Earnings Transcript for PME.AX - Q4 Fiscal Year 2021

Sam Hupert: Good morning everybody. And thanks for joining us for this Results Briefing. As most of you know, Pro Medicus is a healthcare IT company specializing in enterprise imaging and radiology information systems. We work in three jurisdictions, Melbourne, our corporate headquarters; Berlin, our R&D center for Visage products and the U.S. where we have an office in San Diego, where we our biggest market and stuff like headed throughout the U.S. traveled towards clients. I think the important thing is we are a technology focused company with over 40 software engineers and support staffs. In terms of our product set, we have two products, Visage RIS, which was a co-product before 2009. It deals with all the practice management, billing shingling for large radiology corporations. The key market for that product is here in Australia. Ond 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 was still up 19.5% and profit after tax over 33%. I think the other placing numbers where the cash and investments now just to touch on the $62 million, up 42% and the company remains debt free. As a result, we have increased our dividend this year, so $0.15 a share 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 headed in a positive direction. In terms of setting ourselves up for the year and for future years, 2021 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 six key deals, five in Europe and one in – sorry, five in the U.S, sorry, and one in Europe with a number of key academics plus a mixture of non-academic such as MedStar and Intermountain. So, final year measure 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 then on the left, you see where the various clients landed in the top 20, as you'll see. Now we have nine out of the top 20 using our products, over double 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 pie chart before. 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 but 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 few 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 a very fun grind. We have the minimums, which underpin our contract value and that's how we announced the contracts. And I think the important thing is the client grows. So do we because we charge for every additional tests that they do. I think the key figure on this slide is that the forward revenue increased from, I think around $270 million, when we last announced that to $320 million, this is a five-year window. So if a contract is seven years, the final two 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 implied. 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 first quarter was modeling impacted by the tail end of COVID. The trough that occurred in exam numbers was really around the March, April timeframe 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 delta up, but obviously increased transaction numbers in a positive way from there. We are telling the market that we expect this growth to be a step change or a step growth in FY2022. We now have Northwestern, NYU, MedStar and others have implemented in the last fiscal year, 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 to UC campuses and Vermont. So that plus growth in existing clients, we are seeing organic growth across the industry has returned. There is some M&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 adopted new products, particularly open archive of workloads, they are also transaction based. So we will see then contribute to the total of transactions going forward into FY2022. In terms of professional services, many of you seen the slide. It is around project planning, training and implementation. I think the new point on this one, the data migration as part of an archive cell, which we 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 a 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 and 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 sign the contract is all charged as professional services. So we believe it's 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 is continued into the second half. We believe some of that is because of reduced cost pace because 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. Now 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 demonstrate it very readily through the internet in large scale demonstrations and in full diagnostic quality. And I think that sets the time for a lot of the opportunity going forward, because clearly, there's a lot of work from home. Radiologists have to pivot back in March, April last year. And even though the U.S. has come back in most parts to near normal in terms of onsite 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 level. So all-in-all, we were not impacted negatively by COVID other than a 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, Visage RIS, as mentioned, this is used by largely in Australia. We do have some clients in Canada who use it. It is a highly localized product. The key thing for us is, it is progressing well. We are progressing well with our two key contracts with healthcare imaging surfaces used to be primary healthcare and I–MED. 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 I–MED contract because of the M&A and growth, increased market interest in some new opportunities. So we clearly believe in RIS in Australia, we are the undisputed market leader. So that's a good position to be in for that product. In terms of Visage 7, many of you’ve seen the slide before. It's what makes us, we believe the best, the most differentiated product in the market. The three key tenants is, number one 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 two or these three key differentiators between us and others. One of the things this 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 datasets. And that trend is continuing unabated and the traditional methodology of legacy systems compress and saving with I take the file, compress it as much as I can, send it down the network to a pretty beefy workstation to the other end that has a lot of software on it, that then uncompresses the file and the radiologist then manipulates the file. That methodology is not cracking as the same 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 backend server that in new real-time does all the rendering and 3D 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 let's radiologists work in many way, 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, NYU Langone, that implementation was completed 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&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 Bolinas person – from Bolinas 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 LMU Klinikum, 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 five years and we will receive a full year's revenue from this in 2022. Zwanger-Pesiri, this was an existing client. They renewed a five-year contract, so that was another key renewal for us. Then MedStar Health, and MedStar is an interesting one. It's a – technically, it's called an IDN, a non-academic I think interesting for a few reasons. One, it was the first client to take all three disaster products that is our worklist, our viewer and our archive, and it's 100% cloud-based. We think it's most probably the largest PECS implementation 100% cloud-based arguably anywhere in the world. And that implementation was completed towards the end of June, first week of July. And so again, we will receive a full 12 months revenue coming into FY 2022. Intermountain Healthcare, the largest healthcare system 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 slighted for implementation in the September-October timeframe 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 two of the five will be staged in this first half and then another two in the second half of this year, and one about 12 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. Our OSU was our first 100% remote implementation last August. We have now developed a highly optimized hybrid model, which is a mixture of onsite 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 first 100% remote, Northwestern in May of this year was onsite, NYU Langone was 100% remote and MedStar or Hybrid where we had a team onsite 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 were a number of other smaller sites that we did in background over this period. So in terms of implementations, it was by far our busiest programs ever. Just moving forward, one of the key factors we think that supports our pricing model, which is the premium price is 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 – eight of these institutions is critically important. There is – this is a slide talking about a certain way of looking at implants in the Europe and the bottom here, Eric Pepin says some packs of Visage you mentioned, you're able to do this. It takes just a few seconds because in most other systems it could take minutes. And I think this is a perfect example of clinical ROI. Moving forward to 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 and new product offerings, particularly our carbon worklist are starting to kick goals. We did have a second major sale in Europe and we are leveraging our R&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 convert – 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 has 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 new products like Visage Open Archive. And as we said, three of the recent sales were both viewer and archive, and we think that will be a trend that will continue. Not everybody will buy achieve from the get go, but we are seeing an increased number which is positive. Worklist, our newest product. As I’ve said, we've had this in production in some smaller sites for first large scale. Clients go live with 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 that want it like MedStar, but just wanted to deal with one vendor, we were able to do it by having the worklist 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 maybe got – put a little on the back burner because of COVID. This was the one that 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 on 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 be cloud-based. And certainly, we're seeing a lot more cloud focused RFPs coming through and 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 will 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 to 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 a 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 third-party and Visage 7 to develop algorithms to work inside the Visage area 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 Westerhoff, he’s one of the co-developers and founders of this intimidating co-developer platform. Detlev Stalling, who is the other co-developer. And MingDe Lin, who's based out of Yale, but he’s looking – he’s 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 two very important collaboration agreements, one 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 first 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 219 as works in progress, and we got FDA approval in 2021 February. It is implemented in one of the 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 has 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 up because we did get registrants, but it is strange at the conference to see everybody all wearing face masks. And I think that will be the same for the IRS later this year in November. And on that, thank you all. And open it up to questions.

Operator: Thank you. [Operator Instructions] Your first question comes from with Peter Meichelboeck with Select Equities. Peter, your line is open.

Peter Meichelboeck: Hi guys, sorry about that. Just want to ask about renewals. I think – was sort of view 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?

Sam Hupert: Yes. Look South is still progressing. They’ve – we have made some good progress with them. As you mentioned, we – they got particularly badly hit by not only COVID, but bush fires and everything else. So we decided to give them some breathing space. That opportunity is a closed door discussion with us. It’s not going out to market. And we’re hopeful to have something within the next few months, but it could be earlier than that.

Peter Meichelboeck: Right. Which other ones are up for renewal this year? Sorry.

Clayton Hatch: Allegheny was the other, other one that SG during this period and that has been renewed.

Peter Meichelboeck: Right. Okay. Can I just ask, you’ve made particularly comment around just how busy you have been in terms of the implementations and sales, obviously, but particularly in terms of the implementation, has it actually required any additional staffing to do that and also the other part, what with people sort of tied up on the implementation. Does that impact the sort of the R&D or the rest of the business at all?

Sam Hupert: 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 five or six people. I think we’ve hired one or two, but that’s a normal sort of cadence that we do every year. That clearly there has been a big R&D effort and all the work list, because it’s the first major implementation and first cloud. But it hasn’t prevented us from continuing with other projects and some of the AI work and also the product releases. So I think we’ve weathered that going through it incredibly well. And the fact that we’ve got four out of the seven already behind us even with COVID and there was some juggling around that, working out and we’ve optimized our capability to deliver remotely. And as I said, and then 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 had the normal amount over the last 12 months.

Peter Meichelboeck: Okay. And finally, just on the enterprise imaging sort of opportunity there. Appreciate that’s still as you said, sort of a little bit on the back burner, et cetera. And but I mean, how should we be thinking in terms of the – sort of the size of an enterprise imaging sort of opportunity versus just the sort of the radiology, I guess, in general terms?

Sam Hupert: Look, it depends on the department. So if they do department by department, some are bigger, like cardiology is roughly 25%, 30%, depending on the hospital of radiology. So it depends which one you get and what the institutions focuses, because some of them are better known for one area than another. And clearly that would be bigger opportunity. We – it’s hard to tell, because a lot of this is photo and video or reflected light, most institutions don’t know how many images they’ve got, because these are just taken, not as part of the sequence of an order as we call it, they’ve 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 would be an additional 30% to 50% depending on the institution.

Peter Meichelboeck: Right. Great. Okay. Thanks, Sam.

Operator: Your next question comes from Sarah Mann with Moelis Australia.

David Meehan: Hi Sam, it’s David Meehan stepping in for Sarah Mann. I just have a couple of questions. Firstly, a lot of the hospitals had a tough year financially, but the elective procedures being delayed. Have you seen any impact of how some hospitals are thinking about new spend on technology, for example, while you get a sales cycles? And then just following up on that have you seen any of your hospital customers, especially the larger, better capitalized being the opportunistic in the M&A front to acquire some of these impacted hospitals? And if so, what kind of volume up is don’t be saying, is there any?

Sam Hupert: Yes. Look on the first one, we haven’t seen an impact. As I said, the exam numbers, which is the metric we charged on did go down in March hyper last year, because people didn’t know what to do with COVID. Everybody was literally just shutdown 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 somewhere in the early part a little bit of catch up for tests went down during the shutdowns, but we are seeing organic growth back and it’s quite healthy. So least the groups that we deal with, we haven’t had – that have some 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, because it’s been a bit of a tailwind. In terms of the smaller ones, yes, look, there has been some M&A. It hasn’t been major that, 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 sold with Kyle, we sold with Mass General. To us that 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&A where it would add 60% or 70% to our volumes, but we live in hut.

David Meehan: Okay. 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 in a week.

Sam Hupert: They’ve said it’s in person, but a 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 bigger team. There will be restrictions facemasks. 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, it look some of that expense will come back and that’s why we think the 63% margins will most probably come back a bit, but we don’t think it’ll go back to what it was pre-COVID.

David Meehan: Perfect. Thanks.

Operator: Your next question comes from Josh Kannourakis with Barrenjoey.

Josh Kannourakis: Hi Sam and Clayton, hope you’re well. Just quick question on the – 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.

Sam Hupert: 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 still 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 works 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 100% in the cloud. In that case, it’s Google GCP. But end up, 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 three 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, that can stay, we have the full implementation 100% cloud and with UCs and Intermountain, we’ll have more and – we’ll have more.

Josh Kannourakis: Yes, absolutely. And with Intermountain, I mentioned that’ll probably be one of the largest sort of public cloud rollout. 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 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.

Sam Hupert: Look, I think it was a key theme of teams. That was just in Las Vegas last year. It’s conference at all the three 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 now we’re going to cloud. And definitely, it is 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 healthcare 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 two migrate to cloud or migrate the archive to cloud. So it’s certainly a huge part of our strategy and so far it’s working well.

Josh Kannourakis: 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 launched into FDA or brought to market on the next sort of two to three year time horizon.

Sam Hupert: 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 productize 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, could be 12 to 18 months, could be less, just depends on FDA and how bigger product it is. Those where we would do the science or it would be joint science could also be somewhere in that timeframe, 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 then have the way with how to make product and put it through FDA. And if that works for us and what’s 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. So we’re saying, it’s not just here and now decent longer-term projects, but they’re not five years away. They’re hopefully 12 to 24 months away.

Operator: Your next question comes from the webcast Will Hauser at Escala ask, are your margins expanding with new revenue and contained grow in costs. Can you comment on profit margin, please?

Clayton Hatch: Yes. And I’ll, like – 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 were more to do with the marketing and the conference costs, obviously not appearing in this financial year. As I mentioned, that’s like, we’ll come back within November or the first half of this FY2022 financial year. So revenue has been the main driver of those – that margin expansion coupled with the decrease in costs for advertising. Clearly, as we look into FY2022, we think that some of those costs will start coming back to the conferences. But it’ll be some of the revenue that we get from the new contracts coming on board trend by use Northwest and in coming out and MedStar, we’ll start helping that normalized. 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 60, we think with some additional costs with advertising and also sitting up on NYU R&D offers the expenditure there and start to normalize.

Operator: Will Hauser with Escala also ask, can you comment any further traction in Europe, outside the German hospital previously announced?

Sam Hupert: Look, in 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 or 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 commentaries Europe’s a few years behind that tend to not to buy components like us. Well, it hasn’t been in the past and cloud hasn’t been prevalent. We seeing it more and more, I think, in the UK, in particular and parts of Europe. So we think it will be incremental, it’ll 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 AU and data protection on 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 are looking at it, it will be more incremental and take a look, it’ll be more step by some what’s happening in the U.S.

Operator: Michael Legg with Michael Legg & Associates asks, what stuff the competition changing to pixel based communications like Visage.

Sam Hupert: Good question. It something, we – this platform was developed back in 2009 and obviously we’ve enhanced it. But a few things, one, it’s proprietary. So it’s totally in-house. So we didn’t use someone’s toolkit, get 80% and then modify the last 20%, it’s a 100% proprietary in in-house. The second thing is, it’s not just one technology. We talk about the streaming, because that’s 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 or 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 prime optimize the streaming based on bandwidth, which keeps changing even on the best network every sector or so. So I suppose a few things to that question, that’s proprietary. We didn’t leave a roadmap and they can’t get ahead start by just getting someone’s toolkit and trying to put it together, number of tried, haven’t been successful. And then the last thing is, the best form of defenses attack. So we are putting the foot down in terms of R&D and bringing out new features and new capability all the time. So we making ourselves harder to catch. So as I say at this point, we don’t know anybody that has been able to bring out a platform that can one for one competes with us. And I think – and that doesn’t mean one day that may not do something that’s half as capable or three 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.

Operator: Will Hauser with Escala ask, our existing contract being renewed on the old terms. Or are you managing to upsell improve terms when renegotiating new contract?

Clayton Hatch: Yes, we have – we’ve already had a few that have renewed and some of our other bank traditional volumes or increases in exam rate. Clearly, when we first started selling Visage, the exam rate has increased some 65%, 70%. But some of the existing customers obviously pushed into that price. We haven’t done that on per exam basis, but that’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 and long.

Operator: Jason Yen with Lincoln Funds ask, are you able to comment on the list and other financial assets to $19.8 million, especially list an investments in managed funds?

Clayton Hatch: 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 of the 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 they’re own. In terms of where they positioned, we give those to some consultants that put them into the listed the non-listed into these and manage to get those enhanced returns.

Operator: Claude Walker with A Rich Life ask, could you please tell us whether you have lost any opportunities that were previously in the pipeline?

Sam Hupert: 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 the music with their own data in that regard, in terms of material opportunities, now the big one or two 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 RFP and say what are your process say, well, we can’t wait. We’re not going to progress with that. But as I said, thankfully, they’re few and far between snuff, nothing in the pipeline that that would competed on that as dropped out to a competitor at this point.

Julian Mulcahy: Julian Mulcahy with E&P. Asks, when do you expect to receive revenue from the Breast AI Algorithm?

Sam Hupert: We’re hopeful that based on how it’s going. Well, we’ve got it in institute, in the large academic and it’s going really, really well. I would tend to think, realistically second of half FY 2022, possibly first half of FY 2023, but that would stretch it out. So, I think we’ll get our first phase of some revenue hopefully second half of this financial year.

Julian Mulcahy: Julian also asks, what is driving the large increase in receivables?

Clayton Hatch: Yes. Julian there’s a number of factors for that. One is, we’re actually doing more revenues and exam by revenue at the end of every quarter. So to 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 Northwestern and MedStar including data migration to MedStar towards the end of June. So that, that helped drive that trade receivables most of which is in the zero to 30 days. So that’s, when a lot of the invoice got done for some of that.

Ian Lee: Ian Lee with Allianz Global Investors, Hong Kong, said, Sam, any indication on the number of bids you’re engaging on now? Also in Europe, any insights into the momentum?

Sam Hupert: Ian, we don’t normally give out – we don’t give that the numbers of opportunities and sometimes actual numbers can be a little misleading, because you can have two small ones equal fifth 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, we kind of nine out of the top 20, and everybody thinks that’s all we do that it’s not. We have really good sales in what we call the audience non-academic space. So, last year, things like, MedStar, Intermountain, which is huge, but non-academic. And so we see – we look at it both in terms of which markets team 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, that the HR 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 – a group spread across regions like [indiscernible] and three or four, et cetera. So yes, in terms of pipeline clearly a majority of its North American at this stage, and we will see more and more European, particularly as cloud starts to be more prevalent.

Ian Lee: Ian also says, in Australia, are there any views in changing the contract to more software-as-a-service based?

Sam Hupert: Well, in terms of the risk product, that’s what we did with primary it’s a per transaction. So 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 seven to any of the more material clients, which we live in hope, as we say, but 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 where they new sales. Clearly if a client has been with us, long-term line made, which we’ve been servicing on and off for different parts of it for years, if they’ve already had the old model where they paid up front for the licenses, then we keeping that model, but new work we’re doing on SaaS.

Garry Sherriff : Garry Sherriff with RBC, says, morning, Sam and Clayton. Are you able to provide us with rest timing for likely sale of discharge into new departments outside of radiology? Is it likely in FY 2022 or FY 2023 or later? Thank you, Gary, Sheriff.

Sam Hupert: Gary, I think I, in the second and second half of 2022, beginning 2023 is feasible. Clearly it just depends on the institution and their needs, but we would hope to at least have something in that timeframe. Look, it could stretch out further. But I’m optimistic at the end of 2022, beginning of 2023 if everything goes according to plan we would have something.

Adam Jasick: Adam Jasick with Jasick 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?

Sam Hupert: Yes. 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. Old is our systems are the same, so that you just need to drop the algorithm in. It’s not a bespoke 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 will follow in its own route. Is there anything that stops us from deploying it to non-SaaS clients? No, but I think that would be a second stage.

Unidentified Analyst: [Indiscernible] asks, does the Breast Density AI require radiologists to confirm the report or 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?

Sam Hupert: Yes, I’ll answer the second part first. We do have TGA and CE 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, every mammogram or breast tomosynthesis. So in that is just one part of the clinical report. So does it need the radiologist to look at it and comment it – 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. The other applications for – so from a density point of view, now the radiologist doesn’t have to comment on the algorithm can, and the accuracy and consistency are that we’re incredibly placed with, but it has other applications. So, when the technologist actually does the exams, they can actually find out about the density, because if the breasts dense, then it sets in trying to not additional tests like an ultrasounds or an MRI. And they will know that at the point of actually taking the images, they don’t have to interrupt the radiologist, the radiologist, look at the comment on them, and then I go back. So, I think the application is not just is it something less for the radiologist 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 Legg: Michael Legg with Michael Legg & Associates asks, has there been any consideration of PACS for digital pathology, histology?

Sam Hupert: Look, it’s something that we do get asked the platforms 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 microscopy and analysis of those images and those digital slides, which is very is very akin to what’s done in pathology. So look, it is a possibility it’s not on the absolute near term ride back. But that’s not to rule it out, because the platforms that is well suited to that as it is to radiology going forward.

Curtis Larsen: Curtis Larsen with Norse Capital, asked, do you see any demand for multi-cloud capability within a customer where their data can sit on different public clouds at all?

Sam Hupert: Absolutely. So, what normally happens is, the client will have their data and that will be replicated in as part of the cloud providers storage in multiple instances in different locations. So that’s quite standard. So, we do object storage and they 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 of 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 somebody that makes a lot of sense because that's the ultimate and the disaster recovery. And we do support that

Daniel Goldberg: Daniel Goldberg with Select Equities says where is the competition? It seems that closed room renewal discussions means that competition remains deviltry?

Sam Hupert: 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 contract. So I think it's a clear indication that we're doing our job because if we weren't, I would go back out to market. So, our aim is for none of the 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 then 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.

Operator: Patt Williams with [indiscernible] says, hi, Sam can you please comment on the board's approach to succession planning?

Sam Hupert: Yes, look, it is a big topic for us as we get bigger and frankly I'll get older, but look we have started new people and culture committee. We have a 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. So, it's faster to say it is one of the two key areas that our board is looking at. And obviously it's an iterative process over time.

Claude Walker: Claude Walker with a Rich Life says, is Visage worklist with simply elements of the Australian RIS product re-packaged. Can you talk about the differences between this Visage worklist and the Australian RIS and can you please give us a feel for how many clients in the USA are using the worklist profit?

Sam Hupert: Yes. It's not the same and there – the technical reasons. I won't go into why it's not the same, but it has the same DNA. So clearly Malte Westerhoff our global CTO oversees the risk development as well. And a lot of the functionality and concepts we have in our workplace, in the Australian RIS replicated in the U.S. opportunity. It's a slightly different technology stack. It's more and more using a similar stack to the Visage 7 and again, I won't go into all the bits and bytes but, it's different, but it has the same DNA. We now have, I think, as a four clients using the worklist, three 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 wants to use it. We were pretty well guaranteed that it will be applicable. So look, it's an important arrow 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 said people can see it.

Operator: 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.

Chris Cooper: Thanks very much. Apologies. If this has been asked, I've 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 your updated expectations on that process please? And also just an update on where you are with renewal profile across the rest of the contract base and then secondly, I'm just curious to get your latest thoughts on TAM, it's probably the single most frequent conversation we have with investment on this company. And look, I think the perceived wisdom is really from the addressable market around $2 billion to $3 billion clearly with several reasons why that number might be different now. I just be really curious to hear your latest thoughts on the total opportunity and I guess your potential trajectory from here. Thank you.

Sam Hupert: Clayton, do you want to address the first question? I'll do the second.

Clayton Hatch: Yes. In terms of renewals, we spoke about Allegheny has renewed, Sutter was still going through the process, these are closed negotiation in terms of that Sutter renewal WellSpan, as we mentioned, Chris is about 12 months away. We haven't started those conversations yet albeit just to indicate that they contract is running to an end, but we're confident that, that will hopefully remain. I closed during negotiations as well. And continue in the running the process I haven't encountered that that would be going to market. So we hope that continues in terms, Sam do you want to address it.

Sam Hupert: Yes. Look, traditionally the TAM was just looked at as radiology and they called PACS. And I think the, this has widened significantly because applications like ours can move into different, different technologies. 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 the hat. There's the archive, which some people included in PACS, but there were separate DNAs, which was a different market. That's part of the TAM. And then there's all the new stuff like reflective lot 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 alphabetic numeric or less text and a lot more image which is part of the TAM. 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 TAM is expanding not contracting. And I think it's for those multiple reasons.

Chris Cooper: Appreciate the thoughts. Thank you.

Operator: Your next question comes from John Hester with Bell Potter.

John Hester: Hi Sam. Good morning.

Sam Hupert: Hi John.

John Hester: Sam, just on your strategy going forward, obviously a very large business here in the U.S. now highly priced or highly rated stock, where are you guys sitting in terms of, so it's on acquisitions potentially of additional complimentary technologies to spread beyond your area of this radiology imaging.

Sam Hupert: Yes. Look, there were a few things there. I think one thing we're doing is, it's a question of build or buy, on the building side, with the new R&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 those, but then the question around buy. Look, I think we've been consistent, our preferences 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 struggled with evaluations. I think there's a lot a fair amount of blue sky in that when we look at it and put it in a spreadsheet and just, 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 taken a lot longer to commercialize. And then you've got to go through the whole contract cycle with clients and my abilities and PI channels and things we have to do. So look, we're looking, now question and we did 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 very selective for two reasons. We don't want to get distracted, the focus because we got a lot of opportunities and then more importantly we believe we can reach our growth targets organically, but it would be silly. I'll ask, and we're not doing it. We're not closing our eyes – and I, 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.

John Hester: Okay. Then just in relation to FY 2022, probably one is this, we’ll ask it anyway. Consensus revenue is sitting at around $9 million sort of any thoughts on that Sam, you're comfortable with that, or just prefer not to comment.

Sam Hupert: Clayton, did you want to?

Clayton Hatch: Yes. I mean, we've looked at those John and I think, that's reasonable, obviously with some of the wins we've had in the implementation. I think it encounters that will make to win, win a small amount of contracts for this year and implementing clearly the timing of those. So I don't think it's outlandish in terms of the trajectory and where we are from here, but clearly nice to play out in some of the contract wins.

Operator: There are no further questions at this time. I'll hand the conference back to Dr. Sam Hupert for any closing remarks.

Sam Hupert: Well, everybody thank you for joining us and thanks for your questions. Appreciate it very much. And thank you once again. That's about it.