Mach7 Technologies Limited (M7T) Earnings Call Transcript & Summary

My name is Rebecca Thompson and I look after Mach7's Investor Relations. Today, CEO, Mike Lampron, will take us through the full year results and afterwards, he'll be joined by Dyan O'Herne, CFO for Q&A. With regard to the Q&A, attendees can submit their questions via the Q&A text box at the bottom of the screen. Alternatively, you can e-mail me on [email protected]. I'll now hand over to Mike to take us through the full year results.

Thank you, Rebecca, and welcome, everyone, to our call. I will start off by just going through some business overview, followed by our FY '23 results and a brief outlook. I should be able to get us through the presentation in around 20 minutes or so, leaving us plenty of time for Q&A at the end. So Mach7, for those who are new to the story, we develop enterprise imaging software for the medical community. Our focus is really giving health care organizations the capability of bringing on their own independence. And what I mean by that is, traditionally, when hospitals have purchased an imaging system, they would go to some of the modality vendors who provided these software imaging solutions, and they would offer them a whole suite of software. And even if they only wanted one component, they'd have to buy the whole ecosystem from those vendors, giving the customers the feeling of being held captive by their vendors, because they could not transition off of their software very easily. So one of the values of Mach7, is offering that independence to the customers. We do that by really being very innovative in how we produce our software and how we build our software and making it modular, so that customers can take advantage of the components that they need to solve the problems that they have, and also have the scalability to solve problems into the future as well. So this is really important to us and sort of emphasizes the land and expand model we have from a sales perspective. So when it comes down to it, our business is really built off of 3 distinctive products. On the Enterprise Data Management component, we have the Vendor Neutral Archive. This is like a -- this is the hub of an enterprise solution. This is where all the data is stored and is aggregated. This is where the workflow comes from. This is where really the customers get the biggest opportunity to reduce redundancy and reduce costs, by having a true data management software package available to them, where all of their data from across their whole enterprise can all be stored in one centralized location and then served back out to the community in a more meaningful way. So that serving of the data back out can be through a third party as an example, a third-party pack solution. It could be a third-party AI product. We'll get into that in a little bit. But if somebody wants that data to be served back out utilizing another Mach7 product, we have the eUnity Diagnostic Viewer. This is a zero footprint viewer, meaning there's no software to install. You pull up a web browser that supports HTML5 or the proper credentials. You can log in, you can utilize the enterprise viewer. You can get to all of your patients' images, there's worklist capabilities, there's hanging protocols, there is all the advanced features you need, if you're a remote radiologist or a pathologist or any other clinician looking to access images across the enterprise. So this is really a product that offers the visualization of the images that are being stored in the DNA. A popular component of this is integrating it to the electronic medical record. And that's really the platform, from which clinicians can access the eUnity Viewer, most of the time. On the last component, departmental workflow applications, really, this is our universal worklist for radiology. This is DICOM worklist for technologists. It's all of our 3D functions for the worklist. It's quality control modules, so that you can modify data, tag marking just manipulating data that's within the VNA. And the other thing, this is really useful, is this is the central communication platform for third-party integration, like an AI algorithm as an example, or like a Nuance voice recognition system or something like that, would all come through these workflow applications into the VNA, and right through to the eUnity Viewer. So to sort of understand where we -- we really do come from the enterprise. We come at this problem of medical imaging, with the idea of getting images out to all of the clinicians throughout the enterprise is really important, rather than just a departmental solution that's really accessible for the radiologists and radiology imaging only. So when we talk about building on existing work, what we're talking about is there's been a -- years and years of work to build out protocols across the medical imaging community, whether it's DICOM, whether it's HL7, whether it's Fire, there's a number of different protocols. And what we want to do is, we want to build our product on the existing work that's been done, to make ourselves universally available to integrate to third-party capabilities that our customers choose to bring into their technology stack. We have the idea that we want any clinician to be able to join and any clinician to be able to take advantage of seeing images. As simple as that sounds, it's not always the case today. A lot of the clinicians outside of radiology don't have access to a lot of the images that are associated to their patients. They're in a silo storage, maybe even just on a CPU, on a desktop in dermatology. So these images can actually be really valuable to clinicians across the spectrum. We want everyone to be able to enjoy and utilize that information, to provide better care for the patients. From a technology perspective, we're always keeping the technology and the IT focus in mind. We want to allow for new innovations. We want to allow for AI, just the thing that everybody is talking about right now. But there's other solutions out there, that can build on top of our solution to provide, again, more functionality. And from a long-term scalability perspective, really, the capability of storing data, and it could be, as an example, non-DICOM data from -- again, I'll use dermatology as an example. When we ingest that information, if it's in a different format or a proprietary format, we can convert that to DICOM, so it can be stored and used down the road. Think of it like this, where back in the day, maybe we had a VHS tape or a Betamax tape. If you have that still, you wouldn't be able to access that data, because it's in an old format, and nothing can read anymore. The CD is almost to that point where -- who has a CD player anymore. And so those formats and those media types, those are the things we're trying to future-proof, and DICOM is the standard in medical imaging. So we do want to try to convert things to DICOM where we can, and that's a good -- it's just one example of scalability for the long term, outside of -- just the next few years. So AI is a hot topic, and I just wanted to take this opportunity to present sort of our opinion of AI and where it stands in the marketplace. Look, we all know it's a growing industry. It's huge in medical imaging. It's growing astronomically. There's a lot of big drivers around why that's the case. We also know there's a lot of M&A activity, where a lot of these new players are coming into the community and then they're being acquired very quickly. You can see acquisition after acquisition in the industry around that. But there's also some barriers right now to AI really being popular and useful throughout the industry. In the U.S., reimbursement is limited. It's there, in some cases, but it's limited. In some cases, there's a lack of evidence demonstrating the economic benefits. In some cases, clinicians will love the AI algorithm and it works great with someone else's data, but not so much with their data. So they need to have confidence, that it's going to work with their data. And then there's just the regulatory process of getting these things approved. So there's a number of different barriers currently, that will overcome over time. So everyone needs to be ready for this. And our take from a data management perspective is that with the VNA, we're going to create this data depth and the ability to manage the data, and orchestrate the data and all those things are required for AI to be enabled in a workflow environment, where it can be useful in a clinician's environment. One of the key things we hear from radiologists right now, is that they love some of the tools that are difficult to access. So creating that platform, having all of that data, and a capability for it to be stratified by the customers to make it meaningful for them, to test for them, to do R&D for them, to create their own algorithms, all that data can be meaningful to the customer. We store -- manage over 30 million studies annually. Not collectively, just annually, we're adding a minimum of 30 million studies every year to the data that we're managing as a business. We have customers that range anywhere from 10,000 studies a year to 6.5 million studies a year. And that doesn't include any of the data that our customers have migrated into our solution. That's too difficult for us to really capture, but just now that there's a lot of additional data, and we gave a few examples of how some people measure it, but we haven't offered that [indiscernible]. So when we think about the business and what we're looking at, we have 165 customers across 15 countries now. We're sort of really running the spectrum of IDNs, public health, international hospital authorities like Hospital Authority of Hong Kong, regional hospitals, academic, research, teleradiology. We have a bunch of strategic partners, children's health centers. We really run the gamut from some of the very largest to some smaller groups. So it shows the breadth of our product's capabilities, and that can be used in both the acute care market and the ambulatory care market, which also is sort of a unique value prop of Mach7. Not going to spend a ton of time on this slide, but what I really wanted for people to understand is, we did acquire Client Outlook, that's the previous owner of the eUnity software. We finished that in July of '20. And when you look to the graph to the upper right here, and to the lower right, really what we're showing here is the opportunities that have been gained by the business post-acquisition of Client Outlook. I mean FY '23 alone, we sold 17 of [indiscernible], 7 to the VNA. And we had 7 that bought both products at the same time. And we have 6 clients that chose to cross-sell, either they had the viewer and they bought the VNA or they had the VNA and they bought the viewer from us. So you are starting to see the impact in the blue lines here, as we start growing. And you can see the value that this software has brought to the business, and the growth that's coming into our funnel and to our revenue, just from that acquisition of Client Outlook. That was truly a transformational acquisition for us, that has been very, very positive to the business. Many of you have seen this before, our viewer does very well in KLAS in regards to end users' feedback. And we've held the #2 place for the last 2 years. On the VNA side, we go back and forth with reliable data in KLAs, but a couple of things that have come out. People are looking for our latest and greatest software. We have released our new version 12 now, and we're working on getting all of our customers upgraded and on the latest and greatest technology. This was a massive release for us and it was a small role for us, where we made sure that the software was ready for [ prime time ]. So on to the good stuff. So the results for the year, record sales orders of $40 million, $40.3 million. Get into that a little bit -- we'll get into each of these a little bit after this slide. But really, a great sales order year for us, it was fantastic. Record revenue, again, of $30 million, again, every year, growing and growing and growing on the revenue side. The contracted annual recurring revenue, we ended the year at 20.6%, but I thought it was important to reflect here to all of you that, you saw the other releases around DIA and around NTP, we're now sitting at $24.8 million of contracted annual recurring revenue as of July. And on the ARR side, $17 million at the end of June and $17.7 million at the end of July, adding in some support and maintenance that comes through Trinity and [ Aurora ]. New contracts in the high-growth market, Akumin came in at the end of the first half, a very large ambulatory segment business. Nuvodia came in to us. Nuvodia is a reseller of our products. And then, of course, the VHA contract and DIA contract, which came in actually Q1, but important to note because when you think of Akumin, VHA and DIA, they're all ambulatory market segment. So that's just an important note. Adjusted EBITDA of $2.5 million, a little lower than we would have expected. We'll get into that in a bit. But on the flipside, some great news in regards to our NPAT, our NPAT is a negative $1 million right now, which represents a 75% improvement on prior quarter -- prior year. And if you look at the NPATA, which is a metric that we're now going to be moving forward with, NPAT and NPATA, we look at a $7.2 million positive NPATA. We are maintaining a strong financial position. We did have $23.4 million in cash at the end of June and then $25.9 million as of the beginning of July, really the beginning of FY '24, we were sitting at $25.9 million. So we'll talk about sales orders a little bit first, that's $40 million and what it was comprised of, you can see the chart to the right here. And one thing of note, our mix of deals now, on the revenue side, we're sort of -- there's a bunch of things to take into consideration when we think about revenue, the biggest of which is, which business model are our customers buying our software, meaning this is a capital license or is it a subscription license. A couple of years ago, we were really up to 50-50. Capital subscription has been slowly sort of moving more 60-40. It's certainly well into the 60-40 now with FY '23, and as we start to think about FY '24, we know NTP and the no DIA have already signed contracts, and we know those are subscription models. As we look into FY '24, I think we begin to see probably an even higher concentration of recurring revenue subscription orders, rather than capital, as we look towards the future. From the concentration of where these deals come from, really, it's a split between -- when we think of it from a dollars perspective, it's a split between new clients, a little over $22 million, representing from new clients. And then, of course, our land and expand model, that's the renewals, the expansions and the add-ons making up the other, close to 50%. Of that new, of course, Akumin would have been the lion's share of that, followed by Nuvodia and St. Paul's. St. Paul's is another private hospital in Hong Kong, good add-on business from the hospital authority business. I think I really want to point out the renewal profile on the bottom right here, too. When you look at FY '24, and you see that blue line there, representing annual support, we did that specifically because that is actually the support and maintenance agreement for the Hospital Authority of Hong Kong. Because of the size of it, I thought it was important that we pointed that out specifically. So you're not going to see that in the future years, but because that was a bit of an anomaly and because it has an impact on our sales orders for the year, I wanted to point it out and make people aware of that particular support maintenance agreement, that we'll be renewing here in Q1. So just the highlights from these 3 new deals, St. Paul's private hospital, like I said. Nuvodia -- one of the great things about Nuvodia is, they reach a different segment of the market than we typically sell to organically. So we've got a great relationship with them, and they're a great IT service provider as well. So a nice addition to the partner program for us. And Akumin of course, is a very large outpatient radiology service provider, a great customer, and we look forward to serving them into the future years. We signed a long-term 10-year contract, which is a bit of an anomaly for us, but happy to have them with us for a long term. Subsequent to that, I think it kind of -- I think we have to mention, so far in Q1, the Veterans Health Administration that we signed, $11.7 million. And we know that they'll be going live in June of '24. So we also know that we're not going to see revenue for VHA until FY '25, right? It's a subscription model that they don't go live until June, don't expect to see the software revenue, right? It's going to [ trail ]. DIA, again, teleradiology service provider, radiology group and has a subscription contract for $3.7 million, and that was a 5-year term. So still talking a little bit about revenue here and again, showing sort of that revenue composition and where it's coming from a product perspective, either in the diagnostic viewer or from the data management side. It is getting kind of closer to a 50-50 mix just slowly. I don't know that it will ever be a 50-50 mix really, but I think this -- the composition from a product perspective, I think, is really nice. We're seeing more and more clients buy both products collectively together. So we will see some of the cross-selling go down in out years, because more and more clients be buying both products right upfront from us. To note on the revenue growth side, though, the reclassification of the Akumin revenue does have an impact to the business. You see that impact actually on our EBITDA line. So although it definitely affects our EBITDA line, it's definitely there from a fundamental business perspective, the EBITDA actually, having included that Akumin revenue would have been much sharper than it is today because of that, and that is cash flow we're still getting right. That is cash that we're getting over the course of the contract. And then of course, the concept that our revenue growth trails sales orders, right. Revenue comes in, if it's a subscription deal once we reach first productive use. If it's a capital deal, we have revenue associated with support and maintenance. First productive use is anywhere between 6 and 18 months from contract signing date. Again, talking about just the difference of the CARR and the ARR, and this is something that we've spoken about quite a bit in the past. Our ARR currently is sitting at $17.7 million, but it was sitting at $17 million at the end of fiscal. And you can start to see that gap grow a little bit. On July of '23, you've seen gap grow. That's a good sign from my perspective, I'd like to see that gap grow. I continue to like to see our customers reach first productive use, but I always want to make sure that we want more business that's already contracted and already in the backlog and ready for us to convert. So that's good news to see -- to see a little bit gap grow there. So I think just in sort of the -- and from a financials perspective, our revenue at $30 million was reasonably close to broker expectations. I think that our operating expenses were just a touch on the high side, compared to where we really want it to be and where we expect it to be. We did have some expenses come in, in Q4 that I thought were important to us. I think it would have been more expensive in the future, if we hadn't incurred those expenses. So that sort of threw off our OpEx a little bit in Q4, late Q4. But otherwise, our OpEx throughout the year had been pretty sharp. Our EBITDA is showing -- and adjusted EBITDA is usually where we're working off of, at $2.5 million, a bit off the mark on EBITDA. That's going to happen when our revenue number is down a little bit and our OpEx is up a little bit. So really a direct reflection of those 2 business components. But pleasingly, we are making a lot of improvement on NPAT and NPATA. But think about just NPAT right now and the negative $1 million, 75% improvement and getting us very, very close to being able to produce a positive impact from the business going forward. So moving on from financials, just some updates for everyone. We have announced this and we have begun a board renewal process. David Chambers is retiring as of the AGM on the 16th of November. We are in the process of evaluating the board skillset, and what we feel is appropriate and necessary for the Board moving forward. Just take the advantage here of being his choice to retire and use it as a springboard to make sure that we have all the right Board members to work with the company, as we continue to grow. And the same is true with the corporate restructuring from a growth perspective. Dyan was confirmed as the CFO. She's been in that acting role since January, and we're very happy to have Dyan on board as the full-time CFO. And Dave Madaffri, who was appointed as our COO. The role of the COO has not been replaced since I took on this role as the CEO. So for several years now, we've gone without backfilling that role. We're at the point where the company is getting big enough from an operations perspective, that I need a little extra help. Dave has been a fantastic leader from a sales perspective and a commercial perspective. He's got a great way about him that really resonates with the employees, and I think he is going to be exceptionally strong in this role. He does continue to manage the sales team as well directly, while he's in the COO role. And one last thing on -- from a corporate update perspective, on the patent litigation, we do finally have a date of the 5th of October. I know, many people ask about this. So October 5 is when the appeals court will be hearing this. And just as a reminder for everyone, they're not retrying the case, and they're not hearing any new evidence, and there is no jury. The court is simply reviewing the procedures and the decisions from the trial court, to make sure that the proceedings were fair and that proper law is applied correctly. So it will be great to get behind this. I would expect, and this is an assertion on my part, that the hearing is on the 5th of October. Within 2 to 3 weeks, we should get a preliminary hearing and then it could take a couple of months beyond that, before you get the full legal reading. But we should get that preliminary thing that we'll leave at anyone's concerns, usually 2 or 3 weeks from 5th of October. So just as a wrap-up, from an outlook perspective, when we look at this industry, we see a really fragmented environment from a vendor perspective. We have a lot of long-term legacy vendors out there, who are losing market share. That dynamic continues to be skewed and it's moving more and more towards an ambulatory space, the teleradiology space, the remote reading space is taking on more and more of a percentage of reads. Mach7 feels well positioned between the ambulatory space and the acute care space, to continue to really grow, as that [Technical Difficulty]. Lastly, [indiscernible] along with that much more complex opportunities. It's no longer walking into a hospital or dealing with just a radiology department, with 10 radiologists who sit in the same spot every day. It's a much more complex reading environment now, including a lot of third-party integrations to sophisticated software platforms. Interoperability is huge now. The ability to read from home as big. The ability to integrate it to EMR, so you get those images out to the clinicians is big. It's just a much more complex world now, than it was even a few years ago. Now we continue to have a great renewal profile, that land and expand model, again, is working for us. And then our sales pipeline, it continues to be -- every year it gets bigger and bigger and it's the most diverse pipeline that we've had in Mach7's history, as it stands right now. When we look at FY '24, we look at about a 20% sales order growth, a 15% to 25% revenue growth and definitely lower OpEx growth than revenue growth, profitability is on the forefront of our minds. I look at OpEx growth somewhere in the 10% to 15% range, and we intend to be cash flow positive in FY '24. So I think with that Beck, I will hand it back over to you and see if we have any questions out there.

Thanks, Mike. Yes, there's a few questions that have come through. I'll start first with some via e-mail, firstly from [ Ivan Tanner ]. When will Mach7 start portraying operating leverage in terms of cash flow? That is to say, is the current employee and business expense, the right fit and level to handle the announced and expected larger future contracts? i.e., expansion of VNA contract? I note that [ ProMetic ] has generated $127 million of revenue with a $24 million employee and benefit expense line.

Yes. Look, we continue to make progress on this front. And although our EBITDA line, this particular year may not look as productive as it was last year. There is more to the story, as I alluded to. Our expenses did go up, but I think it was important that they went up. I think there was a onetime thing that we had to deal with. And I also think we have timing issues. We're taking -- when we look at our results, we're thinking of things at a spot in time, not taking into account a few days past the quarter or a few days past a major milestone date. But our ARR is catching up and you're seeing our CARR number grow, you're seeing our ARR number grow. You're seeing our sales order grow. So I think that the business is starting to open up to become more profitable. You see good improvement in our NPAT number right now. So we're doing the right things fundamentally to grow the business and open up the jaws of revenue and the margin, in regards to EBITDA. It's definitely a concentration of ours. It's definitely something that we're thinking about every single day. We do intend on being cash flow positive in FY '24. And I think you'll see some good improvement as the year moves on.

Thanks, Mike. So a question which sort of relates to that as well. Why is the company not being more ambitious in achieving greater operating leverage in FY '24 from [indiscernible]?

Look, we maybe were a little conservative. But at the end of the day, I think we've got good visibility to 20% growth on sales orders. And one of the things you need to be careful with our business is that, time has shown that it's still a bit lumpy. And when we think about revenue, the type of revenue that we're bringing in, the type of orders that we're bringing in, could vary. And if we bring in more subscription deals than we do capital deals within FY '24, it will have an impact to our revenue. It doesn't have an impact to our expenses however, our expenses are going to be what our expenses are going to be, to support the number of clients we have, which is 165 clients. So sometimes there's a delay between sales orders and revenue. Sometimes there's a delay between revenue and cash, but still doing the right things, and we're -- and so I think that we actually are being pretty ambitious, in regards to delivering for our clients and bringing them the right amount of sales orders, that shows good growth for the business.

Thanks, Mike. And look, a related question, but just posed a different way from Peter Cooper, will Mach7 be EPS positive in FY '24 and will Mach7 generate positive operating cash flow in FY '24?

To answer that, I guess, a little bit backwards. Look, yes, we fully intend on being cash flow positive for FY '24. And in regards to EPS, I think I've talked about this a little bit already today, just in regards to -- we absolutely have a higher expectation of revenue growth than we do our OpEx growth, right? So you're going to start to see better and better improvement on that margin, which, of course, will affect EPS.

Okay. And now I have a few questions from Indi Rajakaruna and also some questions within those questions, so bear with me. So Hi Mike, congrats on the FY '23 result. FY '23 costs were higher than we thought. Any comments? And I think you've largely answered that previously, will we see the same trend into FY '24?

Look, yes, our costs were a little higher than we would have liked them to be. We did have to make some investment in a few parts of the company in the late part of the year, which I think were important. And I think that just from my perspective, it was something I felt that we needed to do for growth. I think our OpEx is a little bit around 19%, and that's definitely higher than we would have liked to see. And [ more with ] OpEx for FY '24, I think from a range perspective, 10% to 15% OpEx growth, certainly not 19% like we saw in FY '24 [indiscernible].

Okay. And my second question is on contract renewals. How much renewals are there in the FY '24 sales orders? Do you expect 100% retention?

I do expect 100% retention, and I hope to get -- I think we typically talk around a 2% or so attrition rate. When I see the renewals, I don't see any renewals that I think are of highly risky [indiscernible] are doing in FY '24. I think if I go back to that slide, I think it's -- I think if I include capital, subscription and support and maintenance agreements, I think we're at around $30 million in renewals from a total contract value perspective for FY '24.

Okay. Now I might address this next question from Indi to Dyan. Regarding the Akumin contract, how much revenue was recognized in FY '23? The original announcement stated $7.5 million to be recognized in FY '23?

All right. So the announcement indicated $7.5 million. And then when we went through our December review, we had to defer $1.7 million of that to be recognized as interest income over the life of the contract. So we ended up recognizing $5.8 million of revenue as software revenue.

Okay. And look, I have another question. I'll come back to Indi's other questions, but a related question here I can see from Stella Wang, please help us understand how the Akumin contract in the P&L and cash flow, how much is the annual interest income from its capital sale revenue that's received annually? The original contract mentioned annual billing in December, should we expect on receipt per year in the March quarter. That's about $1.5 million for the recurring service? I think that hasn't been spread over the full 10-year term, but I'll leave it to you, Dyan, to answer.

So we do expect an annual payment from Akumin each year to be invoiced every December. The payments that are coming in, that have been structured to increase each year, because based on the usage and as the project progresses. And then obviously, with the interest component, that will decrease year-on-year, because you have less interest over what's outstanding.

Okay. So back to Indi's other questions. Back to Mike, I think you're looking at M&A as a growth option, any comments and timeframes and what areas?

Yes. Look, we always are keeping our ear to the ground in regards to M&A. I wouldn't say that there's anything imminent, anything that I think -- I don't feel that we have a specific product gap that's holding us back right now. I think if we were to find the right M&A opportunity, it would have to be something that I thought was going to bring a lot of value to the company, similar to the way Client Outlook has and would have to be -- will have to make a lot of sense; because just given the current environment and current share price, if we were to go out and raise, we know we have $25 million in cash, it's not enough to do an acquisition. So it'll require a raise, and I really don't want to dilute the shareholders, unless it's something that I think is really going to be a powerful additive to the company.

Okay. And just on the capital management discussion, I think I saw a question in regard to that. Except, there are so many questions that have come in, I've lost it. Here it is, Carlos Gil has asked, the company's mark-to-market pricing is distorted from its fair value. It also holds $25.9 million in cash. Why not use these holdings to buy back shares and improve EPS, ROE, and add a lot of value to shareholders?

Look, we've -- the Board has discussed buyback options historically. We've looked at that almost annually for the last couple of years. It's something that we typically talk about a couple of times a year. To date, the Board has made a decision that they didn't think that was the best to use of our cash. I think that as our cash holdings go up, there could be a greater opportunity to do something with that cash. But for right now, the decision has been made, that we hold on to the cash rather than participate in the buyback.

Okay. Now back to Indi. And probably a question for Dyan, how has the Aussie dollar movement impacted your results?

Well, fiscal '23, doesn't have a significant impact. Most of our business we operate in U.S. dollars across globally, right? And so the exchange rate of USD versus AUD it was pretty much in line at the beginning of the year. During the year, it fluctuated a bit, but quarter-on-quarter, the average was [ close ], and we ended out close to where we started for fiscal '23. And I note for our audited results, you can see the split between realized and unrealized foreign currency gain. Fiscal '22, obviously, the exchange rate had a bit more of an impact on us. But fiscal '23, it wasn't a significant impact.

Okay. Now another question from Stella. With regard to the $3.7 million diagnostic imaging associate contract already booked in the first quarter of FY '24, representing 12.3% of revenue, the 15% to 25% revenue growth looks conservative guidance, what's your assumed retention rate for the -- sorry, that's a separate question. So I'll just go back to that one. So the DIA, look I think that's referring to the total contract value, $3.7 million. It's not actually revenue that's spread over the...

That was a subscription agreement. So again, like I said earlier, I think with most subscription agreements, don't expect to see much revenue from them in the year that they're signed, just given the typical length of deployment. So I wouldn't expect to see a lot of revenue coming out of DIA in FY '24. Similarly to NTP, I wouldn't expect to see much revenue coming out of NTP in FY '24 either.

Right. And then Stella's second part of that question, I think you've already answered, what's your assumed retention rate for the $14 million plus of subscription renewals in FY '24? I think you're hoping for 100%, aren't you, Mike?

Yes. And look, I'll say this about renewals as well. The one thing renewals does not take into account, is any kind of price increase, right? We are using this as a metric. It's a dollar for dollar, because it's the contract what we have today. So we're expecting to renew it at the same price as we did today. Now every opportunity for renewal, is an opportunity to reprice. So hopefully, there's upside to these renewals as well. But just from a reporting perspective, I thought it easier just to produce this report at a dollar for dollar assumption.

Okay. Yes. Another question from Carlos Gil, has the company undertaken a comprehensive review of its structure to optimize efficiency and improve operating leverage?

I mean if we're referring to the actual management organization in regards to how the company is performing operationally, we have spent a lot of time on our organization and the way the organization was laid out. There are hopefully always going to find some efficiencies, efficiencies in how our R&D group is performing, efficiencies on how we can use different tools to continue to grow, without having to add headcount, efficiencies of IT and cybersecurity efficiencies and how we're using our CRM and marketing from a sales perspective. Those are all areas that we have to look at constantly to make constant improvement. I wouldn't say that it's a review. It's a constant review and its constant improvement throughout the organization. I think the focus of the organization right now is really around customer experience, and it's around developing the best customer experience we can, because we've seen that our customers are so important to us, and the install base is so important to us, that our focus is really external and making sure that we have really happy customers, and that's what's really going to help us from a land and expand perspective.

Okay. And look, related to that, a question from Lachlan Rogers, in the fourth quarter result presentation, you mentioned there was some discussion about ongoing headcount needs. Can you please give an update on this process?

Yes. Again, we -- when we looked at headcount, the 2 primary areas we look at headcount are service and support, right? We need to be able to deploy our software in a timely manner, and we need to be able to support our customers in a timely manner. And support is oftentimes a function of a number of users that you have, right, number of cases that are coming in, that you have to answer, a number of phone calls coming in, that you have to answer from end users. So those are 2 areas that we think of, when we think of new headcount in FY '24. We're not thinking of a significant growth in headcount for FY '24. There will be a few areas that we'll have to shore up and potentially, if the right contract comes through, which requires us to hire for that particular contract, then we absolutely will. I think it's well worth it, if that opportunity comes up. But we shouldn't see significant growth in actual headcount.

Okay. Now a question from Darren. The focus of so many is cash flow positive operations. But for you, what is the most important thing for your business right now to focus on in the future?

Yes. There are 2 things for us. It's sales orders because it's -- everything trails from sales orders, revenue trails, cash trails, everything trails, market share, right? We're not going to get market share if we don't have great sales orders, we need sales orders, we need our sales orders to grow. Everything else will grow, as the sales orders grow, as long as we produce good software, and we can deliver it. And the second component is the customer experience. We need our customers to truly be advocates of our company. We want them to be thrilled with our company. We want them to love the service that they're getting, and we want them to think of us, as trusted advisers for their business. That's going to help us in the land and expand. So for me, those are the 2 areas and the 2 areas that I spend the most time making sure that we are making improvements in.

Okay. Now a question from Tony Schiavello, is the company's pipeline more skewed towards capital or subscription deals?

Yes. I think it's oftentimes difficult for us to tell when deals work into the pipeline. We don't know exactly what they are yet. And it's not until some of the later stages that we actually get to, whether they are going to be a subscription deal or a capital license. But I think that right now, I'm seeing more and more of a skew towards the subscription operating model than I am towards the capital model. We've gone from 50-50 to 60-40, and we'll probably start to see more and more transition to even 70-30 in the coming years.

Okay. Now a question from Chad Somerset, to grow revenue, aside from contract renewals, we need to see more new contracts. We are already nearing the end of Q1. What are the expectations for new contracts during the first half of the year?

Yes. Look, we don't have a specific metric on a number of new clients that we want to bring into the business. I get one way of looking at it, if we look at our FY '23 numbers, is that about 50% of the new revenue that we got is from new cost customers. But from a number of customers, yes, net new logos are important for the business for sure. We don't have a specific number we're targeting. But so far, as we look at Q1, NTP was a net new logo, and DIA was a customer already of eUnity. So right now, it's more net new. And I would expect that we would bring in at least 3 to 4 net new clients throughout the fiscal.

Okay. Now this next question -- next few questions, I think, back to Dyan, and relate to Akumin. So I'm going to jump around a bit here, but they're all related. Firstly, from Stella Wang, to show investors a fair EBITDA view, could you please tell us how much interest income is from Akumin fees? I presume that's in the FY '23 period?

All right. So the interest income from Akumin for this fiscal year is just below $200,000.

Okay. And then related to that, Indi has asked a couple of questions. Just following up on the Akumin question before, that $1.7 million of interest income that was taken out of that revenue that we had expected to recognize in the FY '23 year, that's to be spread over the next 10 years. Is that correct?

That's correct.

Yes. And then he also mentioned that in Note 6, interest income is $400,000 for this financial year. You've just mentioned that $200,000 of that was related to Akumin. So the balance is on the cash. Is that correct?

Correct. The balance is from the bank, right, so...

Yes. Okay. And then a question from Ross Marples, are you expecting any acquisitions over the next 1 to 2 years? And if so, how would you intend paying for this? Cash, debt, equity raise? I think, Mike, we touched on that earlier?

Yes. Look, there's nothing imminent that's on our plate. And if we were to find the right opportunity, then we would evaluate what the right vehicle would be to do that acquisition, it will totally depend on the price.

Yes. Okay. A follow-up question from Ross, have you had any customers leave the platform in the last 12 months? We did have a couple in Q4 -- that we referenced in the Q4 release.

We've had one or -- we had a couple of small, small customers that I think were routing customers that did not renew.

And then another question from Stella. FY '23 signed $35 million TCV, excluding renewal, with 20% growth forecast for FY '24 and $30 million in renewals, are we only assuming that $18 million of new TCV to be signed and is that too conservative?

Well, I don't think 20% growth in our sales order is actually all that conservative. I know that, that renewal number looks large. But I also think that there's work to be done there. And look, I hope that we absolutely bring in more than 20% of growth on the sales order front. But when we look at the funnel, we think [ of that ] 20% growth. And look, we've been saying that for a few years now, right, that we've been sticking to 20% growth in sales orders year-over-year for the last few years now. So I think that's a number that we're comfortable with.

Okay. And now a question from Iain Wilkie from Morgans, just on that FY '24 renewal profile. Do we have the detail on how this is split between the viewer versus the VNA?

I do not have that right now.

And also, if you can make a comment on the opportunity to increase prices in each of the products?

Yes. Like I said, whenever we have a renewal, we take the opportunity to review the pricing. In some cases, the pricing can go up considerably. In some cases, they're already at market value, and the price is not going to go up, maybe incrementally or maybe not at all. Totally depends on the customer. It depends on their use case, depends on the value they're getting out of the product, and it depends on when they were signed and under what conditions we need -- do they get some enormous discount for some reason or another, and we can crack that [indiscernible]. Unfortunately, it's [ not what's ] on there. It's really a case-by-case basis.

And a question from Rodney Studniberg, can you be more specific about the expenses that you felt necessary to incur the increased OpEx more than expected?

Yes. Look, there were expenses that we incurred around cybersecurity and expenses we incurred around labor.

Okay. And a final question here from Darren, have there been any significant changes or improvements to software from working with clients and fixing of issues?

Yes. Yes. I mean it's like one of the greatest things, right, is we have a lot of partners as clients, and every user that comes on to the platform is another opportunity to make our software better. So we absolutely -- we have a nice backlog of future requests that come in from our clients, as well as the customers that are coming in with future requests. So they're a huge, huge component of helping us build a better product for the future.

Terrific. Well, that concludes the questions. I'll hand it back now to you, Mike, to close the meeting.

Yes. Thank you, everyone, for attending. We're just a bit over, I apologize for that, but lots of questions there, very good questions. And I look forward to [indiscernible] Australia here in October. And I hope to be able to see you, when it is possible when I come out and just thanks for attending, and we appreciate your consideration.