Orion Health targets return to profit in 2018, lifts annual revenue 26%

See also: Orion Health signs first sales deal under new US partnership

Orion Health [NZX: OHE] is targeting a return to profit in 2018 after reporting a 26 percent increase in annual revenue as a weaker New Zealand dollar bolstered returns and a smaller tax expense helped narrow the health software developer's loss.

The Auckland-based company posted a loss of $54.4 million, or 34.2 cents per share, in the 12 months ended March 31, from a loss of $60.8 million, or 42.3 cents, a year earlier. The bottom line was helped by a tax expense of $1.7 million, down from $10.1 million in 2015 when $5.7 million of tax assets from previous losses and $1.3 million of deferred tax balances were de-recognised. Revenue climbed 26 percent to $207 million as the exporter benefited from a weaker kiwi dollar, and on a constant currency basis sales rose 12 percent.

Orion aims to return to profit in 2018 after forgoing short-term earnings when it listed in 2014 to expand its global operations. The company announced a series of new customers in recent months, including a deal in February to provide its Amadeus platform to Nasdaq-listed Cognizant Group which it saw as having the potential to triple the number of patients it reaches.

The software developer's operating cash outflow of $32.3 million was smaller than the $38.5 million outflow in 2015, and Orion had cash and equivalents of $58.9 million as at March 31. Spending on research and development rose 26 percent to $63 million.

The company expects annual revenue growth of more than 20 percent in the coming year and says its cash reserves are enough to fund its growth strategy. It expects to generate $8 million of annual savings from the restructure of its US business.

"Based on revenue growth expectations, R&D expenditure, efficiencies in product deployment and the benefits of restructuring in our US business, we expect to achieve profitability during FY2018," chief executive Ian McCrae and chairman Andrew Ferrier said in the annual report. "We believe we have sufficient funds and facilities to execute our strategy until profit and positive cash flow is generated."

The shares have jumped 46 percent this year, the second-biggest gain on the S&P/NZX 50 Index, and were down 0.2 percent to $4.65 today.

Recurring revenue from subscriptions climbed to $87.9 million in the year from $53.7 million, and annualised recurring revenue, the favoured measure for software-as-a-service firms, advanced 36 percent to $85 million.

North America remained Orion's biggest market, with revenue up 32 percent to $125 million, while sales in Europe, Middle East, Africa climbed 59 percent to $48 million. Asia Pacific revenue fell 16 percent to $32 million with the sale of one-off perpetual licences in 2015 bolstering the year-earlier figure.

(BusinessDesk)