The share price of Mach7 Technologies Ltd (ASX: M7T), a medical imaging systems provider, is down 4.2% today after the ASX healthcare company reported its FY24 results.
Mach7 Technologies shares have not performed well over the past year, falling more than 22%.
Can this ASX small-cap company turn the tide here and have a chance to become the next Pro Medicus Limited (ASX: PME)?
Let's find out what the company reported for FY24.
Transition to subscription-based business continues
Key highlights from Mach7's FY24 results include:
- Sales orders increased by 52% year-on-year to $61.3 million in terms of total contract value.
- Revenue fell 3% to $21.1 million due to ongoing transition to recurring revenue.
- Annual recurring revenue (ARR) was up 29% to $21.1 million and represented 72% of the total revenue, up from 54% in FY23.
- Operating expenses increased by 13%, in line with management guidance.
- Adjusted earnings before interests, taxes, depreciation, and amortisation (EBITDA) fell from $2.5 million in FY23 to a loss of $2 million in FY24.
- Net profit after tax (NPAT) deteriorated to a loss of $8 million, compared to a $1 million loss in FY23.
- Operating cashflow turned positive to $3.5 million, in line with management guidance.
What else happened in FY24?
Mach7 continues to move towards subscription-based models, particularly in North America.
Subscription and maintenance contracts now dominate Mach7's sales orders, comprising 83% of the total, and representing a substantial increase from previous years. This transition is underscored by a decline in capital software sales, which have decreased significantly in favour of subscription models.
Renewals accounted for $37.5 million or 61% of total sales, a record high for the company, while new customers, including significant projects like the Veterans Health Administration, contributed $13.2 million or 22%.
A slight decrease in overall revenue in FY24 was primarily due to the short-term impact of the subscription transition. Recurring revenue now represents 72% of total revenue, underpinned by steady growth in ARR. This trend highlights Mach7's resilience and the stability provided by its subscription-based business model.
However, weak revenue led to weaker profits for the past financial year, reflecting the anticipated short-term financial impacts of their strategic transition.
On a positive note, the company achieved a positive operating cash flow of $3.5 million, demonstrating robust cash management and financial discipline amidst its growth initiatives.
FY25 guidance
Looking ahead, the company has a strong sales pipeline across different regions, care settings and product combinations.
The company guided for 15% to 25% revenue growth in FY25. Management expects the company's operating expenses to grow slower than revenue growth, leading to margin expansion.
Mach7 CEO Mike Lampron said:
Looking ahead to FY25, our priorities will centre around the addition of net new logos as our pipeline continues to grow and generate opportunities across multiple geographies and product combinations.
We will also undertake targeted investment in our people, processes and tools to further differentiate Mach7 from its competitors. This investment will focus on product innovation and reflect a customer-centric mindset.
Share price snapshot
Mach7 shares are down 4.54% to 56.5 cents at the time of writing.
