Welcome back from the break. We will now jump back to our own home turf in Denmark, actually double A, Aalborg. Welcome to you, Jens Krohn and Martin. Scandinavian Medical Solutions, I'm pretty sure you will give a short introduction to what your company does, but I will hand the words over to you, Jens.
Thank you very much, Michael. Thank you for using the time with us here in Aalborg. I have with me to my left, your right, Jens Hvid Paulsen, a partner from second year of the company, and Martin Lind to my right, your left. Martin Lind is Head of Sales in Scandinavian Medical Solutions. We have a short agenda for you today, where we will present the company, Scandinavian Medical Solutions, tell a little bit about the organization, our financial results in 2021, 2022. We have a broken book year. We just started our new book year. It'll be visible in the slides.
A little bit about the economical trends that we see ongoing, and then of course what we're looking the most forward to is the a Q&A session. Scandinavian Medical Solutions is an, a independent company, I started four years ago. We are an organization that's specialized in the niche of buying and selling used medical equipment. We are specialized in the area on the bigger scale of diagnostic imaging equipment such as CT, MRI, PET/CT, and the cath labs, the bigger thing, the bigger equipment, what we call diagnostic imaging. These type of equipment is super important to have some unique skills. They are difficult to value. They are difficult to price on the market.
They are also very difficult to move, disassembly, pack and resend. Service and maintenance obviously is also a tricky issue with this kind of equipment, and also the transportations. This is why there is a rather large entry barrier into this segment, and it is a niche industry, despite it has a very large volume and high prices. Scandinavian Medical Solutions joined Nasdaq First North, a growth market, in November 2021. We had a very quick onboarding on Nasdaq First North with a 4-month leading up period, and we had an oversubscription of 425%, which was of course quite interesting to see.
We successfully raised DKK 30 million and now have more than 1,000 new shareholders. It was a very, very successful IPO and a good process around it. We are a growth company. We have been cash positive from day 1 and have positive results also before we went on Nasdaq First North. We have an organization that we are strengthening within the last year and ongoing, where we are hiring in and actually can attract profiles from this niche industry that can give us added value and secure our growth going forward.
Bit about one of the three tiers in Scandinavian Medical Solutions is the main tier of the company and what we built the company around from the beginning four years ago is the, what we call equipment, the trading side of the used medical equipment. When we trade equipment, buy and sell, we are very thorough in the selection of the equipment because it is high technology, it's difficult to move around, and it's very expensive to replace and repair if something is not according to what we call OEM standard. Thereby with our purchase team, first of all, we have some really deep dive analysis in the systems that we're buying and testing before we remove the systems from the hospital and bring them to the warehouse.
This secures us to buy the systems at the right prices, the right places, but also in the full flow of going on to sales and onwards to our customers, having the highest level of security in the quality of the products that we are delivering. As we are selling on as-is basis, full payment upfront from our customers, it is the closest as we can get to actually giving a warranty on a system without actually giving it in legal terms. Important for us to outline in this is, point one, that all our customers are paying upfront, meaning, we have full security.
Second of all, with these thorough pre-inspections, we actually enable ourselves to have pre-order on all the systems before hitting our warehouse up to 40%-60% of all the systems going through our company. This actually gives a very low risk margin for Scandinavian Medical in the branch we are working in. A bit about our second tier is our rental solutions, which is a fairly new tier in our company since officially since March this year. This idea came up with where you see hospitals, especially in the private sector, now getting more and more scans, patients from the public sector because post-COVID for one thing, they need to take this pile of extra patients down.
It's very costly to invest in a new MRI scanner and the whole infrastructure around it. The history has taught many of these private hospitals that instead of putting on a big risk and a big investment on your CapEx, to invest in this for something where you might only have won a public tender for two years of scanning, leaving you with a risk of a very high residual value if you're not coming through on the coming tender.
This kind of creates the window for SMS to put in all these mobile modular solutions as one you see on the picture here, where the customer can actually on a short or long-term rent high-quality equipment from us and thereby minimizing their risk and optimizing their focus on scanning patients and earning their money that way around. The fleet is primarily from CT and MRI right now, which is where we see the highest demand in the market and primarily on the Siemens units. We offer them both in short and long-term, depending on what the customers prefer.
What is the ratio on short and long term?
We're renting from all from four weeks. If it's bridging solutions when they're replacing the equipment, we're also seeing we have rental contracts out now on plus four years, terms. It varies a lot on the tailor-made solution our customers need.
Yeah. One year ago, we started our parts and service department. The reason why we started this tier is because that we saw there was a big demand for spare parts. When we have sold systems to our existing customers, then they often require spare parts in the future. We saw there was a big demand, and that's why we created the after-sale service department. We also see that there's a big demand and there's other companies in the industry which is only doing spare parts with great success, so we know there's a big future for this department. The key to success in the spare parts department is that we can store the right parts at the right time.
When we have a demand in the markets, it's important for us that we have a very short lead time and we are able to deliver within a very short timeframe. Some of our existing customers have service contracts with the end users down to about six hours. This means that it's critical for them to be able to source the parts very, very quick and be able to get the scanners back to work. That's the main focus the parts department has. And we already see now that there's a great success with the department from our perspective. The organization, as Jens Short mentioned in the introduction, has grown a lot during the past year.
In this financial year, we have already hired four new employees. We have hired two new guys in sales because we saw that the demand is growing, to be able to cater to all our customers, we needed more people in the sales department. We have hired two new sales employees which have experience from companies in the industry. They are already very effective and the department is running smoothly. We have also hired a guy more for the back office to be able to handle more logistics, and we have hired another guy for our warehouse to be able to pack and ship more equipment.
Our base is now very strong, and we see that we are ready to be able to deliver more products in this year than we were in the past.
A bit about our last book year. As Jens Krohn mentioned, we have a, what we call a broken book year, meaning that we are ending our fiscal year 30th of September. We just stepped out of our last fiscal year into the new one. For those of you who haven't had the time or possibility to check our yearly report, which can also be found on our website page at our homepage, shortly glance through that we are very proud that we hit the breakthrough, what we call the 100 million wall, which was for us, apart from being listed a big milestone for the company, already in the last fiscal year, 4th year of the company, turning over more than 100 million Danish krones.
Dive deeper into it, meaning that we turned around DKK 110.5 million, and we managed to hit our EBITDA at DKK 15.3 million, which we're really proud of in the way that we managed not only to grow the top line, but at the same time still maintaining as we are onboarding people, having more fixed costs to the company, still maintaining a very good increase of a bit over 40% in our bottom line of the company. Which also mean that we, the reality of the expectations of the 5-year plan that we went on Nasdaq with has been canceled. Not that we don't believe it anymore, but the reality kind of ran over the expectations. Meaning that we're now going onward.
We'll only forecast one year at a time to the market. Our expectations for this year is then DKK 125 million-DKK 140 million in revenue.
Yes, just to sum up, trying to sum up a little bit of the presentation again. We are a very lean team, and we are increasing our effect on the global market. There's very high ceiling. We cannot see where the stop gap is on our sales front. We are building the company from bottom up. We are securing that we have the right building blocks to the right foundation to go higher and higher and higher. The global demand for diagnostic imaging equipment is growing. There's more people every day in the world.
Also the general idea of healthcare, through the, through information, it has an increasing demand. More and more people, they know that it's possible to get an MRI scan that can support their health and growing old without having any problems with their body and their health. There's a larger demand worldwide for healthcare. We can see the place that we have in the market, the growth that we have. We are right on the time on this market, and we can see that we can contribute to health, healthcare worldwide. We are buying primarily from Europe, also from the rest of the world, but primarily from Europe and selling worldwide.
There are still always we have some questions about transportation and difficulties, say, during the aftermath of the COVID. We see the prices are normalizing. We took the biggest absorbed the biggest hit on the last fiscal year. Now it's a new normal. Actually we can see that we can mitigate the higher transport price in the sales price. We see that reality also explaining a little bit about the different percentage in increase in the top line and the bottom line. We are extremely focused on keeping this trend where we grow both top and bottom line with a super lean organization.
We have added a lot of people to the team, 19 people versus 2 and a half people 3 years ago. But we have a lot of focus on making it profitable, both on top and bottom. Yes. Then we are with a session where we would like you to ask as many questions as possible, and we will answer the best way we can and are allowed.
Perfect. I will start with one. Can you remind me, is there a tendency that orders come in at the end of the year? Is it like the old joke about the military that you pour out gasoline in the sewer system? Because I have actually seen your news flow that has been quite hefty on new orders. Is this usual or is it a good indicator that market is strong?
We have a strategy with when we announce sales that we have information policy that we follow. Yeah, there is, there's a lot of activity in the end of the year actually to deliver the equipment that's coming out. This equipment also to explain a little bit about the organization, we buy equipment very far in the future. We are offering in and contract on the purchase side equipment coming out in nine months. Then we sell it. 40% of this equipment is actually sold up front, so it depends on when it's coming out.
Mm.
Before, just a few years ago, we could see, there was different seasons where there was a lot of shipment and so on. COVID turned that upside down. Right now it's a little bit leveled out. We don't see that that's a higher increase. In the end of the year, of course, there's a little bit of a peak on the, on the shipment. Again, it's really leveled out throughout the year.
Yeah. Just to add a comment to that, often the orders are made a long time before we ship out. When you receive the news about about the sale, it's when we have the risk transfer. Before Christmas, we always see that people would like to get the equipment. That means that we have a lot of shipments going out before Christmas. Maybe that's explain a little bit about the the news that you saw, but it's not that there's a tendency that we receive a lot more orders in the end of the year.
You touched a little bit upon it on the freight prices that you have absorbed that last year and now you're saying it's normalizing. But if I read my statistics correctly, it's actually maybe more than normalizing. I wouldn't say it's dirt cheap, but any comments to that? I'm not asking you to guide on.
No.
Any guiding or guiding us?
you know that we are from the north in Jutland of Denmark, so we're always super conservative and we don't want to celebrate because we do not know what's around the corner.
Right.
The message is more that, 6 months ago, the freight prices were so high that we didn't make a margin on it, so of course that has a little bit of an impact on our overall EBITDA. These days we can see the prices are normalizing and people are used to the price on the freight is higher. We see more normalized picture than we had 2 years ago on the freight prices. The freight prices are still high compared to 3 years ago. They are still. We are looking forward to see what happens the next year on the freight prices. That is super important for us as well as everybody else.
Yeah. At the same time often when we handle the shipment then, we quote a long time before a shipment actually take place, so it also means that we have to be conservative with the pricing. We have to always estimate a little bit to be sure that we don't take a unnecessary risk.
There's a question here to the business model. Do hospitals acquire used equipment directly from you or is it, or are you not with the hospitals but with some sub-suppliers into the hospital sector?
We again, just one step back to answer the question. There is more or less the same service requirement for MRI that is for airplane engine. That means that there's very high expectations to the installation crew and also the after sales service where you have the uptime that Martin mentioned before. You have to be on site and deliver a fix within six hours and you have a uptime guarantee up to 98% of the equipment, meaning you have to be local. You have to have a service organization. We are not doing that.
We are a business to business partner, we buy as close to the hospital as we can, and we sell as close to the hospital as we can, but not taking over that risk of having the installation and after service. We do support this local independent service organization with the parts that they need to keep the system running for the next many years. Again, there's a replacement cycle, like an airplane engine, you have to change some pieces of this system throughout, outgoing wearing and tearing parts and so on. We try to be in that space where we have the minimum of risk, both on the financial side, but also on the equipment warranty side. We buy as-is, ex-hospital and we sell as-is, ex-warehouse.
we are in between B2B, company.
There's a question here, and I don't know if sales of new equipment is going down due to macroeconomic or something like that, is there a risk that the larger players, you know, who are selling, you know, new equipment also maybe want to look at where it's maybe growing faster, maybe the used equipment market? A little bit about the competitive situation and the risk of if you don't see so much new equipment being sold for, I don't know, budgetary reason or something like that they could enter into your field? Is it, do you need to be much more expert on used equipment?
It's kind of divided in two. We have such a small fraction of the global buying and selling of used medical equipment. For us, if this slows down with the replacing of the new equipment, we can just open our gap to source more. We have a strategy, a long-term strategy, how we can open the markets and get more equipment in, and we cannot again, we cannot see where this will stop. It's possible to open that scope a lot more both vertically and horizontally on equipment side. But the manufacturers already have a used medical program, all of them and they are still in a price segments that's deviates from our used segment. We are independent.
Many times when we buy equipment, we are buying it from the manufacturer that's replacing. We are buying a GE equipment from Siemens, that's why they cannot close the loop on the pipeline. Every time there is shift between a vendor, OEM for the different slots, then we'll have the by-product which is the used medical equipment. Actually when we see the economy right now it's more people are looking for cost-efficient solutions where the used medical equipment of the highest quality that we stand for and stand behind is becoming more attractive.
I think you maybe answer this. Are you unaffected by macroeconomic uncertainty? You are maybe indicating that that could play into your advance, at least not, being a headwind. Is that correctly understood?
It is. It's healthcare and we are also seen, we analyzed of course the numbers from the earlier economic crisis and healthcare always goes steady. Actually, sometimes they have a little bit of a boost in these crises because there will always be budgets for healthcare. Again, the segment that we are in is very little affected by it. We have to see a very long crisis to have an impact on the budgeting, on the public sector for replacing the new equipment, where we have the byproduct of the used equipment and then also the organizations around the world, they have money to invest in healthcare no matter how the economy looks like at the moment.
Often we see that when the economic numbers they drop or is getting higher, then we just see our market shift basically. We're not affected, but we are affected in the way that our market is different when there's a good economical situation in the world. That's, you know, the experience we have. We still have markets to sell and we still have possibilities to buy the equipment in the market. It's just from different places.
From a purchase side, we're mainly dealing with Western European hospitals. They're not changing their equipment because it's not working anymore. They're simply having to replace the equipment because new equipment is coming in which is faster, which is enabling them to optimize the scan floor within the same working hours, maybe 20%-40%. That's the only reason. They have to keep doing that because there's only 24 hours in a day and the amount of personnel they have. Healthcare will always be prioritized also for the replacement cycle where we're buying from to buy the newest equipment all the time to have the fastest machines at the hospitals.
What are the main brands? I guess in your portfolio, you know, do you have some specialized, where you are only focusing in within some brands that you have the knowledge of?
Yes. The resale value is only, you know, a good on the brands which is the major brands in the industry. That's General Electric, it's Philips, it's Canon, and it's Siemens. That's the brands where we usually have our focus.
It's called the Big Four in our industry because they are covering almost the complete market cap. They are very close to covering at least 90%-95% of the market in Europe at least.
It's really hard for new OEMs to enter the market because the service demand is, like Jens told, really, you know, there's some specific demand for being able to provide the service. If you have to go into the market, you need a full worldwide service organization to follow, and that's really hard for new companies to enter that area.
One of the secrets of us getting out of the gate so fast. Again, I would refer to the investor page as well, where you can see the year by year development of our economy and turnover on EBITDA. We have been cash positive from day one. One of the reasons that we have been able to do that is that we have frame agreement with all the Big Four. We are a part of their provider solutions. We actually are approved to buy used medical equipment from them throughout the Big Four. That is one of the one of the difficult access points to get to be approved to buy from them.
That's obviously something that would take more years. Based on our history in the industry, I think between us here we have more than 30 years of experience in the industry and it's very much relation building to be able to get these contracts in.
Let's finalize with the last question, and I don't know whether you wanna give that much detail into your competitive situation, but democratic way, I need to ask it. What is the acquisition price range as compared to original price paid by the seller?
It deviates a lot from system to system. Yeah, we are looking.
I would say in the way you can. It also depends, we're buying equipment that's coming out of ex-leasing, for instance, where they have to, from a university hospital, they need to have the absolute newest, highest technology all the time because they're on all these research programs, so they may be changing their high-end MRI every fourth year. Of course, they will have, percentage-wise from the new price, a fairly high residual value, 'cause it's only four years old and it's with all the options included. We're also buying CT scanners, which are maybe +10 years old and of course in that way, like depreciating everything else, will have a lower price range in the market compared to the new price of it.
For MRI, the typical depreciation time would be 8 to 10 years maybe. Then you can make the math without giving too many of the cornerstones. Of course in that there have to be room for us to purchase and to sell with a profit. That would be a little bit less on CTs. The depreciation time would be between 5 and 8 years, even though many hospitals keep them longer or shorter for that matter.
Perfect. That was the last question. Thank you to you, Jens Krohn and Martin for taking us through the questions and your company. For everybody else listening in, that was the last company of the day. I hope you have gotten some inspiration to some growth companies to invest in, but may everybody have a very nice day.
Thank you for your time.