Optomed Plc: Financial Statements Bulletin, January – December 2023

Optomed Plc         Stock Exchange Release    15 February 2024 at 9:00, Helsinki

Optomed Plc: Financial Statements Bulletin, January – December 2023

October – December 2023

• Revenue decreased by 8.8 percent to EUR 3.7 (4.0) million.
• Devices segment revenue decreased by 19.8 percent to EUR 1.0 (1.3) million.
• Software segment revenue decreased by 3.7 percent to EUR 2.6 (2.7) million.
• EBITDA and adjusted EBITDA amounted to EUR -0.8 (-0.3) million corresponding to -20.7 (-8.7) percent of revenue.
• Optomed expects its full year 2024 revenue to grow compared to 2023.
• Additional data regarding Aurora-AEYE AI fundus camera has been submitted to the FDA after the review period and Optomed is currently waiting to receive FDA feedback.

January – December 2023

• Revenue increased by 3.0 percent to EUR 15.1 (14.7) million.
• Devices segment revenue decreased by 7.2 percent to EUR 5.0 (5.4) million.
• Software segment revenue increased by 8.9 percent to EUR 10.1 (9.3) million.
• Adjusted EBITDA amounted to EUR -1,5 (-2,0) million corresponding to -9.7 (-13.3) percent of revenue.

Key figures

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

Optomed presents Adjusted EBITDA and Adjusted operating result as alternative performance measures to enhance comparability of business performance between reporting periods. In October - December 2023, items affecting comparability amounted to EUR 311 thousand and related to increased credit risk with respect to an overdue trade receivable from a customer in China.

CEO Review

We are pleased to present the year-end report for the fiscal year 2023. Despite facing a relatively soft last quarter, we are proud to report a solid overall growth of 3% in our business compared to the previous year. Our device business segment is very cyclical which makes it challenging in comparing quarters unlike in our software business segment which delivers relatively stable revenue stream over the quarters. The year 2023 presented a mix of opportunities and hurdles, with the pending FDA clearance for artificial intelligence powered Aurora-AEYE AI fundus camera being a significant focus for the company.

Our financial performance for the full year 2023 reflects a steady growth trajectory compared to the previous year. Despite encountering challenges in the last quarter due to the absence of large one-off deals, our overall performance remains good. We attribute this growth to strategic investments in product development, marketing efforts, and expanding our market reach.

Throughout 2023, we continued to prioritize innovation and product development to meet the evolving needs of our customers. We continued our R&D efforts to develop both in software and hardware segments products and services aimed at improving diagnostics and patient care. Additionally, we focused on strengthening our distribution channels and forging strategic partnerships to enhance our market presence.

The last quarter of 2023 presented challenges, with comparable results from the previous year proving to be particularly demanding. However, we remained resilient and agile in our approach, adapting to market dynamics and leveraging opportunities for growth. Despite these challenges, we are confident in our ability to overcome obstacles and drive sustainable growth in the coming years.

One of the key targets of 2023 was the pending FDA clearance for our Aurora- -AEYE AI fundus camera. While the resolution was not achieved by the end of the fiscal year, the process is going forward. This clearance will not only validate the efficacy and safety of our product but also open new avenues for revenue generation and market expansion.

Looking ahead, we are cautious but optimistic about the prospects for Optomed in 2024. With the pending completion of the FDA process for our handheld AI fundus camera, we see accelerated growth and increased market penetration. We remain committed to driving innovation, delivering value to our customers, and creating long-term shareholder value.

In conclusion, despite facing challenges in the last quarter, 2023 was a satisfactory year for Optomed. We are confident in our ability to navigate the evolving landscape of the market and capitalize on emerging opportunities. We thank our employees, customers, and shareholders for their continued support and look forward to a successful year ahead.

Sincerely,

Juho Himberg

CEO

Outlook 2024

Optomed expects its full year 2024 revenue to grow compared to 2023.

Telephone conference

A telephone conference for analysts, investors and media will be arranged on 15 February 2024 at 11.00 EET, (10.00 CET). 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 9 856 263 00

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 656 849 980#

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 2023

In October - December 2023, Group revenue decreased by 8.8 percent to EUR 3,660 (4,013) thousand. Devices segment had a slow quarter and the revenue decreased by 19.8 percent to EUR 1,023 (1,275) thousand. The Software segment revenue decreased by 3.7 percent to EUR 2,637 (2,738) thousand. Software segment’s growth was muted as compared to the extremely strong comparison period where the segment grew 23.2 percent.

In October - December 2023, the gross margin decreased to 68.0 from 68.9 percent of last year.

EBITDA decreased and it was EUR -757 (-347) thousand. The decrease was mainly due to weakened gross profit.

EBIT decreased and it was EUR -1,319 (-870) thousand.

In October - December 2023, net financial items amounted to EUR -230 (-546) thousand and consisted mainly of interest payments to financial institutions and the translation effect of CNY and USD to EUR.

January – December 2023

In January - December 2023, Group revenue increased by 3.0 percent to EUR 15,100 (14,660) thousand. The growth was driven by the Software segment as the Devices segment’s revenue decreased by 7.2 percent while the Software segment’s revenue increased by 8.9 percent.

The gross margin decreased to 68.2 percent from 68.7 percent last year. During the comparison period, the gross margin was negatively affected by an inventory provision of EUR 251 thousand, and Optomed was granted a loan waiver in the amount of EUR 841 thousand treated as other operating income and, therefore, affecting the gross margin positively. The gross margin for 2023 adjusted for grants and other operating income is 67.8 percent compared to comparison period 62.8 percent.

EBITDA amounted to EUR -1,781 (-1,952) thousand and adjusted EBITDA was EUR -1,470 (-1,952) thousand. The comparison period EBITDA was also positively affected by the previously mentioned loan waiver, and the comparison period EBITDA adjusted for grants and other operating income would have been EUR -2,809 thousand.

EBIT was EUR -3,974 (-5,097) thousand and adjusted EBIT was EUR -3,663 (-5,097) thousand. The improvement was due to the improved gross profit.

Net financial items amounted to EUR -545 (-454) thousand and consisted mainly of interest payments to financial institutions and the translation effect of CNY and USD to EUR.

Cash flow and financial position

October – December 2023

In October - December 2023, the cash flow from operating activities amounted to EUR -457 (-109) thousand. Net cash used in investing activities was EUR -583 (-557) thousand and relates to capitalized development expenses. Net cash from financing activities amounted to EUR -1,415 (3,531) thousand. During the quarter, the company repaid a term loan of EUR 1,000 thousand prior to its maturity date in response to evolving interest rate condition.

Consolidated cash and cash equivalents at the end of the period amounted to EUR 7,118 (8,524) thousand. Interest-bearing net debt was EUR -3,768 (-3,251) thousand at the end of the period.

Net working capital was EUR 2,460 (3,738) thousand at the end of the period.

Optomed has large trade receivables from a Chinese customer. The customer missed several payments during H2 and, consequently, the specific loss allowance weighted average loss rate was increased from 30% to 50% in Q3. The payment schedule negotiations continue with the said customer. The total amount of the receivable in the balance sheet is now EUR 767 thousand.

January – December 2023

In January - December 2023, the cash flow from operating activities amounted to EUR -615 (-2,370) thousand.

Net cash used in investing activities was EUR -2,412 (-3,029) thousand and relates to capitalized development expenses.

Net cash from financing activities amounted to EUR 1,609 (7,003) thousand.

Optomed completed a directed share issue consisting of 1,589,042 shares and collected gross proceeds of approximately EUR 4.3 million in September 2023.

Devices segment

Optomed has two synergistic business segments: Devices and Software.

The Devices segment develops, commercializes, and manufactures easy-to-use, and affordable handheld fundus cameras, that are suitable for any clinic for screening of various eye diseases, such as diabetic retinopathy, glaucoma and AMD (Age Related Macular Degeneration).

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

October - December 2023

In October - December 2023, the Devices segment revenue decreased by 19.8 percent to EUR 1,023 (1,275) thousand. In spite the revenue continued to grow in the global distributor sales and in the US, the revenue decreased due to continuing weak trajectory of the OEM sales.

The gross margin was 57.7 (67.7) percent. Gross margin adjusted for grants and other operating income was 57.7 (69.5) percent. The comparison period gross margin was supported by project work for an OEM client.

EBITDA was EUR -570 (-253) thousand or -55.7 (-19.8) percent of revenue. The decline in the EBITDA was due to the declined revenue and gross margin.

January - December 2023

In January - December 2023, the Devices segment revenue decreased by 7.2 percent to EUR 5,009 (5,398) thousand. The global distributor sales and USA grew strongly; however, the growth was offset by weak OEM sales.

The gross margin decreased to 58.8 percent from 69.3 percent and gross margin adjusted for grants and other operating income increased to 58.8 (53.4) percent.

EBITDA was EUR -1,264 (-670) thousand or -25.2 (-12.4) percent of revenue. During the comparison period, Optomed was granted a loan waiver in the amount of EUR 841 thousand treated as other operating income that had a corresponding effect on both gross margin and EBITDA.

Software segment

Optomed has two synergistic business segments: Devices and Software.

The Software segment develops and commercializes screening software for diabetic retinopathy and cancer screening for healthcare organizations. The segment also distributes off-the-shelf products from selected partners to supplement its own solutions and expertise and provides software consultation to support the Devices segment screening solution projects.

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

October – December 2023

In October - December 2023, the Software segment revenue decreased by 3.7 percent to EUR 2,637 (2,738) thousand against very strong comparison period figures when the segment grew 23.2 percent.

Gross margin increased and was 72.0 (69.4) percent. EBITDA was EUR 624 (706) thousand or 23.7 (25.8) percent of revenue.

January – December 2023

In January - December 2023, the Software segment revenue increased by 8.9 percent to EUR 10,091 (9,263) thousand.

Gross margin increased and it was 72.8 (68.3) percent. EBITDA was EUR 2,629 (2,079) thousand or 26.1 (22.4) percent of revenue. The increased profitability was driven by improved performance of the healthcare solution sales.

Group-wide expenses

Group-wide expenses relate to functions supporting the entire group such as treasury, group accounting, marketing, legal, HR, and IT.

October – December 2023

Group-wide operating expenses amounted to EUR 814 (803) thousand.

January – December 2023

Group-wide operating expenses amounted to EUR 3,155 (3,368) thousand.

Personnel

Number of personnel at the end of the reporting period.

Corporate Governance

Optomed complies with Finnish laws and regulations, Optomed’s Articles of Association, the rules of Nasdaq Helsinki and the Finnish Corporate Governance Code 2020 issued by the Securities Market Association of Finland. The code is publicly available at http://cgfinland.fi/en/. Optomed’s corporate governance statement 2022 is available on the company website www.optomed.com/investors/.

Annual General Meeting

The Annual General Meeting held on 10 May 2023 adopted the financial statements for the financial period ended on 31 December 2022 and discharged the members of the Board of Directors and the CEO from liability for the financial period ended on 31 December 2022. The Annual General Meeting decided to reject the remuneration report for governing bodies. The decision made is advisory.

The Annual General Meeting resolved in accordance with the proposal of the Board of Directors that no dividend will be paid for the year 2022.

The number of members of the Board of Directors was confirmed as six. Seppo Mäkinen, Petri Salonen, Reijo Tauriainen and Anna Tenstam were re-elected as members of the Board and Catherine Calarco and Ty Lee were elected as new members of the Board.

The Annual General Meeting confirmed the annual Board remuneration as follows:

• Chairman of the Board EUR 36,000
• members of the Board EUR 18,000.

In addition, a meeting fee in the amount of EUR 300 is paid to the Chairpersons and EUR 200 to members of the Committees for each Committee meeting. 40 percent of the Board remuneration is paid in Optomed shares and 60 percent in cash. The remuneration will be paid once a year in August, after Optomed’s H1 report has been announced.

The Annual General Meeting decided to re-elect KPMG Oy Ab, a firm of authorized public accountants, as the Company’s auditor. KPMG Oy Ab has informed the Company that Authorized Public Accountant Heidi Hyry acts as the auditor with principal responsibility. Auditor’s remuneration will be paid in accordance with an invoice approved by the Company.

The Annual General Meeting approved the authorization for the Board of Directors to repurchase Optomed’s own shares and to accept them as pledge. Altogether no more than 1,654,135 shares may be repurchased or accepted as pledge. The authorization will be valid until the earlier of the end of the next Annual General Meeting or 18 months from the resolution of the Annual General Meeting.

The Annual General Meeting authorized the Board of Directors to decide on the issuance of shares and other special rights entitling to shares referred to in Chapter 10, Section 1 of the Finnish Companies Act. The number of shares to be issued based on this authorization may not exceed 1,654,135. The Board of Directors is authorized to resolve on all terms and conditions of the issuance of shares and special rights entitling to shares, including the right to derogate from the pre-emptive right of the shareholders. The authorization will be valid until the earlier of the end of the next Annual General Meeting or 18 months from the resolution of the Annual General Meeting.

The Annual General Meeting decided to amend the Articles of Association so that the minimum number of the members of the Board of Directors was reduced from five members to four.Decisions of the Board of Directors:

At its meeting held after the Annual General Meeting, the Board of Directors elected from among its members Petri Salonen as its Chairman. The committee members were elected as follows:

Audit Committee:

• Reijo Tauriainen (Chairman)
• Catherine Calarco
• Anna Tenstam

Remuneration Committee:

• Seppo Mäkinen (Chairman)
• Catherine Calarco
• Ty Lee

Shares and shareholders

The Company has one share series with all shares having the same rights. At the end of the review period Optomed Plc's share capital consisted of 18,130,397 shares and the Company held 353,973 shares in the treasury which approximately corresponds to 1.95 percent of the total amount of the shares and votes. Additional information with respect to the shares, shareholding and trading can be found on the Company’s website www.optomed.com/investors/.

Flagging notifications

5.6.2023 Cenova Capital notified that its total holdings in Optomed shares and votes has decreased to 9.96% of all of the registered shares in Optomed.

2.11.2023 Universal-Investment-Gesellschaft mit beschränkter Haftung notified that its total holdings in Optomed shares and votes has decreased to 4.98 per cent of all of the registered shares in Optomed.

4.12 2023 Cenova Capital notified that its total holdings in Optomed shares and votes has decreased to 3.81% of all of the registered shares in Optomed.

Risks and uncertainties

Optomed has reviewed its complete risk position after the year end of 2023. The complete risk position is as follows:

AURORA AEYE FDA CLEARANCE PROCESS

Optomed is in the process to obtain a US FDA clearance for its AI handheld camera Aurora AEYE

Optomed and its partner AEYE Health have a common goal to obtain the US FDA clearance for the handheld AI fundus camera Aurora AEYE. The Company has limited visibility to the FDA decision making process and the Company may be adversely affected if the process is delayed or requires significant additional work or investments from the Company.

PUBLIC PROCUREMENT

In addition to its healthcare customers, Optomed’s Software segment provides development services also to a non-healthcare Finnish governmental agency under a contract the term of which is ending in the beginning of July 2024.

The new contract with the agency is subject to a public procurement process. There is a risk that the Company fails to win the procurement process and the new contract. In case the Company fails to win the new contract, the impact on 2024 revenue is expected to be approximately EUR 0.5M-1M.

PANDEMICS 

In 2020, the COVID-19 pandemic led to widespread lockdowns and had significant effects on the supply chain and revenue streams of various companies.

The Company may be adversely affected if a new outbreak of COVID-19 or another disease causes a new pandemic and lockdowns.

HIGH QUALITY PRODUCTS 

The quality and safety of the Company's products are extremely important for Optomed's competitiveness 

The Company may be adversely affected if it fails to continuously develop and update its fundus cameras and software solutions or to identify or integrate new products and product platforms into its offering. The Company’s or its partners' products may also be subject to clinical trials, the results of which are critical for the products’ regulatory approvals and market acceptance. 

STRATEGY AND M&A 

The Company may be unsuccessful in fulfilling its strategy or the strategy itself may be unsuccessful 

The successful implementation of the Company’s strategy depends upon a number of factors, some of which are completely or partially outside the Company’s control. The Company has an appropriate risk management function in the context of the size of the Company's operations, however, it may not be able to identify or monitor all relevant risks and determine efficient risk management procedures and responsible persons that may again affect the strategy. The Company is also dependent on its ability to develop and manage varying routes-to-market for its products, the efficiency of its sales channels and its customer and distributor relationships. Further, the Company has an opportunistic view on M&A which by nature include inherent risks. Failure of strategy may force the Company to record write-downs on its goodwill. 

MARKET AND COMPETITION 

Optomed operates in a niche market that is highly competitive 

Optomed operates in the fundus camera market that is developing fast and the competition is sometimes fierce. The market acceptance of the Company’s products and solutions is important for our future growth. Optomed recognizes a possibility of new market changing products entering the market. Further, in certain key geographies the client base is limited and, therefore, a loss of a key customer in a key market may adversely affect our revenue streams. 

EXTERNAL ECONOMIC AND POLITICAL RISKS AND NATURAL DISASTERS 

Optomed operates globally and is thus exposed to various external risks 

The Company is exposed to natural disasters taking place in countries where it operates and general and country specific economic political and regulatory risks, which could entail volatile sales in key markets.

SUPPLY CHAIN 

Optomed's business is dependent on the effectiveness of purchasing materials, manufacturing and timely distribution  

The Company is dependent on contract manufacturers for functioning, efficient and effective production and product assembly. Further, the Company is dependent on suppliers which may affect the Company’s ability to supply its customers in a timely manner.

SYSTEMS AND INFORMATION 

Our operations are increasingly dependent on IT systems 

Disruption of the Company's IT systems could inhibit our business operations in a number of ways, including disruption to financial reporting, sales, production and cash flows. 

LITIGATION 

Optomed operates globally and pursues double-digit annual organic growth in medium term 

Optomed may not always be able to reach the best contractual terms with stakeholders. The Company may be negatively affected by legal or administrative proceedings directed at the Company or third parties due to back-to-back liability, or other disputes and claims including product liability, especially in terms of medical devices, and intellectual property rights related items. 

TRADE SECRETS AND PATENTS 

The technologic capabilities are a competitive advantage that the Company must be able to protect 

The Company may not be able to protect its trade secrets and know-how which could lead to losing the competitive advantage the Company has. At the same time, the Company maybe forced to take actions against parties that violate our IPRs. 

TALENT & ORGANISATION 

A skilled workforce and agile organisation are essential for the continued success of our business  

The Company may be adversely affected if it would lose its key personnel or fails to attract the right talent.  

FINANCE 

The Company needs external financing to operate and is not currently profitable 

The Company is dependent on external financing and the Company may have difficulties accessing additional financing on competitive terms or at all which may again contribute the Company's liquidity risks. The Company is also subject to credit and counterparty risks through its trade receivables. Optomed has a large credit risk concentration related to a major Chinese customer whose payments are late. The payments from the customer have continued but materially slower than originally agreed. 

FOREX 

We operate globally and are thus exposed to currency exchange risks 

The Company is exposed to foreign exchange rate risks arising from fluctuations in currency exchange rates, especially with regards USD, EUR and RMB. Currency rates, along with demand cycles, can result in significant swings in the prices of the raw materials needed to produce our goods and our sales prices and OPEX. 

LEGAL AND REGULATORY 

Compliance with laws and regulations is an essential part of Optomed’s business operations 

Optomed together with its suppliers and distributors operate globally and are subject to various national and regional regulations in the areas of medical devices, product safety, product claims, data protection, intellectual property rights, health and safety, competition, employment, taxes and anti-money laundering and anti- bribery & corruption (AML & ABC).  Further, many of the Company's devices are subject to various medical related assessment (including clinical trials), clearance and approval processes that are required to place our products the market. Failure to comply these might lead to loss of sales permits in different markets, product recalls, reputational issues, civil and criminal actions leading to various direct and indirect damages to Optomed and its employees that are not completely covered by Optomed's insurance coverage. Especially, failures with respect to compliance with certain medical devices related regulations and processes may hinder the Company's devices' market access.

The Board’s proposal for the distribution of profit

The parent company’s non-restricted equity on 31 December 2023, was EUR 24,937,168.01 and the net loss for the financial year was EUR 2,583,822.23. The Board of Directors proposes to the Annual General Meeting that no dividend will be paid and the non-restricted equity on the outstanding 18,130,397 shares shall be retained and carried forward. 

Audit review

This financial report has been audited by the company's auditors.

Financial reporting in 2024

• 7 May 2024                Interim Report for 1 January – 31 March 2024
• 8 August 2024           Half-Year Financial Report for 1 January – 30 June 2024
• 7 November 2024      Interim Report for 1 January – 30 September 2024

For more information, contact

Sakari Knuutti, CFO

E-mail: sakari.knuutti@optomed.com               

Juho Himberg, CEO

E-mail:  juho.himberg@optomed.com                   

About Optomed

Optomed is a Finnish medical technology company and one of the leading providers of handheld fundus cameras. Optomed combines handheld fundus cameras with software and artificial intelligence with the aim to transform the diagnostic process of various eye diseases, such as rapidly increasing diabetic retinopathy. In its business Optomed focuses on eye screening devices and software solutions related R&D in Finland and sales through different channels in over 60 countries.

www.optomed.com

Alternative Performance Measures

Optomed uses certain alternative performance measures (APMs) with the purpose to provide a better understanding of how the business develops. These APMs, as defined, cannot be fully compared with other companies’ APMs.

Reconciliation of Alternative Performance Measures

Consolidated income statement

Consolidated condensed comprehensive income statement

Consolidated balance sheet

Consolidated statement of changes in shareholders’ equity

Equity attributable to owners of the parent company

Equity attributable to owners of the parent company

Consolidated cash flow statement

Selected notes

Corporate information and basis of accounting

Corporate information

Optomed is a Finnish medical technology group (hereafter ‘Optomed’ or ‘Group’) that specialises in handheld fundus cameras and solutions for screening of blinding eye diseases, established in 2004.

The Group’s parent company, Optomed Plc (hereafter the ‘Company’), is a Finnish public limited liability company established under the laws of Finland, and its business ID is 1936446-1. It is domiciled in Oulu, Finland and the Company’s registered address is Yrttipellontie 1, 90230 Oulu, Finland.

Basis of accounting                                                                                                                                       

Optomed’s consolidated financial statements has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The preparation of this interim report also takes into account the amendments to IFRS standards that have become effective by January 1, 2023. This financial report has been prepared in accordance with IAS 34 Interim Financial Reporting and it should be read in conjunction with Group`s annual consolidated financial statements

All presented figures have been rounded so the sum of the individual figures may differ from the presented total figure.

Financial ratios have been calculated using exact figures.

This report has been authorized for issue by the company`s board of directors.

Critical management judgments and related estimates and assumptions                                                                                                                                                                                                                  

The preparation of financial statements under IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the end of the reporting period as well as the reported amounts of income and expenses during the reporting period. These estimates and assumptions are based on historical experience and other justified assumptions, such as future expectations, that Optomed management believes are reasonable under the circumstances at the end of the reporting period and the time when they were made.                                                                                                                                                                                                                        

Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates. The estimates and underlying assumptions are reviewed on an on-going basis and when preparing financial statements. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based, or as a result of new information or more experience. Such changes are recognized in the period in which the estimate or the assumption is revised.                  

Use of judgment and estimates

During the 2023 the Russian invasion of Ukraine has not had a material effect on Optomed's business as the sales to the area have been limited.     

Judgements that management has made in the process of applying accounting policies and that have the most significant effect on the amounts recognised in the financial statements, relate to the following areas:

— Determining trade receivables credit risk

— capitalisation of development costs: determination of development expenditure eligible for capitalisation

— impairment testing of development expenditures

Reportable segments

Q4/2023

Q4/2022

2023

2022