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Results: Mach7 share price wobbles after loss balloons by 40%

The Mach7 Technologies Ltd (ASX: M7T) share price is fluctuating today after the company released its results for the 2019 financial year (FY19) to the ASX this morning. M7T shares closed at 82 cents on Friday but opened this morning at 6% lower at 78 cents. The share price has since recovered somewhat to 84 cents. Mach7 Technologies specialises in data management solutions for healthcare providers.

What did Mach7 tell us?

Here is a summary of the key numbers for FY19.

  • Revenue came in at $9.347 million – an increase of 8% from FY18’s $8.644 million
  • Earnings (EBITDA) loss of $3.875 million – an increase of 47% from FY18’s $2.637 million
  • Net loss after tax of $7.059 million – an increase of 43% from FY18’s $4.953 million
  • Earnings per share of negative 5.1 cents – up from FY18’s negative 3.9 cents
  • Cash on hand of $2.3 million – slightly down on the $2.5 million in FY18
  • Total contract revenue value of $21 million – up 62% on FY18’s $13 million
  • Contracted annual recurring revenue of $7.9 million – up 42% on FY18’s $5.6 million
  • Cash outflow of $2.9 million – in line with expectations
  • Operating expenses at $13.113 million – an increase of 13% from FY18’s $11.578 million (according to the company, this includes a $1.6 million one-off cost of “licenses to third-party software which Mach7 has resold”).

Mach7 attributes the rise in revenue to the growth in the Asia-Pacific region – specifically due to the Hospital Authority of Hong Kong (HAHK) contract, which was finalised in October 2018. The company estimates this contract (Mach7’s largest to date) is worth “at least $15 million over five years”. 

Despite this, the majority of the HAHK revenue recognised was via Mach7’s reseller agreement with its partner, Client Outlook. Due to this arrangement, Mach7 stated that “there was a larger than normal distributor fee ($1.6 million) reported for FY2019.  This largely explains why the EBITDA loss of $3.9 million was higher than last year ($2.6 million).”

The company expects to recognise revenue for its own platform per the HAHK contract in FY20, which will “generate much higher profit margins”.

Meanwhile, revenue from the US region was down from $7.6 million in FY18 to $5.5 million in FY19 – which the company attributed to smaller contracts with smaller institutions compared to the prior year.

Outlook for 2020

Mach7 has not provided any quantitative guidance for FY20, but the company has a stated goal to break-even in free cash flow for the twelve months ending February 2020 (which the company reports to be on track with).

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Motley Fool contributor Sebastian Bowen 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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