Medistim ASA

Good morning everyone and welcome to the presentation of Medistim's third quarter results. So my name is Kari Krogstad and I have my CFO Thomas Jakobsen with me and we will take you through the results. Before entering into the highlights, I would like to remind ourselves on our track record and our commitment to deliver profitable growth consistently over time. And as these graphs are describing, that is, I promise we have delivered on. So let's look into the highlights for the third quarter. And after a record start of the year with the first half providing records both for sales and revenues, I'm very happy to present our best third quarter ever for both sales and revenues or operating profits. We can see that we are delivering 166.8 million NOX in revenues. That's a 25.7% growth. And EBIT also growing very nicely, ending at 40.6 million, 27.1% growth. We can see that we have very little currency effect this quarter. That means that the total sales is almost the same, 25.9%. And looking at the sales of our own products, we see that that is at almost 30 percent. So a very, very nice contribution from our own products this quarter. And Americas is continuing to take the lead here up 35.7 percent. And of the 34 million of growth this quarter, Americas are actually delivering 21.5, so 63% of the total nominal value here is coming from Americas, just highlighting the importance of this region for Medicin's growth. Asia Pacific also delivering very nicely, 194% growth. And the only disappointment here this quarter is that EMEA is a bit down. It is the European part that is showing a decline this quarter, while the Middle East Africa section of it is actually growing. And we will get back to more details into what's happening this quarter in EMEA. The third-party products has a normal growth, we would say, looking back at historical levels that has been around 5%, so 4.4% is in line with that. We can remember that we had a fantastic first quarter due to some new hospitals establishing their practices here in Norway. So this is really getting back to a more normal situation. This strong sales performance has led to some higher commissions and accruals for year-end bonuses, and we will see that the operating expenses have increased also quite a lot this quarter. Still, the operating profit is up by 27% and at a margin of 24.3%, so pretty decent. Looking then at the year to date situation, so that means that we are still at the best level yet. Record sales revenues and EBIT year to date, 517.5 million, 25.8% growth on revenues, ending up at 153.9 million in EBIT, a 46.2% increase. Again, very little currency effect here. So total sales up 26%, our own products, very high, 28% growth. And America, as indicated, really taking the lead here in the growth year to date at 36.2%. Asia Pacific also contributing very nicely, 73%. And year to date, EMEA is up at 1%. Third party, well, this is an effect of the tremendous first quarter we had. So year to date, this is growing at 16.2%. And operating profit up 46%, strong EBIT margin at almost 30%. And this is related to strong sales of our own products. So with those highlights, I will leave the floor to Thomas to go through the P&L and some of the other numbers and I'll return with some more details on the business segments.

Thank you for that Kari and good morning everyone. I will take us through the P&L, our balance sheet and cash flow for this quarter and the year to date. And since Kari is going through sales figures in units, split of sales per product and geography, I will not go into that detail in my presentation here. However, cost of goods sold and gross margin is increasing with 1.2%. That despite the fact that we have strong increase in sales of our imaging portfolio. As we've said before, our imaging portfolio has a slightly lower margin than our flow products, but we have very high pricing on the imaging products and it's very profitable for Medestin. And this is partly compensated with high sales through our direct organizations, especially in the US. And therefore we have an improved gross margin of 1.2%, ending at 81.5%. Salary and social expenses increases from 46 million to 60 million. Yes, we have increased our capacity in our commercial organization and elsewhere in the organization, but the main driver for this increase is actually related to incentives and commissions and bonuses. In the third quarter last year, we did realize that our internal goals would not be achieved. So we had actually a reversal of the accrual that we made in the first half of last year in the third quarter. So practically zero commission and bonuses was recorded in the third quarter last year. This is obviously not the case in this quarter and so far this year. And this is the main explanation for why our salary and social expenses increases the way that we can see here. Other operating expenses is also increasing and again related to our commercial activities. We have much more travel expenses and face time with customers through our sales force and marketing departments and so forth. Therefore, we have increased other operating expenses as well as a consequence. Our EBITDA increases 8.7 million ending at 46.4 million. Depreciation increases. It consists of both lease obligations, but also depreciation on development products and other fixed assets. And our operating profit increases 27%, ends at 40.6 million. Net finance is very positive this quarter related to currency, but also hedging contracts and the net positive contribution of 5.4 million. Profit before tax then is about 15 million higher than last year, ends at 45.9 million. And profit after tax ends at 34.7 million, up 48% compared to last year. So strong growth in profit this quarter. If you look at the year-to-date numbers, the explanations are the same very much as for the quarter, only bigger numbers. And still with the increase that we see here on the salary and social expenses, is also actually with the same explanation as for the quarter where we had very low accruals and commissions in 2024 where we did not reach our internal goals again this is not the case in 2025 and we've also seen that the incentives that we've set for this year has actually given us great results in many of our regions especially Americas and also in the APAC region and such. EBITDA increases around 48 million, ends at 171.7. Depreciation being at the same level, we are operating profit ends at 153.8 million, that's up 46%. And if you look at the top line, we increased with more than 25%. And our expenses increases only 20%. This gives the very positive impact on our EBIT and profit as such. Net finance is also positive year to date, ends at 5.1 million. Again, currency related profit after tax ends at 159 million. Profit after tax 121.1 million up 47% compared to last year. So a strong year to date so far for Medistim. Our balance sheet intangible assets increases. We have our two major development projects that we are investing in. Fixed assets decreases. That means we depreciate more than we have invested so far this year. Inventory ends at 167 million. That's up from the beginning of the year. However, it's actually down from end of Q2, which ended at 174 million. So we have now seen a decline in in inventory based upon what also was communicated with those orders that we have committed to that are now fulfilled from our end. Accounts receivable is increasing, ends at 173 million. and we have a strong cash position now recovering after our dividend payment of 110 million in the second quarter and we now are are now well above last year's position 127 million in this this quarter we're at 157.7 million so strong and good cash position Further on our balance sheet, we have a strong balance sheet with equity, almost 73%. No interest-bearing debt from bank or other credit institutions. So our long-term debt is related to lease obligations and extended warranty. The long-term liability related to this is 28.6 million. Total obligation is 37.9 million. Yeah, some key figures when we have strong profit, obviously our earnings per share is following and we have already one crone per share more at the end of September compared to the whole fiscal year 2024. So good performance so far. Our cash flow, strong cash flow from operations year to date, but also very strong cash flow from operation this quarter. And apart from good profit, we also have a reduction in the working capital, decreasing both inventory levels, but also accounts receivable and gives us a solid cash from operation of 69 million. Investments, 6 million, mainly related to our development projects, as I mentioned earlier. And net cash from financing is basically our lease obligation. So net change in cash this period is 61 million, which is drastically up from last year's third quarter, which was only 20.3 million in comparison. So again, we end the period with a good and solid cash position ending at 157.7 million. And with that, I leave the word again to Kari. Thank you.

Yes, let's take a look into the details here. So starting with the unit sales of flow and imaging systems in units. So we see here that we have a net positive number of nine, nine more systems sold this quarter compared to the same quarter last year. And it's really Asia Pacific that is driving this. We see that they are up by eight units. America is up by two units. America or EMEA is down by one. And we will see that EMEA is actually down on all of the different product categories this quarter as a number of units. I think it's interesting to note that this quarter we are actually selling around 50% of the total number of systems sold from Edisteam is with the imaging inside. And this is a very nice and positive development. I think historically we have been around 40% of systems being with the imaging component integrated. So this is definitely a development that we like to see. Also very good this quarter, imaging probe sales in units is growing as high as 73%, and it is Americas that is driving these unit sales. 27 imaging probes sold this quarter, which is extraordinary. Asia-Pacific also doing well here, EMEA down by 10 units. Looking at the flow-only systems in units, We are up five units in total. Asia-Pacific up by nine and both Americas and EMEA is slightly down in number of units here. Flow probes also have a very strong performance this quarter, 22% growth in number of units. And again, Americas is really driving this growth, 66% growth in number of flow probes sold in the Americas. And of course, Americas is US for the most part, although Canada and South America is also contributing. Asia-Pacific up 59%, EMEA down 10%. So let's take a closer look into the Americas. So we are delivering 83.2 million NOX in sales in the third quarter, currency neutral, 35.7% growth. We see that the number of system sales is really on the same level as last year, but we're selling more imaging units. So that is, of course, contributing to the higher revenues. Also mentioned strong probe sales for the quarter, both from the flow probes and the imaging probes. Canada also continuing to contribute, growing this quarter with 68%. And also Latin America is growing or a little bit lower, actually, but it's very small numbers. So it doesn't really have a big impact. Looking at the number of procedures that's coming out of the USA. I've already commented on the number of systems, so that's the first table here. But look at the number of procedures. Here we can see really the impact of the many flow probes that were sold this quarter. So that translates into an extremely high number of procedures. And also when we have this very high number of imaging probe sales, that of course also translates into a very high number of imaging procedures. This is not to say that this is a measure of the utilization of the systems for the same period. I have to be very clear about that. But certainly it's a nice development. And if we look then at the number of flow-only procedures sold in the USA per year, and we're looking at the year-to-date numbers here, we see that we are covering or supporting around 37% of the cabbage procedures in the US with our technology so far. So steadily improving. When it comes to Asia-Pacific, ending up at 25.2 million in sales, 194% growth. And the most important thing to note here is really that we are seeing a continued normalization in the sales to China. So this was our promise at the beginning of this year, that we expect to see quarterly variations, but a normalized year. So, in the third quarter then, we saw that the sales was up 143% in China specifically. Also contributing to the great results in Asia Pacific for the quarter is Japan, contributing with 6.7 million, but we had zero sales from Japan in this quarter last year. And also other distributors are contributing. So EMEA is, as we see, a bit down, 37.1 million, down by 11.8%, currency neutral. And this quarter, it is actually our normally highly performing markets, the direct markets, Spain, Germany, also Scandinavia. which is showing a decline for the quarter 26.8, while the distributor portion of the business is having a good quarter with 22.3% growth. I think that we have to keep in mind that both Spain, Germany and Scandinavia as well are markets where we have a very high penetration in the cabbage part of the business. So with the flow technology, it's really almost fully penetrated. So the growth needs to come from conversion to imaging, which is steadily ongoing, but still that will continue to take some time. And for the future, we really rely on building and developing the market for vascular products. And of course, there will be some new target markets. We're currently working our way into the Turkish market that will also contribute to the future growth here. The third-party products, as mentioned, started on an extremely high note, revenue up 4.4% for the quarter. And then with this first quarter strength, we are looking at a year-to-date growth of 16.2%. So all in all, a very, very strong performance from the third-party. This leads to the regional performance as we see in this table. US up 32%, Canada up 68%, South America up 251%, China as we see 143% up. The rest of Asia Pacific up 84%. And then Europe, especially the European direct markets, this quarter down 17.9%. Middle East Africa up 133%, of course, from a much lower number. And this leads to the total sales growth of the 25.7%. When we look into the split of vascular and cardiac, we see that we are having an unusually slow development for the vascular products this quarter. It's growing only by 3.7%. Then I will ask everyone to keep in mind that both Q1 and Q2 actually delivered more than 40% growth. So this is leading to the year-to-date situation where we're growing at 29%. And looking a little bit back into our history, the growth in vascular has probably been around 20%. So we are still delivering very good developments in vascular and some quarterly variations always have to be expected. Also, I would like to point to the fact that the cardiac product portfolio is also developing extremely nicely, almost 37% growth for the quarter and 27% growth year to date. And we are always interested in seeing the imaging development. And this year, we're seeing terrific performance here. So almost 40% growth for the quarter and 52% growth year to date, meaning that the interest in our imaging products is as solid as ever. And this business is really coming back after weaker 2023 and 24. When it comes to the recurring revenues, this is when we are counting sales from capital probes, PPP smart cards and lease revenues continues to be high. It's for the quarter 72%. And for the last 12 months, we are at 69%. So also very solid. So it's typically a business as usual quarter for us. No big news to talk about. However, I would like to just reiterate how we started the year. And I know I've been talking about this every quarter, but in the beginning of the year, we knew that, you know, we were standing at, as we said, a pivotal moment for the company. We were just about to launch the Intuit software platform and we were also starting the patent study. So we felt it was a perfect time to strengthen our commercial efforts. And I've talked about the organizational changes that we made and also some of the operations that we've changed in that part. I also would like to say that something we have invested quite a lot of time and resources on this year is to establish or re-establish the Medicine Academy. We have actually revamped our training and education program for the sales force. This is part of the efforts of really strengthening of commercial operations at large and really supporting our sales reps and enable them to do the best possible job out in the field. So this is a new program with theoretical and practical exams. It will lead to a certification for the individual sales reps. And the content is, of course, both on product, on clinical application knowledge, and also on the selling scales. We have developed our own sort of a model for how we want sales to be performed, representing our products in the best possible way. So with this, I will leave you with the theme for the year. One team, bold moves, excellence redefined. And we should open up for questions.

Yeah, as usual, we have quite a few questions. The first one is quite general. Congratulations on another strong quarter. Americas is driving the growth, while relative growth is even higher in APAC. EMEA, on the other hand, seems softer. Going forward, where do you expect growth to come from?

Yes, so... I mentioned that today America is actually contributing with the 57% of the total sales of our own products. And I think it's with the investments that we're making in the US in terms of building out the sales force and really continuing to to build on the momentum that we're seeing there. There's every reason to believe that the US and Americas will be the growth driver also in the near term, in the near years to come. And this is driven both by increasing key opinion leader support More awareness steadily increasing, strengthening the sales force, as I mentioned. We really have a lot of things going for us in the US. So that will be the most important growth driver also going forward. But Asia-Pacific is really the medium to longer term growth engine for us. And we should remember that we have the highest growth market in the world in China and in India, growing in number of procedures, cabbage procedures, more than 10%. So, of course, that's the motivation for developing our own direct sales organization in China and also for our heavy involvement and collaboration with Livanova for India. So I think that will be the next one. And when it comes to Europe and Middle East, as I said, it is a much higher penetrated market for coronary bypass surgery, CABG, but we still have growth opportunities in vascular. So for us to grow in EMEA, it will be to increase our efforts on the vascular side, add some additional markets, of course, also go direct when the time is right.

The next one is on the US. You are presenting significant growth in procedures in the US, both for TTFM and imaging. Is this due to orders being placed prior to price increases? Or is this down to other market factor? And is the price increase both for TTFM and imaging products?

Yes, we did a general price increase as of the third quarter. And of course, we've been very curious to see whether that would impact the volumes. What we can see that the high volumes of probes sold in this quarter was at the new pricing. So that's at least an earlier assurance that we are that new pricing is accepted. But of course, we will need to see that also a little bit further into Q4 and see what the achieved selling price really will be. But so far, yes, it was not a stocking up before a price increase.

Thank you. Vascular shows lower growth this quarter, around 4%. What do you expect from this segment going forward?

Yeah, so... I think, you know, quarterly variations, we see it all the time. It can happen in regions. It happens to the different products. That will always be the case. And all in all, we see very solid development from the vascular. But the reason why we believe that vascular, you know, can be trusted to be a significant growth driver for the company going forward, that's really the response that we're seeing now that we are making more deliberate efforts in creating this interest awareness through the patent study and building all of these centers that are participating. For now, we have about 55% enrolled in the study. We're still getting the last study sort of up and ready for starting to enroll. So this is a slow process, but it's moving forward. And we feel there's enthusiasm in this group of investigators, and they are already talking about the technology, and as we know, it's an extremely influential group. So with that investment and everything that we do also on the sales side, I should mention that on the training and education program that I just talked about, we have focused on peripheral bypass as the number one application area where we really wanted to lift the sales force and support them in in how to engage with vascular surgeons so you know we are determined to support invest in the in the area we're seeing that we are getting a response from the market so that will be very positive i think going forward thank you there is a question on cost your cost base is growing can you elaborate on the increase and how flexible are you if you experience lower sale for some time

I was touching upon the topic in my presentation. When we look at our increase in salary and social expenses, it can look like we have hired a lot of new employees. Yes, we have hired some, but the main driver for the growth is actually related to incentives and internal goals that we've been setting. Obviously, when these costs are then increasing, this is related to the fact that our internal goals has actually been reached. For instance, and the main driver for this is US and what we have done for this year is actually to lower the fixed part of compensation and increased the variable one. And if they reach their targets, then they will receive a good commission or reach their incentive. And we've seen that throughout this year. and also as a consequence we have seen a good growth on our top line. If they would not reach their targets, the consequence for instance for the third quarter would be a reduction in expenses of around 10 million and for the first nine months more than 20 million so that means that we in that sense has actually a quite flexible model when it comes to gold setting and reaching our targets so when targets are reached yes then the expense will increase but if it's not reached then there will also be a reduction in expenses thank you there's a question on turkey you mentioned turkey as a new market

Will you start this market with a distributor or will you go direct from the start?

Yes. No, we will follow our traditional method of always starting with a distributor in order to understand the market, map the market, and also see whether there's resonating with the users in that market. And then we also want to have a certain level of business before it's even starting to consider to go direct. So definitely we have started with the distributor. So our job now will be to really support that distributor and follow up closely and ensure that we have selected the right one and that we're seeing the development and results that we need to see. So that's for the future to evaluate a direct operation there.

Thank you. Then it's a question, a wide one. Can you comment on France, Brazil, Japan and India? Are there any plans of going direct in these countries?

France is a pretty, well, it's a challenging country for us. I believe our penetration today is probably around, I don't know, 30%, a little bit more maybe, but still not in the highest end in Europe, definitely. It's one of the countries that it's reasonable to look at for a direct operation. So you could say that's on the list. We have had a great development with our distributors for, I would say, 20 years or more. So they have done a tremendous job for us in developing the cardiac market for flow. They've also done a good job in developing the conversion to imaging in the market. But as we've seen over the past several quarters, there has been some reasons for concern and the total business has been challenged and we haven't seen the steady development that we used to. And of course, this is a profitable business. It is also one of the countries that we should think about for going direct. And then you mentioned Brazil. Well, South America in total hasn't been really the highest priority part of the market for us. Brazil is the most interesting country in South America. And we do have some business there. We do have some installed base there. And we know that there is interest from Brazilian surgeons definitely for the products. So it's a geography where we are considering to increase our efforts, absolutely not going direct in the near future. Did you mention India? India, well, again, we are in a starting phase. I would say we have 2-3% coverage of the procedures performed. As I said, it's growing more than 10%. It will soon actually be larger than USA. and then take the lead as the biggest market in the world in isolation. So definitely a place to be, a place to focus on, a place to ensure that we are present and supporting the local distributor. We're very happy with Livanova, but we need to work it a little bit further before it becomes even a question to go direct.

Thank you. That's another one from the web. Can you comment on the performance of the direct Europe markets? Why was it down so much after being so strong in the past?

So again, you know, quarter by quarter, we do see a lot of variation. And there can be, you know, customer projects that are being closed or not being closed, entering into the next quarter and so on and so forth. That's something that we've seen historically and will continue to see. And that is, of course, if you're not winning the customer interest. or closing the opportunities in the quarter that will affect everything. Like we saw, it was down on both system sales and probe sales. So this is, of course, parts of the same issue. I think that we, of course, our ambition is to continue to grow and especially in the direct markets. We have different challenges. Germany as one market, very, very highly penetrated, rather price sensitive, not easy to just compensate by increasing price. In Spain, we've seen some resistance to buying capital and we've then introduced more consumables based deals, which will then result in less revenue at the time of sales, but really then securing the future growth from the Spanish market. So Spain is in really good condition and Germany for that matter. When it comes to UK, well, it's the occasional close of sale. Still haven't really cracked the nut in the UK, as we talked about many times.

Yeah, then it's the question on Medistim Academy. Could you comment on the Medistim Academy? Is this for internal sales reps only or also for distributor partners?

Yes, definitely. Yeah.

Should I do that? It's a three-part question. Why did you see the need of re-establishing this? Any particular event? And... How would you like your sales force to sell the product? And what does an ideal sales process look like?

Great question. Big question. Well, first of all, of course, we have trained the sales force in the past as well. It's just that now we have revamped the content that we are, the training materials. and the approach. We are using a combination of face, let's say, classroom situations and digital solutions as well in order to do the training. So it's really to elevate the quality of the training and talking about how we want to sell. So we have defined and for a long time defined the Medistim sales process. we have a very clear understanding of what we need to do prior to the sales and also during the sales process and and when we have closed the sales and how important it is for us to really be present and ensure that our technology is being used is being used correctly it creates enthusiasm and that they're upselling within the the customer that we have just sort of won So it's too long to go into detail about the sales process here. But for sure, we're rolling this out also to the distributors. And even more, we have a goal to establish a similar certification system for customers. Some of our customers are actually asked for, you know, is there a way that we could certify our team customers? in the hospital in order to make sure that we have some certified nurses and technicians that can really provide the internal training at the hospitals, which we think is a great idea. And that's on our sort of our next to do list to build out the STEM Academy.

Thank you. That was it. But we have one more. Yeah, one more from the web here. America's recurring revenue was strong in the quarter, around 43% year over year, but not quite as strong as I might have thought given the price increases and very strong unit growth of probes. Could you please explain why?

Well, I don't know what the expectation really was, but we feel that the number of units sold was extremely high. And as you say, we managed to sell this high volume of units at the higher price. So, yeah, I think that's, I don't know whether you're reflecting on that.

Maybe add something to that because yes, the probes sales in units and the pricing we achieved there is obviously within the new pricing. But having said that, we do also have a lot of lease and PPP contracts which are lasting over a period of time so that the price increase that we implemented from the 1st of July would not affect those those accounts so therefore a good portion of the of the number of procedures that we have been sold in the third quarter is based upon the old pricing when it comes to the ppp customers and the hybrid customers so that probably explains why the increase in revenue is slightly lower than one could have expected having said that i'm not sure what the expectation was here but that this is a part partly Thank you.

Another one coming in here on incentive structure. Could you elaborate on the new incentive structure and the flexibility that Thomas hinted? Are goals always set in a way that incentivizes for year-over-year growth? What would happen to bonuses if growth year-over-year was not to happen?

As I said, we were setting new targets every year. And of course, if those targets are not reached, then the incentives will not kick in. So again, going into the detail of the incentive plans for US would take too long time. But again, the main principle has been to lower the fixed compensation and then to give the carrot to sort of make sure that you perform. Because when you perform and performance is either both increase the existing recurring revenue on one side and on the other side actually drive capital sales. So those two are the main factors that will drive the incentive for the sales force.

Thank you.

Thank you.

So with that, we say thank you for being with us for this presentation and look forward to meeting again for the fourth quarter presentation. Thank you.