• High margin SaaS Technology Mark-up -- good SaaS models excel financially with volume. Below we look at the Life-cycle Stages of SaaS Companies.
  • DIAGNOS Inc. poised to rapidly accelerate from being cashflow positive to cash-cow; high GP margin, high growth potential lined-up to become reality, and in large market(s).

DIAGNOS Inc. (TSX-V: ADK) (OTCQB: DGNOF) (Frankfurt: 4D4) is a Canadian-based medical SaaS (Software as a Service) technology company that pioneered 'Computer Assisted Retinal Analysis' (CARA), which automatically analyses the retina (located at the back of the eye) using machine learning / artificial intelligence (AI) technology to identify damage caused by diabetes and cardiovascular issues. After 7 years of commercially advancing its first large-scale application of the technology, primarily aimed at preventing diabetic retinopathy, DIAGNOS is in the process of maturing in its life-cycle as a scalable SaaS technology company with high potential growth in large markets.

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Overview of the Life-cycle Stages of SaaS Companies (typified):

Early stage SaaS companies create a new software which solves a problem or is superior to an existing platform. During this phase all focus is on product development, customer acquisition, customer feedback and iterating the product consistently to improve the offering. In early stage SaaS, the expenses of the business outweigh the revenues of the business.

Middle stage SaaS companies: The software gains traction in the market and revenues grow exponentially. The success of the platform with customers often triggers an acceleration of expansion plans and additional funding is required to accelerate growth through marketing expenses. Additional expenditure may be incurred on hiring sales staff, expanding geographically, or building new modules and functionality in the platform. The important metrics in this phase of the business are the Customer Acquisition Cost (CAC) and the Life Time Value (LTV).

Mature stage SaaS companies: After years of strong double-digit revenue growth the business may reach maturity in their market, hopefully as the market leader. At this stage the company has substantial revenue but the growth of revenue begins to slow down, whilst the cost base is relatively fixed. At this stage, successful SaaS businesses become ‘cash cows’. To become a ‘cash cow’, SaaS businesses must have the following three characteristics:

  1. Very low customer churn: The investment in acquiring customers is lucrative if they become long term subscribers of the platform. The term “recurring revenue” is often used to describe this. Some of the best SaaS companies even have negative churn, meaning that the revenue increases from existing customers outweighs the revenue lost from churned customers. If churn is high the business will have substantial customer acquisition cost, and this will materially hurt profits.
  2. High gross profit margin: A good SaaS platform should have high GP margins as there are very few direct costs in providing a digital product. A good SaaS platform will also have low customer service costs as the platform is intuitive and allows customers to resolve any issues on their own.
  3. High potential growth rates and a large market size: A large international market will drive profits. If a platform is too niche or restricted by a single region, the profitability ceiling will be hit very quickly.

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In DIAGNOS’ case its CARA technology uniquely provides an effective way to affordably screen large swaths of at-risk-populations for several potentially debilitating medical conditions. Retinal imaging diagnostic technology is gaining popularity; doctors and specialists strongly endorse the technology as large numbers of people can be seen that otherwise would not be seen. Governments like it as proactively stopping/minimizing debilitating health issues immensely saves money, and pharma (manufacturers and retailers) like it as they sell advanced medication for conditions identified.

DIAGNOS has a high-margin SaaS model; DIAGNOS charges between ~C$5 - $10 per patient, however the cost to process the image is a fraction of the cost – good SaaS models excel financially with volume. DIAGNOS does not sell the software, it protects its proprietary code and database, the software resides in its servers, and everywhere the CARA platform solution is set up it functions as a service. In the Company’s latest Corporate Update, issued January 26, 2022, DIAGNOS stated “The Company’s accomplishments in 2021 were truly transformational and have positioned DIAGNOS for success in 2022. Our team at DIAGNOS is committed to the task at hand; delivering growth and value for all shareholders. The Company anticipates being cashflow positive by the end of June 2022.

DIAGNOS’ first large-scale application of its CARA technology is not only now set to be cashflow positive, it has the earmarks of quickly accelerating to cash-cow status. We urge readers to review the Company’s aforementioned latest corporate update, DIAGNOS has a lot on the go that appears to have the potential to excel revenues:

  • DIAGNOS confirmed “discussions are ongoing” with EssilorLuxottica (Euronext Paris Stock exchange: EL), the largest eyecare company in the world, with EUR$16+ Billion in revenue/annum and ~18,000 locations. DIAGNOS' MoU is with the Instruments division of Essilor International, a subsidiary of EssilorLuxottica.
  • DIAGNOS also commented on several noteworthy deals in 2021 and ongoing 2022 roll-outs: i.e Three year renewal contract with Optina Diagnostics, opening of five screening clinics at various locations of Magrabi Hospital & centers located in Riyadh, signing of a multi-year agreement in June 2021 with IRIS The Visual Group (1990) Inc., a 7-year agreement with New Look Vision Group Inc. (406 locations), and several agreements in Latin America.

Source: ‘DIAGNOS Provides Corporate Update for 2021 and Outlook for 2022’ https://www.globenewswire.com/news-release/2022/01/26/2373543/0/en/DIAGNOS-Provides-Corporate-Update-for-2021-and-Outlook-for-2022.html 

The above list is for established product on its CARA platform. The market is huge -- the diabetic retinopathy market alone is massive; close to half a billion people worldwide have diabetes and susceptible to vision loss as a result. There is now an industry trend to make eyecare centers ‘point of care’ diagnostic centers. Based on this market segment alone, the independent investment bank / advisory / equity research firm Echelon Capital Markets has issued a recently reiterated rating for DIAGNOS Inc. of 'Top Pick' for Q122, 'Speculative BUY' with a near-term (12 month) target price per common share of DIAGNOS of $1.55 Canadian (or in US dollars: USD$1.23 or in Euros: €1.08). The Analyst’s January-2022 update report may be viewed at https://sectornewswire.com/Echelon-Diagnos-Jan-4-2022.pdf online.

In upcoming markets, on the Stroke Predictor front, the Corporate Update stated “DIAGNOS’ clinical trial is proceeding well.” “December 06, 2021, DIAGNOS began a clinical trial study with CommonSpirit Health Research Institute, Chattanooga Center for Neurologic Research LLC and conducted at the CommonSpirit Hospital in Chattanooga, to confirm early Proof-of-Concept results that showed a strong potential in the early detection of stroke through the inspection and analysis of the retina.” The cardiovascular market is orders of magnitude larger, positive developments on the Stroke Predictor clinical trial will position DIAGNOS at the fore of a whole new class of medical SaaS technology.

On the development front, DIAGNOS stated, “Multiple new applications involving AI-enhanced retinal imaging to address a growing need for general purpose pathology identification are under development. In addition to localized retinal pathology, such as macular degeneration and glaucoma, certain retinal pathologies are also known indicators of various systemic disorders, including cardiovascular and diabetic diseases.”

The Bottom Line: Investors in ADK.V are one spectacular news release away from DIAGNOS catapulting above $1/share.

The following URLs have been identified for further DD on DIAGNOS Inc.:

Company website: http://www.diagnos.ca



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This article has been revised from the original to delete specific calculations of image processing cost gross profit margin mark-ups for the subject company – the original version was accurate, and reflects highly favourable for investors as the company matures, however the specific calculation is not something that helps the business development team when search engines pick up and relay intel out of context to prospective clients.

Content above may contain forward-looking statements regarding future events that involve risk and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual events or results. Articles, excerpts, commentary and reviews herein are for information purposes and are not solicitations to buy or sell any of the securities mentioned.