Mach7 Technologies (ASX:M7T) executives told investors the company’s fiscal second quarter marked an “inflection point” as it moved from planning to execution on the “reset” strategy outlined in the prior quarter. Speaking on the Q2 FY26 update for the quarter ended 31 December 2025, CEO Teri Thomas emphasized a top-to-bottom overhaul of strategy, operating model, and culture, while CFO Daniel Lee highlighted stable recurring revenue, lower costs, and a stronger cash position.
Management frames a shift from “Archive to Architecture”
Thomas began by reiterating Mach7’s role in medical imaging workflow: delivering diagnostic-quality images to clinicians quickly and reliably. She said imaging data remains fragmented across proprietary systems and formats, creating an opportunity for Mach7 to connect imaging across the enterprise.
As part of that reset, Thomas said Mach7 is reviewing customers, partners, and contracts to ensure they align with long-term profitability, including being more selective and stepping back from certain low-revenue relationships that may create competitive conflicts or long-term risks.
VHA exit and portfolio pruning
Thomas addressed the outcome related to the Veterans Health Administration (VHA) program, calling it “disappointing,” but said it frees the company to focus on opportunities more aligned with its core platform and profitability goals. She said the VHA teleradiology program required custom development and high service intensity that would have pressured margins over time.
In the Q&A, Thomas provided additional context on “competitive conflicts,” noting that after the acquisition of eUnity, some eUnity customers used Mach7’s viewer alongside a competing VNA. She said Mach7 has evaluated relationships based on current revenue and strategic alignment and identified a small number that cost more to maintain than they generate, while also presenting business risks.
Q2 financial update: stable ARR run rate, CAR decline, improved cash flow
Lee said the company’s annual recurring revenue (ARR) run rate was stable at AUD 23 million on a constant currency basis, which he attributed to resilience in subscription and maintenance revenues.
He reported contracted annual recurring revenue (CAR) ended the quarter at AUD 26.1 million, a net reduction of AUD 2.9 million quarter over quarter. Lee said the decline was primarily driven by the removal of the NTP project from the CAR backlog, partially offset by net new CAR from sales.
Sales orders totaled AUD 6.8 million in Q2, including AUD 3.1 million of new sales. In response to an investor question, Lee said renewals represented about 40% of sales orders, or AUD 2.9 million, while add-ons and expansions were just over AUD 0.9 million, or 14% of total sales orders.
Operating cash flow improved significantly versus the prior quarter. Lee said cash receipts from customers were AUD 7.9 million, reflecting a catch-up of renewals and invoices delayed into Q1, and this supported positive operating cash flow in Q2.
On costs, Lee said total payments were AUD 7.9 million, down 9% compared with the same quarter last year and down 6% from Q1, reflecting efficiency and cost reduction initiatives. Advertising and marketing spend was AUD 0.4 million, consistent with the prior year and higher than Q1 due to targeted investment in RSNA. Mach7 ended the quarter with AUD 18.5 million in cash and zero debt.
Commercial transformation and first “Flamingo” customer
Thomas said the company’s commercial transformation is “well underway,” including simplification of operations and lowering the cost base while investing selectively in activities tied to commercial momentum and customer outcomes. She said the sales organization is larger, more focused, and has clearer ownership across new customer acquisition, expansions, partners, and services.
Thomas also said Mach7 has strengthened partner engagement, citing expanded partnerships with AWS, Dell, and Ingram. She pointed to RSNA 2025 as a key commercial event where Mach7 launched Flamingo and generated high-quality leads while deepening engagement with more than a dozen partners.
A notable milestone for the quarter was Mach7’s first Flamingo “architecture” customer contract in Q2 FY26. Thomas said it was the first contract for the new product and the company’s first brand-new direct customer relationship since July 2023. She described Flamingo as modular, allowing incremental adoption by existing or new customers, and said it can be deployed alongside the company’s VNA and eUnity viewer or independently.
Operational execution, KLAS commentary, and staffing changes
Thomas said organizational reshaping delivered cost savings through reductions in IT, operating costs, infrastructure changes, licensing optimization, and contract renegotiations. She also said customer execution is improving, citing early gains in eUnity viewer KLAS scores. However, she cautioned that KLAS is a lagging indicator and said the VNA score is “not where I want it to be quite yet.” She said Mach7 is conducting systematic customer engagement and assessment and that, with KLAS reporting lag, it could take up to a year for improvements to fully show.
Thomas relayed feedback attributed to KLAS staff regarding the company’s restructure, including comments about responsiveness and confidence in Mach7’s ability to fix problems.
Thomas said the company has commenced a search for a chief technology officer following the departure of the chief innovation officer in January. She also noted selective recruitment of additional sales staff in Asia and North America aligned with expected demand.
Outside the quarter, Thomas said January included a regulatory milestone: the eUnity viewer received a new CE certificate under EU medical device regulations, supporting continued access to European and Middle Eastern markets. She also outlined expansion of development capacity in Malaysia, including hiring a developer with API integration experience and establishing intern programs in North America and Malaysia.
Looking ahead, Thomas said Mach7 will shift emphasis toward capital deals in Asia and the Middle East as it steps away from the VHA teleradiology program. She said expanded marketing initiatives were set to be launched in February, and that Mach7 plans to increase marketing output by partnering with an external provider while keeping investment “essentially flat.” She also said hiring developers in Malaysia allows the company to expand engineering capacity at a lower cost than in the U.S.
Thomas cautioned that industry sales cycles of one to two years mean it will take time for initiatives to translate into revenue, but said the company expects Flamingo-related opportunities to contribute more meaningfully to ARR in the second half of FY26 and into FY27. She closed by emphasizing that cultural and operating model changes could take 12 to 24 months to be fully visible in ARR growth and KLAS scores, while stressing the focus is now on delivery and execution.
About Mach7 Technologies (ASX:M7T)
Mach7 Technologies Limited provides enterprise imaging data sharing, storage, and interoperability for healthcare enterprises in North America, the Asia Pacific, the Middle East, Europe and internationally. The company offers enterprise diagnostic viewing, which includes eUnity zero-footprint viewer that connects departmental imaging from across the enterprise to deliver studies to care providers via the EMR. It also offers enterprise data management solutions that enable cross-department and cross-enterprise workflows to capture, index, manage, store, distribute, view, exchange, and analyze clinical imaging and multimedia content.
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