Release Date: February 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pro Medicus Ltd (ASX:PME, Financial) reported another record half-year with significant improvements in revenue, profit after tax, and underlying profit.
- The company secured four large contract wins with a cumulative value exceeding $200 million, including a 10-year contract with Baylor Scott & White worth $140 million.
- Pro Medicus Ltd (ASX:PME) has a strong cash reserve and announced an interim dividend of $0.18, up 38.5%.
- The company has a highly scalable, software-only model with a contained cost base, leading to growing margins.
- Pro Medicus Ltd (ASX:PME) maintains a dominant position in the market, with 9 out of the top 20 hospitals in the US as clients.
Negative Points
- The company faces challenges in transitioning existing on-premise clients to cloud-based solutions, which may impact future renewals and revenue growth.
- There is increased competition in the market, with legacy players like Philips launching new cloud-based enterprise imaging solutions.
- The commercialization of cardiology sales has been slower than expected, with some delays in revenue contribution from this segment.
- Pro Medicus Ltd (ASX:PME) is experiencing a global acute shortage of radiologists, which could impact the company's ability to scale and meet demand.
- The company's high pricing relative to competitors may limit its addressable market and could be a barrier to adoption for smaller clients.
Q & A Highlights
Pro Medicus Ltd (ASX:PME) Earnings Call Highlights
Q: Can you give us a sense of any deals as big as Baylor Scott White in the current pipeline?
A: We have a broad spectrum of deals across all market segments and sizes. While I can't specifically refer to Baylor, there are several material deals and a good mix of medium-sized ones. This indicates our Total Addressable Market (TAM) is larger than initially realized. (Sam Hupert, CEO & MD)
Q: Has there been any impediments or holdups to launching and commercializing cardiology sales?
A: We believe the launch is imminent. We are working on multiple strategies, including our investment in Elucid. More clients are testing the product, and while it has taken a bit longer, it hasn't stalled. (Sam Hupert, CEO & MD)
Q: Could you give us more detail around the volume growth and organic growth outlook?
A: Exam volumes are increasing higher than industry standards, which is around 3.5%. We expect this to continue into the second half as we roll out new implementations. Existing customers acquiring new hospital groups also contribute to this growth. (Clayton Hatch, CFO)
Q: What are you seeing in the outpatient clinic and provider markets, and any changes in sentiment?
A: We are seeing an opening up of opportunities in these markets. The compression model is starting to crack, and our products are ideally suited for these markets. Radiologist efficiency is key for remote reading groups, and we see opportunities there. (Sam Hupert, CEO & MD)
Q: Can you provide insights into your TAM and the 80% you mentioned?
A: We estimate around 600-650 million diagnostic imaging exams are done annually in the US, growing roughly 3% a year. Our product is suitable across all market segments, and we believe our TAM is 80%+ in terms of addressability through either commercial or product prisms. (Sam Hupert, CEO & MD)
Q: How do you view the competitive landscape, especially with new cloud-based offerings from legacy players?
A: Our technology lead has increased. We haven't noticed any increase in competitive product capability; if anything, the gap has widened. Our recent release of Visage Ease for Vision Pro is a significant step forward. (Sam Hupert, CEO & MD)
Q: How important is having AI algorithms with specific reimbursement attached for commercializing opportunities?
A: For specialized algorithms like cardiac CT, reimbursement is very important due to the high cost of tests. For more routine tests, reimbursement is less critical but still beneficial. (Sam Hupert, CEO & MD)
Q: How does price factor into your TAM consideration, given Pro Medicus is more expensive than other solutions?
A: Our offering is auto-scaling and cost-effective for smaller groups. They get the same efficiency benefits as larger groups but only pay for what they use. This makes our TAM much larger than initially thought. (Sam Hupert, CEO & MD)
Q: Are there any developments in other ologies outside of radiology?
A: Yes, we are looking at opportunities in areas like ophthalmology and dermatology, which use different imaging methods. Our platform is ideally suited for these applications. (Sam Hupert, CEO & MD)
Q: How are customers thinking about shifting to cloud and transitioning to a full product suite?
A: There is a significant move towards cloud, and we expect a material percentage of on-prem clients to transition. This opens up opportunities for full stack solutions, including viewer, archive, and workflow. (Sam Hupert, CEO & MD)
Q: Can you elaborate on the customer strategy for the corporate space?
A: The corporate space includes radiology reading groups, which are realizing the importance of radiologist efficiency. We are seeing more interest in this area, which is different from hospital or IDN markets. (Sam Hupert, CEO & MD)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
