Pro Medicus 1H25 Earnings Call Highlights

Pro Medicus (ASX: PME) shares slipped 3.2% on Thursday, after the company reported a mixed first-half result that failed to decisively beat lofty market expectations.

Earnings Summary

• Revenue up 31% to $97.2 million vs $99.7 million consensus (2% miss)

• EBITDA up 40% to $72.8 million vs. $76.2 million consensus (4% miss)

• EBITDA margin up 500 bps to 75% vs 76% consensus (1% miss)

• Net profit up 45% to $51.7 million vs. $50.5 million consensus (2% beat)

• Interim dividend up 47% to 25 cents vs. 24.3 cents consensus (3% beat)

Earnings Call Highlights

The below topics have been answered by CEO Dr Sam Hupert and CFO Clayton Hatch.

1H25 earnings: "Definitely a record first half, not only in terms of all the financials, but in pretty much every other key metric. Revenue was up 31.1%, profit after tax up 42.7%, EBIT margins grew from high 60s to 71.9%. Cash and other investments increased 17.7%. The company remains debt-free and paid out a record half-year dividend, up 38.9%, fully franked."

Pipeline and refresh rate: "Our pipeline continues to be strong despite a slew of recent conversions from pipeline to contract. Our forward revenue has jumped materially to $894 million over five years. This only includes five years or roughly half of Trinity because it’s a 10-year contract, so there is still upside."

AI strategy: "We continue to make good progress with other ologies and AI, and we believe the results have set a strong base for growth in FY25 and beyond."

Revenue growth and outlook: "All-in-all, a healthy growth across all the sections of our revenue. Transaction revenue continues to grow materially as new contracts layer on top of existing ones, and our existing ones continue to grow above industry average."

New contracts: "We announced our biggest deal to date with Trinity—at minimum, $330 million over 10 years with room for growth. Other key deals include Mercy ($98 million, 8 years), NYU Langone ($24 million, 5 years), and Duly Health ($30 million, 7 years)."

Changes to competition and threats: "We are still 100% convinced we’re number one in the three key areas that differentiate systems—speed, functionality, and scalability. Most RFPs now coming to market stipulate cloud as the platform, and we have a huge strategic advantage there. Legacy systems struggle with data explosion, particularly with breast imaging, where our technology has a significant edge."

H2 outlook: "We see a lot of potential upside that provides us an annuity stream with far greater predictability. We believe in operating leverage, and our margins continue to grow as our footprint increases."

US market and international expansion plans: "The US now comprises roughly 90% of our revenue and is growing. We are also expanding in Canada and continue to see upside in Australia through long-term RIS contracts."

Cloud adoption: "Cloud is a key factor in our market. NYU and Duke have both transitioned from on-premise to Visage 7 OA in the cloud, adding $39 million of additional revenue from existing clients. Cloud is also crucial for private practices, a growing segment for us."

Renewal rates: "We maintain our record of 100% renewals to date, all at a higher price point than the original contracts and many for longer terms. This, plus upgrades from existing clients, confirms confidence in our product."

Analyst Q&A Highlights

How does the current pipeline compare to six months ago in terms of size and conversion rate? Has the recent strong contract win rate been matched by a consistent pipeline replenishment?

• “We've had an unprecedented amount in a two-month window, which is a plus.”

• “Following RSNA, there were a number of existing ones that came to see us, but actually a material number of new ones that have subsequently followed up with us.”

• “Whilst we don't give an exact number, we're very pleased with the replenishment rate and how the others in the pipeline are still progressing.”

How does the company view AI players like Harrison.ai? Is there a potential for partnership, or are they considered competitors?

• “Definitely not a competitor.”

• “We do see AI and the algorithms coming from three buckets: ones we develop ourselves, ones we co-develop with research partners like NYU, Mayo, Yale and others, and then third party.”

• “We think we have a compelling proposition for those third-party players.”

• “Yes, they certainly could be one of those parties, but definitely not a competitor.”

With major contracts like Trinity and others coming online, how should we think about revenue growth between the first and second half? Will it accelerate?

• “Yes, it will.”

• “Baylor Scott & White was completed in September, so we had three months' worth of revenue in the first half. Clearly, we'll have six months' revenue for that in the second half.”

• “All the new contracts, their revenue won’t start until first half 2026.”

• “We anticipate good second half and an even bigger step-up into 2026, as the contracts we’ve just announced will start coming on stream.”

How should we think about revenue phasing for the Trinity Health contract? What’s the split between different product components, and how will the revenue ramp up?

• “Viewer is around 60%-65%, archive around 25%, and work list the remainder.”

• “A lot of the sites will be complete by the end of the calendar year, and then there are two hospital groups that are a bit further out.”

• “Data migration will start in June or July, so there'll be virtually no revenue within the financial year but more into FY 2026.”

• “The bulk of Trinity will be relatively linear over that 18-month period, and it may be accelerated.”

How much of the pipeline has been converted in the last 6 to 12 months compared to previous periods? Are you converting a higher proportion of potential customers?

• “The last two months sort of eclipsed everything because we had unprecedented conversions.”

• “There was about $485 million conversion at minimums between pipeline and contract.”

• “We’ve never converted as high a dollar value in a six-month period as we have now.”

• “We’re winning at least the same proportion, which is 80%-plus.”

• “We're starting to take market share in this third bucket [private radiology space], which we weren’t really playing in before.”

What’s the latest update on military tender projects?

• "They're still progressing, but nothing new has come out. They're still talking about RFI, RFPs."

• "We have someone on-board… an expert in government and government sales and speaking government, as we call it, navigating all their various ordering and contractual systems."

Has there been any pricing pressure from clients due to inflation or annual price increases?

• "Well, we always see pushback… no one wants to pay more, they all want to pay less, that's a normal dynamic."

• "We are seeing a greater understanding of the ROI… My biggest cost is radiologists. And if I can make them X percent more efficient, I'm home and hosed."

• "We'll always have some that will look at price and do a pilot and then begrudgingly say, yeah, I'll go to you… but we're going to see more and more of that."

This article was generated with the support of AI and reviewed by an editor.