Mentice AB (publ)

Hello and welcome everyone. My name is Richard Engberg and I'm an equity research here at Carnegie Investment Bank. With me I am Frans van Venkert, CEO of Mentes and Lerika Drots, CFO of Mentes, to present the Mentes Q4 results. Frans and Rikha, welcome. The stage is yours. Thank

you for having us. Thank you Richard. Welcome to today's Q4 earnings call. And I'm here as stated also with Rikha Drots as CFO who requires no further introduction and has been in place for more than a year. I'm the new CEO of Mentes and I started January 1st. So effectively I have a long history, 25 years of history in the medtech industry and global roles both across Asia, China, Europe as also the United States. Both in upstream roles as also downstream commercial roles and I'm really excited to be the new CEO of Mentes. Mentes truly a partner, I'd say, in the triangle of both the medical device industry as also the healthcare delivery networks as also the imaging centers. And it's a privilege to be the new CEO of Mentes. I would also like to take the opportunity to thank Joran Namandberg as who led the company for 17 years and really put it, how do you say, and made it where it is today. And I'm honored in order to take the reins and bring it forward to the next chapter of further growth. What we have today is four topics. So first of all, how do you say, this is the highlights and the overview what I will give. Then Ulrika Drots will give the financial results. I will provide some concluding remarks and then we do questions and answers afterwards. In order to get started, so what we look at the financial summary, we had a strong Q4 basically in 2024 with net sales up .4% year over year. And it was also with lower operating expenses as also lower personnel cost. And that really drove a positive EBITDA. .1% margin as also a net profit of 2 million Swedish crowns for the quarter. If you look at the total year from a sales perspective, it was behind target. But we saw positive developments in both the Asia Pacific region as also the EMEA region and stable performance in North America. The positive was the operational cash flow, both for the full year as also in the quarter. And if I now look at the total results, it really sets us up well for 2025 for further growth and performance. If you then look at the business development aspects, if you look at the EMEA sales, it was up by more than 60%. APAC more than 27% for the full year, where we saw modest growth. We almost flat towards the North Americas. It was performing slower in North America and we're implementing measures in order to make sure that we get more order intake as also further operational execution. And our focus is there both on the medical device industry segment as also the hospital care delivery segment. The other thing we see is that the medical device industry order intake increased by 24% in Q4 and we saw a strong demand for our solutions, especially the introduction of what we call the integration between NeuroVascular Connect and Vis Ankyras was received well. And also we saw the progress in that neurovascular segments in order to be in the treatment planning for hospital solutions. So in all a good 2024 Q4 and I would like to hand it over for details to Ulrika Drots.

Thank you, Frans. So as Frans mentioned, we ended the year with a strong Q4 and that gives a year that is more or less in line with 2023. So net sales up .4% compared to the last quarter 2023 and that gives us a total for the year of 290 million, which is a growth of 6%. Together with a higher gross margin, both in the quarter and the year as a total, we end up at an EBTA level of .1% on the margin level and an EBTA result of 16.6%. Sorry, a million Swedish crowns. And as you see, the full result for the year was created in the fourth quarter. And that is despite the fact that we took one of costs of around 7.5 million. So as Frans mentioned, yes, cost control. This leads to an operational cash flow of 13.4 million in the fourth quarter, which is far above the cash flow from last year. On a full year basis, we have an operational cash flow of almost 18 million Swedish crowns, which is approximately half of the operational cash flow that we did in 2023. And from an order intake point of view, we had an increase during the quarter of almost 5% and for the full year, a decrease of 8%. So moving into more details around the net sales per region, as we have mentioned many times during these kind of calls, we are looking at our business on a rolling 12 month basis, which you see in the graph on the right upper hand corner. And there you can see that the Americas, which represents the largest region for us, had an increase during the quarter of 20%. But as there has been a lower performance up until the third quarter, this leaves a flat development for the full year. For the EMEA region, there was a really, really strong growth during the fourth quarter of almost 62%. And the fact that EMEA also had delivered weaker during the year up until the third quarter made the growth for the full year at almost 5%. For the EMEA region, it's the opposite. It has been a very strong growth throughout the year and a decrease in the fourth quarter. And despite that, we end the year with a growth of 76%. Looking at the net sales from a product area perspective, we see a solid growth for the Vist products, which is our main product. For the quarter, it's an increase of 90% with the biggest part on hardware. But I want you to highlight that on a yearly full year basis, we see the biggest increase in software and licenses. Physical Sim had a good development during the fourth quarter compared to 2023. And this is also related to the acquisition of Biomodics at the end of 2023. Just mentioning shortly around the recurring revenues, there has been a flat development for the quarter and also on a rolling 12 month basis. What we do see is an increase in software licenses, which is what we are aiming for. And a somewhat decrease in system rentals. But the focus on software licenses is important for us. The order intake for the quarter was above last year, and that is related to the medical device industry within the EMEA region. And a total order intake of 109 million, as I mentioned previously, is somewhat lower than or sorry, is an increase with 5% for the quarter, but a full year decrease of 8%. And finally, a comment on the order book, leaving the year with 138 million, where of 96 million is related to revenues to be recognized in 2025. And as you can see, the majority of those revenues are related to software within the VIST product area.

Thank you, Ulrike, for those details. And as stated also, I'm truly excited to be part of this team and to really drive what we call -to-end solution, both for the hospital space, but also drive further execution and operational execution in the medical device industry segment. So in all, what we see is that, and that is the key takeaway for today, is that we had a strong finish to the last quarter of 2024. It was a challenging year, I would say, across, but Q4 was strong. And what we see is that the full year results were mostly impacted by a challenging first half, with also performance in North America, which was flat. Robust growth in the EMEA and APAC, especially from a sales perspective. And for us, I'd say the acceleration of the Americas is a critical part for our basically priority. So the priorities going forward is, first of all, advancing the initiative with the launches that we have done in the neurovascular connect platform, but also the integration that we do for VIST and Anchorage, which gets us into treatment planning in order to make sure that we have a true -to-end solution also for the hospital space. And that will really create and unlock further growth, as also making sure that the operational excellence for the medical device industry segment is going to continue. So in all, I would say what we see is that we're operating in a space, in an image guided therapy space, where we see the basically the innovations continuing. And MENTIS is an integral part of providing innovations in the image guided therapy space, and that sets us up well for 2025 and beyond. Thank you very much.

Thank you, Frans and Elrika. So now I'll be having some questions. So my first question is related to you, Frans. This is your first quarterly presentation on MENTIS. And you gave us a brief background in the intro of your presentation. But what do you think are your main experiences that can drive MENTIS forward? Now, thank you, Richard, for

asking that, because I have a long experience within the medtech industry, but specifically also in the image guided therapy space, where I've worked in both upstream roles, what we call more the product marketing and the development roles, as also within the commercial side. I've led North America, and I think I can truly help with, first of all, extending the solutions for the hospital space in order to grow further there with the team, as also coach and guide the team towards the commercial execution, both globally in order to reach further heights. So I think my experience really could help in this space, and it's really teaming up with the great people that we have from a clinical standpoint, technical standpoint, but also commercial standpoint in order to unlock further growth of MENTIS.

And that takes me on to my next question. So what will be your main priorities going into 2025? It

is clearly related to making sure that we provide innovations towards the medical device industry segment. So there could be several innovations if it comes to strong growth areas into valves, for example, or it's also electrophysiology, cardiac vitamin management. So making sure that we continue to grow and help medical device industry companies to get training, but also compliance towards their physicians. But it's also the second part is unlocking growth in the hospital spectrum, which requires a little bit of a different what we call value proposition or so a different product. So we cannot translate that -to-one our medical device product towards the hospital segment. We need to potentially add a few steps in order to make it a true service and attractive towards our hospital segment. And I've also the experience there in the many years in order to help with the team. So my priority is extending the growth in medical device industry, but also accelerating further growth in the hospital segments, which basically then confirms also our financial basically targets that we have set all along.

Okay, great. So during the quarter issue, a really strong sales growth, but a bit lower growth in order intake year on year. And I noticed that was quite a lot of the major orders that came early in the quarter. Is this the main reason for order intake growth being not as high as sales growth?

Ulrike, would you like to take this because you were the most satisfied part of that during the time.

I think the orders coming in early in the quarter helped actually realizing more a greater part of them than usually as net sales. But I wouldn't really say that that is a reason for the lower order intake. I think this is part of the variability that we have in our business.

Okay, great. And can you please describe the VIST Ancora's integration? How has it been received by the markets?

Yeah, absolutely. So it's received well. So maybe as a little bit of a background, what we do is basically provided a new product, how does it introduction with an integration of our simulation solution, also with a treatment planning solution with the Ancora's. And that really helps hospitals in order to be in the treatment planning side. So it really gives a little bit of a different proposition and could provide further growth. And that really helped us. So we have introduced it in several hospitals and the feedback was positive. I also traveled already to those hospitals in order to see it and talk to the doctors. And yes, I said it is received well with a few further tweaks. I think we can extend the growth even further. So received well overall.

Okay, great. And now we'll break in with a question from Christian Binder of Redeye. So he's asking what exact changes will be needed to appeal more to the hospital customers compared to the MDI customers?

It's a great question. Because we have been very well established in the medical device industry as a company. And in order to really go direct towards hospitals, usually a little bit of a service is also required in order to make sure that solutions are truly also adopted. So that people are supporting physicians in order to try and also adopt a new workflow that is required with these solutions. And that is what MENTUS also needs to provide. It's making sure that we provide this also as a service and making sure that it's also then implemented as requested. As also workflow wise, I said we might have to tweak and tune it a little bit to make it easier and also fit within the workflow of physicians. Because they are very busy. I said these are high stress procedures that they're most of the time doing. And it needs to be seamless and fit into the workflow to be adopted. And that's what we are going to drive with the team.

Okay, great. So my next question is you received three major orders in Q4 and you received one major order now in Q1. Can you please describe the nature of these orders and how they have been delivered? Yeah,

Ulrike, would you like to take or can I take? You can take. So they are for the medical device industry where we have solutions also in particular clinical areas. And what we do see is that there is strong growth also from a procedural standpoint in valve implants. As also cardiac rhythm management. As also ablation procedures for electrophysiology. And it is those MDI companies that have basically requested our services in order to help them with training. But also supporting their physicians in order to do those procedures. And that's why these three orders are linked towards. So it's straight into our strategy and also the execution and the proof that we're on the right track.

Okay, great. And my next question is regarding the gross margin. It has been really strong in the quarter and during the year. And can you please describe what is the major reason for this really strong gross margin?

One of the reasons is the increase of software with a higher margin than hardware that we've seen during the year. And another reason is work and efficiencies that we've done around the hardware. So we've created it more cost efficient during the year.

Okay, great. And lastly, I noticed in the quarter report that you made an adjustment in the order book. Can you please describe the reason for this and is there any chance that this revenue can come back, so to say?

I take that one? I

could take it as well. Can you please do so?

This relates to an order that was placed before 2023. And since we at this point in time don't see when it will be delivered and the revenue could be taken, we prefer to actually debook it from the order book. But there is an ongoing discussion. So on the question if it potentially could be realized in the future, yes, we're working for it.

Most likely it will still go to revenue, but we don't know when. Okay,

great. And lastly, you touched upon it in your presentation, but could you please briefly describe the development in annual recurring revenue?

Yes, and as I mentioned, the increase is related to software. And towards the end of the year and towards the end of the quarter, we saw an increase in the recurring revenue on software.

Okay, great. Frans and Ulrika, thank you for coming here to Carnegie Bank. And thank you everyone for listening. Thanks. Thank you, Richard, for having us.