Hydrix Limited - Trading Update and Growth Outlook - 30 July 2024
HYDRIX LIMITED (HYD) Share Update July 2024 Monday 29th
Hydrix Limited Reports Strong Sales Progress and Strategic Growth Outlook
Hydrix Limited (ASX: HYD) has released its Appendix 4C for the quarter ended 30 June 2024, highlighting significant progress in sales conversions and strategic growth in the cardiac and medtech sectors.
Instant Summary:
- $4.7m of contracted sales for the quarter and $11.2m for FY24.
- Potential future revenues exceeding $40m from 15 clients.
- 22% of the sales opportunity pipeline is now Qualified, up 20% from the March quarter.
- 90% of sales are from Europe and the USA.
- Sales of five LUDO mechanical heart controller units.
- Hydrix Medical sales opportunity pipeline for Implicity's remote cardiac patient monitoring cloud software is more than $2.5m.
- $0.9m cash on hand as of 30 June 2024.
- $3.1m group cash receipts from customers in the quarter and $12.3m for FY24.
4th Quarter Financial Highlights
Hydrix Limited has made significant progress in building and converting its international sales opportunity pipeline. The company reported $4.7 million of contracted sales for the quarter and $11.2 million for FY24, bringing potential future revenues to more than $40 million from approximately 15 clients currently contracting at various project stages.
22% of the total sales opportunity pipeline is now qualified, up 20% from the March quarter, representing more than $60 million in potential revenues, including several multi-million-dollar contract opportunities. Notably, 90% of sales are from Europe and the USA, demonstrating the company's strategic focus on growing international revenues.
Sales and Product Development
Hydrix reported $2.4 million in revenues for the quarter, a 26% decrease compared to the previous corresponding period (pcp), and $10.6 million for FY24, a 19% decrease pcp. The year was impacted by ongoing medtech client funding challenges and budget constraints.
The company sold five LUDO mechanical heart controller units, a disruptive platform technology developed by Hydrix. LUDO is used by global clients to de-risk and accelerate early-stage development and testing of heart-based Mechanical Control Systems (MCS) such as ventricular assist devices (VADs) and total artificial hearts (TAHs). These unit sales are anticipated to lead to future fee-for-service revenues as clients commercialize their products.
Group Cashflows and Capital Structure
As of 30 June 2024, Hydrix had $0.9 million in cash on hand. The company received $3.1 million in group cash receipts from customers in the quarter and $12.3 million for FY24. Group net cash used in operating activities was $0.1 million, down 91% pcp, and $2.8 million for FY24.
The company has $4.3 million outstanding in convertible notes and other loans, including $3.8 million from the Directors. Additionally, $0.8 million was drawn under the $1.5 million trade debtor’s facility, which was successfully renewed for a further 12 months to support revenue growth.
FY24 and FY25 Guidance Update
Hydrix provided an update on its FY24 and FY25 guidance. The company had previously anticipated a 10% increase in revenue for the second half of FY24 compared to the first half. However, the unaudited actual result showed a 20% decrease. Revenue for FY24 was $10.6 million, below the anticipated range of $12.0 million to $12.5 million.
Sales conversions and revenues have been impacted by ongoing challenges faced by clients in raising venture capital and procuring budget approvals. As a result, meeting the guidance for the Group to breakeven in the September quarter is looking challenging, but the company remains focused on reaching Group profitability as revenues grow.
The significant progress in sales conversions and the strategic focus on international markets are positive indicators for Hydrix Limited. The sales of LUDO units and the robust sales pipeline demonstrate the company's technical capability and market traction. However, the decrease in revenues compared to the previous year and the challenges faced by clients in raising funds may impact investor sentiment in the short term.
Investor Reaction:
Analysts are likely to view the progress in sales conversions and the strategic focus on international markets positively. However, the decrease in revenues and the challenges faced by clients may raise concerns about the company's ability to meet its financial targets. Overall, investor reaction is expected to be cautiously optimistic, with a focus on the company's ability to convert its sales pipeline into revenues.
Conclusion:
Investors should monitor Hydrix Limited's progress in converting its sales pipeline into revenues and its ability to overcome the challenges faced by its clients. The company's strategic focus on international markets and its technical capability in developing cardiac and medtech products are positive indicators for future growth. Staying informed about the company's updates and financial performance will be crucial for making informed investment decisions.