Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mach7 Technologies Ltd (ASX:M7T, Financial) achieved record sales orders of $61.3 million in FY24.
- The company successfully transitioned from a capital software-intensive business to a subscription-based model, resulting in strong growth in recurring revenue.
- Mach7 Technologies Ltd (ASX:M7T) maintained a positive operating cash flow of $3.5 million and ended FY24 with a cash balance of $26.2 million and no debt.
- The company completed 32 implementations in FY24, enhancing customer satisfaction and product stickiness.
- Mach7 Technologies Ltd (ASX:M7T) secured almost $51 million of forward revenue over the next five years, providing a solid foundation for future growth.
Negative Points
- Revenue for FY24 was slightly lower than FY23 due to the transition to a subscription model, resulting in a decline in capital software revenue.
- Operating expenses grew by 13% in FY24, which, although managed, still represents a significant increase.
- The transition to a subscription model has delayed profitability, with expectations now pushed to FY27.
- The company faces challenges in reducing deployment timeframes from 12-18 months to 6-12 months, impacting the speed of revenue realization.
- Mach7 Technologies Ltd (ASX:M7T) anticipates a modest renewal program in FY25 compared to the large renewals in FY24, potentially affecting short-term revenue growth.
Q & A Highlights
Q: Earlier this year, there was mention of the goal to bring new customers onboard sooner. How is Mach7 progressing in this regard?
A: We aim to reduce the deployment timeframe from 12-18 months to 6-12 months. We've made good progress, including investing in a professional services automation tool to better manage projects and keep customers on track.
Q: When do you expect ARR to cover OpEx?
A: Initially, we projected ARR to cover OpEx by FY26. However, with our recent investment in people, this might be pushed to FY27. We continue to take a disciplined approach to achieve this goal.
Q: What is the ARR for the VA's Phase 1, and when do you expect first productive use?
A: The VA contract is based on actuals, with full volume potentially reaching $3.5 million annually. We expect the go-live in the first half of FY25, with a gradual ramp-up to full capacity.
Q: The $2 million to $3 million investment in systems, people, and tools guided for FY25, is that included within OpEx guidance or additional?
A: It is included within OpEx guidance.
Q: Could you talk a little about the VA and the opportunities you see there and any timeline associated with that opportunity?
A: We expect the first half go-live for Phase 1. Post go-live, we anticipate additional traction with visions for Phase 2. We hope to see one or two visions sign agreements in FY25, with potential for a surge in Phase 2 activity once the national teleradiology program is in use.
Q: What is the tipping point for Mach7 to break through the small-cap ceiling and attract investors from the bigger end of town?
A: Profitability is the critical fulcrum point. Achieving profitability will likely bring a re-rate and attract a new slew of interested investors.
Q: Are there any major renewals you anticipate in FY25? Or will this be very modest following a large FY24?
A: FY25 will be modest in comparison to FY24, with low double-digit renewal activity expected.
Q: Are you able to give us some insight into the DoD VA RFI that is out currently, particularly the size of this contract in total to viewer work list and archive?
A: There is no combined DoD VA RFP. The VA RFP, which we are interested in, is expected in the spring. We will not participate in the DoD RFP due to its different requirements.
Q: Is CARR growth guidance predominantly new customers or add-ons and expansions?
A: Predominantly new customers, although expansions and add-ons can significantly impact the narrative, especially with unexpected hospital acquisitions.
Q: Can you comment on the class ratings and whether you've seen any movement in the past six months?
A: Yes, we've seen positive movement. Since January, the VNA score increased by 7 points and eUnity by 4 points, thanks to improved support processes and a focus on customer intimacy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
