Optomed Oyj: Optomed Plc Financial statements bulletin January - December 2020

Optomed Plc         Stock Exchange Release    18 Febryary 2021 at 9:00, Helsinki

Optomed Plc: Financial Statements Bulletin, January - December 2020

October - December 2020

Revenue decreased by 6.6 percent to EUR 4,041 (4,329) thousand

• Adjusted EBITDA amounted to EUR -62 (-211) thousand corresponding to -1.5 (-4.9) percent of revenue
• The COVID-19 pandemic continued to negatively affect especially the OEM sales of the Devices segment, whereas the Software segment continued its solid performance
• Solid revenue growth in China
• Regulatory approval received for Optomed Aurora camera in China
• The US revenue continued to grow
• Successful launch of Aurora IQ, handheld fundus camera with seamless AI integration in November 2020

January - December 2020

Revenue decreased by 13.1 percent to EUR 13,011 (14,977) thousand

• Adjusted EBITDA amounted to EUR -733 (-196) thousand corresponding to -5.6 (-1.3) percent of revenue
• The COVID-19 pandemic has negatively affected the Devices segment whereas the Software segment continues its solid performance

Key figures

EUR, thousand Q4/2020 Q4/2019 Change, % 2020 2019 Change, %
Revenue 4,041 4,329 -6.6% 13,011 14,977 -13.1%
Gross profit * 2,809 2,745 2,3% 8,955 9,944 -9.9%
Gross margin % * 69.5% 63.4%   68.8% 66.4%  
EBITDA -62 550 -111.2% -733 -335 -118.8%
EBITDA margin *, % -1.5% 12.7%   -5.6% -2.2%  
Adjusted EBITDA * -62 -211 70.7% -733 -196 -274.6%
Adjusted EBITDA margin -1.5% -4.9%   -5.6% -1.3%  
*, %
Operating result -594 -33 -1677.9% -2,906 -2,596 -11.9%
(EBIT)
Operating margin -14.7% -0.8%   -22.3% -17.3%  
(EBIT) *, %
Adjusted operating -594 -794 25.1% -2,906 -2,457 -18.3%
result (EBIT) *
Adjusted operating -14.7% -18.3%   -22.3% -16.4%  
margin (EBIT margin)
*, %
Net profit/ loss -652 -58 -1016,5% -3,177 -2,875 -10.5%
Earnings per share -0.05 -0.01 -612.5% -0.24 -0.32 29.5%
Cash flow from 383 2,000 -80.8% -2,801 161 -1839.7%
operating activities
Net Debt -4,090 -8,940 -54.3% -4,090 -8,940 -54.3%
Net debt/ Adjusted 5.6 45.7   5.6 45.7  
EBITDA (LTM)
Equity ratio * 64.6% 57.2%   64.6% 57.2%  
R&D expenses personnel 395 443 -10.8% 1,406 1,540 -8.7%
R&D expenses other 83 66 25.6% 253 234 8.1%
costs
Total R&D expenses 479 509 -6.1% 1,659 1,774 -6.5%

*) Alternative performance measures, see section Alternative Performance Measures for definitions and calculations.

CEO comments

Optomed's business developed towards a positive direction during the last quarter of the year, even though revenue slightly declined.  The overall demand for our own branded fundus cameras and related software solutions increased, despite the pandemic continued to negatively impact our business, particularly in Europe and the United States.

Both revenue and profitability of our Software segment, which has performed well during the pandemic, continued to grow. This growth came from increasing recurring revenue from the existing customer base and new customer deliveries made during the quarter.

For the Devices segment, 2020 was a year of significant change. Optomed's strategy has been to expand its own distribution network and thus increase sales of camera products and complete screening solutions under its own brand. Optomed branded camera sales via our distribution network started to grow in the third quarter and continued this strong growth during the fourth quarter, while sales to our OEM customers declined. During 2020, the share of cameras sold under the company's own brand significantly exceeded the number of products sold through our OEM customers, growing our own installed base, and providing more opportunities for additional software and other recurring revenue streams in the coming years.

Revenue of our Chinese subsidiary developed favorably, especially in the last quarter of the year. The new product registrations and launches in 2020 are expected to have a positive impact on our China sales in the current and future years.

In the last quarter of 2020, the Devices segment's revenue decreased but the profitability increased. The decline in the revenue was caused by the Covid-19 pandemic constraints in traditional sales work to hospitals affecting our OEM sales the most.

In the fourth quarter, we were especially pleased that we were able to sell and deliver several complete diabetic retinopathy screening solutions, including cameras, software and artificial intelligence services, for healthcare and screening programs in Asia and the Middle East. We expect the number of complete screening solution deliveries to increase further during 2021, especially when the pandemic related travel restrictions begin to ease. The new Aurora IQ camera with AI services launched in November has received very positive feedback from the market, but due to logistics, the delivery volumes were not yet significant in 2020. The Aurora IQ camera is expected to have a considerable impact on the company's growth from 2021 and onwards.

Overall, the company's revenue in the fourth quarter decreased by 6.6 percent due to the decline in camera sales to our OEM customers caused by the pandemic. However, profitability improved because of increased software and higher margin Optomed branded camera sales. The cash flow from operating activities was positive.

The changes in our sales channel structure during 2020, establishment of our US subsidiary, launch of the Aurora IQ camera, new product registrations in China and Canada, and the positive market outlook in China give us a good starting point for 2021. Several of our key markets are showing clear signs of recovery, and therefore in the end of 2020, we started to significantly increase our sales and marketing activities. Although the impact of the Covid-19 pandemic to the market and our business is expected to continue going forward, we expect the company's revenue to grow during 2021.

CEO

Seppo Kopsala

Outlook 2021

Optomed expects its full year 2021 revenue to grow compared to 2020.

Telephone conference

A telephone conference for analysts, investors and media will be arranged on 18 February 2021 at 11.00 EET. The event will be held in English. The presentation material will be available at www.optomed.com/investors 10.00 EET at the latest.

The participants are requested to register for the call in advance by email to sakari.knuutti@optomed.com.

Please see the call-in numbers below:

FI +358 9 856 26300

SE +46 8 505 218 52

UK +44 20 3321 5273

US +1 646 838 1719

FR +33 1 70 99 53 92

The conference id is 554 810 399#.

Please note that by dialing into the conference call, the participant agrees that personal information such as name and company name will be collected.

Group performance

October - December 2020

In October-December 2020, Group revenue decreased by 6.6 percent to EUR 4,041 (4,329) thousand. The Software segment's solid performance continued, and its revenue increased by 6.1 percent driven by stable recurring business from the existing customers in addition to new global delivery projects. The Devices segment OEM sales were still affected by the pandemic and the segment's revenue decreased by 19,5 percent. China, the US, and distribution sales channels performed well. The Group gross margin increased to 69.5 from 63.4 percent last year. The Group recorded other operating income of EUR 40 (11) thousand during October-December. The October-December Group gross margin excluding other operating income was 68.5 percent in 2020 and 63.2 percent in 2019.

In October-December 2020, Group EBITDA amounted to EUR -62 (550) thousand and adjusted EBITDA totaled EUR -62(-211) thousand. The October-December 2019 was affected by EUR 760 thousand of rebooked IPO expenses classified as items affecting comparability. The main reasons for the positive adjusted EBITDA variance versus 2019 were higher gross profit due to more software and Optomed branded product sales and lower operating expenses because of the company's swift response to the pandemic and the related cost reduction actions. The Group has since April cut travelling and postponed external events. EBIT was EUR -594 (-33) thousand and adjusted EBIT was EUR -594 (-794) thousand.

In October-December 2020, net financial items amounted to EUR -69 (-67) thousand and consisted mainly of interest payments to financial institutions and the translation effect of Chinese RMB to EUR.

January - December 2020

In January-December 2020, Group revenue decreased by 13.1 percent to EUR 13,011 (14,977) thousand. The Software segment performed well considering the ongoing COVID-19 situation, and its revenue growth was 3.2 percent driven by stable recurring business from the existing customers. The Devices segment's revenue decreased by 30.3 percent. The decrease was a result of the COVID-19 pandemic causing a decline in OEM sales. Optomed branded products performed well despite pandemic and exceeded OEM sales. The gross margin increased to 68.8 percent from 66.4 percent of the comparison period. The company received other operating income of EUR 157 (254) thousand for the full year of 2020 and 2019, which increased the gross margin of both periods.  The January-December gross margin excluding other operating income was 67.6 percent in 2020 and 64.7 percent in 2019.

In January-December 2020 EBITDA amounted to EUR -733 (-335) thousand and adjusted EBITDA totaled EUR -733 (-196) thousand. January-December 2019 was affected by EUR 139 thousand of IPO expenses classified as items affecting comparability. The main reasons for the adjusted EBITDA variance versus 2019 were lower revenue which was partly compensated by higher gross margin and lower operating expenses due to the layoffs, lower level of corporate travelling, as well as external events that had been cancelled or postponed due to the COVID-19 situation. EBIT was EUR -2,906 (-2,596) thousand and adjusted EBIT was EUR -2,906 (-2,457) thousand.

Net financial items amounted to EUR -341 (-356) thousand in January-December 2020 and consisted mainly of interest payments to financial institutions and the translation effect of Chinese RMB and USD to EUR.

Cash flow and financial position

October- December 2020

In October-December 2020, the cash flow from operating activities amounted to EUR 383 (2,000) thousand. Net cash used in investing activities was EUR -651 (-407) thousand and relates mainly to capitalized development expenses. Net cash from financing activities amounted to EUR -34 (15,548) thousand. Financing activities in the fourth quarter 2019 include share issue proceeds from the IPO of EUR 20 million.

January- December 2020

In January-December 2020, the cash flow from operating activities amounted to EUR -2,801 (161) thousand. Net cash in investing activities was EUR -1,820 (-1,434) thousand and relates mainly to capitalized development expenses. Net cash from financing activities amounted to EUR -3,698 ...