Medistim ASA

Good morning everyone and welcome to the second quarter and first half 2025 financial results presentations from Medistim. My name is Kari Krogstad and as usual I'm joined by my good colleague CFO Thomas Jakobsen and together we will take you through the results. And just before we dive into the highlights, we like to start by reminding everyone of our track record. This is a great reminder of our goal and ambition, which has been and still is to deliver profitable and growth consistently over time. So we can see quarter variations, but our track record shows that we have succeeded to deliver on this promise over the years. But now let's look at the second quarter and the second quarter highlights. So I'm very happy and proud to be able to present the second best quarter, both for sales and EBIT, and it's actually only beaten by the first quarter this year. So we're seeing revenue performance at 169.1 million NOX, which is 16.7% growth over the same quarter last year. And as this slide shows, there is only a slight currency effect here. So if we look at the currency neutral sales development, the total sales is up 15.7%. And as always, we are extremely satisfied to see that it's our own products that are providing and really delivering this great growth. So own product sales, currency neutral, is up 18.2%. Looking closer at the regions, Americas, as we can see, very, very strong performance this quarter. 32.9% currency neutral growth. And Americans are actually accounting for more than 80% of the total nominal revenue increase for this quarter. So that speaks to the importance of this region. Asia Pacific also providing great growth this quarter, up 22.9%. And here is definitely China, which is back on track and really driving this growth. But interestingly, we're also seeing some good developments in India, which is a very interesting long-term market for us. We will revert to that. EMEA this quarter is down by 3.6%, although the direct markets in these regions are performing very good. Third party up 3.3% after a very, very strong first quarter. And when we look closer into the cost side of things, we will see that we have a 20% increase in salary and social expenses for the quarter. This is related to the investments that we're making in the commercial organization, both in terms of headcount and also, of course, increased commission payouts in relation to the high revenue. Still, we are delivering an operating profit of 54.1 million, growing 31% over the same quarter last year, and also then helping us achieve a very strong EBIT margin at 32% this quarter. This is of course also very much driven by the product mix. A lot of growth from our own products is securing this high margin. In the second quarter, we also made the dividend payout of NOX 6 per share a total of 109.6 million. So, great quarter. That makes the first half of 2025 the best first half we have ever delivered. So in the first half, we are seeing 350.6 million NOX in revenue. That is 25.8% growth. We see again, very slim currency effect here. So adjusting for this currency, the total sales is up 24.7%. Own products performing great, 25.4% in total, and we see that Americas again is really the strongest growth driver here, up 33.7, but also Asia Pacific driven by China. Finally, we're getting out of this transition period with the field inventories in the local distributors in China. So getting out of that, we're seeing that the growth is returning. EMEA, as mentioned, a little bit down for the quarter, but for the first half, we're up by 7.1%. And also when it comes to the third party, we saw a very modest growth of 3% for the second quarter, but we had a tremendous 41% growth in the first quarter. So that means that we halfway through the year is at 21.4% growth for third party products. Operating profit 113.3 million, up 55% over last year, also creating this very strong EBIT margin of 32.3% in the first half. I think the biggest piece of news that we have really communicated through this year is the strengthening of our commercial operations. And I will refer to this towards the end of the presentation. So with that introduction, we will go through the numbers in more detail by Thomas.

Thank you, Kari. I will take us through the financials as usual. We'll come back to revenue split per region and per product, so I will not comment that further here, but I need to mention, and Kari touched upon it, that the reason for the improved gross margin is not related to cost saving of material but the product mix. We sell more of our own products where we have the increase and especially in high margin market like USA and we have less increase in third-party products and therefore we experience an improved gross margin from 80% to 81.9%. Salary and social expenses. Yes, we have strengthened our commercial team, but we also have a very solid performance in America and especially in the USA, which then drives the commission expense for our sales team, obviously. But we also have other adjustments this year compared to last year, and also some salary adjustments, which is a yearly thing. Other operating expenses increases, and this is due to increased travel activity related to our commercial team. They're out visiting customers, supporting them, closing sales, so forth. So we're having much more customer time out there, and that drives expenses. But all in all, this is a positive effect. We see an increased EBITDA from 47.7 million to 60.5 million and an EBITDA percent increase, almost 3%, ending at 35.8%. Depreciation is the same level as last year, and our operating profit ends at 54.1 million, up over 50%, as Kari mentioned, from last year, and an improved margin from 28.5% to 32%, so very strong EBIT margin above 30%. Net finance is positive. This is mainly related to currency, either realized gains or losses, or unrealized gains and losses. In total, a net positive effect of 2.2 million. This leaves us with a profit before tax at 56.3 million and profit after tax at 42.9 million up, considerably compared to last year. Then for the first half, again the same explanations to many of the items. Although third-party products actually increased more than 20% in the first half, we have even stronger growth in sales around products. So that again drives the gross margin to a higher level and it's increasing from 80.6% to 82.5%. Salary and social expenses, again, same explanation as for the quarter. But I would also like to add that we made additional accruals for annual bonuses since we now have excellent performance in the first half. We also looked at goals for the year in total and then also made accruals for those bonus that are related to annual goals. And since it's looking good that we're going to achieve this for the first half, we made a portion of that as an accrual in the accounts by the end of the first half. Other operating expenses, travel is the driver, but we also have expenses related to our important project, the patent project this year, which we did not have last year. So those are the two main reasons for the cost increase there. Operating profit before depreciation and amortization ends at 125.2 million up from 86.1 million last year and a solid improvement in the percentage EBITDA from 30.9 to 35.7. Depreciation a little bit lower than last year. That means some of the projects are already been depreciated. Operating profit ends at 113.3 million which is up more than 50%. The top line increases 25%. Operating profit increases more than 50% and that's what we like to see. EBIT percentage 32.3% up from 26.3% last year. Net finance for the first half is actually negative, slightly negative, with 250,000 Norwegian kroner. Profit before tax ends at 130.1 million. And profit after tax ends at 86.4 million versus 59.1 million last year. So we saw the growth on the bottom line. To the balance sheet. fixed asset and intangible assets in total and same level as we entered the year in but we do have an increase in intangible assets which means that we are working on developing our own products which are placed in the balance sheet and fixed assets is being reduced which means that we have less investments in fixed assets that we now are depreciating. Inventory levels are again a little bit up but now we have really honored all those purchase orders that we had to place during the period of supply chain issues. So most of those are delivered so we would expect to sell from inventory going forward and therefore we would expect also entering into 2026 that inventory levels will decrease since we now don't need to place purchase orders on the major components to our products. Customer receivables increases due to higher sales, which is natural. And yes, we have a solid cash position, almost at the same level as last year. But keep in mind that we actually paid a dividend that was almost 30 million higher this year compared to last year. So we are recovering quite fast when it comes to the cash position. Equity, total equity is more than 70% even after the 110 million or 9 million dividend payment in May. we have no interest bearing debt that means bank debt towards banks that we pay interest on we do have long-term debts related to lease obligations and deferred income divided in long term and short term so obviously the short term is within one year and the long term is longer than one year and that's why we have a long-term liability in the balance sheet Key figures, earnings per share, solid improvement as we would expect when we have solid development or strong development in operating profits and profits of the tax. Cash flow, even though we have a profit of more than 100 million, the cash from operation ends at 56.5 million. The main reason for that is prepayment of tax of 28 million. And we also have a change in working capital. And even though we have an increase in inventory, the main driver for the change in working capital is actually customer receivables, which increases with 28 million. Investments ends at 12 and a half million NOX mainly the majority of that is related to development of our own products. Cash from financing obviously dividend is the largest payout but we also purchased our own shares in this period to honor a share program for management and key personnel in Medestim and we also have the lease obligations which also is reported under cash from financing giving us a net negative cash from financing at 126.8 million. So net change in cash of 82 million. We end the first half at 96.3 million in cash. And with that, I give the word further on to Kari. Thank you.

Yes, so let's make a round trip looking at the various products. So as usual, starting with the high value, higher price flow and imaging systems and looking at the unit sales development. We are seeing a very strong quarter from Americas, which are selling eight units more compared to the same period last year. But EMEA and Asia Pacific is slightly down, and that means that the net effect this quarter is one more flow and imaging system compared to the same period. I think it's valuable to highlight also that for the first half, we are actually selling 12 more units of this flow and imaging system compared to the first half, 24. Imaging probes, we are selling seven more than Q2 last year, up 23%. Americas and EMEA is up. Asia Pacific is slightly down on the imaging side. Year to date, we are selling 20 more units this year compared to the first half last year. Flow only systems in units, we see that we are up by six units. America is up two units. Asia Pacific up by seven units. And we're seeing a little bit softness from EMEA this quarter. And it's due to less sales through our distributor sales network. Again, year to date or the first half, we are selling 13 more flow units this year compared to last year. When it comes to the number of flow probes sold in units, we see that the sales is up by 15.6%. And it's up in all regions, although slightly for the quarter in EMEA. And year to date, we are seeing a 17% increase in number of flow probes. So this is a very solid evidence that there is new customers coming in, buying the first probe packages, but also that we have good utilization on the install base. Looking a bit further into the regions and Americas, as highlighted, 78.9 million in sales in the second quarter. Currency neutral, very strong growth, almost 33%. And we can see that it's the total number of systems sold as capital that is really driving this. And we also see that the majority of these systems are flow and imaging systems. So that of course drives revenue. It's a direct market, it's highly priced, and it's a majority of flow and imaging systems. So that all contributes to the great results. It's also great to see that our new direct market, Canada, is continuing to contribute to America's good performance, growing 13.7% this quarter. Latin America is a very small portion of America's sales, and this quarter it's a little softer than normal. Looking a little bit further into some details here, we can see in the table on the top here, the number of capital units sold in USA. So we can clearly see that we have sold more flow systems and also more flow and imaging systems, both for the quarter and for the first half. And we can see that the majority of systems sold is really on the flow and imaging side. So this is driving the revenue as mentioned. It's also interesting to see that the growth in flow probes to capital customers, which we see in the second table here at almost 50% growth. This is, of course, driving the total number of procedures that we are counting as well. And this is a great development. I just wanted to remind us that this is also driven by these initial probe packages that goes out to new customers. So it's not equal to utilization, but we are looking at these numbers as an estimate for utilization. And we can see that this is going in the right direction, definitely. Also very nice to see, and credit to the US team, that we are seeing seven new customers for the quarter and actually 19 new customers achieved so far this year. When it comes to the Asia-Pacific region, as already mentioned, it is China who is really coming back. When we enter this year, we see that China is normalizing after this transition period. We've talked a lot about that. We went direct. And the local distributor network in China was sort of filled up with products. So it was hard for Medistim to start selling in the first phase here. So 23 and 24 was challenging years. Now in 25, we see that we are recovering from this period and the sales is back to normal. So very strong growth in the second quarter from China, up 75%. When it comes to Japan, we see for the quarter it was at the same level as last year, but we do see some growth in the first half from Japan. So a little bit better than we have seen in last year and the previous quarters. It's also interesting to see that our sales to India is picking up. So this quarter, we sold for 1.9 million and 4 million in the first half. Of course, these are very modest numbers, but it's a very important strategic market for Medistim, as we've talked about many times. We have worked together with Livanova for a longer period in order to really establish a pipeline of projects and potential customers. And in this first half of the year, we're seeing that this is starting to pay off. So it will be very interesting to see whether we are able to continue this good trend in the second half and of course, further on. When it comes to EMEA, 42.8 million NOX in sales, slight downward trend for the quarter, but as already mentioned, we are growing in the first half. What is always very positive to notice is that the direct markets, which are Spain, Germany, Scandinavia, are still growing and then not completely making up for the downward result for the quarter from our distributors. But it really points to the importance of medicine strategy, which is to go direct in more markets over time. Third-party products. We started in the first quarter with a tremendous 41% growth, which is very unusual for the third-party portfolio, but this was driven by equipping some new hospitals in Norway. So we're back to a more modest growth this quarter, but still, of course, for the first half, it's looking really, really nice with 21.4% growth. And we are carrying a highly diversified product portfolio in this part of our business. And so far it's Mentor, iCare and AMI which are the biggest contributors. Ophthalmology, the ophthalmology portfolio is the one that has contributed the most to the growth in the first half. And this is summarizing the various geographical performances. And I don't think I will go through this in any detail. Taking a look at how we're doing when we're splitting our own product sales into sales to cardiac surgeons and to vascular surgeons, we see that both portfolios are doing nicely, both for the quarter and also for the first half. But it's always very important for us to see that the vascular products are actually growing more than the average here and more than cardiac. Of course, it's growing from a much smaller sales and we are investing a lot of efforts in order to develop this market. So it's very important that we are seeing a result from this. 41% growth in vascular in the second quarter and 43% in the first half. That speaks to very good development in vascular. also when it comes to the split between flow only products and flow and imaging products it is of course important for us to see that the imaging product portfolio is continuing to grow today the the flow products is making up the majority of the the sales revenues from our own products around 70% and around 30% of the revenues is coming from the imaging products. But we know that we have a huge potential in converting the install based on flow only to flow and imaging. So to monitor progress and success in this portfolio is very, very important. And then we also remember that we had a challenging period for the imaging sales in 2023 and 2024, very much related to a challenging macroeconomic environment. But we saw that towards the end of 2024 and then into this year, the imaging portfolio is coming back strongly, growing 37% in this quarter and 60% in the first half. So this is also very much in line with our own expectations and the feedback we get from the market and from potential new customers that the interest in imaging remains very strong. When we look at the recurring sales versus capital revenues, we are seeing that we had very strong capital sales in the second quarter, so the share of recurring revenues are a bit lower for the quarter. We are at 66% compared to 73% in the second quarter last year. For the last 12 months period, we see that recurring revenue is at 70%, which is about the same level as last year. So that was a deeper dive into some details on product performance and then just some further comments with regard to our strategy and what we are working hard on there. So our strategy, very briefly, is adapted to the various positions we have in the various markets. So we have strong medicine markets where we have a high share in the cabbage field. And here, of course, the main strategy is to convert the flow only to flow and imaging. And then in developing markets where we have a lower position, it is really to grow this adoption through clinical marketing, education and also through the product innovation to make our products as easy to use and adopt as possible. When it comes to some more price sensitive markets such as India, we have also made it our strategy to being able to provide entry level solutions in these markets. Vascular surgery, a very important future growth area for the company. And we are very focused there in our strong cabbage markets to make sure that this is going to be the next lever for growth. But also in the developing markets, we are pushing these products forward. And finally, and as mentioned before, very important for us to continue to expand our direct market coverage. I stated in January that due to the fact that 2025 started with a launch of the Intuit software platform for the cardiac segment, and also that we started to embark on a journey for clinical study in peripheral bypass to really support our vascular segment, this would be a perfect time for us to strengthen our commercial efforts. And as talked about previously, we did make some changes to our commercial operations from January onwards. We got appointed a new chief commercial officer. We had a new leader for the Americas sales region, and we've also strengthened and expanded the sales teams, especially in the Americas with a few more heads. And this will continue into the next year as well. So this is not, of course, only a matter of putting more people in place, but it's also making sure that we are sharing best practices across all regions. We have put more emphasis on training and support to our sales teams, and we are really seeing results from these endeavours already. So we entered the year with our slogan, one team, bold moves and excellence redefined. We feel that we are making good progress on all of this. Then we thank you for participating this morning and we will meet again for the third quarter. Thank you.

Thank you.