Orion Health reports interim results

Orion Health reports interim results, achieves 26 percent increase in revenue on strong growth across key markets

Results overview

Orion Health Group Limited (OHE:NZX/ASX) reported its interim results for the 2016 financial year today, with a 26 percent increase in revenue, period-on-period, to $102 million. Recurring Revenue increased across the same comparative period from 30 percent to 41 percent of total revenue, tracking nicely towards the company’s goal of 50 percent. Annualised Recurring Revenue grew to $86 million.

The net loss before tax was $25 million, up from $21 million in the same period last year. The net loss after tax for the period was $27 million. This is in line with the company’s expectations as it continued to invest in research and development. Cash and deposit balances at 30 September of $77 million, representing an $18 million reduction in the past six months, were also in line with company expectations. The company has benefited from movements in the New Zealand dollar against other currencies.

Orion Health’s software now manages over 90 million patient records around the world.

CEO Ian McCrae said the company was pleased with performance over the period. The business recorded strong growth in nearly every region it operates in, managed costs, continued to invest in research and development and stayed on track with its growth strategy. We see similar levels of growth in the second half of the year.

It also ensured it was well placed to take advantage of an accelerating move to “Precision Medicine”. This is the emerging model of medicine where patient care is customised based on complete patient information and is an area where Orion Health technology is well positioned as a leader.

Markets by region
North America enjoyed the strongest growth in dollar terms, with a 37 percent rise in revenues compared to the same period last year. This was driven by Managed Services growth of 138 percent, primarily the result of deploying several new contracts and continuing to drive revenues from existing customers.

The company secured notable new contracts, including with the United States Department of Defense as part of the Leidos syndicate and enjoyed new revenues from the state of Oklahoma, the province of Ontario in Canada and a large integrated clinical network in Tennessee.

One of Orion Health’s biggest customers, Cal INDEX, founded by two key health insurers to manage a state-wide health information exchange across California, also recently signed its first major customer, with more expected to follow in the near term. This milestone is the start of the next phase of the journey for Cal INDEX. It is important for Orion Health because our business grows with Cal INDEX, as they increase the number of patient records held in the health information exchange.

Over this first six months of the 2016 financial year, the company has enjoyed strong sales in Europe, and in emerging markets in the Middle East. EMEA revenue growth of 81 percent was largely derived from winning significant contracts in the United Kingdom, including contracts with CSC for the Trafford Clinical Commissioning Group in Manchester and Uniting Care in Cambridgeshire. Orion Health also signed a strategic contract with the high street retail pharmacy chain, Boots UK Limited, to deliver in-pharmacy care coordination services across 2,400 outlets in the United Kingdom. The company also won a contract to deploy its open platform technology to a large public healthcare provider serving several million patients in the Castilla y Leon province of Spain.

Operating revenue in the Asia Pacific region declined compared to the same period last year, mainly as a result of the sale of significant one-off perpetual licences in New Zealand in the prior period. In Australia, the company’s new leadership team focussed on customer deliveries and building new business opportunities.

The company achieved strong sales growth across Asia, with a successful go live of its Enterprise solution at The Medical City hospital in the Philippines and securing a contract to provide a complete in-hospital solution to the VINMEC International Group, which operates six premium healthcare hospitals in Vietnam.

Margin Improvement

Margin in the regions increased $3 million or 32 percent when compared to the same period last year. Managed Services is the fastest growing area of the business. In the second half of the last financial year, Managed Services margin had fallen to 3 percent, however margins have started to recover in this period. Orion Health is investing in new cloud based delivery models and automated deployment to support this expansion and improve long term margins. The cloud solution is expected to progressively provide a significantly lower cost footprint per customer, a faster deployment and easier upgrades. Investment will continue over the next 18-24 months whilst we host our existing customers and migrate them to the cloud.

Leadership

We are continually seeking to add to the breadth and depth of leadership at Orion Health as part of ensuring we have the skillsets needed to drive a rapidly growing global business. Across the business this year there have been improvements in leadership capability and experience including the addition of Darren Jones to lead APAC. Darren brings 30 years’ experience in Healthcare IT across APAC and EMEA and will be a valuable member of the executive leadership team.

Another change is that Paul Viskovich, President for North America, is leaving Orion Health and will be replaced by Wayne Oxenham. Viskovich has worked for Orion Health for 18 years and has made a significant contribution to the business, being instrumental in building Orion Health in the North American, Australian, and European markets.

Oxenham, currently EVP EMEA, will assume the North American leadership role early in 2016. Oxenham is a key executive of Orion Health, having excelled in a wide range of roles across the business over the past 12 years, including global services, product management and sales. He has grown the EMEA business significantly since his time in that region. Oxenham will be replaced in EMEA by Jonathan Selby, an experienced industry executive who was responsible for leading InterSystems’ business in the United Kingdom between 2010 and 2014.

In addition to this, the company has appointed Johan Vendrig as CIO and Susan Nemeth has joined as VP Finance.

Research and Development

Orion Health also ensured it is well placed to take advantage of a rapid move towards Precision Medicine, the emerging model of healthcare where personalised medical care is based on complete patient information. Orion Health technology is well positioned as a global leader in this new area.

CEO Ian McCrae says, “we are continuing to invest in R&D to maximise the huge opportunity we have identified for Orion Health. The healthcare industry is quickly transforming and changing to keep up with technological and consumer demand. Increasingly, the focus is moving from treating conditions, to treating individuals and when it does Orion Health will have the modern, scalable technology to deliver and enable it.”

“We want to position ourselves to be at the forefront of delivering the next step in population health management – Precision Medicine. Where population health management is the “who”- defining which patients are high risk and need particular attention, precision medicine is the “how”, enabling the determination of exact prevention and treatment plans that will specifically work for an individual. This is an exciting new area of healthcare.”

Further comment from CEO, Ian McCrae

“We are really pleased with our progress in the first half of the financial year. Our business is growing and new market segments are emerging that have a need for our scalable platform.”

“Signing with Boots and the Department of Defense are recent highlights for us, but we’ve concluded a number of major contracts in Europe and other regions, including with CSC for the Trafford Care Coordination Centre and Uniting Care in Cambridgeshire. We’ve also deployed our open platform solution in Spain and are working on implementation there. We’re confident the remaining half of this financial year will continue to reflect growth.”

Ends.

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