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Mentice AB reported its first-quarter 2025 earnings, revealing a net sales increase of 19.5% to SEK 54 million. Despite the revenue growth, the company faced a challenging quarter with a negative EBITDA of SEK 19 million and one-off costs related to reorganization. The market reacted negatively, with Mentice’s stock price dropping 16.46% in pre-market trading, reflecting investor concerns over operational challenges and currency impacts. According to InvestingPro analysis, the stock is currently trading near its 52-week low, with metrics suggesting potential undervaluation relative to its Fair Value. The company maintains impressive gross profit margins of 88.7% and holds more cash than debt on its balance sheet.
Key Takeaways
- Mentice’s net sales rose by 19.5% year-over-year to SEK 54 million.
- The company reported a negative EBITDA of SEK 19 million, impacted by reorganization costs and currency exchange losses.
- Mentice’s stock fell by 16.46% in pre-market trading.
- The company is focusing on consolidating production and expanding in the neurovascular market.
Company Performance
Mentice demonstrated solid revenue growth in the first quarter of 2025, with net sales increasing by 19.5% compared to the previous year. The growth was driven by a 15% increase in order intake, signifying strong demand for its medical simulation products. While the company’s profitability was hampered by a negative EBITDA of SEK 19 million, influenced by one-off reorganization costs and an unfavorable currency exchange impact, InvestingPro data reveals analysts expect the company to return to profitability this year. Want deeper insights? InvestingPro offers 6 additional key tips about Mentice’s financial health and growth prospects.
Financial Highlights
- Revenue: SEK 54 million, up 19.5% year-over-year
- EBITDA: Negative SEK 19 million
- Order book: SEK 180 million, with SEK 75 million scheduled for 2025
- Operational cash flow: Negative SEK 3.3 million
Outlook & Guidance
Mentice remains focused on the medical device industry, with plans to enhance its healthcare systems market value proposition. The company anticipates increased software and licensing revenues, despite macroeconomic challenges. Mentice is also consolidating production to a single location in Denver, Colorado, to streamline operations and reduce costs.
Executive Commentary
Frans Fekker, CEO of Mentice, stated, "We had solid revenue growth year over year where the net sales was up by close to 20%." He also highlighted the company’s strategic adjustments, noting, "We are adjusting our production capabilities and supply chain also towards potential tariffs."
Risks and Challenges
- Currency Exchange: A SEK 5 million negative impact from currency fluctuations affected profitability.
- Reorganization Costs: One-off costs of SEK 3.5 million related to reorganization efforts.
- Operational Cash Flow: Negative cash flow of SEK 3.3 million poses a challenge to financial stability.
- Market Conditions: Potential tariff implementations and strengthening of the Swedish crown pose risks.
Mentice is navigating a complex landscape, balancing strong revenue growth with operational challenges. The company’s strategic focus on production consolidation and market expansion will be critical in addressing these hurdles. With a market capitalization of $52.44 million and revenue growth forecast of 18% for FY2025, the company shows promising potential despite current headwinds. For comprehensive analysis of Mentice’s growth trajectory and peer comparison, access the detailed Pro Research Report available exclusively on InvestingPro.
Full transcript - Mentice AB (MNTC) Q1 2025:
Richard Engberg, Equity Research Analyst, Carnegie Investment Bank: Good morning, everyone. My name is Richard Engberg, and I’m an Equity Research Analyst here at Carnegie Investment Bank. With me, I have Frans Fekker, CEO of Mentis and Ulrik Adros, CFO of Mentis, who are going to present the first quarter. Frans and Ulrikanth, welcome.
Frans Fekker, CEO, Mentis: Thank you, Richard. Thanks for having us. So the scene is yours. Very good. Thank you, Richard, for us being here.
What we have today is the quarterly results for the first quarter, which we are happy to present to you and all of you. So, what I have is four topics for today. First of all, the highlights and also the interview, basically overview presented by me, the financial results by Henri Katroz, concluding remarks by me and then we go towards questions and answers. Overall, if we look at the quarterly summary, what we see is that we had solid revenue growth year over year where the net sales was up by close to 20%. What we saw is that the EBITA was negatively impacted by one offs.
That was due to restructuring, but also due to currency effects. The revenue came from all three regions. So we were positive from all three regions, specifically North America from an absolute standpoint. From a percentage point also we saw significant growth by APAC although from a lower base. What we are doing is currently addressing the weak developments in the healthcare systems market by addressing also our value proposition.
So really the growth also from an order intake came from the Medical Device industry. Overall order intake increased by 15% year over year and it signaled also a strong interest for our Mentus products going forward. Now if you then look at the business development activity. So first of all, there are activities and we have put activities in place in order to streamline the organization to make sure that we’re really focused towards the sales areas where we’re driven, towards medical device industry as also the healthcare systems markets. We are consolidating the production currently what we had in Stony Brook towards the Denver, Colorado office and make sure that we are going to produce in one location our physical simulation portfolio for the globe.
We have continued focus also from the integration from acquisitions when it comes towards Ankiros as also indicated towards Physical Simulation. And especially the latter part, we saw continuous development and strong order intake also towards that portfolio. There’s progress towards next generation neurovascular simulation platform, where it’s linked or phased towards NV Connect and Ankiras. We have especially for Ankiras, we have approval in Latin America and Brazil in order to start selling. And we are about to get good news also from The United States in order to have our next release also available for The U.
S. So in overall, the initial steps are being taken to improve and strengthen our value proposition, not only in the medical device industry market, but especially also in the healthcare systems market and we start focusing there clearly also on the neurovascular market in order to make an impact there. So with that, I want to give it over to Ulrikad Roz, Ariseit, for the financial results and details.
Ulrik Adros, CFO, Mentis: Thank you, Frans. So the Q1 highlights. Net sales increased with 19.5% to SEK 54,000,000 and a 15% increase in order intake. The main impact comes from the region Americas and the region APAC, and we will come back to that in a short while. EBITDA level, minus SEK 19,000,000.
And as Frans mentioned, this is affected by one off costs of SEK 3,500,000.0 related to the reorganization and SEK 5,000,000 effect of the strengthening krona, which gives a negative impact on our FX. The order book, 180,000,000 with SEK 75,000,000 scheduled for 2025. And when comparing this to the first quarter twenty twenty four, I just want to mention what we said at the Q4 report that at the end of last year, we reviewed our order book and we excluded some orders where we have a very unclear delivery time. So that needs to be taken into account when you compare year over year. The Q1 has an operational cash flow that is negative on 3,300,000.0.
And as Frances mentioned, solid sales for MDI, an increase of almost 26% during the first quarter. And as we also see the somewhat weaker performance of the Healthcare Systems, HCS. And that is, as Frans already mentioned, being addressed with actions from us, so we will see a different development going forward. Looking at net sales from a region perspective, all regions exceeded last year, both on a quarterly and on a rolling twelve months perspective. So the Americas region still represents the largest region and had a growth in net sales with 17% for the first quarter.
And the EMEA region increased with 4% for the first quarter. And this is mostly related to the medical device industry. And looking at the performance on a rolling twelve months perspective, it’s a 12% development. The APAC region has a from a percentage point of view, a really good increase of 88%. And looking at the actual numbers, we have an increase of $4,000,000 in sales.
And looking at the rolling twelve months perspective, it’s still an impressive increase of 49% in development. A short comment on the recurring revenue from software. We see an increase during the first quarter, and we also see the increase on a rolling twelve months basis. And finally, a comment on the order intake. For the quarter, 15% above last year due to the increase in the medical device industry.
And again, we see the somewhat weaker performance in the healthcare systems part. Again, that will be addressed going forward.
Frans Fekker, CEO, Mentis: Thank you, Ulrik. So if we now look at the concluding remarks, there’s also the outlook. What we clearly see is a more challenging market conditions at this moment with a potential implementation of tariffs, but also basically strengthening Swedish crown towards a basket of currencies, specifically the euro and the dollar. And that also attributes to more macro economical factors that we need to take into account. What we see is that we are adjusting our production capabilities and supply chain also towards potential tariffs and making sure that optimize accordingly.
As also if you look at the foreign exchange with the dollar where we have a lot of sales also coming from The U. S, we need to make sure that yes, that we look at this and see whether we can get our cost base also in line towards that. So there’s continued high interest also from the medical device industry. We see that going strong and we need to make sure that we focus and really getting our healthcare systems value proposition to really resonate with repeating sales that can also scale towards the larger in basically the device of basically delivery networks for hospitals. So it’s really capturing the opportunities when they arise and making sure that we drive sales accordingly.
So key takeaways, if I now summarize also with respect to the business highlights, So we had a solid Q1 in terms of sales, but also order intake. Order intake with room for improvement. EBITA impacted by one offs related to organizational restructuring cost, but also foreign exchange effects. But we do see a very strong continued momentum from the medical device industry with almost 24% increase in order intake year over year. So if we then look at the strategic priorities that we’re focusing on is making sure that we drive the health systems market with the integration of NV Connect platform with Wist as also Ankiros in order to be prepared for pre procedure planning and this is an integral part of our strategy in order to address the hospital space.
The second strategic priority is making sure that we reshape our organization and offerings to make sure that our value proposition really resonates not only with the medical device industry market, but especially also the health systems market where the growth also will be going forward. So yes, that’s our summary. It’s a streamlined business structure, which strengthens our strategic focus for operational execution, where we’re currently addressing also the current market challenges. And we continue to be a major player in a market segment where we really established ourselves with a strong organizational foundation, an attractive product, solid balance sheet, but also attractive customers in order to work with. So Richard, that’s what we had so far.
Richard Engberg, Equity Research Analyst, Carnegie Investment Bank: Thank you, Frans and Ulrik. So my first question is basically, can you please describe what these extraordinary costs affecting EBITDA are consisting of?
Frans Fekker, CEO, Mentis: Ulrik, you might want to take that Yes.
Ulrik Adros, CFO, Mentis: It’s reorganization that we’ve done. So that’s it’s cost related to that.
Richard Engberg, Equity Research Analyst, Carnegie Investment Bank: Okay, great. And also like if we can discuss the development within the health care systems, especially year on year, what has been the reason for the weakness in growth and how have you been addressing it?
Frans Fekker, CEO, Mentis: So it is what we see. First of all, Q1 is usually, I’d say, it’s one of the smaller quarters, I’d say it’s a year over year and therefore the effects are also in that sense bigger. But clearly what we see is that we need to provide propositions towards our healthcare systems market that we’re able to scale. And that is also what we’re currently looking at to making sure that where the demand is and the needs is from our customers that we provide our simulation, but also training capabilities exactly in that space and do that in such a way that we are also able to make this bigger, that is it in healthcare systems. And that’s what we’re going to address.
So it is simply in our control in order to make sure that we adjust our value proposition and get the impact that we’re looking for.
Richard Engberg, Equity Research Analyst, Carnegie Investment Bank: Okay, great. Kept, please describe rationale of merging the strategic alliance segment with the medical device segments since you reported three segments before, now you report two.
Frans Fekker, CEO, Mentis: Yes, an important question and also a change that we made. The strategic alliances remain a very important partnership for us. And so our partnership is also stronger than ever with the imaging vendors going forward. And what we see is that a lot of the activities that were happening with strategic alliances were already linked towards similar value propositions what we provided towards the medical device industry. And for that reason it also made sense to consolidate it with the activities that we do within the MDI.
So it doesn’t change our focus from a business standpoint, how we execute, it’s simply how we operate and report our results and make sure that we make that part of the medical device industry business going forward.
Richard Engberg, Equity Research Analyst, Carnegie Investment Bank: Okay, great. And we saw a really strong growth year over year of both hardware and development for Mentus VIST. Is this a sign of like the software revenue will catch up and increase the parts of sales later during the year?
Frans Fekker, CEO, Mentis: Yes. We expect that for sure. So especially it’s all about creating installed base of hardware for our customers both within the medical device industry as also within hospital networks. And the more systems we have out there also we expect and also more recurring revenues if it comes towards software sales or licensing sales going forward. And for that reason, yes, that’s a positive development what we expect for the outlook for the year.
Richard Engberg, Equity Research Analyst, Carnegie Investment Bank: Okay, great. And as a reminder, there is an opportunity to ask questions via the chat on the webcast. So wait just a couple of seconds to see for anything on that as well. No, I don’t see any questions from the web. Then I might maybe end with one question, and that is basically, can you please describe opportunity in Latin America now with Ankiras?
Frans Fekker, CEO, Mentis: It is it provides us the opportunity to really provide our next version of Ankiras towards our hospitals, which is linked towards an improved user interface, has also improved software capabilities and it will simply allow us to provide pre procedure planning specifically in the neurovascular space towards our customers there. So it’s an opportunity for us in order to be more focused towards the neurovascular segment in Brazil, but also grow from there. And so we’re very pleased with the approval. And also we expect the approval, the imminent approval also in The United States also there, so that we not only grow with our Ankiros proposition within Brazil, but that we can also do that within The U. S.
Richard Engberg, Equity Research Analyst, Carnegie Investment Bank: Okay, great. And I don’t see any questions from the web. So do you have any concluding remarks, Frans and Rika?
Frans Fekker, CEO, Mentis: It is maybe concluding remarks. That is it. We are basically presenting in Q1 solid results. We’re off to a decent start when it comes to revenue, but also order intake. We are seeing a little bit of a more challenges towards the economic outlook, macroeconomic basically outlook of the situation, I’d say, in the world.
But clearly, I’d say, we stick, I’d say, towards our projections and growth projections what we have set for the year.
Richard Engberg, Equity Research Analyst, Carnegie Investment Bank: Okay. Thank you, Francois and Enrique, and thank you everyone who has been listening.
Frans Fekker, CEO, Mentis: Thank you, Richard. Thank you.
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