ImExHS Limited (IME) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the 2021 Annual General Meeting of ImExHS Limited. My name is Doug Flynn, Chairman of ImExHS Limited, and I'll be chairing today's meeting. As it is now 10 a.m., as we have a quorum of shareholders present, I declare the meeting open. I confirm that a quorum is present by virtue of the proxies I hold as Chair. Today's meeting has been convened in accordance with the Corporations Act. The Notice of Meeting was available on our website and lodged to the ASX on the 30th of April 2021. We'll take the Notice of Meeting and the resolutions to be considered at the meeting as read if there are no objections. Due to the current and challenging circumstances in relation to COVID-19 and with the safety of our shareholders and staff in mind, this meeting is being delivered live via webcast. I regret that we're unable to meet the shareholders personally today. Having said that, we have shareholders geographically spread across various cities in Australia, New Zealand, Singapore and Colombia. At least this way, everyone is treated completely equally. I would like to commence this meeting by introducing your Board of Directors and members of the management team who are present or online during the meeting today: Dr. German Arango, our Managing Director; Dr. Douglas Lingard, a Nonexecutive Director; Carlos Palacio, Nonexecutive Director; Damian Banks, Nonexecutive Director; and Reena Minhas, our Chief Financial Officer and Company Secretary. Also present is Andrew Hoffmann representing Nexia, the company's auditor. Today's meeting is being held through an online meeting platform powered by Automic. This allows shareholders and proxies to attend the meeting virtually. All attendees can participate in the live broadcast meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. In order to vote at this meeting, you need to have registered your shareholding within Automic. If you haven't already done so, you can follow the instructions on the screen to register and log in to enable you to vote at this meeting. [Operator Instructions] Please note that while you can submit questions from now on, I will not address them until the relevant time of the meeting. Kindly start your question with the agenda item number to which it relates, or mark your question as being general, which will be dealt with after we receive the financial reports. Please note that your questions may be moderated or if we receive multiple questions to one topic, amalgamated together. Due to time constraints, we may run out of time to answer all of your questions, and if that happens, we will answer in due course via e-mail. All questions should be addressed to me as the Chair. I will deal with the question personally or ask someone who is better placed to respond. We will do our best to answer any relevant question raised. I ask that you keep your questions short and to the point so that as many shareholders as possible have a chance to ask a question. Our voting today will be conducted by way of a poll on all items of business. And in order to provide you with enough time to vote, I will shortly open voting for all resolutions. I now declare voting open on all items of business. You can submit your votes at any time. I will give you a warning before I move to close the voting. Now with regard to the format of today's meeting, I will open with the Chairman's address, and Dr. Arango will provide some commentary about the progress of the company. We'll then run through the formal aspects of the agenda as set out in the Notice of Meeting. And as previously notified, all resolutions today will be decided by a poll. Now before moving on to the business of the meeting, I'd like to say a few words about the progress of ImExHS in the past year and will then pass to German, who will provide a business update. We'll then move on to the formal business of the meeting. When I addressed you last year, I'd only been Chairman for a couple of months but was excited about the opportunity ahead. 2020 has indeed been an interesting year and one of significant achievement for ImExHS. We've made considerable progress at every level of the business, delivering a strong 2020 result, which Dr. Arango will talk to in more detail shortly, and enhancing our corporate governance structures. Damian Banks was appointed an independent Nonexecutive Director in May, bringing extensive business experience. He has since made an important contribution to the Board's processes and decision-making. Now during the year, the Board established committees for audit and risk and for remuneration and nominations, chaired respectively by Damian Banks and Carlos Palacio. We also decided to centralize our Australian services and capabilities in Sydney. In October, Reena Minhas became Chief Financial Officer and Company Secretary, taking over from Tony Thomas and Peter Webse, and we thank them for their contribution. In July, ImExHS set up a system to allow our shareholders with holdings worth $2,000 or less to share -- sorry, to sell their shares efficiently, which also reduced the costs associated with servicing smaller holdings. The company repaid a loan of $1 million to an entity associated with director Dr. Doug Lingard and agreed to issue 16.67 million shares to Dr. Lingard's entity, which was approved at an extraordinary general meeting in October. A number of other matters were also approved at that meeting, including: a capital consolidation, which improved the attractiveness of the shares to certain institutions and reduced the scope for buy/sell spread arbitrage; a long-term incentive plan for our management team, which took effect on 1st of January 2021 and is an important step in ensuring retention and alignment; and the appointment and removal of an auditor following a competitive process and which allowed us to move the audit function to Sydney. In October, ImExHS successfully raised $8.3 million in capital via a placement, which introduced several new institutions to our register. Importantly, this provides the company with adequate funding for the journey ahead as we continue to invest in the development of world-leading software and expand our sales distribution capability into new geographies. The Board continues to work well and closely with the senior management team despite our geographical distance. The level of engagement and professionalism of the management team is exemplary, and I believe the Board has the right mix of skills and international experience to guide our company forward. At a business level, there have been a number of notable achievements in product development, sales and marketing and in our expansion into new markets. I'll leave our CEO, Dr. Arango, to comment on these further, but they represent important building blocks for the future. Despite the challenges created by the global pandemic, our company has prevailed, highlighting our resilience and ability to adapt to rapidly changing circumstances. I would like to thank our Board members and management team, most ably led by Dr. Arango, for their hard work and contributions during this unusual and difficult year. I would also like to sincerely thank you, our shareholders, both new and long-term, for your ongoing support. I will now invite our CEO, Dr. German Arango, to address the meeting and provide a business update. German?

Thank you, Doug. Good morning, ladies and gentlemen, and I would like to add my welcome to today's AGM. 2020 was a year of contrasts as we made important progress across a number of key business areas while dealing with the challenges arising from a global pandemic. For many, it was a difficult year, and I would like to extend our deepest condolences to those affected by COVID-19, including families who have lost loved ones. I also wish to acknowledge and express our gratitude to health care workers around the world. The pandemic has accelerated the demand for affordable and accessible technology across many fields, including health care. This aligns with our purpose of democratizing access to high-tech imaging platforms with advanced clinical applications, user-friendly software and AI. Our customer value proposition is based on the provision of a modern platform that is fully web and allows for real-time communication and collaboration. As a professor of neuroradiology, I am particularly focused on making sure that our platform has all the functionalities that a physician requires, improving productivity and delivering superior patient outcomes. In 2020, over 2,100 radiologists used our imaging solutions, which were developed by software engineers based in Colombia. We operated across 15 countries, including the U.S., which represents a significant opportunity, and we also have operations in Spain and Australia. We continue to have high customer retention and have never been displaced by a competitor. Turning to some key elements of our business. The majority of our revenue is recurring, reflecting our subscription model, which is based on multiyear contracts. We provide customized solutions for all complexity levels, from small clinics to large hospital networks. Last May, we launched our disruptive Aquila in the Cloud offering, which provides small and medium-sized customers with a low-cost medical imaging solution. This is generating strong interest and in less than a year, is present in 13 countries. We are well placed to benefit from a number of macro trends in the health care sector and have multiple runways for growth. In addition to our Aquila radiology solutions, we have developed medical verticals, such as Alula for pathology and Anteros for cardiology, and are exploring other verticals such as dental imaging. We also continue to expand into new markets, such as the U.S. In October, we completed an $8.3 million placement, which will fund the next phase for the company's growth. The net proceeds will be used to accelerate penetration into new markets via increased investment in sales and marketing and software development. This slide shows the key features of our core HIRUKO platform, which consists of: a Picture Archiving and Communications System and Vendor Neutral Archive; an enterprise imaging solution which customizes specific workflows for different clinical departments; and advanced post-processing elements, which are our most sophisticated layer. The platform also integrates advanced visualization tools from third parties, such as Vital, which are available in the cloud for the first time via our platform. The agreement with Vital enhances our value proposition and meets our objective of providing customers of all sizes with the best and most affordable medical imaging solutions. HIRUKO also provides management functions, such as scheduling and billing, and can measure the metrics of a business and produce statistics in real time. Next, Aquila in the Cloud is a highly scalable business model that is supported by an extensive and growing network of distributor partners. It is host within Microsoft Azure and can be rapidly deployed across multiple geographies due to our multi-tenant capabilities. By 31 March, we had signed 60 deals, including 3 in the U.S., for an ARR contribution of $1.3 million. Most of these deals have come through our distributor partners, who received training via our online center, as well as sales and post-sales support. We are working with these partners to further optimize our pre-installation activities so that they are better aligned with the speed of our technical deployment. Our Aquila in the Cloud customers can choose from 3 packages, which differ in terms of features and functionality as well as price points. We already have customers moving to higher tiers, and in the future, there will be cross-selling opportunities as we add further tools. Our distribution model is based on a combination of direct sales and distributor partnerships, which forms part of our low-risk go-to-market strategy. In April 2020, we announced our inclusion on Ingram Micro Cloud global marketplace, which provides another distribution channel which is disruptive and scalable and will assist in selling to customers in rural and remote areas. We also provide radiology services for a small number of contracts to access images for training algorithms and AI data sets. As a result, we now have a library of over 940 million images and have developed an AI tool for the detection of viral pneumonia and another for natural language processing. Turning to our FY '20 result. We reported strong growth across our key financial metrics both on a reported and constant currency basis. Sales revenue of $10.9 million was 41% higher year-on-year and 59% higher on a constant currency basis due to new contract wins and renewals. Importantly, this was in line with the FY '20 revenue guidance we provided during the year. Our EBITDA loss of $1.3 million improved by $3.3 million year-on-year. We continue to record strong growth in annual recurring revenue, or ARR, on a constant currency basis, reflecting contract wins and renewals. We made a positive start to the 2021 financial year with ARR of $11 million in the March quarter, which was up 19% on pcp and 29% on a constant currency basis. First quarter sales revenue of $2.5 million was up 9% on pcp and 17% on a constant currency basis. ImExHS is in a sound financial position with closing cash of $10.3 million at 31 March 2021. Our development road map shows a number of key priorities for the coming year. We will enhance our Aquila platform with a new version 4.0 to provide a broader product offering to potential customers in the U.S. and Australia. We will create the Alula Marketplace, the world's first pathology marketplace, and develop other medical verticals, including a dental imaging and veterinary information system. We will also use our rapidly growing image library for training and testing AI algorithms. Turning to the 2021 outlook. We are experiencing renewed interest in our customized solutions from larger customers and have a strong pipeline of near-term opportunities. This follows a period of delayed decision-making related to the pandemic. Our standardized product offering, Aquila in the Cloud, continues to generate a strong underlying demand, and we are working with our partners to optimize the pre-installation process. The partner program is also creating opportunities in new markets, such as Bolivia. Building our U.S. presence remains a priority, and we are pleased with our progress so far. We have signed 3 Aquila in the Cloud customers in Florida and recently hired a field service engineer to meet the growing demand for this product and expected medium-term interest in our customized solutions. After receiving ANVISA certification in 2020, our planned expansion into Brazil has been postponed due to ongoing COVID-19 crisis in that country. ImExHS is in a sound financial position, and our trading for the financial year-to-date is in line with our 2021 expectations. I would also like to briefly comment on the current social unrest in Colombia, which has not impacted our team or operations. Even if this situation continues for some time, we do not expect it to have significant impact on our earnings on a constant currency basis or on the delivery of our strategy. I would like to thank the Board for their guidance during what has been an extraordinary year and our team for their hard work and dedication as we adapted to rapidly changing circumstances. And finally, to you, our shareholders, thank you once again for your ongoing support.

Thank you, German. We'll now move on to the formal business of the meeting. Proxies have been received from 31 shareholders, representing 13.7 million shares, being 45% of the company's issued capital. I will declare the proxies received on a resolution before putting the resolution to a vote. I would like to highlight that where undirected proxies have been given in favor of the Chairman, I will be voting those proxies in favor of all resolutions being put to the meeting today. We'll now move to the formal resolutions contained in the Notice of General Meeting. I refer you to the first item of business as set out in the Notice of the Meeting, which is to receive the financial report of the company and the reports of the directors and auditors for the financial year ending 31 December 2020. Does anyone have any questions or comments on the financial reports or any general questions of management or indeed, of the auditors? We will, of course, take questions in relation to each resolution before resolutions are voted on. However, now is a good time to ask any questions more broadly about the business. Do we have any...

Doug, there are no questions presently.

Okay. Thank you. So let's move to resolution one. Resolution one, as set out in the Notice of Meeting, is to consider as a nonbinding ordinary resolution the adoption of the Remuneration Report. Are there any questions or comments on the resolution?

No questions.

Okay. Proxy votes received on this resolution are currently displayed on the screen. In my capacity as Chairman, I am calling a poll on this motion. The poll is currently open and will close shortly after the conclusion of discussion on the items of business. I will give you a warning before I move to close voting. We'll now move to the next resolution. Resolution two, as set out in the Notice of Meeting, is an ordinary resolution to approve the reelection of director, Mr. Damian Banks. Are there any questions or comments on the resolution?

No questions.

The proxy votes received on this resolution are currently displayed on the screen. In my capacity as Chairman, I am calling a poll on this motion. A poll is currently open and will close shortly after the conclusion of the discussion on the items of business. I will give you a warning before I move to close voting. I'll now move on to the next resolution. Resolution three, as set out in the Notice of Meeting, is an ordinary resolution to approve the reelection of director, Dr. Douglas Lingard. Are there any questions or comments on the resolution?

No questions.

The proxy votes received on this resolution are currently displayed on the screen. In my capacity as Chairman, I'm calling a poll on this motion. The poll is currently open and will close shortly after the conclusion of the discussion on the items of business. I will give you a warning before I move to close voting. We'll now move to the next resolution. Resolution four, as set out in the Notice of Meeting, is an ordinary resolution to approve the grant of options to the Chief Executive Officer, Dr. German Arango. Are there any questions or comments on this resolution?

No questions.

The proxy votes received on this resolution are currently displayed on the screen. In my capacity as Chairman, I am calling a poll on this motion. The poll is currently open and will close shortly after the conclusion of the discussion on the items of business. I will give you a warning before I move to close voting. We'll now move to the next resolution. Resolution five, as set out in the Notice of Meeting, is an ordinary resolution to approve the grant of options to Nonexecutive Director, Mr. Damian Banks. Are there any questions or comments on the resolution?

No questions.

The proxy votes received on this resolution are currently displayed on the screen. In my capacity as Chairman, I am calling a poll on this motion. The poll is currently open and will close shortly after the conclusion of the discussion on the items of business. I will give you a warning before I move to close voting. We'll now move to the next resolution. As resolution six relates to me, I will hand the chair to Carlos Palacio.

Thank you, Doug. Resolution six, as set out in the Notice of Meeting, is an ordinary resolution to approve the grant of options to Nonexecutive Director, Mr. Doug Flynn. Are there any questions or comments on the resolution?

No questions.

The proxy votes received on this resolution are currently displayed on the screen. In my capacity as Chairman, I'm calling a poll on this motion. The poll is currently open and will close shortly after the conclusion of the discussion of the items of business. I will give you a warning before I move to close the voting. I will now hand the chair back to Doug Flynn.

Thanks, Carlos. Resolution seven, as set out in the Notice of Meeting, is an ordinary resolution to approve the grant of options to Nonexecutive Director, Dr. Douglas Lingard. Are there any questions or comments on the resolution?

No.

Proxy votes received on this resolution are currently displayed on the screen. In my capacity as Chairman, I'm calling a poll on this motion. The poll is currently open and will close shortly after the conclusion of the discussion on the items of business. I will give you a warning before I move to close voting. We'll now move to the next resolution. Resolution eight, as set out in the Notice of Meeting, is an ordinary resolution to approve the grant of options to Nonexecutive Director, Mr. Carlos Palacio. Are there any questions or comments on the resolution?

No questions.

The proxy votes received on this resolution are currently displayed on the screen. In my capacity as Chairman, I'm calling a poll on this motion. The poll is currently open and will close shortly after the conclusion of the discussion on the items of business. I will give you a warning before I move to close voting. We'll now move on to the next resolution. Resolution nine, as set out in the Notice of Meeting, is a special resolution to approve additional capacity to issue equity securities up to 10% of the issued capital of the company. Are there any questions or comments on the resolution?

No questions.

Proxy votes received on this resolution are currently displayed on the screen. In my capacity as Chairman, I am calling a poll on this motion. The poll is currently open and will close shortly after the conclusion of the discussion on the items of business. I will give you a warning before I move to close voting. We'll now move to the next resolution. Resolution ten, as set out in the Notice of Meeting, is an ordinary resolution to ratify the prior issue of shares for the placement completed in October 2020. Are there any questions or comments on the resolution?

No questions.

The proxy votes received on this resolution are currently displayed on the screen. In my capacity as Chairman, I am calling a poll on this motion. The poll is currently open and will close shortly after the conclusion of the discussion on the items of business. I'll give you a warning before I move to close voting. Ladies and gentlemen, that concludes discussion on the items of business. In a couple of minutes, I will close the voting system. Please ensure that you have cast your vote on all resolutions. I'll now pause to allow you time to finalize those votes. [Voting]

If you haven't already commenced registering your vote, please do so now. I'll give you another minute to register your votes. [Voting]

I will now close the poll. When the voting has been collated, results will be declared on each resolution and released on the announcements platform of the ASX and published on the company's website. Thank you, ladies and gentlemen. That now concludes the formal part of the meeting, and I would like to thank you all for your online attendance today. I declare the meeting closed.