After a 200% rise in a year, does Pro Medicus have another gear?

Please note: this interview was filmed on Thursday, 13 February 2025. 

As equity investors, we’re so focused on valuations and share prices. And most of the time, that’s fair enough – the only reason why we play the game of markets is to make money.

Sometimes, however, there are multiple dimensions through which we might consider our investments. In the case of healthcare imaging IT provider – Pro Medicus - there are three.

Yes, the financials still matter

Of course, the financials still matter. On that front, it’s hard to fault the recent results – many of which were records for the company.

"From a financial point of view, all of our key financial metrics headed in the right direction", said Dr Hupert. 

Revenues grew more than 30%, underlying NPAT was up more than 40%, margins expanded – and are “2-3 times our nearest competitor”, according to Dr Hupert.

With Pro Medicus boasting a cash balance north of $180 million, no debt, having never lost a client, and delivering a fully franked – and record – dividend of 25 cents per share, the boxes appear to have been ticked.

Yes, some analysts may have wanted more and the share price sold off ex-results, but everything that PME could control, it did. Those same analysts probably argued that PME was expensive when it was $5, or $100 just a year ago. It’s now $280 and change.

Investors should also be mindful of PME’s total addressable market – a legitimate concern given the importance of contract wins. In the US, the company estimates it has a 9% share – so there is still plenty of runway – whilst also looking to continue its push into Europe.

"Roughly 60 cents in every dollar spent on healthcare globally has spent in the US. It's a massive figure and it's such a big market. And even now that we've had all these wins recently, we're just a tad under 9%, so there's plenty of runway there" said Dr Hupert. 

And finally, on the equivalent results day this time last year, the share price fell from around $115 to $85 in a couple of days – one of the last times you could buy PME under $100 per share.

Operational success

Other than financials, the key metric by which PME measures itself and its return on investment, is in radiologists’ efficiency. According to Dr Hupert, the world is facing a "huge and acute shortage of radiologists", and PME is helping to solve that problem. 

"The only way around all of this is efficiency," says Dr Hupert. 

"We've seen empirically, no matter which client, we get north of 20% efficiency compared to another modern system. So that alone can break that bottleneck and help the radiologists actually do more in a day". 

Last time I spoke with Dr Hupert, PME had nine of the top 20 US training institutions as clients – they now have 11. Their nearest competitor has three.

Another sign of operational success has been improving implementation times, with a recent implementation for Baylor Scott & White done in a company record 11 months from the date of signing.

The human element

When I spoke with Dr Hupert last reporting season, one of the things that stood out to me was that he is still a clinician at heart, wanting to “move the needle clinically” and get the best results for as many people as possible.

Whilst we’re all interested in the financials, the contract pipeline, and the share price, it’s comforting to know that real lives are being positively impacted, which remains a key focus for Pro Medicus. 

One would hope that whilst it remains the case, the rest will take care of itself.

Edited transcript

Chris Conway: Hello and welcome to Livewire Markets. My name is Chris Conway. It would be fair to say that Pro Medicus is one of the most exciting growth companies on the ASX. It was also voted the second most-tipped growth stock for 2025 by Livewire readers. So today we're in for a real treat. I'm sitting down with the Co-founder and CEO, Dr. Sam Hupert, who's going to be talking through the latest results and the future outlook for the company.

Sam, thanks so much for sitting down with Livewire again, on your results day no less.

Dr Sam Hupert: Thank you. Thanks for having me.

Chris Conway: Of course. It's been a year since we last spoke. What a year it has been. There's plenty to talk about. We are, of course, here on your results release day, however, so can you just take us across the key numbers you think investors should be aware of?

Dr Sam Hupert: Well, I think from a financial point of view, all of our key financial metrics all headed in the right direction.

Our revenue went up over 30%, our profit after tax over 40%, our retained earnings - which is a six-month figure - went up 17.7%. We're still debt-free, we're still very conservative, and we paid our biggest dividend ever in 25 cents, fully franked. So I think it all moved in the right direction and has set us up for a good second half.

Chris Conway: Sam, if I'm not mistaken, last time we spoke there were record numbers, and there's some record numbers in that last cohort that you just went through as well, is there not?

Dr Sam Hupert: Yeah. So we're consistently building. Our aim is to not only grow the company but grow it profitably. And that 30%+ we've been able to continue to do that. The other figure that did go up period-on-period was our margins, which are two to three times our nearest competitor, and we've always felt they would stay where they were, but because we've been able to get a lot more transaction revenue for some big clients coming on the half, that kicked them up another few percentage points, so that was encouraging as well.

Chris Conway: Sam, so much is made of the contract wins, but the market, of course, we only see the final numbers; X number of years for X millions of dollars is often the case. Without giving away any secrets, I was hoping you could just take us inside the process a little bit. So how do you find clients? How long is the process typically? Do you need to get involved? Do you need to jump on any calls? And what are some of the common reasons why clients end up saying yes?

Dr Sam Hupert: Well, they all differ, but the average time from first contact to a signed contract is anywhere between 18 months to two and a half years. So there's a lot of work in between. Often there's an RFP process, then there's a due diligence demonstration process. Sometimes they do two or three of those - particularly if they're larger groups. Then you deal with the technical side and then you deal with purchasing if you're lucky enough to become vendor of choice, and that can take a long, long time because their role is to try and squeeze you on price, whereas our role is to try and maintain our price. It's a lot of argy-bargy. So 18 months to two years. I think it's a little shorter for the private groups over the larger hospitals, and it goes in fits and starts. So people just saw, "Oh, you've just landed five contracts in two months." That's largely circumstantial. Each of those had its own cadence. Different starting points. They had different sort of periods, some started and stopped. The fact that they all moved from pipeline to contracts so quickly was just purely circumstantial.

Chris Conway: And some of the common reasons why people say yes - is it the customer service you offer along the way, is it just the product is so compelling versus your competitors? What are some of the reasons that you're hearing back as the getting to the yes?

Dr Sam Hupert: I think it's a mixture because it is a very big, long-term commitment. We are the prime platform or primary platform for diagnostic imaging, so if we stop, all of diagnostic imaging stops and pretty much a lot of the hospital stops. So it's reputational, it's the technology, it's the ability to implement quickly because that used to be a huge disincentive, particularly for the large groups, where they were balancing and juggling between two systems for years. Things slip through the cracks. We don't do any of that. And I think they've gone around and done their due diligence. They've seen other clients often. So site visits are an important part. And I think the clever ones try before they buy, because with cloud we can set them up with a demonstration account very quickly. We can even take some of their own studies, de-identify them, and they work them on their own network, so it's about as close to the live production system, the real thing, as possible. And we're one of the few, if only ones that can do that.

Chris Conway: If I'm not mistaken, you recently had, if it wasn't your biggest deal, close to it, but implemented in the shortest amount of time, 11 months if I'm not mistaken.

Dr Sam Hupert: Yes.

Chris Conway: You must be very proud of that.

Dr Sam Hupert: Yeah. So I think that's a good case in point. That was 11 months from signing. And the first six or seven months, a lot of it is planning and a lot of this is testing because a lot of interfaces, there are a lot of pieces of equipment that we need to get images from. All that's done in background early on. The actual go live for Baylor, which is the client in point, started in June. We had three little mini-cutovers because highly regionalised, and the last one was finished in September. So 11 months from actually signing the contract to being fully live, with over 500 radiologists and multiple medical regions, that's most probably a land speed record.

Chris Conway: Fantastic. Sam, on the other side of it, do people ever say ‘no’ once they're deep in the process? You said it sort of comes in fits and starts, so I imagine they have their processes that they need to go through, procurement and all those sorts of things. So is there ever a ‘no’, or is it most often a wait and see? And then retention rates. Do you ever lose clients?

Dr Sam Hupert: So the last one I can answer first. We haven't lost a client to date, and during the last period we renewed one of the RIS or practice management clients here in Australia for another five years. And also we renewed Mercy, one of our first really large multi-state IDNs. Their original contract was what we call six-plus-one, so a phase in year and then six full years. They renewed for eight years.

So we've never lost any, so that's been really good.

Now, sometimes, like in any process, you get a ‘no’. Often, 99% of the time, it's because they're looking for something cheaper. Now, sometimes cheaper in terms of sticker price doesn't mean cheaper in terms of outcome, and ROI, and value, because, as you know, we believe we really shoot out the lights when it comes to ROI - both financial and clinical. But sometimes we get a ‘no’ and then later on they come back a few years later. So one of our largest deals ever was something that we were knocked out of early on three years ago and now it's become our biggest contract. So sometimes a ‘no’ turns into a ‘yes’, someone that says ‘no’ initially and then realises that maybe they do need us after all.

Chris Conway: Sam, recent wins have been across a diverse group. So I was looking at an announcement, admittedly from a while ago, it was last year, discussing multiple contracts wins. I think it was five at the time. There was two children's hospitals, two private radiology groups, and a cancer centre. Now, I focused on that because I think it's reflective of the diversity of groups that you're signing up and are interested in the product. Has diversity been a focus or a happy circumstance of the quality of the product, if you will?

Dr Sam Hupert: I think it has been a focus, because we've always said that we, from a product point of view, can address pretty much a hundred percent of the market with the one product, which is unique. So we've had a two-man radiology practice near the airport here in Melbourne, and Mayo Clinic, and it's the same platform. Then there's the question around when is a deal too small, and I think particularly with Full Stack, where we sell them three products and cloud, that bar has been lowered. So we're really saying, to get a bigger percentage of that market as possible, you've got to play across all the segments. You can't just confine yourself to one, and we don't. So I think we're showing the market we're not just the academic medical centres or not just the big IDNs like a Mercy or a Trinity. We play that middle space and some of the specialist hospitals where, again, we have a very important role not just in the financials, but also in the delivery of the clinical support that we provide through the system.

Chris Conway: Sam, I know most of your revenue comes from the US, but have been trying to expand into other geographies. Europe has been a focus area. How's that progressing?

Dr Sam Hupert: Yeah, so I think if we looked at it, it's US first and foremost. Roughly 60 cents in every dollar spent on healthcare globally has spent in the US. It's a massive figure and it's such a big market. And even now that we've had all these wins recently, we're just a tad under 9%, so there's plenty of runway there.

Europe, on the other hand, is a big market, but it's made up of many smaller markets, which is each country. And it doesn't have cloud yet. That's coming. And it also has the impedance of most of the health systems are publicly funded, and so they're always running out of funds for expansion. So it is an area we're looking at. We have been successful in Germany, where we have the teams in Berlin, but I think first and foremost, our target is the US.

Chris Conway: Sam, last time we spoke you had nine out of the top 20 training institutions in the US. How many do you have now? And just more broadly, are there any hospitals, really well-known institutions, that you are not in yet, that you haven't cracked yet, but you would like to be?

Dr Sam Hupert: Oh, yeah, there are always ones we want. We now have 11 out of 20, and it's really an annual bake-off. It's quite an extensive survey done by, I think it's called US News, and it ranks every department and every hospital and then totes them up. Most of the hospitals are academic because they’re the most well-known, but having said that, I think our nearest competitor has three, and clearly we would like those three and the other six. But not every system changes its technology. I mean, some people keep it for 20 years, believe it or not. But the fact that we've got 11, I think augers well.

Chris Conway: Yeah, absolutely. Sam, let's pivot to AI. So much money being thrown at AI across every realm. As I understand it though, it has the potential to have real and huge impacts in diagnostics via faster and more accurate diagnoses. How is PME using AI and how have things changed since we last spoke?

Dr Sam Hupert: Well, I think there've been multiple pockets of AI use, particularly in healthcare, because healthcare was one of the first areas where AI was applied, and like most areas there was this hype phase, then a disappointment phase, and I think now we're getting to the reality phase or commercial phase.

So most of AI in diagnostic imaging is actually embedded into equipment. So the big equipment manufacturers use it for denoising and telling someone, the patient, "The image is no good, you need to take it again," those sorts of things. And there are other uses around that, but I think the biggest use for us will be as an aid to diagnosis or a second set of eyes, and I think there's some very strong use cases around that. So for instance, breast imaging. In Australia and Europe, all screening is read by two radiologists, and if they disagree, a third one arbitrates. In the US, for all the money they spend on healthcare, breast screening is only read by one person, and if it's missed, it's missed. So can AI be that second set of eyes there, that backstop? And I think they're the sorts of applications we're going to see.

Chris Conway: Sam, just on that, I'm jumping around a little bit here, but that analogy lends me to thinking about self-driving cars. At the start, they weren't very good, they got better and better and better, drove more kilometres, and now they're safer than human drivers, and that's statistically proven, right?

Dr Sam Hupert: Yeah.

Chris Conway: Do we get to the point where the ability of AI to diagnose and recognise problems within these images gets better than the human element? And do we want that? I know that's a big question…

Dr Sam Hupert: I think we're a fair way away from that because the radiologist is not just looking at one thing. Sure, if there's a primary diagnosis to be made, is there a tumour there, yes or no, then clearly that's the focus of what they're looking for. But often they'll pick up incidental things or other things in and around it, whereas AI tends to be very specific. It's got a specific purpose. Now, some of that is broadening, and maybe one day that may occur in certain instances where you don't need a radiologist, but certainly I don't see that in the foreseeable future. I think AI will be an aid.

There's another area of AI where there are things that the human eye can't see that AI can extrapolate. So in cardiac CT, if you have a blockage, you need to know the pressure gradient across the blockage, and there are AI algorithms that can actually extrapolate that but the human eye can't see it. So that's just one of the instances where it does something different to what a human can actually do.

Chris Conway: Amazing. Sam, how much time, energy, capital is Pro Medicus is dedicating to AI? Not looking for a percentage number here, but is it a big part of what you're doing now?

Dr Sam Hupert: Yeah, it is, and a lot of what we're doing is under the bonnet, so we put it into our core platform. So a lot of radiology is about comparison, measurements in particular, and if you can automate a lot of that, it makes the radiologist so much quicker. We are also working with some of our research partners. We have collaboration agreements with NYU, Yale, Mayo, and working on some of the AI that they've been working on to see where it fits, commercialise that, and bring it to the outside world. And we're also looking at a lot of the third-party AI vendors and saying, "Well, what can we put on our platform that makes sense for our end users, for our radiologists," and then have some collaborative agreement with those third parties.

Chris Conway: Sam, last time we spoke, you talked about there being an acute shortage of radiologists globally and the importance of efficiency, you sort of touched on it already, and the two prisms through which you measure return on investment, so the financials, of course, which we've talked about, but that efficiency for radiologists and getting to the right diagnosis. Are those numbers improving? And if so, why?

Dr Sam Hupert: Yeah, so there is a huge and acute worldwide shortage of radiologists. I haven't seen anything like it in my 40 years in the industry. It's global. No one's really quite sure why that occurred. Some are postulating it was because a futurist said many years ago there won't be a need for radiologists in five years, and so a lot of trainees thought, "Well, I'm not going to do radiology because I'd get out, there won't be a job." But whatever it is, everywhere you go, there's a shortage, so much so in US, that some of the groups that used to bid for additional work are actually knocking it back. They can't even cater for what they've got. And so the only way around all of this is efficiency. And so we know that we've seen empirically, no matter which client, we get north of 20% efficiency compared to another modern system. So that alone can break that bottleneck and help the radiologists actually do more in a day, but they actually think, "Hang on, I haven't done as much," because they don't feel it as much.

Chris Conway: Right. Sam, a wise man told me that there's two states in software, quick and dead, and you don't want to be dead. Now, the wise man, of course, was yourself 12 months ago. What have been some of the most exciting innovations in that last 12-month period?

Dr Sam Hupert: Well, there's a few things. So a lot of our R&D spend is on our core technology. So we release two, if not three major updates every single year. So you can never just have a product and it be static in the market. And then on top of that, we're investing R&D in new areas. So we've released cardiology and we announced today our first implementation will be in April of this year.

Chris Conway: I saw that. Congratulations.

Dr Sam Hupert: Yeah. So that's been good. And now we're looking at some other AI projects, some of which we showcased at the RSNA in December last year, and we're looking to bring those through FDA and commercialise in the coming 12 months. So a lot of work that's been under the bonnet that we think will pay dividends as we commercialise it over the next 12 months-plus.

Chris Conway: Sam, just a general question here. Things are getting faster. It seems product cycles are shorter, technological advances. Does it make things easier or does it make things more challenging as everything gets faster and faster?

Dr Sam Hupert: Well, we're used to that increased cadence because it's been with us since we started. This is an industry that always moves very quickly, and it's married to an industry, particularly in imaging, where the technology drives rapid change. So between both ourselves and the market we're in, plus the imaging industry and healthcare, they're both moving at a rapid rate. So we're used to that cadence and speed, but you're right, it is moving quicker, and like you said before, you've just got to keep moving quicker than it again, otherwise you get caught up in it.

Chris Conway: I suppose if you've been doing it for forever and a day, it's like the frog in the boiling pot, you don't feel it so much because it's what you're used to.

Dr Sam Hupert: Correct.

Chris Conway: Sam, a lot of other healthcare companies are still cycling off a tough COVID period and just getting back to full strength. Of course, that hasn't been the case for PME. What's the outlook from here, both from a financial and technological standpoint?

Dr Sam Hupert: Well, COVID didn't really impact us. I think maybe for a few months. You may remember it seems like a thousand years ago, in the dark past, where they just shut down all these hospitals, but that was only for two or three months and then things started to normalise. If anything, COVID's been a tailwind for us because like every other industry, there's a component of work from home. Now, if you are a neurosurgeon or something, you can't do that.

But if you're a radiologist, you can. And so we've seen that the fact that we can allow work from home is if you're in the office, it's the same experience, same speed, has been an incredible driver for us. And particularly with the radiologist shortage, if you don't offer any work from home capability, you are most probably not going to attract too many new radiologists. So it's been a bit of a tailwind for us. But with actual COVID itself, I think there was a catch-up period, particularly for breast screening 'back in 21, but I think things have normalised.

Chris Conway: Sam, it doesn't appear from the outside looking in that there's many significant risks. Now, I'm not asking you to sign your own death warrant. But other than a ritzy share price, which, of course, you don't control, if you're an analyst covering Pro Medicus, knowing what you know, what would you think are some of the key risks that people need to be aware of?

Dr Sam Hupert: Well, I think the risks that every business has. Now, some of them we don't have, like interest rates or being consumer-facing. We don't have any of those things where rates affect things or housing mortgage rates. They don't affect us per se because we don't have any borrowings. But then we have things that are common. So the big ones are cyber, and particularly in our industry of healthcare, where you're dealing with what the Americans call PHI (protected health information), patient information, clinical information. So that's every single entity, whether you're a hospital, or an IT company, or a provider, cyber is a threat. Then we have all the things around key man risk that we as a board try and mitigate and work on and build the bench and make sure people say, "Well, what happens if I get hit by a bus?" I'd like to think maybe-

Chris Conway: Touch wood, touch wood Sam.

Dr Sam Hupert: I'd like to think maybe just go on a holiday would be a little less morbid. So we do all of those things. I mean, obviously competition, but-

Chris Conway: Sorry, just on competition, because I remember when we spoke last time, you said that in 10 years, no one's come close to you, and again, just from an outsider looking in, it seems like there is still no one that's getting anywhere near what your capabilities are.

Dr Sam Hupert: Yes. And we believe that, too. But the threat is not only today, but going forward. So, of course, there we can try and mitigate by moving even quicker, which is what we discussed before.

So there's key man, cyber, and then it's all a matter around staff and staff retention and all the normal things that face any other business, but nothing out of the box that would all of a sudden say, "Yes, you've got a different risk profile to what you've had over the last 5 to 10 years."

Chris Conway: Sam, last one for today. From an investment standpoint, so much is made of the technology and the contract wins, all those things we've already talked about. When I spoke to you last time though, the thing that stood out to me is you're still a clinician at heart. What really matters to you is ‘moving the needle clinically’, those were your words last time, getting the best results for as many people as possible. So I was just going to ask, are there any stories that you can share from clients that they've passed back to you about really having an impact on people's lives?

Dr Sam Hupert: Yeah, so we've had a few. One was where a child came in and came into emergency and had these brain aneurysms, and the radiologist was able to do the work up from the CT and MRI pretty much in real time, without sending it off to a 3D lab waiting, and then immediately, a neurointerventional radiologist went and put in coils, like stents. Now, could something have happened between when the patient came in to when they stented? The longer the time period you've got, the higher the probability.

And then we have other things, particularly around tumours. We do a lot of children's hospitals and paediatric tumours, largely neurological tumours, where they feel that they can actually measure these things that used to take hours in less than four minutes.

And so not all of it is life-saving here and now, some is, but some of it's purely giving capability that derives a better outcome.

Chris Conway: Yeah. Incredibly special though when children are involved. That's great.

Dr Sam Hupert: And you may notice that recently we've had a spate of children's hospitals that we've contracted with. And then I think not only that, our staff love it because we feel we're giving something back to the community. We've even got a little mascot that our head of creative did called Speedy.

Chris Conway: Oh, fantastic.

Dr Sam Hupert: That we use within the children's environment. But that's just one area, but of course, any area where patients are involved, we think we do make a difference.

Chris Conway: Sam, thank you so much for sitting down with Livewire. Great results once again. Congratulations on all your success, and I think our audience is rooting for you, so well done.

Dr Sam Hupert: Thank you very much.

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