Pro Medicus Limited (PME) Earnings Call Transcript & Summary

Good morning, everybody, and thanks for joining us on this webcast. Just going through our slides for those who are new to Pro Medicus. We are a health care IT company specializing in enterprise imaging mainly for the radiology or diagnostic imaging industry. We have 3 jurisdictions. We work in headquarters here in Melbourne, Berlin, which is our largest R&D center, and our largest market is in the U.S. Importantly, over half our staff are engineering based. We have 2 product sets. The first one is what we call Visage RIS, which was effectively practice management, billing, scheduling interface to payers that we sell largely here in Australia. And on the right side of the screen, the Visage 7 product, which is a clinical product radiologists use to call up images, manipulate them and make a diagnosis, and it's a product that we sell largely in North America. So Visage RIS, just to start off with that. This was redeveloped, as many of you would know, about 4, 5 years ago. It's a very modern platform designed to scale. We have 2 key clients here in Australia, the largest and second largest radiology providers in I-MED and Helios, who's previously known as Primary. The good news is the rollouts of these are progressing, and we'll talk a bit about that later. It has added over $1 million to our revenue going forward and once fully deployed will continue to add up to $4.4 million a year. In terms of the Visage product itself, we believe it is #1 in the 3 key areas. They are speed, functionality and scalability. And it's a combination of those 3 things that we think may make it a leading-edge platform. The thing that is driving changes in the market, the biggest factor nowadays, is the massive escalation of the size of datasets. They're not going up in a linear fashion, they're going up in an exponential fashion. And some examples here on the slide, things such as high-density CT, breast tomosynthesis, which most probably is the biggest driver. Mammograms used to be about 300 to 500 megabytes; breast tomosynthesis, particularly the high-density version or high-definition version, between 6 and 10 gigabytes a study. So what is happening in the market is legacy technology, which takes an image, compresses it, sends it down the network, uncompresses it on a workstation and uses the power of the workstation to view the images, that is starting to -- that technology is starting to crack. The images are just getting too big. And our differentiator is we don't do that. We don't actually compress, send and move the image. We use server-side rendering, which we've been doing since Visage was originally developed. We are one of the leaders in this technology, if not the leader, and we actually stream the pixels to the end user, hence the speed and the ability to read any exam regardless of size pretty much anywhere even on a limited bandwidth. In terms of the half in review, there were a few key points. One of our sales, Ohio State University, which we announced in November, was a $9 million 5-year deal. It is a state university that has a medical center attached to it. So it's a bit of a hybrid between state owned and academic. And then we announced a deal I'll talk a little bit more about later on with Nines, who is a AI startup based out of Palo Alto that's looking to combine AI with teleradiology services. That's a $6 million, 5-year deal. Also important in the half, we were able to complete Phase 1 of Partners, which occurred at the end of July we believe in record time, and I'll talk about that. We have released and have clients in what we call Visage in the Cloud, which is our cloud-based offering that uses Google Cloud. And then we also believe that in the half, we've seen that as the pipeline was strong before, increased even further, particularly after the recent RSNA conference in December 2019. In terms of the financial metrics, you would have seen our results released this morning. We think all of our key numbers headed in the right direction. Revenue was up and as was profit. And importantly, our margins still stayed above 50%, where it's usually in the first half. They dipped a bit because our biggest cost in the RSNA is fully expensed in the half. We're also very pleased that our cash reserves increased significantly to $38.8 million. And hence, the Board announced an increased dividend -- interim dividend of $0.06 a share fully franked. And of course, we remain debt free. So feel free -- feel that we have a good claim to state that our balance sheet is strong. In terms of the split, this is a telling slide. It's half to half. The semen color at the bottom is transaction revenue, and that grew very strongly. So roughly 30% from the previous 6 months. Part -- we did preempt the market that we believe it would grow because of partners coming online in the July time frame. Pleasingly, so did the blue sector, which you see, which is service contracts and OEMs grew through that period as well. So effectively, the important part for us is the blue and the pink areas on the graph are pretty much largely recurring revenue and so will set the base going forward for the second half of the year and, of course, into the future. The operational transaction model, I think most of you are familiar with. It is based on a committed number of minimums. And with the recent contracts we've won, the forward revenue, assuming those contracts that are going to renew within the next 5 years renew at the same dollar value, is now increased about AUD 195 million over the next 5 years. It is an annuity-style stream. And clearly, any new contracts that we get going forward will add to this figure and sit on top of those transaction revenues that we already have. The -- as I mentioned before, exam revenue is recurring and increased 30% half-on-half. It was due, as we forecast, to Partners. We will get some additional revenue coming from Duke, which goes live in another week or 2. Obviously, it will come late in the piece and contribute some. But then clearly, going forward into next year, both Duke, OSU and Partners will contribute a full 12 months' worth. We are also seeing some existing organic growth from clients as they add on new practices, new hospitals, et cetera, and all of that goes into the mix. Professional services, this was pretty much in line with what we expected. The new accounting standards came into effect in the last half. And effectively, they're roughly 10% of the value of the contract that we announced, and they're spread over the life of the contract. So we believe where -- we have good claims to state that we have a very scalable offering. There is no hardware involved, so all of the fees we charge or all the revenue comes directly to us. We don't pay out to third parties because we own the software in its entirety. We have a contained cost base, which, as a percentage of revenue, continued to go down even though we invested in new staff and we will continue to do so. So we have high operating leverage and margin continues to grow as our footprint increases, particularly in North America. Of the 2 sales, the first one was in Ohio State. As mentioned, it was a $9 million deal over 5 years. It's our standard transaction-based model. It is a large regional hospital. And as I said, it is one of the key medical training and teaching facilities in the state of Ohio. That implementation will now occur in the fourth quarter, so towards the end of this financial year. It is largely one significant campus, so the bulk of it will go live in one go. And we believe the main impact to revenue will start early in financial year '21. Nines is an unusual one because it's a very different sort of client. It's a 5-year, $6 million deal. It is transaction-based, but because they are more of a startup, the volumes increase, the minimums increase year-on-year. It is a pure Software as a Service offering based on -- in Google Cloud or Visage in the Cloud. Nines' team come from a mix of very highly respected people in Palo Alto that have experience in machine learning AI and some key radiologists in both Mount Sinai, which is a Tier 1 academic in New York, and Stanford. So their plan is to leverage some AI algorithms that they've produced and provide a more efficient teleradiology services using their radiology manpower. All of it will be based on Visage in the Cloud. So that opens up a whole new segment for us in the market, and they will go live 1st of April in 2020. We still think one of our strengths is not just the technology, but our ability to fast track the implementations. We have reaffirmed to the market this morning that we are ahead -- on or ahead of schedule. We were able to deliver the Partners project, we believe, in record time for Phase 1, which, many of you will remember, were the 2 key hospitals systems of Massachusetts General and Brigham and Women's, the large -- a large hunk of Boston. We believe that by being able to do it, it delivers huge savings for the clients, and it frees up our staff so that we are able to use the same teams on other implementations going forward. The other big thing that we've noticed is it reduces the barrier to change because implementation issues, time and costs were a huge barrier for people thinking about change, and the fact that we've been able to prove to the market that we can do this very efficiently and quickly has been a big plus for us. In terms of the proven ROI, we are still known as the most expensive in the market, but we think we justify that by our return on investment not only from a financial point of view but also from a clinical point of view. There was a lot of talk around the industry about radiologist burnout, and we think that with our application making it quicker, easier for them, and the fact that they can read them anywhere has really had a significant impact in helping reduce that burnout and make them feel they can get through more in the same amount of time. In terms of our growth strategy, it's multipronged, clearly expanding our footprint, and we added 2 new clients. And as we've mentioned, we'll talk a little bit more about our pipeline continues to grow. We are getting growth, transaction growth from all of our clients. No one has done less than 100% of what they have told us that we're going to do in the beginning, and some have grown by more than that, which has been good for us because that organic growth we're able to harness. We have new product offerings. And over the last 24 to -- 24 months, we've introduced the Archive. We have introduced a new workers' product, the enterprise imaging product we are starting to put out in various sites. And clearly, AI, which is emerging technology, we believe we're well suited for when that becomes mainstream, and I'll talk about that a little later. Certainly, expanding to other markets, the main one being Europe, and we're trying to leverage our R&D capability. So we are -- particularly with our academic clients, we are looking at partnerships that will help us commercialize some of their product and some joint development. And the first product that came out of that was the breast density algorithm that we've written with medical input from Yale. Going forward, the pipeline, as I said, we believe that it is stronger than it's ever been. RSNA kicked that along even further. Not only did we -- were we able to progress those existing in the pipeline, but a number of new opportunities from all areas of the radiological spectrum private practice. Some cloud based, newer start-ups following Nines and similar and also some of the larger institutions that are now telling us they'll be coming to market within the next 12 to 18 months. So all in all, the pipeline has grown not only in volume but also quality. And as I said, RSNA kicked it along in a significant way. New products, the Archive, just going through it. This is the ability to actually have the software that stores images. Many of you will remember, Mercy became one of our first clients, and it was one of the biggest Archives with over 30 million exams. They're now not only using it for radiology exams but for other ology. So they're storing their cardiology and other ology exams in the Archive. So the number of transactions we do are actually even greater than the number of exams they do in radiology. And interestingly, a fair percentage of the opportunities in the pipeline are for both Viewer and Archive. And clearly, as we offer a fully managed service in the cloud, it will involve our Archive rather than third parties'. So the Archive has been instrumental in a number of different areas in helping us in terms of opportunity. The enterprise imaging, this means different things to different companies. For us, enterprise imaging means one view across all diagnostic disciplines, plus one view across all the clinical reviews, which means a non-radiologist looking at radiology. Our 2 key markets, and we're looking at cardiology and ophthalmology, we have some proof-of-concepts in both working. And clearly, we're looking to extend that. So the bigger our footprint, the more the opportunity to extend that going forward. And then a new thing that we released at RSNA, which is a worklist. It has the -- now the third component of a stack of technology, which is worklist view or Archive, we base -- we've been doing worklists here in Australia through our Visage RIS for over 30 years. So we have a lot of domain expertise. It's an -- we felt it was important that we were able to offer a single-vendor solution for those in the market that required it. Now not everybody does. Some people already have worklist and Archive solutions in place and we sell the viewer, but there are a number of opportunities that we're coming across that don't have any and -- any of these modules and want to buy all from one vendor. So we now offer that as an option. It is also an integral part of Visage in the Cloud, and Nines will be using the Visage worklist as well as viewer. And we've designed it specifically so they can interface with modern AI algorithms because a number of algorithms try and prioritize worklists particularly through emergency room rating, and it was important that this was capable of accepting algorithms, either our own or third party. So that product has now been made officially available in the U.S. and, as I said, will also be part of our Software as a Service Visage in the Cloud strategy. Which brings me to my next slide. We do have a partnership with Google Cloud. We are certified for [ EdgeShield ]. We -- importantly, Visage 7 was always designed to be cloud deployable and highly optimized for cloud where most of the other systems are not. You get the same ultrafast performance as on-premise. You get the full functionality. The beauty is it's very rapid to deploy because you don't have to purchase and configure hardware. It's pretty much on demand. So it's suitable for all size implementations, small practices all the way through to some of the largest that we would deal with. And we believe it'll open up market opportunities for us in the -- not only in the mid-market, but those institutions who have already committed to put everything in the cloud, being able to offer this as a solution, we see as a plus. The Visage 7 AI, we did announce the AI Accelerator platform just before RSNA. We did showcase it. It is unique. It's a complete solution that supports both research and production environments, which is particularly important for some of our larger-scale academic clients. It's based on the same market-leading technology, and its whole reason for being is that it can allow our clients to fast-track AI within their organizations, which is something all of them want to do but have struggled with because of all the disparate bits of data and systems that they have, and the Accelerator platform allows them to unify it as one. It has multiple components. But I think clearly, the important thing is it works from research to bedside, as we say, and it will allow third-party algorithms as well as our own and as well as those our clients produce to be run natively on the Visage platform rather than having an additional third-party platform which radiologists don't want. They want it all integrated as part of their desktop. The people that are running it, Malte Westerhoff and Detlev Stalling, are the 2 co-developers of the Visage platform. Malte is our Global CTO. Detlev is our Head of Operations and Software Development. And MingDe Lin, who we hired out of Yale, who's a PhD medical scientist. So we have someone on the ground in the U.S. working with clients to work out which opportunities are suitable for us to be involved in. And that team will continue to expand as more and more opportunities come to light. And then to prove that it all works, we use the AI accelerator ourselves. We developed a breast density algorithm with medical input from the breast imaging team at Yale, which is one of the most highly regarded in the company -- in the country rather. The beauty of the product is it works natively on Visage hardware, so you don't have to send images to the cloud. In fact, it works in virtual real-time. We previewed it at the RSNA in -- as works in progress. And because of the response we've got, it is now in for regulatory approval for FDA 501(k). And we will use that as a model for future collaboration with other academic institutions. So being able to prove that we've been -- we've done something and it's worked far quicker than most people expected, I think, was a positive. So just going through and in summary, we do have a growing American footprint. We were very pleased that our transaction revenue went up 30% compared to the previous half. So it puts us in great shape and gives us a great leg up for year-on-year growth in transaction revenue. We still believe we have market-leading technologies. We didn't see anything at the RSNA that even remotely came close to what we believe we have. Having partners, Mayo, Yale and others, under our belt, we think we've proven quite clearly to the market our implementation and support capability. We also are seeing very strong return on investment from all of our clients that tell us about clinical return on investment, financial return on investment. The pipeline continues to grow, and we think with the Visage accelerator that we're strategically positioned to leverage AI as it becomes more mainstream in the market. So thank you.

[Operator Instructions] Your first phone question comes from Chris Cooper of Goldman Sachs.

I've got a few. I'll ask them one by one, if that's okay. I guess first one for Clayton. Just on the massive sales growth, I mean, transaction volumes were up 30%. Tax revenue look to be up 20%. Is this just an issue of, I guess, implementation revenue or service revenue? Or is there something else I'm missing there?

Thanks, Chris. It's a mixture of both.

It's a mixture of both.

There is some exam revenue growth. We obviously spoke about that with Partners Health Care (sic) [ Primary Health Care ] came on board. There is some organic growth from some of our existing customers. There is some growth from -- exam volume from Mercy archive that I'll hopefully announce in the March period. This is for a period of 6 months. And also, there was some support revenue on mainly the German government contracts that we -- [ launched, that we ] that put on for the German government. We did get additional support for that and additional OEM revenue. So it was in a few different areas. So there was an increase in exam revenue, there was, obviously, an increase in the support.

Got it. Okay. Second question, just on the contract wins. I mean I appreciate the last couple of years were particularly strong, particularly fiscal '19, but you are currently tracking at a slower run rate, I guess, in terms of both number of wins and also contract size. Just focusing on the transaction size as part of that equation. I mean given the success you've had to date in some of the really large institutions, is it reasonable to assume at this stage that more of the incremental growth coming forward is likely to be smaller on average? Or is that a trend you expect to recover? And obviously, this is a lumpy business that clearly we have very little visibility in. I guess any comments you could offer would be helpful.

Sure. No. The answer is it's not a trend, it's just how it falls. We had a higher stake. They've been in the pipeline for over 4 years. Some of the others in the pipeline are large. There is a mixture. And they just come in -- they just come at their own time. So there's -- they're quite the opposite. We don't want the market to think that we've done all the big ones and there are only small ones. Quite -- it's a complete mix in the pipeline, but there's a good smattering of all sizes, including a number of very large ones.

Okay. And just last one, pricing. You are pricing your product at a premium to the competition. You've shown a good trajectory in that regard for some time now. We are hearing more and more instances of competitors being more competitive on price. I just wanted to kind of get your thoughts on whether you're seeing that in the market and also what impact that is having on you as a company. Is that changing your conversations at all either with existing or potential customers in any way?

There's always been someone who wants to price cheaply, so there's nothing new. And for some of our competitors, particularly those with the more aging presence in technology, it's most probably the only lead that they have. So we're not really seeing any change in the dynamics. There might be different parties doing it. But realistically, no. There's always someone that will be under half or 1/4 of what we offer. What we are seeing is some of the ones that have offered it cheaply in the past have not been able to deliver. So that seems a bit of a warning bell to the market. But clearly, look, we've always expected that. We expect it from the majors. We've seen it before. We're seeing it now. We don't think it's really changed.

Your next question comes from Garry Sherriff of Royal Bank of Canada.

Sam and Clayton, just a few questions in relation to, firstly, contract renewals over the next 12 months. Are there any that you can call out? And if so, have negotiations started on those potential contracts?

We have 2. And yes, negotiations have started on both of them. And that -- we expected that. So we'll have 2 coming up within the next, I would say, 6 months, roughly. And we've been in -- they've been in contact with us, and we have started those negotiations, as you would imagine we would.

Yes. That makes sense. And if for some unusual reason that they were to go elsewhere, which I doubt, but let's say they did, what would the transition period be? How long would it take them to actually transition to somebody else?

Well, first, I would say there are a few things. First, they'll have to find someone else, and then it just depends on who that someone else is. Look, it could take anywhere from a year to 2 years, depending. But again, it's more who they might transition to. We've, thankfully, not had that issue before. But it's not an insignificant job because remember, you have to retrain all your radiologists, and you have to give them a platform that is as good if not better than ours. So otherwise, they're not going to be happy. So look, we haven't come across that, thankfully, but it would take -- depending on the size of organization, clearly it would take anywhere from 12 to 24 months or possibly even longer.

I also think that the fact that they're engaging with us is an encouraging sign. It doesn't guarantee it. But at this stage, they're already customers, and they're engaging with us. So we think that we're confident that they'll renew with us.

Yes. That's clear. And I should have probably clarified. So they haven't actually put an open tender out for other players to bid for the contract that you're aware of?

No.

No? Okay. And in terms of price negotiations, given that you guys historically have been able to push the price lever over time, I imagine that you are expecting or hoping for material price increases on these legacy contracts if they are renewed?

Yes. The thing is this. Look, if someone had started the last 5 years ago, clearly they should have a benefit if they're an early adopter. So we won't expect them to come to current market price. I think that wouldn't be right. But we are looking -- we are hoping that there is a negotiation in price as part of that.

A question on the Partners implementation. So you've talked through Phase I, which is completed in record time. Could you give me maybe just a rough split on that contract value? So when we look at the contract value for Partners Phase I, roughly what was -- is the percentage of that contract? Because I'm just trying to get a sense for Phase II, which will take, I think you said, 9 months to implement. I just want to get a rough split, I guess, on the transaction value between 1 and 2 just in the finished terms.

Yes. The amount that we announced with Partners is just purely Phase I. So that amount was just for the Brigham and Women -- well, just -- it's the Brigham and Women's and Massachusetts General, and they're roughly 70% combined of Partners' total volume. Now the reason Phase II will take longer is the hospitals aren't as concentrated and they are more -- a smaller -- numbers of smaller hospitals. And for various logistic reasons, nothing to do with us, that'll be done as sort of much smaller implementations. So it won't be that big bang that we had when we did Partners Phase I. There'll be much smaller teams. They'll just be done, I won't say, in background, but if they -- it's not like the size of team we would use for Phase I. So the timing at the moment, based on their timing and their schedule, finishes off in 9 months. So in fits and starts, which is what we expected. So it'll be done sort of almost in the background, finished by end of year.

Your next question comes from Sarah Mann of Moelis Australia.

Just wanted to ask quickly on the U.S. part of the business. So you flagged if some of the -- you benefited from organic growth from some of your sites, I guess, kind of expanding their operations. Are there any kind of notable M&A amongst your customers or talk of M&A that we should be aware of that will kind of help your organic growth going forward?

Yes. Well, I think the answer is, look, you hear -- we hear rumors there. I think the organic growth that we had was more hospitals taking over the radiology of smaller hospitals. Some of them are bigger clients, more regional hospitals, and that just relates to the mix. We did have one M&A event, which was significant but smaller when Mercy took over St. Anthony's in St. Louis. That happened last year. And look, there are rumors in markets all the time about M&A between hospital systems, and we live in hope from what we call a free kick where a client takes over someone 60% or 80% of their size. That hasn't happened yet. But clearly, if it did, it would be a significant benefit to us.

Great. And then just in terms of, I guess, your enterprise imaging products and expanding into other departments. You mentioned clearly you've got some proof-of-concepts that are happening that seem to be working well. Like, what do you think needs to happen from here before they can kind of get converted into contract wins that you can announce?

Well, I think what we need to do is get someone that uses all the departments. And as I said, I met a lot of people who talk about enterprise imaging. It's just a loose term for us. It's -- they use it for the diagnostic component as well as the viewing component. And most people talk about it purely from the viewing component, and that's far, far different price point. It's much, much, much cheaper. We want to do it for both. I think, look, it is a mindset thing because everybody -- in some of these hospitals, they have different IT departments for different ologies. But look, we are seeing that change. It's not going to change on a dime or just tomorrow. But we are -- we do see that changing, and we do think we have a compelling offering in as much as it's the same software, the same infrastructure, same management, same remote access, things that are significant for a big organization. But clearly, we need to have one group use it across all the ologies, use that as a showcase, and I think that will open it up further. But we are seeing more and more. And as I said, some of it's happening in background that they archive it into our archive, the other ologies. So we're really getting money from it, but that's not the viewing layer quite yet, but we think that will come.

Excellent. And then just the last one for me. Clearly, you signed the Nines contract, and that's purely cloud-based. And you, I think, mentioned in the past you've got other contracts in the tender pipeline that are looking for cloud-based delivery system, too. I mean just interested in how you think that's going to evolve over kind of the next 3 to 5 years in terms of, I guess, roughly, what kind of percent of contracts do you think eventually will kind of move to cloud in that period.

I think, look, over 5 years, I think that, this is just a guess, but 50% of our work would be cloud-based. There are a number of hospitals now -- health is a big market for cloud providers and a number of big things have happened, particularly with Mayo putting -- will be putting everything into the cloud. So we are seeing a good percentage of the opportunities in the pipeline saying if we go, we'll go with cloud. Now clearly, 2 things have to happen. They have to go with us, and then they have to push the button on cloud. But that's been their preference up front. So I think we'll see 50% over 5 years, maybe even more.

Your next question comes from Julian Mulcahy of Evans & Partners.

Sam and Clayton, just some -- a bit more color around the revenue sort of surprised us. I sort of the first half was a little bit stronger. So the new contributions that weren't in the previous half, I'm writing this thing so I've got Mercy Archive, [ Cal Law ], Partners Phase I, and then there seems to be quite a reasonable contribution from OEM sales. Is that right?

Yes. There's contribution from OEM sales but also the implementations for Primary Health Care and I-MED. They did kick up a lot in this first half, which we expected. So we...

No. I'm just talking about the exam revenue 30% increase.

Oh, Primary Health Care is exam revenue, and OEM is not part of that exam revenue.

OEMs is in the blue section.

Right. Okay. And so in the second half, again, is the Duke, Ohio, Nines and...

Around the end of the year, 6-month period. So it'll be a small blush of that revenue.

Yes. But Duke is going live, we expect -- Duke is going live next week. And it's a bit like Yale. It's largely focused around the main teaching hospital campus. So 80% or 90% of Duke will go live in one go. So come end of February, we'll have March, April, May, June, a fair percentage of revenue. So it'll be 4 months of nearly about 80-plus percent revenues in Duke, but the rest will be completed fairly quickly. So when we're going to first half 2021, we should have pretty much all of Duke and most of Ohio done, and then they will then contribute a full 6 months. And this coming half, we'll also get a full 6 months of Partners because we completed it in -- towards the end of July. So it was about 5 months' worth. And then anything else that we implement. There are some other things where people have acquired or growing or starting new hospitals, they'll come into this half depending on when they go live and then contribute a full 6 months next half.

Right. And would you expect many OEM sales in the second half?

We always have OEM sales. So we've had that since acquisition. They kicked up a little bit in this half but not materially different from other periods. So whilst it was in the blue section, so not in the exam revenue, majority of that was through increased support contracts for I-MED and the German government, so...

Right. So the first half numbers for Primary and I-MED, are they now the full run rate? Or is there still a bit more in the second half?

They're not full run rate. They -- we're still implementing. So the 5-year period starts at the end of those rollouts or implementation periods. So we still have some implementations in second half.

Your next question comes from Peter Meichelboeck of Select Equities.

Just in relation to the -- there's obviously a series of growth opportunities that you and I are continually talking about in terms of the pipeline and et cetera, et cetera. I'm just thinking, in terms of the U.S. What sort of resourcing do you have there at the moment to actually, I suppose, make full -- take full advantage of that opportunity? And I'm just trying to get a sense of your staffing and resources for that. And what's -- is there an easy ability to expand that at a reasonable cost if you have to do that?

Yes. Well, good news is we increased our sales and -- our sales team by 50%. So we went from 2 to 3. The new guy started on Monday. Look, it's hard to find really good people. It's a different mindset to those that have worked in big companies. We -- clearly, if we felt we were missing opportunities, we would put on more. We have put on some more technical people, some on the East Coast because it means that we have people that sort of 8 in the morning their time would be 5 on the West -- 5 in the morning West Coast time. So we've had a new support person join us. We've had some new people in Berlin. So we have been actively recruiting throughout the half, and you'll see that reflected in our cost base. But as we've told the market, we're doing it in 1s and 2s rather than 10s and 20s. And look, at this point, clearly we don't feel that we need to double our staff or increase it by 30%. Otherwise, we would. So we're comfortable that we're well positioned. Having put out implementations, getting them done is really, really important because, as I said this morning, we've got Duke and OSU ahead of us, but then that we still have plenty of runway if we get new clients to be able to put them in with the teams that we've got. So yes, look, we've been selectively hiring and ferreting out the good people, doing a lot more on the research side. That may take some more people but more in 1s and 2s incremental than a whole 20%, 30% increase in staff at this point.

Right. Okay. And just on the -- I think in a brief -- opening briefing, you talked about how you view the cash as sort of the 3 buckets, the investor and the business first and then the dividends and then the M&A. I suppose I have 2 questions on that. I mean I don't think too many people would disagree with that approach. Just on the M&A, has the environment at all changed for -- in terms of opportunities for you guys at all? Do you see any change in that? And the second part of that question is also, I mean, should we be thinking -- what should we be thinking in terms of the buyback? Obviously, a very, very small amount that's being utilized. Where does that sort of fit into that picture, I guess?

Well, look, we're always looking for opportunities. And as you can imagine, there are a number that come around. One of our competitors, which was owned by private equity, recently got sold to another private equity. Clearly, we were -- that was not our main focus. We're looking at something where we can have adjacent technology rather than taking our market share. Look, they're hard to come by. In the AI space, there are a lot of companies that -- will they ever see the light of day, where they have to make revenue. These things are hard to judge. But look, we're always looking. I will say it has changed a bit maybe in the last 8 to 12 months. Some of those companies who have thought they'd get more traction early on seemingly have not been able to. So maybe they'll plan a little tougher in terms of funding that may suit us. So look, we're looking, but there's nothing just on the radar at the moment, but that doesn't mean there won't be tomorrow or the week after.

Okay. And in terms of the buyback, that just sits there? Or...

Yes, I think so. I think at the time, we felt it was -- we felt that the shares were undervalued. But look, it -- we make our -- we make a decision. People make their own. And so at the moment, yes, I don't think -- I think it's there. But...

And just the last one for me. Sam, I think it was -- well, there's 2 parts for this as well just in terms of the share register. I just wanted to get a sense of how does the share register compare now to, say, where it was for the 12 or 18 months ago, particularly around sort of international holding. And just on the share, just the second part I wanted to ask was, I think it was 2 years ago that you guys were encouraged. Yourself and Anthony were encouraged, I think, to sell 3 million shares each over 12 months. And I think from memory, you have done 2 million each. I just wanted to also find out if the Board was still providing that encouragement for another 1 million shares each or something to help with the liquidity?

Look, on the register, we believe we've got more overseas institutions only because they tell us. We don't know that empirically, but we're pretty sure there's been some -- a greater uptake than maybe 1 year or 2 years ago. The Board talked to us about 2 years ago, 9 months ago, and we said up to 3 million shares. You're right, we've done 2 million each, which is just a very small percentage of our shareholding. But that doesn't necessarily mean it will be 3 million. It just means up to. So I wouldn't read too much into it.

Your next question comes from Josh Kannourakis of UBS.

Sam and Clayton, can you hear me okay?