Pro Medicus Limited

Thank you and good morning, everybody, and thanks for joining us. The -- Pro Medicus, we have three jurisdictions we work in; our corporate headquarters in Melbourne, Australia; our largest office, Berlin, where we do the R&D for the Visage 7 product; and our quarters in San Diego in the U.S., with most of our staff working from home at the moment.

Globally, we are 100% working from home. And the important thing for us is we have over 40 software engineers, very much an R&D focused technology company.

In terms of our product sets, for those not familiar, we have two products: The Visage RIS, which was our first product, which deals with the practice management aspects of the radiology practice, which is largely sold here and two of the largest radiology providers use it in I-MED and Healius; and Visage 7, which is a clinical desktop product that radiologists use to call up, enhance, manipulate images and make a diagnosis, and it's the one that we sell globally and is leading our sales efforts in the U.S. In terms of the half year in review, we had a very full half year.

I think it started in August while we were still in the depths of COVID, where we did a 100% go-live remote with Ohio State University. So no Visage personnel on-site throughout, which was very important so we could prove that that technology could work.

In September, we announced a cornerstone agreement with NYU Langone, one of the top health systems in the U.S., a top teaching hospital system based out of New York. Followed in October by a deal LMU Klinikum based in Munich, again, one of the largest teaching hospitals in Europe.

We were pleased to announce November, the renewal of the Zwanger Pesiri contract, and then rounding out the year in terms of new contracts, a deal with MedStar Health for AUD18 million for five years, which I'll talk about a little later. And at the half, we still had a strong and growing pipeline.

So it was a very busy half for us despite working from home and despite some of the restrictions of COVID. In terms of the financials, we were pleased that they all headed in the right direction.

Clearly, things like underlying profit went up nearly 26%. EBIT margins, which I'll talk about a little later, grew because of decrease in expenses as well as increase in some revenue.

And our cash reserves grew by AUD7.5 million. So clearly, we're able to continue invoicing and getting paid for the services where we provide.

And because of that and the increase in cash reserves, we've increased our interim dividend to $0.07 a share fully franked, up about 16.6%. So given circumstances with COVID and the world in general, we were very pleased with the results.

In terms of the revenue split, those who are familiar with our presentations have seen this before, the salmon color is recurring transaction revenue. As you can see in the second half of 2020, it dropped because the -- from March onwards, there was a complete shift away from elected procedures.

People were repurposing their health care institutions to the anticipated flood of COVID patients, and we saw exam numbers go down. But pleasingly, they started to recover towards the end of -- in 2020 -- towards 2021, the second half.

So the first half they were starting to recover from March, April lows. But towards the October, November, December period, we saw them become near normal end as of now back to where they were pre-COVID levels.

So clearly, that salmon color is growing, and we'll talk about it in a minute, we'll grow substantially from here as we put in some of our new sites. And so we were pleased that we could compensate for the dip in the first three months of the half and actually outstrip in terms of revenue for the total half.

In terms of the operational model, again, most people are familiar with this, it is a SaaS model. It is highly scalable, and it is based on transaction minimums.

And we've had the biggest jump in forward revenue over five years since our last announcement. It's now in excess of AUD305 million over the next five years.

So again, a reflection of the strong sales pipeline that we've had in the past six months. And again, we'll talk a little bit more about that later.

We believe it is a highly scalable model, no CapEx, and we do all of our training and installation charges, professional services, whether we do them on-site or remotely. So we have a very highly contained cost base with high operating leverage in the business, and our margins continue to grow as our footprint increases.

In this particular half, we saw margins increase on around 51% at the EBIT level to 59%. A lot of -- some of that had to do with increased revenue.

A fair bit had to do with a significantly decreased cost base simply because there was no travel. One of our biggest expenses in the year, the RS&A, the big conference in November was virtual.

So while there was cost, it was significantly less than being at the conference. But we do believe that with some of the remote capability, we've developed and enhanced over the last six to nine months, that even when things do get back to normal, and you are allowed to travel freely and there will be on-site conferences, that we still will be able to benefit from some of the technology that we've put in place.

So we are seeing a possibility of margins not staying at 59%, but eventually settling higher than they were before COVID hit. In terms of the second half, we did at our AGM indicate that we were confident the second half will be stronger than the first.

I think a few things to that. Firstly, client volumes are back to normal towards the end of the first half and now into the second half.

We see continued growth, and that's from a few areas; one, our existing clients. So now that they're back fully on deck, we are seeing organic growth come back, and some catch-up from examinations deferred during the COVID period.

We did install the large system at Munich University, LMU Klinikum in December, so we will have a full six months of revenue from that contract. And I think importantly, we will be implementing three very large contracts within the next few months that will contribute to the second half in Northwestern NYU and MedStar.

And then on top of that, we've recently announced two additional contracts, Intermountain and one we announced yesterday in California with the five academic health systems, and they will start to contribute in the second half as well. And, of course, possibility any additional sales.

So we have a lot of contracted revenue still ahead of us, and a lot of that will start to come on stream in this coming second half. In terms of the RIS, we're still progressing well with that and our particular rollouts.

We have virtually finished the primary health care of our Healius rollout, and we are continuing additional rollouts for I-MED as they acquire additional sites. So the combined contract revenue is now in excess of AUD 4.4 million, which is the figure we had before.

It has grown from that point. And we're pleased that we are gaining new opportunities, and we are still the undisputed market leader.

In terms of Visage 7, we think we can lay claim to – it continues to be number one, particularly if you look at our recent sales history. And it's – because it's number one in the three key aspects, it's the fastest product.

It's the only one that we know of that can do 2D, 3D and 4D within the one product and desktop. And it's incredibly scalable.

And I think that's very important, particularly for some of the large sales we've made recently scalability with their previous systems was a huge issue, and we're able to overcome that. What's driving the market?

Again, data explosion goes on in an unrelenting fashion. New forms of imaging technologies are just creating bigger and bigger data sets, and that helps us simply because legacy systems are still stuck in the compressor send paradigm.

They need to take the images, compress them without losing any fidelity, move them across the network to a workstation, then uncompress them and then the radiologists can manipulate them locally. And whilst, historically, that had worked to a degree, that the size of the data sets are choking these sorts of systems and creating huge issues.

Whereas with our technology, we don't move the image. We do take the images and in near real time, do all of the rendering 2D to 3D to 4D, and then we stream the pixels to the radiologist.

So we are able to visualize even the largest data sets in under two seconds remotely. And we don't build at any – currently – capability.

In terms of the recent sales, I think this tells picture of what's happened over the last seven to eight months. We have won six out of six of the major contracts that have been awarded, five in North America and one in Europe.

It started with Northwestern in June 2020, just before the first half. Continued with NYU Langone.

Both of these are Tier 1 academic institutions, large teaching hospitals affiliated with top academic research centers. And then in October, we won our second material contract in Germany at LMU.

It is the key hospital in Munich and one of the largest university hospitals in Europe. In December, we won MedStar.

And then quickly after that, Intermountain Healthcare, which is our largest deal to date. And then as recently as yesterday, we were spleased to announce that we won a group of 5 academic hospitals, which I'll talk about in a minute in the State of California, very high profile, well-regarded hospitals that we won.

In terms of the clients, Northwestern, it's a minimum of $22 million over 5 years. It is a transaction-based model.

And they are voted in the top 10 hospitals in North America. So it adds another Tier 1 academic to our growing base of clients such as the Mayo Partners healthcare or Mass Gen Brigham and Duke and Yale.

So we are expanding that base within the Tier 1 academic space. The next one was NYU Langone in the half.

Again, similar to Northwestern large academic, university based, top-tier medical school; and again, one of the top 20 hospitals in the U.S. that have standardized on Visage.

The -- as I mentioned, the third deal, LMU clinic, a European-based, again important because we were able to break the mold of -- which is traditional European hospitals where they use a single vendor for all the equipment and the informatics. And this was the second time we've been able to break that nexus, which we think will help us with further sales in the U.S..

We were pleased to announce renewal of Zwanger-Pesiri, a large private group in Long Island that we signed just over 5 years ago and they're renewed for another 5 years. The deal starts being bigger than the original one.

And then the recent sales in MedStar, I think interesting for a number of reasons. It is the first time we have sold all 3 Visage modules at the get-go, our Viewer, our Open Archive and the Workflow, it will be fully deployed in public cloud, so 100% cloud-based.

And MedStar, whilst they do have an academic site in Georgetown University Hospital, they are largely a regional integrated delivery network or regional health player. So it extends our reach outside academic space, and joins clients like Mercy and Sutter that we previously had and others outside that Tier 1 academic space.

Intermountain Healthcare, which we signed in January. Again, for -- it's our biggest deal.

It is cloud based. It is for both Visage 7 Viewer and Open Archive.

Again, it extends our position in these large regional health systems. And because of its size and their growth profile, we see that there's upside in the transaction-based model.

And finally, the deal we announced yesterday, it is for the hospital -- academic hospital systems of UCLA, UCSF, UC San Diego, UC Davis and UC Irvine. We believe it's the first time all five campuses have been on one system which, in the past, people thought would never happen.

A bit like was what originally happened with Mass Gen Brigham, they were on two completely separate systems and then made a unanimous decision to go to one, as did these five academic campuses. It will be cloud deployed.

And we do have an option here where there are a number of affiliates to these five campuses that can adopt the Visage platform. And if they do, any transactions that they generate will be on top of the AUD 31 million that we've announced this deal size as.

Just moving through, we continue our implementations remotely. OSU, as I mentioned, was our first 100% remote implementation.

We are transitioning to a mixture of on-site and remote for the upcoming implementations, clearly dictated by our ability to be on-site with COVID, but we see that's starting to become a possibility with vaccinations in the U.S. But even as things get back to normal, we will retain this mixture of on-site and remote as we've found it optimal.

And we think that our ability to fast track implementation was a major selling point in all of the previous six deals that I have just mentioned. Certainly, for them, it's important the size and prestige of the organizations, that they can't stop working while you're putting these systems in.

And we think we have a unique methodology here, which is equally as important as the technology itself. Moving forward quickly, we did talk about ROI, both clinical and financial.

We think we have -- we are able to show that we have the best ROI of any system, in both clinical and financial metrics. And here is a perfect example.

It's a bit hard to explain, but it's one radiologist putting out that if you're looking for a stone in someone's urethra, which is the tube bleeding between the bladder and the kidney, you need to do certain reformats, certain 3D views and a Visage user was basically showing that they're able to do that pretty much instantly instead of spending anywhere between 30 seconds and a few minutes to do it. It's pretty much single click.

So a perfect example of clinical ROI. Just to finish off in the last few minutes.

In terms of our growth strategy, clearly expand our footprint, new clients. And I think we've done that more so than in the last six months than ever before.

I think, for the industry, it's unprecedented to finalize six contracts within a period of seven to eight months. So we are growing that footprint.

The transaction growth from existing clients, as I said, it had a bit of a dip in COVID, but it's now come back and is growing, which is positive. We will talk a little bit more about new products in the extent to new geographical markets.

Clearly, Europe is the next focus. And the key country in that is Germany, where we won that LMU clinical deal.

And we are extending our R&D capability and our collaborative capability with some of our academic clients. Some of you may have noticed when we announced NYU, we also announced we will be setting up an extension of our R&D capability in New York as part of that deal.

So we are working on multiple fronts in terms of our growth strategy. In terms of the pipeline, we have converted six very large opportunities in the last seven to eight months from pipeline to contract.

But we are pleased to say that they have been replenished with new opportunities. There are opportunities both for cloud and non-cloud.

It's across multiple types of health systems, some academics, some not. Different sizes, different tags.

But importantly, some of them for more than one product like MedStar and Intermountain. So we are seeing a very good mix of opportunities and our strategy of multiple products is clearly bearing fruit.

I'll go quickly through these slides, just -- these are some of the new products we're looking to bring out the enterprise imaging, moving into other departments. The Archive, which as you've seen, our first big sale was to Mercy Health.

And we've now sold the Archive to MedStar and Intermountain. And the uplift in terms of revenue of the deals has been material, and we believe more and more of our opportunities going forward will include Archive, as well as some opportunities to sell it to existing clients when they roll off their current Archive contracts.

And the workflow manager, which will be first implemented at MedStar. Again, it rounds out our offering and allows us to provide both single vendor and best-in-class solutions, purely to fit in with what works best for the client.

So we think that flexibility is incredibly important. And finally, on offering cloud, the last three deals have been significant and have been public cloud or cloud based.

We see this as a growing trend. We see this as a huge strategic advantage, because we don't believe others can easily transition their technology to the cloud, whereas, our Visage products have been developed to be 100% cloud native, and it's exactly the same product, whether it's on-premise or in cloud.

So it's been instrumental in opening up some of the sales opportunities. And evidence of that is three out of the last six opportunities are cloud-based.

Finally, AI and radiology, I won't go into too much detail here, other than to say we believe this will become mainstream in the very near future. We have developed the Visage AI accelerated program, largely for our academic clients to use Visage in their research environments, because it helps bring together or tie together all the separate dots and separate islands of data that they have in their research laboratories.

And it really has been very, very popular with these Tier 1 academics, of which three of our last six sales have been in that space. And finally, I'll just -- one forward on the last slide.

Many of you may remember, we did develop a breast density algorithm with Yale. Pleased to say that we did get FDAC and TGA approval.

So FDA approval came in February 2021 this year, and we are looking to commercialize that in the very near future. And we think it opens up and shows a model for other institutions as how we can fast track this, not only for ourselves but for our academic partners.

So in summary, we had a very good growth in our footprint, most probably the biggest uplift in terms of sales in the last six to seven months we've ever experienced. We will see transaction revenues go up in the second half.

And then a major step-up coming into FY 2022, as these opportunities that we're implementing come on stream. We are growing the product portfolio.

And as I said, I think two of the opportunities did have more than one product, and that validates that strategy. We do have an unparalleled value proposition.

Cloud is gaining momentum. We are very happy with the pipeline and how it continues to grow, and we are seeing a very strong network effect from our – as a result of our user base and recent sales.

And we think we're well positioned to leverage AI going forward. So thank you very much, and we can open it up to questions.

Hi, morning. Thanks very much.

So look, firstly, really good to see transaction volumes back to pre-COVID levels. Can I just ask, specifically just on the facilities, where you think you're seeing some backlog play out?

So I sense from your tone that there's some, but perhaps not a hugely material at this stage. Firstly, I guess, is that right?

But if so, do you expect that level of backlog revenues to increase if conditions continue to normalize? Or do you think that what we're seeing right now is the majority of what we're going to get?

Look, it's hard to tell, because some people delayed things and then they were going to go and have tests done. And then with COVID increasing again in certain jurisdictions, it's sort of started and stopped.

But I think in most jurisdictions, we are more than 100% of what the similar numbers were in December 2019. So clearly, that would be a mixture of backlog and maybe some organic growth starting to come back.

The only jurisdiction that's yet to fully recover as we see it, it's much, much better than it was, but it's not quite fully recovered, is West Coast, US, in particular, California. So we are anticipating that numbers will grow from here without like-for-like as a mixture of backlog and organic.

Okay. Thank you.

Just on the pipeline, just secondly, obviously you’ve had a very strong run of contract wins. But we noticed you had dropped that wording you've made in recent statements around the pipeline being the largest or the best it's ever been.

I just wanted to confirm that, that statement doesn't currently apply. I mean, we noticed you have dropped that previously before – before legacy is sort of reconfirming it.

So I just wanted to double check that was intentional. And I guess, just to push you again for any additional commentary you could provide on the pipeline both on so near-term and mid-term opportunities that would be helpful.

Thank you.

Yes. No.

First of all, the changing the terminology wasn't intentional. And it's not to suggest that the pipeline has decreased.

It hasn't quite the opposite. Now that – clearly, that is – as of now, with the University of California campuses coming from pipeline, which has been – coming from pipeline to contract.

So we do have a lot of – we've had an increasing number. And we've said this over that maybe the last six to 10 months, maybe a year, increasing number of opportunities at the front end of the pipeline.

And we see that for a few reasons. That one is because of the large data sets forcing people, I think -- COVID showed a lot of people that if they weren't able to read remotely, that was a huge problem, as I had to pivot to at home reading and that's our strong suit.

And I think we're seeing more and more of this network effect because with each high-profile sale, it resonates throughout the industry. So we are seeing a very good inbound opportunity across a range of things, not just academics, not just big, small cloud, non-cloud.

So we're very happy with that. And then, as is always the case, when we make commentary that there are opportunities that have been in the pipeline for a while, these things, particularly the big ones, often take years.

And they've all progressed. We haven't lost any.

So no, we're very happy with the pipeline and we think it's about as strong as we've ever had it, if not more so.

Okay. Thanks.

I have got a couple more, so I will get back in the queue.

Hi, Sam and Clayton. Just a couple of questions for me.

Firstly, just following on for your comment on the cloud, have you seen any other of the major players or any other of the key specialty players in the market make large-scale public cloud deployments yet? Just interested to hear what you've heard in terms of the industry feedback on that front?

Not that we've heard of, no. We think these will be 3 of the biggest, and Intermountain will be the biggest yet.

So we don't know of anyone that's been able to do a full cloud deployment like we are going to do.

Got it. And within the RFP for that, was cloud a requirement or a sort of added extra in terms of the you know the staying on was intend?

In two of the opportunities cloud was their preference in the RFP. And the third one, that question was left open, but in technical discussions it was deemed to be the way they wanted to go.

And they were comfortable that we would be able to do it, whereas, I think they had reservations about others. So two pretty clear upfront, cloud is what they want.

One looked at both on premise, which we call private cloud or public infrastructure and then in the end chose public infrastructure.

Got it. And then just rolling that into, I guess, the mid-market or the sort of more regional hospitals, which has been, I guess, a big focus for investors over the last while.

When we look at Intermountain or deal of that that size I mean, have you seen – do you think you need to implement that contract? Or are you already seeing an uptick in activity levels from some of those like-minded or similar sort of hospital networks in America outside of the top tier?

No. I think, look, we already have clients in the cloud, 100% in the cloud.

I think the delta here is the size of the opportunity going into cloud. So no, I think people -- first of all, they can try it.

We have our test system in the cloud, right? You just give them an account, send them a link and they can try it.

So no, I don't think -- I think people are -- no one here has any hesitation that our cloud offering works. But I think anybody accepts that it does.

And sorry, Sam, I was just sort of meaning there as well in terms of the regional -- outside of the top-tier hospitals, just the inbounds on the interest level in that side of the market post, obviously winning -- Intermountain and who's obviously a large player in that market. I'm just interested to understand the sort of pipeline mix between the top-tier and whether you think there's a larger opportunity now in terms of that mid-market or more regional hospital networks outside of the top-tier?

Yes, absolutely. I think there is.

And as I said, for certain groups, cloud makes a whole lot of sense, because they don't have their own data centers, and they don't have the depth of IT departments that may be a massively large academic would. And so, they're looking at it.

And then, even in the corporate sector, a lot of people are saying, we're health providers. We're not IT people.

And their CIOs are going, we must transition to cloud. So, look, it is a momentum that's occurring in all industries.

Ours was maybe a little later than most because people were worried about security, but I think there's an argument to be made. Public cloud is more secure than your own private cloud.

So, yes, it is opening opportunities, no question for us in that mid-market.

Okay. Got it.

Thanks very much.

Hi, Sam. Just a couple of questions.

Firstly, the professional services line, quite a big jump. What kind of drove that?

Was Intermountain included in that half? Or is it something else?

Hi, Julian, it's Clayton here. Part of that was actually MedStar being deployed in the cloud.

So some of the data migration with archive sales, data migration occurs pre go-live, and part of that data migration was included in the December figures.

Right. Okay.

And second question, with the archive opportunity, can you have a sort of feel for just the existing customer base, how many have archive contracts that are about to expire? And therefore, you can pitch your service to them?

Yes. Look, when you say expire, we're talking about in the next short period, two years, for instance.

And I think, that's a material number. Now, some of them develop their own archives, like Mayo.

So whether they're looking to go off their own is a separate question. But those that had third-party archives, I would say, there would be at least half, could be more, whose contracts will end -- who will expire in the next two to three-year window.

So they are a good source of opportunity for us.

You've started to pitch to them?

Absolutely. Absolutely.

These decisions for archives are often made over a year or two. So, absolutely, we have, and we're in conversations with as many of our clients as possible regarding it, because we think a far better solution than the third-party archive they currently have.

And we have proof in large-scale, like Mercy and soon MedStar, Intermountain, et cetera.

Cool. Thanks, Sam.

Yes. A good question.

Look, Volpara, and I only know what I see in the public space -- one of the cornerstone offerings was breast density analysis. But they do have other product suite designed for breast imaging around that.

So it's not a one-for-one comparison. The other thing is ours is on-premise and it's on demand.

So effectively, the technologist will push a button and in under two seconds, usually under one, we will be able to provide that readout. So they're not exactly like-for-like.

Will it mean that clients that have ours may or may not buy Volpara? I think that's likely.

But it's a bit early for that. We -- as we mentioned, we've just received FDA approval.

We will be putting it into a large site and the one that helps us develop it. So there's no secret there.

Looking at how it works in the ROI and then looking to commercialize it, and then we'll have better idea. But look, it's not a one-for-one overlap.

But in some instances, it will compete.

I was just going to say we spoke about margins growing to above 50%. And then from their, it wouldn't grow too much.

Clearly, in the last half, they have by virtue of the RSNA moving towards a virtual conference and some of our travel, which Sam spoke about earlier. Clearly, we think those -- we're hopeful of those things into the future do occur.

So there might be added costs there. We're also looking to increase our base in both North America and in Europe.

But yes, obviously, new sales coming on board will increase the EBIT margins. To what extent, we think they've grown quite considerably in this half because of those -- the expense reasons.

But they may come back a little bit in terms of future periods.

Look, I think we are looking at all aspects of the market. I know we're most known or well-known for the large Tier 1 academics, large health systems because they're the ones we announced.

And most people know the names like UCLA or Mayo Clinic, but that doesn't mean we don't do work in the mid-market. Quite the opposite, a number of our clients are in that medium space like Alleghany, Welspun, Karl [ph].

Great clients. You may not have heard of them because they're not as prominent as some of the others.

And we do have private clients. Like Zwanger, we have private clients here in Australia, and we do have some in the corporate space like Nines and teleradiology.

So look, I think all the market is fair game. Clearly, there's a point where the cost of sale doesn't make it worth it or groups will -- just won't pay our premium price.

But I think that's becoming a smaller, smaller section of the pie. I think more people are realizing the value.

And yes, we have plans for all sections of the market. And not just the U.S., clearly, we're based here in Australia, and we would love to see growth of our products in Australia.

And when you talk about government market, LMU Klinikum is government. And the other contract we had in Europe was government.

So we are looking to expand that where possible.

Well, as I just mentioned, one of the answers before, we think the pipeline is very healthy, and we're very, very pleased with our conversion rate and our inbound rate. Clearly, we have a small, very focused sales team, and it's – I think it's outdone the rest of the industry put together, as witnessed by the last six sales.

We're six out of six. I think – look, we are looking for some salespeople, but they will be in increments.

We currently have three in the US, three in a bit, if you include me. So we've been going from three to four, not three to 30.

And I still think we will still continue to gain great share of the market.

In terms of our client base and the ones that are fully implemented, all of our clients are above the minimums that are fully implemented, and all of them above their original 100% that they had mentioned to us when we're in contract. So once they're fully implemented, we get 100% of their volumes.

So they're all above that rate. In terms of charging for them once they're above their minimums or volumes that they indicated, it's done on a same basis, same exam rate basis.

It's not discounted or increased in any way. It's just a linear per exam rate.

There's no – Garry, no fixed rhyme or reason as to when systems come to market. It's not like there's a specific point or they lose a tax deduction if they don't do it by the end of 2021.

They all come based on a whole lot of different factors. Look, we are saying that the last six deals, in such a short period of time, I think is unprecedented in the industry.

I don't know of any company that has done that before us. So I can't say we'll keep up exactly that rate.

They come in their own cadence. We may have one or two and then it stops a little while, and we have three or four.

Clearly, it would be much easier for us if we had a large contract drop every month or two, but it doesn't quite work that way. All I can say is the pipeline is good.

And their people – in their various stages of the sales cycle. So clearly, some more towards the beginning, but some more middle and importantly, some towards the end.

So whilst we can't give you a number, all we can say is track history is – we've won last six our of six, and we're hopeful to continue winning all the ones that come up. We can't guarantee it, but at least, we think we're in a good position to continue to win a majority share of what becomes available.

Yes, thanks for that question. There are 2 things a system must perform technically and then it must give a return on investment.

Clearly, financial return means radiologist efficiency, massive consolidation of IT infrastructure and savings for some of our clients save millions a year, literally, in going from 10 different instances of 1 system down to one Visage. But then it's also important for the radiologists that they are able to do things they otherwise couldn't do, which we enable because of all our 3D and everything else.

Or if they could do it, it would take them so long that they wouldn't do it. And the example I showed in my presentation was something you could do if you had a workstation.

But someone would have to go to that workstation, spend a few minutes and confirm that it was a stone in the urether. On ours, so just click it's on the same workstation that's right there, so they always do it.

So that's what we talk about clinical ROI, being able to provide them with capability that either don't have with another system. Or they do have another system.

But because it's so cumbersome, they won't use it so effectively, don't have it.

In terms of our charging, yes, it's the same product. The economics in cloud maybe work a little bit better for us because we manage that instance of the cloud.

So in an on-premise solution, we deal with a large IT department that has everything from networking people to security people, etcetera. And we're very adept at that, because a lot of our clients, you know of like Mayo and Mass Gen, Brigham and Yale and Duke, that's the infrastructure that they've got.

What we see with cloud is that once they're up and running because we manage a lot of that, in the patching of operating systems and everything that you would expect with the cloud, we find that, if anything maybe takes a little less resource than supporting on-premise. But in terms of cost and selling, it's exactly the same, and we let the client decide which way they want to go.

Yes, look, as we implement these large systems, they all talk to each other. They all know each other.

They all talk to each other, their peers. And when you get some of these large academic hospitals, there's also a trickle-down effect.

So more of the, I suppose, middle-sized hospitals, more regional hospitals, they will look at what a Mass Gen, Brigham or a Yale or Mayo or -- does. So I think it works 2 ways: One, with their peers.

So clearly, Northwestern, NYU, the UCS that we just signed, they were all speaking to our existing clients. That's their reference check.

That's a sanity check. So the bigger the base you've got, the greater the effect and it's not linear.

It won't say it's exponential, but it's not linear. And I think the fact that we've had this increase in sales and who they are, I think -- I think, supports that.

It was a mixture. The group is slightly different in its structure now, at least, when we saw them five years ago.

And there were some extra considerations around it. I think -- but I think it was, in their case, we had enabled them to grow, and we were the beneficiary of that when the contract renewed.

So they're a bigger group now than they were when we first met them five years ago. And I think they've been very vocal that we were a key driver of that.

So it's a mixture, but I think volume was an important one here.

I'm only familiar with what I've read in the paper. I haven't seen it.

I believe it has a different use case to us, rather than a diagnostic use case. So from -- based on what I know, I believe it's an adjacency to our market.

And again, based on what I know, it does, I don't see it as a competitive threat at this point.

We are still working with them. With Sutter Health, in particular, where I said certain jurisdictions got really badly hit.

With COVID, California, where Sutter is and the UC for that, were hit even harder than their East Coast peers. And so, with that end also, it's a bit like Australia, but in reverse.

We had bushfires and COVID. They had COVID and bushfires.

It's been tough out there. So we've agreed to extend the contract, but we are in negotiations with them.

I think the key thing for us is to extend the existing contract and then look at any add-ons after that.

Yes, sure. Hi, Bella, nice to hear from you again.

The -- some of the support revenue that we have are OEM revenues, both in North America and Europe. And although it is recurring in nature, it sometimes can be lumpy and change from period to period.

So that is the main driver from the decline from last half. It did go up from second half of -- first half of FY 2020, mainly through the rollout of the I-MED contracts and that OEM revenue can change from period to period.

Well, I believe that is a good estimation of the market size. But the market is moving, because it's expanding into other ologies.

We'd like to think that the lion's share would consider us. I think, we have shown the technology from -- the product from a technology perspective, addresses the broadest range of the market or the biggest percentage of the market.

So we have clients in Australia that are two-man radiology partnerships that have been happily using Visage for seven or eight years. And we have clients like Mayo Clinic and Mass General, and it's exactly the same product.

We don't have separate products. So we think from a technology point of view, we can address as close to 100% of the market as is possible.

I think the thing is what about from a price, cost of sale, cost of support, cost of client perspective. And we see that broadening.

Cloud is certainly helping that a lot because some of the smaller groups that didn't want their own hardware, cloud will be an attractive offering. So our view is we must probably address the large percentage of the market of any of the offerings.

No, it's all progressing really well. I mean, the strategy, sort of, went through the slides maybe a little quickly at the end, but the strategy is multipronged.

To embed it in our own product, to automate it and make it even further ahead of the market is what we're doing as we speak. The second thing is to use our platform because most AI and radiology needs to show or visualize something, and we can integrate that output, whereas, most products can't.

And radiologists won't use it if it comes in separate pop-up windows. So we are speaking to third parties, DC-funded groups anywhere from literally Tel Aviv to Sydney, because we do have a big user base that they can address if they come on our platform, plus the technology itself.

And then we are doing more and more work with our academic clients. And clearly, with that footprint is growing rapidly with NYU, Northwestern, the UCs, they're all ones that have massive data science labs.

They're all doing research in various AI, and they're all interested in our accelerated program. And with NYU, clearly, they've already taken it, and we will be setting up a hub there.

So all of that is moving quite quickly in the background. And then finally, we've -- one of the -- there are not that many companies that have FDA-approved AI algorithms, and we're one of them.

And so that opens the door for more, so all 4 strategies are all moving. Having said that, a lot of companies are still pre-revenue when it comes to AI.

The inflection point for mass usage or mass market usage hasn't quite occurred. We're sure it will.

What will be the catalyst, we're not quite sure. And I don't think anyone else is.

What we're saying is we're in the slot so when it does occur, we think we're very well-positioned. So in answer to your question, yes, working in background and working well on all fronts.

It's our standard commercial pricing. So when we said competitive, we meant competitive from a other vendor perspective.

They did do a lot of, as you would expect, a lot of investigation, research, reference checks. And they did do a group-wide on-site pilot.

So it wasn't just at one institution, it was across all five. Wherever there is a group that does pilots and a number of others, like Northwestern and NYU have, we've never lost.

So it's a bit like – if you buy off RFP, akin to buying off a brochure or buying off a web page. If you do a pilot, it's the ultimate test drive.

So yes, we were very, very pleased to win it. Each of the five campuses had the right to make their own decision.

And I think it's the first time in their history, they've all made aid it for the same platform, because previously, different campuses were on different offerings and different vendors.

On and off. It was maybe three to four, maybe five years.

Now again, bear in mind that some of the interaction we had was with just one of the campuses. So it doesn't necessarily mean the others have engaged with us.

There was an RFP thinking somewhere around 18 months ago, it was put out by all five. But as I said, they had independent rights to look at it.

And if anything, in this particular case because they were so deadly hit with COVID, I think during the process, it actually halted for a while. So if anything, it sort of got held up.

But then the realization of, well, what do we do after COVID, sort of the second part of it, went a bit faster. So I think COVID held it up a fraction.

But certainly, the ability to seamlessly remote read, I think, worked in our favor.

Look, again, as we said, we're in the process of commercializing it, and we haven't priced it yet. I think it will – one algorithm in its own right won't create hundreds – I don't think will create tens of hundreds of millions of dollars.

It's more having a suite, but you need to start somewhere. We do believe, and we are hopeful that we will get some revenue from it, but the growing base of either third-party or our own algorithms, we think will be material.

But is that going to be in 12 months or 18 months or two years? I don't think any one is quite sure.

But certainly, this was a fantastic first step, at least from our point of view. And as I said, it paves the way for other algorithms.

Not only our own, but also things that we do in collaboration with our growing base of academic clients.

Well, what we've done is – there are two things to this that – well, there are two things that are standard in this contract, that is it's five-plus years term. In this case, seven years and that it's based on minimums across the five campuses.

The difference between maybe some of the others that there may be a longer, the first year or two. So two campuses will come on board pretty much from the get-go.

Then another two and then one a little later on, simply because they're rolling off. So there's the difference between that and maybe an NYU or Northwestern will be the phase-in time, because we need to fit in with the campuses.

The other thing is the campuses are growing, so we will get organic growth. And as I said, they're minimums, and they always are above their minimums because they don't commit to 100% of their volume.

The other unknown here that we think it could be positive is there are a lot of affiliates, some partially owned, some fully owned, that can partake in the contract. And some of them are, reasonably, they do good volumes.

And so if they do, that will be on top of the minimums of $31 million that we announced. We just don't know the extent of it other than there's a significant possibility.

So a little like what happens with partners where we did Mass Gen and Brigham and then bought on their others. These -- again, they're smaller and more often.

So we're not quite sure how that will pan out other than if anyone comes on board, which we hope they will, it will all be positive.

Look, the market really has 3 groups: The equipment manufacturers, Siemens, GE, Philips and the most active at the moment in that space is Philips who bought Carestream, a competitor and trying to roll all that up. But we hear that Siemens are saying, well, in the next few years, I'll bring out a new platform, but we have no one seen it.

The second group are the people that used to be in the film business, X-ray films like Agfa, Carestream, which is now sold to Philips. Fuji, Canon, and they all produce digital systems, and we compete against them.

And then there are independents like ourselves, the Swedish Group, Sectra and Telerad that they're literally hundreds, and they work up and down the market. So it really depends which market we're in.

If we're Tier 1 academics, it would be the equipment manufacturers, some of the film people like maybe a Fuji or an Agfa and people like – more like Sectra and some of the other independents. If you go lower down or in the teleradiology space, we compete against a whole lot, some very, very small you never heard of.

So it's a whole mix. So it really depends on the market segment.

But yes, look, the market is very competitive. People think we have it all to ourselves.

I wish we did. It's too big for that.

But thankfully, we're able to compete and in the lion's share.

Look, I think we're always looking for additional people. But we're talking in terms of increments.

So we're always hiring. But we're not turning around and saying, right, we need 10 new heads because we're doing 5 academic campuses.

So we are hiring. But if you look at our cost base, it only goes up in small increments, whereas our revenue goes up much more than that.

So we are looking. We are building out the team, particularly in the U.S.

and in Europe, but more in ones and twos rather than wholesale, 20% or 30% or 40% increases. And we'll keep it that way because we're able to -- we believe we have -- we're refining our methodology and between on site, off-site and making it as efficient as possible.

Thanks for taking the follow up. So just your comment about winning six out of the six major contracts in the key markets.

So there was a number of other contracts awarded during the period. But I presume you didn't call this out, because you didn't participate?

I just wanted to clarify if that was the case. And if you didn't participate, why didn't they make sense?

Yes. Look, there's always -- there are always some, less and less, but there are always some where we won't get on a starting line or one of our competitors may not.

Now some are just rollovers. And they're just extensions of existing contracts.

So they're announced as a new contract, but they're an extension of. So we, for instance, got archives at nursing, we -- whilst we competed against others, it wasn't like a whole RFP process.

I think when we talk about six out of six, they're the ones that were completed by most players in the market and because of their size. So we would have on some others that we don't include in that, because they're smaller or because they weren't as openly competitive.

So that's how we do it. Where we've been in the mix, we haven't lost in the last -- in that period.

Thank you. And just one final one.

Just on the University California network. So you mentioned two campuses are basically going to be onboard near enough from the get-go.

Can you just confirm are they two of the larger ones or two of the smaller ones?

They're more towards the larger end. And I think the reason is their current vendor is -- they want to get off the current platforms.

And that was one of the things that drove the decision at the moment. But because all five wanted to make the same decision and be under the same contract, that's why the phase-in time can be stretched out a little.

But having said that, the one that's currently scheduled to go last, may turn around and say, right, we want to go a little earlier and bring that 18 to 24 months in, that just remains to be played out.

That’s helpful. Thanks, Sam.

Hi, guys. Just quickly on the renewals.

You mentioned earlier around Sutter, with -- that you're working with them and given the slowdown in the West Coast, et cetera. I just check, are they already in the extension period as we speak?

Yes.

Yes. And is it a case -- are they testing the market at all?

Or are they tendering? Or is this just as far as you're aware, just a discussion for renewal with yourself?

No, they're not tendering, and it's just a discussion of renewal. One of the other things is, because of COVID in everything, they furloughed a lot of people, or particularly people in purchasing and contracting are only in a day or -- a week or two a month.

So they're on and off. So that's made a little bit more complicated than would normally be the case.

But no, they're not -- they haven't gone out to tender. It's purely discussions between the two parties.

And we're just giving them a bit of breathing space, because of what's happened in that region.

And the other question I just had on renewals. Who else are you currently talking to in terms of the renewals that are coming up, that you have sort of started the discussions with?

Can I ask?

The other one would be Allegheny Health. That and Sutter Health are the only ones.

Langone was one from last period, which obviously, we've renewed. And so Sutter and Allegheny are the ones at the moment.

Yes. And Vision 23, which was one of our earlier five-year contracts with the Department of Veterans Affairs that renewed, I think, about 18 months ago for another five years.

So that one is behind us.

Yeah. Okay, great.

Thanks a lot.

Well, thank you very much, and thanks all for participating in your questions. Very much appreciated them.

And thanks for your time.

Thank you.