Mentice AB (publ)

Good morning and welcome everyone. My name is Richard Engberg and I'm an equity research analyst here at Carnegie. With me I have Garen Malmberg, CEO of Mentis, and Rikard Rotz, CFO of Mentis, who are going to present the third quarter. Welcome.

Thank you, Rickard. So nice to be here. So I will dive right into the presentation. So, yeah, Jarman Berg, CEO, and Rickard, CFO. So dive in. So the third quarter, not entirely where we wanted, but still, I mean, slightly below last year. But we should also remember that this is on the back end of a record high second quarter. As a consequence of the top line, obviously the profitability is also lower than expected, where we had a negative EBITDA in the quarter, but a break even for the full year so far. We also have a positive cash flow, positive operational cash flow for year to date, while negative in the quarter. And we should also remember, we'll talk about that a bit later. I mean, we have a variational business and had a back end of a really strong last year, especially strong in US where we had a growth of 60%. We started off the year weaker and that's still what we are a bit impacting our result. If we're looking at the last six months, we have actually been in line with what we expect and we have had about 15% growth for the second and the third quarter as a combination. So a bit about the business. Generally, America's and European region is still behind for net sales for the year based on our target. But while APAC or Asian region is significantly above last year, if you look at the total, we are on par with last year's net sales for the first three quarters. Continues very positive business development, generally with medical device. We also see good development with all of our key device industry clients. We can also see that we have a very strong third quarter from a hospital business point of view, where we are 30% above the same period for last year. So from a product marketing point of view, we just launched the last week here two products which sort of are related or combined. The first one is EnriConnect, which is a subscription-based portfolio products for the neurovascular area. which then also launched together with our first integration with the Ankyros business that allows you to do a full simulation in the Vist environment based on a simulation you have done in Ankyros. And I will talk a bit about the conference activities we had over the last couple of months, which is really, really nice to see the impact we have in the market. So first, I'll talk about Envy Connect and the Ankerias, sorry about the rehearsal for this. And ReConnect is a way for us to really standardize our offering in each area. And ReConnect is the first in the series of products we expect to develop. That really, in this case, all of our offerings in this space, it's four or five products in that area that we're building into one environment. And we will continuously develop one product for this field that will be a benefit for all stakeholders here. So we believe that that's going to change this market clearly. The subscription-based transition, we've already done that for Hofstede generally, but in this case it's also going to move industry to a SaaS-based model, which is important. This will also then, since we have the same structure for all clients, this will also provide an infrastructure for industry to actually leverage our hospital client base to accelerate their adoption of new medical device. So this is very nice to see, and we got really good feedback on that. So my second discussion is on medical conferences we participated in over the last two, three months here, starting with SNS, which is a neurocognitive syndrome in Colorado Springs, S-Mint as well, Neurohepathy Europe, CSIS for radiology and cardiovascular, And then we have another neuro conference. And the last one is TCT, which is one of the world's largest cardiovascular congresses. And you can see that we are here pretty much the only simulation vendor that participate in these conferences. And last week in TCT, we can see that we had something like 40 or so systems across the Congress floor and very few other competitive systems in the market. More than 90% of the simulation technology in that field comes from Mantis. So we're clearly moving in a good direction here. One really nice thing here is, I mean, I think we, from a simulation-based, in a lot of cases, simulations has been used traditionally, mainly by unit physicians for basic training and so, and this is from the event in New York here, an event where we had on stage, the main stage, in front of hundreds of people, We had all our technology on this stage with the VIST virtual reality simulation. We had our physical simulator and Ankyros. And this was set up as a kind of competition, as a kind of hunger game lookalike, where six of the best physicians in the world, real rock stars in this field, We competed one European team, one US team, and one team from innovation. And these three groups, two and two, competed with each other and challenged each other on our simulators. So I think the importance of having the best physicians in the world really using our technology as a means to challenge each other and talk about the best practice and things like that, and also discuss the difference in treatment techniques between the different regions. So super, super interested, and I think it's very important for me to see that the most experienced physicians in the world actually leverage from what we are doing. So a bit of a sidestep maybe. I will go back to the numbers with Ulrika here.

Thank you, Göran. So as Göran started saying, this has been a challenging quarter, above all in the MDI segment in the Americas. And this leads us to a net sales of 58 million, which is a decline of 10% compared to the third quarter last year. So basically, within the US region, related to the MDI industry, and also in the EMEA region, we've seen the decline with 19% compared to last year. And as Joran also pointed out, the APAC region had a good quarter with a sales of 40 million, which is actually an increase of 4% compared to last year. Looking at the net sales per product area, we see a strong performance of Physical Sim and Ankyras. And just to remind everyone, we did an acquisition of Biomodics products end of last year. That's included in the Physical Sim product area. So we see a solid growth in these two areas with 26% compared to the same quarter last year. And the sales of VIST is very tightly connected to the MDI segment and that is why we see the decrease during this quarter. And as I hope you've all seen, we have announced two large VIST orders after the end of the period and they are related to the MDI segment and the VIST products. And the order intake, I mean the net sales, is related to the order intake. And as we've said a couple of times in different combinations, we have a variability in our business and a variability between the quarters between the years. And what we see is actually, as also Göran pointed out, after a very strong quarter, which we had in Q2, we often see a bit slower quarter following. And looking at the order intake, obviously we see the decrease in the MDI industry, and we also see an increase compared to last year with a healthy 36% in the healthcare system with lesser hospitals. And there is also a decline in the strategic alliances. So the total order intake, 61 million this quarter, this year, the third quarter this year compared to the third quarter last year, that is a decline of 6%. And as you can see on the right hand side on the graph, the order intake on a rolling 12 month basis is more or less the same compared to the last quarter. And the order intake obviously is reflected in the order book, and end of Q3 we had a decline in our order book from 129 to 117, which is a decrease of 9%, which shows the ordering intake, the net sales and the order book, the decrease is in line with each other. Of these 107 million Swedish crowns, 37 are related to expected revenues for this year. And as you can see, the majority of those are related to VIST. And we have the majority of the order book related to 2025 and going forward. And in the order book, we have orders as far away as 2029, which is related to software and the subscription over five years time. And just a short notice on the annual recurring revenues. It's more or less on a stable level compared to last year with a switch where we have the software licenses increasing versus the decrease in system rentals. So to summarize this, order intake, 61 million compared to 65, with a total for the full year so far, year to date, 170 million. The order book, a decrease of 9% to 117, gives net sales in the quarter at 58 million, and for the full year, 205, sorry, 204, which, as Jørgen pointed out, is in line with year to date last year. And since we have made investments for the future this year and we are growing our strategic initiatives, this leads to an EBTA for the quarter which is negative with minus 6.2 and more or less a break even for the full year compared with an EBTA of 21%, almost 22% last year, year to date. And a comment on the cost base. While we are cautiously managing our cost base, we at the same time continue to invest in our future in areas related to global sales, to strategic initiatives, especially the ones that we talked about at the Capital Markets Day in March, and also actions to improve our efficiency going forward and preparing us for scaling. And last but not least, a comment on the operational cash flow, which is positive year to date, while negative for the quarter. And this is obviously tied to the results, and also an increase of accounts receivables. And this leaves us with a cash at the end of the period of 46 million.