Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Second-half revenue increased by 14% compared to the first half, indicating a strong recovery.
- The trophon business alone delivered a profit before tax of $40.4 million, representing 24% of sales.
- Nanosonics Ltd (NNCSF, Financial) has a strong cash position with $130 million in cash and cash equivalents and no debt.
- The company has reached 50% market penetration in North America for its trophon units, with strategies in place to access the remaining market.
- Significant progress in regulatory and market expansion efforts, including a new partnership with Ecolab in France and ongoing efforts in Japan and China.
Negative Points
- First-half revenue was negatively impacted by hospital budget constraints, leading to an overall modest annual revenue growth of 2%.
- Operating expenses increased by 10% year-over-year, impacting overall profitability.
- Gross profit margin decreased to 77.9%, down 0.8 points from the previous year, partly due to a one-off slowdown in manufacturing.
- The upgrade opportunity outside North America is limited due to the lower installed base of older devices.
- The CORIS device is still undergoing FDA approval, with no revenue contribution expected in FY25, while continuing to incur significant R&D and commercialization costs.
Q & A Highlights
Q: Can you comment on what you're seeing in terms of hospital budgets and whether or not those have eased?
A: Michael Kavanagh, CEO: Hospital budget constraints still exist, but they seem to have eased somewhat. We feel confident in our strategies and pipeline for FY25, which should support our projected growth in capital sales.
Q: Has the pipeline grown for both new units as well as upgrades?
A: Michael Kavanagh, CEO: Yes, the pipeline is tracking well and is in line with our projections. We are confident in our pipeline growth and identification of opportunities.
Q: Have you had any opportunities that were lost from the pipeline?
A: Michael Kavanagh, CEO: Not really, especially not in North America. If something in the pipeline ages significantly, we remove it and start again, but we haven't lost any significant opportunities.
Q: Is the time to convert sales opportunities improving or reducing?
A: Michael Kavanagh, CEO: The timeline to convert has improved for both new installed base and upgrades, and we are maintaining these improved timelines into the start of this year.
Q: Can you give more context around the momentum in installed base for FY25?
A: Michael Kavanagh, CEO: We expect the installed base to grow more than in FY24, with North America contributing around 2,000 units and other regions contributing more, aiming for closer to 3,000 new IB over the coming years.
Q: How should we think about the mix of OpEx growth across the trophon business versus the CORIS business?
A: Michael Kavanagh, CEO: Non-trophon OpEx was around $27 million, mostly associated with CORIS. We anticipate further investments in CORIS, especially in commercialization. Overall, we expect revenue to grow faster than total OpEx, including CORIS-related expenses.
Q: Can you update us on your M&A strategy and focus?
A: Michael Kavanagh, CEO: We are focusing more on M&A to expand our product portfolio, particularly in instrument reprocessing. We have hired a dedicated resource in Europe to identify opportunities, especially in endoscope reprocessing.
Q: Were the FDA's questions on the CORIS device expected, and do they affect the timetable?
A: Michael Kavanagh, CEO: The questions were expected and are a normal part of the regulatory process. They do not affect our timetable, and we are working diligently to address them.
Q: Can you explain the strong consumable sales in the second half, particularly in the US?
A: Michael Kavanagh, CEO: The strong sales were driven by higher ultrasound procedural volumes and growth in service contracts. We expect this trend to continue, correlated with new installed base growth and upgrades.
Q: Are you seeing a regulatory push that could drive significant sales uplift in other regions?
A: Michael Kavanagh, CEO: We are confident in further growth in Europe and Japan, but significant regulatory-driven sales uplift will take time. We aim for a run rate of 3,000 new units globally over the next two to three years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
