?
Thanks.
Yes. Look, off the top of my head, I would say roughly 50% are talking cloud. And bear in mind, in some of the opportunities that we've contracted, one in particular, when we first started dealing with them, Cloud was sort of in the background. It wasn't it was going to be an on premise till they sort of looked at it all and then went, yes, we're going cloud. So Roughly 50%, could be a tad higher.
So there's definitely a momentum swing towards cloud. I think in terms of competitors, we only know what we hear. We don't believe anybody else is Cloud native. In other words, they can put their entire application in the cloud and it work in exactly the same way as it would work on premise. So we think that's a very strong advantage.
And we now have a number of cloud implementations, Material ones under our belt. And in the case of MedStar, all three applications of ours are 100% in the cloud. In that case, it's Google GCP. But and the other thing about cloud is we're agnostic. So some of our opportunities are in AWS.
We believe some will be in Microsoft Azure. So we will have examples in every one of the 3 big clouds. We wouldn't use A second tier cloud provider. So I think as far as we can tell, we're the only ones that can state we have Full implementation, 100 percent in the cloud. And with UCs and Intermountain, we'll have more and UVM will have more.
Yes, absolutely. And with Intermountain, I imagine that will probably be one of the largest sort of public cloud rollouts in North America, maybe globally. Like, I guess, I'm interested in your view around whether you're doing much outbound marketing or what the sort of funnel of inquiry has been specifically around Cloud and just I'm just interested in terms of especially relevant to some of that more mid market, whether that Opens up that opportunity for you in a greater capacity.
Look, I think it was a key theme at HIMSS. That was just in Las Vegas last year. It's a conference that all the 3 cloud providers go to as well. So that dovetailed nicely. Look, UVM is more in that mid tier in terms of volume.
So there's a perfect example that used to be completely on premise And just went, no, we're going to cloud. And definitely, definitely, it has opened up opportunities, but not just in the mid market. There are certain Large health institutions that are now saying we're not IT companies, we're health care providers. And So they have a cloud first strategy and that plays nicely into what we're doing. But certainly, we are making it well known.
I mean, That's what you'd expect us to do. And as I said, not everybody's cloud and those that go on premise may in a year or Migrate to cloud and migrate the archive to cloud. So it's certainly a huge part of our strategy and so far it's working well.
Great. And just a quick question on your AI commercialization with some of your partners in the market there. I'd love to just get an update in terms of How we should be thinking about the timing and pipeline of any other products that could be Lodged into FDA or brought to market on the next sort of 2 to 3 year time horizon?
Yes. Look, it depends on the organization. Most of them already Have projects where a lot of what I call the science or the research is already underway. And in those instances, With Accelerator, we are the glue that sort of fast tracks that process. And so you may find that they complete the science And we do the FDA and what I call prioritize it.
In other words, how you make it a product that's supportable and distributable And then we commercialize it. So those would be maybe a little bit more near term. It could be 12, 18 months, could be less, just depends on FDA and How big a product it is, those where we would do the science or it would be joint science could also be somewhere in that Time frame? Some could be longer. It really just depends on the project.
But I think there are a few projects that are Further down the track simply because they've done the science but don't have the wherewithal to make a product and put it through FDA. And if that works For us and works for them, then we'd be able to pick the ball up at that point and do it relatively quickly compared to the rest of the market. We're saying, it's not just here and now. These are longer term projects, but they're not 5 years away. They're hopefully 12 to 24 months away.
Your next question comes from the webcast. Will Hauser at Escala asked, are your margins expanding with new revenue and contained grow in costs? Can you comment on profit margin, please?
Yes. It's Clayton here. I'll answer that. Our margins expanded with a little bit of both. Obviously, new revenue coming through.
Some of the contained costs Well, more to do with the marketing and the conference costs, obviously, not appearing in this financial year. As Sam mentioned, that's like will come back within November or the first half of this, the FY 'twenty two financial year. So revenue It has been the main driver of those that margin expansion coupled with the decrease in costs for advertising.
Clearly, as
we look into FY 'twenty two, we think that some of those costs will start coming back to the conferences, but it will be some of the revenue that we get The new contracts coming on board for NYU, Northwestern and Intermountain and MedStar will start Helping that normalize. So we think the margins, it's had a bit of a step change in terms of where it's gone from mid-50s to over-sixty. We think with some additional costs with advertising and also setting up on the NYU R and D Offers, the expenditure there, I'll start to normalize.
Will Hauser with Aschalla also asked, Can you comment any further traction in Europe outside the German hospital previously announced?
Look, our commentary around Europe is it's unfortunately not one country. It's a whole lot of countries and each one has A different health system and more importantly, different funding for health. We think outside Germany, the Larger countries with more sophisticated health systems are looking at a different way of buying their technology. They're looking more towards the American model. So in our commentary is Europe's a few years behind.
It tends not to buy components like us, Well, hasn't in the past and cloud hasn't been prevalent. We're seeing it more and more, I think, In the U. K. In particular and parts of Europe. So we think it will be incremental.
It will take a little longer. We think cloud will be A key part of it going forward. Now there's some regulatory things around cloud and Things to do with the EU and data protection and cloud providers being American, but clearly that needs to be worked through by the cloud providers. But once it does, we think that will open Some opportunities. So Europe, we're looking at it.
It will be more incremental and take a look it will be more step by some what's happened in the U. S.
Michael Legg with Michael Legg and Associates asks,
This platform was developed back in 2009, and obviously, we've enhanced it. But a few things, one, it's proprietary. So and it's all in house. So we didn't use someone's toolkit, get 80% and then modify the last 20%. It's 100% Proprietary and in house.
The second thing is it's not just one technology. We talk about the streaming because that's the easiest one To try and explain a bit like Netflix for radiology, but a bit more sophisticated, but there are a lot of other technologies in and around What we do because it is two way communications and you can't have any jerkiness in it because the minute you have any jerkiness Well, hesitation in the image flow. Radiologists will just go, sorry, can't use it because they think they're missing something. And so there's certain technologies that Try and optimize the streaming based on bandwidth, which keeps changing even on the best network every half second or so. So I suppose a few things to that question.
It's proprietary. We didn't leave a road map. And they can't get a head start by just Getting someone's toolkit and trying to put it together. A number have tried, haven't been successful. And then the last thing is the best form of defense is attack.
So We are putting the foot down in terms of R and D and bringing out new features and new capability all the time. So we're making ourselves harder to catch. So as I said, at this point, we don't know anybody that has been able to bring out a platform that And one for 1 competes with us, I think. And that doesn't mean one day they may not do something that's Half as capable or 3 quarters or equivalent that we just don't know, but at this point we haven't seen anything similar in the market. And I think the fact that we're winning The lion's share of the large public opportunities and this probably supports it.
Will Hauser with Escala asks, are existing contracts being renewed on the old terms or are you managing to upsell improved terms when renegotiating new contracts.
Yes. We have we've only had Few that have renewed and some have either been for additional volumes or increases in exam rate. Clearly, when we first started selling Vazage, the exam rate has increased some 65%, 70%. But some of the existing customers have obviously pushed into that price. We haven't done that on a per exam basis, but there's somewhere in between.
So We've been able to negotiate an exam rate that's fair and reasonable for both parties, but to bring it more in line.
Jason Yin with Lincoln Funds asks, are you able to comment on the list in other financial assets to $19,800,000 especially unlisted investments in managed funds.
Yes. So the other financial assets Investments of our cash holdings. So we've taken it out of pure cash and term deposits and put it into Some other financial assets or investments. The main reason to have done that in the fixed income securities is to enhance our returns For those available funds that are on, in terms of where they're positioned, we give those to
Claude Walker with A Rich Life asked, could you please tell us whether you have lost Any opportunities that were previously in the pipeline?
No. It's a short answer. There are some opportunities that we don't get a look at, and Thankfully, they're not many. But any of the opportunities where we've had a chance to compete, And when I mean compete, it is go through an RFP process, do demonstrations to the radiologists And then often there'll be a pilot or proof of concept where you have them use it with their own data In that regard, in terms of material opportunities, no. Now there have been 1 or 2 over the years Where we haven't even got to the starting line, we don't get the RFP or we get the minute they do an RFI and say, what are your prices?
I say, well, we can't. We're not going to progress with that. But as I said, thankfully, they're few and far between. So nothing in the pipeline That we've competed on that has dropped out to a competitor at this point.
Julien Mulcahy with ENT Ask when do you expect to receive revenue from the Breast AI algorithm?
We're hopeful that based on how it's going, well, we've got it in situ in a large academic and it's going really, really well. I would tend to think realistically second half FY 'twenty two, possibly first half 'twenty three, but that would Stretch it out. So I think we'll get our first taste of some revenue, hopefully second half of this financial year.
Julien also asked what is driving the large increase in receivables.
Yes. Tylin, that's there's a number of factors for that. One is we're actually doing more revenue, so exam based revenue at the end of every quarter. So it's at the end of June. We have a number of higher volumes, so more customers, more volumes.
So that's part of the reason. The other one is timing of implementations. We as Sam mentioned, we had finished implementations for NYU, Northwest and then MedStar, including data migration to MedStar towards the end of June. So that helped drive that trade receivables, Most of which is in the 0 to 30 days. So that's when a lot of the invoicing got done for some of those.
Ian Lee with Allianz Global Investors Hong Kong says, Sam, any indication on the number of bids you're engaging on now? Also in Europe, any insights into the momentum?
Ian, we don't normally give out we don't give out the numbers of opportunities. And sometimes, Actual numbers can be a little misleading because you could have 2 small ones equal to a 5th of a really big one. I think the important thing for us is Not only is there a good quantum in terms of exams because that's how we size each opportunity, It's across a whole range of market segments because I know you see my slide where 9 out of the top 20 and everybody thinks that's all we do, but it's not. We have really good sales in what we call the RDN non academic space. So last year, things like You know, MedStar in the mountain, which is huge, but non academic.
And so we see we look at it both in terms of Which markets it's in, and we're looking at things in the for profit, private, academic, non academic. So we're pretty pleased with the spread, good spread cloud, non cloud. And then the other trend, which is Really important for us is there's an increasing number that are looking at taking more than one product from us From the get go. So clearly, the total contract value gets padded up by these additional products and that can be quite material. So The comment on the pipeline is we're happy with it and we think it's a great mix across multiple markets and multiple types of opportunities.
In terms of Europe, I think, really, as I mentioned before, each opportunity is smaller because Europe tends to have Regional hospitals like the one in Munich is the biggest hospital in that area, but there's only one campus, whereas in America, they tend to Spread groups spread across regions like Mayo and 3 or 4, etcetera. So yes, in terms of pipeline, Clearly, majority of it's North American at this stage, and we will see more and more European, particularly as cloud starts to be more prevalent.
Ian also says, in Australia, are there any views in changing the contract to more Software as a Service based?
Well, in terms of the risk product, that's what we did with Primary. It's a per transaction. They bought the whole thing based on that. So I think that was we use the same model we use in the U. S.
Certainly, if we sell These are 7 to any of the more material clients, which we live in hope as we say. Obviously, we think we've got a good story there. That would be on a SaaS model as well. So we are bringing it in with their new sales. Clearly, if a client has been with us Long term like HiMed, which we've been servicing on and off at different parts of it for years, if they've already had the old model where they Paid upfront for the licenses, then we're keeping that model, but new work we're doing on SaaS.
Gary Sherif with RBC says, Morning, Sam and Clayton. Are you able to provide us with rough timing for likely sale of Visage into new departments outside of radiology. Is it likely in FY 'twenty two or FY 'twenty three or later? Thank you. Gary Sherif.
Gary, I think end second half 'twenty two, beginning 'twenty three It's feasible. Clearly, it just depends on the institution and their needs, but We would hope to at least have something in that time frame. Look, it could stretch out further, But I'm optimistic we can end of 'twenty two, beginning of 'twenty three. If everything goes according to plan, we would have something.
Adam Jassik with Jassik Invest is interested to hear what you see is the future of your AI Breast Density application. Do you see the future market as broad public health screening or targeted health care by institutions that have already installed? Or will you install your offerings?
It's a good question. I think the first phase will be for to sell it back to our existing user base because we've already we're already there. All these systems are the same so that you just need to drop the algorithm in. It's not a Spoke implementation for any one client. It's very easy to deploy.
And we have a material user base And a growing user base that would make that strategy worthwhile in its own right. Is there anything that stops us from Deploying it to non Vazars clients? No, but I think that would be a second stage.
Panos Rodriguez asked, does the breast density AI require radiologists to confirm the report where the FDA has approved the release of the results without a radiologist. Plus, have you sought approval from the Australian regulators read this AI system after getting approval from the FDA.
Yes. I'll answer the second part first. We do have TGAMC approval as well as FDA. FDA was The last. So the answer to that is yes.
I think you need to in the U. S. In most states Comment on breast density for every mammogram or breast tomosynthesis. So that is just one part of The clinical report. So does it need the radiologist to look at it and comment on it outside AI?
Most probably not, but that doesn't give the full report that you need for the mammogram. So radiologists would be looking at the images anyway. There are other applications for so from a density point of view, no, the radiologist doesn't have to comment on the algorithm can. And the accuracy and consistency are that we're incredibly pleased with, But it has other applications. So when the technologist actually does the exams, they can actually find out about the density because that If the breasts are dense, then it sets in training additional tests like an ultrasound or an MR, and they will know that That's the point of actually taking the images.
They don't have to interrupt the radiologists. The radiologists look at them, comment on them and then they go back. So I think the application is not just, is it something else for the radiologists to do? I suppose the answer to that is yes. But it has a lot of other applicability inside the sort of whole workflow of how the patient goes through the practice.
Michael Leggs with Michael Legg and Associates asked, has there been any consideration of PACS for digital pathology histology?
Look, it's something that we do get asked. The platform is very suitable for it. And the people in Berlin actually have a lot of expertise because Originally, we had a division called the Mirror that did a lot of electron microscopy and analysis of those images and Those digital slides, which is very sort of it's very akin to what's done in pathology. So look, It is a possibility. It's not on the absolute near term roadmap, but that's not to rule it out because the platform As well suited to that as it is to radiology going forward.
Curtis Larson with North Capital Ask, do you see any demand for multi cloud capability within a customer where their data can sit on different public clouds at all?
Absolutely. So what normally happens is the client will have their data and that will be replicated As part of the cloud provider's storage in multiple instances in different locations, So that's quite standard. So we do object storage and they're replicated as part of the standard. Some clients will then look to actually have that data made immutable. So it can't be changed because the images are the images And store those as a backup in a completely different cloud provider.
So it's really a matter of what Each client wants, but certainly, to me that makes a lot of sense because that's the ultimate in disaster recovery and we do support that.
Daniel Goldberg with Select Equity says, where is the competition? It seems that closed room renewal discussions means that competition remains desultory.
Look, as I said, I think in the when we have closed room discussions, it means The client is happy with us because when they're unhappy, they go back out to market and we haven't had that. It's purely in terms of Pricing and in terms of length of contracts. So I think it's a clear indication that We're doing our job because if we weren't, they would go back out to market. So our aim is For none of our clients to ever go back out to market and clearly the only way we can do that is make sure the product still remains the best And that we provide the service that they expect. And so, thankfully in these instances, I believe we have.
So that's why it's closed door.
Scott Williams with Team Invest says, Hi, Sam. Can you please comment on the Board's approach to succession planning?
Yes. Look, it is a big topic for us as we get bigger and frankly, I get older. But look, We have started new people and culture committee. We have part of that role is not just remuneration, but clearly succession planning and What they call building the bench. We've had a great expansion in our market share, and we've been able to do that with the resources we've got.
But Clearly, we need to look at what's over the horizon, particularly with these new opportunities. Suffice to say, it is one of the 2 key areas that our Board is looking at. And Obviously, it's an iterative process over time.
Scott Walker with A Rich Life Says, is visage worklist simply elements of the Australian RIS product repackaged? Can you talk about the differences between visage worklist and the Australian RIS. And can you please give us a feel for how many clients in the USA are using the Workless product?
Yes. It's not the same and there are technical reasons. I won't go into why it's not the same, but it has the same DNA. So clearly, Malte Westhoff, our global CTO, oversees the risk development as well and a lot of the Functionality and concepts we have in our work list in the Australian reps are replicated In the U. S.
Opportunity, it's a slightly different technology stack. It's Moin, Moin, using a similar stack to the VISIT 7. And again, I won't come to all the bits and bytes, but It's different, but it has the same DNA. We now have, I think, Over 4 clients using the work list, 3 that are smaller and growing and clearly Intermountain, which is the last one, which is large. So It's sort of pretty much at that fully hardened commercial point.
And so anyone else of any size He wants to use it. We're pretty well guaranteed that it will be applicable. So look, it's an important Now we're in our quiver. And as I said, it just allows us to provide flexibility and address A broader range of opportunities. And so we're really pleased we have it on deck and live so people can see it.
Thank you. We will now move back to questions from the telephone. Your next question comes from Chris Cooper with Goldman Sachs. Please go ahead.
Thanks very much. Apologies if this has been asked. I joined the call a bit late. I just wanted to ask on the renewal profile. I know you've got WellSpan, I believe, coming up in the relatively near future.
Can you just give me your updated expectations on that process, And also just an update on where you are with the renewal profile across the rest of the contract base. And then secondly, just curious to get your latest thoughts on Span. That's probably the single most frequent conversation we have With investors on this company and look, I think the pursuit of wisdom is really from addressable market around US2 $1,000,000,000 to US3 $1,000,000,000 Clearly, there's several reasons why that number might be different now. I'd just be really curious to hear your latest thoughts on the total opportunity and I guess your potential trajectory from here. Thank you.
Clive, do you want to address the first question and I'll do the second?
Yes. In terms of renewals, we spoke about Alleghany has renewed Sato. We're still going through the process because it's a Closed negotiation in terms of that sort of renewal. WellSpan, as you rightly mentioned, Chris, is About 12 months away, we haven't started those conversations yet, albeit just to indicate that the contract is running to an end. But We're confident that, that will hopefully remain a closed door negotiations as well and continue running the process.
They haven't indicated that they will Going to market, so we hope that that continues. In terms of TAM, if you want to address that?
Yes. Look, traditionally, the TAM has just looked at As radiology and they called it PACS. And I think the VISTA has widened significantly Because applications like ours can move into differentologies. So that's one thing. And I think People are looking at whole of hospital viewing review, which is not as many dollars in it, but There's more to that.
There's the archive, which some people included in PACS, but there were separate V and As, which was a different market. That's Part of the TAM. And then there's all the new stuff like reflective light photos becoming a huge part Of the medical record. In other words, I think more and more if you look at the record over time, It's less alphabetical numeric or less text and a lot more image, which is part of the term. And then of course, There's the whole question around AI and radiology and what that addressable market is because it's all related to what we do.
And I think the addressable market is large, but I don't think anyone has an accurate figure on it. So I think the term is expanding, not contracting, and I think it's for those multiple reasons.
Appreciate the thoughts. Thank you.
Your next question comes from Jon Hester with Bell Potter.
Hi, Sam. Good morning. Hi, guys. Sam, just on Your strategy going forward, obviously, you've got a very large business here in the U. S.
Now, highly priced or highly rated stock. Where are you guys Sitting in terms
of
thoughts on acquisitions, potentially of additional complementary Technologies to spread beyond your area of just radiology imaging.
Yes. Look, there are a few things there. I think one thing we're doing is, it's a question of build or buy. On the building side, we with the new R and D center in New York starting later this month and the research collaboration that's More on the build side, it's partnering but building, so we're not doing it all ourselves. And then the question around and so there'll be some investments in But then the question around buy.
Look, I think we've been consistent. Our preference is we don't look to buy market share and we haven't. It's more around adjacencies. And I think some of the areas at the moment we Particularly around AI capability, we struggle with evaluations. I think there's a lot a fair amount of blue sky in them that When we look at it and put it in a spreadsheet, we understand it's not linear, but we don't see that we can't see it working out.
But Look, that landscape is changing. I think some of the VC funded, AI companies are starting to run out of a bit of runway because it's taking a lot longer to commercialize and then you've got to go through the whole contract cycle with clients and liabilities and PHI and all the things we have to do. So look, we're looking, no question. And we do get propositions from various Investment banks from time to time, and if we keep looking long enough, I'm sure something will pop up. I think the main thing is also we want to be selective for two reasons.
We want to we don't want to get distracted and defocused because we've got a lot of opportunities. And more importantly, We believe we can reach our growth targets organically, but it would be silly of us and we're not doing it. We're not closing our eyes to M and A and If we can find something that we think we can add value to because of our technology and our user base, we'd certainly look at it.
Okay.
Okay. And just in relation to FY 'twenty two, I'll ask it anyway. Consensus revenues are sitting at around $90,000,000 Sort of any thoughts on that, Sam, are you comfortable with that or just prefer not to comment?
Clayton, did you want to?
Yes. I mean, we've looked at those, John, I think that that's reasonable, obviously, with some of the wins we've had in the implementations. I think in the counties that we'll need We have a small amount of contracts for this year and implement and clearly the timing of those. So I don't think it's outlandish in terms of the
There are no further questions at this time. I'll hand the conference back to Doctor. Sam Hubert for any closing remarks.
Well, everybody, thank you for joining us, and thanks for your questions. Appreciate it very much, and Thank you once again. That's it.
That does conclude our conference for today. Thank you for participating. You may now disconnect.