- The most recent quarterly report from ImExHS (IME) has seen shares crash nearly 30 per cent
- While the company reported consistent revenue growth, its cash flows are what let it down
- Over the quarter, ImExHS recorded lower than expected customer receipts and higher than expected costs
- Nevertheless, following a $10 million capital raise, company CEO Dr German Arango says ImExHS is well-positioned for future expansion
- In early afternoon trade, shares are at a seven-month low of three cents each
Medical imaging company ImExHS (IME) has slumped almost 30 per cent today to a seven-month low following its latest quarterly report.
In terms of the raw figures, ImExHS’ report seemed respectable. Over the December quarter, the company’s annual revenue for 2019 came to $7.7 million — up 33 per cent over 2018.
Further, ImExHS’ annualised recurring revenue (ARR) increased 94 per cent over the year before, rising from 2018’s $4.4 million to $8.5 million in 2019. ImExHS said it has a 95 per cent contract renewal rate and generally prefers to secure contracted revenues over five-to-seven years. This means, according to the company, the $8.5 million ARR is so far a good indicator of the minimum revenue the company can expect over the next 12 months.
The report’s downfall, however, comes from ImExHS’ cash flows.
The company recorded a deadly combination of lower-than-expected customer receipts and higher-than-expected costs.
For cash inflows over the quarter, ImExHS took in $1.9 million in receipts from customers, down roughly 30 per cent from the expected $2.7 million. The company said timing issues relating to a $440,000 payment from a large client, as well as some lower than expected one-off sales, is to blame for the weak earnings.
As for costs, the company overspent by more than 60 per cent. ImExHS originally forecast spending of $2.6 million for the quarter, but ended up spending $4.2 million. Heavy admin and corporate costs and general working capital payments copped the blame for the extra spending.
Nevertheless, ImExHS CEO Dr German Arango said the company is positioned well for expansion into new markets despite a somewhat challenging quarter.
“We are working diligently to improve our internal controls and processes so that we can capitalise on the strong recurring revenue base we are building,” Dr German said.
He said the challenges from the past quarter provided some important learning opportunities for the company.
Looking ahead, the company currently has roughly $7.1 million cash on hand after a $10 million capital raise which was completed in December.
With roughly $5 million in spending estimated for the next quarter, this doesn’t leave ImExHS with a whole lot of room for error. As such, the company may be relying on its recurring revenues and a few new contracts to keep its head above water.
Just after midday AEDT, ImExHS shares are down 28.6 per cent and worth three cents each. The company has a market cap valuation of $35.27 million.