Key drivers point toward record Q2 for 1st Group

Special Report: Australian online health, media and technology company 1^st Group is forecasting a robust outlook for the second quarter, with accelerated growth in annualised contract value leading the way.

1^st Group (ASX:1ST) supplies integrated technology platforms that enable online search and appointment booking services to the healthcare services industry, as well as a range of value-add apps and online services all aimed at improving the patient/customer healthcare journey.

The company today released its first quarterly update for the 2019 financial year, which showed $4.6 million in annualised contract value (ACV), a 36 per cent increase on the first quarter of last financial year.

The headline revenue figure for the quarter was $864k, but the company’s chief Klaus Bartosch says the real story was the record level of customer activations during the period pointing to strong revenue growth.

He told Stockhead it has a significant backlog of signed subscription contracts in the process of being activated and set to generate subscription revenue.

“The revenue performance in Q1 conceals our record level of activations in the quarter of signed contracts which will result in increased subscription revenue in Q2.”

“Reducing the ACV backlog (signed contracts not yet on-boarded and therefore, not generating revenue) from $1.4m to $1.2m despite continued sales growth in Q1 highlights the significant progress made in activations in the quarter.”

“We made record progress with activating previously signed and new contracts, and that activation momentum is expected to continue into Q2 and beyond.”

Mr Bartosch also pointed to the company’s significant reduction in cash burn – $467k, which was down 47 per cent from the fourth quarter FY18.

“It is very encouraging to see strong growth in adoption and engagement as we build scale and momentum for this financial year. Given the strong growth of the business and the predictability of the high-quality recurring revenues, the Board confidently reaffirms the maiden ACV guidance for 1H FY19.”

The company says it has added $240K in ACV during Q1, taking it the total to $4.6m at the end of quarter – a new high and more than double where they were two years ago.

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Multiple growth opportunities

1^st Group works with companies across a range of sectors, mainly focusing on optometry, pharmacy, vet and pet services, as well as GP and dental clinics, hospitals and government agencies, facilitating over 7.5m appointments booked online.

Amcal, Priceline, nib, Petbarn, Healthcare Australia and Pacific Smiles Group are just some of the customers who have chosen 1^st Group’s technology.

With four major revenue sources, 1^st Group is well-positioned to capitalise on the changing health ecosystem.

One-off fees are payable to 1^st Group for setup, training and customisation but it also has sources of recurring revenue.

Customers pay subscription fees as well as usage fees for 1^st Group technology such as the EasyCheck-in Kiosk, which facilitates appointment arrivals and gives patients an idea of where they are in the queue.

The company has also invested heavily in media, advertising and patient education, all designed to help health professionals streamline customer engagement and improve loyalty.

All up, the combination of subscription and usage fees along with advertising and patient education revenue enable 1^st Group to tap into a $1.9 billion total addressable market in Australia.

1^st Group could even look to emulate the runaway success of Babylon Health, a British subscription healthcare startup which raised US$60 million last year, putting the company’s valuation in excess of US$200 million.

1st Group is a Stockhead advertiser. 

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