ContextVision AB
OSE:CONTX
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ContextVision AB
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Gerald Potzsch, you are the CEO of ContextVision. You delivered yet another fantastic quarter. Can you give us the key takeaways?
Well, absolutely. So both the second quarter as well as the entire first half year have shown excellent growth on net sales. And we've been showing a very strong EBITDA margins, which is fantastic to see. We also remain cash flow positive. We've distributed a good part, dividend payments. So all in all, we couldn't be happier with the second quarter.
Yes. The growth was close to 10%. Do you expect this to continue?
With the fundamental reason behind the growth that we're seeing is an increase in license sales. So that's recurring revenue. We're stepping up both with existing customers as well as winning new customers and driving our service revenues from recurring fees. So I would say the organic growth behind it is very healthy. But we're also seeing currency effects, and that's continuing due to the weaker Swedish krona. But all in all, I'm very optimistic on a strong 2023.
Okay. So the core business is doing good. It's been a year since you joined the ContextVision. And earlier this year, you launched a very ambitious growth program. Is that on track?
Already in spring initiated the growth program and decided to have dedicated investments into that growth program. The second quarter then, we've defined the strategy. We've adjusted organizational structures, both in the R&D organization as well as in the service organization and we have recruited key talent. And I think that journey is going to continue. But at the end of the year, I'm pretty sure we have the team online.
Is it difficult to get the talent?
Indeed, we are operating in a niche business, highly specified resources, both in machine learning as well as in image processing so we take our time to recruit the best talent, but it can be found. We're a very attractive employer since 40 years on the market, excellent culture. So we do get the right tent.
But if we look at the overall market, we are getting older and older in the whole world. And how would this affect ContextVision's business?
Well, overall, as you say, the market is growing strongly. We're getting older. We're getting sicker. We see more chronic diseases. So the need for clinical and diagnostic images in particular, is growing. On the other side, we're facing a tremendous shortage of skilled staff and resources. So we have set course now to help our customers, the OEM to solve that dilemma in the care health care market, which means we need to increase efficiency. We need to rationalize. So one of the things is we could make to be used by non easier to be used by non-trained users like nurses, like general practitioners, the ones that have not experienced in imaging per se could use ultrasound systems as easy as a mobile phone or as a compact camera that would solve a huge part of the business.
Yes. And you are actually using artificial intelligence and deep learning to get this done audit.
Exactly. So I think the key point to make the use of an ultrasound system, as an example, easier, is to build up acquisition intelligence to get the right shot at the first time, keep it simple, but a diagnostic quality. And that's where deep learning combined with image enhancement is the strongest asset.
And you've called this POCUS. Can you explain a bit better?
Well, POCUS stands for Point of Care Ultracold and that's a paradigm shift in the health care market where previously you had sent patients to an expensive imaging center or a department. But now if we have ultrasound as simple as a mobile phone, we can bring that ultrasound system to the patient, to the point of care, we're seeing what's happening, whether that's in the emergency department, whether that's in the ambulance, whether that's in the general practitioner's office. So overall, lower cost care settings is the key benefit of having more POCUS.
We see that as the strongest growing market overall, CAGR is around 20%, 25% over the next 5 years. So fantastic growth rates in a number of systems that are going to be sold. If we unlock that market with our acquisition intelligence, it's going to be a fantastic once-in-a-lifetime opportunity for ContextVision.
Do you see any big challenges when you work on the POCUS?
Well, there's two challenges. Number one is, as we talked about earlier, to get the right talent. So still, there's a lot to be done. The technology needs to solve the problem of having controllable and tunable artificial intelligence. That's nothing you can buy ready made, something that we develop. Number two is access to data. But I think that's every AI company facing that challenge. And we do have a good set of data and good collaboration partners that we work with to ensure the data supply.
Okay. a bit back to the core business. Do you expect that to grow going forward. What is the key to managing to get that growth?
So we've seen over the last couple of quarters, EBITDA margins in the 40s, high 40s when you look to Q2. We want to track that performance and show that performance to our investors moving forward. So we're going to show from Q3 on adjusted EBITDA margins to show the performance of our core business and at the same time, show the investments that are going into our growth program around POCUS. So we're going to be able to track the success of the innovation in the growth program, and I'm very optimistic by the way, that even that innovation team is going to create revenues soon.
Well, you know personally OEMs very well. contention for 4 years, there have been clients. So they also know it well. How important are these OEMs for ContextVision?
So they are absolutely key. And I think we will continue in our core business to invest into our image enhancement portfolio. So we continue investing into our X-ray family into our ultrasound family. We're going to grow share so there's still room within those OEMs. There are partners already today to cover more platforms to cover more systems to cover more releases. So there is quite some room to grow in our existing customer base. But thirdly, I think we increased our professional services.
So we're going to much tighter interact and work with those OEMs on a service side but also on an R&D side. And I think that partnership aspect is key to be built out for us in the core business.
Well, it's exciting times for ContextVision. And again, congratulations with fantastic figures for the second quarter. And good luck with the growth.
Thank you.