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Mentice AB
STO:MNTC

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Mentice AB
STO:MNTC
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Price: 25 SEK 0.4% Market Closed
Market Cap: 639.3m SEK
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Earnings Call Transcript

Earnings Call Transcript
2020-Q3

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Stacy Hammar
Corporate Marketing Manager of Medical Device

Hello, and welcome to the Mentice AB Q3 2020 report. The report will be presented by CEO, Göran Malmberg. [Operator Instructions]Göran, I will now hand it over to you.

G
Göran Malmberg
Group CEO & President

Thank you, Stacy. So good morning, everyone. Nice to be able to present our third quarter report for this year, and I will switch to the presentation, and I will take away my videos. Now you're seeing that I am moving -- just hold 1 second. Okay. So I will move to the first slide here. So really, this is super nice to be able to present this report. The third quarter for Mentice is typically a slower quarter since it's the vacation quarter. And so with -- what we have this year is an unusually strong third quarter, where we have 40% or more increase year-over-year for the fourth quarter. And we have also, I would say, regained what we have lost for the pandemic, mainly from the second quarter. And we all also -- which is also unusual that the third quarter is the strongest of the first 3 quarters here. So that's super, super nice to be able to present that. Really, really pleased with that kind of performance with these difficult conditions. I mean seeing other companies presenting slower performance, still is very pleased -- or are pleased with what we do. But this is really super nice. So on a high level, I'm going to talk about a bit on the numbers, not too much. I mean the report is up so obviously, you have the details there. We'll talk about some of the other events we had during the quarter and the beginning of the fourth quarter with the 2 companies that we acquired, and then we will open up for some questions. So overall, it's obviously the medical device industry that is driving our business. We are -- I mean if we are up 40% totally for the fourth quarter, device industry is up 70% for the year compared to the same period last year. And that's obviously very, very nice to see. And also the -- as we have presented, as I'm sure you have seen, we have presented a number of larger orders from end of the second quarter up to now. We also have a good progress with our alliances partners. Where we obviously -- as presented before, this is our ultimate growth opportunity, where our aim is obviously to place Mentice systems close to cath labs in the world really, and we are moving towards those kind of solutions where we want to bundle and embed now this kind of solutions with the sales of cath labs. And so that's also moving in that direction in a good way. We have -- the main effect we see from the pandemic has been on the academic side and on the hospital side, which we'll also, to some extent, see with the alliances partners' sales. So all the business that's aimed directly to the hospitals is down. And with our own academic and hospital segment, we are about 50% of the last year's comparable intake or intake for the first 9 months. If we look at the net sales, we're also above -- also the third quarter is the strongest so far this year, and were slightly above last year's first 9 months. We have a strong order book, and that's obviously the end of Q3 order book, you see here. So we have added to that order book going into the fourth quarter. The cost levels is maintained at a lower level. I mean just right below SEK 10 million per month, so a significant decrease compared to last year, which obviously have an effect on our bottom line. The cash flow continued to be positive from the operation. So we have a SEK 10.6 million positive cash flow for the first 9 months compared to minus SEK 20 million from last year. And the income, EBITDA for the fourth quarter was a positive SEK 4.1 million compared to minus SEK 6.7 million and for the first 9 months, we are, I mean, significantly better than the same period last year. So all in all, very pleased with this and I'm really pleased with how we've been able to maintain our business despite the fact that the number of physical meetings we have had since March really has been a handful. So we've been able to conduct our business virtually almost entirely, which is fantastic. We did 2 acquisitions during the period that was finalized in the beginning of the fourth quarter. That's also really exciting, and this is always something we've been working with for a while. The first one, Vascular Simulations, is the most significant one. It adds an immediate business to what we do. It's a fiscal model simulation, where you physically simulate a procedure on a 3D-printed model, basically using real clinical devices. And that adds a capability for us to really work with early phase product development, conceptual design phases with medical device companies, where you want to evaluate the specific design on a specific product, which is not possible to do with a VR simulation. So the combination of a physical model simulation and a VR simulation, we think is really, really strong. No one else can offer this. And it will allow us to engage with the large medical device companies much earlier in their product development process. And if we can, and that's our intention, synchronize or integrate those solutions to make sure you have 2, as I said, 2 synchronized environments in VR and physical simulation, I think we can provide much higher value to our clients, but also give something that no one else can give. Vascular Simulations would add around SEK 20 million to our top line. It was about -- the revenue result for last year 2019 for Vascular was actually more. It will be slightly less this year, but our assumption is that we will be able to get it up to SEK 20 million and potentially a little bit more during next year. Leveraging our distribution, our customer network. Vascular Simulations was mainly a U.S. focused company and incorporating that in Mentice will make it a global company. We can sell those solutions to all our clients. So I think that's an exciting addition to what we do. Clearly, it's going to improve what we do with our clients and we have got only positive feedback from our larger clients about this combo here. The other acquisition is start-up, a very early start-up. So I think it's still very, very interesting. And it shows the direction of what we are doing. And that's the myIRlog of the company called EQIP. It's a Florida-based small start-up, where a group of physicians have built a cloud-based case tracking environment for doctors with the ability for doctors to track their own cases performed, so real cases perform, which is sort of a resume or a kind of credential for these doctors when they move between different jobs or but also ability for hospitals to have control over the credentials and the experience of their doctors. So this company have opened up and offered this to interventional radiologists in the U.S. They have about 1,000 physicians currently that are logging the cases, adding quite a bit of cases every month. It's about 150,000 cases registered so far. And incorporating this in the Mentice Live, our cloud environment. Our intention is to really link information about real cases with the kind of simulated cases. It also gives us direct access to true doctors, initially in U.S., obviously, but our ambition is to expand this to also outside U.S., but also to expand this to other specialities. So this is not going to generate an immediate revenue stream or a business. But I think from a conceptual ID, this is clearly very, very relevant. And as I said, showing in the direction of what we are doing. Talking about the larger orders. We're not going to dwell on the details of this. But I think it's very nice to see the lineup of our orders. So these are since end of June. So it's what, 2, 4, 6 orders over SEK 5 million -- or the last one is not obviously, but seeing a mix of order for us. Where we got Abbott, 2 orders from Abbott, and Abbott so far is our largest client this year. They will move to an all-time high for Abbott. Edwards Lifesciences, a very important client to us in the structural heart space, added an order for one of the new product groups. And I want to mention Stryker Neurovascular here as well. It was just an order we received early November here, where we improved our position in the -- sorry, in the neurovascular space. Stryker is really one of the most prominent player in that space. But it was also a competitive account. So we are increasing market share by this move. And I will say that's one of the few remaining competitive accounts we have in the U.S., I mean the American life sci. So again, this is really nice to see. And I think several of these will -- are also just the kind of initial order for a new product group. So a lot of these here will provide additional orders, some of them already for this year, but the others for 2021 and the years to come. So really nice to see, I mean, as you have followed us for a time, we had a little bit of difficulties during last year, obviously, but this really shows a promising progress for -- within life sci. All right. So what is happening now then what's happening for the fourth quarter, going into next year? It's still obviously hard to assess, and it's difficult to not be able to give a clear guidance for even in the near future. But I'm sure you understand the situation as well as everyone do in terms of the recent outbreaks of cases for the pandemic in almost all parts of the world. On the other hand, with the positive news of a vaccine being available probably in the near future. So it's very hard to understand. We can see that the last couple of weeks to a month of outbreaks of corona cases in U.S. and Europe, but also to parts of Asia. It's obviously made the hospital market very worried. So that's -- it's really hard to understand how that will impact us. But our expectation is that the industry will continue to drive this. And we have seen that the industry's sort of pushing through the issues. In my mind, they are really focusing on the time after the pandemic. We are linked very much to new product launches. And in most cases, the companies are moving forward with a plan for those product launches. So that's on full speed, and we have more to do than ever on the medical device side on the customization work we are doing. So that's really pushing on hard. We -- so it's really the health system and the relation to Siemens and Philips and our partners. But where we know that the issues in the health system or hospital side are also impacting the sales for our partners. But we see a positive trend there as well. We might not reach entirely what we wanted for, for these partners for 2020, we see that we have a significant increase of our business during this year and that continued to move into next year. We believe we have a good control over our cost levels. Obviously, still, we expect that travel will be minimal for the next 6 to 9 months, at least, I mean, maybe even for majority on next year. Congress participation will also be minimal. It's a lot of virtual congresses and things like that. So we will probably still continue with a fairly lean cost level for the near kind of future. And we're also a little bit careful with hiring. We have opened up a bit, as I said, for the last quarter, but we're still careful in how we add costs to our bottom line. Yes. So on the right side here, I mean, I think I have talked about our partners. Our aim is obviously to get to bundling or embedded kind of solutions. And that's the focus there. I mean, we believe that's possible. And that's the dialogue we are having, to make sure that our solution really add value to a complete solution sold to hospitals. And that's our ambition, and we hope that's near term. We were able to present something like this. That's what we are focusing on. On the technology side, we -- as I said, we have more to do than ever. We have had a very strong rollout of new products during this year. The most significant is the new hardware platform with G7, where we are now going into volume production. And we have a large amount of system already sold for this year. So it is already impacting our sales and even more so going into 2021. So we have a lot of activities on the product development side. And then obviously, the medical device, I mean we talked about this in the previous report, the heart valve-related procedures is really pushing the envelope of what we can do from a technology-wise or technology perspective. But it's also opening up a lot of opportunities, both for training and patient-specific camera solutions. So that's very, very interesting. And I think we have over the last 2 years really improved our competitive position there. And we are able to do things that no one else can do. And I think that's the reason why we have been able to line up some of these orders in the last 4, 5 months. And lastly, the Vascular Simulations, I believe, is a very nice addition that we immediately see a revenue and orders coming. And I think we should be able to go into next year, combined orders, combined opportunities where the combination of our 2 technologies will open for new kinds of businesses. So short and sweet, really happy with our performance, looking positively towards the full year and going into next year. So yes, it's been a tough year, obviously, but I think I'm super pleased with what we have done over the first 9 months. So with that, I will open for some questions, I guess, Stacy. So if anyone has a question, raise your hand and we will allow you to formulate your question.

S
Stacy Hammar
Corporate Marketing Manager of Medical Device

Okay. We have one person with their hand up. Bear with me, and I can take you off-mute. Okay. Christian Lee, feel free to present your question. Okay. Christian doesn't seem to be asking the question live. I will ask his question for him. Can you give us an update on the integration of Vascular Simulations? And how much you expect in sales contribution in quarter 4?

G
Göran Malmberg
Group CEO & President

Okay. Yes, we haven't announced that specifically, but I would say -- I mean I said we expect a volume of about SEK 20 million per year. It's one quarter, so that would mean about SEK 5 million. So I think that's a pretty accurate number. I'm not sure I was supposed to give you any more details. But yes, we think it would be something like that for the fourth quarter. So nothing significant. But still, we -- we have a smaller stream of revenue that we acquired that was on order before we closed the transaction. But then already into fourth quarter, we have received new orders, and we have integrated our products offering, obviously, so we are offering Vascular Solutions via Mentice to end clients. So yes, so something like that. SEK 5-ish million, might be a little bit more, but yes.

S
Stacy Hammar
Corporate Marketing Manager of Medical Device

There are no other questions right now. Maybe we can wait a few more minutes, Göran.

G
Göran Malmberg
Group CEO & President

Sure. I'm not going to -- I'm not going to tell you a joke. I'm not going to sing. I don't have any other stories. So we can wait for a minute to see if anything pops up.

S
Stacy Hammar
Corporate Marketing Manager of Medical Device

Absolutely.

G
Göran Malmberg
Group CEO & President

Okay. I think we will close it there. Stacy, thanks for...

S
Stacy Hammar
Corporate Marketing Manager of Medical Device

Absolutely.

G
Göran Malmberg
Group CEO & President

Thanks, everyone. And see you soon again, I guess.

S
Stacy Hammar
Corporate Marketing Manager of Medical Device

We will. Thank you, Göran.

G
Göran Malmberg
Group CEO & President

Thank you.