MEDICALGORITHMICS S.A. sums up 2018 and announces changes
The Medicalgorithmics Group, a provider of advanced cardiac solutions, has published its consolidated financial figures for 2018. These figures are as follows: PLN 199.4 million of consolidated revenue, PLN 36.3 million of EBITDA and PLN 18.9 million of net profit. In 2018, the Group continued to pursue its business strategy based on the innovative PocketECG system.Consolidated sales revenue of the Group stood at PLN 199.4 million and remained relatively stable compared to 2017 (-2% y/y, mainly due to the weakening of USD against PLN and lower sales to partners, including AMI/Spectocor, partially offset by increased organic revenue at Medi-Lynx). EBITDA for 2018 amounted to PLN 36.3 million, compared to PLN 54.3 million in 2017 (-33%). Net profit earned in 2018 reached PLN 18.9 million, down 44% on 2017 (PLN 33.7 million in 2017), and net profit attributable to shareholders of the parent amounted to PLN 14.4 million (vs PLN 25.5 million in 2017).
The financial performance in 2018 was largely affected by an increase in operating expenses, with employee benefits expense representing the most significant component (64%). The average annual increase in staff costs at Medi-Lynx, resulting from the acquisition of AMI/Spectocor’s client base, was partially offset by the change in the average USD exchange rate, lower valuation of the incentive scheme and lower level of remuneration paid to the Management Board of Medicalgorithmics S.A. It should also be noted that following the verification of sales performance, a decision was made to change the business model and, consequently, the headcount at Medi-Lynx was reduced in Q4 2018 and in early 2019.
Despite weaker performance, the Group has maintained a strong cash position. In 2018, Medicalgorithmics generated PLN 44.2 million from operating activities, which translated into an increase in the cash position to more than PLN 60 million at the end of 2018. At the end of the year, the Net Debt/EBITDA ratio fell below 0.2x.
In 2018, the Group earned all of its revenue from the sales of PocketECG system. This revenue comprised the revenue from sales of devices in the amount of PLN 1.8 million (PLN 0.7 million in 2017), representing 0.9% of total revenue (0.4% in 2017), and revenue from sales of services in the amount of PLN 197.6 million (PLN 202.6 million in 2017), representing 99.1% of total revenue (99.6% in 2017).
“It was a year of intense efforts to consolidate and expand the business. In the fourth quarter of 2018 alone, we posted consolidated revenue of PLN 56.9 million (+12.7 q/q), EBITDA of PLN 13.6 million (+6.1 q/q) and net profit of PLN 8.0 million (-13.7 q/q, including PLN 6.0 million of profit attributable to shareholders of the parent) which was a great accomplishment compared to full year’s figures. However, we are not satisfied with our performance throughout 2018. For this reason, in the last quarter of 2018 we decided to launch a review of strategic options for the Company. We consider attracting a strategic or financial investor, entering into a strategic alliance, or perhaps executing a transaction of a different structure. At the same time, we are carrying out in-depth analyses of the possibilities to change the sales model in the USA, aimed primarily at restoring revenue growth rates – there are many indications that this is the only way to achieve medium- and long-term development objectives. We believe that the selection of a strategic option will be an important factor shaping the Group’s development, and I hope that it will also contribute to the expansion of the scale of operations and, ultimately, to the increase in the value of Medicalgorithmics.” – says Marek Dziubiński, Medicalgorithmics CEO.
As part of the expansion of sales of the PocketECG system on new markets, the Medicalgorithmics acquired new commercial partners in 2018. In June 2018, the Company signed an agreement for the distribution and sales of the arrythmia diagnostics system with a new strategic partner from Canada, m-Health Solutions, Inc. In the same year, the Group was expanded to include Medicalgorithmics Polska Sp. z o.o., a company with long-lasting relations with representatives of many health care institutions in Poland. At the same time, the Group expanded its collaboration with the Scandinavian-based Vingmed Group in the area of sales of the cardiac arrhythmia diagnostics system. Contracts have been signed with Vingmed AS from Norway and Vingmed AB from Sweden.
The analysis of the possibility to change the Group’s business model in the USA and preparation for the strategic options review entailed the necessary changes in the Medicalgorithmics team.
In October 2018, Peter G. Pellerito was appointed CEO of Medi-Lynx. Peter Pellerito is primarily responsible for delivering the Group’s strategic medium-term objectives, i.e. changing the business model by signing long-term service contracts directly with key private insurers (in-network contracts). The Group assumes that if this goal is achieved, although it will result in lower reimbursement rates for a single service, the Group will secure access to new clients and, as a consequence, significantly increase the sales volume. Medicalgorithmics is of the opinion that this strategy will allow Medi-Lynx to achieve sustained annual revenue growth and implement its business growth strategy, as well as increase the security and stability of Medi-Lynx’s revenue.