Modulight Corporation, Company Release, 19 August 2022 at 8.00 A.M. Finnish Time

This release is a summary of Modulight’s business review for January–June 2022. The complete report is attached to this release.

Highlights in April-June 2022

• Modulight continued to execute the growth strategy and invest in increasing its production capacity and improving other capabilities to realize the company’s long-term potential.
• Good progress with some projects. The total number of projects remained 26 (26 in the first quarter of 2022). Customer development projects continue to be affected by COVID-19 related delays and shortages in component availability. 
• As a result of the change in our operating environment we will review our strategy and update especially our go-to-market strategy. The updates will be announced later this year.
• Revenue was EUR 498 (2,355) thousand. Revenue decline was driven by the uncertainty in company’s business environment. Russia’s war on Ukraine has impacted the capital markets and created challenges and delays of Modulight’s potential customers’ capital expenditure and the availability of financing for some of the early-stage companies. 
• EBITDA was EUR -2,176 (1,784) thousand. Profitability was impacted mainly by low revenue.
• Operating result (EBIT) was EUR -2,610 (1,482) thousand.
• Operating result (EBIT) margin was -524.2 (62.9) % of revenue.

Highlights in January-June 2022

• Revenue was EUR 2,100 (4,560) thousand
• EBITDA was EUR -2,594 (3,158) thousand
• Operating result (EBIT) was EUR -3,480 (2,605) thousand
• Operating result (EBIT) margin was -165.7 (57.1) % of revenue

(The figures in brackets refer to the corresponding period of the previous year. This half-year report is unaudited.)

Outlook for 2022
Modulight has not issued guidance for revenue or profitability in 2022. As the company’s customer projects are still distributed across varying early stages of development and predicting developments in the market remains challenging, it is difficult to forecast performance in 2022. However, we expect that changes in the operating environment caused by COVID-19 restrictions as well as macroeconomic and geopolitical uncertainty still impact our financial performance in the short term.

Webcast
Modulight's CEO Seppo Orsila will present the result in an English-language webcast, which will be held on August 19, 2022 at 10:30 am (EET). The broadcast can be followed at https://modulight.videosync.fi/2022-1h22-results. Questions are requested to be submitted in writing on the webcast portal. CFO Anca Guina is also present to answer questions.
Presentation materials will be available before the start of the event on the company’s website at www.modulight.com/reports-presentations/.

Seppo Orsila, CEO
Our second quarter in 2022 was disappointing in light of the financial performance. We are still affected by COVID-19 related restrictions and shortages in component availability continued to impact us more than expected. Although we do not sell to or purchase from Russia, Russia’s war on Ukraine causes uncertainty in our business environment and impacts our potential customers’ capital expenditure and the availability of financing for some of the early-stage companies and projects.

However, our most important strategic performance indicator, the product development pipeline remained solid with 26 projects, and we received a major new order (USD 3.9 million) and several smaller ones during the quarter. At the end of the first quarter of 2022, as announced earlier, we received a strategically important order from one of the world’s largest pharmaceutical companies evidencing the potential to use our technology for new indications, such as lung cancer.

Our second quarter revenue decreased to EUR 498 (2,355) thousand and our EBITDA was EUR -2,176 (1,784) thousand. The remaining COVID-19 related restrictions related to traveling and on-site visits still slowed down our customers’ research projects and also impacted our sales efforts. Our sales projects are complex and often require several face-to-face meetings during a long sales cycle that typically ranges from six months to two years. This means that both positive and negative impacts may take a long time to materialize and are hard to predict.

Furthermore, revenue and profitability decreased due to global problems with basic component availability which postponed about half of our planned second-quarter deliveries. To mitigate this risk in the future, we have systematically increased our inventories. Material costs have little impact on our profitability and we do not expect a major impact from salary inflation either.

One of the highlights in the second quarter was a USD 3.9 million purchase order received from an existing U.S. private sector customer. This order supports well our strategy of expanding our offering to new indications. In this case, our technology will be applied to diagnostics, while it has already been used for the treatment of brain cancer by other customers.

We increased our IP portfolio and filed three new US patents during the second quarter. These patents are in the fields of semiconductors, biomedical imaging and diagnostics. Our newly built analytics team is working on several patent applications related to life science and we will continue building a broader overall patent portfolio.

Our strategy implementation continued through the expansion of our manufacturing capability and capacity, although we unfortunately also experienced some delays in machine deliveries. Especially suppliers from Japan continue to highlight risks with their machine deliveries and notify us of delays on a very short notice.

Our unique technology is the basis for our long-term success and we see more opportunities than ever for expanding our co-operation with existing customers and offering our technology to new customers and indications. Our strategy is well supported by the aging population trend and the need for better cancer and eye disease prevention. We are confident that in the long term, we can also achieve our financial targets of maintaining our high rate of revenue growth and a high degree of profitability, supported by our strong balance sheet which enables accelerating investments. However, we expect that changes in the operating environment caused by COVID-19, component shortages and geopolitical uncertainty still impact our financial performance in the short term. We will review our strategy, and update especially our go-to-market strategy. The updates will be announced later this year.

Key figures 1)

1) Unaudited
2) Audited

Events after the reporting period
There have been no significant events since the review period.

Financial reporting in 2022
During the year 2022, Modulight will publish the financial information as follows:

• 3Q22 Business review (1–9/2022): October 20, 2022

For further information, please contact:
CEO: Seppo Orsila m. +358 40 830 4671
IR: Ulla Haapanen m. +358 40 830 4676
Email: ir@modulight.com
Certified Adviser: Danske Bank A/S, Finland Branch, m. +358 40 414 5358
www.modulight.com
Twitter: @modulight

Modulight in brief
Modulight Corporation is a biomedical laser company that designs and manufactures products for oncology, ophthalmology and genetics. The company also provides solutions for selected high value-add applications including quantum computing and digital press. The company’s products include medical devices, subsystems, software, cloud services and specialized semiconductors. Modulight's products are used worldwide by many Fortune 500 companies, international pharmaceutical companies, and well-known cancer centers and universities. Modulight was founded in 2000 and is headquartered in Tampere, Finland. www.modulight.com