Earnings Release • Feb 17, 2017
Earnings Release
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4. quarter and preliminary year end financials for 2016
The financial report as per December 2016 has been prepared according to the IFRS (International Financial Reporting Standard) and follows IAS 34 for interim financial reporting, as do the comparable numbers for 2015.
(Comparative numbers for 2015 in parenthesis)
Sales in the fourth quarter amounted to MNOK 67.4 (MNOK 74.6).Fourth quarter 2015 was the best quarter ever for Medistim. Sales declined in all regions except for the US. In the US sales increased with 10.1%. Sales in Europe decreased with MNOK 4,1. In Asia sales decreased with MNOK 3.3 and in the rest of the world there was a decrease of MNOK 1.6. The decline in sales is related to two things. The loss of the Medtronic agency impacted negative with MNOK 4.6 for the quarter. There was also a back order situation for flow probes related to production capacity that resultet in MNOK 3.6 in less sales.
For 2016 there was an increase in all regions except Europe. In the US sales increased with 19.4 %. In Asia and in the "rest of the world" sales increased with 14.3 % and 34.7 % respectively. In Europe there was a decrease of MNOK 5.3 or 3.8 %. The decrease was related to lower sales of 3. party products and the termination of the Medtronic agency. The Medtronic agency represented around MNOK 20 in lost sales.Good growth in other 3.party products partly compensated lost sales related to the Medtronic agency. Sales for 2016 ended at MNOK 268.1 (MNOK 251.4), a growth of 6.6 %.
Fourth quarter sales of own products amounted to MNOK 49.3 (MNOK 53.7) affected by the back order situation with MNOK 3.6. Sales of third party products were in the same period MNOK 18.2 (MNOK 20.9) .
For 2016 , sales of own products ended at MNOK 199.6 (MNOK 175.3), a 13.8 % growth. Sales of third party products ended at MNOK 68.8 (MNOK 76.1), a 10.0 % reduction. The reduction was related to the lost agency.
With the same rates as in 2015 sales would have amounted to MNOK 68.8 for the quarter, a currency neutral decline of 7.7 %. With same rates, sale of own products would have amounted to MNOK 50.7, a decline of 5.7 %.
Similar comparison for 2016 would have resulted in a sale of MNOK 260.5. For own products sales with the same rate as 2015 would have been MNOK 192.0, which indicates a volume growth of 9.5 %.
Cost of goods sold ended at MNOK 16.5 for the quarter (MNOK 20.1) and cost of goods sold represent a percentage of 24.5 % of total sales (26.9 %). For 2016 cost of goods sold ended at MNOK 64.9 (MNOK 64.6), and cost of goods sold represent a percentage of 24.2 % of sales (25.7 %).
Salaries and social expenses ended at MNOK 25.3 (MNOK 23.4) for the quarter. For 2016 salary and social expenses ended at MNOK 89.7 (MNOK 79.1). The higher expense level for 2016 is related to the full year effect of 5 new sales representatives in the US and weaker NOK against USD and EUR in 2016 compared to 2015. The currency effect alone is MNOK 1.1, while increased expenses related to new sales representatives was MNOK 2.8. In addition to this there was an expense related to the share options to CEO with MNOK 1.2. The remaining increase was related to general salary adjustments and new employees in 2016.
Other operating expenses ended at MNOK 12.8 (MNOK 12.8) for the quarter. For 2016 other operating expenses ended at MNOK 45.3 (MNOK 44.0). The increase in expenses was related index regulated expenses.
For the quarter MNOK 2.2 (MNOK 3.3) was used within research and development (R&D). Result before R&D and depreciations was MNOK 13.6 (MNOK 19.2). This equals a margin of 20.2 % (25.8 %). During the quarter MNOK 1.4 (MNOK 2.4) of the R&D expense was activated in the balance sheet.
For 2016 MNOK 9.3 (MNOK 11.0) was used within research and development (R&D). Result before R&D, depreciations and write offs was MNOK 73.8 (MNOK 67.9). This equals a margin of 27.5 % (27.0 %). In 2016 MNOK 3.6 (MNOK 6.8) of the R & D expense was activated in the balance sheet.
Operating profit before depreciation (EBITDA) for the quarter ended at MNOK 12.8 (MNOK 18.3). EBITDA for 2016 ended at MNOK 68.1 (MNOK 63.6).
Result before tax and finance (EBIT) ended at MNOK 9.7 (MNOK 16.0) for the quarter. Weaker EBIT is related to the less sales with the result effect of MNOK 5.8 and the expense related to share options of 1.2 MNOK.
EBIT for 2016 ended at MNOK 56.4 (MNOK 50.3), which represents an EBIT margin of 21 %.
Net finance ended negative with MNOK 1.1 for the quarter (positive MNOK 1.2). For 2016 net finance ended negative with MNOK 2.8 (positive MNOK 5.4). Net finance was mainly related to realised and unrealized gains or losses from to currency exposure.
Result before tax was MNOK 8.6 (MNOK 17.2) for the quarter. Result after tax for the quarter was MNOK 5.8 (MNOK 12.2). Result per share for the quarter was NOK 0.32 (NOK 0.67).
For 2016, result before tax ended at MNOK 53.5 (MNOK 55.6). Result after tax as for 2015 was MNOK 39.1 (MNOK 40.4). Result per share for 2016 ended at NOK 2.15 (NOK 2.23).
Average number of shares outstanding was 18.150.502 (18. 118.336) by end of December 2016.
Equity by the end of December was MNOK 166.7 (MNOK 156.2). This equals an equity ratio of 77.0 % (71.5 %). A dividend of MNOK 29.95 was recorded against the equity in 2016.
Cash as of 31st of December 2016 was MNOK 31.1 and the company had 5,6 MNOK (MNOK 11,0) in interest bearing debt. By year end the comapny was cash positive with MNOK 25.4. Cash flow from operation ended at MNOK 28.3 as of December. The Company invested 11.9 MNOK in 2016 (11.7 MNOK). The investments was related to infrastructure, new products and systems placed at customer sites in the US on leasing contracts.
Compared to last year working capital has increased with MNOK 20.5. The reason for the increase in working capital is related to build up of component to the new productline MiraQ, while the VeriQ productline still needs to be maintained. Increased sales and securing critical components has also contributed to increased working capital.
The balance sheet ended at MNOK 216.4 from MNOK 218.4 by the beginning of the year.
In Europe there was a decline in both sales of own products and sales of 3.party products. 3. party products decreased with MNOK 2.8 and ended at MNOK 18.2. Sales of own products ended at MNOK 20.5, a MNOK 1.4 decrease. For 2016 sales of 3.party products decreased with MNOK 7.6, a 10.0 % decrease. Sales of own products ended at MNOK 67.9, a MNOK 2.3 increase which represent a 3.2 %
The decrease in sales of 3.party products was related to termination of the Medtronic agency in 2015. Medtronic represented 25 % of 3.party products sales in 2015 and was the reason why sales decreased in Europe in 2016.
Sales of own products had a positive development in Germany, the largest market in Europe, and in UK. Medistim has direct representation in both of these markets. In Germany sales increased with 8.6 % and ended at MNOK 36.6. In UK sales ended at MNOK 3.0, a 400 % increase. Sales to distributors was lower than expected, but this was due to random variation. The increased focus towards the vascular market will contribute to future growth.
Medistim has a business model in the US that is mainly based upon sales of procedures, but also offers capital sale as in other markets.
4th quarter sales ended with a growth of 10.1 % in NOK, while sales in USD increased 13.4 %. There was a solid growth within all product areas both for the quarter and for the year.
For the quarter there was sold 12.995 procedures, compared to last year 9.778, a 32.9 % increase.
During the quarter 1.807 procedures was sold to customers using the combined flow and imaging system compared 828 procedures in 2015. Number of flow procedures was 11.188 (8.950). Capital sales increased from 2 units in the 4th quarter in 2015 to 4 units in the 4th quarter of 2016.
In 2016 there were sold 45.201 procedures, compared to last year 40.036 procedures. Total number of imaging and flow procedures sold was 5.807 (3.988), and total number of flow procedures sold were 40.394 (36.048). Capital sales increased from 9 units in 2015 to 13 units in 2016.
Number of procedures per year
In the US about 80 % of the bypass surgeries are performed with no other quality assurance of blood flow other than the surgeons experience by feeling pulse on the vessels using the finger. It is clinically proven that this method is not reliable. It is therefore a large potential and need for Medistims products in the US. Medistim has large ambitions in the US market. So far Medistim has achieved a market penetration of more than 17.5 % of the total market of approximately 230.000 bypass surgery procedures performed annually. Medistim has a market penetration of about 70 % in Germany, Scandinavia and Japan. Medistim
expect that the market penetration in the US will develop in the same manner over time.
In Asia there was a 41.6 % decrease in sales in the fourth quarter, while sales in 2016 increased with 14.3 % compared to last year. For the quarter sales of flow probes was at the same level while systems and imaging probes had a decrease. For the year, the sales increase was driven by sales of flow probes that increased with 38.7 % in number of units. The increased volume of flow probes is an indication that the utilization of the equipment at installed base is increasing.
In other markets sales decreased with 40.0 % in the 4th quarter, while sales increased with 34.7 % for the year. There was a solid growth in both system sales and probe sales in 2016. The sales increase was related to the positive development in Australia.
Medistim entered a license and OEM agreement with em-tec GmbH in October 2015. Through the agreement, Medistim obtains exclusive, eternal, world-wide rights to market and sell em-tec's transit time flow measurement (TTFM) technology for use on human blood vessels within cardiac-, vascular- and transplant surgery. em-tec's flow measurement device is designed as a basic, entry-level customer solution that meets lower price-point market segments and fills a gap within Medistim's product portfolio. The first Medistim labeled device, SonoQ, was launched in India during the quarter. In 2016 3 systems where sold. One of the most important target markets for the SonoQ is India, a market with about 150,000 coronary artery bypass procedures per year, which is very low compared to the population size of 1.3 billion, and therefore expected to grow. In collaboration with the local distributor, Medistim has launched the new product at the International Coronary Congress (ICC) in New Delhi, India, on November 11-13. The ICC meeting is dedicated to state of the art surgical
coronary revascularization, and the program highlights the necessity of surgical guidance and quality assessment based on intraoperative ultrasound and TTFM.
Medistim is the market leader with high-end products for surgical guidance and blood flow measurement in cardiac-, vascular and transplant surgery, but have been lacking an entry-level device to reach some emerging market product segments. SonoQ represent an entry-level device that can accelerate the adaption in price sensitive markets like India. Medistim look forward to continue the collaboration with Indian surgeons and support their work to achieve the best possible surgical outcomes.
After the launch of vascular products late 2015 in Europe and the launch of the same products in the US in the first half, focus for the development recources has been to establish and optimize the production line for the new products.
The company aims to develop products to meet surgeons' growing need for quality control of heart-bypass surgery, peripheral vascular surgery and transplant surgery. Our vision is that Medistim's solutions should represent the «standard of care» for clinical practice and that blood flow measurements and intraoperative ultrasound imaging are performed on all patients.
Medistim's focus is to strengthen the company's ability to effectively commercialize existing product portfolio on a global basis. One of the key tasks to achieve this is closer contact with customers through a strengthened sales and marketing organization. Another important task is to produce enhanced clinical documentation and focus on putting blood flow measurements, ultrasound imaging, surgical guidance and quality assurance on the agenda in relevant forums and channels.
Continious technology and product development will secure Medistims products and leading position within cardiac surgery also in the future. The company also has ambitions to launch new products adapted to specialities within vascular- and transplant surgery.
On a global basis it is performed more than 700,000 heart bypass surgeries per year. The US represents the largest market for Medistims products with 1/3 of the world market. The global number of procedures has in the past been
constant. The decrease in number of procedures perfomed in the western countries has been compensated by an increase in the BRIC countries (Brazil, Russia, India and China). It is therefore expected to have a stabil growing trend in the years to come.
Adding intraoperative ultrasound imaging to flow measurements more than doubles Medistims market potential, because of new applications and relevance and higher pricing compared to traditional flowmeasurement technollogy. Total market size within cardiac surgery is estimated to be 2 billion NOK annualy. The imagingfunctionallity makes MiraQTM and VeriQC relevant in other cardiac surgeries and not just by pass surgery. Medistim estimates this potential to be 1 billion NOK.
In addition, the company has a significant potential within the global vascular market, which is estimated to be about 600,000 vascular procedures annually. Total market size within vascular surgery is estimated to be over 1 billion NOK.
The trend in surgery moves towards less intervention and keyhole surgery, which gives the surgeon less workspace and the ability to control in a traditional way. It is therefore an increased need to verify the desired result in the future.
Global demographic trends are an important driving force for the many cost-efficiency measures around the world, with America's health care reform as very important. Focus on quality is growing, driven by the need to reduce costs, particularly related to correction of errors, the need for repeated treatments and repeated hospital admissions. Medistim therefore has a good opportunity to position their products as an important contributor to achieving these goals.
Medistim's flow meters have been in use in more than 1.5 million patients worldwide since it came on the market, and the company is the clear leader in its niche. The equipment is used today in more than 28 % of the total number of by-pass surgeries performed worldwide. Medistims penetration and market share is expected to increase gradually as quality assurance in surgery is getting more attention and acceptance.
There are competitors that use the transit time measurement principle. Equipment from competitors is estimated to be in use in about 7 % of the procedures performed. This means that in about 65 % of the cases where by pass surgery is performed there is no equipment in use to verify blood flow. This market represent Medistim's largest opportunity.
With Medistim's Ultrasound imaging technollogy and MiraQTM platform, the company has acquired a new edge compared to competitors, with unique and differentiated products that is currently alone in its segment.
The company is exposed to EUR and USD. Exposure can vary depending on how large share of revenues and costs USD and EUR account for of total income and expenses. For 2016 a 10 % change in the exchange rate against USD and EUR would result in a 7.5 % change in sales and a 20.3 % change in operating result. The company partly secures its positions with hedging contracts.
Q2 16
Q3 15
Q3 16
Q4 15
Q4 16
Q1 15
Q1 16
Q2 15
The company had 186.000 Medistim shares by the end of December 2016. The shares were purchased at a price per share of NOK 14.70. The share price was NOK 72.00 per share at the end of the quarter. For comparison entering 2016 the share price was 53.70 per share.
The number of shares sold in the fourth quarter of 2016 was 1.168.0893. In 2016 4.010.426 shares was sold.
The five largest shareholders were Intertrade Shipping AS with 3.850.000 shares, Salvesen & Thams Invest AS with 1.862.500 shares, Follum Capital with 1.000.000 shares, Skagen Vekst with 850.072 shares and Protector Forsikring with 784.155 shares.
The Board will suggest to the General Meeting a dividend of NOK 1,75 per share (NOK 1.65). The equals a pay out ratio of 81 % (74 %).
Operating profit per quarter.
Operating profit per year. The pension effect of TNOK 9.291 is marked in 2012.
*Dividend per share in 2017 suggested by the Board of Directors
Oslo 17. February 2017, Board of Directors and managing director in Medistim ASA
| Profit & loss | 4. quarter 16 | 4. quarter 15 | 2016 | 2015 |
|---|---|---|---|---|
| All numbers in NOK 1000 | ||||
| Sales | 67 433 | 74 621 | 268 061 | 251 429 |
| Cost of goods sold | 16 529 | 20 091 | 64 957 | 64 653 |
| Salary and sosial expenses | 25 310 | 23 378 | 89 719 | 79 102 |
| Other operating expenses | 12 812 | 12 847 | 45 304 | 44 027 |
| Total operating expenses | 54 651 | 56 317 | 199 980 | 187 783 |
| Opr. res.before. depr. and write offs | 12 783 | 18 305 | 68 081 | 63 646 |
| Opr. res before depr and write off % | 18,96 % | 24,53 % | 25,40 % | 25,31 % |
| Depreciation | 3 034 | 2 770 | 11 726 | 10 642 |
| Write offs | - | (453) | - | 2 747 |
| Operating result | 9 749 | 15 988 | 56 355 | 50 257 |
| Financial income | 3 381 | 2 518 | 7 506 | 10 755 |
| Financial expenses | 4 490 | 1 327 | 10 334 | 5 367 |
| Net finance | (1 109) | 1 190 | (2 828) | 5 388 |
| Pre tax profit | 8 640 | 17 178 | 53 527 | 55 645 |
| Tax | 2 798 | 4 951 | 14 429 | 15 223 |
| Result | 5 842 | 12 227 | 39 098 | 40 422 |
| Dividend | - | - | 29 950 | 25 362 |
| Comprehensive income | ||||
| Result after tax | 5 842 | 12 227 | 39 098 | 40 422 |
| Exchange differences arising | ||||
| on translation of foreign operations | 682 | (34) | 216 | 807 |
| Total comprehensive income | 6 523 | 12 193 | 39 314 | 41 229 |
| Key figures | 4. quarter 16 | 4. quarter 15 | 2016 | 2015 |
| Equity share | 77,02 % | 71,49 % | 77,02 % | 71,49 % |
| Earnings per share | kr 0,32 |
kr 0,67 |
kr 2,15 |
kr 2,23 |
| Earnings per share | kr | 0,32 | kr | 0,67 | kr | 2,15 | kr | 2,23 |
|---|---|---|---|---|---|---|---|---|
| Earnings per share diluted | kr | 0,32 | kr | 0,67 | kr | 2,15 | kr | 2,23 |
| Average shares outstanding in 1000 | 18 151 | 18 141 | 18 150 | 18 118 | ||||
| Average shares outstanding in 1000 diluted | 18 151 | 18 141 | 18 150 | 18 118 | ||||
| Split of operating | ||||
|---|---|---|---|---|
| result per segment | 4. quarter 16 | 4. quarter 15 | 2016 | 2015 |
| All numbers in NOK 1000 | ||||
| Res from Medistim products | 7 127 | 11 762 | 49 381 | 39 991 |
| Margin Medistim products | 14,47 % | 21,90 % | 24,74 % | 22,81 % |
| Res from 3 party products | 2 622 | 4 226 | 6 974 | 10 266 |
| Margin 3 party prod. | 14,43 % | 20,20 % | 10,19 % | 13,49 % |
| Totalt result | 9 749 | 15 988 | 56 355 | 50 257 |
| Margin | 14,46 % | 21,43 % | 21,02 % | 19,99 % |
| Balance sheet | 31.12.2016 | 31.12.2015 |
|---|---|---|
| All numbers in NOK 1000 | ||
| Assets | ||
| Intangible assets | 51 698 | 55 122 |
| Fixed assets | 18 404 | 14 158 |
| Total tangible and fixed assets | 70 102 | 69 280 |
| Inventory | 59 297 | 46 613 |
| Customers receivables | 48 328 | 44 831 |
| Other receivables | 7 651 | 8 787 |
| Cash | 31 065 | 48 925 |
| Total current assets | 146 341 | 149 156 |
| Total assets | 216 443 | 218 436 |
| Equity and liability | ||
| Share capital | 4 585 | 4 585 |
| Share premium reserve | 44 172 | 41 852 |
| Other equity | 117 946 | 109 727 |
| Total equity | 166 703 | 156 164 |
| Deferred income | 677 | 1 375 |
| Other long term debt | 1 875 | 5 626 |
| Total long term debt | 2 552 | 7 001 |
| Total short term debt | 47 188 | 55 271 |
| Total equity and liability | 216 443 | 218 436 |
| Net interest bearing debt | (25 440) | (37 883) |
| Change in equity | 31.12.2016 | 31.12.2015 |
|---|---|---|
| All numbers in NOK 1000 | ||
| Equity start of period | 156 164 | 139 097 |
| Result for the period | 39 098 | 40 422 |
| Dividend | (29 950) | (25 362) |
| Medistim shares | (0) | 1 200 |
| Changes in exchangerates | 216 | 807 |
| Equity end of period | 166 703 | 156 164 |
| Cash flow analysis | 31.12.2016 | 31.12.2015 |
|---|---|---|
| All numbers in NOK 1000 | ||
| Result for the period | 39 098 | 40 422 |
| Other cash flow from operation | (10 825) | 2 298 |
| Cash flow from operation | 28 274 | 42 720 |
| Investments | (11 943) | (11 726) |
| Cash flow from financing | (34 191) | (31 544) |
| Change in cash for the period | (17 860) | (550) |
| Cash at start of period | 48 925 | 49 475 |
| Cash by the end of period | 31 065 | 48 925 |
| Geographic split of sales | 4. quarter 16 | 4. quarter 15 | 2016 | 2015 |
|---|---|---|---|---|
| All numbers in NOK 1000 | ||||
| USA | 21 873 | 19 868 | 90 990 | 76 219 |
| Asia | 4 748 | 8 134 | 24 805 | 21 703 |
| Europe | 38 320 | 42 467 | 136 383 | 141 715 |
| Rest of the world | 2 492 | 4 152 | 15 883 | 11 792 |
| Total sales | 67 433 | 74 621 | 268 061 | 251 429 |
| Geographic split | ||||
| of sales in number of units | 4. quarter 16 | 4. quarter 15 | 2016 | 2015 |
| USA | ||||
| Procedures flow measurement | 11 188 | 8 950 | 40 394 | 36 048 |
| Procedures imaging and flow | 1 807 | 828 | 5 807 | 3 988 |
| Capital sales VeriQ flowmeasurement instrument | 3 | - | 6 | 3 |
| Capital sales VeriQC imaging and flowmeasurement instrument | 1 | 2 | 7 | 6 |
| Asia | ||||
| VeriQ flowmeasurement instrument | 2 | 8 | 20 | 29 |
| VeriQC imaging and flowmeasurement instrument | 2 | 8 | 14 | 16 |
| Imaging probes | 5 | 12 | 22 | 28 |
| Flowmeasurement probes | 320 | 313 | 1 651 | 1 190 |
| Europe | ||||
| MiraQ and VeriQ flowmeasurement instrument | 17 | 9 | 40 | 33 |
| MiraQ and VeriQC imaging and flowmeasurement instrument | 2 | 13 | 7 | 20 |
| Imaging probes | 4 | 8 | 13 | 21 |
| Flowmeasurement probes | 1 037 | 1 275 | 3 833 | 4 124 |
| Rest of the world | ||||
| MiraQ andVeriQ flowmeasurement instrument | 3 | - | 11 | 5 |
| MiraQ and VeriQC imaging and flowmeasurement instrument | - | 5 | 12 | 13 |
| Imaging probes | - | 7 | 18 | 20 |
| Flowmeasurement probes | 225 | 89 | 724 | 590 |
| Total sales outside the US in units | 22 | 17 | 71 | 67 |
| Number of MiraQ and VeriQ flow instruments outside USA | 4 | 26 | 33 | 49 |
| MiraQ and VeriQC imaging and flow instruments | 9 | 27 | 53 | 69 |
| Total number of imaging probes | 1 582 | 1 677 | 6 208 | 5 904 |
| Split of sales per segment | 4. quarter 15 | 4. quarter 14 | 2015 | 2014 |
| All numbers in NOK 1000 | ||||
| USA | ||||
| Procedural revenue | 20 277 | 18 021 | 81 924 | 69 729 |
| Capital sales VeriQ flowmeasurement instruments | 1 367 | 21 | 3 353 | 1 192 |
| Capital sales VeriQC imaging and flowmeasurement instrument Outside USA |
230 | 1 826 | 5 713 | 5 298 |
| MiraQ and VeriQ flowmeasurement instrument | 4 268 | 3 608 | 14 361 | 11 668 |
| MiraQ and VeriQC imaging and flowmeasurement instrument | 2 570 | 8 483 | 15 281 | 17 974 |
| Imaging probes | 588 | 1 783 | 3 146 | 3 885 |
| Flowmeasurement probes | 17 498 | 19 947 | 70 446 | 64 135 |
| Other | 2 469 | 9 | 5 389 | 1 459 |
| Total sale of Medistim prod. | 49 266 | 53 698 | 199 613 | 175 340 |
| Sale of 3 party products | 18 168 | 20 924 | 68 448 | 76 089 |
| Total sales | 67 434 | 74 622 | 268 061 | 251 429 |
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