LiDCO announces further US success as revenues decline

The AIM-traded firm said HUP had continued to build momentum after its launch in July last year, and to date the company now had seven US customers for HUP with the 85 HUP monitors in the US generating annualised recurring revenues of $0.97m.

As LiDCO continued to transition its business to a software-as-a-service (SaaS) operating model, it said recurring revenues in the half year to 31 July were up 11% to £2.52m, and total revenues - including third party products - were down 8% to £3.64m, as reduced capital sales impacted short-term revenue recognition.

Comparisons with the prior year were described as “difficult” by the board, as the company transitioned its business model towards SaaS.

In the US, recurring revenues were ahead 61% to £0.58m, with the growth being driven by customer wins involving the HUP business model.

The company said it was aiming to take share in that “large and growing” market by targeting the highest users of advanced hemodynamic monitoring.

Although it was taking longer than anticipated to sign new agreements for HUP in the territory, the firm said there remained an “encouraging” pipeline of prospects.

In the UK, where the company was the market leader and enjoyed an over-50% market share, total revenues were down 9% to £2.38m for the half-year.

LiDCO said its product recurring revenues were about the same as the comparative period last year at £1.57m, but a number of capital purchases were now expected in the second half.

There was an expected decline in third-party sales as the company came to the end of its contract with Merit Medical, impacting total sales.

Capital sales were traditionally uneven, the board claimed, and it said it expected “strong” second half capital sales.

In July, LiDCO won a “significant” new account in the UK - a 1,000 bed NHS hospital with more than 100 critical care beds.

That customer had taken 14 systems on placement, which would have a “modest” impact on full year revenues.

As it had previously announced, LiDCO entered into an exclusive UK distribution agreement with Maicuff Technology to take full distribution responsibilities for Maicuff's range of non-invasive blood pressure disposable products in the UK.

The company said it was in contract negotiations with a number of third parties, and expected to announce further distribution agreements in the forthcoming months.

Generally those were likely to be higher-margin than the Merit Medical sales and, in the next two years, were expected to replace the contribution which LiDCO had historically earned on third-party product sales.

In continental Europe, sales were ahead 20% in the six month period to £0.24m.

For the half-year the company, working through its third-party partners, said it had a “noteworthy” tender win in Finland, as well as further success in Denmark with the HUP model.

In the rest-of-world territory, sales grew 36% to £0.42m, with sales to Japan continuing to grow as LiDO benefitted from having a focussed distribution partner in Merit Medical Japan.

Elsewhere, it said it was continuing to expand its reach with new distributor sales to South Korea and Vietnam.

The company was reportedly continuing to make progress with the registration of its new monitor in China, and having completed a number of critical steps, the project was “nearing" the final submission with the prospect that - subject to regulatory approval - the new monitor could be launched there by the end of the fiscal year.

Net cash outflow during the period was £1.22m, with cash at the period end of £2.01m.

The board said the outflow reflected the 2017 investments made in commercial resources, and some “significant” non-recurring investments in working capital as the company managed various changes in the supply chain of the ‘LiDCO Plus’ consumables.

It added that, while it had been a “slow” first half, it was expecting a “much stronger” second half as more customers signed up to the HUP programme, especially in the US.

As a result, it still expected the year to 31 January to be a year of further growth of LiDCO sales.

In addition, the company's cash position was expected to benefit in the second half from the further growth in HUP contracts, as customers paid in advance of services being provided.

The company said it intended to announce its interim results for the half-year to 31 July on 9 October.

“We are continuing to make progress with growing recurring revenues, and have a significant pipeline of opportunities for our unique high-usage programme, especially in the US,” said chief executive officer Matt Sassone.

“In the second half of the year we expect to benefit from this pipeline developing in the US, a higher level of capital sales in the UK and contributions from signing new third party distribution agreements.”