Shares of New Zealand-based health software and services company, Orion Health Group Ltd (ASX: OHE), are trading around 3% higher today on the back of a full-year business update released this morning.
In an announcement to the ASX for its financial year (FY) ended 31 March 2015, Orion Health said its unaudited operating revenue was 7% higher than the prior corresponding period at $164 million. It said all regions except North America experienced top line growth.
North America however was affected by a transition from perpetual licences to subscription revenue and a delay in contract closures. It expects more closures in financial year 2016.
Orion Health develops software which is used to link healthcare professionals and also provide meaningful data analysis.
At 31 March 2015, the company said annualised recurring revenue was $63 million, compared to $44 million a year earlier.
Pleasingly, for its fourth quarter cash flow statement Orion Health reported net operating cash flow of $0.8 million, but it noted variances in quarterly cash flows are typically a result of lumpiness in contract revenues and seasonal factors.
Year-to-date operating cash flows were negative $38.5 million for FY15. However the group remains well funded with approximately $95 million in cash.
Should you buy Orion Health shares?
Orion Health is pursuing a similar strategy to many other innovative cloud computing businesses like Freelancer Ltd (ASX: FLN) and fellow New Zealand company, XERO FPO NZ (ASX: XRO). Despite the obvious potential that lays ahead of it investors have proceeded to sell-down Orion Health's share price by more than 25% since it listed on the ASX in late 2014.
This may be a result of investors' lack of understanding, myopia or concerns over competition in the cloud computing healthcare market. Indeed, there are many risks investors must accept before considering a purchase of any unprofitable company's stock, let alone one which has only a short track record on public markets and operates in a dynamic industry.
Whilst the company could have a bright future, investors bullish on Orion Health's growth strategy should remember uncertainty abounds and determine their exposure accordingly.
