ContextVision AB

OSE:CONTX

Earnings Call Transcript 2022-Q3

[Unknown Attendee]

Gerald Potzsch, CEO of ContextVision.

[Unknown Attendee]

You've been here now for a few months. What's your take so far?

[Gerald Potzsch, executive]

Well, it's been very rewarding first 2 months. I experienced a very welcoming, open, inclusive culture. And ContextVision for me has simply proven to be a great place to work.

But let me also mention 2 fundamental insights. Number one, very positively perceived from my side, I guess also externally, is that we have a very healthy business. We're growing stronger than the market. We're having a very positive cash flow position. Margins look good. We're debt-free. So overall, good opportunities moving forward.

Number two, our tech drive and position is very strong. We almost have 50% capacity allocated to it and that gives us, likewise, a strong momentum into the future.

[Unknown Attendee]

So what will be your main focus going forward?

[Gerald Potzsch, executive]

Well, next to the technology focus that I mentioned, we are already investing into our sales and marketing organization and we're also investing into service as a business.

Just as an example, we've just completed the recruitment of 2 very skilled and fantastic people added to our team. But skilled people, they can pick and choose.

[Unknown Attendee]

How easy it is to get skilled people to ContextVision?

[Gerald Potzsch, executive]

It's been a journey, but I think we're a very attractive place to work as a global company yet giving the opportunity to enjoy downtown Stockholm or Linköping. And it's exciting projects to work with machine learning, artificial intelligence, et cetera.

[Unknown Attendee]

Okay. 2022, so far, has been a fantastic year for ContextVision. Will this continue?

[Gerald Potzsch, executive]

Well, I can confirm the first 9 months have been very good, it's been very exciting for ContextVision. And a 23% growth for the first 3 quarters on the top line can't indicate a bad year, right? But Q4 is going to be an important quarter for us. RSNA is coming up, new product releases. So it's looking very nice.

But let me also mention a few one -- effects that we saw in Q3 comparable to last year. So one, currency effects are continuing to help us in a positive way. We still see beneficial contributions from the INIFY spinoff now restated as other income. But if you look to net sales comparable to last year, we still see a significant high single-digit growth. So overall, I'm very impressed on the performance and the opportunities moving forward.

[Unknown Attendee]

But when I look at your margins, close to 50%, it's like you're printing money. How can you improve such a business model?

[Gerald Potzsch, executive]

Yes. Printing money is -- well, we're not doing as good as the money markets, I guess. But fundamentally, there's nothing wrong, right? Indeed, Q3 margins have even outperformed Q2, which is fantastic to see. But we do need this to invest into executing our growth strategy moving forward, but we certainly will also optimize our capital allocation strategy.

Just to add to that, the main challenge for us is to get OpEx under control and set a new baseline after the spinoff. And I think we've done very good and according to plan. So what you see throughout the first 3 quarters, I do think is a good new baseline that we've established.

[Unknown Attendee]

Okay. I know you're in the middle of a strategy discussion as we speak. But can you reveal some part of it now?

[Gerald Potzsch, executive]

Well, I'm happy to do -- to give you a few thoughts on what we're up to. So number one, I think the insight is that our focus on the core, which we set as a strategy after the spinoff of INIFY has proven and shown to be very successful, right? So using and working within our customer segments that we're addressing now, building on the technology and product portfolio that we have still allows us to significantly grow the share of wallet, mainly within larger OEM and accounts. And that is true for ultrasound, but we're also going to reenter stronger into the x-ray market.

So there are good opportunities by focusing on the core. But next to that, I think the stronger partnership approach and collaboration approach, especially with the larger OEMs, is going to show us more opportunities in adjacent business areas, right? To grow with our customers is going to be a very good opportunity moving forward.

[Unknown Attendee]

Yes. And you come from one of these big conglomerates. How would that impact?

[Gerald Potzsch, executive]

Well, I hope that is going to help, right? To some extent, we know what they work on, how they think, what they need. And I do see we're able to deliver on those needs.

[Unknown Attendee]

Exciting times. ContextVision is doing well, but the world, it's difficult times. U.S. is going into recession. Many European countries are doing the same. How do you think that will affect ContextVision.

[Gerald Potzsch, executive]

Yes, we're carefully following the situation. And indeed, it's very dynamic. But overall, we're depending on the business of our customers. And their business, at least when it comes to the European and U.S. markets, to a large extent, is anti-cyclical. So in that sense, I would not expect a very significant impact.

Plus, we're having a very strong growth pattern in Asia, so that might help as well.

And number three, when it comes to potential crisis situations, which we're also following that could hit us, we're still a lean and dynamic organization. So I think we're well set up to weather that storm.

[Unknown Attendee]

Well, it's looking good for ContextVision, that's good. And good luck.

[Gerald Potzsch, executive]

Thank you.