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Mach7 Technologies share price falls 3% lower on weak quarterly update

The Mach7 Technologies Ltd (ASX: M7T) share price is currently trading 3% lower on the S&P/ASX 200 (INDEXASX: XJO) index after its Q4 2019 quarterly update to shareholders this morning.

What did Mach7 announce in its quarterly update?

In March this year, Mach7 announced a free cash flow break-even target for the ensuing 12-month period (ending February 2020).

In the latest update, Mach7 said the company’s cash position has grown since that target was announced, and the company is on track to be free cash flow break-even for the above stated 12-month period.

However, management said that throughout the 12-month target period, free cash flow will continue to fluctuate from quarter to quarter, largely due to the timing of support contract renewals and payment terms for new sales.

In line with the company’s expectations for Q4 FY19, Mach7 reported operating cash-outflows of $0.4 million and $2.9 million for the financial year.

For the financial year, Mach7 reported $10.3 million of cash receipts from customers in a record result for the company, which was largely driven by growth in sales and recurring revenue.

Mach7 noted that cash receipts of this level would cover the company’s current run-rate for annual expenses.

The company also reported growth in sales orders with Children’s of Alabama being added to its customer base, with Advocate Aurora Health having been added since the end of the quarter.

As of today, the company’s contracted annual recurring revenue continues to grow and now stands at $8.5 million.

Mach7 provided an update on its current software deployments, noting that implementation is progressing well at Hospital Authority of Hong Kong (HAHK).

Mach7 is now recognising revenue and receiving cash from its HAHK contract while both revenue and cash will be recognised over the five-year term of the contract, but will fluctuate from quarter to quarter.

In terms of product innovation for the quarter, Mach7 released the newest version of the Mach7 Platform, version 11.8.4.

According to management, much of the innovation in this release was customer-led, driven by the company’s key partnerships with MaineHealth and Sentara Healthcare.

Despite dipping 3% this morning, the Mach7 share price remains nearly 4 times higher than its $0.21 per share valuation at the start of the year, as one of the top performers on the ASX.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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