Mentice AB

STO:MNTC

Earnings Call Transcript 2021-Q4

[Göran Malmberg, Group CEO & President]

Good morning. Welcome to this presentation of our Q4 and full year report. So I'm here today, Goran Malmberg is my name, CEO of Mentice; and Gunilla Andersson, our CFO. So we will walk you through our slide deck presenting the result from last year. So we'll start with the financial update, and I will let Gunilla talk about the financials, and we will make some calls.

[Gunilla Andersson, Chief Financial Officer]

Yes. Good morning, everybody. The financials for this year starts with really good order intake. We are actually above SEK 200 million for the first time. So order intake in the quarter on par with last year. But for the full year, SEK 205.6 million compared to SEK 168.6 million last year. This is an increase with 22%. We also ended the year with a really good order book. By the end of the period, this is SEK 87 million, which is then 31% above last year.

[Göran Malmberg, Group CEO & President]

So a couple of comments on that. As Gunilla said, the first time over SEK 200 million, it's obviously a milestone for us, very nice to see. We also see that the -- our businesses continue to be fueled by the medical device industry. Very, very strong performance on that, 45%, and change more for the year of 2021 compared to the previous year, and also strong growth in the actual quarter for medical device.Moving on. On the order side, we can also note that the acquisition we did in October of 2020 have also moved very well in the year. We more than doubled the order intake from that business unit compared to the comparable year for 2020. We had it in Mentice only for the fourth quarter, but if we look at the full year, we more than doubled that. So that generated SEK 26 million in order intake for the full year. And that's very nice to see. That's predominantly U.S.-based revenue, and we believe this year, we're going to be able to move it out to the rest of the year in a stronger way. So it's really nice to see how we execute on really leveraging our sales and distribution to bring those products out to the market. The hospital market is still slow. We -- based on the pandemic, we're obviously suffering from that all the way to '19 -- from 2020, sorry, and into 2021. We saw an opening after the summer, but then when Omicron hit us in Q4, we saw that the market rapidly closed down again. So we're still behind the 2019 levels actually, but also behind 2020 levels. We see on the device side that the large clients, which is a really important part and part of our strategy to really improve our work with the large and really large sort of mega clients, and we can see that we have a larger amount of client that will produce order intake and sales above SEK 10 million. We also have a handful of clients over SEK 15 million, and our largest client this year was somewhere SEK 30 million. But -- so that's also nice to see. And then last point on the order and order book side, as Gunilla said, the order book is moving up from SEK 66 million up to almost SEK 90 million, and that also -- really, 2 comments there. One is that we're getting into 2022 with a good start, SEK 65 million scheduled for this year, which is a nice start coming into the year. But we can also see that we are increasing the recurring revenue component which is a combination of rental and kind of subscription, so that's almost SEK 60 million as well. So that's my comments on the order and order book, so we can continue with the rest of the financial components.

[Gunilla Andersson, Chief Financial Officer]

Yes. Net sales for the quarter amounted to SEK 67.7 million. This is an increase that is very close to 50%, 47.5%. And we came in at SEK 185.1 million for the full year, a growth of SEK 34.6%. We also finished the year with a strong gross margin in Q4, 78.9%. And you might remember that we had a quite bad quarter last year at only 63.3%, very much linked to an unfavorable product mix. And this takes us for the full year then to 81% gross margin compared to 77.9% the last year. Our cost levels increased, up 25% to SEK 152.6 million compared to SEK 121.6 million last year. And for the full year, the acquisition of Vascular Simulations adds a total cost of SEK 9.7 million. And we only had Q4 in our books last year, so that's the SEK 2.3 million that you see there in the brackets. Cash flow in the quarter was positive, SEK 7.4 million. Not as positive as SEK 20.1 million, which we delivered last year, but it's the first quarter where we were positive during the year 2021. We ended then negative SEK 5.1 million. We had positive SEK 30.5 million last year. This is mainly due to our growth in Medical Device Industry. Meaning that our accounts receivables are growing, but with very safe and secure customers. The operating income, EBITDA, came in at SEK 12.0 million in the quarter and SEK 2.5 million positive in the full year. But this is then negatively impacted by some costs of nonrecurring nature, and that then would have changed this result with SEK 4.6 million if we would have taken them in, which we have. But we've shown in the report exactly what those consist of.

[Göran Malmberg, Group CEO & President]

Right. So overall, I think a very solid year what we set out to do. And I think it's nice to see that we are delivering growth on the level on par with the financial target that we have, 30-plus percent, which is very nice. Go ahead. So getting into the -- a little bit other reflections on the fourth quarter. First, if we look at the device industry, we are really stronger. I mean, we had a good year in 2020. We have an even stronger year in 2021. And we are continuing to see that our larger clients are increasing their spendings. But as I said before, we are adding more clients that produces more revenue, up in the SEK 10 million level or even more. So that pipeline is growing. The opportunities are growing, and we can see that medical device company or segment will continue to drive or be the core part of our growth. We look at the hospital market. We can see that, as I said, the pandemic obviously are impacting us. We believe that partly we are past the -- we'll get past the pandemic in 2022 with [indiscernible]. Obviously, we don't control that. So we hope that the conversion rate from -- so when I talk about conversion rate, typically, we -- if we have a pipeline, a list of opportunities, we convert about 20% of those into orders. But in 2020 and 2021, that was significantly lower. In 2021, that was below 10%. And we believe, based on the view we have now, that we can get back to a more normal level. Maybe not up to 20% or 20% but up to close to 20%. Looking at the strategic alliances with the -- in collaboration with Siemens and Philips. We have moved that -- those relationships forward. I think the big breakthrough we talk a little bit more about in this presentation is the announcement we did connected to Corindus in China, where they have made a commitment to bundle every sale of the Corindus robot in China going forward from 2022 with a Mentice system. And that's a significant breakthrough for us, and we believe that the Corindus -- that's really to be followed by other regions in terms of Corindus. But we monitor the China development, and that's going to have a positive impact for us in 2022. So we have talked about in some presentations what is our focus, what are we doing? And I think it's important to just reemphasize that we are not only a training company. We are not only a simulation company. We are moving into an area where our specialty is really the therapy areas we focus on. We're talking about image guided interventional therapies, that's our vertical. And in this area, we want to provide solution sets and tools that inspire physicians to use our tools and help them make better kind of decisions. Obviously, also training is part of this, but we want to move further than that. So we're talking about what our marketplace is really combining solutions for planning, diagnostic tools, use of data benchmarking and integrating, for instance, with tools like instant segmentation. If we look at the market again, I mean, we can see that during the pandemic, there have been a lot of interest for solutions for simulation and trading activities on the cloud, virtual environments. And we've been able to move that very rapidly during the last 2 years where we now have products and projects where we run our simulation in the cloud and allow medical-device companies but also hospitals to engage with their clients and partners in a virtual environment and allow a real immersive [ realist ] in this environment and allow several people in a session located in different locations to be able to interact and really interfere with the actual simulation. So this is something we see and really in addition to what we have done prior. We can see that the combination of the physical, so the acquisition we did a year ago with 3D-printed anatomies and deploying -- deployment of the devices, also in combination with the virtual technologies from Mentice, really makes a lot of sense [indiscernible] the physical side, clearly combination. We see more and more clients that want to have both, the synergies to use both. We see the discussion with Corindus where, really, we will be a very important part of their go-to-market but also their way of getting accepted in the market. So we are used both for research and development for their go-to-market activity but also for the continuous use in -- out in the market. So what is important to see is that we obviously are moving rapidly with our own development. But also, as we talked about during last year, we have spent a lot of time here looking at what could make sense to complement our portfolio with in terms of acquired businesses. And that's an important part of my work and our work to really identify that, and that will continue into this year. Some comments. The Siemens and the Corindus press release from China, I think will be very important for our hospital business and the Siemens business, but it will also be important for the rest of the world's interaction we have with Siemens. We can see on the medical device side that we add a lot of clients that bring this company up here, Inari. It was not announced at the press release because it was below our order for announcement of SEK 5 million, but it's a really critical or good example of us moving into new area. This company has an innovative solution for thrombectomy in all parts of the body, and it's a new application for us and it's a new start. So this is a good example of new projects, and we have multiple of those during the year. Another example is the Brazilian Neuroradiology Society that we have worked with, so this is an example of our interaction with societies on a country level. We have similar discussions and collaborations in Germany and Norway and some other places. This situation here in Brazil, the neuro society there have decided to use Mentice exclusively for training of all their trainees in the neuro area, but also they clearly want to move to the part where all physicians in the space will use Mentice for their training, for the certification and their ongoing improvement. So that's a good example of the work we do on the hospital and the kind of society side. 2022 and beyond, we believe medical device will continue be a core driver. That will continue to be a large part of our business hopefully. And maybe a little bit less dominant than in 2021, but still a very, very important part of what we do. We said before the order book of close to SEK 70 million is obviously a very nice start for the year, and we have an ambition and we believe that we can get back to more normal situation with the hospital side. We are continuing to invest in the hospital. We have the resources there. We have the solution set, so we are ready to make this happen. And we believe that the market will be more favorable for us in this year. So really in summary, strong finish for 2021, a good general view for 2022 and a strong market position. We see very few, if any, competitors that are approaching the market the same way we do. And we really see a strong demand from all regions and all segments, which is really nice. That was it. Do we have any questions? Wait for a minute or so.

[Gunilla Andersson, Chief Financial Officer]

No. No questions.

[Göran Malmberg, Group CEO & President]

Should we then say thank you? Thanks for your time, and very nice to be able to present 2021. That's a good year, and we are excited about 2022. So thank you.

[Gunilla Andersson, Chief Financial Officer]

Thanks a lot.