How IMEXHS’s Mexico Tender Win and Cost Cuts Are Driving ARR Growth
IMEXHS Limited reported steady Q2 FY25 revenue with an 11% rise in annual recurring revenue, supported by a $2.6 million capital raise and operational advances including a major Mexican contract win.
- Q2 FY25 revenue stable at $6.6 million, slight 3% decline year-on-year
- Annualised Recurring Revenue (ARR) up 11% to $32.8 million
- Completed $2.6 million capital raising to fund growth initiatives
- Won significant public tender at Mexico’s Neurológico de México adding $206,000 NARR
- Cost reduction programs including AI automation underway to improve profitability
Financial Performance in Context
IMEXHS Limited (ASX, IME), a cloud-based medical imaging software and radiology services provider, delivered a largely stable financial performance in Q2 FY25. Revenue came in at $6.6 million, down 3% compared to the prior corresponding period, though excluding one-off sales from the previous year, revenue actually grew by 1%. The company’s underlying EBITDA remained modestly positive at $0.2 million, consistent with management’s expectations.
Annualised Recurring Revenue (ARR), a key metric for subscription-based businesses, rose impressively by 11% year-on-year to $32.8 million, reflecting the growing base of contracted recurring revenue. This growth was driven by both the radiology services segment and the software business, with software ARR increasing 20% in the half-year to $11.9 million.
Operational Highlights and Market Expansion
Operationally, IMEXHS made significant strides in expanding its footprint and strengthening its partner ecosystem. The company secured a notable public tender at Mexico’s Neurológico de México, the country’s leading neuro-sciences institute, adding $206,000 in new annual recurring revenue. This contract underscores IMEXHS’s growing influence in Latin America’s healthcare technology market.
The partner program was expanded to 25 high-performing partners across 15 countries, contributing over 40% of software revenue in Q2, a substantial increase from 15.5% in FY24. This channel expansion is a strategic move to accelerate international growth efficiently.
Cost Management and Profitability Initiatives
Facing challenges from Colombia’s unsettled healthcare sector and working capital pressures, IMEXHS has implemented a rigorous cost reduction program. Initiatives include AI-driven automation of call centre workflows, cloud storage and compute cost optimizations, and selective headcount reductions. These measures aim to improve profitability in the second half of FY25 and beyond.
The radiology services division continues to focus on pricing discipline and portfolio management, exiting contracts that do not meet margin targets or have payment issues, which has constrained growth but protected margins.
Product Development and Future Outlook
Product enhancements remain a priority, with ongoing rollout of the Aquila+ Radiology Information System and upgrades to the Patient Portal and Universal Viewer. New features such as smart study routing and BI-RADS compliance are designed to improve workflow efficiency and regulatory adherence.
Looking ahead, IMEXHS expects revenue growth of 4% to 6.6% for FY25, underlying EBITDA to increase to between $1.3 million and $1.6 million, and to achieve positive cash flow for the year. The company anticipates stronger performance in the second half, supported by pipeline expansion and improved sales conversion.
Bottom Line?
IMEXHS’s steady ARR growth and cost discipline position it well for a stronger H2, though healthcare sector risks in Colombia warrant close watch.
Questions in the middle?
- Will the major contract under negotiation materialize and how will it impact revenue?
- How effectively can IMEXHS manage working capital amid Colombian healthcare uncertainties?
- What is the timeline and expected impact of the Aquila+ software rollout on sales acceleration?
