A very good morning from Medistim's headquarters in Oslo. A nd we are welcoming everyone on this Friday, the 16th of August, to the second quarter and first half 2024 financial results. My name is Kari Krogstad, and together with CFO Thomas Jakobsen, we are going to take you through the highlights of the quarter and the first half. Then we'll go through the financial statements, provide more comments into the various business segments. A nd then wrap up with reiterating our strategy. Medistim's goal and ambition has been, and still is to deliver profitable growth consistently over time, and our track record shows that we have succeeded to deliver on this promise over the years with sales growth around 10%.
We aim to deliver growth every single quarter, but as we saw in the fourth quarter last year, this is not always possible. So in the first quarter, we came back with a growth of 3.5%, and this second quarter, we continued the improvement. So for the second quarter, we're delivering a revenue of almost NOK 145 million . So this is the best quarterly sales results we have delivered so far, and we are comparing to the third-best sales result also in our history. So a growth of 5.5% is a positive development. If we look at the currency contribution here, we see that it's slight this quarter. And when we are adjusting for this, we see that the total sales is up 4.1%.
Looking at our own product sales. So this is up a modest 1.7% this quarter, but then we should keep in mind that this is the first actually positive development since the second quarter last year. So we've had some decline for this, our own products, constant currency neutral, through the past three quarters. So this is a positive signal. And we're seeing that it's coming from Americas, which is picking up a bit this quarter, growing 6%, EMEA up 5%, and we're seeing that Asia-Pacific is continuing to go through a transition from a distributor to direct operations and is still down this quarter 15%.
When our own products are showing moderate growth, it's good to have the third-party product portfolio, and they have shown very good performance both in the first quarter and now also in the second quarter, growing 17.7%. We see here that the EBIT is slightly down from last year, but I think the most important thing to notice is that we're seeing that our EBIT margin, which was very disappointing in the fourth quarter, with 16.4%, is normalizing. So we delivered 24% in the first quarter, and now we are close to what we would normally see, 28.5% in this second quarter. Worth mentioning also as a highlight from the second quarter was a dividend payout of NOK 4.50 , a total of NOK 82.4 million.
Then, if we look at the first half in total, we see that, we are delivering NOK 278.7 million in sales, growth of 4.5%, moderate or slight currency help here, 1.3%, and adjusting for this, the total sales is up 3.2%. Looking at, again, our own product sales, in total, up 1.5%, and we see that Americas is contributing slightly with 1.4% growth. EMEA is really the growth driver here with 17.3%, and Asia-Pacific, as we know, going through transition and is still down over the same period last year. As I started to say, third-party products are delivering very well all through the first half.
In the first half, we're also seeing that the operating profit is slightly down, but again, we are normalizing. So in the first half, we see an EBIT margin of 26.3% compared to the 28.4% in the last year's period. And of course, the reason why we are seeing a bit weaker operating result in this period is that we are running now at an operating expense level, at a high level, due to the direct sales organization establishments in China, Canada, and Sweden, which happened in the second half of last year. Also, we see an effect of the double shift that we introduced in our probe production. So that's the introduction for the second quarter, and with that, I leave the next phase to Thomas.
Thank you, Kari. I will take us through the numbers as usual. Kari will go through in more detail the sales revenue, per product, and geography later on. I will leave that to her, go straight into the cost and expense set up in the P&L. We do see that cost of goods sold have been reduced in this period, despite sales record. There are two major explanations here. One, on the negative side, when it comes to cost of goods sold, is that we sold more third-party products, and that gives us a higher cost of goods sold, lower gross margin. On the positive side, we see good contribution from our new direct operations in Sweden, Canada, and in China.
And all in all, net, this gives us a positive contribution of a gross margin that's 2% better compared to same period last year. Salary and social expenses increases from NOK 34.2 to NOK 39.8. Kari was touching upon why we do have direct operations in two new countries. So that obviously also includes increased salary expenses, and also the double shift in production, which was in its initial phase in the second quarter last year. We started up the and the planning and implementation in the second quarter. In this quarter, we have a full-fledged double shift in operation, and therefore, we have higher expenses related to that.
Other operating expenses, again, with direct, more direct operations, increases expenses, but we also had higher expenses related to consultancy in this quarter compared to last year's quarter. All in all, profit before depreciation ends actually then at the same level as last year, NOK 47.7 million. Depreciation is slightly up. We do have higher lease obligations with new facilities in China and also in Horten. But we're also depreciating on previous infrastructure investments in this year, which was done in 2023. So operating profit, EBIT, EBIT ends NOK 1 million down compared to last year and ends at NOK 41.3 million. Net finance, however, is positive, NOK 3.4 million versus NOK 1.2 million negative last year.
That gives us profit before tax, which is NOK 3.6 million above last year and ends at NOK 44.6 million or up 8%, around 8%. Net profit ends at NOK 34.7 million, up from last year's NOK 32.9 million. All in all, we look at the first half. The explanation on the cost and expenses is the same as for the quarter, only larger numbers. I don't go through that in detail again. What we do see, though, is that we have an improved EBIT margin. Having in mind 16% EBIT margin in the fourth quarter last year, improved to 24% in the first quarter and 28.5% in this second quarter.
Yes, first half last year was 24. Sorry, 28.4%. But the fiscal year, 2023, was 25%, so we are 1.3% better than the fiscal year 2023. Profit for the first half ends at the same level as last year, NOK 75.3 million, and profit after tax is, slightly above last year, ends at NOK 59.1 million versus NOK 58.6 million last year. Balance sheet. Intangible assets are increasing, and this is related to our R&D activities, product development. Fixed assets is declining. We have had very little investments in infrastructure in 2024, so, we've been depreciating on previous investments, so far this year. Inventory increases to NOK 164.4 million.
I've talked about before securing end-of-life components and critical components, but we also have an effect of orders that was placed when we had supply chain issues, where we also placed orders that would, you know, normally be higher than what we normally would do because there were uncertainty related to deliveries. So we want to make sure that we got the components that we need. And we have seen over the past year that those orders have actually been delivered 100%.
Having said that, we have now adjusted our future orders, and I also have to mention that the lead time on some of these components are one year and all the way up to one and a half and maybe two years in some instances. So we've seen now the last deliveries on those orders. So we are trying to adjust this going forward. Customer receivables is down from NOK 103.4 million same period last year, to NOK 66.5 million. I would give credit to our accounting teams throughout the organization for doing a great job in cash collection, and especially our U.S. team, Spanish team, and also our Norwegian team has done an excellent job here.
Cash is solid, NOK 107 million after a dividend payment of NOK 82.4 million. Solid balance sheet, otherwise, equity more than 80%. Long-term debt is related to lease obligations and warranty revenue, adding up to NOK 11.9 million. So in other words, no interest-bearing debt in the traditional way by loan from banks. Some key figures. Earnings per share is actually up this quarter from NOK 1.8 last year to NOK 1.9 this quarter. If you look at the first half, we are at the same level as last year, NOK 3.2 per share. Cash flow. Cash from operation is down compared to operating profit for the period.
There are two major things to mention there. One is prepayment of taxes in the first and second quarter, and the other thing is increase in working capital driven by inventory, as we've just discussed when we looked at the balance sheet. Cash flow from investments is mainly internal development of products. Cash from financing is related to dividend, NOK 182.4 million, and also the payment of the lease contracts is the remaining amount that ends in total NOK 86.6 million. So the change in cash for the period is negative by almost NOK 47 million, but still a solid cash position by the end of the period that ends at NOK 107 million.
And that's the financial review, and by that, I give the word further on to Kari for a business segment update. Thank you.
Okay, so, let's go and look at the volume sales in the different product categories, and starting with the very important flow and imaging combined systems, and look at the sales in units here. So we can see that we are selling 21 systems this quarter, compared to 19 systems in the same quarter last year. And, so the two, let's say, more units sold comes from Americas, and they were actually sold in Latin America and in Canada. So rather stable, you could say. When it comes to the imaging probes and units, it looks very dramatic as a decline here.
Of course, the sales of imaging probes tend to follow in the same pattern as the system sales, but this quarter we see a big drop, and it's all coming from Asia-Pacific and is due to that we're comparing to the second quarter last year, where we delivered the last order to the former Chinese distributor. Also worth mentioning, Asia-Pacific is currently suffering in the first half of very low sales to our distributor in Japan, which is reflecting quarterly variation in purchasing pattern, and we have no information about any underlying challenges in the market as such. Moving on to looking at our flow-only systems in units, there is sales there of 30 units, compared to the 36 units in the same quarter last year.
Again, it's due to Asia-Pacific being down by eight flow systems, again, affected by this transition that we are going through, which is, of course, a phase, and, hopefully for already the next quarter, we will see a more positive development in Asia-Pacific region. Flow probes in units pretty stable. Well, a 5% decline in the quarter, but we see that Americas is up 11% in unit sales here, which is, of course, a good sign of utilization. EMEA is slightly down this quarter, but as we know, have delivered very strongly in the first quarter, and the year to date is also doing well. Asia-Pacific, again, down due to the same explanation of the transition that we're going through, and lower sales than normal to our distributor in Japan.
If we then take a look at region by region, we see here Americas contributing with more than almost NOK 55 million in sales for the quarter and more than NOK 100 million in the first half. So Americas is definitely the biggest contributor to Medistim's sales and have also been a growth engine for us for years. Currency neutral, the revenue is up 6% for the quarter and 1.4% in the first half. Looking back a little bit on Americas and then U.S.A. in particular, we know that the sales was down a little bit in the COVID year, but had a very, very strong recovery after COVID, with 28% currency neutral growth in 2021, and 22% growth in 2022.
Then in 2023, we saw a decline of 6%, which could be also related to the very high sales in the previous years. But we do believe that the macroeconomic situation inclined our customers to be more prudent and careful in investing in completely new technology for them. So we do see that the total number of systems sold as capital, which has really been explaining sort of the downward trend lately in Americas, is at the same level now as the last year, both for the quarter and for first half. However, more units have been sold in Canada and Latin America, which is sold then at a lower price and margin compared to the United States. So this is impacting on the total revenues from the region.
And we also should keep in mind that the U.S.A. was boosted by a one-off deal of five flow and imaging systems in the first quarter of 2023 worth around NOK 10 million. So it's a tough comparable. But it's, in total, for the region, a slight lightening, I would say. It's going in the right direction, and it's particularly encouraging also to see the good development continues in Canada, our new direct market. A s well as in Latin America, which is starting to deliver a little bit more meaningful revenue due to more attention from our U.S. sales team. Yeah, here we are showing some more data from the Americas region.
We see the total number of units sold of Americas sold as capital is at the same level as the same quarter last year, just one less outplaced on the lease model. We also see that the total number of procedures sold; it's flat with Q2 last year. We see that the flow procedures is slightly down, while the imaging procedure is up 6.4%. And I just want to make sure that everybody understands that when we are saying, well, we are counting here the numbers sold and taking that as an estimate for utilization, which I think is fairly accurate in the longer perspective.
And as we see, the number of procedures growing year by year here, it is clearly showing that we have been able to grow the utilization in the United States. But this has been flattening out a little bit in the later quarters. We have gained two new customers in the second quarter and 11 new customers in the first half. Moving on to Asia-Pacific, delivering NOK 17.7 million in sales in the second quarter, NOK 34.6 million for the first half, and we see that currency neutral, the revenue is down 15.5% for the quarter and 23.3% in the first half year. So, I have mentioned the tough comparable due to the transition.
So China is a big contributor to this result, which is temporarily, and Japan is also lower than normal, which is actually quite promising for the second half of the year from Japan. We should also appreciate that sales through our new direct sales or operation in China is also decent this second quarter, contributing with 77.3%, sorry, 7.3 million NOK, and then NOK 15.7 million in the first half. So this is showing that we have an operating team which are very busy entertaining customers and working out with the local internal Chinese distributors as well. And everything is working as it should do in the early stage of this direct operation.
In EMEA, we have delivered NOK 43.7 million in sales in the second quarter, NOK 83.5 million in the first half. Currency neutral, revenue is up 5% for the quarter and 17.3% in the first half year. EMEA has really been the growth driver and the best performing region so far this year. We are particularly happy to see that it's the direct markets, in particular Spain and Germany, and our new direct market, Sweden, which has contributed very positively. This is a reminder of why we have it as a strategic objective for us to go direct in new markets over time. It's going to pay off both in growth and in profitability.
So we need to keep that in mind when we are patiently waiting for that effect to happen also in Asia-Pacific. We have seen that the contribution from our third-party product portfolio has been quite substantial, both in the quarter and in the first half. So, yeah, NOK 46.8 million in the first half, with good growth, 17.7% in the quarter and almost 13% in the first half. We are very happy to see this. We have a highly diversified product portfolio here, with Mentor, Icare and A.M.I., as the biggest contributors. And you will remember that by going direct in Sweden, we are also establishing this Scandinavian, third-party distribution franchise, and we're seeing that we are able to win new agencies for more than one country.
This is contributing to the positive development that we are seeing in Scandinavia at the moment. The latest agency, Peters Surgical, we signed with in the first quarter, and this is a very promising new agency for the future. This is just summarizing what we've just been going through. All the details is to be found in this table. Looking at the split of our sales to our own products in cardiac and the vascular space. As you know, to establish a position in vascular surgery is a strategic imperative for Medistim, as we have a very, very solid position in coronary surgery. We do want to make sure that our technology is also gaining traction in the vascular procedures.
So it's important for us to see that we are continuing to see good growth in the vascular portfolio. Almost 27% growth in this quarter and 20% so far this year. When it comes to splitting flow and imaging, again, it's a strategic goal for Medistim to develop or to convert flow-only users to becoming flow and imaging users. Both because this is the best solution for the patients and this, of course, also very important for the Medistim business, which is actually doubling its potential by converting from flow to flow and imaging systems. So we have seen very strong growth in imaging over the last years. In 2021, we had 29% growth.
In 2022, we had actually 44% growth, and then in 2023, we had a slight 2% decline. This year, 2024, we also started with a negative development. We related this downward tendency to a high reluctance to invest in new technologies in the more challenged macroeconomic environment, and we've seen a particular impact then on our U.S. revenues. But we believe also this is temporary. We are not seeing anything but keen interest from new prospects in the imaging technology. This quarter, we're seeing a slight positive upturn of 3.8% growth. Still we are down in the first half, but we do believe that the imaging sales and growth will return.
Yes, and here we see the split between recurring and capital sales. So recurring revenues is sales of probes and pay-per-procedure smart cards, and also lease revenues. And we can see that this is at 71.4% in the last 12-month period, so still very high and reassuring. So, with that go through of the status of the business right now, I just want to make sure that everybody is up to date on the growth strategy for the company. I already alluded to a couple of points here.
But of course, since we are really highly penetrated in a lot of markets, such as Japan, even China, the Nordic region, Central Europe, and so on, with very, very high penetration and market share, it is imperative for us to convert this huge install base on flow systems to flow and imaging systems. And how are we doing that? Well, we are getting a lot of support from the early adopters and key opinion leaders, who are really helping us to spread the message and advocate for the clinical advantage of using both technologies in combination.
Then we also continue to see very good support based on the REQUEST study that we performed a few years ago, which is very clinical clinical evidence that is very important to depict the clinical value of the combination. And then, of course, we are also eager to ease the conversion through the fact that the MiraQ is upgradable. So every time we sell a flow-only system, we are always selling the promise of the ability for the customer to later upgrade their system to a full-fledged flow and imaging system. So that's how we are working towards that strategic goal.
Then we have some markets, which is not as penetrated, and we are still considering U.S.A. as in being in that category, although we are now at around 35% penetration, so it's definitely happening also in the U.S.A., U.S.A.. Here, it's very much about clinical marketing, clinical collaborative projects. It's about utilizing the guidelines that we have, and we are also very much focusing and are going to focus even more strongly on education initiatives, both strategically with teaching institutions, but also through more e-learning programs and attention from both our medical marketing and sales departments. So that's going to be intensified going forward.
Product innovation for ease of use. I guess it goes without saying, but we are developing the next generation, both of our software and for the, a little bit later, also of the whole device. The leading star here is always to find new features and, and the services that will make our technology and products more attractive for new users. We will be looking forward to seeing the effect of our innovation work soon in the market. We are also highlighting that we tend to be and strive to be very flexible in our pricing and also in our business models. We want to find solutions for the individual customer's needs. We are offering an entry-level solution in price-sensitive markets such as India.
We also have the price per procedure model in the U.S. and in the U.K., and of course, in combination with capital sales and also lease opportunities and hybrid models of these. I mentioned the importance of building a position in vascular surgery. Here we have developed a dedicated MiraQ Vascular system and dedicated probes. These products are also in development for adding new features that will make them even more beneficial for our users to apply in their daily practice. Of course, we are building position with societies and KOLs, and we have made really progress in this during the last several years, I would say. Expand direct market coverage, that is a strategic goal.
We want to get closer to the customer, but we also want to secure that more of the revenues and also the profit is coming back to the manufacturer, Medistim. So, with that review of the strategy, I guess we will be opening up for questions.
Yeah, and we have a few questions. The first one is on Japan. Japan has historically been a strong market for Medistim, but the trend from Q1 continues in Q2, and sales are around half of the level from 2023. Can you give some insight into why?
Well, it's a correct observation that the Japanese market has been a very strong contributor to the Asia-Pacific sales revenues, and also has been very consistent in their purchasing pattern with a certain number of system that has been really stable over several years. So, yeah, so it's unusual to see that we haven't received the orders in the first—well, for systems in the first half. But we are convinced that this is an inventory issue. They have what they need for the time being to serve their markets, and customers, and that also, as I think I mentioned, that this is also providing some optimism for larger orders from Japan in the second half.
Thank you. The next one is on the EBIT margin. The EBIT margin is getting closer to 30%, and that's good to see, especially considering the strong growth from the third-party business that typically has a lower margin. What is driving the margin growth?
Well, you're touching upon some of it. We had good growth on the third-party products, but third-party products has lower margins, so that actually gives a negative impact on the EBIT margin as such, if you look at the total. But having said that, the largest contributor so far this year has been our direct initiatives in the three countries that we mentioned earlier with... in Sweden, Canada, and in China.
Having this transition period that we've had in China, I would also expect even further improvements as a consequence when we see that all of the, shall we say, orders that was fulfilled through our former distributor and those inventories to the sub-distributors are being used up, then we will see an uptake in the Chinese market as such, and I will expect a growth also in the APAC region. So I think we should be in very good position to get close to our 30% EBIT margin that we've shown before.
Thank you. Inventory levels are high, and it has been rising for some time. Do you expect working capital to decrease going forward?
Well, we've done an excellent job on accounts receivable, adding to at least modify the increase in the working capital. I elaborated a bit on the inventory in my presentation. In addition to securing end-of-life components and the critical components, we have been receiving orders that we had to place when there were supply chain issues. When there were supply chain issues, we had no guarantee for deliveries, and we were actually placing orders that were larger than the actual need was, in order to make sure that we received the components, because we had no guarantee how much of that order we would actually receive.
Having said that, we've now seen deliveries of most of those orders from that time when there was supply chain issues. Going forward now, we have adjusted our future orders when it coming to components. So in that respect, I think we will see a stabilization in the working capital, and might even also see a decrease in the inventory level as a consequence, because now there's normal supply chain deliveries, and then we can sort of have more for lean orders, to put it that way. So we can also be able to reduce some of our inventory levels.
Thank you. And then it's one on the U.S., from the web here. "U.S. procedures have been flat for the last eight quarters now, despite that the installed base keep increasing. Do you attribute this to the significant stocking by U.S. customers during the post-pandemic period, where number of procedures grew significantly, or is it something else?
Yeah. It's correct that it's flattening out. And of course, it's both related to, you know, capital sales. When we see lower capital sales, we also tend to see lower probe sales, significantly lower probe sales, with also an effect on the procedures. And we've also seen, you know, as we saw now for the second quarter, fewer new customers been added to our customer list, which we again see as a consequence of a more reluctant sort of strategy from purchasing at the hospitals to invest in technology that they previously haven't used.
Having said that, we're also seeing that we have a very, very solid pipeline of projects that we are working on also for, which we believe will end up in capital capital deals and, and sales. So, you know, we're, we're still not quite out of this situation, but, but we're seeing some, some signs of relief, and, and we do believe that that will happen.
And just to be clear, to add to that, when we have lower levels of capital sales, we have lower probe sales for a new customer. When a new customer buys a system, they will typically buy somewhere between 5 probes-8 probes, and 5 probes-8 probes with each probe having 50 procedures. And that's to Kari's point earlier on, that is sort of an inventory buildup of procedures that we are reporting on, because we don't really know the exact number of procedures done on a daily basis at the hospital. So that is an effect that will affect the numbers that we are looking at today.
Yeah, and another one on the U.S. here. Our placement of systems in the U.S. is zero in the quarter. Can you talk about the change in dynamic among U.S. customers opting for capital sales and probes instead of PPP/smart cards?
Yeah. You know, it's several things happening here. So over the last several years, we've seen an inclination for U.S. customers to prefer the capital model compared to the historical purchasing in the U.S. So that has been growing at the expense of fewer than the PPP customers and lease customers. Of course, it's also related to the fact that, you know, we have built up a business on capital, and for Medistim to continue to deliver quarter by quarter, it's also important for us to deliver capital sales. So our sales reps are also more interested and maybe pushing even harder than in previous days to actually close the capital deals. Yeah.
That's it.
Very good.
Yeah. Okay, so there's no more questions?
No more questions.
Okay. Then we thank everybody who participated, and look forward to our quarter three presentation. Thank you very much.
Thank you.