ImExHS Limited (IME) Earnings Call Transcript & Summary

As it's now 10:00 a.m., and as we have a quorum of shareholders present, I declare the meeting open. I confirm that the 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 with the ASX on 21 April 2022. We will take the notice of meeting and the resolutions to be considered at the meeting as read if there are no objections. Now due to the current and changing 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 are unable to meet with shareholders personally today. Having said that, we have shareholders geographically spread across various cities in Australia, New Zealand 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; Douglas Lingard, our Nonexecutive Director; Mr. Carlos Palacio, Nonexecutive Director; Damian Banks, Non-Executive Director; and Reena Minhas, our Chief Financial Officer and Company Secretary. Also present is Nicholas Bennett, 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 a live webcast of the 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 you're a shareholder with Automic. If you haven't already done so, you can follow the instructions on 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 in the meeting. Kindly start your question with the agenda item number to which it relates. Please also note, your questions may be moderated; if we receive multiple questions on one topic, amalgamated together. Due to time constraints, we may run out of time to answer your questions. If this happens, we'll answer them in due course via e-mail. All questions should be addressed to me as the Chairman. I'll have to deal with the question personally or ask someone who is better placed to respond. We'll 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. Voting today will be conducted by way of a poll on all items of business. 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, and I will give you a warning before I move to close voting. Now with regards to the format of today's meeting, I'll 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. As previously notified, all resolutions today will be decided on by poll. Now before moving on to the business meeting, I'd like to say a few words about the progress of IMEXHS in the last year, and will then pass to German who will provide a business update. We're pleased with the progress made throughout 2021 to grow the business within Latin America and to expand overseas. IMEXHS met 2021 revenue guidance provided during the year. Revenue growth saw a high and rising share of recurring revenue, low customer churn and was driven by the expansion of our global footprint through sales of our standardized radiology software product and by volumes growing in existing customers for both our medical imaging software and our radiology services. Notably, 2021, through the acquisition of Colombian radiology services provider RIMAB SAS, which is performing above our expectations, has a strong growth profile and is solidly profitable. Results since acquisition in Q4 2021 and Q1 2022 show the financial benefit of having RIMAB within the company. Furthermore, the acquisition of RIMAB removes related party transactions. They are also preexisting and administratively complicated joint contracts with several customers between IMEXHS and RIMAB. Going forward, our reporting should be clearer for shareholders with segmental reporting covering medical imaging software and radiology services. We are 1 company, 2 businesses. Collectively, our radiology services business is one of exceptional quality and is recognized as having some of the best radiologists in Colombia. Use of IMEXHS software provides an edge in terms of productivity and, consequently, cost. This is a significant step forward in our ability to provide outstanding service and win new business. It also gives us an outstanding showcase for our software and ownership of a very large and growing database through AI tool development. It's the company's intention to continue to build the imaging software business globally and grow the radiology services business, particularly within Colombia. We have developed a structure to ensure that each business has appropriate resources to both independently and symbiotically develop and grow. The success of Aquila in the Cloud, now part of IMEXHS Cloud, is evident in terms of the sales and acceptance of the model of non-customized Software-as-a-Service product distributed through 35 partners that is now present in 11 countries. In the early stages, product implementation was slow as we learned how to better help clients and partners prepare to onboard the software and adopt related beneficial changes in working practice. To that end, we've developed better processes and implementation; times have markedly improved. Importantly, the software package approach offers us some interesting strategic options through direct online distribution and, through our product development program, moving towards 1 software platform for all medical imaging, which will include other ologies such as cardiology pathology ophthalmology, et cetera. IMEXHS made 2 important announcements at the Radiological Society of North America, the RSNA, Scientific Assembly held in Chicago in November '21. Firstly, IMEXHS announced a partnership agreement with Neusoft Medical, a global leader in clinical diagnostic and treatment solutions. And secondly, IMEXHS announced the new IMEXHS Cloud product and solution. Neusoft will be one of IMEXHS's first strategic partners to offer the new cloud product. Our product development team continued to do outstanding work and we've undertaken significant organization development in this area. We've had excellent feedback from new clients and from existing users as new releases have been seamlessly applied. Global development in medical software in terms of architecture, integration and capabilities in the development of AI tools has never moved so swiftly. We believe this company is well placed to thrive. Our thoughts are with our staff and their families who contracted COVID-19 during the year and who have thankfully all recovered. The gradual recovery from COVID-19 conditions in Latin America was reflected in our combined contract win for Colombia's Police Central Hospital announced in December '21 and which will contribute over $1.1 million in annualized recurring revenue. This validates the RIMAB acquisition and further positions IMEXHS as a more integrated proposition while still allowing customers the flexibility of choice. We recently released an upgrade to guidance for 2022 and outlined a program to extend our cash runway. This should see the company achieve positive underlying EBITDA for 2022 and monthly underlying run rate cash flow breakeven during the second half. To allow the company to reach profitability and cash flow breakeven, management is undertaking projects on 2 fronts. The first initiative has been to move swiftly defined cost savings that minimize any impact on the company's operations and growth plans. And this has included some synergies made possible from the acquisition of RIMAB in October '21. All cost savings initiatives ensure that the integrity of the company's 5-year strategic framework announced on the 21st of March will be maintained. We will continue to invest in product development and sales to maintain the momentum of our disruptive medical imaging software platform and international growth. The second area of focus is on working capital. A consequence of the company's growth has been the expansion of working capital on our balance sheet. And this is mostly as a result of the growth of radiology services and a slower than acceptable payment cycle. The company is focused on improving working capital levels by taking a more proactive stance on collections, and where possible, new contract payment terms. Now after reviewing overdue receivables, we do not believe there are any unprovided credit risk. And lastly, to align directors' interest to shareholders and to contribute to cash preservation, Board has elected to take future directors fees in the form of newly issued shares. Secondly, the Board recommends directors to be paid -- be issued nil paid options equal to 50% of directors fees versus 100% in the prior year. The quantum proposed is to ensure adequate headroom for issuance under the executive share plan and to acknowledge the relatively poor share price performance. Both of these measures are put to shareholders at our AGM today. IMEXHS is well placed to leverage its distribution channels and unique global market positioning. The need for affordable medical imaging software at all levels is not being met by the large players and leaves an enormous addressable market. The Board and management continues to recognize the challenges, both actual and perceived, of overseeing a company whose operations are largely run outside of the government's jurisdiction. However, the Board meets frequently, both formally and informally and with regular management discussions. Furthermore, the company has in place appropriate governance charters, and the Board is satisfied as to the company's adherence to those charters as well as the requirements of both the ASIC and ASX listing rules and the spirit of those rules. With the world normalizing from COVID, if not the hangover of supply chain disruption and the impact of war in Ukraine, we're working hard to get back to face-to-face engagement as appropriate. I visited Colombia and spent time with our management team and visited customers. We've had Dr. Arango meet with prospective clients and shareholders here in Australia and our CFO, Reena Minhas, has recently returned from Bogota. We entered 2022 with a significant agenda but well placed to seize the opportunities available. I would like to thank our directors for their contribution throughout the year. And of course, our management team and staff across the world, most ably led by our Chief Executive Officer, Dr. German Arango. And lastly, thank you to our shareholders. We appreciate your continued support and commitment. I will now invite our CEO, Dr. German Arango, to address the meeting and provide a business update. German?

Thank you very much, Doug. Good morning, ladies and gentlemen. I would also like to welcome you to today's AGM. I am based in Bogota, but was pleased to visit Sydney and Melbourne last month to meet IMEXHS clients and shareholders and present the company's 5-year strategic framework. We are now celebrating our 10th year as an organization and 4th as an ASX-listed company. IMEXHS was founded in 2012 to solve 2 pervasive issues in Global Healthcare: the prohibitive cost of care and the need for access to modern technology. We started selling our cloud-based medical imaging software in Colombia and expanded into other countries in Latin America in 2015. In 2020, we launched a standardized cloud-based Software as a Service targeted at small to midsized radiologic companies that has allowed us to expand into much larger global markets like U.S. We have made great inroads in the global SME market due to our disruptive technology. Last year, the company purchased RIMAB SAS to strengthen our radiology services business and access vast amounts of data for AI development and testing. The company has grown from 2 founders to approximately 350 employees across 2 businesses: medical imaging software and radiology services. Our software is used in 15 countries by more than 2,500 radiologists and is developed by 37 software development engineers. Our radiology services business consists of more than 100 radiologists who exclusively use IMEXHS software and have a library of over 1.5 billion images built up over 10 years. 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, and we have never been displaced by our competitors. In 2021, like many other companies, we overcame a number of COVID-related challenges that led to delayed decision-making, particularly with large enterprise customers. We also overcame in customer challenges related to our disruptive SME software, IMEXHS Cloud. Nevertheless, we reported a strong year-over-year growth in all our key metrics, helped by a strong contribution from RIMAB in Q4 and a large enterprise contract win towards the end of the year. Revenue for the 12 months ended 31 December was $13.4 million, up 23% and up 34% on a constant currency basis versus PCP, and in line with our guidance provided during the year. Annual recurring revenue or ARR of $20.4 million increased by 102% and 121% on a constant currency basis. Underlying EBITDA was a loss of $1.4 million versus a loss of $0.7 million in 2020, and we ended the year with a cash balance of $4.2 million. Welcoming RIMAB into IMEXHS in October 2021 was a significant milestone for the company. It eliminates related- party transactions and enables us to restructure the organization in 2 businesses: software and services. Over time, we anticipate medical services and software to become increasingly intertwined and strongly believe that artificial intelligence will be the vehicle for enhancing that connection. That brings us to the end game of our 5-year growth strategy, where we expect the software and services business to overlap and create an open collaborative platform. For this to happen, we will need to work on 3 things. First, on a single software platform that brings all our software tools and capabilities together under one umbrella to standardize deployment, training and services. Second, using and testing images from our own and third-party medical practices to make our software and services offerings smarter. And lastly, creating AI algorithms and tools to link the software and services together. We anticipate technology will have a greater role to play for medical practices in the future due to the AI element. The next slide provides you with more detail on how we plan to get there. Our first growth horizon is the seeding phase, which is already underway. This phase is focused on 3 product segments: IMEXHS Cloud, IMEXHS Enterprise and Radiology Services. For each segment, we have a strategy to grow the business with product development, go-to-market, customer focus and geographical expansion. The evolution of our product offering is taking us into a broader proposal for Aquila in the Cloud with several extensions available in a marketplace we are calling IMEXHS Cloud. Sharing the same software platform plus an engine for a specific customized business rules, IMEXHS Enterprise is also evolving for the high-end customers. The second horizon, the growth phase, is focused on consolidating our software onto a single medical imaging platform, IMEXHS Cloud, which requires changes in our technologies such as MSA, automation, et cetera. We will start working with data sets and data lakes from our AI library to prepare for a more intensive AI horizon. The AI integration engine has to have a bigger number of algorithms from our own images and the third parties. We will also keep growing from outsourcing our Radiology Services, but with a more international scope. The third horizon, harvesting, is AI intensive and involves integrating large volumes of data and algorithms. Turning to the current trading for the 2022 financial year, we made a positive start in Q1 with revenue of $4.7 million, up 89% versus PCP and up 39%, excluding the RIMAB acquisition. ARR was $21.5 million, up 95% versus PCP. Underlying EBITDA was a loss of $0.2 million, up $0.6 million compared to a loss of $0.8 million in the prior year, and the cash balance was $2.9 million. Year-to-date, the number of contracts for our standardized radiology software, IMEXHS Cloud, has increased to 128 and amounts to ARR of $2.8 million. Most of these deals have come through our 35 distributor partners whom we are working closely with to further optimize the installation process. To accelerate our expansion overseas, we signed 5 new partners from 3 different countries, 1 of which is Thailand. We have also signed Crowd IT as a master distributor in Australia and 3verest as a master distributor for U.K., which both came about through contacts made in Australia. On the Enterprise software side, we are experiencing renewed interest in our customized solutions for larger customers and have a strong pipeline of near-term opportunities. The strong growth in ARR continued into Q1 with ARR of $21.5 million, up 95% versus PCP and up 94% on a constant currency basis. ARR as at 31 March 2022 consisted of $7.4 million from software and $14.1 million from Radiology Services and includes $1.1 million from the Colombian National Police Central Hospital contract won at the end of December that includes software and services. Trading in Q1 FY '22 is encouraging and provides us with the confidence to provide revenue guidance for the full year, showing a strong year-over-year growth. While executing on our growth strategy, we are aware of our limited cash resources, which has led the company to recently announce and implement initiatives to reach profitability and run rate underlying cash breakeven. The first initiative deals with cost savings that minimize the impact on the company's operations and growth plans, some of which will come from synergies from the RIMAB acquisition. The second area of focus is on decreasing working capital needs by taking a more proactive stance on collections and, where possible, introducing new contract payment terms. Lastly, the Board is proposing directors to be partially compensated in noncash payments. All cost savings initiatives ensure that the integrity of the company's 5-year strategic framework will be maintained. Our focus in FY '22 will be on building AI at the core of our business. We will aim to win more large contracts for IMEXHS Enterprise, improve implementation timing for IMEXHS Cloud, further integrate RIMAB into the business, and leverage our partnership network, which has been the key to the success of our global expansion. In closing, I would like to extend my sincere thanks to the directors for their guidance as well the whole IMEXHS team for their effort. And thank you to our shareholders for your continued support. With that, I will now hand back to our Chairman, Doug Flynn. Thank you, Doug.

Thank you, German. We will now move on to the formal business of the meeting. Proxies have been received from 37 shareholders, representing 7.6 million shares being 25% 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 the favor of the Chairman, I'll be voting those proxies in favor of all resolutions being put to the meeting. We will now move to the formal resolutions contained in the Notice of General Meeting. In my capacity as Chairman, I will be calling a poll on each of the resolutions. Polls are currently open and will close shortly before the conclusion of discussion on the items of business, and I will give you a warning before I move to close voting. [Voting]

I refer you to the first item of business as set out in the Notice of Meeting, which is to receive the financial report of the company and the reports of the directors and auditors for the financial year ended 31 December 2021. Does anyone have any questions or comments on the financial reports or any general questions for management or indeed the auditors. We would, of course, take questions in relation to each resolution before resolutions are voted on, but now is a good time to ask any questions more broadly about the business. Do we have any questions?

No question.

Thanks, Reena. The resolution 1, as set out in the notice of meeting, is to consider as a binding ordinary resolution the adoption of the remuneration report. Are there any questions or comments on the resolution?

No questions.

Thank you. 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. We will now move on to the next resolution. Resolution 2, as set out in the notice of meeting, is an ordinary resolution to approve the reelection of 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. And in my capacity as Chairman, I'm calling a poll on this motion. Resolution 3, 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 resolution?

No questions.

The proxy votes received on this resolution are currently displayed. In my capacity as Chairman, I'm calling a poll on this motion. 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. We will now move on to the next set of resolutions, which relate to the grant of options to each of the non-executive directors. I will take any questions on this set of resolutions now and then move through each of the resolutions, 4 to 7. Are there any questions or comments on the resolution?

No questions.

Resolution 4, as set out in the notice of meeting, is an ordinary resolution to approve the grant of options to Nonexecutive Director, Mr. Damian Banks. 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. As Resolution 5 relates to me, I will hand the chair to Carlos Palacio, the Chairman of the Remuneration Committee.

Thank you, Doug. Resolution 5, as set out in the notice of meeting, is an ordinary resolution to approve the grant of options to Nonexecutive Director, Mr. Douglas Flynn. 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. I will now hand the chair back to Doug Flynn.

Thanks, Carlos. We will now move on to the next resolution. Resolution 6, as set out in note the meeting, is an ordinary resolution to approve the grant of options to Non-Executive Director, Dr. Douglas Lingard. 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. Resolution 7, as set out in the Notice of Meeting, is an ordinary resolution to approve the grant of options to Nonexecutive Director, Mr. Carlos Palacio. The proxy votes received on this resolution are currently displayed on the screen. In my capacity as Chair, I am calling a poll on this motion. The next set of resolutions relate to the issue of shares in lieu of payment of nonexecutive directors fees. So I'll take any question on the set of resolutions now and then move through each resolution, 8 to 11. Are there any questions or comments on this resolution?

No questions.

Thank you. Resolution 8, as set out in the notice of meeting, is an ordinary resolution to approve the issue of shares to nonexecutive director, Mr. Damian Banks, in lieu of Directors' fees payable. 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. As Resolution 9 relates to me, I will hand the chair to Carlos Palacio, Chairman of the Remuneration Committee.

Thank you, Doug. Resolution 9, as set out in the Notice of Meeting, is an ordinary resolution to approve the issue of shares to Non-Executive Director, Mr. Douglas Flynn, in lieu of directors fees payable. 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. I will now hand the chair back to Doug Flynn.

Thanks, Carlos. I'll now move on to the next resolution. Resolution 10, as set out in the notice of meeting, is an ordinary resolution to approve the issue of shares to the Nonexecutive Director, Dr. Douglas Lingard, in lieu of Directors fees payable. 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. We'll now move on to the next resolution. Resolution 11, as set out in the notice of the meeting, is an ordinary resolution to approve to issue of shares to the Nonexecutive Director, Mr. Carlos Palacio, in lieu of Directors fees payable. 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. We'll now move on to the next resolution. Resolution 12, as set out in the notice of meeting, is a special resolution to approve the additional capacity to issue equity securities up to 10% of the issued capital of the company. Are there any questions or comments on this resolution?

No question.

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. Ladies and gentlemen, that concludes the 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. If you haven't already commenced registering your vote, please do so now. I'll give you another minute to register your votes. I will now close the poll. When the voting has been collated, the 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. I'd like to thank you all for your online attendance today. I declare the meeting closed.