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Why Mach7 Technologies is in a trading halt

The Mach7 Technologies Ltd (ASX: M7T) share price won’t be going anywhere on Friday after the enterprise imaging solutions business requested a trading halt. 

Why are Mach7 Technologies shares in a trading halt? 

This morning Mach7 requested a trading halt pending a material announcement in relation to a proposed capital raising. Shares will be in a trading halt until the earlier of commencement of normal trading on December 3, or when the announcement concerning the proposed capital raising is released to the market. 

According to an article in the Australian Financial Review, Mach7 is attempting to raise $20 million at $0.62 a share.

The capital raising comes after a record quarterly performance by Mach7. For the first quarter of FY20, the company recorded its strongest quarterly cash flow result in its history. It received $4.7 million in cash from customers and recorded $1.7 million in positive operating cash flow. Free cash flow came in at $1.6 million. As a result, cash and cash equivalents jumped from $2.3 million to $4.3 million by quarter end.  

The $4.7 million in cash receipts for the quarter consisted of $1.6 million of support fees (recurring cash) and $3.1 million of software and services receipts. Notably, the company received a significant payment from Advocate Aurora Health after it acquired the Mach7 Platform in July.  

Cash payments for the September quarter were $3.1 million, which was similar to the prior quarter’s $3.0 million. Moreover, cash outflows for the December 2019 quarter are projected to be $3.6 million.

At quarter end Mach7 had $10.7 million in service and support fees under contract, including $8.5 million in contracted annual recurring revenue. Management also confirmed in its commentary that it was on track to meet its 12-month free cash flow break even target ending in February 2020. 

How have Mach7 shares performed in 2019?

A number of material contract wins has resulted in Mach7 shares rising 231% in 2019. In FY20, the company has already secured $7.5 million of sales orders with a total contract value over 5 years. 

Other small cap technology companies that have also rewarded shareholders with large gains in 2019 include Alcidion Group Ltd (ASX: ALC), Audinate Group Ltd (ASX: AD8) and Bigtincan Holdings Ltd (ASX: BTH).

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Motley Fool contributor Tim Katavic has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Alcidion Group Ltd and MACH7 FPO. The Motley Fool Australia owns shares of and has recommended AUDINATEGL FPO and BIGTINCAN FPO. The Motley Fool Australia has recommended Alcidion Group Ltd. 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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