ContextVision AB

OSE:CONTX

Earnings Call Transcript 2020-Q4

[Fredrik Palm, Chief Executive Officer]

Welcome to ContextVision's webcast for the fourth quarter and the full year of 2020. Let me start with the fourth quarter in short. Revenues increased in the fourth quarter compared to the third quarter in 2020. We signed an important research agreement with one of our key customers within ultrasound. We are performing clinical evaluations of INIFY Prostate Screening, our first product within digital pathology. And last but not least, we had a positive cash flow. If we take a look at the highlights for the entire year of 2020. Revenues matches the record year 2019, which is a strong achievement given the circumstances. We continue to see substantial growth within our X-ray business. We have signed multiple contracts with new customers as well as expanded our business with existing key customers during the year. We released INIFY Prostate Screening by the end of second quarter in 2020, a clear milestone for the company and a firm entrance into the digital pathology market. In the second half of the year, we are focusing on establishing a network of reference sites for INIFY. So COVID-19 effects. When the global pandemic hits us in the beginning of 2020, a lot of uncertainty came up. So we implemented precautionary measures early in 2020 to secure solid financials, and that plan has been successful. Our ultrasound business was affected from Q2 and forward during the year. Projects and business in general has been moving slower due to travel restrictions and the restrictions from physical meetings in general. However, I have to say that I'm impressed about the way we adapt to the complete new circumstances, including our customers and partners, and the extra efforts everyone puts in to make progress despite the new conditions. Sales in the fourth quarter declined compared to the fourth quarter in 2019, but it increases slightly compared to the third quarter in 2020, which I think is a relevant comparison. Total sales reached SEK 94.7 million, heavily supported by a strong first quarter. In fact, a record first quarter in 2020 for the company. The pandemic affected our sales negatively in the second quarter. And since then, we have seen a stepwise recovery in the third and the fourth quarter during 2020. Regional sales. In Asia, we continue to see an increase, while we saw a decline in Europe and our sales in United States were flat. Looking at the sales per product line. Our ultrasound customers has been affected by the pandemic, which in turn also causes lower license sales for us. On the other hand, our X-ray business grew over 50% and has taken a much larger share of total sales. In fact, it is the highest X-ray sales in the company's history, and it now represents 27% of our total sales in 2020. So to summarize, Medical Imaging, our significant growth within X-ray is primarily related to Altumira, our latest product line within X-ray, which has been very well received by the market. The release of Rivent, our seventh generation of ultrasound, position us even further within that market. It creates exceptional image quality without sacrificing clinical information. And once again, we have pioneered the industry by pushing the boundaries of image quality within ultrasound. New contracts and expanded business with existing key customers strengthen our foundation for further growth in our Medical Imaging business. Digital Pathology. In the back end of the second quarter, we moved from being a potent candidate to become a leading company within digital pathology by releasing INIFY Prostate Screening, our first product within digital pathology. Since then, we are focusing on expanding our network of reference sites, where clinical evaluations have reached different stages. Vall d'Hebron in Barcelona, being the latest one, recently announced in the press release as well. Close collaborations with reference sites is essential for us to build a solid foundation to grow from in the business unit. Now we have agreement with several clinics around Europe. In R&D, we've been focusing on developing additional functionality in our prostate product. In parallel, we have performed research within additional cancer types, causing the heaviest burden on pathologists, where colorectal cancer is the primary target. Taking a closer look at the financials. Sales has already been covered, reached SEK 94.7 million. We had a strong operating result of SEK 15.5 million, which corresponds to an operating margin of 16.3%. Our EBITDA reached SEK 25.5 million, although our capitalization was lower than 2019 and ended at SEK 8.1 million. If we take a closer look at the business unit or operating segments. Revenues are lower in the fourth quarter, but also costs are lower in the fourth quarter. So we improve our margin significantly both in the fourth quarter as well as for the entire year, and the margin ends at 50%. In Digital Pathology. No revenues are recorded as of yet. Costs are lower in the fourth quarter, mainly related to lower marketing and travel costs. Total cost for Digital Pathology increased in 2020. The main reason being that we continue to build organization within the business units, so we have an increase in personnel cost. We have a lower level of capitalization. And since we released the first INIFY product, we have started depreciation as well. Cash flow. We had a positive cash flow in the fourth quarter of SEK 1.9 million, and for the full year, we had a positive cash flow of SEK 10 million. So to summarize 2020. Thanks to stable sales and lower costs, our financials are strengthened. We strengthened our market position and foundation for further growth within the Medical Imaging business through the signing of new contracts and business expansion with existing key customers. We made progress in our work to establish a network of reference sites within Digital Pathology to create a solid foundation from where to grow in that business unit as well. Even though the pandemic has caused slowdown effects short term, it really underlines the need for efficient health care solutions to cope with existing and future challenges, which is exactly what digitalization and powerful software tools are offering. The ability to drive business and projects with digital communication only has improved incredibly during 2020. And I'm cautiously optimistic about a stepwise return to an environment where we -- that also can include physical meetings, at least at the later part of 2021. So thank you for listening, and stay safe.