Good afternoon.
Good afternoon.
Welcome to the Modulight first quarter webinar. My name is Seppo Orsila, Founder and CEO, and I have here with me our CFO, Mrs. Anca Guina. We're going to first talk about the company. Just as a short recap, we do lasers and optics for better life. There is ample material about our products and our solution in our investor site, and I encourage everyone to get acquainted with our recently released annual report, which has a lot more detail about the therapy, our products, and the company overall.
Now, let's go to today's agenda. We're going to recap the first quarter, talk a little bit about the FDA approval.
Anca is gonna talk about the highlights of from the finance point of view, then, I'm gonna discuss the R&D pipeline, its implications to us. We're gonna recap very shortly the revenue model, and then we have the summary at the end. As I said, earlier, the company is not issuing an outlook, but we hope that providing you events in sequence in a well-organized manner will help you to understand better than what the company's doing and what you can expect from the company.
First quarter in brief. The R&D pipeline remained strong at 27 projects, and we are particularly happy about the progress within the pipeline for multiple projects.
First and foremost, we received a PMA approval from United States Food and Drug Administration in January, and now our laser system is certified for wet age-related macular degeneration. As many of you may know, there are also other off-label indications which are being generally treated with that. We have announced with our bio collaboration partner that we expect that the device will be in the hands of the healthcare professionals during the first half of 2023.
Our revenue grew 18% sequentially, was still down 7% versus year-on-year. What was very important for us was the fact that customer meetings have returned to the pre-corona level.
During the first months of this year, we can pretty much say that every single month, we had more people visiting our head office here in Tampere than we had the whole of last year. This has traditionally been a very good indication to us about the progress with the portfolio. In connection with our equipment investments, we completed the investment program last year and have now been ramping up the activities and accelerating activities that benefit from the new equipments.
We'll discuss those more later on in this presentation. About the PMA approval, I said, we're extremely happy about this for two reasons.
One is that it gives us a clear milestone in our R&D pipeline, and thus one project is moving forward towards commercialization. Secondly, it validates our cloud strategy. It validates the business model we are trying to push. Thirdly, it's a very big customer reference. I have had multiple senior customer executives and CEOs tell to me that how impressed they are about our cloud technology and our kind of advances in digitalization.
I guess there's not a single customer who has not been feeling that we are at the forefront of digitalization in the domain. Not only is the validation in a formal way from the regulator, but also overall that we've been able to take this to the state of the approval.
It's a significant step forward according to the customers. As said, we have announced together with our partner Bausch that we expect to put the first devices in the hands of healthcare professionals during the first half of 2023. This is something that we expect to do. Anca, do you talk about the numbers?
Yes. Thank you. We closed our first quarter with a revenue of EUR 1.49 million. This is 7% below what was in the same period for last year, but 18% higher than for the fourth quarter of last year. We continue to see delays with the customer projects, and we cannot say we are happy with the level of revenues we have right now. Nevertheless, we have to acknowledge the fact that it is a sequential, consecutive, consequential growth of three quarters.
The profitability was lower, that was mainly driven by the increase of the operational costs associated with the acceleration of our growth strategy implementation, which we emphasize every single quarter. Especially, this investment program completion, last year basically accelerated the related activities and, this made an increasing of our costs temporarily. Our balance sheet remains really strong with over EUR 75 million.
As we announced, in our previous webcast for 44 financial result release, we had in the last quarter of the year a record number of equipment investments. Part of those investments are obviously translated to cash transactions also in this quarter and also in the next coming quarters as milestone payments related to installations of equipment or final testing.
The setting up of the new process equipment will continue also in the coming quarters. We have already mentioned this before. We keep seeing the benefits of our investment programs in the form of increased differentiation compared to our competitors, expanded offering, increased productivity, increased capacity as well. Our investments done in the past basically increased our opportunities to be more competitive in the market.
The acceleration of these investments increased temporarily the costs. That is expected to reduce basically this year. It will not continue for a very long time. Cash at the end of the quarter was EUR 37.6 million, and the headcount as full-time equivalent was 63 persons.
Balance sheet, as mentioned earlier, very strong at the level of over EUR 75 million. Thank you.
Thanks, Anca. As announced, in 29th of November, we defined 5 strategic programs to help us steer the company forward and particularly help with the transition in the go-to-market process, but also to build on the long-term strategy related to the products and technology. We also introduced a separate package for development of ESG governance and reporting. About the 1st one, operations development.
The most important topic which we said that we wanna work on and invest more is U.S. local operations. Now, during the 1st quarter of the year, we have had constantly more activity in the U.S. than ever before.
We have a U.S. service center to support our clinical customers, as well as regulatory work and providing demos to the customers. Most importantly, providing the security and feeling to the customers that Modulight is present there, no matter what the restrictions, etc. We continue to invest into building the local operations to be to be on a perceived level closer to the customer.
I wanna emphasize that we have been able to provide excellent customer service also remotely from Finland, according to customer feedback. This is now taking it to the second level. Secondly, we have had more exhibitions, more conference participation, and more activity with the customers and the market and the doctors than ever before.
During some of the weekends, this spring, we have had three different consecutive conferences running in parallel, and thus, three or four teams, separate teams in the United States simultaneously. We are really investing now to the go-to-market, which was obviously a big identified gap in our execution last year. Secondly, the cloud technology and cloud-based service development.
We have made progress with our SaaS slash pay per treatment business model. And as reported already, for the Q4, we have seen a pickup in the activity since last summer.
There has been particularly good development after the FDA PMA approval, which of course was an achievement itself for the cloud technology, but has also enabled us to accelerate those things, and we expect to tell more later this year. This is something where we feel particularly happy about the progress and ability to accelerate the implementation of the strategy versus what we felt two years ago.
Productizing platforms, devices for various indications and applications. We obviously have now reached an approval state for AMD, but there is also significant application progress in bladder cancer, glioblastoma, and uveal melanoma to name some. Fourthly, technology development based on the complete investment program.
Anca elaborated a little bit of the benefits that we're seeing here. We can, for example, say that for some of the laser devices we have doubled performance for certain critical parameters versus the best in the market and so forth. We really believe that technology development is accelerating and helping us going forward. This is very much thanks to the completed investment program. Yes, it has increased our cost levels temporarily.
This is mostly due to the fact that accelerated driving of the equipment into the process and applying them for a wider range of applications and offering takes more money on a short-term basis. This is not to be expected as a kind of a long-term impact on the operating expenses.
The development of the ESG governance and reporting. Last but not least, we have made our first ESG report as a part of the annual report, and this is not so much a kind of actual progress, but rather a progress on the visibility and reporting.
As some of you probably remember, the company has been acting in a very responsible way since its birth in year 2000, but now we are be able to make it more visible and more transparent, and we continue to work with efforts of making it more transparent as we go forward.
We have also launched certain programs that we expect to contribute to reduced carbon footprint, reduced social responsibility and other activities, and announce the results of those later this year. I think the core point here is that we are now making it more visible and more transparent, and also, we expect that the company's governance will develop in a favorable manner.
This is maybe something that is better addressed after next Tuesday's AGM, depending on what are the decisions proposed and approved by the shareholders. About the R&D pipeline, the most important thing is obviously the progress within the portfolio. No new project introduced and no new projects, no projects killed. I discussed a little bit about the progress in the cloud technology.
Translates obviously into the portfolio through many ways, whether we are talking about ophthalmic diseases or cancer. In nutshell, we see that some of the projects are progressing in a manner that they propose significant revenue potential still this year. Here, the cloud technology, new business models, and their applications, the both kind of so-called production and clinical activity as well as clinical trials are seen as important and significant opportunities.
Almost all of this progress is with existing long-term customers. Some studies which also suffered during COVID about the patient recruitment and things like glioblastoma have now started to progress better.
This is of course something that takes the activity forward as well, even if they're not the kind of concrete step in a clinical result point of view. Here, we're summarizing some of the benefits or the progress, say, in the portfolio from a more technical point of view. We are kind of making progress in the glioblastoma, i.e. the brain cancer, in several technical terms as well as patient recruitment.
I talked about the cloud progress, and I think the pinnacle of that is the FDA approval, but more so the validation and signal it sends to the market. One customer said that this is kind of helping the industry to renew and shows the way for the cloud technology in our industry.
This is of course not kind of a study result, but a feedback from the customers, which we find very important. Thirdly, the fact that we are able to accelerate and deploy the cloud wider obviously, furthermore validates our cloud technology.
Most importantly, not just the technical services, but primarily where the focus has recently been with several customers ranging from different indications to different applications, meaning preclinical as well as clinical trial activities, and applying the pay per treatment or other SaaS-based business models across different applications.
We are extremely pleased about the reception it has been recently taking on the market.
I just wanna remind you about our revenue model. The company is still getting a fair share of its revenue from early stage clinical trials. As the maturity of the projects increases, the predictability and steadiness of the revenue is expected to improve. This is of course to be validated through practice, but this is how we see and expect things to develop.
We have discussed the revenue model in more detail in earlier presentations, so I encourage to refer back to those if you are more interested or come back to us with a, with a separate discussion. The customer base remains steady. We have now, as promised a year ago, focused on this one single view, which was anyway only view that was discussed with the investors.
Earlier we had three other views after the same data. Those were a little bit to some degree subjective. As this is a fully objective view regarding the definitions and classifications of the companies, we have now this year as said a year ago, moved fully to implement only this view. No changes in the customer base that are relevant, i.e., no change in customer base for the most important projects.
Bulk of the companies remain to be public companies. There are several with over 1 billion revenue. Just a reminder, company has not issued a guidance for revenue or profit.
As the company's projects are still distributed across varying early stage development and predicting development in the market remains challenging, it is difficult to forecast the performance in 2023. As the company expects that changes in operating environment and so forth, we will eventually hope to be able to introduce outlook maybe in the future. In summary, we had the FDA PMA approval in January.
There is a significant increase in the customer activity. As said, it has been traditionally very important to us when the senior executives of the customers visit our HQ in Tampere. Product development pipeline stayed on the year level of the end of last year, but most importantly, there is progress, and we see significant revenue potential in this year.
We believe that our actions are in line with our strategy, and we made progress in all strategy programs during the first quarter. We reiterate what we announced as the strategy that the company intends to grow revenue every single year during the strategy period and come back to strong profitability during the strategy period of 2023 to 2025. Thank you very much. We are happy to take questions.
All right. We have our analysts online, Lars Hevreng, Antti Siltanen, and Joona Tersa. I'd like to first give you a chance to ask questions. Lars, please go ahead.
Yes, thanks. Can you say anything about your comment that you see a significant revenue for revenue potential already this year for a project? Would that be, these revenues would they refer to milestone payments? Or what do you refer to really?
Thanks, Lars. There are some projects, not one project, but some projects, where we see that there is progress, which takes us forward in the business case. I'm not necessarily meaning only milestone payments, but as you know, as you project progress in a project, at some point you will start to have production units or production deliveries of the services, and more kind of a, let's say a little bit of a volume type of business. These are all options.
We didn't reiterate specifically what those would be, but I mean, as the projects mature, there are also things other than milestone payments that we see coming. If you think about what we said, for example, about the cloud products, we are putting it into the hands of the healthcare professionals. That should start generate things other than milestone payments. This is maybe something that is appropriate to say at this time, and I hope it answers the question.
Okay, thank you. And also, so with [Oxlon], what can you say about... you said the first installation's gonna take place-In the first half of-
Yeah, we have announced together with Bausch, you can see the exact wording from the Bausch website. It's roughly so that we expect to have the first units of the product at the hands of the healthcare professionals during the first half of 2023. We will announce more as we have more updates to give onto the markets later on this year.
Your revenue recognition in this collaboration, is that you're paid for deliveries to Bausch + Lomb, and, how will it work really?
Our revenue recognition remains the same as it has been for a very long time. We only recognize revenue on the delivered product or service.
Going forward, there may be a slightly delayed revenue recognition, meaning that, for example, assuming that there would be a payment based on each patient treated, we may extend certain clinics or hospitals additional payment time, and then recognize the revenue only when, let's say, certain criteria are met and may not recognize the revenue on the spot when the therapy occurs.
This is yet to be defined, there are several options including something that is quite typical in the pharmaceutical industry.
We are considering to be relatively, let's say conservative with this, given our history and everything.
All right. Thank you. I'm not sure if I saw any balance sheet details from the Q1. Have I missed that?
We have the key figures in the usual key figures we publish with every quarter bulletin. Basically the cash equivalent is there and, the acquisition of the fixed assets.
Okay.
There is-
Can you say anything about the status of the accounts receivable items?
Yeah. There is actually.
A very good question.
... just a question on the bulletin about that. Sorry, in the chat about that. We have not had kind of any issues or major issues certainly in for quite some time with the customers regarding the payments. There is a question that whether we will be able to recover the lost from last year.
We will obviously update the market if there are significant recoveries, but we are expecting to make progress, but we'll announce of course, if there are significant steps forward. Then there is another question on the chat asking about significant revenue potential, how large that is in euros.
This is something that I guess is still a little bit indeterminate factor. Obviously, all of us would compare significant revenue per company that for Modulight a certain number is significant. This is probably talking about millions of euros, but for others it's maybe more or some it's less. We want to say that it would be significant from our point of view and not to give it any definitive number at this time.
We believe that the making progress and the progress we see with the portfolio gives us opportunity to have potentially significant revenues from the progress even this year.
I emphasize that this is by no means certain and. We are seeing significant potential due to the progress.
All right. Thank you.
Thank you, Lars. How about you, Joona Tersav'a, Antti Siltanen, would you, any of you have questions you would like to ask?
Sure. Can you hear me all right?
Yes, we can hear you, Antti.
Great. Thanks. I'm trying to understand your revenues in Q1 a little bit better. Last year you mentioned about the $3.1 million deal that will be realized over several quarters. Can you advise on how much of that deal was realized during Q1 and what is the outlook on Q2?
Yeah. I don't know, maybe Anca could answer the better, but I mean, the, as we're not giving revenue splits, so it's a little bit difficult to answer the first part. As we're not giving an outlook, it's slightly difficult to answer the second part. We have had significant revenues related to projects which we have discussed in the past, and we have no updates to those. Yes, there are also delays with some customers, not necessarily tying it specifically to the one that you referred to.
I would say that we have been happy with the portfolio overall in a way that portfolio or the stream of revenues has been distributing and thus this has given us let's say certain operational benefits. Overall, we're not satisfied obviously with the revenue level and this is obviously something that the company needs to focus a lot going forward. I'm sorry I'm unable to give you any outlook.
Okay, thank you. Another question on your development in Europe and the recent news on your distribution deal with Laser 2000. Checking their website, they seem to currently have one Modulight laser platform on their offering. How will that develop? How many products do you see kind of being distributed via Laser 2000 and kind of how long do you expect to kind of reach the potential of that distribution deal?
Yeah. That's an excellent question. Laser 2000, you can obviously look at their website, how they are. They are definitely not a life science-focused company, but they are, to our understanding, very well penetrated with the majority of the large OEM laser users in Germany in particular, but as well in France, Switzerland, and other DACH countries.
The main product that we are pushing with them is our configurable cloud connected subsystem. It's, you can consider it as an intelligent component, and that would be integrated by a kind of a device manufacturers who use lasers as substantial portions of their product, namely life science products, but maybe also some other high value products.
The whole rational strategy for the collaboration was that since Modulight is more or less solely focused on the United States and any businesses that branch out of United States, then Laser 2000 can address particularly the Central European markets and offer the same products the system integrators there.
We do have our own limited collaborations with pharmaceutical companies also in Europe, but those are out of scope of this relationship and we continue to serve those independently of them. We believe that as years go by, the integration of these same subsystems that we have been selling elsewhere to products made in Europe is an interesting opportunity.
Here you are looking for a timeframe of easily 1 to 3 years to make a significant business potential. This is why we're not highlighting that so much also in the summary or the highlights, because while this provides an interesting long-term opportunity to leverage the same technology in Europe, it is still not expected to have a huge short-term benefits, but more like long-term synergies with products we are anyway developing for the US market.
Thank you very much. That's everything from me.
Thanks, Antti.
Thank you. Joona, do you have any questions?
Yeah. Thank you. You mentioned that the costs are significantly higher than a year before. Can you specify what type of costs have increased? Are those wages, raw material costs or some other?
Well, we, I was mentioning about the operating costs, related to this, investment program. Basically, yeah, the activities related to development of technologies and so on, so forth.
Okay.
we also, yeah, announced that, you know, last year that we would increase the headcount to basically support the growth strategy. Yeah.
I mean, from the technical point of view, one thing that is a fairly big cost driver is that once you take into use, for example, a molecular reactor, there is a fair amount of materials that you are consuming in running up the reactor and taking the process into use. Especially if you are leveraging across a wider range of processes, which we have been doing, developing more technology.
There is a fair amount of consumed materials, but those are not kind of representative of. We have done this before, so we know that it's not gonna be a kind of permanent level increase in the operating expenses, but they are more like temporary.
Thank you.
Welcome, Joona.
Okay.
Do you have any additional questions on the line?
No, no, I think we tackled every question so far.
If no further questions, we thank everyone and wish a great weekend and a great Vappu to those who are celebrating that. Hope to see many of you in the annual general meeting and in the, let's say, related events during the spring and the autumn. Thank you very much. Bye-bye.
Thank you. Bye.