Pro Medicus Limited

Thank you. Good morning, everybody.

Thanks for joining us for this half year presentation. For those, who are not familiar with us, we are a healthcare company specialized in -- or -- an IT company specializing in healthcare IT.

We have 3 jurisdictions, Melbourne, Australia, our corporate office and where we do development for our RIS product; our headquarters in Europe in Berlin, where we do R&D for the Visage product; and U.S., which is our largest market. And we have 2 products, the RIS, which is mainly Australian-based, although we do have some clients in Canada and the Visage 7 product, which is a clinical product used by radiologists and clinicians to look up images and make diagnosis, which is the product we sell globally and particularly in the U.S.

In terms of the first half results, I think summary, it was another record half for us. Everything went in the right direction.

We had 4 large contract wins with a cumulative contract value of greater than $200 million at the minimums, which is our biggest half of sales to date. We completed 4 implementations in the half.

Our major conference in RSNA, the '23 conference in November, December of last year was our busiest day. We made material progress with other ologies and AI.

And so, we believe this first half forms the base for a stronger second half and beyond, as I'll discuss a little later. In terms of all the figures, I won't go through each one, but I think material improvements in revenue, profit after tax and underlying profit.

Cash reserves grew. Usually, they grow a little bit more in the second half than the first, but there's still a good uplift.

And because of that and the fact that we don't have any debt, we announced an interim dividend of $0.18, which is up 38.5%. In terms of the revenue split, a lot of you actually been following us for a while know the graph.

The pink bar is recurring transaction revenue, which grew materially, and we believe pretty sure will grow even further in the second half, and I'll discuss that in a minute. The blue bars are also recurring, but more support contracts from the older sale of licenses that we had.

The green is professional services and the yellow is data migrations. And because we are selling a fair amount of full stack of all 3 products that includes the Archive, the migration columns continually growing.

In terms of the highlights, as I mentioned, 4 very key implementations we came out of the gate fairly early in July with Memorial Sloan Kettering, one of the 2 top cancer centers in the U.S. and one on the top globally.

Then in September, our biggest contract to date with Baylor Scott & White, the largest not-for-profit in Texas. It's a 10-year contract with $140 million at minimums, followed the next month by South Shore, a regional IDN in the Southern part of Massachusetts.

And then towards the end of the year with Oregon Health and Science Tier 1 academic in State of Oregon. Then, of course, RSNA, as I mentioned before, our busiest to date.

We had the biggest presence, the biggest number of attendees to the stand. And again, that resulted in a very positive flow of new leagues.

And we completed 4 implementations, which are particularly important for us with the full new sales coming up, so we could clear the decks and get ready to start implementing them in the second half. In terms of the transaction model, most of you know this, it is a per-click model.

It is underpinned by a minimum commitment on a take-or-pay basis. Usually about 80% of the previous 12 months volumes at the time of providing the contract.

So we now have increased our forward revenue with the contracts we've had to a minimum of $608 million over 5 years, which has been a material uplift largely due to the all new sales. And we do see upside, as the client examinations grow.

So we believe that, that $608 million is an absolute minimum for the period. The -- we have a lot of operating leverage.

We have a highly scalable offering. It's a software-only model.

We don't provide hardware. Training and installation is charged as professional services.

So again, that's quite a high-margin business as well. We have a contained cost base.

So our margin continues to grow, as our footprint increases. The client base, we have maintained the position of 9 out of the top 20 hospitals.

This used to be ranked in how high in the order they were, but it's now ranked alphabetically. I think our next nearest competitor has 3 or maybe 4.

So it's -- we do have the lion's share of the top 20 something no one has been able to achieve in a 10-year time window. We don't just do academics.

We do an area called IDNs or integrated delivery networks. These are large hospital networks and medium-sized hospital networks.

The key difference being they don't have a university of teaching hospital, as part of the network. They are often very large, sometimes larger than the academic centers.

And we had a number with Mercy, Sutter Health, Intermountain and Medstar previously. But if you followed us over the last 18 months to 24 months, we've had an increasing number of IDNs become clients, such as Novant, Inova and Allina.

And recently, some of the ones in the last few months that have increased our penetration. So we've had 6 sales for IDNs in the last 18 months.

All 6 opportunities to be cloud deployed. So we are having and see an increased network effect in this segment, which is the largest segment of the market in the U.S.

Visage RIS, this was our core product that continues to develop the new versions coming out. We had a number of long-term contracts with 2 biggest, with Lumus, who previously, Primary Healthcare, and I-MED, the largest radiology group in the country.

The Lumus rollouts are complete. There's some upside via organic M&A.

And we are fielding interest in new opportunities, particularly as the market starts to reconsolidate and some of the radiologists coming out forming new groups. They will look at both our RIS and Visage PACS.

In terms of Visage PACS and Visage 7, we continually benchmark ourselves against the industry. And we're highly confident that we are still #1 in terms of speed, functionality and scalability with 3 key pillars that determine the success and capability of the product in the market.

We see the massive data explosion continuing, assisting us simply because the old technologies can't deal with these ever-increasing data sets, where the gigabytes, there is new megabyte and it's not uncommon to have single exams in the 5 gigabyte plus anymore, some punching up to 8 gigabytes or 9 gigabytes per test. So why doesn't the old technology work?

Basically, it relies on compressing the file as much as is possible without losing any fidelity and sending that file down the network to a heavily configured workstation, which then unpacks that file and does all the image manipulation, rendering and 3D globally. And the problem with that is the costs are just getting too big for that to be done on a demand or timely manner.

Our technology is very different. We rely on -- we have rather our own proprietary streaming technology that we developed in house many, many years ago.

It allows us doing near real-time compute the 3D models, do the rendering and just send the pixels to the radiologist. So in most instances, in [ 99.9 ] something percent of time, we're actually able to provide full diagnostic capability remotely sub-one second.

The solution is actually a whole ecosystem of product. It's all based on the core Visage offering, the Visage 7 offering.

This could be either on-premise, but of late in the last 3 years, it has all been cloud-based. It is the same product that stream started not only to radiologists, but all referring physicians throughout the organization.

It does all modalities, all imaging tests. And for those that a part of that ecosystem, particularly the academics, we do have the AI accelerated, which is again, all part of the same streaming platform, which is very expandable.

And as I'll talk a little later, the Visage Ease, which is the remote capability now with the new Apple Vision product being supported. In terms of the recent -- in terms of the recent sales, the first one, Memorial Sloan Kettering.

It was a 7 year, $24 million contract. It is currently in the process of being implemented.

The rollout is scheduled to be completed mid second half financial year. And we're increasing our footprint in the Tier 1 academic space with this plant in the Upper East side of New York.

The next big sale, well, our biggest to date, as I mentioned, was Baylor Scott & White. It is for full stack, Viewer, Worklist and Archive.

It is the largest not-for-profit system in North Texas. The rollout in terms of data migrations has commenced.

And we believe that the first site will go live towards middle of this calendar year. And so, we will start to see some material revenue into the first half of FY '25.

South Shore, an 8 year, $16 million transaction. Regional IDN based in Southern Massachusetts.

Again, we believe that this implementation will be completed and -- deployed and completed towards the end of this financial year in the next few months. And then finally, OHSU academic in the state of Oregon.

This one will actually been done towards the second half of the calendar year. So again, will start contributing revenue in the beginning of FY '25 for us.

So 4 very material contracts. All of the revenue from these contracts still ahead of us.

And we believe cumulatively, they will provide a very material step up in terms of transaction numbers, particularly going into the beginning of FY '25 and beyond. [indiscernible] [ to sell it to another thing to install ].

We continue with our fast track implementation. As I mentioned, we had 4 material implementations in the first half and a full roster for the second half.

We're able to implement with a mixture of on-site and remote, well under 1/4 of the time, sometimes well under [ 10th the time ] of industry norms. So huge savings for clients.

And it allows us to maximize the utilization of our implementation teams by having them go alongside, do the work within a week or 2 come back, then refresh and be ready for the next implementation. So it has a number of advantages, not only for us, but also for the client.

The ROI, in other words, why would people buy us? We are known to be most expensive in the market.

I think we continue to improve our value proposition at the more we do, the more we prove it. And I think it's really in 2 areas.

There's the financial ROI in terms of infrastructure equipment and especially radiologist efficiency, where we believe we increase efficiency, orders of magnitude larger than our -- more than our nearest competitors, but then there's also the clinical component. We allow radiologists to do things they otherwise could do, but would take too long, so don't do it or give them new capability, so provide a better platform for diagnosis.

So we do move the needle clinically. There have been some examples I've shown before.

Some interesting work we did with Mariam Aboian, who is a top pediatric neuroradiologist, previously at Yale, now as another client in the Children's Hospital, Pennsylvania. Some groundbreaking work in signeting tumors in children, and we're going to be using a lot of that technology under the [ bonnet ], as we go forward with new versions of Visage.

Something completely different project with NYU Langone, where we have a research agreement, where the Chair of Radiology felt patients were not close enough to their diagnosis. They never saw the radiologist.

They couldn't quite understand what they saw on the images even if they are made available. So this concept of video reports by radiologists can dictate and film a short 30 second to 1-minute synopsis of the case and diagnosis that is made available to the patient electronically is -- they've found to have excellent patient engagement and a lot of very strong and good volume from the referring clinicians.

The other key thing that we work on is become endemic in the industry that is burnout. There are some global acute shortage of radiologists.

The fact that we can increase productivity between [ 20 and up to 45%-plus ] depending on the situation, certainly addresses this. It's been a key selling feature and one that we think gives us a strategic advantage in the market as compared to others.

Our growth strategy, again, we have multiple lines in the fire. I think all of these are currently in play.

We are expanding our footprint quite rapidly, as witnessed by our busiest sales half in the first half. We are getting above-average, industry average growth from all of our existing clients.

So they're growing greater than the mean, which also helps us. Some of that is just through efficiency, some it's through M&A, and we see that continuing.

We are bringing new products to the market, and we are looking at new geographies, particularly with the adoption of cloud becoming a little bit more prevalent outside the U.S., which we think will be positive for us. Pipeline and my commentary in the interview, pipeline is robust.

Even though, we've had a bigger sales half in the Company's history, that's been replenished with new opportunities, importantly, of different sizes and across different segments of the market. So we are starting to spread our leads across a much larger target user base, not only academics and IDNs, but also in the corporate space.

And so, we believe that we are unique, and the one product can address the largest percentage of the market, which we now deem to be in excess of 80% of the total addressable market. The product, I would say, the Viewer was our core product, joined by the Archive a number of years ago.

The Archive has been very strategic for us, particularly as clients look to transition to cloud and Archive is fully cloud-based. It's highly optimized for cloud and cloud storage and provides a very, very cost-effective performance solution.

So that's why we are seeing more and more of our sales, particularly the recent launch of full stack, where they do take not just the Viewer, but the Archive, and the next product, the Workflow, which is the least that the radiologists use that tells them, which cases to read. This is our most recent product, but one that we have started to get very good penetration, not only in just the new opportunities, but we're also back selling it to a number of existing clients because it is a best-in-breed product.

As I mentioned cloud, we think we're highly differentiated here because we're one of the -- only one of the true cloud native, not -- only cloud-native or cloud engineered products in the market over the last 3 years. In the U.S., we have only had cloud or done, performed cloud implementations.

So not a single on-premise one. We think the market has definitely shifted in a very big way towards cloud.

And the fact that we have not only a large user base, but a proven capability in cloud has been a very important strategic plus for us. The One viewer product, mainly we would have seen our first foray into this, which was cardiology and particularly our own cardiac ultrasound.

We did showcase a broad suite of cardiac ultrasound capability at RSNA 2023 in December, December -- November, December last year. It was incredibly well received.

And we are looking to now see that product commercially into the market. We have a number of key clients that are using part of this capability to bench test it, and the feedback has been very positive to date.

AI, again, it's a hot topic in every industry, but in healthcare, in particular. And in healthcare imaging, which is suited to AI, we do see a large number of use cases, so it could be embedded in software or imaging equipment.

It has originally been used to prioritize cases, read through a whole lot of PET CTs and put those, where the AR believes that there's some pathology or at the top of the list because they're the most important to read quickly. We are seeing areas, where large-scale screening is using AIs and adjuncts.

There is just not enough radiologists to go around. We think the biggest area will be the second set of eyes or an aid to diagnosis, where we are seeing a number of use cases starting to open up.

Some of them with possible reimbursements in the future, which I think will certainly accelerate the adoption of some of these technologies and the new diagnostic tools. So tools, where the human cannot see the result, and one of these is the FFR in cardiac CT, that can measure the pressure gradients in a coronary artery on both sides of the blockage, the gradient, the pressure, the larger the problem.

And in future, there's always a possibility of automated diagnosis using AI in certain cases. We do believe our platform is very well suited.

We do believe that because we have GPC technology. We have an open AI interface APIs that we are well placed for when AI becomes even more mainstream to become a major player in this market.

Just for the sake of time, I'll go just to the new kid on the block, our Visage Ease VP for Apple Vision Pro. Many of you will have heard that Apple released its new set of spatial imaging headset called the Apple Vision Pro.

As one commentator mentioned on the Internet is like going from the Flintstones to the Jetsons. So key thing for us is, we were one of the first.

We've been working on this project for quite a number of months. We've been able to [ port ] part of our Visage Ease product, which is used on iPhones and iPads to the Vision Pro operating system, so that it is a native application for the Apple Vision Pro at launch.

So it was launched on the 5th of February. Our cinematic rendering engine natively embedded.

So it's ideally suited in terms of our rendering and our streaming the device for those, who haven't seen it supports virtual screens more than 4K resolution per eye. It has true immersive spatial experiences for diagnostic imaging.

We believe that will be a very interesting platform for AI integration. So immersive imaging and AI, we think are a very interesting technologies that can work incredibly well together.

And one of our clients, UC San Diego was our launch client for this product and other key Visage clients are now in a position of looking to pilot the technology, which, as I mentioned, was released on 5th. I think one of the key things about it is not only will it extend, where medical imaging goes, particularly longer term, as in multiple versions of the Visage -- of the Apple Vision Pro release.

It also, I think underpins our belief that our technology is months ahead with competitors, if not more, simply because we are now able to take full advantage of these very new and exciting technologies on release. And part of that, a large part of that is purely the platform and how it's configured.

Finally, RSNA '23, it was our biggest ever, our biggest stand. We had a 64-foot screen, if you can see at the top.

So we certainly were very visible. We have the largest number of visitors to the booth.

And as a percentage of those visitors, the highest percentage of new opportunities that we have had certainly over the last few years. So all very positive, very good feedback.

High percentage of new opportunities, as well as a very good attendance from existing clients looking to see what's new coming out. So we were exceptionally pleased with the net effect of that.

So in summary, most successful half in our history. Our North American footprint grew very strongly with those 4 big sales in the half.

The full stack solution certainly is paying major dividends for us. Our implementation capability, both remote and on-site is proving to be a boon and as much as we can do more implementations, it was [Technical Difficulty] possible, maybe even 2 years ago.

Cloud has been a huge strategic advantage for us. We think we continue our unparalleled value proposition.

Our pipeline is growing strongly across a very broad range of opportunities. We believe we're well positioned to leverage AI.

And we think that another key step that will play out in the future is obviously the release -- the launch of Visage VP for Vision Pro. On that, I'm going to finish the presentation, and certainly would love to take any questions.

Sorry, Simon, Clayton. 2 quick questions.

One on the core Visage pipeline and the second one on sales outside of radiology. In terms of the Visage pipeline, can you maybe just give us a sense, is there any deals as big as Baylor Scott & White in the current pipeline?

And in terms of your RFPs, can you maybe just give us a sense of the number or percentage of RFPs that you've been shortlisted for? That's probably the first question.

Yes. Well, we -- certainly, we've got them across a broad spectrum and the spectrum can be looked at through 2 prisms, one is market segment.

So they're across all market segments. The second is size.

So without specifically referring to Baylor, there are a number of material ones in there, as well as quite a good snapping of medium-sized ones. So I think the important thing is to us, it indicates that our TAM is really much bigger than people realized initially because people thought with our price point, with our technology only the really big guys would take it.

And we've shown that, that's not the case. They thought maybe only the academics would take it, and I think we've shown that's not the case.

So big spread, both in terms of market and also size.

Understood. And then those RFPs or number of percentage in that pipeline that you've been shortlisted for roughly?

Yes. We don't give that number out, but it's the fact that the pipeline continues to grow.

And obviously, some of these opportunities, as you know, could take 2 years. So they're at various stages.

I think we have seen an increase in frequency of inbound over the last 18 months. I think a few reasons for that.

I think cloud is a big one, data set sizes, maybe some of the organizations have gone through their transition to electronic health record and our imaging is next because it's a key part of it. But certainly, there's been an increased cadence of new RFPs.

Sam, and in terms of those sales to cardiology. So I guess, the timing appears a little bit behind your expectations over the last, call it, 18 months.

Has there been any impediments or holdups to launch and commercialize the cardiology sales? I mean, what's the latest plans and timing, I guess, on revenue contribution?

I know you've clearly been outline -- or you've outlined demonstrations at RSNA, and you also talked about the investment that you made with Elucid. But just trying to get a sense on impediments or holdups in terms of commercialization and maybe the latest timing on revenue contribution from cardiology sales?

Look, we think it's imminent. We are -- and you mentioned the Elucid investment, we are looking at multiple planks to that strategy of which Elucid is another plank.

So there's a fair bit of work going on in and around all of this. It's not just the cardiac ultrasound, there are other bits and pieces that hopefully will come to the fore, as we continue.

So we are -- we do think it's imminent. We do have more people actually using it, existing clients, testing it in different environments just, which is a positive for us.

So whilst they don't have an exact [ data ], I don't want anyone to think that this thing is [ stalled ] in any way, shape or form and it hasn't. We're just -- it's just taking a little touch longer.

But I think other things are happening in and around it as well.

Hi, Sam and Clayton, thanks for taking my call. First question, just around some of the volume growth that you're seeing in the business, and I guess, the outlook for some of the organic growth around your clients as well.

Could you give us a little bit more detail around that?

Yes. We're definitely seeing the exam volumes increase.

And as Sam mentioned that during his presentation, we are seeing that it's higher than industry standards. Exam revenue went up around 9%, but we obviously had some implementations through that period, but more to the back end.

We think that will increase again into the second half, as we roll out Memorial Sloan Kettering, Baylor Scott & White, South Shore, et cetera. But the organic growth we're seeing through our existing client base is growing higher than industry standards, which is around 3%, 3.5%.

So that is pleasing to know. In terms of acquisition, we have seen some of our existing customers take on new hospital groups, and we get some of that uplift.

Some of it is 12 months to 18 months after they make the acquisition because they generally need to get in the electronic medical record and other software, but then we start seeing that exam growth come through. So we are seeing it.

And pleasingly, with our exam volume operational model, we can see that come through to revenue pretty quickly.

Yes. And the only thing I'll say, Josh, is if anything, and this is maybe a bit anecdotal.

We think that our clients not only -- are continuing to grow quicker. So there was this gap originally, this uplift.

But it's not very rare, a week or a month, where we don't get that. NYU just opened a massive new center in Long Island or another client just annexed 2 hospitals or it seems that the rate of increase, if anything is going up, now there are obviously multiple reasons for that.

We think one of them is our technologies and enablers. So the rate of increase of organically within these groups, we think is actually growing [indiscernible] just being a one-off and then staying steady.

Got it. No, that's very helpful.

Secondly, just around the pipeline, you obviously mentioned that we've got the U.S. If we sort of go into some of the subdivisions of their sort of outpatient including providers and the like are a big part of that, both here and also, I guess, in Australia as well, that's pretty much been dominated by IntelliRad.

I'm interested just in any feedback you've got on what you're seeing in those end markets. And obviously, there's a bit of noise before the end of last year, Sam, I think, which we talked on around that AWS-related announcement with Red Partners, but more so we're also keen to just understand what you're seeing in those end markets and whether you're seeing any change in sentiment around your sort of opportunity there?

Yes. It was an area, as we mentioned, till recently, with strong sales that was in deep freeze.

A lot of these private groups were looking to sell into corporates. There was some [indiscernible] like a frenzy and who's buying who, which has now abated.

I think we have started to see an opening up of opportunity in those markets. And I think I'm not talking against another competitor, but the compression send model is starting to crack.

And even for remote reading, where they have to send all the fires, it's becoming harder and harder to do. So we made some inroads into that market.

I think we'll make more. I think our products are ideally suited.

And in time, I think people will understand it. The key thing for those remote reading works is radiologist efficiency because that's exactly what they do.

They -- it's just radiologists reading, they don't own equipment, et cetera. So the more they can do provide [indiscernible] it's better off [indiscernible].

So excuse me, I think we see opportunity here.

My first one was just around your commentary regarding the TAM. I was just wondering if you could give us a few insights into your numbers about how you think about it and the 80% you mentioned?

Yes. So there is a figure that we've been able to triangulate, and I think some others have done similar exercise because unlike here in Australia, where the government tells you how many tests were done in the U.S.

It comes from multiple data sources. We think that it is around 600 million to 650 million diagnostic imaging exams done [indiscernible] roughly around 3% a year.

And then we looked at all the various markets in terms of academic medical centers, IDNs and the corporate market we just talked about, and said, well, if the product suitable, can it work across all these markets as one product. And I think our answer is absolutely.

We're 100% sure of that. But my question was really a commercial one.

When is the deal too small. And I think 2 things have lowered the bar there significantly for us, one is cloud because if they had to go through a hardware purchase cycle, it just take too long.

And the other one is full stack because that increases the total contract value. So we then did an analysis of the markets and all the data we could get, and we believe it's 80% plus in terms of addressability through either commercial or product present.

Got it. That's clear.

And then another one on KLAS of these ranking and you noticed that a competitor of yours has taken the #1 in terms of universal viewer. I was just curious to get your thoughts on that?

Yes. So KLAS is an organization onto itself, if I can put it that way.

We tend not to use their reports. We feel the market should actually make its own decision based on product.

So last year, when we were included, it was actually a bit of a surprise because we didn't do anything for that. It was just an interview of various clients.

So I don't -- we don't put too much stock into whether we're 1 or 2. I think the fact that we're gaining market share and rapidly gaining against competitors, I think, to us is more important.

I think we've also been categorized in the category under a universal viewer that we actually think we could be in a different area because we're obviously doing PACS replacements that possibly the category that we're at just in for a starting point is not the correct one. We are replacing people's PACS, so it should be included in the PACS category.

But as Sam mentioned, they are sort of an entity on their own. So they come out.

We don't really deal with them much, so.

You mentioned that you increased staff numbers to support new contracts. Just wondering, if this step-up [ will surpass ] -- should you bring in more high-value contracts?

And does this cover some of the starting AI and its adjacencies, essentially just trying to gauge the ramp-up over the next few years in this area?

Yes. Well, it's really all of the above.

So we had budgets for increased kind of new hires. We don't specifically hire for an implementation.

So we didn't hire 5 people just the Baylor. It's purely as we find them and looking forward, it takes a while to train people to bring them, for them to understand the application.

So it's not a thing we can hire someone today and immediately have them up to speed tomorrow. So this was all planned.

It wasn't just the Baylor, it was Baylor, plus other opportunities, and those opportunities across every segment of the market and every application that we're looking at. So [Technical Difficulty] if we do start, which we plan to specialize in cardiology, obviously, they have to be people that help support that in amongst the general imaging.

So it's for all the applications going forward. And as I said, a lot of it is to be ready for the future growth of the [indiscernible] be coming.

Okay. So sorry, you don't think there's going to be those large step-ups in the future like that, that can kind of supply for next year or 2?

Or is this an ongoing investment?

It's a stepwise ongoing investment that we've always done. So it's really just to say the cost base is going to keep going up, but less than the revenue.

That's basically what's been happening, and this is just a continuation of that process. We had brought on some people that specialize in areas or someone that specializes in cardiology, as a focus that we [ brought ] that person over a year ago, but they do general stuff as well.

So it's [ only an ] anticipation of not just increased volume, but increased diversity of our offering.

Okay. That's great.

And then just on AI, just trying to think, has there been any changes to your AI strategy, just thinking about the in-house AI development versus external bolt-ons and essentially, do you think that there's any M&A requirements that you need to see in this space?

I believe, we always viewed it as a multipronged strategy. One is we've got the platform, and that's a big task.

But then the question was where did the algorithms come from? Yes, some that we developed ourselves, some we will develop with our academic partners, so that there's processes a foot there and then some that will be third party and third party doesn't necessarily involve an equity participation.

But in the case of Elucid, we though this -- this is an area that we see growing rapidly. We like their technology.

They were in a Series C funding round. And we thought it would be a good investment.

So it will be all of the above. And we're looking at those opportunities, as a great [Technical Difficulty] all the time.

So we have people assessing all these things, do we build, do we partner, do we use third party.

Good morning, Sam and Clayton. My first question is just on competitive landscape.

So if we think about RSNA last year, we saw that Philips launched kind of a new cloud-based enterprise imaging health suite with Amazon. And I think the reason I bring that up is we haven't seen those legacy players really step up to the plate, if you like.

So I guess, just any thoughts you had on, I guess, that particular product, but also what you're seeing competitively? And if you think there's a bit of a shift, where those legacy players are starting to at least attempt to compete on product offering again?

Yes, interesting. To be frank, I think our technology lead has actually increased.

So we don't know of anybody -- I mean, there's marketing announcements and that's one thing. But certainly, we feel, if anything, we've seen the technology gap widened.

And I think with the release of Visage Ease VP for the Vision Pro, it's jumped the whole step again. So no, we haven't noticed any increase in the competitive landscape in terms of product capability, I think, if anything, the opposite.

Okay. That's helpful.

And the second question was circling back to the Elucid investment. I think you mentioned they have very specific kind of cardiac CT algorithms and things like that, but also that they're amenable to reimbursement.

I mean, how important do you think having AI algorithms that have specific reimbursement attached is going to be to, I guess, commercializing some of these opportunities?

I think particularly for algorithms like this, where the reimbursement is material, very material. It's very important because they're very expensive test.

They're not done on every single cardiac CT. But where there's an indication it can save not only the patient, but the hospital, a fair amount of downstream costs.

So the cardiac CT will look at someone's [ coronary arteries ]. The 2 additional AI components will basically help decide whether that person needs angiography, which is very expensive and invasive or not.

So the reimbursement is quite material. And I think between the 2 could be somewhere around USD 1,800 to USD 2,000 per CT.

So in this specific space, where it's very specialized high dollar revenue, I think the reimbursement is incredibly important. If it's something a bit more then you need to do all day, every day, [ they like ] breast density, maybe at the other end of the dollar revenue the test, yes, it good to have a reimbursement, but I don't think that will stop people from using it if it didn't.

Hi, Sam. Hi, Clayton.

My first one is just regarding that TAM consideration and 80%. I'd be keen to understand just how much price comes into consideration here.

And as you kind of pointed out, it's been noted that relative to other solutions out there that Pro Medicus is materially more expensive. But how should we think about this, whether you're too expensive or the other systems are too cheap?

And any other data points that you use to kind of like think about the pricing equation and how that plays into the TAM consideration?

Yes. I think the key part of it all is our offering is auto scaling or auto [ cycling ] because we charge the test because cloud is really charged for what you use.

The small guys are no longer a disadvantage because in the old days, they had to buy hardware. You couldn't buy a hardware [ or 1/3 ] of the server, certain software components that people would sell.

They have to buy the whole thing, but only use 1/4 of it. With us, you don't do any of that.

It's -- you only pay for what you use. The advantage in terms of benefits of the small guy is exactly the same.

It's just -- they get the same efficiency all right. So it's not over 5 million exams, it's over [ 800,000 ] exams, but they only pay for what they use.

So I think the auto fitting or scaling component of the offering is incredibly is fundamental for that end of the market. And as I said, they get the same percentage benefit same thing.

So that's why we've seen a number of those small and mid-sized IDNs like Lumus, Samaritan, Gundersen, South Shore, these are groups, where people thought are -- they would never be able to buy [ Visage 7 ], the Mayo clinics of the world, but clearly that's not correct. So I think the important part is the orders -- having orders sizing -- part of the equation.

And these groups need the sophistication just because they're small, it doesn't mean they're not sophisticated. So that's why we think our TAM is much bigger than the market most probably initially thought.

And my second question is just on Slide 18 of the deck under the One Viewer, I've noticed that we've got ophthalmology there. Just curious to see if there might be any progress on the development of other ologies outside of radiology, well, [ that's relisted about ] at this point in time?

I hope there is. So I think other ologies like the first [indiscernible] to radiology and a lot of its imaging method, nearly all of it uses radiology modalities, ultrasound, CT, MRI, et cetera.

The further you get away from that, it's more reflected [ light ] photos, videos. Ophthalmology, dermatology are very good examples of that, where they tend not to have an X-ray type advancement like imaging.

So yes, and we are ideally suited to that. And matter of fact, when we won LMU in Munich, the first [Technical Difficulty] was looking at videos of -- [ finding ] videos of operations for QA and teaching purposes, nothing to do with radiology initially.

So yes, we think it's ideally suited. And we're looking at various opportunities that have the same platform can be used across [indiscernible].

Good morning, Sam and Clayton. First question for me is just with regards to contract renewals.

Clearly, you've had a good track record of being able to increase price. But just thinking about, I guess, some of the contracts that are coming up for renewal over the next 3 years, a lot of them are -- I think almost all of them are on-prem.

Just interested in how some of those customers might be thinking about potentially shifting to cloud, given that, that's clearly a hot topic of discussion at the moment. And if that kind of does progress, what that also might mean for transitioning to a order product suite?

Yes. There's certainly -- there's a big move towards cloud in the industry.

So I think it's fair to say that a reasonable percentage of existing on-prem clients we'll look to cloud transition, as part of the broader transition of the enterprise, not all, but I think it's -- it would be a material percentage. And once they do that, then that certainly opens up the question of Archive because the way you store data in cloud is very different to the on-premise.

And I think a number of opportunities, where people had Viewer only on-premise will transition over time to Viewer plus Archive plus potentially Workflow in the cloud. So definitely something that we see will happen.

The timing really depends on a number of things like when the hardware comes to end of life, when the contracts to Archive are rolling off, et cetera. But definitely, I think we'll see more and more make that transition to cloud.

I think renewals or the timing of renewals and the pricing discussion of going from one price to a new pricing because of renewals, but sometimes just want to get -- get out of the way and that negotiation done. And possibly with the view to say, in the next 5 years or 6 years of this new renewal contract length, we will be moving to cloud, but let's have that discussion afterwards.

So get the renewal done with a view to move to cloud. And as Sam mentioned, and hopefully add on additional product from there.

Got it. That makes sense.

And then the other question was just a comment that you made about cloud opening up new geographies outside of the U.S. Just curious in terms of, I guess, how you're kind of approaching, which geographies is priority, like clearly, you've got a presence in Germany.

Is that kind of the main focus for now? Or are there other key markets?

And if there are other markets, will you need to add kind of extra staff to target them?

Yes. So the -- as I mentioned, Europe, and we've talked about this a fair bit.

There are a few things about Europe. One health is government funded almost across all the countries.

So there's a large bureaucratic layer. The opportunity each one is smaller.

But we think that with cloud, it will be a bit of an icebreaker that will open up these opportunities because the big cloud vendors not been able to work within Europe because of privacy rule -- rulings, where is now up in the U.S. government and the EU have come to an agreement, how they can progress.

And we think that there will be a movement to cloud in Europe. It's a few years behind the U.S., but definitely will be this movement.

So we've got 2 things happening. I think it takes away some of the [ impediments ].

Now, again, the cloud providers that they're massive, they are global, they're everywhere. And it will be maybe think of it a bit more opportunistic, but there will be some opportunities, where they will have a presence in a totally different geography, where they're looking at a solution within healthcare, and we may be part of that solution because technically, there's no reason we couldn't be anywhere.

It's just purely from a cost of sales point of view, we're not going to have people on the street in [ new group, new ] jurisdiction everywhere. So this would actually help us.

So yes, we're seeing very early blush of the interest across multiple jurisdictions, largely generated by cloud providers being in those jurisdictions.

Yes. I think we've shown in the past that on renewals, we've spoken about pricing has gone up 50%, 60% over the last 5 years or 6 years.

So it's not an exact 10% per year, but we have been able to gain pricing increase and mainly through referenceability and additional product. That trend we expect to continue, and it has done over the last 12 months, but we expect that to continue into 2024.

The other thing we've been able to do is with full stack solution, we were initially sort of 1 and 1 and 1 equals a lower amount, but we've now been able to gain higher price per click for all 3 components. So that adds up to a higher amount as well, which does -- it is moving quicker than inflation.

So we do feel that our pricing is beating inflation on a yearly basis. But we bear that in mind for each new contract.

Yes. I'll answer the second question first, 100% yes.

But pretty much every RFP has a cloud option for -- we're seeing more and more and more that's just mandate [ private ]. So being cloud capable is incredibly important.

There is cloud, cloud and cloud, as they say. The difference between us and our competitors is, we're 100% in the cloud and 100% optimize.

So the way cloud uses storage and compute is totally different to on-premise. So it's not like we've just taken something and forklifted into the cloud, which I believe the others have done or partially forklifted their operations into the cloud.

So definitely very different, very different technology stack, and the fact that we can complete a 100% cloud with absolutely no hardware on-premise even in the largest organization. I don't know if anyone else that can actually do that.

They can only do parts, which to me is not really cloud, it's like part cloud.

Yes. I think we answered the second part of that question on the KLAS, and we think our opportunity and a strong pipeline is a mismatch to that the ranking, but we've commented about that.

In terms of investment, we are investing more into headcount, and you can see that in our employee salary lines and in terms of the expenses. Advertising clearly gone -- we've increased that as well as our presence has grown through North America in many conferences, but obviously mainly in the RSNA conference in Chicago.

But we will be continuing to invest, and we don't feel like we're missing out on opportunity whilst we are accelerating growth. So headcount will increase.

We will keep investing in people, and that's our main one. We don't have a capital expense, where we need to redevelopment -- redevelop any of the product, both the RIS product here in Australia, but also the Visage 7 platform, we think we're investing in that, how we see fit and as more opportunities come to market.

I think we are incredibly well positioned. It is a market that is emerging.

I know there's a lot of press around it. But in reality, the market is really just starting.

So we put a few lines in the fire. And I think one of the key ones is the platform itself, that it can natively show the output of AI.

And that's what radiologists want. They don't want separate applications.

And that has been one of the reasons the market hasn't really taken off. They've all been separate.

I think we're also well placed in assessing the actual -- what AI is out there and how to actually develop it ourselves, as well as with our partners, so that we have a 3-pronged strategy there develop ourselves a lot breast density, work with some of our academic partners and their project support. Clearly, we haven't discussed them in any great detail because they're still in development.

And then there is third party and as I mentioned, the first one that's become public is Elucid, but we have been looking at a number of others, where they have novel [indiscernible] suited AI and how we can integrate that into the platform because those companies trying to bring in, in front of the radiologist by themselves has proven to be incredibly difficult. So we think we are incredibly well suited to benefit from the uplift in AI as and when that occur.

Yes. The corporate space is made up of largely 2 [ bits ].

The biggest part are radiology reading groups. So in the U.S., the fee for a radiology exam or diagnostic imaging exam is 2 part.

One is called the technical fee that's actually for taking the images, handling the equipment, the actual technologists or radiographers that take the pictures. The second part is what they call the professional component, which is the actual radiologist reading the exams.

And they are 2 separate fees, even if the same group does them. So there is this radiology reading group infrastructure in the U.S.

or groups, but we work for other parties for hospitals, Visage for large hospitals. And that has been an area, where we haven't focused on much in the past, but we're seeing some more green shoots in that area because people are realizing efficiencies, it's the one tool they have because it's purely around radiologist productivity.

So we're starting to see a lot more interest in that area, which is a different market segment to maybe a hospital or IDN.

Just a quick follow-up on cardiology. I was just curious to get your views on the TAM for that and the potential pace of uptake given that you had a reasonable installed base in radiology now?

Cardiology is multiple things. So there's cardiology ultrasound, which was the main stay in the past.

I think cardiac CT is rapidly increasing in terms of frequency and there's even talk that it should become a screening test because the biggest cause of mortality in the world is cardiac events. And this is a very on the rise technology as is cardiac MRI.

So the landscape moves a bit, but we think the TAM is roughly around 20% to 25% of radiology. The clear thing around it is that fewer tests, but higher dollar value.

Got it. And just on the uptake that you may see from that product when it launches given your installed base in Visage?

I think that main thing is to get 1 or 2 key clients using it and using them, as a reference site. And we're in that process at the moment with a number of clients using the applications that we've developed in slightly different ways, which is what we want, so that we can add a broader user base and experience.

And then it's a matter of really proving the value, it's value to the existing client base. But certainly, the thought process now is very different from what it used to be.

In the past, it was always separate siloed systems, and now it's the exact opposite. Can we get one system that covers multiple basis because just managing and securing systems is a big ask.

So the few [indiscernible] more cloud-based they are, the more secure they are. So that's, again, another thing driving.

Just wanted to thank everybody for participating today and the questions. If there are any other further questions from the analysts on the line, well, I mean, please feel free to contact us via e-mail.

And thank you, everybody, for joining us. Thank you.