Pro Medicus $PME FY25 Earnings - Cust Rev $213m +32% ↗️🟢 - Rev $221m +33% ↗️🟢 - GP $220m +33% ↗️🟢 margin 100% +4 bps ✅ - EBT $163m +40% ↗️🟢 margin 74% +401 bps ✅ - Underlying Profit $158m +40% ↗️🟢 margin 72% +402 bps ✅ - Net Inc $115m +39% ↗️🟢 margin 52% +247 bps ✅ - OCF $111m +36% ↗️🟢 margin 50% +120 bps ✅ - FCF $104m +38% ↗️🟢 margin 47% +187 bps ✅ Revenue by Geography & Segment - North America $191m +36% ↗️🟢 - Australia $176m +34% ↗️🟢 - Europe $17m +16% ↗️🟢 - PACS $197m +35% ↗️🟢 - PACS (NA) $191m +36% ↗️🟢 - RIS $16m +3% ↗️🟡 Revenue by Type - Exam/license $158m +30% ↗️🟢 - Support/baseline $26m +17% ↗️🟢 - Professional Svcs $12m +18% ↗️🟢 - Archive data migration $17m +128% ⤴️🟢 Summary - Ultra-fast fully cloud native medical imaging on-demand streaming for radiologists with one viewer across all modalities - Software SaaS transaction-based model on annuity style offering - Forward revenue >A$948m/5 years - Customers sign 5-10 year contracts - 100% renewals to date, at higher price points, and many for longer terms - 10% share of US TAM (85% addressable), long runway of growth - 11 of top 20 US hospitals (Visage 7 PACS) - Highly scalable, no capex (HW), only SW - Continued expanding profit margins - Debt free, Cash $211m +36% ↗️🟢 13 Wins of A$870m (New, Renewals, Additions) - UCHealth A$170m 10Y New - Franciscan Missionaries of Our Lady Health A$20m 5Y Renewal - University of Iowa Health Care A$20m 5Y New - LucidHealth A$40m 7Y New - BayCare A$53m 7Y New - University of Kentucky Healthcare A$33m 9Y New - Duly Health and Care A$30m 7Y New - Duke University Health System A$15m 5Y Addition - Trinity Health A$330m 10Y New - NYU Langone Health A$24m 5Y Addition - Mercy Health A$98m 8Y Renewal - Large Australian Radiology Network A$32m 5Y Renewal - Lurie Children's Hospital of Chicago A$5m 7Y New 1 | Strong results - growing faster and much more profitable than competitors In terms of our results, I think it's fair to say that all of our key financial metrics moved materially in the right direction revenue up just under 32%. Pro t after tax, approximately around 40%, underlying EBIT around 40% and our margins, which are more than any of our competitors by multiples in the industry went up from mid 72% to 74%. 2 | Record wins with 7 contracts with A$520m minimums, renewed 2 large contracts A$130m, and A$39m of upgrades In terms of the summary of the year, it was another record year by any measure. We won 7 contracts totaling $520 million at minimums. We also renewed 2 large contracts worth $130 million, and we had upgrade for additional products with existing clients for a total of $39 million. So in all sales areas, new sales, renewals and upgrades, we made material strides. We also did 7 implementations 3 | See potential upside with renewals So there's potential upside with every deal. The likes of our 3 core products, work flow we released a few years ago. Again, it's been very popular. We've been able to sell that back to NYU and to others like Yale, but also all of that new opportunities or the majority of them take the work ow as well as archive is part of full stack solution. Clearly increases our total contract value. 4 | Updated TAM of $670m, think they can address 100% of TAM from a product perspective and 85% from a commercial perspective (not 15% tail), though industry consolidation could be a tailwind The TAM, we've updated our figure from $650 million to $670 million based on growth rate of roughly 3% in any 1 year, the industry grows between 2% and 3% organically. We believe we are able to address 100% of that TAM from a product perspective and about 85% from a commercial perspective. That is the tail of 15%. Some of the opportunities are almost probably too small to address one-on-one. But that tail is shrinking as a lot of the smaller people are being merged into some of the larger health organizations in their area. Including a recent sale of few Colorado, which came just after 30th of June, we estimate that current penetration is a bit up 10% and growing. So whilst we have a material footprint, we still think we have a very much addressable runway. 5 | Legacy systems still have 90% of the market share, Pro Medicus with 10% market share is the only real leader able to compete to disrupt legacy incumbents 90% because we have 10 -- that's probably the most [indiscernible]. And bear in mind, some of them have over the years developed more sophistication around how they push the images around. But again, that's coming to its high watermark as well. So we really don't believe anybody else has been able to do this on demand regardless to push the bar in the far there in red someone second. We don't believe anybody else has been able to crack that nut except for us. 6 | Their IP, software was built from the ground up, not using existing toolkits So VISAGE was built from the ground up in Berlin, and it was built without using an existing toolkit. They can't get a sort of Microsoft toolkit and get to 70% out of the box and then refine the rest. So -- so those that have got existing systems, it's a really, really, really big job to bring out a new system and then not only that, get it FDA approved get it hard and get it scaled and then transition clients to it. But as far as we know, and I think we have a pretty good view over the market, no one's been able to do that. 7 | Pipeline is the strongest ever been, even after Trinity is now a customer Clearly, the pipeline is dynamic. We're standing up at the AGM in November. I think the pipeline was the biggest it's ever been. We had all of the sales that occurred within the next 3 to 4 months, still in the pipeline at that time, a week later, clearly, Trinity transition from pipeline to contract and then all the other contracts. But I'm pleased to say that as a result of RSNA '24 and other opportunities, the pipeline has been continually refreshed. 8 | A$300m win 10Y deal with Trinity is the largest of such win ever, and they are huge in 26 states The largest being Trinity at $330 million. We think it's most probably the biggest contract led in the industry software only. I talked about Trinity that came just after the IDN. It is one of the top 10 IDNs in North America. I think they have facilities in 26 states. Just to give you an idea of the size, they have committed to us for 10 years for the full stack and will be fully cloud upon it. 9 | Highly scalable model with a lot of operating leverage, sell only software, no hardware, cloud fees are passed and not part of financials, with profit margins continuing to expand So the model that most of you are familiar with, we believe it's highly scalable with a lot of operating leverage. We don't sell hardware. Cloud fees measured o below the line, so not part of any of these revenue figures. We charge for our training and implementation and travel once the contract is signed. We have maintained a highly contained cost base. And as a result, our margins, as I mentioned, would be industry-leading by long shot, continued to grow in the full year. 10 | Contracts are typically signed with minimums that are 80% of volumes, with material upside if they just do the same volumes, their clients tend to grow faster than the industry which then flows back to the higher transaction volume So the transaction model, again, we talk about a concept of a minimum if we have a new opportunity. They tell us how many examinations they did prior 12 months. We usually get them to commit to on average around 80% of that volume. And that's what we call the minimum. So each of these contracts that we announced has material upside built into it even if they just do the same volume as they did the previous 12 months, which invariably they do. And we've noticed that our clients as a whole grow well above the industry average. So all that growth then gets captured an additional transaction volume. 11 | Forward revenue grew from A$600m+ to A$948m, and see upside to this The forward revenue has increased materially with the recent sales. It's a 5-year window. It's moved up from 600 -- low $600 million to $948 million Again, these are minimums. We see upside as client examinations continue to grow, and we see this very much as an annuity style revenue base. 12 | Run rate for renewals remains at 100%, conversations are similar to the past Again, I won't go into too much our run rate for renewals is -- remains at 100%. But yes, we've sort of started with some of the ones more towards the front of the year approaching that conversation, but it's pretty much what we've had similar sort of conversations to what we've had in the past. 13 | Pro Medicus will not win all the time, and when they lose is typically to customers with lower budgets, will win customers who appreciate their premium value and are willing to pay for it So obviously, there are times, as you know, that we don't win every single opportunity, pretty much 100% of the time is because of the perceived cost. I think that's actually the wrong way to go because you spend the money, you don't get the full result. But clearly, we seem to be winning those arguments more than we're losing them and hence, the reason for the additional sales. But yes, there is a feeling and maybe this big beautiful bill will sort of heighten that. We haven't seen that, but there has been a feeling that hospitals, particularly post COVID became unprofitable, and now they're sort of tightening their belts and optimizing and is one of them. And if they use us, then we believe we give them in the result. 14 | Will not have 100% hit rate, but will outsell most of competitors altogether, typically lose on price, but some customers have come back later Look, we will never have a 100% hit rate. I wish we did. That would be unbelievable bearing in mind that we simply outsell most of our competitors put together. The ones that we -- sometimes we lose them early on, they just look at price and you've got to be kidding. Having said that, it's not I'm heard of for those people to come back a few years later. And sometimes people are just look at something and they feel their budget is x. So there will always be some that there were other excluded from fairly early on or people look at price. Sometimes there's the concept that maybe the opposition that have a broad range of product, which I hope that believes the case. So we're all -- we're not going to have 100%. But clearly, our recent hit rate has been the highest we've ever had. 15 | Really focuses on the tier 1 academics (who are willing to pay for the value), and they are multiples larger than their nearest competitor In terms of who we service, many of you already know, we service pretty much all the markets or the segments of the market in the academic medical centers or we call Tier 1 academics. We do 11 out of the 20 -- top 20. Now these are usually all academic centers because they rated on clinical excellence and research. But I think we do at least 2, if not more multiples or higher multiples than our nearest competitor. 16 | They compete on value, not price There's not any particular rate limiting factor. It's purely in terms of what RFPs come to market. It's -- it's not that we don't have capacity or other bits and pieces. It's purely the number, and it's purely, as I said before, putting our best foot forward and showing the value that we have rather than just competing on price, which we don't do. So there are no particular limiting factors at this point 17 | They don’t do rolling 1 year contracts, only do longer term 5-10 year contracts We have some. It's very hard because some of these systems that have other vendors will sometimes just roll over a contract for a year. We tend not to do that for our contracts and renewals, as you know, longer term. So we had some insight, but it's not a clear crystal ball. I don't think anybody has that, and we try and remember that certainly at rate try and encourage those people to come and see us. 18 | Competitors use the standard legacy technology of compress and send So what makes us different? We think that all of our competitors use a standard legacy technology of compress and send, where the files come from the scanner, they compress as much as they can be without losing any fidelity and that led and sent to workstation that is highly configured unpacks the lings all the enhancements in manipulation locally on that workstation. 19 | Pro Medicus’s proprietary real-time streaming technology is one second versus minutes for competitors We, on the other hand, have a unique and proprietary streaming technology where the fast come to a central spot today that's cloud all the 3D and advanced visualization is done in near real time, and we actually stream the pixels we don't actually move far. And this causes a delta, particularly around speed that can sometimes be many orders of magnitude. So we are one second in most exams, whereas in some cases, if compression technology was used. That could be many minutes as a comparison. So it is a huge differentiator particularly important as organizations get larger and more distributed and particularly now that pretty much every radiologist want some capability to work at home for part of the week and they need the same functionality and speed the payers they did within the hospital. 20 | Rapid implementation in weeks and months allow customers to realise significant ROI quickly, versus the 2-2.5 years for competitors As an example, we completed that go-lives for Vale within a 3-month window. And prior to Trinity, they were our biggest client. So give you an example how we are can do this seamlessly and quickly, which we believe is a signi cant factor in reducing the barrier to change because previously, companies would take 2, 2.5 years to complete an implementation where we do it in a matter of weeks or months. So ROI, we position ourselves as a premium product in the market. We believe we provide signi cant return on investment multiples of what the clients spend with us in 2 areas. One is infrastructure and unparalleled clinician efficiency. We quote between north of 25% radiologist improvement, which we've been able to log in a number of clients. 21 | Pro Medicus is the only one can do 100% cloud at scale And not only that makes the implementations easier, so we don't have to do with third parties. Again, it is a transaction-based model with outside One of our key strengths is cloud. We are -- we believe, the only company that does 100% full cloud at scale. So there is no hardware on-site anymore if there is no back hardware that book gets decommissioned and it's 100% in cloud, as you would expect. We have been able to show it suitable for all size implementations and some smaller IDNs that we do all the way up to the groups and the like of [indiscernible] with where we're talking about millions exams petabytes per year. 22 | Customers will shout cloud and AI, its just marketing hype noise, but none has a truly 100% cloud-based offering like theirs, and they have managed to implement In terms of cloud, I'll be honest. You go to RSNA, everybody has those exact 2 words on every single stand cloud and AI. Reality is we don't believe that any of our major competitors have a truly 100% cloud-based offering. They talk about hybrids where you have to have the system on site. To me, that's noncloud, cloud upcoming. I mean pay defeats the purpose. So as far as we know, whilst there's a lot of marketing hype noise around it. We believe we're the only ones that can do true cloud at scale. And as evidence of that, we haven't put it on premium implementation in the U.S. In the last 4 years and all the small to biggest have been cloud. So again, AI is something similar that everybody says they have AI and various bits and pieces, but we don't know anyone that's taken the march on AI and on the market by any means quite the opposite. 23 | They can support all of the 3 largest clouds, AWS, Azure, and GCP and being agnostic is a major advantage I think the important thing about cloud is the market has shifted drastically towards cloud over the last 3 to 4 years and maybe a bit longer. For us, we are agnostic. In other words, we worked well in all through cloud environment, AWS, Azure and Google GCP. So far clients have an existing agreement with 1 of the 3. We enabled them to use that agreement because they make commitments that they want to use, and we allow them to do that without any delta between the 3. So we see that cloud and the ability to work in all 3 as a major advantage going forward. 24 | The AI that they do is involves much more clinical validation that a general LLM one The AI that we are also looking in other things like the breast cancer detection with NYU is clinical. And then you have to go through quite a rigorous clinical validation process. You can't just do it and say, well, we try it on 5 best mammography exams and therefore, it works, has to be quite a rigorous clinical process behind it. And that's actually not only time consuming, but you need willing partners, okay, at the hospitals to do that. So I think there are 2 streams of AI in our space, generally in where if it's going to help and do conclusions for a report. 25 | Focus remains on US and Europe, but largest focus remains on US (larger and private, cloud), more bang for the buck in terms of effort relative to the Europe (smaller, government, less cloud) So there are really 2 markets we look at as blocks we could think of them as 3 now. So Europe U.K. and Asia as a block, excluding China. And at this point, Japan because Japan has its own regulatory cycle and very different dynamics to maybe places like Korea and Taiwan. We have said in the past and we still say U.S. is the biggest market, then it's about 60% of health care spend globally is spent in the U.S. That's how big it is. Having said that, we've had some success in Europe, particularly in Germany, which is our base. And we're looking at the possibility of extending our capability there. It's not a technical thing. It product will work anywhere it's purely market dynamics. Having said that, the cost of sale is much higher in Europe. Each opportunity is smaller. Each opportunity is pretty much government run. So a lot will be okay, a lot bigger tenders. So the bang for back in terms of return is not there. as it is in the U.S. But we are seeing slowly a change, particularly as cloud vendors come into the mix because currently, there's pretty much 0 cloud in health care in Europe and that may help us. So our message, I think, is we maintain U.S. first. That's where the biggest opportunity is we've got a material foothold of 10%, but huge runway and that's where we see the least impedance to doing business. But clearly, as things change, particularly with cloud, we can see the other markets, Europe and Asia possibly opening up in the future. 26 | Don’t see them going into China in the near-term, not actively looking at it In terms of China, we don't have any current aspirations for sales in China due to a whole lot of reasons. But could it be used technically, absolutely can be used anyway. It's purely because there are nuances around the Chinese market that we currently feel we should so part of the -- not a region that we're actively looking at, at this point. 27 | Breast imaging with now 3D from 2D is going to have much larger files and will be a massive problem for the industry (and opportunity for Pro Medicus instead) Breast imaging is usually the canary in the coal mine. In the past, 2D mammography was a few hundred megabytes each itching. We have now 3D, which is called digital breast Tomosynthesis, where we're now talking about 3 gigabytes per exam and in high resolution, they can go as high as 6 gigabytes, for example. So the data sets are increasing massively with all of the new modalities. 28 | Cardiology has been implemented at UC Health Colorado, see the cardiology market as material, 15-20% of vale of radiology Cardiology, as I said, at the first site was implemented very successfully now with UC Health Colorado to follow in this financial year. Yes. So cardiology works with the same equipment as radiology. The one that was always deemed to be cardiology specific with ultrasound of cardiac echo, which is the first option that we put forward. We are seeing a lot. A significant increase in cardiac CT as a screen test instead of angiography that it's replacing in a lot of places. Then there's cardiac MRI and cardiac nuclear. So with all of those together, we think depending on the organization that they took all 4 could be between 15% and 20% of radiology. There are far fewer tests done. But each test is more expensive in terms of the -- what you can charge the industry charges more for cardiology because they're more involved. So if you get all of them between 15% and 20% in new Colorado, what we did was the key piece of ultrasound, and that was north of 10%. So it is material. 29 | While cardiologists are slightly different to radiologists (100% of day is acquiring and diagnosing images), the dynamic should still be similar You have a slightly different audience, as I mentioned, with ultrasound because we're dealing with cardiologists where image and acquiring and diagnostic image is part of their day, whereas the radiologist, it's 100% of their day. But having said that, once you build the base of referenceability then clearly, the ability to sell after that gets easier. So we think the rst step was getting it out, the next step getting our rst client. We think we've taken another step with this new sale. And again, we think that, yes, it should have a similar dynamic to what we did with radiology. 30 | Will release digital pathology by FY26, think pathology is like radiology 20 years ago from film to digital We will be releasing digital pathology at end of this calendar year. I think the pathology market is where the radiology market was about 20 years ago. Radiology, as you went from film to digital. The use case and the imperative of pathology to do so is slightly different because the Velko pathology is not a niche. It's what we call biochemistry like someone's cholesterol or hemoglobin count. 31 | Radiologists change their field of vision, pathologists use microscope, do not change their field of vision But the difference between the radiologists and the pathologists looking at an image is the radiologist has an image and they move their head to see the whole image because it's on a big screen in front of them. In pathology, pathologist looks down a microscope. So they actually moved the slide under the microscope. They never moved their field of vision. So the thing you can actually do with mentioned pros exactly that, that the gobbles can sort of almost be like this immersive microscope here with your hands, you move the image in front of your eyes. 32 | Sees pathology as an emerging market, and sizing it to be a bit less than ⅔ the size of the radiology market (which is huge) Having said that, the big drivers for digital pathology are around and the ability, pathology is becoming very subspecialized much like radiology has, and you can't have a melanoma specialized pathologists that can be single point that you do it. So I think the ability to remotely agreed this become a little bit more acute in pathology than it was in the past. I think the market, we size it may be a bit less than what you think, but of that, to be honest, I don't think anyone really knows and it also will end on whether the organizations will scan their historical slides because of these glass slides that by all, they still have to keep margin small. There's 6 small gas slides on average per test. But I think a few things about pathology, we are seen as an emerging market. 33 | Think they are well positioned with pathology because of huge files and color, hard to predict exact pace of adoption, but directionally should expand And we think our technology, particularly with cloud and the storage because pathology files is huge because they're color and I believe, platform is well suited. And as I said, I think it is an expanding market. So the figures we have may be slightly smaller than yours, but I don't think anyone really knows because it it's nascent in terms of overall adoption, but we think that will speed up pretty quickly from there.