All right, welcome everyone to Optomed Q4 Investor Call. My name is Sakari Knuutti, and I'm the CFO of Optomed, and we also have the CEO, Juho Himberg, on the line. Our quarterly results, including the full-year results, came out this morning, a couple of hours ago. The presentation that we will go through is available on our IR website, www.optomed.com. Juho, please go ahead.
Thank you, and good morning to everyone.
I will walk you through the highlights of Q4. First of all, Q4 was very strong for us, especially for the device segment. Revenue grew by almost 150%, and it was supported by the deal in the United States. Unfortunately, our software segment declined slightly. Thirdly, the highlight is that we had a positive cash flow from the operating activities and a strong cash position at the end of the year. That is good news. If we are moving to the Q4 Optomed financials, revenue grew 39.3% for the whole group. Gross profit grew 33%, adjusted EBITDA 29.7%, and cash flow from the operating activities was positive compared to previous years, - 457 negative. If we are looking at the full year, we were on par with the previous year.
Gross profit was - 6.0%, adjusted debt - 90.2%, and the cash flow from the operating activities was approximately EUR 1 million more on the negative side comparing to the previous year. Moving into the device or the segment highlights, I'm starting from the devices. Revenue surged as the device segment received a large order from the United States. The timing and the size of the large deals, it remains hard to forecast. Thirdly, the gross margin improved, and the EBITDA would have been positive without these EUR 273,000 credit loss provisions, one-timer, which we activated during Q4. Overall, revenue grew almost 150%. Gross profit improved 150%. EBITDA improved 79%, and EBITDA margin was significantly better than the same time of last year.
Software segment revenue declined slightly due to the slower-than-expected contract renewals, but we anticipate a recovery in 2025, especially in the dental business, which is the new business segment for Optomed software. Revenue was down compared to the same period of last year by 3.3%. Gross profit was slightly smaller. EBITDA declined EUR 200,000, and the EBITDA margin was also a little bit lower than the same period of last year. I will hand over to Sakari talking about our cash flow statements.
Thank you, Juho.
Our cash flow for Q4, it was positive on the net cash from operating activities level, and the cash position overall remains strong. We have EUR 10.5 million, or we had EUR 10.5 million at the end of the year, so the position is strong. Like Juho mentioned, we actually had a credit loss provision that was increased to 100% related to China. We will continue with the debt collection in the future as well, but the idea is that we will not be throwing good money after bad money. We will be trying to pursue the debt collection measures, but we will do that without using too much money on it. That is why we thought it would be prudent to increase the provision at this point to 100%. No other highlights on the cash flow.
Thank you, Sakari.
Talking about the 2025 outlook, Optomed expects this year, the full year, 2025 revenue to grow strongly comparing to 2025. The key item supporting our growth is increased adaptation of AI-powered screening solutions, particularly in the United States, following our last year's FDA clearance. There will be new partnerships, collaborations with the healthcare providers and research institutions, which will drive our top line. Also, continued innovation and investment in AI and handheld imaging technology. Challenges and unknowns, what we are currently facing is a challenge to accurately forecast the timing and the size of the large deals due to the various uncertainties and the market dynamics. We are working in the blue ocean market, the market which nobody has been before. Also, sales cycles are still somewhat not that fully clear as we have been doing this business less than a year.
Geopolitics plays a role. In this new time, we see that geopolitics can play for us or they can play against us. There are various reasons for that. The summary: strong finish for the year 2024, strong growth expected in 2025. External reporting changes are under review, and the capital markets day will be arranged in the fall at earliest. That is under consideration. Optomed remains committed to its mission of making eye screening accessible and efficient worldwide. Thank you very much. Now me and Sakari, we are ready to take some of your questions.
You can unmute yourself by pressing star, thanks.
Hello, gentlemen. It's Pia Roosqvist from Carnegie. I hope you can hear me.
Yes, I can hear you.
Great. Thank you for the presentation. A few clarifications, if I may. If I start with the outlook for 2025, you expect strong revenue growth. Is this quantifiable in any manner?
The only thing that we can quantify at this point is that we would have still one step up, which would be the very strong growth. Obviously, we have debts to grow, and the market may have some ideas on what that has meant in the past as well. Perhaps I want to highlight here that there is still one step further that we can go in terms of our outlook.
Maybe I can open a little bit of that question, is that we are having two segments in Optomed devices and software, and our forecast for these various segments are different.
All right, thank you. Regarding the screening service you are offering now in the U.S., the Aurora AI service, can you share any comments on how you have been able to scale up it so far? Are there any negative surprises, any positive surprises you would like to share?
Positive surprise has been that we have been able to get numerous scalable large accounts. Those accounts are presenting for us as a potential high growth rate. We are currently having multiple clients who have capacity to make this business grow very fast. Negatives, I would not say negatives, but also adaptation of the new technology, bringing AI, testing it, looking how it works, dealing with the various stakeholders. The sales process is completely different comparing to selling a standalone camera. There are many stakeholders involved in the decision-making, starting from the quality IT, finance, and so on. The sales processes are completely different than selling a standalone camera. These are the learnings what we have done.
Good. I have a follow-up question regarding the sales channel in the U.S. How do you sell the product? We know that you are cooperating with AI Health, so you are selling it directly. AI Health is selling the service. Do you also use distributors? Do you have independent sales reps who sell this product or service?
Yes. The primary sales channels are Optomed U.S. and AI Health. We are selling exactly the same product, and we are coordinating our activities in the market. These are our primary channels. In some territories, we are collaborating with distributors. Also, in some territories, we are collaborating with the larger med tech companies in this field.
Thank you. Two more questions for me, please. Regarding your cost development in 2025, can you give any guidance on that?
In terms of cost, we would be expecting that the trajectory would remain the same as in 2024, so the level would be about the same. Now, if you think about our cost level in Q4 and 2024 in general, we have actually quite many, let's say, one-timer consulting services type of expenses that have been burning down our cost. Overall, the cost level is expected to stay on the same trajectory. In case, it kind of depends on how fast we want to press the pedal to the metal or not in terms of marketing efforts so that we remain also kind of opportunistic in terms of the accelerating marketing efforts and so on. At this point, we are expecting the same type of cost level as this.
Okay, thank you. Finally, regarding your financing, I think you in the report say that you are well set to deliver on your growth ambitions. In terms of your financing position, do you need more to, as you said, if you decide to press the pedal?
Yeah, if you think about our cash burn rate during the last two years, we've burned taking into account the EPID races and such. Let's put it this way that we are in pretty good shape at this point of time.
Good. That's all for me. Thank you.
Thank you, Pia.
Thanks.
We are happy to take more questions.
Hi, this is Gustav from Red Eye. Just a couple of questions. I'm also wondering about the positive outlook for 2025. We expect sales to strongly increase compared to 2024. Would you say that the main reason for this strong growth is due to the U.S. market and Aurora AI launch?
Yes. These are the primary drivers for the growth.
Great. I also wonder if you could give us an update about the joint venture in China or the Chinese market overall.
Yeah, that is something we need to bear in mind that in our shareholder agreement, we are having 19.9% of the shares. We are the minority shareholder according to the shareholder agreement. Currently, what we have done is that we have provided all technicalities for the joint venture. We have localized all the softwares, we have built the technical readiness. What is currently going on is the registration of the company as a healthcare provider. In China and in any other country, there are some burdens. You can form a company, just a normal company. When you become a healthcare provider, there are extra things you need to do, and that is currently in the process.
Okay, great. I think my connection was pretty bad. I think you mentioned about the costs during the quarter. What are the main reasons for the increase in cost during the quarter? Because I didn't hear.
Yeah, there are a lot of, let's say, various small items that kind of add up. Most of those are one-timers. There are things like consulting items, marketing efforts, conferences, small items that just happen to pile up in Q4. Not a great one single great big thing there apart from the credit loss that we mentioned.
Okay, great. Yeah, that was my last question. Thank you very much.
Thanks, Gustav.
Hi, this is Yuval from Inderes. Hopefully, you can hear me.
Yes, we can. Hello, Yuval.
Excellent. Just to make sure that I understood right, I think you hinted that you are expecting the revenue growth possibly to decline in the software segment. Could you comment on the outlook there?
I didn't say that. Our expectations for software segment and devices segment growth rates are different.
All right. You are expecting a very strong growth from Aurora AI in the U.S., but I suppose you are not expecting a huge growth from software. If I understood correctly, you are not expecting a significant growth also from China.
That's right. That's right. China still remains uncertain, and there are some variables which need to happen in order for Chinese joint ventures starting to generate revenue.
All right. Now I understand your guidance. Thank you very much.
Yeah. Any more questions, Yuval?
That's all for now.
Okay, thank you.
Thank you. We still have time for additional questions to start. Six, please.
A question from Hong Fengdong, private investor. Couldn't you just tell us how you account for sort of an agreement in the U.S. regarding Aurora AI? Sort of describe how you account for it, and is that the reason why you're considering changes in your reporting?
If I take first the reporting changes, the reason there is that we are expecting or the investor communities, obviously, they want more information. Now one possible indication would be that I've been requested is reporting somehow to be more transparency on the amount of recurring revenue that we have, especially overall. Then secondly, coming from especially the U.S. and our new product, Aurora AI. That's kind of we would like to give some more transparency to that item.
Oh, that's good.
That is kind of what we are thinking, how to do it, and such that is still under consideration. In terms of how we account it, we have a monthly revenue. It is a service model. Each month, the revenue side is on our revenue. There is a revenue share agreement between ourselves and AI Health. The revenue share is accounted as COGS. That can be shown there. In terms of the balance sheet, the inventory value of our product is moved to tangible assets. It is amortized or actually depreciated. It is taken out via depreciation during the term of the agreement that we have with the client. There is a monthly depreciation with regards to tangible assets. Finally, when the term of the contract is out, the inventory value and the tangible asset is zero.
There is obviously the side that if AI Health or a partner is selling, then it's kind of the other way around that our revenue is basically the revenue share that AI Health would be paying us based on the revenue. We would still have the same tangible asset item in terms of the device on our balance sheet.
Okay.
I hope that helps.
Yeah. I think you in your possibly changed reporting, I think you need to sort of describe this more in detail in written language so it can be really understood by investors. It is good that you're contemplating this recurring revenue. Anything to say about the new camera, apart from that you got CE registration? Any change in plans there, or are you still planning to launch it this year, or?
Yes, that's the plan.
Okay. Okay. Thank you for me.
Thank you. Thank you very much. You're happy to take more questions. Star six if you want to unmute yourself. Please go ahead if you have any questions. I can see one hand on the application, but if you want to unmute yourself, please press star six.
Hello, this is Johannes from Fuqua. Can you hear me?
Yes, we can hear you.
Yeah, very good. Thanks for taking my question. I just want with regard to the new business segment, so to speak, in the U.S., I understand your point that it's difficult to account for it due to the various income streams, either through your partner or if you sell it directly. Could you share with us how many cameras do you already have in the field in the U.S?
This, we have not disclosed the camera amount in the field. What I can say about that, what we did last year or end of Q2 or Q3 is that we have opened numerous accounts, potentially relatively large accounts at our camera site in those places. Those accounts are scalable upwards with tens or hundreds of cameras.
Okay. If you say numerous, are we talking about a handful of accounts, or is it rather a dozen of such accounts, or how should I read into this?
I can say that it's more than your fingers.
Okay. Of both hands. Maybe following that, when you say you have such accounts, did you sell one camera to each of those, or did you already equip them with, let's say, at least five per such an account?
How this business works is that since this is new technology, these hospital systems, what they do is that they are taking cameras into use, and then they are looking that if it's something they want to then purchase. We have installed some of those cameras per client. Once they want to start to use it, we will activate those cameras, and they order more. This is how it works. It goes like a snowball with these clients. You start from small, and then you persuade the client, you work with the client, and make them to order more.
Yeah. Yeah. And for how long is the testing period? Is it about three to five months, like what you have described as a sales cycle previously?
It depends so much on the client. Our experience, basically, is this half a year what we have been doing this business, or even less than half a year, since we really started after the summer. We talk about months before the trial or these trial periods are months. You count them in the months.
Okay. Can you tell us whether the momentum has been fading away a little bit? Because in your Q3 statement, you said that there is good commercial traction and that you are signing accounts on a weekly basis. Now, in the current statement, there was not such a sentence included. How should I take this? Did the momentum fade away a little bit, or why did you not go for a certain statement with regards to that business?
Yeah. Good point. It has not faded away. It continues the same way. We are signing the accounts on a weekly basis, and we are planting the seeds in the market. That is how it works.
Okay. When you say on a weekly basis, how many accounts on average do you close on a weekly basis? Is it one or rather two or three? Just to have an indicative idea to calculate a little bit around.
Yeah. We have not really disclosed that. This number is something, it's very different if you sign the account which has the potential to buy two cameras or one camera, or you sign with a client who has potential to purchase over the years 400 cameras. These are very different. We have not really disclosed that one.
Okay. Thank you. That's it from my side.
Thanks. Thank you very much. Is there any final questions still? All right. Thank you very much for participating in our investor call. We will hope to see you again in our Q1 investor call in May. Thank you very much. Thank you.