Good morning, everybody. Welcome to Optomed Q3 investor call. My name is Sakari Knuutti, and I'm the CFO of Optomed. We have also on the line our new CEO, Juho Himberg. Our Q3 release came out this morning, and the presentation that we are about to go through in this call is available on our IR site, www.optomed.com, investor relations. Please note that everyone can unmute themselves by pressing star six. All right, Juho, the stage is yours.
Thank you, Sakari, and welcome everybody this beautiful morning to my first investor call. My name is Juho Himberg, and I've been the CEO of Optomed since beginning of October.
You've been muted. To unmute yourself, press star six.
Q3 results, and the highlights are really excellent operational results in both segments, both in software and in devices. We also had a record-breaking operational cash flow, which is really delightful for us, seeing such a high and such a big improvement on the cash flow side. And thirdly, we had a directed share issue, and we raised roughly EUR 4.5 million. So when we are moving to our numbers, we see that our revenue, it grew 14%. Our gross profit, when we are excluding the grants for the waiver, increased significantly.
If we are looking into the adjusted EBITDA margin, we had a 6.2%, comparing to 3.9% last year. Also, at adjusted EBITDA, it grew from EUR 145 to EUR 263. 544 to positive 767. So we are really delighted on the numbers we delivered in the Q3. And then when we are looking nine months results, we are currently growing 7.4%. Gross profit is up 6.8%.
Here also, when we are looking the numbers, we need to bear in mind that when we are comparing the numbers from last year, that we are excluding that we are really comparing apples to apples, so that we are excluding the waiver we got last year. And that waiver came in in Q3 last year. Then, moving to the segment highlights, devices first, revenue grew 7.5%, and it was driven by global distributor sales and the China sales channel sales. Gross margins, adjusted for grants and other operating income, it was 61.9% comparing to 44.2% last year. And adjusted EBITDA was -50 comparing to 296 last year.
As I mentioned before, comparison period affected by a loan waiver in the amount of EUR 846,000, treated as other operating income. And this one was recorded into the devices business. Then moving into the software segment, we had a fantastic, actually, quarter. So, the revenue grew 19.4, comparing to last year. Gross profit was up 25%, and the gross margins were also improved. And we generated EBITDA of 63,000, and EBITDA margin grew 2.6 percentage points. And this increase was driven by very strong performance in our healthcare solutions business.
All right, moving to cash flow, and I would like to say a couple of words here. First, the operational slide. The net cash from operating activities, that was EUR 0.8 million positive. The results were supported by our cash management focus and also large deals that we managed to get through this quarter. However, I want to also highlight that, after net cash use in investing activities, it would also be in the black in terms of cash flow. So we are very happy about the cash flow during the quarter. The second item I want to highlight, that Juho also touched briefly on, was that, we raised EUR 3.4 million from the market in September.
This strengthens our balance sheet, and that puts us in a better position for the months and years to come.
Okay, thanks, Sakari. Then, if we are moving into our new business model, so I think those ones who have been before in these calls has seen this before. But this is in a nutshell how we will build our US business moving forward. So we are having this newly established reimbursement CPT code, which is required for the reimbursement in the US market. We are targeting 300 target customers slash clinics, and in next 5-10 years, there will be at least 50,000-100,000 AI-connected fundus cameras in the US market. And this is mainly driven by the fact that currently fundus cameras has been, majority of them are used by ophthalmologists.
So when this AI-connected fundus cameras will conquer the market, it can be carried out, or the measurement can be carried out by any healthcare professional, so which will then be a completely blue ocean for the fundus camera measurements. We are offering complete solution, camera plus portal plus artificial intelligence. And it will move us away from the capital sales model, where we have been currently. So we will have a like a recurring revenue model, where we are getting money all the time, and we are not dependent on individual larger deals. And there will be a big benefits for customers.
So with our recurring revenue model, there are no initial investments, only monthly rental fee, so the purchasing decisions are easy to be made. And also, there is a clinical results, which are excellent. And what is important here is, when talking about the U.S. market, it's predominantly driven by private market, and it is important that also clinicians are making money on this. So, they will get reimbursed by $55, by the diabetic patient. There would be also profits for clinics, with their low screening volume. So they don't need to... How we have calculated the model, you don't need to have that many patients, to for the clinics to break even on that one.
And the more you do, the more beneficial it is for the clinics and more money they make. And then also, it improves clinics' HEDIS score, which is Medicare star rating. So this one is in a nutshell where we are aiming at once we will have FDA clearance. So we are really waiting, you know, to start to implement this one. And in summary, we had an excellent operational results in both segments in the Q3. We had a record-breaking operational cash flow, as well as we are very well positioned for the next phase of growth.
Thank you, Juho. We would be now very happy to take any questions you might have, and please remember that you can unmute yourself by pressing star six.
Hello, gentlemen-
Hi
This is,
Sorry. You can go first.
Oh, sorry. Just go ahead. All right.
Okay.
Hi, thank you. Hi, it's Pia calling from Carnegie. Thanks for taking my questions, and congratulations on nice results. I've got a few questions. If I start by digging into software. So you talk about these healthcare solutions which drove sales. How are you performing with regards to recurring sales in Q3? Did recurring sales also grow?
It's basically majority of it, it's recurring sales what we are having in software. Plus, also what we are doing, we are having also the products which are supporting our camera sales. So, both segments grew in Q3.
There was no, let's say, one-off deliveries in the software segment this quarter. So, just like you all said, most of the growth there is recurring.
All right. Thank you. That clarifies. Then, regarding your device sales, can you share some information about the deliveries now to China? China has been very quiet for quite some time. So what is happening now in China? And, is this a new client to you or someone you are familiar with from before?
It's basically a new client, and it's a large healthcare company where we delivered the first batch of products. There will be... We don't know yet when and how much, but there will be an additional purchase to China.
All right. And can you somehow quantify, the deliveries, made now in, the third quarter to get, an understanding of, on the size, of the deal to China?
Well, let's say that it's in hundreds of thousands.
Okay, thanks. Then, the Spanish order, I think you announced or, yes, I know you, you announced that already earlier, but that delivery is for the second half, I believe. So how much of the deliveries were now, you know, specifically in the third quarter, and how much will be still left for the fourth quarter? I'm trying here to get an understanding of your guidance. You, despite the very strong results, you still stuck to your guidance. So, what should we expect for the fourth quarter?
So, large majority of the delivery was done in Q3. This will also open additional opportunities for us, so it's not that the case is closed, but there will be a that business will continue in the future as well. So there will be after-sales business after the deliveries of Q3. But I would say that large majority went in Q3.
All right. Thank you. That's clear. Then, the receivables issues or the receivable issue from China. So, there was a late payment or no payment at all. Has the client now paid the amount after the third quarter, or is it still, the receivable is still outstanding?
Yeah, well, how it works at the moment is that the clients, they have been paying a sum each month. However, now they missed one payment during the quarter. It was actually the last payment of the quarter. The situation, we wanted to be cautious that there is a chance that there might be additional delays or something similar. So we wanted to be cautious and increase the credit approval that we had on in terms of the receivable.
All right. Okay, good. Then maybe my final question to you also, please share your, your first impressions, regarding Optomed. What have you found? What are the, the positives, and where do you see, room for improvement?
Thanks for the question. So, I think, you know, it's a excellent company. It's when I'm looking into this company and comparing where I have spent my career, it's really entrepreneurial. You have a lot of smart people working here, lot of talent. And I think, you know, the strategy is right. So we just now need to have the clearance from the FDA that we can really show, you know, what we can do.
Okay, and if I still can continue on this, so, with regards to the FDA approval, have is the results now being from...? Have you been able to send the additional clinical study for evaluation to the FDA, or are you still analyzing the results?
We don't comment on it. The only thing what I can say is that we are 3 months closer to the clearance than what we were in the last quarter. All right, that's all for me. Thank you.
Thank you, Pia. We are happy to take further questions as well, so star six.
Hi, this is Gustaf Meyer from Redeye. Thank you very much for the presentation, and many of my question was actually answered, but I have one question. I saw that the number of employees increased by one person compared to the last quarter, but also that the employee benefit expenses decreased with a few hundred thousand EUR. So my question is, if you could elaborate a bit more about this, what was the reason for this?
So overall, as it comes to our personnel expenses, last year, during Q3, we were paying, we had actually two additional team members in the leadership team, first of all, that have now left the company since then. So we were paying, with regards to those two persons, we were paying salaries already or back then in Q3, and that had an effect. And then also you can see that we had streamlined the organization slightly and the total amount of personnel that we have at the moment is slightly decreased. So that had a positive effect on the employee costs.
Okay. Thank you. And also, you state that the OEM sales channels continues to have a tough quarter. Could you elaborate more on that?
So could you repeat the question?
Oh, sorry. Yeah, about the OEM sales channel. I wonder if you could tell us more about the progress in that channel.
Okay. Yes. This OEM thing, it's like a double-edged sword. So, you know that our margins on the OEM channels are lower what they are when we are selling directly. Of course, you know, OEM business is important, and it continues to be important part of our business. Then also, as medical technology company, for us, it's more beneficial that we are selling with our own brand, because we need to brand the company. And when we work with OEMs, it doesn't work like that.
And the other thing is that we are now, when we have been increasing the sales, in some cases, our OEM and our own channels are competing against each other. So, that has also possibly reduced some of the OEM sales.
Okay, thank you very much. That was my last question.
Thank you, Gustaf. We still have time for more questions, so star six, if you have something to ask.
Yeah. Hello, gentlemen, this is Juha from Inderes.
Hello
Most of my questions have been asked and answered, but I just wanted to clarify the situation in China. I guess you got a large customer, but you haven't found a sale channel or partner. Did I understand this right, that you have actually managed to get this client with your own small team there?
Yeah. So in terms of China, we do know the client that we are talking about, it is known to us from the history. It's not a completely unknown party before this quarter. The client itself was found by our Chinese organization, so yes, they did manage to find the sales over there.
All right. You don't have any additional news about the partner that you have been looking for in China?
No, no additional news. Perhaps it's fair to say that in China, we are assessing the situation every quarter, that there might be a partner like we had before. However, it's also possible that we might try the more traditional distributor sales. We are looking at all options in terms of China.
All right. Understood. Final question. Is this a private company, meaning that it's a private healthcare company, not a public healthcare, not in the public healthcare system, let's say it like that?
That's right.
All right. Thank you very much.
Thank you, we are happy to take more questions as still, so star six, if you have anything to ask from us.
Hi, it's Pia here again. Can you hear me?
Sure. Hi, Pia.
Yeah. Great, thanks. I have a couple of additional questions. So with regards to sales to China, what kind of precautions or measures have you made now to ensure that the problems with the receivables won't be repeated?
Right. So first of all, let's say, the very large majority of the receivable in terms of this new customer, it's prepayment. So we receive the most of the money first. So we do not give any long payment terms here. And that's kind of the key issue that how we prevent from ending up into the situation like we have in terms of the previous Chinese customer and the overdue receivables.
Okay. So that means that the strong operational cash flow actually was now boosted by these prepayments?
That is correct.
Of course, yes.
Yeah. All right,
But we have quite a short-
Okay.
Anyway, we have quite a short, you know, lead times, and so on. So we get the cash in quite fast.
Yeah, and as it comes to kind of the overall global distributor sales, kind of the default term is actually prepayment. So we make exceptions there here and now, but for example, in case the client is big enough and the opportunity is good enough, but we did one exception a couple of years ago in China, and it turned out to be a wrong decision, so we are not doing the same mistake again in the same country.
That's clear. Thank you. Then, finally, again, to you, you said you are happy with the strategy, but with regards to the financial targets, which have been unchanged since the IPO, do you see a need to revise these?
Good question. So, if we are comparing Q4 last year, so we are having quite tough comparables, and to meet them. That's why we have not, at this stage, we have not yet revised the outlook.
Or Pia, did you refer to the long-term, long-term financial targets?
Yeah. Sorry for being unclear. So I was referring to the mid and long-term financial targets.
So we have not touched that one yet, so but, but definitely we need to revisit it.
All right. Okay, thank you. That's all for me.
Thank you, Pia. So star six for further questions. All right, I suppose that's it for this quarter. Thank you very much for good questions and we hope to see you in our investor call in Q4 with regards to Q4 results. Thank you very much, all.
Thank you very much.