Good morning everyone, and welcome to this first quarter 2024 financial results from Medistim. My name is Kari Krogstad, and together with my good colleague CFO Thomas Jakobsen, we're pleased to take you through the first quarter results. We will follow our normal agenda, starting with the highlights. For this quarter I would like to start, and pointing to the improved profitability that we are showing this quarter. As everyone will remember, we ended 2023 with a fourth quarter result on EBIT at a 16.4% EBIT rate, which was absolutely a significant deviation from Medistim's typical performance. I'm very pleased to present a much more healthy EBIT margin this quarter at 24%. When looking at the revenues, we ended at NOK 133.8 million this quarter, a 3.5% growth.
As we can see, there was a small currency effect this quarter, so currency neutral, the total sales was up 2.2%, although sales of own products is still down a little bit, 1%. As we will see later in this presentation, we will show very strong quarterly performance for the EMEA region. We will also see that Americas and Asia Pacific their growth is influenced by very strong comparables from the same quarter last year, so we will get into that topic. We can also see that the third-party products has done well this first quarter with growth at 7.8%. Also, it's good to note that the cash position is very solid at the quarter end at NOK 170.3 million. The General Assembly decided the dividend of NOK 4.50 per share, and that amounts to a total of NOK 82.4 million.
So, with that highlights introduction, I will leave the floor to Thomas.
Thank you, Kari. I will go through our P&L and our balance sheets, as I normally do, and Kari will speak more about revenue, product, and also geographic split later on, so I will not go into those details in my presentation. But I'll go straight to the expenses in the P&L, and we do experience a reduction in cost of goods sold. There are two things to mention here. On the negative side, when it comes to cost of goods sold and gross margin, is that we have an increase in sales of third-party products. That typically increases cost of goods sold when you have a lower margin on those products. On the other hand, on the positive side, we have a very strong quarter in our new direct operation in Canada, but we also have a solid quarter for our well-established German entity and also in Spain.
Not to forget, we also have an improved margin with our new Chinese setup. So these things weigh up for the increased sales of third-party products. So all in all, our gross margin improves 1.3% from 80% to 81.3% in the first quarter. Salary and social expenses are up, and in the first quarter last year, expenses, very little expenses if any, were incurred related to our direct initiatives in Sweden, in China, and in Canada. And we have those expenses in the first quarter this year, obviously. Same is the case for our second shift in production. We introduced that in the second quarter last year, started to set it up in April, so those costs were not incurred in the first quarter last year also.
These two are the main reasons why salary and social expenses have increased compared to same period last year. Other operating expenses are at the same level as last year, and our EBITDA ends at NOK 38.4 million, or an EBITDA percentage of 28.7%. Depreciation increases. This is additional lease obligations to our increased facilities in Horten for our operations and R&D activities, but also premises in China for our new Chinese setup. Operating profit ends at NOK 32.1 million, an EBIT margin of 24%, in line with our last year EBIT margin of 25%, and as Kari mentioned, a much more healthy EBIT margin the first quarter this year compared to fourth quarter last year, which was not what we would call normal standards for Medistim. Net finance is negative.
This is realized, unrealized, currency-related, and pre-tax profit for the quarter ends at NOK 37.7 million, and profit after tax ends at NOK 24.4 million compared to last year's NOK 25.7 million. Going through the balance sheet, intangible and fixed assets in total are unchanged, but we see that intangible assets are increasing, and this is because we are very actively working with the product development, at the moment. That means that we are capitalizing expenses related to product development in a higher pace than what we are depreciating. The opposite is the case for fixed assets, and the total ends up with the same, more or less the same amount, for the total.
Inventory levels are high, and this is related to securing critical stocks, which I've mentioned many times before, but also securing end-of-life components to ensure that we have products to sell until we have new components approved through the regulatory process. Accounts receivable are down from NOK 74 million-NOK 68 million. That means that we have a pretty effective cash collection of our outstanding amounts, and also cash position is strong. Dividend that was decided yesterday by the General Assembly will be paid on the 6th of May. Equity and liability, we have no traditional interest-bearing debt. I mean, thinking about bank loan type of, what we do have of long-term liability is related to lease obligations. Total lease obligation is NOK 17.4 million. NOK 9.1 million of this is long-term, and the remaining NOK 3.5 million are related to extended warranty or service contracts, or what we would call deferred revenue.
All in all, we have a very healthy balance sheet, more than 80% equity share, 81.4% to be exact, earnings per share slightly down, a little bit weaker profitability in the first quarter, but we also have more shares outstanding, and this is related to the share program for management. Some comments related to cash flow. All in all, profit before tax ends at NOK 30.7 million. Cash from operation is down NOK 8.45 million, and this is related to mainly two things. We have a prepayment of taxes of about NOK 13 million, and we also have increased working capital with NOK 2.4 million. Cash flow from investments is capitalizing product development activities, mainly internal activities, but also some external, and cash flow from lease obligation is self-explanatory.
So all in all, the change in cash for the period is positive with NOK 16.4 million, leaving us with cash by the end of the period of a solid NOK 170.3 million. Finally, return on invested capital, slightly reduced compared to 2023, mainly because we've increased invested capital, and the main driver for this is the increase in inventory. So with that, I leave the word further on to Kari to talk more about the business. Thank you.
Okay, so we will start with looking at how our unit sales performed this first quarter. And starting with looking at the flow and imaging systems sold in units, and we're talking about systems sold as capital sales. We're not counting in outplacement systems in the U.S.A on lease or PPP models. As we can see, we sold 13 or 15 units this quarter, 9 fewer than the comparable quarter last year. And we see that 5 of these came from Asia Pacific, 5 fewer in Asia Pacific, and this is directly related to the transition that we have been talking about for the past several quarters, since we went direct with an own sales operation in China in the second quarter of 2023. That has had an impact, with a sales push from the former distributor, in the quarters prior to this change.
So, that meant that we had many systems sold to the China and Asia Pacific distributor in the previous quarter. Also in Americas, we see that we are selling fewer flow and imaging units. This is in particular related to one deal that we made with one hospital in the U.S.A, first quarter last year, where we sold 5 imaging systems to this one customer. So, it was a deal worth NOK 10 million, and this is very untypical. Mostly we are selling one or mostly two systems at a time, so this is a very big deal and is not reproduced this quarter. So that's the main explanations for why the flow and imaging unit sales is this much lower this quarter.
When we then look at the sales of imaging probes, of course that follows when we are selling fewer systems that will also normally lead to fewer imaging probes sold. So that's the connection there. Looking at flow-only systems in units, we can also see that the capital sales of flow systems is down by quite a high number, 16 units, and here again we can see that 15 of these 16 units is a decline in the Asia Pacific, again directly related to this transition that we have been going through in our sales setup in China. So this is not going to continue. When it comes to flow probes in unit sales, this is a more positive story.
We are looking at 16% growth here, and it's remarkable to see the strong volume increase we see in the EMEA region at 48%, and also Americas growing here at 24%. Asia Pacific down 26%, this time not related to the transition in China, but actually influenced by Japan. The story here is that we introduced a price increase on our products in the first of January 2023. This led to our Japanese distributor putting or setting a big order for probes in the fourth quarter of 2022, but we were not able to deliver that order until the first quarter of 2023. So that explains why we get this effect for the Japanese probe sales this quarter. But all in all, really strong development for flow probe sales, which we are of course very happy to see. Yes.
When it comes to Americas, I think I would like to remind that we've had two very strong years after the COVID period in the Americas. First of all, we had 28% currency neutral growth in 2021, and then in 2022, we also had 22% growth. So very, very strong years after COVID. Last year, we showed a 6% currency neutral decline in Americas. And we were actually seeing that every quarter throughout last year was a decline. And also this year, first quarter of 2024, we are seeing a decline, although it is the smallest in five quarters. When we are then also counting in that, as I already mentioned, the comparable for this quarter is particularly strong due to this one-off deal, the Q1 may become the turning point into new growth for the Americas region. We also want to point to Canada.
This is a market where we went direct in the late second quarter last year, and it is fantastic to see that the new team there is delivering very strong results early in this year, NOK 5.8 million in sales, which is actually on par with the whole fiscal year 2023. So very promising. Looking a little bit more into the details here. As we can see from the table to the left here, we see that we are selling the same total number of systems when we're counting both the outplaced systems and the systems sold as capital. So 11 units this quarter, comparable to 11 units last quarter in 2023. We are also seeing that the flow procedures are growing by 10%, which is a very positive sign.
And then together with what I already mentioned, 24% growth in flow probes sales, this points to high utilization of our products. So this is a solid foundation. We also see that we are keeping winning new hospital customers, so eight new customers won this first quarter compared to six, the same quarter last year. Yeah. When it comes to Asia Pacific, I already mentioned that we've had a tough quarter, 29% down in Norwegian currency and 32% down currency neutral. So again, it was challenged by very strong comparables from last year. I mentioned the high probe sales to Japan the same quarter last year due to the price increase, and of course the exceptionally high system sales to our distributor for China prior to us going direct in the second quarter last year.
Yeah, I already mentioned that we are happy to see that the Chinese operation and team is doing very well and delivered NOK 8.4 million in sales through this direct channel in the first quarter. So that holds good promise for the continuation of our direct operation in China. This is just to give a flavor of what's going on in China. We have a very active local team, which we can actually see in the picture here in the middle, with both marketing support, service support, and sales and clinical support. And this month, actually, they were participating in the celebration of the 40th anniversary of the largest, well, CABG hospital in the world, actually, the Anzhen Hospital in Beijing. This is a hospital that is performing more than 7,000 CABG procedures every year.
There is another hospital also in Beijing, the Fuwai Hospital, which is performing almost the same amount. These two hospitals and their surgeons were participating in a big seminar, which had really great attendance. It was also live-streamed. At this seminar, Medistim was also present, and Professor David Taggart was there and gave several lectures on various aspects of the use of Medistim's technology. This was a fantastic event, of course, for Anzhen, but also for Medistim. It's very important for us now to build very close relationships to these leading hospitals, not only in China, but in the world. We already have a high number of our devices in these hospitals, but we would like to continue with that good collaboration, and this is a great foundation also for the further growth in China. Yes.
I think we are wrapping up the regional journey here with EMEA, where we saw a 36.8% revenue increase in Norwegian currency this quarter. It's actually a 32% currency neutral increase, a very, very strong result from EMEA this quarter. In particular, we see strong development in our direct markets, such as Spain and Germany, which was actually growing by 50% currency neutral. So again, very inspiring for us now that we are establishing with our direct teams. We mentioned China and Canada as also doing very well in this first quarter, a great inspiration and reminder that going direct has been a very successful story for Medistim. In addition, we also see that in particular the European distributors have done well this first quarter with the 6.7% currency neutral growth.
I would also like to mention, since we went direct in Sweden last year, partly to expand our distribution business and establish the Scandinavian distributor franchise, we have added Peters Surgical to the Swedish portfolio. We already represent Peters Surgical in Norway, and now with also adding Sweden as a distributor business for us, we got the rights for Peters Surgical there as well. So they are delivering clips and clamps and sutures and equipment used in the cardiovascular surgical space. So just wrapping up revenue performance by region, we have seen that the U.S.A is still a bit down, Canada doing very well, South America haven't mentioned not so big numbers, but also doing well this first quarter, China still suffering from the transition, Japan suffering from the price change, and the rest of Asia Pacific growing 31%.
Europe doing extremely well, the distributors in the Middle East and Africa a bit down for the quarter. So that wraps up the regional analysis. If we take a look at the split between products sold for cardiac and vascular surgery, we can note that the vascular surgical procedure is growing by almost 13%. So we are continuing to see good uptake in the vascular surgical space. As mentioned several times, this is a strategic objective for Medistim to establish a solid position within vascular surgery, and in particular in those countries where we already have very high market penetration in the cardiac surgical space. When it comes to the split between flow sales of flow products and imaging sales, I also would like to note that we have had very strong imaging growth. In 2021, that was growing by 29%, and in 2022 by 44%.
Then in the last year, we saw a softness with a -2% decline. So we're starting also this year with a negative development for the imaging portfolio, but after a very strong growth period. And this is a consequence of what I've said earlier in this presentation, that the number of imaging units sold was lower this quarter. We also see that capital sales of this product is lower in the U.S.A, and the particularly strong comparables, both in Asia Pacific and in the U.S., is really explaining the large decline we see in imaging products revenues for this quarter compared to the revenue last year.
So we're not expecting this to continue, and I would like to stress that we are seeing continued very strong interest from potential customers for this technology that is not changing at all, and there are no other changes in the competitive situation either. Yeah, this is a slide which is highlighting the split between capital sales and recurring revenues. So in Medistim, we are counting sales of probes, sales of PPP, smart cards, and also the lease revenues as recurring. And we have kept the recurring revenues at a high percentage over the years, and the last 12 months end up at 71% recurring revenue. So this continues to be quite stable. Then I thought I would just go through and remind everybody about our growth strategy.
In the CABG market, in the cardiac market, and in those markets where we have a very high penetration with our technology, the primary goal for us and strategy is to convert these high-penetrated flow-only markets to flow and imaging. And then introducing what we are calling the new standard of care, which is the use of transit time flow measurement and high-frequency ultrasound imaging in combination. And our ways to achieve this are to work with the early adopters, ensure very strong key opinion leader support. We are leading the REQUEST Study. We are also easing this conversion with our MiraQ, which is upgradable from a flow-only to a flow and imaging device. So a very clear strategy on how to handle these high-penetrated CABG markets.
When it's coming to growing the adoption in under-penetrated markets, we are doing that through clinical marketing, meaning that we are working with the KOLs and other hospitals in order to provide more data and engage in various projects to further shed light on the value of using our equipment. Of course, always with the goal of entering into new guidelines globally or to improve and sustain the guideline endorsements that we are already enjoying. Education is also very, very critical, and that also is depending on very close collaborations and relationships to the clinicians out there in the world. Product innovation, everything we do there is really pointed towards ease of use to make our products and technologies as easy to use as possible and lowering the barrier both to start but also to get experts into the use of the technologies.
When it comes to emerging high-growth markets, we have pointed out India as a key target for us due to the size of the opportunity in India. We have an entry-level solution to offer in a price-sensitive market like India, but I would also like to say that it's a strategy for us to always provide flexible pricing and business models. So the price-per-procedure model, which is not developed for India or offered in India, but rather in the U.S.A. and also now in the U.K., is examples of our flexibility when it comes to providing solutions that our customer can afford. When it comes to the vascular surgical space, of course, again, the primary countries that we target with our vascular products are the countries where we already have a strong position in the cardiac space.
So, here we want to take advantage of the close customer relationship we had with the cardiac customers and expand into the vascular departments. We're doing this with our dedicated system for MiraQ Vascular and also a unique probe family, developed for vascular use. Otherwise, it's really applying the same strategy that has shown very successfully in the cardiac space by building very close relationships with the vascular societies and also key opinion leaders, and there will be more clinical projects and collaborations also to engage in the future. Last but not least, we are growing, also by expanding the direct market coverage, which we have seen some good examples of lately. With this, we are wrapping up our presentation here.
Just reminding on our solid track record when it comes to both sales and EBIT and and also our policy of paying out dividend to our shareholders. Then I think it's time for questions, if we have received any.
Yeah, we have a few from the... Turn your microphone a bit for us. What? Okay, yeah. Direct direct market sales in Europe are very strong during the period, and it's good to see strong sales from new markets like China and Canada. Can you share your view on the difference between using a distributor and having your own, local salesforce in the market?
Yes, so, I mean, traditionally it has been a Medistim strategy to enter new markets through distributors. We are operating in a niche market. We have, basically, I mean, one product, although it comes in different shapes and forms.
So in order to manage the cost side of the business, it's a wise strategy to start by using distributors. But typically, when distributors have been able to grow the business and establish a very solid market penetration, sometimes we also see that maybe the efforts to do the more challenging parts of the work of converting to imaging and also to enter into the vascular space have shown more challenging for the distributors. And if the business size is right and also the growth potential is still there, then that is a great timing for us to go direct. And that's what's happened in the U.S.A after being represented by Medtronic for a number of years. We've seen that, of course, earlier in Germany and later in Spain and now very recently in Canada and China and also Sweden.
Thank you. The next one is on inventory. Inventory levels are high and have been rising for some time. Are these levels the new normal or do you expect working capital to decrease going forward?
This is a challenging thing. We came out of a supply chain situation, where we could not have firm orders or firm deliveries on orders. And we were very much dependent upon putting in firm orders in order to have components coming in. So, in that sense, we have had deliveries which have been at a higher level than we would normally do in circumstances where the supply chain situation is normal. And we have seen this normalizing now, and we have taken action to reduce our orders on critical components and on other components as well, to make sure that we are leveling out our inventory level.
And by that, I hope that we are over the top on the inventory level as we speak. And we will follow this very closely going forward to make sure that we keep inventory level at the level I think where we are now, that we are not increasing it further and maybe even reducing it a little.
Thank you. Medistim's equity ratio is, as usual, very high at above 80%. Organic growth is obviously the strategy. Have you considered using these funds for structural growth rather than paying out dividend every year?
Should I take that, sorry? You can, yeah. Well, we also always had a tradition in Medistim to build a company, as we say in Norwegian, stone by stone, and grown organically.
We have not actively gone out to look at M&A, but we have been approached by several companies, and in that sense, we have been opportunistic. We have had several meetings with the different opportunities over the years. But having said that, we have been very picky about what we are going to enter into. And the reason for that is that we want to make sure that we are following up the opportunity that we have already and not being distracted by a different product portfolio or a different product or different call points or and all those things.
We have seen up until now that we have a great potential both within cardiac, within vascular, within transplant, and we don't want to disrupt that opportunity by doing an M&A which would then take a lot of attention from Medistim management in other directions. So, I'm not saying that we are not going to investigate this further in the future, but you know we will still be very picky on this point.
And the last one is on R&D. The R&D spend has also been rising for some time. Maybe will this continue?
Yeah, so, I think it's fair to say that, if you go a few years back, our R&D spending was probably at around 4%-5% of sales, which is on the low side compared to other companies in the medtech industry.
And we have also experienced over the years that R&D resources have been more and more, well, occupied with more day-to-day support issues. I mean, it can be regulatory related or life of components changes and work like that. So we've seen a need to make sure that we actually have sufficient resources also for new product development and innovation. So, for this quarter, I think our R&D spending as a percentage of sales is probably around 7%. So over the time, we have increased gradually. Well, the team of engineers that are working for us also introduced a new way of working in R&D. We're also introducing our innovation team that is solely working with customers externally and piloting and testing new product concepts. So yes, it is higher than it used to be, and it's absolutely a deliberate strategy.
Thank you.
That was all the questions.
Okay, with that, I think we say thank you for this presentation, and we will meet again for the second quarter presentation. Thank you very much.
Take care.