Nexstim H1'24 earnings preview: Growth supported by recurring revenue

Translation: Original comment published in Finnish on 8/14/2024 at 7:00 am EEST.

Nexstim will publish its H2 report on Friday, August 16. After a strong H2'23, Nexstim's system sales have continued at the pace of the comparison period in the seasonally slower H1, according to press releases. However, with the new NBS6 system and continued recurring revenue growth, we expect higher revenues and lower losses than in the prior year.

Growth expected as average price increases and recurring revenue continues to grow

System sales in H1 were in line with the comparison period, with Nexstim announcing six deals during the period. H1 is seasonally quieter than the rest of the year as hospitals make their purchases towards the end of the year. Our H1 revenue forecast is 3.4 MEUR, which would represent an increase of 0.9 MEUR year-on-year. Our growth expectations are based on the assumption of higher NBS6 average revenue and recurring revenue growth, which we saw signs of in the H2 report. Nexstim does not necessarily report all system sales, so there is some uncertainty in our forecast. It is difficult to accurately forecast the revenue of system sales because systems can generate revenue immediately or in the longer term if it is leased.

Earnings improve supported by higher revenue

Our EBIT forecast is -0.9 MEUR (H1’23: -1.4 MEUR) based on growing revenue and strict cost management. We expect cash flow to be weaker than earnings as we expect capitalized costs to be higher than depreciation. However, there should be no acute risks to cash adequacy as the company's balance sheet has been strengthened by the recent R&D loan and convertible bond. A sustainable turnaround in operating cash flow would obviously be very important for the company.

Success for remainder of year will be determined by potential new deal

Nexstim's guidance for 2024 is for year-on-year revenue and earnings growth. Growth and profitability will be significantly impacted by the Company's ability to enter into an agreement in Alzheimer's disease following the previously announced letter of intent. The resolution of the company's dispute with Magnus Medical will also have a significant impact on earnings. Our full-year revenue forecast is 9.3 MEUR, which includes the assumption of a strong sales for the rest of the year and 1 MEUR in license revenue from the Alzheimer's disease contract (we assume a license revenue value of 2 MEUR and a 50% probability of realization). Our expected results are at zero level, and a potential agreement will have a significant impact on this. In the event of an agreement, our profit forecast would be clearly exceeded and, correspondingly, the result would be clearly negative in the absence of an agreement.