ImExHS Ltd

ASX:IME

Earnings Call Transcript

[German Arango, executive]

Good morning and thank you for joining us. We will keep today's update focused, the financial turning point we achieved in Q3, where we are concentrating execution for the next phase of growth and how Aquila+ positions our software business for scale. After that, we will open for Q&A. With me on the call is Reena Minhas, our CFO. On Slide 2, IMEXHS is one company with 2 independent but complementary engines. First, IME software, cloud-native medical imaging software sold on a subscription-based Software-as-a-Service model across 18 countries.

Second, RIMAB Radiology Services in Colombia, a clinical operation that provides reading and reporting services supported by our own software stack. On Slide 3, Global RIS/PACS is a $6.5 billion market today, compounding at approximately 6% to 7% a year. The shift we are all seeing is the move from static systems to agentic AI, AI embedded in real-world workflows to triage, prioritize, draft and accelerate reporting. That shifts matter because imaging volumes and data are compounding across modalities and specialties. AI is becoming the practical layer that absorbs this growth.

We have been working with AI, principally machine learning in production for 5 to 6 years. We don't use AI as a buzzword. We use it to deliver measurable efficiencies and better service levels. That is precisely where IMEXHS is positioned, software that handles raising volumes reliable and affordably. Demonstrated with more than 556 site installed, supporting more than 3,400 radiologists to report approximately 9 million studies per year and more than 6 million patients to access the images and results. On Slide 4, over 2 years ago, we started a company-wide transformation.

People, we strengthened leadership, finance, operations and the layers beneath them, processes, the quality function, mature documentation, SLAs and escalation paths were rebuilt. Systems, we implemented modern document management and systems management, optimized CRM and HR and then push automation targets into every department, many delivered with AI. The aim was simple, better service, lower cost, stronger margins. You see that in the results, sustained improvement in underlying EBITDA, stronger operating cash generation, disciplined working capital management and lower debt. We have flipped from negative to positive while protecting customers.

Help desk automation and tighter SLAs have reduced effort for users and improved first-time resolution. This execution discipline is now our baseline. On Slide 5, ARR evolution. As at 30 September, group ARR was $36.4 million, up 24% year-on-year and up 11% since 30 June. Breaking it down, software ARR is $11.7 million, a 2% step down from $11.9 million at 30 June. That movement is essentially volume driven. Importantly, the software pipeline strengthened. Several deals expected in Q3 have shifted into Q4 and Q1, not lost. Radiology services ARR is $24.7 million, up 18% from $20.9 million at 30 June, reflecting contract wins and disciplined portfolio actions.

Services provide a stable base for cash conversion while we scale software. On Slide 6, cost and cash discipline, what we do, not just what we spend. On cost and cash, our message is discipline. We have tightened credit controls, improved collections and applied pricing and terms discipline on renewals. On the cost side, we continue to automate back office and services workflows and to optimize cloud and storage. And also on financing, we are pushing financial discipline to reduce finance cost over time being selective on facilities, improving terms where appropriate and avoiding unnecessary charges.

Next slide, our focus right now, from here, we will cover 3 priorities: accelerate software sales, margin improvement and working capital and cash. Then we will go deeper on Aquila+. Aquila+ value proposition. Our value proposition with Aquila+ is clear, an advanced contemporary and secure AI-enhanced radiology software suite delivered as multi-tenant cloud-native RIS/PACS. Implementation is fast and predictable. DevOps cadence by weekly updates without downtime and a straightforward path to go live. And our customer service and support benchmarks are top tier with high uptime and strong SLAs, reflected in improving effort scores and NPS in our patient-facing portal.

That combination, speed, reliability and total cost to serve is what resonates with teleradiology providers, ambulatory clinics and hospital networks. The product is ready for scale, and we are selling through a focused partner program alongside direct enterprise sales. On Slide 8, margin improvement. On margins, our plan is, first, pricing and terms discipline. We are segmenting offers, applying improved terms and conditions, standardizing SLAs and monetizing add-ons where they clearly create value. AI triage, advanced visualization and storage tiers. Second, automation and unit cost.

AI-orchestrated workflows are already lowering service effort. We are optimizing cloud and storage and automating help desk and admin, so every incremental customer is cheaper to support. Third, portfolio and mix. In software, we prioritize higher-margin modules and enterprise deployments. In radiology services, we maintain a selective customer approach and exit subscale or persistently late paying contracts. Next slide, #9, working capital and cash. Turning to cash. Discipline is holding. Receipts were $7.9 million in Q3. Operating cash flow was positive $1.2 million, and we ended the quarter with $3 million in cash. Debt is down to $1 million.

Colombia's policy environment remains good, even so tighter credit controls, rephased collections and disciplined pricing are keeping cash conversion solid and liquidity stable. We are managing for resiliency while continuing to invest to scale software. On Slide 10, Aquila+ status and opportunity. For us, the product is the strategy. For customers, faster worklist, fewer clicks, embedded voice dictation and AI assistant for translation, evidence, templates, end-to-end risk workflow with ready-to-go integrations, AI triage, advanced visualization, HL7/APIs, VNA, enterprise controls, business intelligence dashboards and disaster recovery.

For patients, Aquila+ shortens the path from scan to answer, delivering faster report turnaround. fewer repeat visits through smarter workflows and secure anytime access to results and images. For IMEXHS, materially lower marginal cost to serve per new SaaS tenant, one-click tenant activation and 99.9% uptime, all of which supporting higher gross margins and repeatable rollouts. Slide 10. On software, the update this quarter is pipeline quality and channel leverage. A handful of signatures moved forward into Q4 and early Q1, but the overall pipeline strengthened with good traction in Mexico.

Our partner channel has now delivered 2 consecutive strong quarters and is contributing the majority of software new ARR. Key wins, we won back OMNI Hospital in Ecuador after displacing a competitor and renewed and upgraded Grupo San Pablo in Peru. In Colombia, Fabilu renewed for 36 months, totaling $162,000 ARR. Our partner engine closed the quarter with 26 active partners across 14 countries. We onboarded high performers and offboarded underperformers. New alliances include Bukeala in Argentina, plus 2 new partners in Colombia and one focused on Peru's public sector.

Slide 12. In Radiology Services, we signed Oncolife in Colombia, a 1-year high complexity engagement supported by our enterprise RIS/PACS, patient portal and selected AI layers expected to contribute about $1.4 million in new ARR. Margin actions are delivering. AI-orchestrated call-center workflows and a broader cost saving program, revised pricing and disciplined portfolio management, including exiting subscale or persistent late paying contracts have strengthened unit economics and profitability. As for the previously disclosed material opportunity, scope has grown, timing now looks like Q1 FY '26 with no certainty of signing.

On Slide 13, guidance. We are reaffirming this year's guidance, revenue of $27.5 million to $28.2 million, up 4% to 6.6% on the prior year, and underlying EBITDA of $1.3 million to $1.6 million versus $0.6 (sic) [ $0.5 ] million in FY '24. This stance reflects year-to-date performance and our expectations for Q4. On Slide 14, outlook and priorities. First, scale software, strengthen and grow across the region by expanding Aquila+ and our enterprise cloud through a balanced mix of direct sales and high-performing partners.

Second, pipeline and go-to-market. Several Q3 contracts slipped into Q4 and Q1, but the pipeline strengthened. The partner channel is delivering the majority of software new ARR and momentum in Mexico is encouraging. Third, margin expansion, continued cost savings, including AI orchestrated call center workflows, maintain revised pricing and disciplined portfolio mix and target software margin improvement over the next 6 to 9 months.

Finally, working capital discipline. Colombia's policy backdrop remains fluid, so we are keeping tightened credit controls, re-phased collections and pricing adjustments in place to preserve cash conversion. Liquidity remains stable. A sincere thank you to our customers, our team for their disciplined execution, our Board for its guidance and our shareholders for their continued support. We are building and doing efficient business, and we look forward to your questions.

I will now hand over to Reena Minhas for the Q&A. Reena is there any question?

[Reena Minhas, executive]

Yes, Iain Wilkie has got questions, so I will just unmute him now. Are you there, Iain. Iain, you should ask your question.

[Iain Wilkie, analyst]

Yes. Well done on the quarter, obviously. Just a couple of questions. Several contracts that you sort of mentioned slipped into fourth quarter or early FY '26. I mean what gives you confidence that these will close? And what proportion of the pipeline is sort of sitting in that advanced stage bucket?

[German Arango, executive]

Iain, thank you for the question and for the time today. So the -- we have 2 important deals in the very final stage of the process, which means that we are waiting the final definitions. And those 2 contracts, one is from the software side, the other one is from the services side are -- well, as I said, we are in the very final stage, avoiding any incorrect guidance. What I can say is that we have been in permanent contact with the potential customers, and we are just waiting for a final definition.

[Iain Wilkie, analyst]

Okay. No problem. And then just on contracts like that Oncolife contract where it's combined services and software. Any color on what the $1.4 million in split -- sorry, in split is in terms of software versus services?

[German Arango, executive]

Yes. Well, this is a small proportion of software in this case compared to the proportion of revenue that is coming from services is approximately 10% software and 90% services.

[Iain Wilkie, analyst]

Okay. And how does that compare to the other similar contracts like where they're bundled?

[German Arango, executive]

It's variable, depending on the scope of the services activity. Sometimes the scope of the services is, let's say, wider like in this case, sometimes the contract is predominantly software with some service support. I can say that the range may be something in a range of 70 -- when there is a services and software combined contract, there is normally a 70%, 30% services and 30% software to 90%, 10% is more or less the range where we have most of those contracts.

[Iain Wilkie, analyst]

Okay. Awesome. And just one more for me. I mean you've mentioned revised pricing. I think that was in reference to the software product. I mean is -- can you provide more color on any successes you've had over the last 3 to 6 months on maybe contract renewals that you've been able to increase pricing or like the flip side new customers?

[German Arango, executive]

Yes. We have done a disciplined work around initially doing our own segmentation of the market in order to create a differential pricing book. depending on the segment. This is an activity that has been based on the methodology jobs to be done. And we are trying to provide as much as possible value to every segment with differential pricing, as I said. That differential pricing is representing increases for every segment. We completed that work in the third quarter, and we started a pilot by the end of the third quarter and some of the new sales have been done already under this pricing structure.

This in regard to new pricing and new segmentation. In regards to the existing customers and renewals, we -- given the stickiness of our product, given the quality of the services we are providing, in every case, we have been able to increase pricing during the renewals, mostly because we are always in a strong position, not only to claim an index or a price increase, but also because they request from us additional services. So we create a dual effect when renewing at least increasing pricing and upselling.

And I can tell you that every single customer we have renewed during this year has been subject of price increases. And once we complete this pilot of the new segmentation and new pricing for the market, that is being successful, and we get full feedback from the market. In the last quarter of this year, we will fully implement it. And every single new customer will be sold with that new pricing that may represent -- is viable, but may represent pricing increases from 15% to 45%.

[Reena Minhas, executive]

Are there any other questions. German, it appears there are no further questions.

[German Arango, executive]

Should we give 1 minute more...

[Reena Minhas, executive]

Yes, sure.

[German Arango, executive]

Close the session.

[Reena Minhas, executive]

Nothing coming through, German. I think we are done.

[German Arango, executive]

Okay. Well, thanks again for making the time this morning, and thank you very much for the ongoing support. Have a good day.

[Reena Minhas, executive]

Thank you.