© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by, and welcome to the Imaging Experts and Healthcare Services Limited Investor Q&A for the First Quarter Appendix 4C Results. [Operator Instructions] I must advise you that this conference is being recorded today, Tuesday, the 7th of May 2019.And now I'll hand the conference over to your first speaker today, Managing Director and CEO, Dr. German Arango. Thank you. Please go ahead.
Okay. Hello, everybody. Thank you for taking the time for attending the corporate presentation update -- updated corporate presentation. And well, if you have your latest version of the presentation, we will go through this.And in the Slide #2, we have the company highlights. This is a company developing next-generation software for radiology and imaging software platforms. This is a company that was founded in 2012. We have been growing very fast. And given that growing metrics, we have had operations in 5 countries: Colombia, Peru, Mexico, Ecuador and Costa Rica.We already have distributors in 11 countries, in total 18 distributors. And our strategy is to make this a global business, but our natural environment for expansion is Latin American countries. For that, we are a little bit of low-risk go-to-market strategy based on finding and recurring experienced distributors in the region and worldwide.We have been doing our first collaboration in Australia. We have tried the future trial that -- which should be done and tested and will soon become a revenue generator contract.We are constantly evolving from the technological perspective and developing additional functionalities. We recently introduced to the market Web MPR with 3D and MIP functionalities and have been -- and these functionalities have been fully deployed and are already in a commercial stage.Also, we applied for the FDA in the last quarter of -- from 2018, and we are now waiting for the final answer from the FDA which should happen before the first half of 2019.This is a company with solutions fully developed, very mature, fully validated and in operation. And here are the other where numbers are very significant. We have deployed more than 200 sites in Latin America. Our platform has been used by over 600 radiologists growing in more than 35,000 clinical devices. We have solutions in 71 hospitals, 180 clinics and total 216 customers. And a very significant number is that we have -- we are running currently to our platform more than 5 million new radiological studies per annum.Next slide is the #3, and I will allow our Chairman, Tom Pascarella, to explain it to you.
Thank you, German, for that. And thank you, investors, for dialing in this morning and taking time and interest.Three main highlights: one is around the contracts, second one about cash or cash position and the third one is about the debt facilities that we've put in place for growth. As you see on the slide, we increased our receipts from customers 81%, up to $1.4 million quarter-on-quarter. TCV has now reached $20.6 million, and some new contracts signed. And the ARR, annualized recurring revenue, has reached $4.5 million.The cash position. As we had explained in other previous 4Cs, we do have a seasonal end-of-year given the one-off sales that occur on a calendar year basis. We recorded $886,000 in cash. We have an additional $847,000 in receivables coming in April and May, which are remaining from the 2018 one-off sales. So I've used the concept that we're resetting cash to $1.7 million. And across our various receivables, we have 30 -- some contracts on 30, some on 60 and some on 90-day invoicing periods. So we're managing the metrics across all those to get them onto a more regularized flow.With respect to the announcement about the debt facility, there were 2 main ones. One is the new working capital facility with Banco de Bogota. I met with them a few weeks ago. It's a great old line bank, a little boutique bank that services on small businesses. We put in place a $225,000 working capital facility which will get us the necessary buffers and FX facilities for working capital. And importantly, they're happy to grow with us as they learn our business model and as our needs grow.On -- in Australia, we announced the Binding Terms Sheet with CVC Limited and Forrest Capital. That's for $2 million facility. It is a debt facility with options. It is not a convertible note structure. It is a structured debt facility. Our objective there was to recycle the equity capital that we have tied up in 2 very large PaaS contracts and be able to get a facility structure and a facility -- a debt facility discipline in place to help us with growth alternatives in the future. So in the upcoming quarter, we've -- we're expecting cash inflows to exceed cash outflows so that -- we believe that's a positive step.If you turn to Page 4, that just helps to illustrate the TCV. The chart on the left has stepped up by $600,000. And now in the 4C, we did announce Clinica Nueva which was an -- originally signed amend and extend, which added quite nicely to the TCV, but it added capability with facilities. And we also concurrently have reached out the end of existing contract, which moved that one down. So our net position is a $600,000 increase for the quarter.On our ARR, the important update there is that the backlog in revenue not yet billing has stepped down from $1.2 million to $300,000. And what that indicates is that the implementation times required for some of these more of the complex hospitals in all these sites where it does take a period of time to get to our invoicing. And that invoicing starts when capabilities, facilities are brought online, the training has occurred and the client is accepting the choices that we have provided. So there is still $300,000 to invoice there at the end of the first quarter.I'll turn it over to German for a review of the business model, which is on Page 5.
Thank you, Tom. We got a link to the business model where it's very important to say that the main message behind it are that we have a company with multiple growth opportunities coming from development of the group, people, our industry and business models for different geographies and the potential of being global but also because we have been developing new verticals in thinking and growing our portfolio. Also, we have a very good potential of growing based on our distribution model.And so I will tell you that the business model and -- the business model. I think it's important to say that the company is essentially doing SaaS deals, but we have found that there is a good potential in PaaS deals as well. Those are deals that are usually signed in a 5- to 7-year time line.And in these kind of deals, we find -- we have found multiple customers that have our requirement of how they're going to learn the software or to improve the workflow of the facility. After that, we will -- after the first, we will diagnose this to optimize the facility workflow. And then we suggest a bundle or a platform including hardware and software. And to offer this complete service is very attractive for our customers because they avoid some service agreements and [ deals ]. And we're able to give them coordinates of updating the technology. That's why it is becoming more frequent in our funnel.And -- but it's also important, as I said, just to say that we are essentially a SaaS company, that these kind of deals are a good potential ahead. We have been increasing in our commercial activity in the region. We have been completing the activities of the region and working neutral for the -- for being ready to the commercial launch after the trial we have been doing recently. Also, as I said, we're working for the FDA which should be soon. And then when we have the 510(k) clearance, we will be able to offer the soft launch in the U.S.I will highlight the release of the Anatomical Pathology Laboratory Information System, a new vertical that we have been exploring in the various activity where it's coming, radiology. Also, it's important to insist in the putting out our distribution model, which varies in finding experienced distributors with an existing network of customers and with existing knowledge of these kind of platforms and deals allowing us to have short-term increased impact in our targets.If we go to next slide, the #6, I will just highlight the benefits of our growth. And essentially, our platforms exceed the capability and usability of our competitors. As you already know, price point is up to 75% cheaper than our competitors. In one hand, we present this state-of-art -- all this state-of-the-art technology. And these are single platform, fully integrated from end to end, including all the requirements with the portfolio offering and equally being a single software platform.The radiologists love our platform. It's very easy for them because they can work from anywhere, any device, without an increased installation. They can even use speech recognition in a Web platform. And we also have a bunch of processing tools for the images to aid in the diagnosis.And in the next slide, the #7, we have the map, the distribution of our distributors. Essentially in blue, we have the countries where we already have distributors. And green, we have the contributors where we have been appointing for distributors and we will soon sign our distributors. Again, I have to insist that -- in the quality of the distributors. Most of them are [indiscernible] distributors for our competitors like for Agfa, CareStream and [ Fuji ]. So they have good experience, knowledge and a good network of potential customers to increase our funnel.The next slide is the summary slide. And I will again hand it now to Tom to go through this.
Thank you, German. Just in summary, we believe it's a derisked low-risk business model with the high margins across the SaaS business and also the one-off sales where we strive for 20% to 30% margins in one-off sales, much higher margins in the SaaS business. And that, of course, is a mix of recovering capital and getting the SaaS contracts.In technology, German has pointed out in the earlier slides the -- our operating footprint. We're working in all different size facilities with the -- with productivity tools, the AI tools and the tools available for diagnostics. The business was built by radiologists for radiologists. It was not an off-the-shelf technology that is customized. It was built starting from a blank sheet of paper day 1, and it's working quite well in -- with our clients.We're proven across the countries we're operating in. Some of the hospital systems, they have more difficult circumstances than others. Some are ultramodern, and some are rural facilities. So we feel good with our capabilities and the robustness of the platform that we have in place.The sales pipeline is stronger. We work it from a bottoms up with contract-by-contract potential client with our distributors with 9 different stages of waitings based on where those conversations are in a procurement process. As you can appreciate, any kind of medical technology, hospital procurements do have a lead time. And that's where one of our important deliverables is getting distributors in the country who have the experience to work with those existing healthcare providers in each country to start building up the pipeline for us.And the development -- the funding that we're working to put in place, but it's on the working capital level. I think in the 4C I mentioned these 3 levels we're focused on. One is Colombian peso working capital. We've achieved that. The second one is one in Colombian peso banks or debt funds to help us with the cash contracts that come up. And thirdly, the Australian bank debt facility, which is a traditional debt structure with a package of options. It's not a convertible note tax structure. And that gives us some additional capital to recycle our equity as well as to refinance the 2 large cash contracts from last year. So we're very pleased with getting the -- get the resources in place for further growth.I will hand it back to the moderator for Q&A at this point in time. Thank you.
[Operator Instructions] Our first question today is from [ Steve Motbey ] who's a private investor.
I see in the presentation, they haven't -- with the FDA approval, can you give us an update on that? It says you've applied for it, which I think is at the start of the year. Have they come back with any concerns or questions? And when do you expect mostly for that to be approved?
Yes. Regarding to FDA, the submission was done in the last week of December 2018. And they have in the process 100-days window for requesting additional information. And this has already happened. And after that, they have additional 80 days for the final answer. So the deadline for the big 180 days is in the last half of June. So we still have to wait for them to review their final answer, and we're still in the current regular process within the window.
Okay. So for the first submission, the first 100 days, they didn't have any questions or concerns that you need to recommit?
Yes. They request some additional information from us. We already hand them that. But it's going through a regular and standard process as the advisers have explained to us. So the total we know is 180 days, and the end of the window is in the last part of June.
Okay. Yes. And just one following on. Is that -- I guess the plan end of June, what's the intention of scaling up and selling and applying resources for that market in that region?
Sure. The initial planning we have within -- in our existing or in our current business plan is to soft launch. So we already have done some app launches to radiology facilities that may be interested in -- or keen in studying our platform as an initial test bed regarding the more detailed information about the local workflow on regulations, after that, doing the localization and final customization of the platform to reach the specific requirements. It's fair to say that we have been working in advance, trying to have all the workflow adopted to this kind of local regulations. For example, we have been doing this -- being CIPA-compliant, trying to achieve all the security tools and the features required for this kind of market. But there may be some specific detail requirement that we will have to finally customize, and then we will be ready for the full commercial launch. But in our current business plan, we have included only a soft launch, which we will illustrate regarding the information and having a platform fully localized. Then we will be ready for the second stage that may represent additional resources and additional clarification.
[Operator Instructions] Our next question is from [ Max ] from [ Honne Investments ].
Look, I've got a couple of questions. The first one relates to your ARR, which I noticed in the last quarter since have stalled after a few halves and very strong growth. What are your expectations on the ARR? Do you expect that to rebound in the next quarter or the next half? And what sort of trajectory of growth do you expect there?
[ Max ], thank you for your question. ARR, we expect steady growth. I mean as you can project, we started from a lower space. Some of these past contracts can be quite substantial in their TCV, which ultimately then thus translate into ARR. We're running the business that bottoms up from contracts being monitored. And the implementation time and the billing time, that's the challenge of the ARR, is getting through the implementation required and the billing required to actually add to the invoicing ARR. So we see steady growth. The growth will be up with some big contracts. And we also do have smaller contracts that were not necessarily announced. But that's the nature of the business, to be covering all sizes of the businesses, which German explained in the business model. And the other thing, [ Max ], when you look at our chart, it's quarter-by-quarter. So we've showed the increase over the last 3 months there. So I wouldn't say it stalled. It's, as I think we've said throughout, medical technology sales does have a lead time. It's an uncertain lead time. And when you win a contract, it's the largest contract, there is an implementation time. So we're very confident with -- comfortable with where we are and confident we have the growth outlook, that we're not giving guidance as far as particular numbers or trajectories or [ backflows ] we outlined.
Okay. That's fine. My other question is about your expansion into U.S. and Australia. I'm just wondering, I mean, you're dealing with deeply competitive markets. Why is it that you're going into those -- I mean, obviously, from the market side it's pretty obvious. They're bigger markets. But from a competitive standpoint, it's much more competitive. So I'm just wondering why are you going into those markets. Do you see your product as being competitive, superior? Why is it that you're tackling markets that will be more competitive rather than speaking to markets that you're currently in, where there's less competition and potentially Asia access to new customers?
German, I might hand that one to you.
Yes. Well, we have a different reason behind this. It's very accurate to say that it's more comfortable for us in the developing world because there are less competitors and we have both. We are more flexible and we can be more easily localized and added to the local workflows. But -- and we have a good potential and we have been very confident on this, but in our -- in the current business plan, we decided to include what we have called, again, soft launch for Australia and the U.S. essentially because we realized in the pursuit that our platform is -- it has a technology as good or better than the products that are allowed in these markets. The second reason is that if we achieve installations in these markets, it's going to be a very good reference for us. We should [indiscernible] the commercial stage in the developing world because you know that the developing countries use passive reference in technology, the developed countries. And finally, because we want to explore or to open a window for higher -- for higher prices for our products. And it's also important to say that in the developing world that the charges of our approach and the price is less compared to U.S. or Australia, for example. And if we can do a same kind of deal that we have been doing in the Latin American region, in these new geographies, we will be able to charge more per study than we have been charging in these regions and knowingly increase the profitability of our products. So those are the main reasons. But also, I want to say to you, this is not a cheap third-world product. It's a state-of-the-art technology, and it has been tested by engineers from multinational companies and it has been very good and well rated by them. And in multiple aspects, it's superior compared to those coming from the international companies. And it's also important to say that our competitors in, for example, in Latin America are probably the same companies a while ago in the developed world. And we have been able to be superior to them and to win [ fields ] in this region. We are absolutely confident that we can do it in a more demanding and competitive scenario.
Okay. And how do you manage the resources required to do that? I mean you're dealing in a different language. You're dealing in different markets. I appreciate everything you've said about what -- the comments you've made. I understand what you're saying. But the flip side to that is greater investment, perhaps longer investment lead times initially to convince -- perhaps get the good customers initially. I'd say you get some traction. So I'm just looking at that and looking at the growth you're having in, I guess, you could call it emerging markets and trying to balance whether maybe you're better off expanding in the emerging markets, not only in South America but elsewhere, rather than the course you're taking. That's all I'm saying.
Yes. You're absolutely right. And I already -- I have the same opinion about this. And we have a lot to do in the emerging markets, as you mentioned. And we have a huge potential because we have been successful in this kind of environment. But again, we decided to include in our current business plan not a formal commercial penetration of the U.S. or Australia because it may require a significant additional investment, and we even included this in our current business plan and budget. We just want to have an initial test bed in both geographies in order to have commercial reference and to understand these markets to gather the information from the field and then decide if we will put an additional or second stage. But in the meantime, we have a very good successful business in the emerging countries. And yes, it's -- again, I do agree with you, with your perception.
There's no more further questions at this time. I'd like to hand the call back to Tom for any closing remarks. Please continue.
Thank you all for dialing in and having the interest. I must say that we're very pleased with how we're traveling. The debt facility is an important step for us, the various debt facilities, as the reasons given. And it gives us a little more flexibility and capacity for some of the growth alternatives, as you've seen and heard, that multiple areas for growth through the different verticals, through the different geographies that we're working with our experienced distributors so that we'll start gaining more and more traction. I guess the general question is, as we've added distributors, what's the timing? How long does it take to win new contracts? Well, a lot of that is related to the state that each client assumes as far as new procurements and modernization and their own internal budgets. But that's why we're working with experienced distributors to accelerate that process. So we're very pleased with the growth alternatives that we've outlined. We do have our AGM on 21st of May. And as I think some of you on the line have been contacted, German will be in town for a few weeks, and we do plan to do a thorough roadshow through most of the capital cities. And we're willing meet face-to-face or have easier phone calls, as you might require. So please get in touch with myself, with Michael Brown on our IR advisory site to -- if you haven't been contacted yet. We'd be more than pleased to meet and discuss the business in details. Thank you all. On that note, I will wrap up the call and we appreciate your time again. Thank you.
Ladies and gentlemen, that does conclude the call for today. Thank you for participating. You may all disconnect. Goodbye.
Thank you all.