Pro Medicus boosts profit by more than a third

The imaging IT provider boosted its full year profit by more than a third, but its CEO says there is still a huge runway of growth ahead.

Pro Medicus CEO Sam Hupert.

Pro Medicus says its customers are growing well above the industry average, boding well for the future after the company announced its full year profits were up by more than a third to a new record.

The imaging IT provider said on Wednesday full year revenue from ordinary activities came in at $161.5m, up 29 per cent, while net profit was $82.8m, up nearly 37 per cent.

The company remains debt free. Pro Medicus shares surged 6.6 per cent on the news to $140.30.

Chief executive Sam Hupert said while maintaining growth rates of more than 30 per cent “gets harder as the base gets bigger’’, the company was confident it could maintain its trajectory.

“Our clients are growing well above industry average and with our transaction-based model, if they grow, we grow,’’ Dr Hupert said.

“We also had a record year in terms of new contract wins that are now coming on stream, so we expect a material step-up in transaction volumes from these clients in the FY25 year.’’

The company will have fully implemented its largest contract to date – with Texas-based not for profit Baylor Scott and White – by September.

“And then there is the prospect of new sales which … are long term contracts that adds to our base of recurring revenue,’’ Dr Hupert said.

Dr Hupert said the US now accounted for close to 90 per cent of revenue, but at the same time Pro Medicus had only captured about 7 per cent of the total addressable market, “so there is still a huge amount of runway ahead of us’’.

Dr Hupert said the company’s growth was down to several factors, including its proprietary streaming technology, its ability to implement its software “in a fraction of time compared to our peers” and its cloud expertise.

“We are also benefiting from the increasing network effect as a result of our growing client base not only in terms of the numbers of clients, but also who they are,’’ Dr Hupert said.

“We now service 11 of the top 20 hospitals in the US … far more than any of our competitors.’’

Pro Medicus’s underlying earnings margin increased from 67.2 per cent to 69.5 per cent over the most recent financial year, which was “multiples of our peers’’, Dr Hupert said.

“We thought that the initial bump in margins during the Covid-19 pandemic – because we didn’t have major expenses in travel and trade shows – would be temporary and

once things settled would gravitate to a midpoint between Covid and pre-Covid levels, but we were able to maintain these margins after the pandemic and have been able to steadily increase them year-on-year.

“This year being another case in point. We believe these margins are sustainable and do not

expect them to deviate materially in either direction from these levels.’’

Pro Medicus won nine contracts during the year, worth a minimum $245m, ranging from boutique up to the Baylor Scott and White deal.

“As we have demonstrated, our solution can work across all segments of the market from a two person radiology practice in Melbourne all the way to the largest, most-sophisticated healthcare enterprises in the US such as Mayo Clinic,’’ Dr Hupert said.

“Being able to address such a broad range of opportunities is incredibly important because it gives us a much larger total addressable market.

“Unlike our competitors, we are not confined to a single segment of the market.’’

Dr Hupert said the company would continue to focus predominantly on the US for now, with Europe and Asia a number of years behind in terms of healthcare IT.

On the competition front, Dr Hupert said legacy vendors have struggled to transition to cloud technology, with some using hybrid systems, which was “In my view … the worst of both worlds’’.

“We think we are in a unique position.’’

Macquarie said it was a better than expected result, driven by lower costs and better margins.

“More generally, we see scope for increased penetration of the US addressable market across various customer types, with upside to our forecasts from the commercialisation of new products and expansion into new geographies,’’ Macquarie analysts said.

RBC Capital markets said net profit came in at 5 per cent higher than consensus..

“We won nine contracts, with a minimum total contract value of $245m, ranging from boutique opportunities such as the Florida-based Nicklaus Children’s Hospital through to our biggest sale to date in Baylor, Scott and White – the largest not for profit in the state of Texas.

“As we have demonstrated, our solution can work across all segments of the market from a two-person radiology practice in Melbourne all the way to the largest, most-sophisticated healthcare enterprises in the US such as Mayo Clinic.

Pro Medicus will pay a 22c per share fully franked final dividend, up from 17c a share last year.

Originally published as Pro Medicus boosts profit by more than a third