Hey, good afternoon, good morning, depending on wherever you are. Welcome to Modulight's Q2 financial release webinar. My name is Seppo Orsila. I'm Founder and CEO, and I have with me-
My name is Anca Guina, and I'm CFO of Modulight. Hello.
We'll first discuss the Q2 and second first half highlights with Anca. Then we'll proceed to discussing the progress with the pipeline, implementation of the strategy, and at the end, we'll summarize and take questions as before. So just as a recap, what is Modulight? We fight cancer with science and technology. As there is an ample kind of published literature about the use of our technology, this is something we find that you'll find increasingly useful, and encourage you to follow us in social media, where all the time, leading scientists are publishing how they apply our product to treatment of the leading edge cancer therapies. So second quarter in brief, we progressed with the implementation of the PPT.
Now, there are leading hospitals employing our technology on a regular basis, applying the pay-per-treatment business model. Our R&D pipeline grew to 30% projects, and we'd like to emphasize to all of you who asked about this, is that all these projects are about commercializing our product with the customers' therapies, and all our products are manufactured and designed here in Tampere. Our big pride of the quarter was that our cash flow and operating efficiency improved due to the completion of the investment program. We discussed many times in the past that this is happening, and now I believe that it shows very well in the first half, and particularly second quarter numbers, but Anca will discuss those more later on. We got new customers.
We had a revenue of slightly short of EUR 1 million versus EUR 1.1 million a year earlier. EBITDA was - EUR 1.2 million, and operating cash flow, as said, only EUR 93,000 -, versus - EUR 4 million a year ago, so we proceed now to discussing the financial highlights by Anca.
Yes. Thank you. Q2 highlights are continued improvement in efficiency and profitability through the vertical integration we built with the help of the investment program, which we started in 2019 and ended last year, as already announced. During this time, we made investments across the board to widen the offering, increase the differentiation of our products, as well as production capacity, and more, even more than that, to enable us to speed up the R&D activities. The completion of the investment program is reflected in the cash flow, as Seppo already mentioned, which improved significantly from last year. We had a 93% increase in the operating cash flow and 62% increase in the net cash flow. Product development activities, as well as geographical expansion, have increased.
The cost savings, which we announced already earlier, sorry, earlier, have not been achieved through the cutting of the activities, but by improving actually efficiency and focus. The product pipeline grew to 30 projects in from Q2, and I want to emphasize that all these projects focus on the commercialization of Modulight's state-of-the-art products manufactured here in Tampere. The revenue for the second quarter was EUR 965,000, compared to EUR 1.1 million in 2023. Our product is used in more than half of the clinical trials in photoimmunotherapy, and the user base continues to grow. This proves the confidence of experts in our product.
Due to the PPT model, this is not yet reflected in the revenue, which was 22% behind last year for the same period. EBITDA was -EUR 2.5 million, which is 16% higher than last year, and that was achieved by increasing the efficiency of operations, as already mentioned earlier. The expenses related to the implementation of the investment program decreased, and as we already announced last year, we expect the trend to continue. Thanks. PPT business model and the delays in some projects are still limiting the revenue development. Improved profitability is seen in EBITDA for both quarter and half year. Due to the increase in the depreciation base of the fixed assets, the operating result was weaker than in the comparison period.
Modulight has a strong cash position, and the headcount, as full-time employee equivalent at the end of June, was 79, compared to 74 in the previous year.
... Yeah, for this, I would like to highlight what I believe we discussed also last year, that we have a sizable number of students always going into the full-time mode at the beginning of June. So every single year, we see then Q3 number to be less than the previous quarter, even though there is no real changes in employee base. But yeah, to the pipeline, so R&D pipeline grew by two projects. There has been quite a few questions from some investors about what these projects mean, and this is why we decided to elaborate this and repeat what has been said many times, including the IPO prospectus, that we are manufacturing the projects here in Tampere.
We design them, they are our own projects, and the products are being used in these pipeline projects. And the sole purpose of these projects is to commercialize our product in the respective therapies. We focused on advancing, especially the projects, in a more mature state, namely phase III trials. We gained two new pharmaceutical companies as customers in the pipeline or recognized in the pipeline. And then what is quite important is that our geographic presence is increasingly being appreciated by the customers. Some of the business in Asia came to us largely due to our capabilities and kind of reputation in the United States. This is something I'm extremely proud of the team achieving.
Also, we have been expanding the geographic footprint through a number of strategic distribution partnerships. This has helped us in Europe and Asia, but most importantly, in the United States, the hiring of a senior sales executive at the beginning of this year has now clearly stepped up our commercial discussions, and that is also reflected already a little bit in the pipeline development. Our customer base, outlined in a traditional way, 37% customers have over one billion revenue based on our sources. 60% are listed companies, and there are also a small number of what we would call research companies, but a growing and healthy portfolio of established large companies, to use the layman's terms.
Revenue model, we always repeat this, to recap, that still most of the revenue is coming from early stage, but there are now increasing number of projects at the states going to more mature states. As reported earlier this year, there were certain delays with the projects, but now we are progressing again, as anticipated in the Q2. Obviously, as the number of parallel projects increases and they mature, we expect the revenue to become more predictable and steady flow.
Just to recap our strategy and the targets, we have five strategic projects or programs: geographical expansion, namely, aiming to expand our business across the globe, continuing the U.S. as the first focus, but then, addressing the other geographies, namely with distribution partners. Extension of the offering to new indications and applications. Basically, this means applying same technology and increasingly also something that we have already done with one pharmaceutical company, do the exactly same treatment with someone else. To me, this is the best vote of confidence from the pharma if they choose a technology that is proprietary solely from us, and to the same indication that their competition is already using from us. New business models at the core of our progress.
We have been discussing now for quite some time about the introduction of pay-per-treatment model, and I'm happy that we are making progress with that. And while it is not yet significant, there are already steady revenue flows from that, as I reported also today. Commercial and operational excellence. We continue to strive for better productivity, for better production capacity, for better offering and product. And I believe we are now starting to see that in some of the numbers that Anca has shared with us, as we expected already more than a year ago. And state-of-the-art laser technology. While the total cost has come down, as Anca explained, we have now largely done the one-off, one-time decommissioning costs of the new equipment after ending the investment program.
Now we are actually doing more product R&D on absolute basis, more geographical expansion work by the sales and marketing than ever before. And this is really core to understand that we're doing more, not less, despite the total costs going down. And the key reason really is that these decommissioning costs are now over, and they are one time, as explained, for at least one and a half years. A little bit more on the geographic expansion. We continue to invest, and even this summer, we had probably a record number of events in the United States. June, July, four events, each, I believe, constantly having several team members in the U.S. meeting customers and then addressing the other geographies through the strategic distribution partners.
We continue to develop the business with the U.S. focus, but increasingly our partners in other geographies are coming up with interesting opportunities, and also the presence in the U.S. market is leading to the business in other markets. What I would like to particularly mention is also that certain Asian customers wanted to become our customers, largely due to the fact of our expertise and recognition in the United States, and one pharma, for example, chose us their leading partner for the U.S. lung cancer trial. This is really great and shows the appreciation for our team's expertise. Business model implementation. We continue to pursue the pay-per-treatment with increasing number of customers and sites.
Revenue is still modest or small, but anyway, it's already six figures during the quarter, so certain progress there as well. We have been able to extend that across several customers and several sites and different indications. This is really important to me. There are both East Coast and West Coast regular users of our PPT devices and, for example, I believe Stanford is using on a weekly basis. So not just no-name events, but really prestigious kind of institutions, even on the world scale. We are increasingly having more customers, particularly in the ophthalmology sales funnel, which is obviously natural as that is an approved product, whereas the others are largely in the different phases of clinical trials. New indications and applications.
We continue to extend the offering. New customers increasingly often develop therapies for the indications which we already are doing with someone else. That obviously brings synergies and increased productivity, and hopefully helps our customers to shorten the time to market, and here I'm particularly referring to our expertise, know-how, and product. I'm also happy to share that a high-profile quantum company ordered some laser technology from us, and this is a further evidence to the uniqueness of our laser technology offering. Focus on operational efficiency continues, and we continue to develop the strategic distribution network. We have strengthened the management team, and we have received ISO certification as reported during the first half.
In general, I would say that this information security reviews with the customers, which were a little bit of a delay a year ago in implementation of the PPT. I'm happy to share that we have made significant progress, and that is much less of a nuisance anymore. People have clearly accepted us as a one company that is handling information and data very securely in a very, very good manner. At least, this is an indirect conclusion I'm making based on the fact that it's not so much of a topic anymore. Obviously, the number of prestigious institutes already adopting our technology and product are a clear kind of help in that. We continue to invest also into the core technology of lasers.
While the costs are going down, the one-off or one-time decommissioning costs have reduced, and thus, the total costs are reduced, and focus on the product R&D is now much more, or we can use resources even more on that than before, and this is certainly visible in the technical results, and like before, I'd like to remind you that several of the customers also appreciate the own production facility, vertical integration, and the fact that our products are made in Finland. We are not issuing any guidance, neither revenue or profitability, thus the outlook policy remains the same.
But in summary, company has currently 30 projects in the R&D pipeline to be viewed to have significant commercial scale when full speed at production. We are mostly focusing on the projects which are more on the mature end of the pipeline, but obviously taking all these projects and even more forward as a course of our daily business. We achieved 2 new customers in the pipeline. The operational efficiency and cash flow improved quite nicely. PPT model implementation is progressing, and investments in R&D and geographical expansion continue. And if you consider R&D, only the product R&D, which is obviously closer to the revenue, I think that we are now doing it more than ever before.
Whether you measure in terms of activities or number of, kind of, customers we are working with or, talking to for potential new customers. Revenue at EUR 1 million, and EBITDA at EUR -1.2 million, slightly behind last year, and, kind of, quarter on quarter. So thank you. We're happy to take any questions that you might have. Daniel, I see you raising hand, so do you want to start?
Yeah, sure. Hi, Seppo, and hi, Anca. Can you hear me?
Yeah. Hi.
Excellent. So yeah, it's Daniel Lepistö from Danske Bank. I have a few questions from my end. Maybe starting off with the PPT revenues that you discussed being some low six digits in the Q2. So are you currently seeing sort of a steady increase with these types of recurring revenues or the treatments, or is there to be some large fluctuations if you look forward to the coming quarters? So how do you see the trends on these PPT revenues currently?
Yeah, that's an excellent question, Daniel. Obviously, the number of kind of treatments is still relatively small, as you can extract, even from the figure. But we're also kind of providing a few months kind of free trial, and this has been kind of seen to accelerate the deployment of the devices, and thus, it may not be fully linear, what we will see. But I would say that it's too early to comment on the growth rates, but the business is still small, and I think we should look for future quarters, how it develops.
Certainly, I think some of the things like a video published by Dr. Mark Nelson during the summer. He's quite kind of a recognized key opinion leader, having treated over 25,000 of these patients, as he says on the video. And there are more to come. I believe that these are good signs about or early signs, and we'll just have to see where it takes us. Numbers are still small, but what we were able to say that there are now at least some users who are using regularly. Obviously, if they increase or if there will be more of users, then the total numbers would increase. But as we say, we don't give a forecast, so this is just what one could expect to happen.
Yeah. All right, that makes a lot of sense. I mean, maybe still continuing on the same topic, you also note that, okay, these current customers, they are leading hospitals, obviously in the United States, noting that there are a few of them, which, as you said, are regularly using the technology here. So should we sort of read it the way you maybe partially answered this question already, but that you have only a few customers currently that have adapted this paid treatment, and these few customers are the ones that produce all the revenues, at this point?
Yes, exactly.
So yeah-
I want to emphasize to avoid any misunderstanding. There is fairly large number of hospitals, actually three digit worth of hospitals who are using our technology, but this will then cover all the clinical trials. But I was only speaking of the commercial PPT devices today. For those, there is a small number of sites active at the moment.
Yeah, that's a good clarification. I mean, that's useful. Thank you.
Yeah.
Maybe on the second topic, you noted there was some delays with delivering some prototypes. Had this any material impact on the revenues in Q2, or are these insignificant?
With the relatively small numbers, we are now having obviously any delay will reduce the revenue. I think it's a bit subjective, what is material, but we have had delays before, so I'd rather not kind of try to speculate how large or small they were. But there were some delays, and that impacted the revenue, and but we're working on the kind of basis to fix things, and some of those have already been delivered. So that's good. But it certainly still impacts the revenue as Anca mentioned.
So, it's fair to say that some revenues were postponed from Q2 to the potentially coming quarters?
Yeah, that's true, and as you know, this has unfortunately happened earlier as well. But that is quite common when you have a complicated high-tech product that nobody has ever built in the world before.
Exactly. Exactly. I guess the final question regarding those phase III projects that you are currently operating with. Should we expect sort of any, I mean, deliverables or milestone progression and maybe a bit more material revenues, I don't know, next, the next twelve months or so? Since thinking about the business model and thinking about the sort of a revenue accumulation from these deeper stage projects.
Maybe, I don't think we can provide you the answer you are looking for. We have not issued any guidance, and we're working hard to take projects forward. Now there are more projects with advanced state, and then, of course, that means that we expect to be closer to the larger revenues, but we cannot really give a forecast on that. Sorry.
All right. That's fair. That's all from my end at this point. Thanks for the answers.
Thank you.
So who would go next? Do we have the other analysts? Kimmo, do you want to ask something? I see your hand up. Kimmo, do you hear us? Okay, while Kimmo is tuning his microphone, there is some question on the chat board. How many projects do you have close to maturity? There are several projects close to maturity and in phase III state, and this is, I believe, what we have elaborated in our releases. Kimmo, does it work for you now? Sorry, Kimmo, we can't hear you, but how about Antti? Are you on the line?
Yes. Can you hear me all right?
Yes.
Good afternoon, and thanks for taking my questions. So, about the PPT drivers, so what would you say are the most important drivers? So is it coming from ophthalmology Visudyne usage or the phase III trials? Or what would you say is driving the PPT growth?
Yeah, that's an important question. I believe we elaborated earlier this year and last year some of the economics put together with KPMG strategy consultants. We'll be happy to refer back to those, but just out the top of my memory, that if we look at those, the therapeutic costs for oncology patients are many times over those of the ophthalmic conditions. So, if we think purely the revenue model, it's obviously number of patients in a specific indication. It's the price per patient or the price per treatment, and then it's obviously the frequency of the therapies.
One of the strong points of our therapy is that the patient needs less number of treatments, and this results into a better quality of life, according to several doctors and patients. This is some benefit besides the reduced cost that we can offer. In the ophthalmology, the average costs for the therapies are ranging from low four digits to kind of let's say a few thousands, typically. Then in the oncology, we are easily talking ten or even hundred x more in the U.S. market.
So obviously, when you have cancer patients which are being treated, just by looking at the macro data about the therapeutic costs, one could conclude that those patients are much more profitable per patient basis. But obviously, in the ophthalmology, you have a much larger patient population if you look at the general health data from United Nations or FDA or any other official agency. So, I don't know. Does this answer the question, Antti?
... Yes. Thank you. That's very nice. So the second question you highlighted on the flow cytometry win, winning that deal. So just to understand the revenue realization, so is it something that will... you will see the revenues quickly, or will there be a kind of delay, or will it be over many years or kind of more one-off realization, or what would you say?
I think the main point why we highlighted this is that, as our primary use of our technology is in our own products, but as we have elaborated that there are people who are building instruments, whether they are flow cytometers or quantum computers, that use the same laser technology. Now, we were extremely proud that a world-leading laser company with a solid, mature product was actually replaced by our laser core. And to me, this tells about the maturity or the competitiveness of our products. And this is this one is a case which is not possible to predict the future. We certainly have some future expectations. We are not working on one-offs.
As a general rule, we are working only on cases which would deliver us consistent long-term revenue streams. That will obviously not be always the case, and there is a known kind of zero probability of failure in these cases, but certainly we're looking for long-term returns. In these cases where our laser cores are integrated to other people's devices, the time to production is typically shorter than, for example, with a drug development, which starts from the in vitro.
This, I believe, was what we introduced late 2022 in the updated strategy, as a kind of reason that why we are putting a little bit more focus on commercializing our technology in other people's products to shorten the time to revenue versus the projects in oncology. We have, for example, one of the projects in oncology, which is now in phase three. We have been working with that particular company since two thousand and fourteen, and that gives you an idea how long the drug development typically takes. But if we have not done that so long time ago, I would say that it would mean that we would probably not be very or we would not be where we are today with that development.
Okay. Thank you very much. That's, that's all from me.
Kimmo, do you wanna go next?
We have a question from him.
Ah, what is the level of revenue in second half versus first half? Same, up or down? I have to gracefully give you a vague answer, Kimmo. Unfortunately, we're not kind of giving guidance. We are aiming to grow the revenue. Obviously, there has been limited success with that so far, but that remains our kind of strategic target, and we are expecting to do that, but unfortunately, we don't have a forecast or guidance to share at this time. Currently, I don't see other questions on the chat board. If...
I'll still wait for a while, but if there will be no other questions, then we'll probably go close the session. And thank you all for participating, and hope you will follow our releases. And looking at some of the kind of commentary from the investor community during the summer, I would encourage all of you to follow our LinkedIn, our Instagram, our Twitter/X account, Facebook, et cetera, for all the releases. Our internet pages are also quite informative. They are outlining many, many cases where two hundred plus world-recognized scientists and doctors are reporting results done with our product, and they are citing those or our product by name in the highest kind of rated scientific literature in medicine.
So, this is something that you can use as an additional source of information about us and about our business. But thank you very much, all, and have a nice weekend. Thank you. Bye-bye.