ContextVision AB

OSE:CONTX

Earnings Call Transcript 2020-Q2

[Fredrik Palm, Chief Executive Officer]

Welcome to ContextVision's summary and report of the second quarter in 2020. The second quarter was very progressive for our company. The first product within Digital Pathology was granted CE mark. Our latest product for ultrasound was released for sale. We had a significant increase in our X-ray sales in the quarter, and we ended the quarter with a solid cash position. Sales in the second quarter reached SEK 20.1 million, which is a 13% decrease compared to the second quarter in 2019.Due to the present pandemic situation, we had lower sales within ultrasound. Hospitals and clinics around the world has been forced to other priorities due to COVID-19, which in turn affected primarily our ultrasound sales. However, we managed to close several new contracts with customers despite 100% travel restrictions. Thanks to commitment and creativity among our staff and customers, we are able to move things forward on remote by using digital platforms.Exhibitions, seminars and meetings are currently 100% performed on digital platforms. Regionally, we saw a decrease in Asia and Europe, while United States had a smaller growth. The distribution of our sales per product line saw a significant change in this quarter, although 1 quarter is a short time period for our OEM business.Our X-ray continue on the positive path and grew with 78% compared to the corresponding quarter in 2019. This partly compensated for a lower sales within ultrasound. Our largest business segment, 2D ultrasound, decreased with 8%, while the 3D ultrasound sales saw a more dramatic decrease.The 3D ultrasound business has suffered the most due to COVID-19, but a lower level of sales were forecasted anyhow since one of our customers started to phase out the product a year ago, and now we see the full effect of that. But most important, we consider the decrease in ultrasound business being temporary and entirely related to the pandemic situation.In May, we released our seventh-generation of ultrasound product named Rivent. With this product, we can create an image quality and sharpness in an ultrasound image, which is closing in on the sharpness you find in an MRI image. Extraordinary sharpness in the image quality has been increasingly requested by global leading ultrasound manufacturers around the world. And once again, we deliver product in the forefront of technology and prove our leadership within the field.Altumira, our AR-based product for X-ray, continue to drive growth within our X-ray business. The single most important milestone for the company in the second quarter is the release of our first product within Digital Pathology.Digital Pathology is a young, but rapidly growing market. High workload and shortage of pathologists are main drivers. And such situation also lead to an elevated risk for diagnostic mistakes.Decision support tools will be a vital key to address such challenges, and it will turn clinical pathology into a digital discipline. It could, in fact, be like a comparison with a pilot driving an aircraft manually versus one that is using an autopilot. Ultimately, it will offer significantly improved efficiency, diagnostic confidence and standardization. The pilot will be the pathologist.Market reports estimate the present market size for software within digital pathology to be about USD 250 million. However, we estimate the market to be $1 billion market a few years down the line. And the availability of high-performing decision support tools will be one of the key drivers.INIFY Prostate Screening was granted CE mark in June. Basically, it is the first product in a planned portfolio of products addressing the most common cancer types causing the heaviest burden on pathologists. Basically, how it works? After the sample has been scanned or digitized, INIFY makes an automatic prediction and outline suspicious cancer areas, and present all the samples in a worst first order for the pathologist. This will draw the pathologist attention to samples with suspicious cancer and minimize time spent on samples with benign tissue. Thanks to training data generated by our patented Master Annotation method. Our algorithms achieve an accuracy beyond case or slide level. We reached 95% accuracy on pixel level. Lastly, we have developed a highly intuitive and user-friendly interface, since it is essential from a workflow and usability perspective. The involvement of clinical expertise has been central in the development. Dr. [ Frazetta ], for example, is Chief Pathologist in one of the few fully digitalized lab in Europe, where INIFY already is highly valued.Now we focus on installing on additional reference centers across Europe to broadening the use in the clinical workflow, which is our priority.Several contracts are already in place, and we have additional late-phase discussions with prospects, and notable revenues are expected to come during next year.A summary of the financials. Sales, we already talked about. The EBITDA ended at SEK 3.7 million in the second quarter, and the operating result was SEK 1.6 million, which corresponds to 8% operating margin. Despite somewhat lower sales in the second quarter, our first half year, we were actually able to deliver a 11.3% growth in the company, and this -- a lot thanks to a strong first quarter. In the second quarter, we maintained a good margin in the Medical Imaging business, reaching 38%, while Digital Pathology has not started sales yet.We had a positive cash flow of SEK 12.2 million during the second quarter, and the cash position end of June was SEK 45.2 million.So to summarize the quarter, we entered the Digital Pathology market with our first product for prostate diagnosis. Going forward, we will focus on installing in additional reference centers, while R&D is focusing on developing additional products for the portfolio. So we are building the business brick by brick.We continue to confirm our leading position within ultrasound by releasing a new generation that can create an extraordinary sharp image quality, supporting sonographers and doctors in their diagnostic task.COVID-19 affected our ultrasound sales in the second quarter, which was expected with such a severe global situation. We see this as temporary and entirely related to the pandemic situation. On the other hand, our X-ray sales continue to grow significantly, which partly compensated for the drop in ultrasound. The remaining part of the year continue to be unpredictable. But globally, we are getting more and more used to move projects forward on remote by using digital platforms. We had a positive cash flow and ended the quarter with a solid cash position. So we keep focusing on developing the company with a long-term mindset, all the way from majority owners to employees, which we see as a key for success. The need for efficient solutions within health care, which is what digital tools is offering, has -- had never been more obvious. So stay safe, and thank you for listening.