ContextVision AB

OSE:CONTX

Earnings Call Transcript 2021-Q2

[Fredrik Palm, Chief Executive Officer]

Welcome to ContextVision's webcast for the second quarter in 2021. Let me start with the highlights. Highest second quarter sales in the company's history for the Medical Imaging business is a sign of recovery. INIFY Prostate, our first product within digital pathology are currently in ongoing clinical evaluations, but also in detailed planning for additional sites. Initial feedback received from the lead investigators is very positive. We had a positive cash flow, and we maintain a solid cash position. Sales. Sales reached SEK 24.4 million, which is an increase of 21% in comparison with the first quarter. It represents a 32% increase compared with the second quarter in 2020 when adjusting for currency effects. This is, of course, very positive, and we see signs of recovery, although we can expect uncertainties to remain during the rest of the year. Sales per region. The increase comes entirely from customers based in Asia and primarily Ultrasound. However, as mentioned in the first quarter, some customers have been shifted to be booked in Asia instead of Europe and United States since the beginning of this year. So to make a fair comparison with the corresponding quarter previous year, we need to make an adjustment in comparison with the financial report. Sales in Europe, for instance, seems to decrease significantly, but this is related to the customers that has been shifted and booked in Asia sales instead. So when adjusting to make a correct comparison, we have growth in all regions, which we interpreted as a sign of recovery. Product-wise, there are clear positive sign in all modalities or product categories. Our dominating modality ultrasound is growing 24% versus the second quarter in 2020. X-ray, where we pioneered the market with our first product containing machine learning technology 2019 also grew 10% in the second quarter. Sales divided by modality remained similar. Ultrasound being the largest revenue driver followed by x-ray, which is according to our strategy. The share of sales divided by region is similar. Asia remained to be our largest region, followed by Europe and United States. So a summary of medical imaging, we see signs of recovery. Best Q2 sales is, of course, a sign in itself, but even more important is that we see increasing project activity. New customer projects are started and projects that has been put on hold because of the pandemic are being restarted. We experienced an interest for new products and upgrades and tools that we have developed for remote services and interaction will benefit us and customers even post pandemic. Digital pathology. We continue to focus on expanding our network of reference sites where clinical evaluations are either ongoing or in detailed planning phase. Linköping University Hospital is now added to our group of evaluation sites in Europe. And as announced early in July, we added 2 highly respected sites in United States. Ohio State University Hospital, as well as Tufts Medical Center in Massachusetts. INIFY Prostate is CE-marked and cleared for clinical use in Europe. Pathology laboratories in the United States had the option to perform what's called a lab-developed test, which basically is a local test with a specific laboratory. If the test result becomes approved by the medical lab director, the software can be used in the clinical workflow at that lab. This is what we do with Tufts and Ohio State University Hospital. Initial feedback from ongoing evaluations and demonstrations is positive. In fact, lead investigators have expressed that the accuracy in detect and outline suspicious cancer areas on digital slide performed by INIFY Prostate is impressive. First results from studies will be published in the end of August. Primary focus in R&D is the ongoing development of additional functionality in our product for prostate cancer. In parallel, we continue with research work within colorectal cancer, which today is a huge workload for pathologists. Financial summary. Sales has already been covered. Our operating result ended at minus SEK 3 million, which corresponds to a negative margin of 12.3%. EBITDA ended at minus SEK 0.1 million, mainly since none of our ongoing development projects have reached a point where we start capitalization. If we take a closer look at the business units for the second quarter, the operating result for our Medical Imaging business ended at SEK 10.3 million, which corresponds to 42% operating margin. No sales are recorded within Digital Pathology as of yet, and we see a cost increase mainly since we had no capitalization. We started depreciation, and we also see some increasing costs for development, which was expected. Looking at the first 6 months, we have 42% margin within Medical Imaging, while Digital Pathology remains to be in the market interface. We had a positive cash flow of SEK 3.1 million in the quarter, and the cash position end of June was almost SEK 51 million. So to summarize the quarter, all-time high second quarter sales in Medical Imaging, paired with more project activity is interpreted as a sign of market recovery. Growing our group of evaluation sites in Europe and the addition of 2 respectable sites in the United States is important steps in line with our strategy within Digital Pathology. The positive feedback from the evaluation site is, of course, encouraging and of high importance for our entry into the market. We have intensified our work with the market assessment and customer interactions in general to optimize our go-to-market strategy. Digital Pathology is an emerging market, so we are attentive and open to multiple business structures. All above, paired with solid financials puts us in a great position to continue the leadership and growth within Medical Imaging, while we, in parallel, continue to build a solid ground for our Digital Pathology business. So thank you for listening, and stay safe.