Welcome to Nexstim's webinar for investors, analysts, and media. In this webinar, Nexstim's CEO, Mikko Karvinen, and CFO, Joonas Juokslahti, will be giving a presentation that will take about half an hour, followed by a Q&A session. The webinar will be recorded, and we will inform you later on where you can find the recording. For the Q&A session after the presentations, we ask you to send any questions through the webinar's Q&A chat. Questions can be sent at any time during the webinar, but they will be replied to only during the Q&A session. When you write a question, please state your name and organization. As you send us a question, it will be first visible for us organizers only. We've reserved an hour for the webinar.
In case we do not have time to answer all questions, we will email you later given that you have given us your full name within any questions. Now, let's move on to the webinar. First presenting is Nexstim's CEO, Mikko Karvinen. Go ahead, Mikko.
Thank you. Thank you, Essi, and welcome everyone to this Nexstim Plc webinar. My name is Mikko Karvinen. I'm the CEO of Nexstim. We will be presenting you today with the 2021 financial results and also the second half results for 2021. We're very happy to present the results as first of all, this was a record-breaking year for Nexstim in many ways. Also, the second half of 2021 was the first profitable review period ever in Nexstim's history. We'll be going through the details together with our CFO, Joonas Juokslahti . I'll now switch on to the presentation slides. Just a moment. Here we go. At Nexstim, we focus into personalized brain diagnostics and therapy.
Today we will be going through the second half of 2021 and the full year 2021 financial results in this webinar together with our CFO, Joonas Juokslahti. I'll begin in the beginning with our story, a brief look into our mission, vision, and values. We're a Finnish globally operating medical technology company, and we have a very important mission, which is to enable personalized and effective therapies and diagnostics for challenging brain diseases and disorders. We've progressed also with our vision during 2021 in our innovation, creating a possibility for a better life. With our technological know-how, we set a new standard for the treatment of challenging brain diseases and disorders. In everything we do in Nexstim, we're guided by our values.
We're based on science and clinical evidence. Our systems that we manufacture and we use for patient treatments are based, of course, on solid science and are evaluated through clinical trials and clinical evidence before any approvals. We strive for financial success, and we've also shown significant financial success very recently. As an example, from 2021, we're posting positive results from our second half and have been very successful also in growing our revenue at a fast pace. Our team is full of passion and commitment into this important mission and the work that we do in Nexstim. Anything we do is through ethics and responsibility.
For example, in the area of designing our systems and manufacturing, we do all this work in Finland, and we take high responsibility into having everything done ethically in an ethical manner. Now, if we look quickly through a few key megatrends that support our growth, and I want to highlight on the right the integrated Nexstim system, the unique proprietary neuronavigated TMS technology that we use for both diagnostic and therapy applications. Our competitive advantage is within the neuronavigation and how we model the E-field when inducing electric stimulation into the brain and the cortex.
If we look at the megatrends from the aging population's point of view, the population is aging and a significant decline in the working age population in Western countries is what we're experiencing. Brain diseases increase with aging, and this is a fact that both the areas of brain tumors or brain diseases such as mental diseases, depression, and also chronic neuropathic pain are on average increasing with this aging population. In that sense, the megatrend is also working towards us helping more patients also in the future with our systems.
Technological development in healthcare is actively also researching and enabling wider use of new applications, and especially in the treatment of challenging brain disease and disorders. We've seen a lot of change from, for example, the severe depression or depressive disorder, major depressive treatments, more and more patients are seeking for treatments that are outside of just the pharma approach and looking for non-drug treatments such as the Nexstim systems.
We see that in the future there will be more and more usages of systems such as like Nexstim systems in the TMS area where drugs have either not been able to help the patients or the patients seek for something else than a pharma approach to their disease, whether it's a disorder such as depression or chronic neuropathic pain as examples. The healthcare cost pressures also are a mega-trend both in the private and the public healthcare sector. There is a need for more effective and faster rehabilitation for all patients. Especially if we look at the working age population that would be affected by whether it be a brain tumor or a depression or chronic neuropathic pain.
A lot of the patients are still working age and are needed to be rehabilitated fast to the society and to be able to be productive members of the society as fast as possible. Let's take a quick look before digging into the financial progress of 2021. I still want to remind about the progress we've made with our business and products. We have two businesses derived from our technology platform. The first one is diagnostics business, and the second one is therapy business. Now, when we use our system for diagnostic purposes, we call it, market it at the name of NBS, Navigated Brain Stimulation system. When we use it for a therapy application, it is NBT, Navigated Brain Therapy system.
If we start with the diagnostic side, the status is such that we have over 200 systems sold. The application we use an NBS system is pre-surgical mapping of the brain, both motor and language functions prior to a surgery, such as a tumor surgery. We are both CE marked and FDA approved for pre-surgical mapping of the brain, and we're the only TMS system in the world that has these both approvals, both CE mark and FDA approval for pre-surgical mapping of the brain with a TMS system. Now, it is helpful for the surgeon, first of all, to have this knowledge of the motor and speech functions prior to making decisions on the surgery, for example, whether to operate or not.
When in the surgery, this information also helps in decision-making, and in that sense, it helps also for a better treatment or better outcomes from the surgeries and also for the patients a faster recovery in that sense. The therapy business where we operate with the NBT devices, we have over 50 systems, including the therapy software. We most recently, actually, we've sold systems that have both the NBS and NBT capabilities in the same system, and we call this, for example, in the U.S. markets, an NBS 5+ system, where there is the presurgical mapping applications, but also a depression application included in the system.
There's a bit of overlapping within these systems, but over 50 systems, Nexstim systems include the therapy systems, therapy software, at the end of 2021. In the depression indication, which is the main therapy indication right now, we are also both CE marked and FDA approved, so we can sell and market the NBT systems for depression treatment in the E.U. and also in the United States. In the United States, in addition, we also have existing reimbursement from major insurance providers, and it's a wide reimbursement for this treatment of depression, major depressive disorder with a TMS device. That helps our customers, which are typically clinics in the U.S., private clinics, to purchase a Nexstim system, and then, of course, to treat patients with insurance coverage.
Finally, we also have a chronic pain application for the NBT that we use. We have a CE mark to sell and market it in Europe. We have currently some systems already in use for clinical use in Europe. As an example, the Helsinki University Hospital uses an NBT system frequently for the treatment of chronic neuropathic pain patients and have seen about a 50% remission or 50% of the patients have got significant, meaningful, clinically meaningful help for their chronic pain symptoms. On the depression side, our patient registry shows that we have, after 300 patients, we have a 50% remission rate and a 77% clinical response with treatments, major depressive disorder treatments done in the U.S. with a Nexstim NBT system.
Good results also on the therapy side. Let's move on to the main topic of today, and we'll begin with the business summary for 2021. Year 2021 was Nexstim's historically best full year measured by net sales, operating result, and result for the review period. We also posted our first positive result for the period in the second half of 2021, and this was the first positive results in the history of the company. This is a big moment and special thank you for, of course, the Nexstim team, our customers, our business partners and investors for making this a reality for Nexstim in the second half of 2021. Our business continued to grow very fast despite the changes in the operating environment caused by the COVID-19 pandemic.
2021 was still very much a COVID-19 affected year, and we managed to operate in a very efficient and growing manner, still, despite the environment. In some cases, it wasn't easy, but as a clever and agile company, we managed to overcome things like doing more remote demonstrations of our system for clinical and sales and marketing of the system. We also managed to deliver the systems to the hospitals despite some of the restrictions for mobility and entering hospitals. We also managed to look at components and to oversee that we have relevant components and supplies of them during 2021.
There was a lot of things that affected it, but fortunately, the end result was that the system sales increased the most during the year 2021, up to 3.7 million was the system sales, and there was an increase of 113%. A substantial increase of net sales of systems for 2021. Recurring revenue also had healthy growth, and accounted for EUR 2.7 million and an increase of 13.1%. When we look at the best reported full year to date from a net sales perspective, we ended up at EUR 6.4 million, and there was a large increase of 55.5% in comparison to 2020.
On the operating results side, I'm very happy to see that we posted a 56.4% decrease in our operating loss and ended up with EUR 1.5 million of loss in the operating results in comparison to EUR 3.3 million in 2020. When we look at the spread between diagnostic and therapy, diagnostic business was the faster-growing in 2021, so our net sales grew in the diagnostic business area by 71.4%, up to EUR 3.7 million. In the therapy business, we also saw very fast growth by 37.9% in 2021, and it amounted to EUR 2.7 million. Very healthy growth, amazing growth in both of these businesses, but the diagnostic business sales growing even faster than the therapy business in 2021.
In the springtime of 2021, we had a successful rights issue. It was oversubscribed, and we managed to get EUR 6.6 million in new capital raised in this issue. This, of course, was a very big help for first of all, growing our business during 2021. As you can also see from our cash position at the end of 2021, we still have quite a bit of that left, and Joonas will be guiding you soon with our details in also the cash reserves. Very much needed capital was raised during the spring of 2021. Then finally, as a strategic investment, we informed an investment in the service company of a Californian clinic, which is PNC Management Services, LLC.
This is a management services organization which provides some services for the clinic that treats patients with depression. The value of the investment is around EUR 0.5 million . We see that this type of partnerships with providing services through these MSOs, these management services organizations, to clinics, specifically neuroscience centers in the U.S., is something that we will focus very much to also in 2022 to make new clinics in the U.S. I'll speak a bit more about that once Joonas has gone through some of the financial details of 2021. With that, I move to Joonas now to go through some of the key financials for 2021.
Thank you, Mikko, and good afternoon, everyone. Today in the morning Helsinki time, we had the chance of publishing some good news in the form of Nexstim Plc financial statements release. The year 2021 was a great year of growth for Nexstim. Not only did we see record growth pace and record revenue, but we also had the best year in terms of operating result and the result for the period. The total net sales for the full year grew by 56% to EUR 6.4 million. The diagnostic NBS business grew by 71% to EUR 3.7 million, whereas the therapy business grew at a really good pace of 38% to EUR 2.7 million.
Now, as per usual, we also review our total net sales by dividing it into sale of new systems and recurring revenue. As we already saw in the first half, the year 2021 has been a really good year for sale of new systems, and that trend will continue in the second half. The growth of sale of new systems was 130% to EUR 3 million for the full year. At the same time, the strategically really important recurring revenue grew at a pace of 13% to EUR 2.7 million.
While reviewing revenue growth, it's really important to also take a look at the gross margin and gross margin ratio, and I'm really happy to see that in 2021 the gross margin ratio increased from 76%-82% in comparison to 2020. The personnel expenses were EUR 4.3 million with growth of 17%. At the same time, the other operating expenses grew by 27% to EUR 3.1 million. The growth of operating expenses are mainly due to the non-recurring cost-saving measures taken due to COVID-19 in the comparative period in 2020, the spring in Q2. The best operating result in history was EUR -1.5 million, and that shows the operating loss decreasing by 56%.
Now, same as the webinar for first half results, I wanted to use the simple graph, which represents the development of net sales and operating result through recent years, 2019 through 2021. That's below the key financials table. The orange columns represent our net sales growth, and we can see that it's been accelerating. Below that, the blue columns represent our operating loss, which have been cut in half each year. Now, when we take a look at the result for the period, that was also the best in the history of the company, and that was -EUR 0.8 million.
Now even if we are reviewing full-year figures here, I would like to note as Mikko already said, that the second half of 2021 was the first positive period for the company, and that is a real good milestone for the company internally and externally. The negative cash flow from operating activities decreased by roughly 30% to EUR 2.1 million. Now, I would like to note that roughly half a million of this includes an investment of half a million to secure a normal continuation of our manufacturing of our products during the shortage of components globally.
At the end of the year, our cash position was EUR 5.2 million, and the increase in cash position was mainly due to the successful rights issue during last spring. Now, if we take into account the cash position and our increased profitability, as well as the $4 million signing payment received from the significant license deal we published earlier this year, we could say that Nexstim is not planning any new funding rounds at the moment. Now to end with a even more positive note, the future outlook for 2022 goes as follows. The company expects its revenue to continue to grow during 2022 and the operating result for the year to be positive.
Now, I would like to remind everyone that next week on Tuesday, the eighth of March, we will be publishing the annual reports with the full financials. That is a really good information package, and I really recommend everyone to take a look at that. It's a really good publication. With that, back to you, Mikko.
Thank you. Thank you very much, Joonas, and we've now ended the 2021 review and the happy progress in many areas of our financials. I'd like to end the presentation today with taking a look at our key strategic objectives for this year, 2022. 2021 was a great year in progress in many areas. We're taking the view of also publishing our key strategic objectives as part of our financial statement release, and we've done this now twice earlier. When we look at our strategic objectives for year 2022, we're very focused. I'll reveal that there are two of them, and we look at the first one.
Number one, we want to continue the profitable net sales growth leading into our first operating profit-making financial year while also minimizing future capital needs. I'll split this objective into some areas. How to achieve this? First of all, our organic growth will come from both diagnostic and therapy businesses. We see that there's large opportunities for growth in both areas. We see there's a need for systems that combine both the NBS and the NBT, the so-called NBS 5+ which has both diagnostic and therapy capabilities.
We see more and more customers, hospitals that want to do a pre-surgical mapping of the brain prior to surgery, then they want to possibly do a post-operative mapping of the brain, and some of them even want to do therapy for patients afterwards, whether they be in rehabilitation for deficits from surgery or they might be also some patients that suffer from depression because of their condition. This is one source of sales growth in a concrete manner for 2022, the sales of diagnostic and therapy systems, and in some cases, that they are in the very same system provided to the hospital customers mainly.
We also had a news piece very early this year in mid-February about licensing our technology to Magnus Medical, Inc., a U.S. early-stage startup company that will be using our technology for neuropsychiatric disorders. The NBT technology in particular was licensed, and we got a EUR 3.5 million initial upfront payment, and then we will have about EUR 13 million estimated royalties that are estimated to be paid in the future during a royalty period. This EUR 3.5 million is going to be revenue for 2022. It's gonna be revenue, new type of a revenue for Nexstim, which is licensing revenue, but that's also gonna be part of both the growth and also the profitability.
It's gonna be a bit of a combination of this licensing revenue and licensing profit from the licensing deal and then also drive from our organic growth through the NBS and NBT sales, the diagnostic and the therapy businesses. Now, final comment on this is minimizing future capital needs. As you heard from Joonas presenting our numbers at the end of 2021, we had EUR 5.2 million in cash reserves, and we also got the EUR 3.5 million since that as an upfront payment. Our cash position right now is very good, and we look forward to a period where we don't have any funding rounds we are planning right now.
Of course, if there are some investment in the future to our business, which we see, that would provide a good return for Nexstim and our shareholders, we will of course then be looking, considering, reconsidering that. But at the moment, our operative business can run very well with the cash reserves we have, and we can minimize the future capital needs by executing our strategy and operating our business. To the second point in our key strategic objectives. As I mentioned, we have two objectives for this year. The second one is expansion of Nexstim's network of exclusive neuroscience center partner clinics, especially in the United States.
The Piedmont Neuroscience Center management services organization that I mentioned that we've invested into, the strategic investment we did at the end of year 2021, we look forward to of course operating that new business. Also in expanding and having new neuroscience center type of partner clinics that Nexstim invests into opened in the United States. We want to progress on this path in addition to our operational business and get this type of investment model because we see that there's a larger value chain in treating patients with mental disorders such as major depressive disorder. Just by being a system provider or a service, we can do a lot more by being a service provider for those clinics.
Providing the Nexstim systems to get the treatments done and also the exceptional results we can get by using a Nexstim system, but then have a broader possibilities of servicing these clinics and helping them concentrate in what they do best, which is treating the patients and getting excellent treatment results. We see that this will be backing our way also for the future profitability in a sense that we get the revenue from the system and the recurring revenue that we used to, but we're also adding other components that are going to be making us more profitable in the future. Those two are the main key strategic objectives for the year 2022, and we of course look forward to reporting progress during this year onwards in these both objectives.
From the presentation side, I thank you for listening, and I hope that we have some questions. I can switch into the question mode. Happy to answer some questions, and I'm sure that Joonas can also address the ones that have maybe detailed questions on the financials. Thank you at this point already. As a reminder, you can post questions to the Q&A chat, and then we're able to read them here. I can see there's a few questions already, so I'll start answering. There's maybe about a 30-second lag sometimes in posting those questions, so please be patient. I'll try to also wait a bit of time if necessary.
The first question is from Fredrik Thor from Redeye, and it asks: Could you expand a bit on the capitalized fixed assets for fiscal year 2021 and what it relates to? Maybe Joonas, do you want to pick up that one?
Sure. In addition to patents and other IP, the capitalized fixed asset mainly consists of development costs related to continuing development of our already commercialized products. We see that those costs will have an impact over multiple years.
Yes. Thank you. Thank you, Joonas. There's also Fredrik continuing with a question on the backlog. We mentioned a EUR 1 million backlog in the CEO review, and what is the split between NBS and NBT?
Yeah, I can maybe continue on that.
Yeah, please do.
We have published a press release of each or most of the orders during the second half, and it's fair to say that the strong emphasis is on the NBS systems. Many of those nowadays tend to have the hybrid capabilities, meaning that there are the therapy capabilities in the system, even if it's an NBS system.
Okay. Thank you. Thank you, Joonas. Then there's also quite a financial focus on the next question. It's also from Fredrik: For 2023, what can we expect in terms of EBIT margin without upfront and potentially with royalties? Should we expect a decrease before Magnus have ramped up sales? That's a very good question, and I think it might be quite early to speculate on the 2023, as we are only giving an outlook on 2022. I understand the kind of need to understand year 2023. I have to say that if we look at the licensing business, the Magnus licensing agreement is the first one for Nexstim in this area of licensing, and it's a very significant deal for us.
I wouldn't expect that we're going to do similar deals necessarily every year. It is in that sense a bit of an exceptional deal. There are, of course, possibilities that we might license our technology. We license it now to therapy and a bit—I would say quite a narrow area in that sense that there are still a lot of possibilities. For example, the diagnostics area, the diagnostics business, there might be some licensing possibilities there. There might also be some licensing possibilities for other geographies than the U.S. There could be licensing deals, but I don't want to go into the exact detail of commenting on the 2023 financials.
I understand the so-called worry on what happens between 2022 and 2023, and I can tell that this is a big focus also for Nexstim's management. We want to assure that 2023 will also be, of course, a financially successful year but without commenting on the details yet. There are also some things that I don't want to mention which are in relationship to competitive situation, of course. Then there are some things where we have to, for example, on the licensing side, we need to respect our confidentiality agreements. That's where I can take it. Unless there's anything else, Joonas, you would want to add on that question about 2023.
No, I think that was a good answer.
Okay, thank you. We have a question, an anonymous question about will the Magnus Medical upfront be recognized in first half of 2022 or is there a deferred recognition element? Maybe you, Joonas, could take that one.
Yes. We are estimating that all or most of the upfront payment will be recognized as revenue in the first half. If there would be a deferred element, that would be a minimal one and recognized during the second half.
Yes. Thank you. No additions to that, so it's very likely that most of the revenue indeed would be recognized in the first half of 2022. Those are the questions that I saw published, and I do realize that there's a bit of a lag if you are posting a question right now, it might take up to 30 seconds to see it here. But I welcome if there are any other questions at this point. We still have time to take them right now. We also have time, of course, to talk later on if someone wants to be in contact either by email or, well, then that's possible. Okay. There's one new question from Fredrik.
Overall growth in NBS was strong and will be strategically important for Nexstim's own operations given the deal with Magnus Medical. With more internal resources, what do you hope to achieve in upcoming years? That's a very good question, and I think that this year 2021 has shown that there's a lot of potential in the diagnostic business, first of all. Nexstim can, by taking our diagnostics business forward, there's huge possibilities of getting both growth and high margin growth. As you see, the diagnostic system sales was the most, the area of most increased revenue during this year. And this was also year 2021. And it was also the year where we had the highest posted margins, gross margins, and we also posted the first positive result, for example, in second half.
There's a lot of potential in the diagnostics business. I also still want to say that despite the Magnus Medical deal, the therapy business has huge potential also because we've taken the strategy of operating or having the therapy capabilities also within the same system. The future NBS such as the NBS 5+, they will have both diagnostic and therapy capabilities. If a hospital buys them nowadays, most of the hospitals actually want the therapy capabilities also within them. There will be hospital use of NBS systems that will have therapy capabilities in the future in all markets, and that includes the U.S. We have our own clinic strategic investments into the clinics.
The clinic business will have possibilities that the neuroscience centers are so-called allowed in the Magnus Medical deal, as we've posted in the release on the fourteenth of February. We can operate neuroscience centers, and we can do strategic investments into those neuroscience centers management services organizations. We can have management services organizations in the future also in the U.S. that help neuroscience centers treat their patients. That's gonna be for our purposes and for our profitability purposes. We see that there's significant potential still in that area. Then finally, the therapy business outside of the U.S., the therapy business outside of the U.S. is not in any means decreased or restricted by the Magnus Agreement. Of course, we can't do SAINT.
We can't do SAINT type of treatments as such, but we can do therapy treatments such as NBT systems in the future or therapy systems in the future. For example, markets like in the EU and of course, potentially in the future also to the Asian markets. There's still a lot of potential in that, but I do understand that certain restrictions purely to the NBT system in the U.S. will be somewhat restricting of course that growth potential in the U.S. The diagnostic business, the partnership clinics, and the therapy outside of the U.S. have huge potential still left for the company. Okay. We have a question from Franc Greco from Trinity Delta. First of all, congratulations on achieving profitability.
Looking ahead, is this something you see becoming a consistent feature, or will you continue to invest, and when appropriate? A very good question indeed. Thank you. Our strategic objective, the main objective when we renewed our strategy already from 2020 to 2024 was to get Nexstim into a profitable path and a long-term profitable path. I see that of course, second half of 2021 was shown to be the first one that we actually made black numbers, but also, 2022 now we're having an outlook for the first positive operating result also for the year. Without going into the detail of the 2023 and the 2024, but I would say that of course we're coming towards the end of the strategy period, which ends at 2024.
I don't see any reason why we should have less ambition to the future profitability when we get towards the end of the strategy period. At the same time, we do know that there might be some very interesting investment possibilities in the future that might arise. One of them might be that maybe we want to accelerate certain parts, certain growth, whether it be in the diagnostic business or the clinics, the partnership clinics I mentioned, or some other area. We might of course then introduce new investments, and that might mean that we get funds, for example, grants or some other funding methods to fund those investments. Then finally, we have had quite a bit of science, of course, and a clinical evidence as part of our values, and we still have that.
There might be some interesting trial work. There might be some interesting work in the area of possible new indications. That's also an area where we might invest still in the future. Purely looking at 2022, where our financial guidance currently ends at, we're probably going to see more of an operational execution year. Then when we look towards the end of the strategy period, 2023 and 2024, we might have some questions around these investments, but we are not willing to drop our profitability objective when we reach the end of our strategy period. I hope that answers the questions and that's at least quite openly what, how we feel at the moment. It seems like we don't have any questions right now posed.
We still have time if there's some final, maybe final questions on anything in relationship to our business or financials. Thank you. Thank you all for participating. Thank you for Franc and Thor and Fredrik for the questions. Very good questions. We of course hope to see that the positive news flow and the possibilities of reaching out during this year with positive news flow. Of course in August, the twelfth of August, we will be publishing the first half of 2022 numbers. Officially then. Before that, as Joonas mentioned, our annual report on the eighth of March comes out, the 2021 annual report.
Looking forward to publishing other news flow in relationship to how we progress with our business, going forward. Thank you everyone, and I wish you a great week forward and a happy upcoming springtime. Thanks.