ContextVision AB (publ)

Okay, so then we will start the presentation. So welcome to Q1 2022 presentation by Context Vision. You will hear from the company's CEO, Ola Lindblad, before there will be a Q&A session in the end. If you have any questions to Ola, these can be asked in the questions section. And as you have noticed, this presentation will go in English instead of Swedish. So then, Ola, the word is yours.

Thank you. Thank you very much. And thanks for having me. I really, really look forward to share the latest financial results, but also to share some basic company or basic facts about our great company. As Christian was saying, my name is Ola Lindblad, and I do hope here at the end that you will all agree with me on the statement here that says on the slide here that we are on the right path going forward. So, before we do anything, I just wanted to share some or tell you a little bit of a story. So, This is the reality of many of the physicians and radiologists around the world. They're spending long hours in front of the screens trying to determine if there's something wrong, thus set the diagnose or even set a treatment. And imagine that you are sitting there and the image that you're looking at is not fair enough. It's not crisp. You can't really do your work. So what is then the use for this machine? Does it really matter that it has all the bells and all the whistles, that it has the latest stuff in it and latest functionality, if it doesn't show the best possible quality in it? And that is really where we come in. Because we are the software company that is focusing solely and only on image quality and working with AI to ensure that the medical imaging are as good as possible for our customers, which are the OEMs. Before I continue digging more into details here, just some brief facts. And I'm fully aware that many of you on the call have seen this before and are fully known a lot about the company already. But some of the numbers here have actually changed. So still, bear with me. So we are, as of right now, about 35 employees. We're still around 50% on the R&D side. And with the 35 years of experience, coupled with the AI that we have, we are the world-leading independent provider of these kind of services. We're still headquartered in Sweden, and we do have, I mean, we're a truly global company with sales offices all around the world, and with our 60 customers that are spread all around the world. we see ourselves as being a global company. And if you look at our largest revenue generator is really ultrasound, which stands for about 70% of our revenue. And that's actually really, really good because the ultrasound is really one of the biggest expanding businesses within this area because it actually had a CAGR growth of about 5%. And so it is an increasing business that we are in. And then the next number is something that we are really proud over, because we are in 350,000 systems all around the world. So This means that wherever you go around the world and you take a x-ray exam or ultrasound, you can be pretty sure that we are inside the system and making the image better than it would otherwise. We are, we're turnover about 98 million and then a bit of 44%. And obviously, I'm going to come back to the numbers here later. And then we are listed, as you are aware, on the Oslo Stock Exchange. But then these were just the brief facts. But the question is, what is it we really do? And I think this is a very important piece that we also need to sort of understand. Because how do we fit into the overall process? Because The OEM in this market, they are manufacturing the system, right? So they start with their hardware components, with the screens, the wheels, the chassis, the monitors, the probes, and so forth. They add software to it to make it all linked together. And At the end, they do get an ultrasound system in this case. So then they sell it, obviously, to the hospital or to the clinic. And then the clinician starts using it. So all good and fine. So then where do we fit in? Well, we are right here in the software pack or stack, I should say. So we are highly integrated into the system, meaning that as we are integrated, we are very hard to get rid of. I mean, we're in there, and we're in there for a long time. So whenever the OEM has started to use us in their system, it is pretty hard for them to take us out, and they wouldn't do it either. But we're really in there, which is – which is obviously really good. And, yeah, so our customers are really the OEMs. So those are our customers. And then moving into, so this is how the process looks. And I talked about the doctor before and the physician and how that person wanted this. the image to look better. But how much better can it really look like? I brought a few slides here just to give you some examples because I think it's important to see the difference. And if you look at this to start with, this is from an ultrasound 2D image where to the left You have the unprocessed image. It's of a heart. And then we have then processed it with our solution, Revent, and you can see how much crisper, clearer this image is. So imagine how much more happy the physician should be by looking at this image. So that was one. And then for you on the call that have kids, You might like this slide. Here, there's something we call baby phase, and it's getting more and more popular to do this by the midwives, where you obviously have the unprocessed first, and then you have the process with our brand new Revent 3D solution. where you can see how much more crisp and clear the borders are here and how much more, obviously, value you can get out of this image. And this, obviously, the 3D solution can be used for many other, I mean, not only for baby faces, can be used for cardiac and others as well. And then this is something we also released a solution or a product called Revent Mobile because that is what we see a big coming trend, and I am going to come back to that here in a little bit while. But the units are getting smaller and smaller, and right now we see – But, I mean, now you have the probes just connected to the iPhone, and all of a sudden you have an ultrasound. And this is, of course, in a dire need for having image enhancements, improve the image quality of these, because otherwise they're obviously no use. So this is something we see a strong market for us here going forward. And then the last slide here is really around the Altamira. So Altamira is one of our AI solutions for x-ray. And what's interesting with this is it doesn't only give you better images, it also gives you a more efficient way of doing x-rays. Because If you have eight people here with their broken wrists and you take an x-ray, the doctor comes in, it takes the x-ray of one obese person, one with an implant, and so forth. And you see you can get eight different images here. And they all look a little bit different. So then when the doctor is going to look at these, he's going to look at them or she's going to look at them and say, well, Here it's not clear enough, so I need to retake it because it wasn't set correctly. So then imagine at the hospitals, the radiologists had already moved on, the cart is gone to another department, and we need to call them back, and it takes a few hours, and so forth. So... what we come up with is this Altamira solution. Actually, the AI is seeing, okay, this is a wrist, so let's look at the wrist and make sure we are using this component and say, okay, this is a wrist, so it uses the sensor to take the right amount of robustness when taking the x-ray. So, you can see here on the top part, they all look the same. So, when the physician looks at it, it's perfect. Hence, you don't need to retake it. It is good already, regardless of how the patient looks like. So, it is really an example of, as I said before, of doing it... to do it in a more efficient way, and also, of course, get a better image. Then, so this was a way of showing, A, where we fit in, and then also the value that we are really giving. Next, I wanted to give you some thoughts on some of the trends that we are seeing that One, we are looking at for the future, but also that we are already now really using and helping out to solve. So, first one is around the increased efficiency that I talked briefly about before. The world's population, I mean, it is growing, and it's not only that It's growing in terms of more people. But also, the middle class is increasing. Everyone gets older. The average age is increasing. And all this leads to more and more people need to get access to radiology, to ultrasound. And that also drives a big, obviously a big challenge for the healthcare system. Because at the same time, you also have a driving force saying that everything needs to be cheaper. You need to look at cost all the time. So what we need to do is then to drive efficiency. So by having smarter, better images and also finding ways, just as Altamira, in making things more efficient. This is one way of supporting and helping this megatrend, if you wish. And there are obviously, for the future, is going to come more ideas from our side around this. Next one is digitalization. This has obviously gone on for a long time. I mean, no news. However, the medical market is growing. as you all know, very highly regulated. So it does take some time in order to get there. But what we see is with the cloud-based solution, with faster graphic cards, and I mean, that enables AI solutions to be much more advanced. And also, you can put them in smaller devices, which makes it much more, even the handheld is getting AI components that which are really, really strong. And with data analytics on top of it, and with 5G coming into the picture, you can all of a sudden send images much quicker and much easier. And this is something, some of the things that we are looking for in the future when we are saying, okay, what are the next steps for us when we're looking into the future? These are components that we are considering, as you might imagine. And last one, and this is, I mean, with new users of ultrasound, especially with the handheld, many are saying that for doctors, they're not starting now, they're not only going to use, you're not going to see doctors only with a stethoscope around their neck, they're going to have the stethoscope, and then in the pocket, they're going to have a handheld ultrasound device. And a lot of things looks at that is going to become the new reality. And that obviously means that there is a big market pickup on the ultrasound. But also what this means is that we're going to have a lot more users that are not used to using it. meaning that they're not maybe enough trained or that they're not fully versed in using it. And with our new Revent Mobile, it can help, but this also opens the door for future development. And how can we help physicians to, by different solutions, become more trained or make the solutions more easy to use? So, these were just some, I wanted to give you some trends here and just tell you where we are and also a little bit about what we're thinking. Then, looking into the sort of, that was looking in the future, if we look at the market, this is a report that came from Signify Research, where If you look at the left, on the left hand here, you can see the biggest, the 10 biggest vendors in the world right now. And you can see that the total here, it actually, it totals up to, that the top 10 actually handles about 90% of the market. So it's very consolidated. And if you look at even closer, you can see that the top three are actually have about 60%, 61% of the market. So, yeah, very consolidated. And what's interesting here and why I'm showing this, and I can't tell you here because of NDAs that we have with our customers, I can't tell you which ones that we are working with, but what I can say is that we are working with a large amount of these customers. as of today, and the ones that we're not with, we do have ongoing dialogues, or many of them we're having ongoing dialogues with. And then, here at the bottom, I wanted to put this in here, because you can see it's divided into, the market is divided into three different parts, the cart, the compact, the handheld. And you can see the total increase of the market. As I mentioned before, it's about 4.8%. But what's interesting is if you look at the growth here on the handheld, it's actually up to 25%, which obviously is a significant growth. But then you have to bear in mind that the starting point is obviously a lot lower than for the cart and for the compact. But from a growth perspective... That is a, it is a, it's a big growth going forward. So, then my idea was I wanted to, that was looking a little bit market and what's going on there. I now wanted to move into more what has happened in Q1 and then dig into some of the numbers. I think that one of the biggest events for us as a company in Q1 was really the spinoff of Unify Laboratories. So what really happened the February 9th here? I mean, it was really the – that was the day when we split up the two business units. I mean, up until then, we've had one – Business unit, medical imaging, focusing on exactly what I've been describing before. Solid business, pushing this being the core business going on for many, many years. And then we have the startup business, Unify, that we're really focusing on a decision support tool for prostate cancer with a support tool. with AI. And in the beginning, there was a lot of synergies between these two when it all started. And then the realization was that the labs that were going to do this, they weren't digitalized fast enough. So a decision was made to let's change the strategic of Inify or the strategy of Inify and instead look at the possibility of building a laboratory by using the same tool that was developed. And when that decision was made, it was also pretty clear that the synergies between the two business units wasn't really there. So then the decision was made that, no, let's split up the business unit. Let's put them in two different companies so each one can focus on their business. And then so in early February, as I said before, the split happened. And we are really coming on top. my side and on our side on medical imaging, we are obviously very thrilled about this, that we can now fully focus on medical imaging. So I wanted to, that was probably one of the main things that happened. The other things that happened in Q1 that I want to mention is, I already talked about the first one. Second thing is obviously with the spin-off, many of the leadership team left because they moved into the Indify organization. So we set a new leadership team in place, very strong and experienced one, which I have full faith in we're going to move this company in the right direction. We now have a full focus on growing the medical imaging. And it's not only, it's sort of the entire company now. I mean, you have to look at it from the R&D, the portfolio management, then all the way down to finance. We all now can focus in on the medical imaging side, which is very exciting. Obviously, strong revenue here in Q1, which I'm going to come back to. And then what we managed to do also in Q1 was to release both Revent 3D and Revent Mobile. So, those were some events in Q1 that I didn't want to touch upon. So, going into the numbers for Q1. So, what did we accomplish? Well, we did a A sales of 27.2 million. And if you compare that to the last year's Q1, which was 20.3 million, so it's a significant increase in revenue. And I'm going to come back to some of the reasons behind that. An operating result, 7.3 million last year with 8.2. EBITDA with 9.2 and slightly lower than last Q1. And then earnings per share also that, for obvious reasons, slightly below. But overall... we're really, really happy about, especially, I mean, the sales has really helped us here. So if you look at this, I want to talk a little bit about the sales. So this is a slide showing the quarter sales all the way from Q119 all the way up to Q122. And what you see here is we had a pretty strong trajectory up here. Then in Q2 2000, the pandemic hit us and hit basically our customers, meaning that they didn't sell enough systems on their side, meaning that we couldn't sell as many licenses as we hoped for. But we have ever since. Continued here on the upwards trend with a slight decrease here in Q1 last year. But we are on a moving up trend here, which we are really happy about. And I should say that the Q1 here, it is – because usually the first quarter is slightly lower than the other quarters. So this quarter, I mean, it is a little bit doped by some currency effect compared to Q1. But we also have seen a much stronger market and also some of the new sales. So it's... somewhat doped with currency, but really the big thing is we have seen an increase on the market. So, that was sort of overall sales. If we then look at the revenue in EBTA on the year perspective, this is where it gets a bit tricky, because when we separate the two companies, we need to get some sort of comparison numbers here. And that is, I shouldn't say too tricky, but it's, yeah, the numbers are not really comparable. And I'm going to try to explain here what I mean. So from a revenue perspective each year, it is really the revenue has always been through the medical imaging business unit. So that stays the same. This continues here, 94.7, 98, and so forth. And this is the revenue for this quarter. So these are 100% comparable numbers. The EVTA here, though, is showing the medical imaging business unit only. So 50.3 here is the number for just the medical imaging business unit, meaning that it doesn't take into account the Inify business unit at all. So that is why you see a drop here from the 50.3 down to 9.3, because this is really or the 50% mark around here, and then down to 34%, which this is. And that is really because now we have to carry all the overall costs, all the overhead costs, which we didn't have to do before. So we will now start, we're at the 34% right now, and we hope that that's going to, we're going to obviously, this is the main target to continue to drive that upwards. But when you see, I still wanted to show this for everybody, that there is a, when you compare these numbers, this is really what it looks like. Moving into the revenue per region, Here is a slide showing the different regions and the first quarter the last three years. So really the increase here from last year to this year in Asia has been a number of things. We've had some very interesting new customers coming in. We have increased some share of wallet where we have seen some pickup in the business. So we've managed to increase our share of wallet of our customers that we already have. So those are, I would say, the main areas of increase here. And then obviously, yeah, that's it. Then in Europe, it's pretty steady. I mean, we have We had some timing effects. That's why it's slightly here above. And then in the Americas, we have seen a few new customers coming in, which is very encouraging. And then there is a slight revenue effect here as well as, obviously, the customers here are paying in U.S. dollars. But really, the new customers has been really exciting to see that they're coming in. So then that was the region. So if you then split the revenue on the modality instead. So the modality is really the different segments that we sell. And that is, those are really dependent on or 100% dependent on which customers we're selling to. So you can see, for example, Let's start with the MR here. You can see in 2021 Q1, the MR was 4%, and we basically more than doubled it in this quarter. And that is due to a large contract that we signed here in this quarter, which means that that affects this number pretty significantly. And same goes with the 17% here on x-ray, which goes from 17 to 22, and that's all due to a few customers that bought a number of x-ray licenses from us, or a stack of licenses, I should say, here in Q1, which means that those percentages goes up, and then obviously the ultrasound slowed or went down, but This is what the modality percentages look like in Q1. Then that was looking back a little bit. So if we look forward instead, what is it we are looking at and plans for Q2? Well, We're obviously continuing to expanding on medical imaging. That is our core business. That is really where our bread and butter to which, and that is we want to continue pushing that. There is continuing to be a market, a larger addressable market that we want to get into. We are going to continue focusing on our strategic customers, the larger ones that you saw on the slide before. We believe that that is one of the key areas for us to increase our revenues, to work closer with the larger ones. The next topic is very encouraging that we now can see that we can start traveling, at least in the Americas and in Europe, and also attend IRL conferences. That's going to make a big difference to be able to talk to customers and so forth. Having said that, It's not like we're going to stop because of the issues in Asia or in China, for example. It's not like we're going to stop any business because of that. We've been pretty successful in closing business anyway, but it will probably delay some contracting. But it's not going to stop any revenue coming in. And then finally, we are obviously having our product strategy and our set roadmap, which we're going to continue pushing on to make sure that we get the new products out and make sure that our research focusing and driving in the direction that we already set out. So plans for Q2. And then I would like to finalize with – the next slide here. And it's really about, it's sort of a summary on why is complex vision interesting? Why would anyone invest in complex vision? Well, I see it as a couple of things, or actually three things. Number one is we are the market leader within this. We have a long history history of experience, working with the history, but also with the brand new tools that are available. We spend a lot of our surplus, if you wish, on reinvesting into the company and making sure that we are in the forefront of the research. And we are very strong financially, as many of you are aware of. And so very strong in that sense and also with people and R&D organization that really is aware and knows what they're doing. Second thing is our long-term customer relationship. We've been working with our customers for many, many, many years. And it's both smaller medium-sized but also the largest I've been talking about before. And our churn, and I don't want to be cocky in this, but our churning customers has been very, very low. And that is obviously because we provide them with a great value. We are giving them some great value to them. And now getting an even stronger focus on the strategic customers that we're working with, we're thinking that is, or we strongly believe that is the right way to go. And then finally, our products are world-leading. It does give our customers really an advantage over their competition. And it's really a smart software. It's pretty smart structured as it's really a black box where you then, the same black box that all customers have. And we then put a customization layer around it to fit each individual customer and each of their specific system. So same tool, but specific customization for each customer, which makes we can do, I mean, the architecture is smart in that sense, because when we do upgrades, we can do it just for the black box, if you wish. So very smart architecture makes us efficient in the product development and product development costs, and while still then delivering the customer value. So, three things, and that actually concludes my presentation. So, I do hope that there are some questions, and I hope I can answer as many as possible of them.

Thank you, Ola. So, we're ready for the Q&A session, and just as you know, it's possible to ask questions in Norwegian as well, so I can read them up to you. We have got some questions, Ola. The first one is on the Inify laboratories process. So they ask, you think about listing Inify laboratories during this spring. Do you have any more information regarding the process?

No, I don't. And we are right now two totally different companies. So all questions around Inify, I hate to do it, but I just have to defer those to Inify and Frederik Palm, who's the CEO, or go into Inify.com. Unfortunately, that's all I can answer right now.

That's okay. So then we move on. It's a question on revenues and the split on segment geographically. Last year, the Asia segment has seen great growth. while the segment in Europe has the opposite effect. Could you elaborate on the development and what you think about the future in the different segments?

Yeah, so there are two answers to that. Number one is, which makes the comparison between these numbers a little bit different and hard to actually... dig into deep into because when we measure revenue, what we do is we look at revenue coming in from the region, regardless of the origin of the company. So if a company, for example, is a US company producing, their systems in Asia, we count that as Asian revenue, which means that if a company chooses then to start and move production to Asia or move production to EMEA, we have an increase or a decrease in the regions, which is it doesn't tell us or you guys that much. It's just more of a moving from our customers are moving their production. It gives some ideas, but sometimes it's hard to really understand the differences. I mean, that answer is part of it, but if you take that away, we still see that the We believe that Europe is going to probably stay pretty – I mean, it's not going to be the huge growth engine for us, to be honest. Asia can still grow. I believe so. But I think the biggest growth is really going to come from the Americas market. That's where we see it. I mean, there is – yeah, there is a big potential there.

Okay, thank you. And then there are some questions on margins. We can start with the cost level. Is the cost level quite fixed? Do you think you can increase the sales without also increasing the cost level?

Yeah, I believe we can. I think we are... It's not a one-to-one match there, I believe. So no, I believe we can. I don't see a...

Because of inflation and stuff like that, so do you think you can push it on to the customers as well, the increase in costs?

I think maybe we can push some on to the customer, but I don't see we need to increase the whole organization's costs in order to increase revenue. I think we can... Yeah, I think there are other things we can do. So, no. Okay.

Thank you. And then there's something, yeah, regarding traveling and your ambition to increase traveling. Do you think that will affect the margins and in what magnitude if it does?

Of course it's going to affect the margin. Yeah, of course it is to some extent. But, I mean, it's still going to be – I should say, we have local representation in the U.S., so that's going to be handled a lot from there. And the European travel is going to be – I mean, that's not going to be a major effect on the margin side. And as Asia, we're still not seeing any travel to Asia until maybe late – late spring or after summer, any major travel. So, I mean, of course, it's going to have some effect, but I think it's not going to have a major right now as I see it.

I understand. And then someone on cash flow. And the first one is about dividends. So now that you don't have to finance the Inify business anymore, what do you think about the dividend policy going forward?

Yeah, so it's one of those, I mean, we see ourselves as being an innovation company, and we are going to be an innovation company. That's really how we see ourselves. And a lot of them, I mean, we see money coming back and put into the R&D in order to keep our products up to speed and drive the development really on our side. But then, of course, if all that investment is done and there's still money left, of course, the board will look into and see if there are money to spend, of course, that's going to be a discussion. So I'm not going to say yes, I'm not going to say no, but there is potential for it, yes.

And then a quite similar question. What do you think about the capitalization cost as percent of revenue going forward, as you just talked about?

I mean, I think we need to, because of the focus on the medical imaging, I think we need to increase our capex. going forward. And we have actually, with the new, and I wrote about that in the report, we actually increased our R&D organization here over the first quarter. So I believe we have a very strong team in place, which means that we will have a, yeah, we're looking for a stronger CapEx here going forward.

Do you think that increase in number of employees will continue in 2022?

We'll see. There are some plans in starting or continuing increase. Then what the end result is going to look like, I'll leave that for now. But we have, I mean, you can look at the homepage. There is a number of open positions still out there. But there might be more here coming in the future.

Okay, and then one more question. Do you have any total new products on the drawing board, or will it only be upgrades of existing products the next couple of years?

No, it won't be just upgrades. There are discussions and thinking and ideas that are tossing around at the moment. So, no, I mean, I mean, I'm trying to convey a message that, I mean, we're not going to just sit still and doing, increasing our business lightly. I mean, we want to be in the forefront. We want to be driving this business. And you can't do that by just doing small increments. You need to do bigger, bigger, bigger things. Think bigger. Think wider. Think more disruptive. I think that's the only way you can be really successful here. So, No, it's not only going to be small increments.

And then going back to revenues for a bit, you talked about churn. Could you give some figures on the churn rates for the years, or is it like it's low?

On the churn, I think in terms of losing customers? Yeah. Zero?

Zero? That's great.

Okay, so... Yeah, continue? No, no, I was just – no, we do have a very close relationship with our customers. And, of course, it happens. As I said, I don't want to be cocky on this, absolutely not. And it requires a lot of hard work to keep this close collaboration with them. But we have been very successful in keeping our customers, really.

That's really great. And then another on revenues. So how much is your total market growing each year?

Yeah, so total market and... Total market potential. Yeah, I would say that the total market potential is growing just as much as the total market, hence the 5%. And then, of course, we can always... take additional market share because our biggest competitors are obviously our customers. So if we can convince them to use us instead of their own departments, that's where we can grow our market share. And that's obviously why we want to get closer to the larger customers because that's really where the volume is. So let's say if we have the 5% that the general market on ultrasound is growing, and then we want to drive increased market share on top of that.

Okay. So I think we're near the end. It looks like we're through. If there's not any more questions coming in, let's just wait for some seconds. Okay, I think I'll wrap it up. So thank you so much, Ola Lindblad, for the presentation and the great answers on the questions. Thank you to the ones that listened in and the ones that asked questions, of course. So, yeah, thank you so much and have a great day.

Thank you and have a great weekend.

Have a great weekend. Okay, bye-bye. Bye-bye.