Medistim ASA

Good morning everyone and welcome to Medistim's fourth quarter and the full year 2024 preliminary financial results. My name is Kari Krokstad and together with my good colleague CFO Thomas Jakobsen, we will take you through the results. First of all, I would like to remind everybody that Medistim's goal and ambition remains to deliver profitable growth consistently over time. And our track record shows that we have succeeded to deliver on this promise over the years. But let's move into the fourth quarter. So I'm very pleased to being able to report an all time high sales for a quarter ending at 151.1 million. That is an 11.4% increase over the same quarter last year. And as we can see here, the currency effect is quite modest, and that means that the currency neutral sales is also close to 10%. We can see that our third party products is up 10% as well, meaning that we have good performance also from our own product sales, also close to 10%. I would particularly point to Americas, which is really continuing the great development that we've seen through 2024. Last quarter, we had a 17% currency neutral growth from Americas. Now it's close to 30%. Also EMEA is keeping the pace for the year with almost 11% growth for this quarter, while Asia Pacific continues to be down this quarter at 24%. Looking at the EBIT ending at 25.8 million, that is a 16% growth over the same quarter last year. Still, the margin is on the lower side at 17.1%. And this is very much driven by an extremely high activity level in the fourth quarter. We did launch the new Intuit software with several launch events and projects connected to that launch. We also arranged the European Cardec meeting with the distributor meetings and other events in Lisbon this quarter. We sponsored the International Coronary Congress meeting in London and had also a big presence there. We arranged a capital markets day in London and we also had some expenses now coming in from the patent study. When we then move on to looking at 2024 as a whole, we are reporting 562.6 million in revenues, so that is a 6.9% increase. Currency effect is again quite modest, meaning that the currency neutral sales development is at 5.4%. And the third-party product portfolio have really performed extremely well all through the years, ending at 13% growth. And we're still seeing then a softer development in our own product sales, ending at 3.9%. However, I'm very happy to see double-digit growth from the Americas, which is really back where we want to see it. Also, I feel EMEA is delivering very impressive 8% growth for the year and Asia-Pacific, as we have seen, continues to be down. For the year, it's actually a bigger contribution or effect of softness in Japan and not so much related to the transition that we have gone through in China, where we have gone from a distributor-supported sales model to a direct presence in China. Looking at the EBIT, we are ending at 131 million, so that is the same level as last year. And that, of course, takes the margin down to 23.3%, a little bit softer than the previous year. And to summarize this, while the Americas and the EMEA shows really solid sales development, it is the decline in the sales in APEC that is challenging our margin. And that creates this effect since we are continuing to invest in our business. We do have higher operating expenses now from this direct market, China, Canada and Sweden. We have over the time strengthened our R&D and product innovation teams. We have been launching the Intui software, in particular with high expenses in the forequarter. And we're also investing in clinical marketing studies. In summary, Medistim continues to deliver profitable growth, showing solid cash flow, and also have an optimistic outlook for 2025. So the board of directors are suggesting a dividend of six NOGs per share. And with that introduction, I will leave the word to Thomas.

Thank you, Kari. And good morning everyone. I will go straight to the P&L and our numbers and as usual Kari will take us through sales figures in regions and product splits. So I will not go into that detail when I go through the P&L. But to explain the change in gross margin, that means cost of material and cost of goods, we have a margin improvement of 3%. And the reason for that is that we increase more on our own product sales versus third party, even though third party is also on the double digit end. Third party is only 15% of the total revenue and therefore we get an improved margin. when 85% of sales is with a better gross margin and therefore the percentage increase in gross profit. Salary and social expenses increases Kari mentioned America's up 30% and of course with this growth in sales commissions to sales reps increases. We also have more employees in this quarter compared to last quarter, so that adds to expenses. And last but not least, general adjustments in salaries explains the increase in the fourth quarter versus the fourth quarter last year. Kari mentioned the high activity level when it comes to other operating expenses and I don't need to repeat that other than I just like to add and Kari will talk more about this later on with the change in the commercial operations and with this change we also had some one-off recruitment expenses. EBITDA ends up with 3 million for the quarter. Depreciation is down half a million and obviously some assets are fully depreciated. Operating profit up 16% or 3.5 million. Net finance positive with 2.5 million that leaves us with a pre-tax profit of 28.3 million and profit after tax up 11% ends at 21.3 million which is the same top line growth 11%. For the year, when it comes to the margin, kind of the same explanation, although third-party products increases with 13% for the year, our own products in NOX increases 5.8%. Since third-party is a smaller portion of the total, we are able to improve margin by a percentage point. Salary and social expenses the direct initiatives in Sweden, Canada, China increases expenses but also we have an effect actually of the introduction of double shift in pro-production. We initiated that in 2023 so we had expenses related to it but it wasn't fully operational with with all the new employees on to the second shift before the beginning of the third quarter. So therefore we have a full year effect of that. All these things also explains why other operating expenses increases in addition to what's already been mentioned for the fourth quarter. EBITDA ends up 400,000 for the year so it's more or less on the same level as last year. We have slightly higher depreciation expenses compared to 2023 and operating profit ends 400,000 below last year or more or less the same 131 million or 0.1 million. And an EBIT margin which is slightly down from 25 to 23.3. Financial net finance is positive by 3.2 million. Financial income is basically interest rate but also gains realized and unrealized gains on foreign exchange. financial expenses is only related to realized or unrealized losses on foreign exchange. Pre-tax profit ends at 134.2 million and profit of the tax same as last year 103.8 million. If we look at the balance sheet, intangible assets increases. There are two reasons for that. We had two major development projects. One is the Intui software project, which we will talk more about later, but also the project related to increased efficiency within program production. Fixed assets increases. This is related to an extended lease at the main office with five years. Inventory levels are increasing and higher than what it was by the end of last year. However, we're down from the peak we had by the end of the second quarter. So in the second quarter, we ended at 164 million. Now we're down at 160.5 million. Although revenue increases, risk customer receivables are reduced. That means we have a good and effective cash collection. And as you can see, solid cash position ends at 179.2 million by the end of the year, which is improvement from last year's 153.8. Strong equity increases from 398 million to 436.6 million. The increased long-term liability is related to what I just mentioned when it comes to fixed assets, and that's the added lease obligation related to head offices here in Oslo. Some key figures, earnings per share increases this quarter since we have a better profit for this quarter compared to last year. However, for the year, we end at the same level, 5.67 per share. The change in equity and the reduction in equity, although we are increasing in value, we do have an increased total balance sheet, and there's three major reasons for that. One is the development projects that we went through when we looked at the balance sheet and also the increased lease obligations and also increased inventory levels. Cash flow, solid cash flow, cash flow operation increases from 115 million to 141.5 million. Cash flow investments is related to our product development, 18.6 million is related to that and another 4 million is related to outplacement of systems in the USA, the so-called lease or PPP solution. Cash flow from financial activities, 82 million is related to dividend and the rest is cash from lease activities. All in all, very solid cash position. We end at 179.2 million, which is very comfortable for a CFO. Thank you very much. With that, I leave the word to Kari.

We will dig into the various aspects of the business, starting with looking at the development of our flow and imaging systems in units. So we can see here that we have a software quarter going down from the fourth quarter last year, five less units sold, but Americas is up by two units, which is encouraging. EMEA is also up by four units, and we see that it's Asia-Pacific that is taking this down this quarter, much related to weaker imaging sales to Japan. And for the year, it is also Asia Pacific that is driving the number of imaging systems down. Then it's interesting to see that we see a somewhat upward trend in imaging probe sales over the past four quarters. America is up by five units this quarter. EMEA is also up by four units. Again, Asia-Pacific is down. So the increase here is also speaking to utilization of the imaging technology out there. Looking at our flow only systems in units. So this is at the same level as four quarter last year. Yeah, it's indicating some recovery from past quarters. America's up four units, while both EMEA and Asia Pacific is a bit down for this quarter. For the year is again Asia Pacific that is driving the number of imaging systems down. Flow pros in units for the quarter, it's a modest 1.6% growth, but looking at the year in full, it's actually 5.6% growth. And this is coming despite we see a lower unit sales of systems. So that really speaks to robust utilization amongst the current users and customers. And again, very happy to see a significant uptake in the Americas by 23%, while the other regions for the quarter is a little bit down. Going further into the territories here, so Americas, 61.7 million in sales in the fourth quarter, 237.2 for the year. Currency neutral up almost 30% for the quarter and about 10% for the year. So this is a performance that we like to see from our biggest growth contributor. It is also encouraging to know that both Canada and Latin America, which are smaller parts of America, but they are still both contributing very positively to the overall result. Looking a little bit closer into the performance in the USA in isolation. So we see for the quarter significant improvements in capital sales of systems, both for the quarter and for the year. And this is something that we have seen been quite weak through 2023 and also in the beginning of this year. And we have attributed this tendency as a consequence of what we call the macroeconomic headwinds with high inflation and so on, and a more conservative approach to purchasing new technologies. If we look at the number of procedures, we do see that the total number of procedures sold is flat for the quarter and for the year. But the flow procedures from capital accounts are growing for the quarter at 6.6% and for the year at 5.6%. This is very promising and is of course related to the increase in capital sales as well. And then we can see that the number of procedures coming from our PPP or lease accounts is going down. It doesn't necessarily mean that we're losing customers. New customers, they tend to be capital accounts. That's one factor. And we also see that some of our current PPP and lease customers tend to convert to capital when their agreements expire. For the quarter, we also see good growth in number of new customers, 10, and also 26 new customers for the full year. So a very positive development from the USA. Asia-Pacific, as mentioned several times now, it is weaker than we saw in the same period last year, both for the quarter and for the year. And as we have mentioned several times now, the growth for the year has been challenged quarter by quarter from exceptionally high system sales to our distributor for China prior to Medistim going direct in the second quarter in 2023. So this has been a significant effect. We have seen that this effect is becoming smaller and smaller, and that is very promising. And we have much better visibility, of course, into the inventory states at our local distributors and are looking now forward into 2025 with optimism. When it comes to Japan, we have seen very weak sales to the distributor in Japan for the year. And while we cannot identify any less interest from Japanese customers or any particular trends that can explain this, we are actively collaborating with our distributors here to really understand market dynamics. And of course, we're evaluating strategies to optimize the business there. So we will continue to report back what is happening in Japan. EMEA has had a very strong year. Revenue is up 10.9% for the quarter, 8% for the year and also very encouraging to see that this growth is coming from our direct markets, especially Spain and Germany and also Sweden has had a great year and in total they have shown a growth of almost 20% for the year. Our third-party products sold in Norway, Sweden and Denmark also have had a very strong year ending at 13% growth. This is a highly diversified product portfolio with some larger agencies that is contributing a lot but very good performance from most parts of this portfolio. So this summarizes the regional performance revenue. Here, I just want to point to the quarterly development in China, because this is our own organization, our direct operation in China for the quarter delivered 14.2 million in sales. So that's close to 16.7 that was delivered last year. And then I can mention that there was some minimum commitment from the local distributors in China, which was also contributing last year. So just showing that the performance from our local team is absolutely decent and promising going forward. When it comes to Japan, as I said, it's been weak and the 49.7% down for the year says all about that. At the same time, we're seeing some type of recovery in the fourth quarter. We mentioned this in the third quarter as well, that we had reports on a stronger pipeline or project for the fourth quarter. And Japan is then delivering closer to a normal performance. So it will be very interesting to see how this develops going forward. Looking at the split between cardiac products and vascular products, We see that the vascular growth is very low for the quarter, but ends at 15% for the year. And now the vascular portfolio makes up 19% of the total sales of own products. So steadily growing the portion of vascular sales year by year. When it comes to the split between flow and imaging products, As we will recall, imaging has really been growing very highly over several years, but had a setback in 2023 and also for the most part during 2024. This quarter, we are seeing a little bit improvement with 10% growth in our imaging portfolio. Still, we are a little bit down for the year, but... There is no, again, no signals from customers that the interest is decreasing. And we do believe that the sales of this product will pick up as we are moving forward. And we are keeping track on the contribution from sales of probes and PPP cards and lease agreements, what we call recurring revenues. And for 2024, that ends at 73.7% of the total. Then I would like to provide some comments to our strategy and our recent activities to implement this strategy. As you will recall, we have a strategy that is adapted to the various geographies and market conditions. So typically in markets where we have very strong penetration with flow technology in Cabbage, our strategy is to focus a lot on converting that install base to imaging. Then in markets where we have lower penetration, it's very much about marketing and also product innovation for ease of use to really get new potential customers and users intrigued by the technology and really wanting to get on board. In emerging high growth economies with more price sensitivity, we also want to be flexible when it comes to pricing. And I've also developed a specific solution of our technology to fit better. So this is also part of our strategy. And vascular, so for all around the world, we want to build our position in the vascular surgery field. And last but not least, as we are strengthening our position in many markets, we will continue to go direct in more countries going forward. So starting now with some comments around our activities for product innovation for ease of use. To explain a little bit also how we're thinking about product innovation. Some years ago, we established what we call an external innovation team, which is a small team of engineers, innovators, which are working very closely with our customers and being responsible for proof of concept testing and piloting. And this was arranged in order to have a much more rapid testing and avoid that we are putting, let's say, bad ideas into the formal product development process, which is much more both costly and more stringent. So this is part of the reason why we have increased the OPEX also from R&D and from innovation. Looking forward, innovation, well, we started as an innovator in the mid-90s with launching the first flow meter, the CardioMed, and we have come out with several generations of the equipment since then. Then in 2010, we also launched high-frequency ultrasound imaging, which was really a new paradigm with the VeriQ-C, and then the MiraQ took over in 2014, and we are developing the next generation. But going forward, we should all expect concentration on digital innovation. And in December, we then launched the Intui software platform. And this is the first initiative of a number of projects that we're working on that will reach the market in the time to come. So the Intui, a new software platform, what is it? So it is both a response to users request, but it's also for MediSteam internally to really revamp our software architecture for the product software and making sure that it's developed now on cutting edge future proof solutions. This is going to help us shorten the development time for next upgrades. But going back to the user's request, of course, we have had very intimate interactions and sought feedback from all our users from various initiatives over the years. And they told us that although it is rather easy to learn the TTFM technique, still it is a need for a more intuitive user interface. They ask for simple navigation. And as technology develops, of course, it's also relevant to ask for interpretation guidance. And we would like to do that really sophisticated in the future. But at least in this version of the software, we are providing reference values so that the measurements that are shown on the screen is compared to what the surgeons in question believes are good values. And we also provide some guidance there. The new software also provides context data and that will help increase the quality of the utilization of the technology. It will help data analysis and also help the reporting and increase the value of the report coming out of the procedure. So there are many benefits and so far the feedback from surgeons that has taken a look at the new software are very, very positive. So just want to stress Intui that is definitely a solution that will offer advanced support for clinical decision making, but it's just the beginning. And amongst other things, we are working on expanding this technology to vascular applications in the near future. The vascular surgery area, the strategy is to build a position there. And we believe that one of the best ways to do that is actually to do a clinical project together with leaders in this field. So in December, we were also actually in November, we were launching the patent study, which is a clinical study on flow and imaging in peripheral bypass surgery. And peripheral bypass surgery, that is a treatment to revascularize patients that has occlusions in the arteries in the lower limbs. And we call this critical limb threatening ischemia, which is an advanced stage of peripheral artery disease. This is a very serious disease. It has a very negative prognosis. We can see that within a year after the initial diagnosis, one year amputation rates are approximately 12%, mortality at 50% at five years, 70% at 10 years. So that really speaks to the serious condition. And while bypass surgery is a great treatment strategy, about 20% of these bypasses fail today. So very clearly there is a need for improved intraoperative guidance and control. And here is where Medistim comes in and we can help. and the timing for this project is really good because as in CABG surgery also in vascular endovascular treatments is the first choice but a recent study from 2022 has shown that open surgery may provide better results so there's a lot of interest and attention going into this this procedure not only peripheral bypass but also other variants of vascular surgery at the moment The goal with the study is to detect technical issues with the graft and giving the surgeon the opportunity to correct this intraoperatively, so while the patient is on the operating table. Also to identify grafts with a high risk of failure and separate from grafts with lower failure risk, so this is to detect the prognostic value. design this is going to be a or is a prospective non-randomized it's an international multi-center study and it will enroll around 450 patients and the endpoints here first of all the primary endpoint is graft patency rate at one year but we're also going to follow the number of revisions or surgical changes based on the information from the flow and imaging technology. So very much like what we did in the request study for CABG. As you can see here, also early growth failure rate, major adverse limb events, re-interventions and amputation free survival are secondary endpoints. And very important, we have absolutely the top thought leaders in this field participating in the investigator team. So Professor Michael Comte is the lead investigator of the trial. He was the first author of the global guidelines. for this procedure. We have the Secretary General from the European Society, Professor Marit Venemo. We also have the President of the Japanese Society of Vascular Surgery, Professor Asuma. And we have the first author of this trial that I just mentioned, which is so important, challenging the use of endovascular procedures only, Professor Alec Farber. We also have two past presidents from the Society of Vascular Surgery in the United States, including Professor Mills, which was the president in 2024, and many other really influential surgeons as well as part of the investigative team. So we do believe that the patent study has the potential to be a game changer for us in vascular surgery and in the vascular segment, very much like how the request study was transformative for the adoption of imaging in CABG. Finally, I would like to add some comments about some organizational developments that will support accelerated growth going forward. This is information that was disclosed in January. And we stated in our press release that with the launch of the Intui software and also with the commencement of the patent study, which will support all of our activities in vascular surgery, this is really the perfect time to strengthen our commercial efforts. So what we have done is to reorganize a little bit how we are approaching the commercial part of our business. And we have appointed Mr. Mike Karim as chief commercial officer, which is a very, very experienced person with many years of experience. experience from the medical device segments, a lot from the cardiac and vascular side, which is really bringing a lot of expertise into commercialization of products like ours. So extremely happy to have Mark Karim on board. We have also changed the leadership of our America's sales region. And we are introducing Mr. Tony Winter as a new vice president of this region. So our ambition is to enhance our commercial initiatives. We believe that with this organization, we are also enabling better collaboration, sharing of best practices across all regions. And we believe this is going to be very important to deliver the growth that we are foreseeing. So Medistim is ready for 2025. We will thank everybody for the participation this morning and wish everybody a good day. Thank you.