Orion Health announces $61m loss on top of revenue growth

Orion Health has reported a loss of $NZ61 million for the 2015 financial year ended March 31, with increases in operating costs due to employee and administration growth offsetting a seven per cent increase in revenue and what it calls a pleasing increase in its recurring revenue base.

Orion Health, which raised $125m in capital following its successful initial public offering (IPO) and listing on the Australian and New Zealand stock exchanges last year, said at the time that it expected to spend money on boosting its research and development capacity over the next few years.

Reporting its full-year results today, the company said it had added almost 100 new people to its R&D team, with R&D accounting for 30 per cent of expenses.

Orion reported growth in its annualised recurring revenue from $44m to $63m from the 2014 to 2015 financial years, with an important contributor being an implementation for its first large health insurer customer in the US, California Integrated Data Exchange (Cal Index).

While the US market remains the company's largest, Orion Health had warned earlier this year that revenue growth there was being affected by some volatility in contract closures as well a move from perpetual licenses for its technology to a subscription licence model.

This saw a drop of 81 per cent year on year in revenue derived from its Healthier Populations product division, but the company says it expects to build on this next financial year.

Orion Health CEO Ian McCrae said 2015 had been a “challenging year” in many respects, but the company had achieved several strategic milestones, including the IPO. It also announced a realignment of its divisions late last year, along with rebranding of its product suites for the hospital market.

Mr McCrae said the US market was transitioning from a fee-for-service model to focusing on “value-based outcomes”, with health insurers beginning to play a larger role.

North America still accounted for the bulk of the company's revenue – $95m or 58 per cent – compared to $38m (23 per cent) in the Asia Pacific and $30m (19 per cent) in Europe and the rest of the world.

Its Healthier Populations product division, aimed at the US market, accounts for $81m or 49 per cent, followed by Smarter Hospitals ($44m) and Intelligent Integration ($39m).

Other than North America, all other regions saw growth in the financial year, with the company's businesses in the UK and New Zealand highlighted as the standouts. They saw 60 per cent and 23 per cent growth respectively.

“We are especially delighted with the growth we have enjoyed in the United Kingdom with a good run of contracting activity with National Health Service Trusts and Clinical Commissioning Groups,” Mr McCrae said in a statement.

“We upscaled our R&D capacity in FY2015 to enable us to invest further in new product development and were extremely happy with the launch of new versions of our software solutions at the HIMSS global healthcare IT conference in April.

“The fact remains that the health information technology market is huge, estimated to be worth nearly $US57 billion by 2017. Globally we are seeing a preference shift towards [population health management] solutions and we believe Orion Health is the only vendor taking a scalable whole of platform approach to market.

“We have significant experience in the key market segments of big data, disease management and care coordination, all of which are expected to grow at faster rates than the rest of the health infotech sector.”

Orion's annual results show operating revenue was $164.1m, up seven per cent from last year, with total income $169.2m. Operating expenses of $221.2m saw a loss after income tax of $60.8m. It has a healthy net cash balance of $95m.

Recurring revenue from licence fees was 33 per cent of operating revenue in 2015, but Orion says it plans to increase this to 50 per cent over the next five years.

Annualised recurring revenue jumped 42 per cent to $63m. This followed an increase of 43 per cent from 2013 to 2014 and 76 per cent from 2012 to 2013.

The growth strategy for Europe is to continue to target NHS trusts in the UK, where it last year won a contract for the Sheffield NHS Trust.

For the local region, the company saw strong growth in New Zealand and south-east Asia, including the signing of a commercial agreement with the South Island District Health Boards for the SI PICS patient administration system and the deployment of the Enterprise and Consult suite at The Medical City group of hospitals in the Philippines.

It also saw large-scale deployments continuing with ACT Health. The growth strategy for the region is to target regional and national population health solutions in Australia and New Zealand, and private hospital groups in south-east Asia.

Posted in Asia Pacific Health IT

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