Observe Medical — Earnings Release 2020

Feb 23, 2021

OBSERVE MEDICAL

Q4 2020

CEO Björn Larsson / CFO Per Arne Nygård

Oslo, February 23, 2021

Overview

Sippi®

Automated and wireless connected Solid medtech platform for growth digital urine meter for ICUs and wards

Overview

Solid medtech platform for growth

Sippi®

Automated and wireless connected digital urine meter for ICUs and wards

The 2020 journey – key initiatives

Solid financial basis: Rights issue of NOK 45 million

Strengthened sales capabilities: Sylak acquisition in Q4 2020

Distributor agreement in Italy

|--|

New scientific evidence published

Sippi® market push: Accelerated clinical use in the Nordics

Established advisory board

Overview

Solid medtech platform for growth

Sippi®

Automated and wireless connected digital urine meter for ICUs and wards

Observe Medical Nordic Sales Operations

Highly competent sales team and medtech product portfolio enabling customer access for Sippi®

Strong market opportunity – accelerated by Covid-19 Urine measurement, anesthesia/ICU and wound care products

Current market focus: Nordics and Europe Strong sales growth and market opportunities in the Nordics

Enabled through acquisition of Sylak

Hourly urine monitoring of patients is one of the last remaining manual monitoring procedures in the ICU

with significant clinical implications

Risk of infections

Inaccurate patient data for clinical decisions

Time-consuming for staff and compromised ergonomics reducing clinical capacity

SIPPI®

Sippi® addresses the clinical challenges

Only automated, digital urine meter with wireless data transfer (Sipplink®) to the hospital patient data management system and which detects (Sippsense®) and hinders (Sippcoat®) bacterial biofilm formation – that can lead to urinary infections.

Hindering risk factors for hospital acquired infections

Improved quality of patient data for clinical decisions

Recent doctoral dissertation further demonstrates clinical benefits of Sippi®

"The AU was non-inferior to the MU regarding precision, and significantly better than the MU in terms of bias, temporal deviation and staff opinion."

"...the higher measurement resolution that may be obtained with the AU should benefit early detection of an upcoming AKI."

"...staff consistently appraised the AU significantly higher than the MU in terms of user-friendliness, reliability, safety and efficacy"

"Likewise, using the AU in normal wards may allow hourly UO measurements in all patients with a urinary catheter, and not restrict measurements to infrequent daily episodes"

"Silicone oil, irrespective of viscosity, significantly decreased biofilm formation by common uropathogenic bacteria, including ESBL producing and multi-drug resistant strains, as well as C. albicans"

"The AU may also potentially decrease the risk of retrograde urinary tract contamination, ..."

Dr. Martin Slettengren

SIPPI®

Significant market opportunity for Sippi® remains

Good progress in accelerating clinical use – new hospitals and clinics added in Q4 2020 and Q1 2021

NORDICS

Nya Karolinska hospital, Sweden Cardiothoracic ICU unit

• Resumed clinical implementation Q1 2021 after pause during 2020 due to Covid-19

EUROPE

Distributor Sim Italia s.r.l.

• ICU unit at major hospital in Northern Italy implemented Sippi in clinical use Q1 2021

ENABLER FOR CONTINUED ACCELERATION:

Strengthened access to Sippi® target customers

• Establishment of Observe Medical Nordic sales operations through acquisition of Sylak
• Further enhanced Nordic sales team
• New collaborations in Norway
• Distributor SIM Italia gaining momentum
• Distribution in new geographies to come

Promising and progressing pipeline of customer leads - additional clinical implementations expected near term

SYLAK ACQUISITION

Sippi® market access through strong sales teams and synergistic product portfolio – both with Nordics direct sales and with distributors

Observe Medical – Nordic Sales Operations

FINANCIAL REVIEW

CFO Per Arne Nygård

Financial review comments

Revenue and gross results Q4 2020

Revenues Q4 2020

• Total revenues at TNOK 2 920
• Revenues at TNOK 2 880 in November and December from new acquired product portfolio
• Strong sales growth in new acquired product portfolio in November and December

Gross result Q4 2020

• Gross result at TNOK 1 071 in the quarter
• Gross margin at 36.7%

Revenue and gross results FY 2020

Revenues FY 2020

• Total revenues at TNOK 2 961

Gross result FY 2020

• Gross result at TNOK 986 in 2020
• Gross margin at 33.3%

FINANCIAL REVIEW Key figures Profit and loss statement

Amounts in NOK thousand (excl. earnings per share)	Q4 2020	Q4 2019	FY 2020	FY 2019
Gross result	1 071	70	986	-460
Operating expenses	10 569	3 631	25 910	11 041
EBITDA	-9 498	-3 561	-24 923	-11 501
Depreciation and amortisation	779	1 083	3 163	4 285
EBIT	-10 277	-4 644	-28 087	-15 787
Net finance	-10 169	121	-8 782	-1 131
Result	-20 446	-4 524	-36 868	-16 917
Earnings per share (NOK per share)	-1,04	-0,32	-2,22	-1,36

Operating expenses Q4 2020

• Increased headcount mainly due to acquisition of Sylak
• Increased consultancy expenses due to increased market activities
• Sylak included from 1 November 2020
• Transaction expenses related to Sylak acquisition at TNOK 1 212

Net finance Q4 2020

• Increased finance expenses related to increased contingent consideration liabilities
• Increased interest expenses due to increased interest-bearing debt compared to same period last year.

Key figures - Statement of Financial Position

(Amounts in TNOK)	At 31 December 2020	At 31 December 2019
ASSETS
Non-current assets
Goodwill	36 268	30 333
Intangible assets and tangible assets	21 668	21 336
Total non-current assets	57 936	51 670
Current assets
Receivables and inventories	10 851	3 178
Bank deposits	18 945	485
Total current assets	29 797	3 663
Total assets	87 733	55 333
EQUITY AND LIABILITIES
Total equity	20 349	14 542
Non-current liabilities
Contingent consideration	22 368	12 398
Non-current interest bearing liabilities	35 081	25 491
Total non-current liabilities	57 449	37 889
Current liabilities	9 935	2 902
Total liabilities	67 384	40 791
Total equity and liabilities	87 733	55 333

Assets

• Increased Goodwill due to acquisition of Sylak AB and currency
• Increased inventories and receivables mainly related to consolidation of Sylak AB from 1 November 2020
• Bank deposits increased due to rights issue completed in third quarter

Equity and liabilities

• Increased equity due to rights issue in third quarter which more than offset the result in 2020
• Increased Contingent Consideration liability due to adjusted sales forecast Sippi and change in discount rate
• Increased non-current liabilities due to increased interestbearing debt and lease liability

Key Figures

Cash Flow Statement fourth quarter 2020

• Negative cash flow from operations due to the result in the period
• Cash flow used in investing activities is mainly due to net cash effect of the Sylak acquisition at TNOK 6,838 and investment in tangible assets and Sippi.
• Group cash balance at TNOK 18,945 as of 31 December 2020

SUMMARY AND OUTLOOK

CEO Björn Larsson

Summary & Outlook

Summary

Continued rollout of Sippi® systems in clinical use

Sippi® in clinical use in ICU unit at major hospital in Northern Italy

Karolinska Nya Sjukhuset resuming clinical implementation at ICU

Observe Medical Nordic sales operations fully up and running and with strong sales, following acquisition of Sylak AB

Further strengthened commercial sales operations team

Strengthened Sippi® scientific validation with Martin Slettengren PhD thesis

Outlook

Continued focus on the Nordics and Europe

Continuous roll-out of Sippi® systems for clinical use

Strengthening the distributor network

Thank you!

OBSERVE MEDICAL

Finance calendar

Appendix

Experienced management team and board

Björn Larsson Chief executive officer

Per Arne Nygård Chief financial officer

Mikael Löfgren CTO/COO

Anders Nachtweij Sales Director

Terje Bakken Chairman of the board

Kristin Nyberg Board member

Kathrine Gamborg Andreassen Board member

Thomas Grünfeld Board member

Condensed Consolidated Statement of Comprehensive Income

(Amounts in NOK)	Q4 2020	Q4 2019	FY 2020	FY 2019
Operating revenues	2 920 001	94 389	2 961 334	176 650
Cost of materials	1 848 654	24 431	1 975 121	636 781
Gross result	1 071 348	69 958	986 212	-460 131
Employee benefit expenses	3 037 075	1 781 127	10 891 324	5 299 190
Other operating expenses	7 531 949	1 850 140	15 018 206	5 742 122
Operating expenses	10 569 024	3 631 266	25 909 530	11 041 311
Operating result before depreciation and amortisation (EBITDA)	-9 497 676	-3 561 309	-24 923 317	-11 501 443
Depreciation and amortisation	779 059	1 083 182	3 163 304	4 285 200
Operating result (EBIT)	-10 276 735	-4 644 490	-28 086 622	-15 786 642
Financial income and expenses
Financial income	956 910	966 007	3 852 756	365 329
Financial expenses	11 125 906	845 129	12 634 604	1 495 987
Net financial items	-10 168 996	120 878	-8 781 848	-1 130 658
Result before tax	-20 445 731	-4 523 613	-36 868 470	-16 917 301
Income tax expense
Result for the period	-20 445 731	-4 523 613	-36 868 470	-16 917 301
Other comprehensice income that may be reclassified subsequently to profit or loss
Currency translations differences	446 220	862 450	1 131 206	-1 363 229
Total comprehensive income/loss for the period	-19 999 511	-3 661 163	-35 737 264	-18 280 530

Condensed Consolidated Statement of Financial Position

(Amounts in NOK)	At 31 December 2020	At 31 December 2019
ASSETS
Non-current assets
Goodwill	36 268 318	30 333 459
Intangible assets	20 965 076	20 997 241
Tangible assets	702 757	339 069
Total non-current assets	57 936 151	51 669 769
Current assets
Trade receivables	1 460 179	65 625
Inventories	7 661 072	2 503 530
Other receivables and prepaid expenses	1 729 950	608 776
Bank deposits	18 945 476	485 207
Total current assets	29 796 676	3 663 138
Total assets	87 732 826	55 332 907

Condensed Consolidated Statement of Financial Positions

(Amounts in NOK)	At 31 December 2020 At 31 December 2019
EQUITY AND LIABILITIES
Total equity	20 349 125	14 541 734
Non-current liabilities
Non-current lease liabilities	260 356	77 945
Contingent consideration	22 367 995	12 398 226
Non-current interest bearing liabilities	34 820 640	25 413 198
Total non-current liabilities	57 448 990	37 889 369
Current liabilities
Trade payables	3 842 906	1 338 188
VAT and other public taxes and duties payables	2 348 302	499 466
Current lease liabilities	135 912	200 622
Other current liabilities	3 607 590	863 528
Total current liabilities	9 934 710	2 901 804
Total liabilities	67 383 701	40 791 173
Total equity and liabilities	87 732 826	55 332 907

Cash Flow Statement

(Amounts in NOK)	Q4 2020	Q4 2019	FY 2020	FY 2019
Cash flow from operating activities
Result before tax	-20 445 731	-4 523 613	-36 868 470	-16 917 301
Depreciation and impairment	779 059	1 083 182	3 163 304	4 285 200
Change in net finance, no cash effect	10 239 116	-1 030 310	8 683 650	221 226
Change in inventories	377 457	-110 417	-1 844 015	-172 980
Change in trade receivables and other receivables	-949 633	-214 098	-829 286	404 930
Change trade account payables and other current liabilities	5 060 839	73 262	6 053 473	-2 300 546
Changes in other current items	0	507 400	0	507 400
Net cash flow from operating activities	-4 938 893	-4 214 594	-21 641 344	-13 972 072
Cash flow used in investing activities
Net cash effect of business combination	-6 838 103	0	-6 838 103	0
Purchase / disposal of tangible and intangible assets	-673 014	-1 208 507	-1 238 513	-2 140 695
Net cash flow used in investing activities	-7 511 117	-1 208 507	-8 076 616	-2 140 695
Cash flow from financing activities
Change in net interest -bearing debt	0	5 907 103	6 901 271	16 380 771
Net proceeds from share issue	0	1 000 000	41 392 194	1 000 000
Repayment share capital	0	-1 000 000	0	-1 000 000
Payments of lease liabilities	-9 143	-53 866	-124 232	-194 066
Net cash flow from financing activities	-9 143	5 853 237	48 169 232	16 186 705
Exchange rate fluctuations	-25 139	-214 543	8 998	-209 876
Change in cash	-12 484 293	215 593	18 460 269	-135 938
Bank deposits start of period	31 429 769	269 614	485 207	621 144
Bank deposits end of period	18 945 476	485 207	18 945 475	485 207

Top 20 Shareholders

Rank	Name	Number of shares	% of top 20	% of total	Country
1	NAVAMEDIC ASA	4 222 727	25,40 %	21,54 %	Norway
2	INGERØ REITEN INV. COMPANY AS	3 939 394	23,69 %	20,09 %	Norway
3	RO, LARS	1 500 000	9,02 %	7,65 %	Norway
4	UBS Switzerland AG	1 417 522	8,53 %	7,23 %	Switzerland
5	ARTAL AS	990 407	5,96 %	5,05 %	Norway
6	ALPINE CAPITAL AS	650 000	3,91 %	3,32 %	Norway
7	SOLEGLAD INVEST AS	586 668	3,53 %	2,99 %	Norway
8	NORDA ASA	516 570	3,11 %	2,63 %	Norway
9	TRANBERGKOLLEN INVEST AS	500 000	3,01 %	2,55 %	Norway
10	LEIKERANE AS	400 179	2,41 %	2,04 %	Norway
11	LAPAS AS	348 326	2,10 %	1,78 %	Norway
12	MP PENSJON PK	262 025	1,58 %	1,34 %	Norway
13	GINNY INVEST AS	230 030	1,38 %	1,17 %	Norway
14	KRAEBER Verwaltung GMBH	214 850	1,29 %	1,10 %	Germany
15	PHILIP HOLDING AS	210 000	1,26 %	1,07 %	Norway
16	CAM AS	151 000	0,91 %	0,77 %	Norway
17	BJØRNTVEDT, EIVIND	130 000	0,78 %	0,66 %	Norway
18	NORDNET BANK AB	126 369	0,76 %	0,64 %	Sweden
19	ABC INVEST AS	120 000	0,72 %	0,61 %	Norway
20	BUKKEVIK INVESTERING AS	110 160	0,66 %	0,56 %	Norway
	Total number owned by top 20	16 626 227	100,00 %	84,80 %
	Total number of shares	19 605 457

Definitions of Alternative Performance Measures (APM)

The APMs are regularly reviewed by management and their aim is to enhance stakeholders' understanding of the company's performance. APMs presented may be determined or calculated differently by other companies.

Gross result: Operating revenues less direct cost of materials as cost price, transportation and warehouse cost of materials for sale. Gross result is a sub-total in the condensed consolidated statement of income.

EBIT: Earnings before net financial items, results from associates and joint ventures and income tax. EBIT is a sub-total in the condensed consolidated statement of income.

EBITDA: Earnings before interest, tax, depreciation and amortization. EBITDA is a sub-total in the condensed consolidated statement of comprehensive income.

Operating expenses: Employee benefit expenses plus other operating expenses.

Earnings per share: Result after tax divided at average number of outstanding shares over the period

Copyright and Disclaimer

Copyright

Copyright of all published material including photographs, drawings and images in this document remains vested in Observe Medical and third party contributors as appropriate. Accordingly, neither the whole nor any part of this document shall be reproduced in anyform nor used in any manner without express prior permission and applicable acknowledgements. No trademark, copyright or other noticeshall be altered or removed from any reproduction.

Disclaimer

This Presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements and this Presentation are based on current expectations, estimates and projections about economic. Observe Medical ASA believes that its expectations and the Presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation. Observe Medical ASA is making no representation or warranty, expressed or implied, as to the accuracy,

reliability or completeness of the Presentation, and neither Observe Medical ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use. Observe Medical ASA consists of several legally independent entities, constituting their own separate identities. Observe Medical is used as the common brand or trade mark for most of these entities. In this presentation we may sometimes use "Observe Medical", "we" or "us" when we refer to Observe Medical companies in general or where no useful purpose is served by identifying any particular Observe Medical company.