IME presented their full year report today.

As usual present a rosy future but...

they don't make money on radiology. This is the business they bought from CEO. A step for this year is to set minimum contribution margin. So have been going for revenue over profit. Really!

The annual report said the following

The Group has experienced growth in revenue in the year ended 31 December 2023 of approximately 10% on a consistent currency basis, however, there has been a significant increase in costs in radiology and corporate overhead to deliver. The Group has performed a profitability assessment and is reviewing customer pricing and delivery costs. The Group has commenced a process to improve margins in radiology through higher prices on new contracts and increased prices on existing contracts and tighter cost control. The forecasted growth for the year ended 31 December 2024 will likely require additional working capital. 

They also have a debt from a customer that they have had to escalate for government intervention. Chances of getting this?

They need to raise money

In response to those matters and to support growth and the likely additional requirements for working capital, the Board and management have been considering various options, including but not limited to external debt funding, owned equipment re- financing, the issuance of a preference shares, convertible note(s) or undertaking ordinary equity capital raise(s). 

I bought on the promise of the early traction that their SME, cloud offering gained. This hasn't continued plus they also had to revisit the customers they chased, had delays in rollout for billing. This is the same sort of problem they have just repeated with radiology so they haven't learnt.

This loss of faith in management plus the need for additional funding is the reason for selling.

Sold.

IME reported today for Q4 and full year.

• • Q4 FY23 Revenue of $5.7m, up 48% vs pcp; up 22% on a constant currency basis2.
• • Q4 FY23 Underlying EBITDA3 break-even.
• • FY23 Revenue of $19.7m in line with guidance, up 15% vs pcp; up 11% on a constant currency basis.
• • 2H FY23 Revenue up 23% vs 1H FY23 and 42% vs pcp.
• • FY23 Underlying EBITDA was a profit of $0.4m; up $0.5m vs pcp loss of ($0.1m).
• • Annualised Recurring Revenue (ARR)4 of $25.0m, up 27% vs pcp; up 1% on a constant currency basis.
• • Cash of $2.4m at 31 Dec-23, up from $1.9m at 31 Dec 22.
• • Debt of $1.3m at 31 Dec-23, up from $1.1m at 31 Dec-22.

Bottom line is that they are almost cash positive for the year. They conveniently remove some costs to achieve it. That's better than burning cash though.

They have some more hosting costs to come out.

They have started writing contracts in $US. Ironically this went against them as some of the local currencies appreciated against the $US (one of their main ones by 20%). Ouch. They are to remain writing contracts in $US, which is a good thing.

I'll give them more time but there is something missing. It all sounds good but for some reason their software just isn't getting the traction it should.

IME has had two radiology contract wins in the past month.

1. Colombia’s 5th largest insurance provide - AUD$1.1M ARR but only 4 month contract (seems bizarre - maybe fy based?)
2. Grupo Avidanti hospital group for a new hospital. A$750,000 ARR on year term with extensions. 2nd year expected to be $1M. They say Grupo Avidanti is growing rapidly across LATAM so it is an important win with the hope IME can grow with them

This should raise revenue to $20M/yr with marcap cap of $26M. THese should be enough to make them truly cash flow positive. I say that because Directors are being paid in shares ATM rather than cash

Recent Q4 report

Note the significant change to now being a Radiology (outsource) provider. Previously there was a convoluted partnership with the Radiology provider that IME has now purchased (from the CEO!). Part of the rationale was to clean up its reporting. On the surface there is clear separation. Perhaps the annual report will reveal whether this is the case.

IME has a market cap of $36M which is less than 2x ARR. Radiology services won't have the same dynamics as a pure SaaS provider but even as a pure SaaS play it's on 5x ARR.

Rhin20 thanks for the link to arichlife.com.au article. I hold quite the opposite view on IME and of course could be wrong. Here are my thoughts.

Firstly, I can understand why the comparison to PME but PME has also been a once in a generation opportunity. IME only needs to be half as good to be a fantastic investment.

I feel that the information in the 'arichlife' article is out of date. Perhaps in the past IME offered hardware, but now offer SaaS products. They have two. Once is a customisable product and the other is off the shelf and aimed at smaller enterprises. This second product has grown from nothing to $2M is ARR in one year. Within two months of launching in FLorida and the AUS they had made sales.

Their strategy is to land and expand. They land with their off the shelf offering with 60% of that now being sold via resellers. Behind that they will put in dedicated sales staff and then try to sell the custom offering to bigger clients. They are still waiting to get into Brazil, which they have been accredited to do, but Brazil has been hit hard by the pandemic. Brazil is the largest LATAM market.

'arichlife' also mentions options. That information is out of date by more than 2 years There was a share consolidation in OCt 2019. Options are shy of 10% of current total shares. Most are held by the CEO and are substantially out of the money. Current share price needs to double before any reach there exercise price.

ARR is now $12.7M for a market cap of $42M. So a multiple of 3.5. ARR has grown 57% year-on-year on constant curreny.

I think the current share price is a low multiple for a strongly growing company off a small base. They don't compete with PME so I think they have plenty of growth. On the down side monthly run rate EBITDA breakeven by December 2021 may not be achieved.

Strongest Acquila in the Cloud qtr

It's all good.

"Aquila in the Cloud (AiC), has closed the second quarter of 2021 with a total of 84 signed contracts since launching in May 2020 for an expected contribution of $2.0m in Annual Recurring Revenue (ARR). During the second quarter of 2021, IMEXHS signed a new AiC contractevery 4.5 days on average witha total of 24 deals. Strong sales momentum was generated in key markets with three new orders fromthe US and a further three from Australia."

That's a growth since last qrt of 50% in ARR and 30% in deals signed. They've gone from 60 deals and $1.3M in ARR.

Really pleasing is the traction in US and now AUS. They only launched into the US in Dec 20 and Aus Feb 21. They are launching into Spain but no news there and they are still waiting to get into Brazil (delayed due to COVID).

Their full year report for Dec 20 (report on calendar year) said they were looking to the EBITDA positive run-rate by end of 2021. If costs are kept in check then they will certainly achieve that. In fact the growth this qty is more than the cash loss last qtr. AiC is only one of their products. This assumes the others are holding up.

Not sure why this wasn't marked as market sensitive.

annoucement

Another good update from IME this morning about the traction of Aquila in the Cloud. Growth of 20% in the past 2 months.

It now has 54 deals worth $1.2M in ARR. As at 31 Dec 2020 it was $945,000 from 41 contracts.

Significantly they now have 3 contracts in the US. They only laucnhed there late last year and got their first trial in Dec 2020.

https://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=02353854

q4 4c report

• FY20 revenue of $10.9m1, up 41% vs pcp2; up 59% on constant currency basis3 and in line with FY20 guidance
• Q4 FY20 recurring revenue of $2.4m, up 13% vs pcp; up 31% on constant currency basis
• Annualised Recurring Revenue (ARR)4 of $10.1m1, up 19% vs pcp; up 33% on a constant currency basis

IME is in a really strong position to deliver significant growth and it seems cheap to me at mcap/arr of 5.

Acquila in the cloud, only launched in April 2020 now provides $1M in ARR. 41 contracts in place with 26 coming in the last quarter. So this is accelerating nicely. They have spoken of significant interest in Mexico - one of 16 countries the sysem is used in. They now have their first sale in US and Brazil (largest market in Sth America) has only just gained approval.

In addition to Acquila in the Cloud they also have their more general Hiroku platform which has recently received approval in Europe.

Strong sales for Aquila in the Cloud

The product was laucnhed in May as a packaged RIS/PACS cloud solution for small/medium businesses.

At 30 Sept they had 15 deals.

By 19 October they had 17 deals for ARR of $473,190

By 2 December they have 28 deals contributing approximately A$675,000 in annual recurring revenue and generated 175 new pipeline opportunities.

By 31 Dec have signed a total of 41 deals as at 31 December which are expected to contribute over A$945,000 in Annual Recurring Revenue(ARR)

As at end Q3 they had $9m in ARR. This announcement means they will get to at leat $9.5m ARR for a market cap of $50M. So that's only a Mcap/ARR of 5.

Future growth is expected to come from

- recent approval for Brazil - the largest Sth American market

- recent launch into US and AUS

- awarded CE mark for Europe

In addition to Aqilia in the Cloud they have Hiruko, their full RIS/PACS cloud solution for customers with complex requirements - which Aquila is a derivative of.

Two updates in the last couple of days.

- They have received the CE mark to sell in Europe. Initially they will focus on Spain and Portugal.

- Acquila in the cloud is selling strongly. See

IMEXHS launched Aquila in the Cloud in May 2020

• At 30 Sept they had 15 deals.
• By 19 October they had 17 deals for ARR of $473,190
• By 2 December they have 28 deals contributing approximately A$675,000 in annual recurring revenue and generated 175 new pipeline opportunities.

Most of these sold by distributors across 6 countries. They now have 20 distributors across 13 countries.

They only just recently started in the US and now have a customer for a 30-day trial in Miami. "This region represents a significant opportunity given that the high cost of on- premise solutions limits access to medical imaging technology for approximately 80% of the US market."

IMEXHS Co-founder and CEO Dr German Arango said: "Aquila in the Cloud was designed to provide small and medium-sized customers with an affordable, comprehensive and flexible RIS/PACS solution. Since it was launched, I have been astonished by the number of clinics and medical imaging centres that have been completely overlooked by the large on-premise providers."

"HIRUKO?s multi-tenancy capabilities mean that we can deploy our AiC offering in around 13 days compared to over 60 days for customised projects, and our sales cycle is also significantly shorter."

Keep in mind that Acquila in the Cloud is their 'packaged' version of Hiruko for small/medium businesses. Hiruko can be deployed as a customised solution. Also their last updated said that by end Dec 2020 they will have $10m-$12M in revenue for the year for a small market cap of $44M. Worth comparing that to 3DP that I used to own.

Offering SaaS medical imaging solutions. PME is the success story in this market but IME has some advantages.

• PME bought their product. IME have developed it from scratch with the 4 founders still in the business (2 medico's and 2 software engineers). Recently have appointed Doug Flynn as chair who also chairs NXT.
• IME have 700M images to train AI. They already offer AI functionality and are adding more. They have an annotation tool for medico's to use. This is important for AI training. eg Appen's business model is providing the tools and people to annotate images  for AI training.
• AI is a big deal in medical imaging. There is a worldwide shortage of Radiologists at the same time that the use of imaging is increasing.
• One third of their workforce are software engineers.

Currently their big market is Latin America and they have just been granted the required permit for Brazil - which is the biggest in South America. Recently they have appointed business developmernt people for AUS and US. They already have at least one client in AUS with another trialing the solution. Working on getting the European CE mark.

Other examples of the advantages of a SaaS platform are

• they are going to offer a marketplace of products
• they have integrated a Canon set of tools for image manipulation
• from their core product Hiroku they have created Acquila in the cloud - a full featured practice solution for small and medium sized businesses. In the 6 months since launch is has 17 contracts and ARR of $477k

Their recent q3 report was solid with YTD revenue of $6.7m up 21% on pcp, annualised recurring revenue (ARR) of $9.0m up 11% (30% on constant currency).

With one qtr remaining they have re-affirmed revenue guidance of $10M - $12M. That's a big lift from Q3 YTD revenue of $6.7M!

To me it looks like IME are the disrupters in the market with the first SaaS product.