Pro Medicus Limited (ASX: PME) is a healthcare IT company with leading-edge products and with global presence specializing in Enterprise imaging and radiology information system (RIS) software.
It today announced half-yearly 2019 results, where it reported cash reserves of $24.735 Mn. Its profit after tax increased by 184.3% to $9.082 Mn. Its underlying net profit after tax (NPAT) increased by 79.9% to $9.234 Mn. It reported EBIT margins at 51.8%. With virtually no debt on board and strong balance sheet, the company management declared a fully franked interim dividend of $0.035 plus special advance fully franked dividend of $0.025.
In July 2018, it received new contracts of $5 Mn from Carle and $27 Mn from Partners Healthcare. In December 2018, it received an extension of its contract from the German government hospital. It is either well on schedule or above schedule in its US implementations of contracts with Mayo Clinic and Yale Newhaven Health. It has reported strong growth with a robust pipeline.
Its revenue for H1 FY19 can be split into exam/licence revenue at $12,177,000; support/baseline revenue at $6,235,000; capital revenue (net of hardware) at $3,049,000; and professional services (new revenue standard) at $2,649,000.
Its professional services involve project planning, training, and implementation. Its revenue spread over the length of the contract as per the new accounting standards (AASB 15). 10% of its contract value is recurring in nature.
Its exam (transaction) revenue is recurring in nature. It increased by 31% from H2 FY18 to H1 FY19. It expects growth to continue in FY 2019 from its existing clients (Organic/Inorganic) and new clients. It will step up its growth with Partners Healthcare in FY2020. It expects a further drift in its growth with the adoption of new products such as VISAGE 7 Open Archive and Enterprise Imaging.
PME’s operational (transactional) model is used in the vast majority of US contracts. It includes delivery as the SaaS model. It is now used in RIS contracts in AUS. The model is based on a minimum guaranteed transaction with forward revenue more than A$160 Mn per 5 years. It expects an upside growth in the coming times as client examination volumes grow. It follows the annuity-style revenue stream which has greater predictability.
With the company’s highly scalable offerings, training & installation are charged as professional services. It has a relatively fixed cost base, and its margin continues to grow as its footprint increases.
Its Visage RIS has a 5-year long term contract with the 2 biggest radiology providers in Australia, i.e. Primary Healthcare and I-med. PME in its estimation has identified a combined additional revenue of $4.4 Mn p.a. once the system is fully deployed. As per current status, its rollouts are progressing well. The company expects, post its full deployment PME will be repositioned as an undisputed market leader.
Its growth strategy includes:
- Transaction growth from existing clients
- Expand footprint with New clients on board
- New product offerings for existing clients
- Extend to other geographical markets
- Leverage its R&D capability to introduce next generation products
PME’s share traded at $17.13 up 4.451% on March 18, 2019, with the market capitalization of ~$1.7 Bn.
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