Optomed Plc         Stock Exchange Release    17 February 2022 at 9:00, Helsinki

Optomed Plc: Financial Statements Bulletin, January - December 2021

• Revenue decreased by 12.1 percent to EUR 3,552 (4,041) thousand
• Devices segment revenue decreased by 23.6 percent to EUR 1,329 (1,738) thousand, as no camera deliveries were made to China during the quarter
• Devices segment revenue continue strong growth in North America, Europe, and to the OEM channel
• The Software segment revenue decreased by 3.5 percent to EUR 2,223 (2,303), as revenue from one-time deliveries in the comparison period of 2020 were exceptionally high
• Adjusted EBITDA amounted to EUR -1,528 (-62) thousand corresponding to -43.0 (-1.5) percent of revenue, including a credit risk accrual of EUR 645 thousand including overdue trade receivable from a customer in China
• Sales through the new distribution channel in China has not started as expected, Phoebus exclusivity ended, and new distribution partners appointed in China
• After the review period, Optomed announced the clinical trial results intended to assess Optomed Aurora together with AEYE Health's AI for autonomous detection of more than mild diabetic retinopathy

January - December 2021

       Revenue increased by 14.1 percent to EUR 14,850 (13,011) thousand

       Software segment revenue continued strong growth at 13.9 percent driven by recurring revenue from the healthcare sector

       Devices segment revenue grew 14.5 percent, despite negative business impact from China in the second half while other markets and sales channels continued to grow

       Adjusted EBITDA amounted to EUR -2,002 (-733) thousand corresponding to -13.5 (-5.6) percent of revenue, including a change in the credit risk accrual of EUR 709 thousand including overdue trade receivable from a customer in China

Key figures

EUR, thousand Q4/2021 Q4/2020 Change, % 2021 2020 Change, %
Revenue 3,552 4,041 -12.1% 14,850 13,011 14.1%
Gross profit * 2,407 2,809 -14.3% 10,558 8,955 17.9%
Gross margin % * 67.8% 69.5% 71.1% 68.8%
EBITDA -1,528 -62 -2374.1% -2,002 -733 -173.2%
EBITDA margin *, % -43.0% -1.5% -13.5% -5.6%
Adjusted EBITDA * -1,528 -62 -2374.1% -2,002 -733 -173.2%
Adjusted EBITDA margin -43.0% -1.5% -13.5% -5.6%
*, %
Operating result -2,182 -594 -267.2% -4,780 -2,906 -64.5%
(EBIT)
Operating margin -61.4% -14.7% -32.2% -22.3%
(EBIT) *, %
Adjusted operating -2,182 -594 -267.2% -4,780 -2,906 -64.5%
result (EBIT) *
Adjusted operating -61.4% -14.7% -32.2% -22.3%
margin (EBIT margin)
*, %
Net profit/ loss -1,936 -652 -196.9% -4,249 -3,177 -33.8%
Earnings per share -0.14 -0.05 -193.0% -0.32 -0.24 -32.0%
Cash flow from -484 383 226.2% -2,940 -2,801 -5.0%
operating activities
Net Debt 213 -4,090 -105.2% 213 -4,090 -105.2%
Net debt/ Adjusted -0.1 5.6 -0.1 5.6
EBITDA (LTM)
Equity ratio * 58.8% 64.6% 58.8% 64.6%
R&D expenses personnel 419 395 5.9% 1,773 1,406 26.1%
R&D expenses other 121 83 45.5% 511 253 101.8%
costs
Total R&D expenses 540 479 12.8% 2,284 1,659 37.6%

*) Alternative performance measures, see section Alternative Performance Measures for definitions and calculations. 

CEO comments

Very strong revenue growth in the United States, China's revenue fell significantly. Other business areas grew slightly from previous year. Promising results from a clinical study. 

Optomed's both business segments recorded strong revenue growth of 14 percent in 2021. In the Devices segment, revenue growth was very strong in the US market and in the OEM channel, both in the fourth quarter and full year. However, sales to China declined, which limited the overall revenue growth of the Devices segment in both, the fourth quarter and full year. The Software segment's full year sales continued strong growth, despite there were no large-scale one-time system deliveries in the fourth quarter like in the previous year. The Software segment's recurring revenue from healthcare solutions continued to grow strongly in both, the fourth quarter and full year.

The main challenge of 2021 was that sales via the new distribution channel in China did not progress as expected. The agreement between Phoebus Medical Technology Co., Ltd. (Phoebus), Optomed's strategic partner, and their distribution channel China National Pharmaceutical Group Co., Ltd. (Sinopharm), ended during the fourth quarter. The termination of the cooperation between Phoebus and Sinopharm has negatively affected Phoebus' business, and also impacted the short-term outlook for Optomed's camera sales in China. As a result, Phoebus' exclusivity for Optomed cameras in China has ended at end of the year. Business with Phoebus will continue on non-exclusive basis in 2022 and in addition to this sales channel, Optomed has entered into new distribution agreements with other Chinese resellers. Optomed will also continue distribution cooperation with Sinopharm directly in two high volume provinces. Optomed is therefore returning back to its previous distribution model based on several local distributors in China.

In the past couple of years, China has accounted for approximately 15 percent of Optomed's revenue, and a major share of this has come through Phoebus. The drop in sales in China had a negative impact on revenue growth in the second half of 2021 and will continue to have a negative impact in the first half of 2022. Revenue from China is expected to pick up again in the second half of 2022.

Long-term uncertainty in China is increased by new national guidelines published in the fall of 2021, where Chinese government-funded hospitals should prioritize Chinese made products in their procurement of fundus cameras in the future. We are not yet able to assess how significantly these guidelines will affect on Optomed's long-term business in China. Despite the changes in the operating environment, we expect China to remain a significant market for our company also in the future. But from now on we will focus more of our growth efforts in the United States and other fast growing key markets.

Sales to the United States continued very strong growth, both in the fourth quarter and full year. As a result of recent development, the US is now emerging as Optomed's main market over China, and we expect this trend to continue also in the future. The growth of demand for handheld cameras in the US has been strong, and Optomed's revenue comes from the growing number of direct sales customers and through our expanding distribution network. We are planning to significantly increase our sales and marketing efforts in the US during 2022.

Optomed's most significant strategic projects are to develop, validate and commercialize products that combine Optomed's fundus cameras with artificial intelligence. On February 7, 2022, we announced the results of a clinical trial intended to assess Optomed's handheld fundus camera Aurora together with AEYE Health's AI for autonomous detection of more than mild diabetic retinopathy. The research results for the Aurora AEYE camera were as follows; sensitivity 91.9 percent, specificity 93.6 percent and imageability > 99 percent. These results were achieved by taking only one image per eye, which makes the fundus examination process faster and easier to perform compared to other solutions. This combined with the Aurora AEYE's excellent mobility and cost-effectiveness, is believed to provide Optomed with a unique competitive advantage. We are very proud of the results we have achieved as this will allow us to move on to the next step towards our goal of obtaining FDA clearance for the product in the US market.

Optomed's main strategic goal for 2022 is to move forward with our cameras combined with artificial intelligence towards the FDA clearance process in the United States, and to increase the company's market share and revenue in our strategic key markets. We expect the company's revenue growth to accelerate significantly once our camera products combined with artificial intelligence are regulatory approved and commercialized in key markets. Due to the relatively small size and early stage of the company, variations in revenue growth rate between fiscal years and their quarters may be significant.

CEO

Seppo Kopsala

Outlook 2022

Optomed expects its full year 2022 revenue to grow compared to 2021.

Telephone conference

A telephone conference for analysts, investors and media will be arranged on 17 February 2022 at 11.00 EET. The event will be held in English. The presentation material will be available at www.optomed.com/investors 10.00 EET at the latest.

The participants are requested to register for the call in advance by email to sakari.knuutti@optomed.com.

Please see the call-in numbers below:

FI +358 9 856 26300

SE +46 8 505 218 52

UK +44 20 3321 5273

US +1 646 838 1719

FR +33 1 70 99 53 92

The conference id is 393 139 762#.

Please note that by dialing into the conference call, the participant agrees that personal information such as name and company name will be collected.

Group performance

October - December 2021

In October-December 2021, Group revenue decreased by 12.1 percent to EUR 3,552 (4,041) thousand. The main reason for weak Group revenue growth relates to the Devices segment, as no camera deliveries were made to China in the fourth quarter. In the comparison period of 2020, the camera sales to China accounted for a significant share of the segment's revenue. The Devices segment's revenue decreased by 23.6 percent due to China, while North America, Europe, and the OEM channel continued strong growth also in the fourth quarter. The Software segment's stable performance continued even though revenue decreased by 3.5 percent as revenue from one-time deliveries in the comparison period in 2020 was exceptionally high.

The gross margin decreased to 67.8 from 69.5 percent last year. The company received grants and other operating income of EUR 57 (40) thousand. The gross margin for the fourth quarter of 2021 adjusted for grants and other operating income would have been 66.2 percent compared to 68.5 percent in 2020.

In October-December 2021, Group EBITDA amounted to EUR -1,528 (-62) thousand and adjusted EBITDA totaled EUR -1,528 (-62) thousand. The fourth quarter include a credit risk accrual of EUR 645 thousand including overdue trade receivable from a customer in China. The remaining negative EBITDA variance versus last year is a combination of lower revenue and gross profit together with higher operating expenses because of Optomed's US market entry and expansion as well as the strengthened Group Marketing function.

In October-December 2021, net financial items amounted to EUR 226 (-69) thousand and consisted mainly of interest payments to financial institutions and the translation effect of Chinese RMB and USD to EUR.

January - December 2021

In January-December 2021, Group revenue increased by 14.1 percent to EUR 14,850 (13,011) thousand. The Devices segment revenue increased by 14.5 percent, despite negative business impact from China in the second half. The strong growth was mainly driven by increased demand in North America and Europe as well as from the OEM channel. The Software segment revenue increased by 13.9 percent and was mainly driven by screening and workflow software deliveries to new customers as well as increase in recurring revenue from existing customers due to a rise in patient volumes.

The gross margin increased to 71.2 percent from 68.8 percent last year. The company's other operating income includes governmental grants of EUR 810 (157) thousand including a waived loan from Business Finland of EUR 538 thousand related to a terminated product development project. The gross margin for the twelve-month period of 2021 adjusted for the total amount of the grants and other operating income would have been 65.6 percent compared to 67.6 percent in 2020. 

In January-December 2021 EBITDA amounted to EUR -2,002 (-733) thousand and adjusted EBITDA totaled EUR -2,002 (-733) thousand. EBITDA for 2021 includes a change in the credit loss of EUR 709 thousand, as an impairment loss was recognized for overdue trade receivables from a Chinese customer.  

Net financial items amounted to EUR 453 (-341) thousand in January-December 2021 and consisted mainly of interest payments to financial institutions and the translation effect of Chinese RMB and USD to EUR.

Cash flow and financial position

October- December 2021

In October-December 2021, the cash flow from operating activities amounted to EUR -484 (383) thousand. Net cash used in investing activities was EUR -882 (-651) thousand and relates mainly to capitalized development expenses. Net cash from financing activities amounted to EUR 291 (-34) thousand.

January- December 2021

In January-December 2021, the cash flow from operating activities amounted to EUR -2,940 (-2,801) thousand. Net cash in investing activities was EUR -2,574 (-1,820) thousand and relates mainly to capitalized development expenses. Net cash from financing activities amounted to EUR 1,637 in 2021 and include a new loan of EUR 1,0 million in the third quarter of 2021. Net cash from financing activities in 2020 amounted to EUR -3,698 thousand and include a loan repayment of EUR 3,2 million in the first quarter of 2020.

Consolidated cash and cash equivalents at the end of the period amounted to EUR 6,804 (10,608) thousand. Interest-bearing net debt totaled EUR 213 (-4,090) thousand at the end of the period.

Net working capital was EUR 4,315 (3,440) thousand at the end of the period.

The net working capital include trade receivables of EUR 3,7 (2,6) million which is the main reason for the increase compared to last year. One Chinese customer represent approximately 50% of the total group trade receivables out of which approximately EUR 2,0 million is overdue, which after management's assessment have resulted in a credit risk accrual of EUR 715 thousand which represent approximately 30% of the total outstanding trade receivable. 

Devices segment

Optomed has two synergistic business segments: Devices and Software.

The Devices segment develops, commercializes, and manufactures easy-to-use, and affordable handheld fundus cameras, that are suitable for any clinic for screening of various eye diseases, such as diabetic retinopathy, glaucoma and AMD (Age Related Macular Degeneration).

EUR, thousand Q4/2021 Q4/2020 Change, % 2021 2020 Change, %
Revenue 1,329 1,738 -23.6 % 5,839 5,097 14.5 %
Gross profit * 764 990 -22.8 % 4,139 2,862 44.6 %
Gross margin, 57.5 % 56.9 % 70.9 % 56.1 %
% *
EBITDA -1,198 1 -192327.5 % -1,014 -251 -304.5 %
EBITDA margin, -90.2 % 0.0 % -17.4 % -4.9 %
% *
Operating -1,698 -384 -342.7 % -3,182 -1,820 -74.8 %
result (EBIT)
Operating -127.8 % -22.1 % -54.5 % -35.7 %
margin (EBIT),
% *

*) Alternative performance measures, see section Alternative Performance Measures for definitions and calculations.

October- December 2021

In October-December 2021, the Devices segment revenue decreased by 23.6 percent and was EUR 1,329 (1,738) thousand, as no hardware deliveries were made to China during the second half of 2021. In the comparison period of 2020, the camera sales to China accounted for a significant share of the segment's revenue.  North America and European markets continued strong growth as well as sales to OEM-customers.

In October-December 2021, the gross margin increased to 57.5 percent from 56.9 percent in the previous year. The Devices segment's other operating income was EUR 57 (0) thousand, which increased the gross margin in the fourth quarter. The gross margin adjusted for grants and the total amount of other operating income would have been 53.2 percent compared to 56.9 percent in 2020.  The variance is mainly due to a higher share of devices sales to OEM customers.

In October-December 2021, EBITDA was EUR -1,198 (1) thousand or -90.2 (0.0) percent of revenue. The fourth quarter include a credit risk accrual of EUR 645 thousand including overdue trade receivable from a customer in China. The remaining negative EBITDA variance versus last year is a combination of lower revenue and gross profit together with higher operating expenses mainly because of Optomed's US market entry and expansion.

January- December 2021

In January-December 2021, the Devices segment revenue increased by 14.5 percent and was EUR 5,839 (5,097).  The main drivers for the increase were high demand in North America and Europe as well as from OEM customers, despite negative business impact from China in the second half.

In January-December 2021, the gross margin increased to 70.9 percent from 56.1 percent in the previous year. The company received other operating income of EUR 811 (101) thousand in 2021, including a waived loan from Business Finland of EUR 538 thousand related to a terminated product development project. The gross margin excluding other operating income was 57.0 percent in 2021 and 54.1 percent in 2020.

In January-December 2021, EBITDA was EUR -1,014 (-251) thousand or -17.4 (-4.9) percent of revenue. EBITDA for 2021 includes a change in the credit loss of EUR 709 thousand, as an impairment loss was recognized for overdue trade receivables from a Chinese customer.  

Software segment

Optomed has two synergistic business segments: Devices and Software.

The Software segment develops and commercializes screening software for diabetic retinopathy and cancer screening for healthcare organizations. The segment also distributes off-the-shelf products from selected partners to supplement its own solutions and expertise and provides software consultation to support the Devices segment screening solution projects.

EUR, thousand Q4/2021 Q4/2020 Change, % 2021 2020 Change, %
Revenue 2,223 2,303 -3.5 % 9,011 7,913 13.9 %
Gross profit * 1,643 1,819 -9.7 % 6,420 6,093 5.4 %
Gross margin, 73.9 % 79.0 % 71.2 % 77.0 %
% *
EBITDA 516 635 -18.8 % 1,855 1,926 -3.7 %
EBITDA margin, 23.2 % 27.6 % 20.6 % 24.3 %
% *
Operating 363 487 -25.5 % 1,247 1,323 -5.7 %
result (EBIT)
Operating 16.3 % 21.1 % 13.8 % 16.7 %
margin (EBIT),
% *

*) Alternative performance measures, see section Alternative Performance Measures for definitions and calculations.

October - December 2021

In October-December 2021, the Software segment had another stable quarter even though the revenue decreased by 3.5 percent and was EUR 2,223 (2,303) thousand, while the comparison in 2020 was exceptionally strong due to one-time deliveries. Software sales was mainly driven by screening and workflow software deliveries to new customers as well as increase in recurring revenue from existing customers due to a rise in patient volumes.

In October-December 2021, the gross margin was 73.9 (79.0) percent. Other operating income was EUR 0 (40) thousand in 2021. The gross margin excluding other operating income was 73.9 percent in 2021 and 77.0 percent in 2020.

EBITDA stood at EUR 516 (635) thousand or 23.2 (27.6) percent of revenue, respectively.

The negative variance is mainly due to lower gross margin.

January - December 2021

In January-December 2021, the Software segment revenue increased by 13.9 percent and was EUR 9,011 (7,913) thousand. The gross profit included other operating income of EUR 56 thousand in 2021. The gross margin excluding other operating income was 71.2 percent in 2021 and 76.3 percent in 2020. EBITDA was EUR 1,855 (1,926) thousand or 20.6 (24.3) percent of revenue.

Group-wide expenses

Group-wide expenses relate to functions supporting the entire group such as treasury, group accounting, Marketing, legal, HR, and IT.

October - December 2021

In October-December 2021, group-wide operating expenses amounted to EUR 845 (697). The increase is mainly related to strengthened of Group Marketing function in 2021.  

January - December 2021

In January-December 2021, group-wide operating expenses amounted to EUR 2,843 (2,408). The increase is mainly related to strengthened of Group Marketing function in 2021.  

Personnel

Number of personnel at the end of the reporting period.

2021 2020
Devices 50 53
Software 45 38
Group 23 18
Total 118 109

The increase of personnel is mainly related to strengthening of sales and marketing in Optomed's subsidiary in the US and Optomed's Group Marketing function.

Corporate Governance

Optomed complies with Finnish laws and regulations, Optomed's Articles of Association, the rules of Nasdaq Helsinki and the Finnish Corporate Governance Code 2020 issued by the Securities Market Association of Finland. The code is publicly available at http://cgfinland.fi/en/. Optomed's corporate governance statement 2020 is available on the company website www.optomed.com/investors/.

Annual General Meeting

On 28 April 2021, Optomed held its Annual General Meeting (AGM) that adopted the financial statements 2020 and the remuneration report for governing bodies and discharged the members of the Board of Directors and the CEO from liability for 2020. The AGM resolved that no dividend will be paid for the year 2020.

The number of members of the Board of Directors was confirmed as five:

       Seppo Mäkinen, Petri Salonen, Reijo Tauriainen and Anna Tenstam were re-elected as members of the Board

       Xisi Guo was elected as a new member of the Board.

The Annual General Meeting confirmed the annual Board remuneration as follows:

       Chairman of the Board EUR 36,000

       members of the Board EUR 18,000.

In addition, a meeting fee in the amount of EUR 500 is paid to the Chairman of the Audit Committee for each Audit Committee meeting. 40 percent of the Board remuneration is paid in Optomed shares and 60 percent in cash. The remuneration will be paid once a year in August, after Optomed's Q1-Q3 report has been announced.

The AGM decided to elect KPMG Oy Ab, a firm of authorized public accountants, as the Company's auditor. KPMG Oy Ab has informed the Company that Authorized Public Accountant Tapio Raappana will continue as the auditor with principal responsibility.

The AGM approved the authorization for the Board of Directors to repurchase Optomed's own shares and to accept them as pledge. Altogether no more than 1,400,314 shares may be repurchased or accepted as pledge. The authorization will be valid until the earlier of the end of the next Annual General Meeting or 18 months from the resolution of the Annual General Meeting.

The General Meeting authorized the Board of Directors to decide on the issuance of shares as well as the issuance of option rights and other special rights entitling to shares referred to in Chapter 10, Section 1 of the Finnish Companies Act. The number of shares to be issued based on this authorization may not exceed 1,400,314. The Board of Directors is authorized to resolve on all terms and conditions of the issuance of shares and special rights entitling to shares, including the right to derogate from the pre-emptive right of the shareholders. The authorization will be valid until the earlier of the end of the next Annual General Meeting or 18 months from the resolution of the Annual General Meeting.

Decisions of the Board of Directors:

At its meeting held after the Annual General Meeting, the Board of Directors elected from among its members Petri Salonen as its Chairman. The committee members were elected as follows:

Audit Committee:

       Reijo Tauriainen (Chairman)

       Seppo Mäkinen

       Anna Tenstam

Remuneration Committee:

       Seppo Mäkinen (Chairman)

       Reijo Tauriainen

       Anna Tenstam

Shares and shareholders

The company has one share series with all shares having the same rights. At the end of the review period Optomed Plc's share capital consisted of 14,003,144 shares and the company held 421,517 shares in the treasury which corresponds approximately 3.0 percent of the total amount of the shares and votes. Additional information with respect to the shares, shareholding and trading can be found on the company's website www.optomed.com/investors/.

Risks and uncertainties

Optomed has reviewed its complete risk position after the year end of 2021. The complete risk position is as follows:

COVID-19 coronavirus

The COVID-19 outbreak has turned into a pandemic the length and prolonged effect of which are uncertain.

The company's software segment has been proven to be largely unaffected due to recurring nature of the business and long-term customer agreements, however, the Devices segment sales have been negatively affected by the pandemic. The medical sector as a whole is still concentrated on addressing the pandemic and other supplier meetings and purchases are still postponed in certain key markets. This has an effect on the company's ability to sell its devices and new software solutions and affects the Company's ability to increase its customer base especially because face-to-face meetings are market standard for fundus camera sales.  Optomed recognizes the risk of a prolonged pandemic which may cause additional restrictions and other negative effects globally. The company has taken precautions to protect its currently strong cash position

High quality products

The quality and safety of the Company's products are extremely important for competitiveness.

The Company may be adversely affected if it fails to continuously develop and update its fundus cameras and software solutions or to identify or integrate new products and product platforms into its offering. The Company's or its partners products may also be subject to clinical trials, the results of which are critical for the products' regulatory approvals and market acceptance.

Strategy and M&A

The company may be unsuccessful in fulfilling its strategy or the strategy itself may be unsuccessful.

The successful implementation of the company's strategy depends upon several factors, some of which are completely or partially outside the company's control.  The company has an appropriate risk management function in the context of the size of the company's operations, however, it may not be able to identify or monitor all relevant risks and determine efficient risk management procedures and responsible persons that may again affect the strategy. The company is also dependent on its ability to develop and manage varying routes-to-market for its products, the efficiency of its sales channels and its customer and distributor relationships. Further, the company has an opportunistic view on M&A which by nature include inherent risks. Failure of strategy may force the company to record write-downs on its goodwill.             

Market and competition

The company operates in a market that is highly competitive.

Optomed operates in the fundus camera market that is developing fast and the competition is sometimes fierce. The market acceptance of the company's products and solutions is important for its future growth. Optomed recognizes a possibility of new market changing products entering the market. Further, in certain key geographies Optomed's client base is limited and, therefore, a loss of a key customer in a key market may adversely affect the Company's revenue streams.

External economic and political risks and natural disasters

Optomed operates globally and is thus exposed to various external risks.

The Company is exposed to natural disasters taking place in countries where it operates and general and country specific economic political and regulatory risks, which could entail volatile sales in key markets. In the PRC, "Made in China 2025" national strategic plan may have an effect on medical device manufacturers' sales to the public sector.

Supply chain

Optomed's business is dependent on the effectiveness of purchasing materials, manufacturing and timely distribution.

The Company is dependant on contract manufacturers for functioning, efficient and effective production and product assembly.  Further, the Company is dependent on suppliers which may affect the Company's ability to supply its customers in a timely manner. Global component sourcing issues make it harder to obtain the key components for the Company's medical devices.

Systems and information

Optomed's operations are increasingly dependent on IT systems.

Disruption of the company's IT systems could inhibit the business operations in a number of ways, including disruption to financial reporting, sales, production and cash flows.

Litigation

Optomed operates globally and pursues double digit annual organic growth in medium term.

Optomed may not always be able to reach the best contractual terms with stakeholders. The company may be negatively affected by legal or administrative proceedings directed at the company or third parties due to back-to-back liability, or other disputes and claims including product liability, especially in terms of medical devices, and intellectual property rights related items.

Trade secrets and patents

The technological capabilities are a competitive advantage that the company must be able to protect.

The company may not be able to protect its trade secrets and know-how which could lead to losing the competitive advantage the company has. At the same time, the company may be forced to take actions against parties that violate Optomed's IPRs.

Talent & organization

A skilled workforce and agile organization are essential for the continued success of the business.

The company may be adversely affected if it would lose its key personnel or fails to attract the right talent.

Finance

The company needs external financing to operate and is not currently profitable.

The Company is dependent on external financing and the Company may have difficulties accessing additional financing on competitive terms or at all which may again contribute the Company's liquidity risks. The Company is also subject to credit and counterparty risks through its trade receivables. The Company's receivables in China have increased and Optomed has a large credit risk concentration related to a major Chinese customer whose payments are late. The payments from the customer continue but materially slower than originally agreed.

Forex

Optomed operates globally and is thus exposed to currency exchange risks.

The company is exposed to foreign exchange rate risks arising from fluctuations in currency exchange rates, especially with regards to USD, EUR and RMB. Currency rates, along with demand cycles, can result in significant swings in the prices of the raw materials needed to produce the Company's goods, sales prices and OPEX.

Legal and regulatory

Compliance with laws and regulations is an essential part of Optomed's business operations.

Optomed and its' suppliers and distributors operate globally and are subject to various national and regional regulations in the areas of medical devices, product safety, product claims, data protection, intellectual property rights, health and safety, competition, employment, taxes and anti-money laundering and anti-bribery & corruption (AML & ABC). Furthermore, many of the company's devices are subject to various medical related assessment (including clinical trials), clearance and approval processes that are required to introduce the Company's products on the markets.

Failure to comply with the regulations might lead to loss of sales permits in different markets, product recalls, reputational issues, civil and criminal actions leading to various direct and indirect damages to Optomed and its employees that are not completely covered by Optomed's insurance coverage. Especially, failures with respect to compliance with certain medical devices related regulations and processes may hinder the company's devices market access.

Flagging notifications

On 17 February 2021, the total holdings of treasury shares held by Optomed Plc decreased to 4.61 per cent of all the registered shares.

On 8 April 2021, the total holdings in Optomed shares and votes held by OP-Rahastoyhtiö Oy increased to 5.46 per cent of all of the registered shares in Optomed.

On 28 April 2021, the total holdings in Optomed shares and votes held by BI Asset Management Fondsmægler-selskab A/S increased to 5.69 per cent of all of the registered shares in Optomed.

On 25 May 2021, the total holdings in Optomed shares and votes held by Robert Bosch Venture Capital GmbH decreased to below 5.00 per cent of all of the registered shares in Optomed.

Events after the review period

On 25 January 2022, Optomed announced the proposal of the Nomination Board to the next Annual General Meeting.

The Nomination Board proposed that Xisi Guo, Seppo Mäkinen, Petri Salonen, Reijo Tauriainen and Anna Tenstam are re-elected as Board members.

On 7 February 2022, Optomed announced the results from the prospective, multi-center clinical trial intended to assess its handheld fundus camera Aurora together with AEYE Health's AI for autonomous detection of more than mild diabetic retinopathy (mtmDR). Among patients positive for mtmDR, the combined product, Aurora AEYE detected 91,9 percent (sensitivity), while patients without the eye disease were correctly identified 93,6 percent of the time (specificity). The observed imageability was over 99 percent.

The Board's proposal for the distribution of profit

The parent company's non-restricted equity on 31 December 2021, was EUR 17,844,289.15 and the net loss for the financial year was EUR 2,208,466.18. The Board of Directors proposes to the Annual General Meeting that no dividend will be paid and the non-restricted equity on the outstanding 14,003,144 shares shall be retained and carried forward.

Audit review

This financial report has been audited by the company's auditors.

Financial reporting in 2022

4 March 2022  Annual Report 2021

5 May 2022  Interim Report for 1 January - 31 March 2022

4 August 2022  Half-Year Financial Report for 1 January - 30 June 2022

3 November 2022 Interim Report for 1 January - 30 September 2022

For more information, contact

Lars Lindqvist, CFO

Tel: +46 702 59 57 89

E-mail: lars.lindqvist@optomed.com

Seppo Kopsala, CEO

Tel.: +358 40 555 1050

E-mail:  seppo.kopsala@optomed.com

About Optomed

Optomed is a Finnish medical technology company and a leading manufacturer of handheld fundus cameras and screening software. Optomed combines handheld fundus cameras with software and artificial intelligence with the aim to transform the diagnostic process of various diseases, such as rapidly increasing diabetic retinopathy. Optomed has offices in Finland, the US and China and the company's products are sold via various sales channels in over 60 countries globally.

Alternative Performance Measures

Optomed uses certain alternative performance measures (APMs) with the purpose to provide a better understanding of how the business develops. These APMs, as defined, cannot be fully compared with other companies' APMs.

Alternative Definition
Performance
Measures
Gross profit Revenue + Other operating income - Materials and services
expenses
Gross margin, % Gross profit / Revenue
EBITDA Operating result before depreciation, amortization, and
impairment losses
EBITDA margin, % EBITDA / Revenue
Operating result Profit/loss after depreciation, amortization, and
impairment losses
Operating margin, % Operating result / Revenue
Adjusted operating Operating result excluding items affecting comparability
result
Adjusted operating Adjusted operating result / Revenue
margin, %
Adjusted EBITDA EBITDA excluding items affecting comparability
Adjusted EBITDA Adjusted EBITDA / Revenue
margin %
Items affecting Material items outside ordinary course of business
comparability including restructuring costs, net gains or losses from
sale of business operations or other non-current assets,
strategic development projects, external advisory costs
related to capital reorganization, impairment charges on
non-current assets incurred in connection with
restructurings, compensation for damages and transaction
costs related to business acquisitions.
Net Debt Interest-bearing liabilities (borrowings from financial
institutions, government loans and subordinated loans) -
cash and cash equivalents (excl. lease liabilities
according to IFRS 16)
Net Debt / Adjusted Net Debt / Adjusted EBITDA (for the last twelve months,
EBITDA (LTM), times LTM)
Earnings per share Net result / Number of outstanding shares
Equity ratio, % Total equity / Total assets
R&D expenses Employee benefit expenses for R&D personnel and other
operational expenses related to R&D activities

Consolidated income statement

In thousands of euro Q4/2021 Q4/2020 2021 2020
Revenue 3,552 4,041 14,850 13,011
Other operating income 57 40 810 157
Materials and services -1,201 -1,272 -5,102 -4,213
Employee benefit -2,448 -2,161 -8,702 -7,319
expenses
Depreciation, -654 -533 -2,778 -2,173
amortization and
Impairment losses
Other operating expenses -1,486 -710 -3,858 -2,369
Operating result -2,182 -594 -4,780 -2,906

Finance income 264 197 715 452
Finance expenses -38 -266 -263 -794
Net finance expenses 226 -69 453 -341

Profit (loss) before -1,956 -663 -4,327 -3,247
income taxes

Income tax expense 20 11 78 70

Loss for the period -1,936 -652 -4,249 -3,177

Loss for the period
attributable to
Owners of the parent -1,956 -652 -4,249 -3,177
company
Loss per share
attributable to owners

of the parent company
Weighted average number 13,441,437 13,262,766 13,441,437 13,262,766
of shares
Basic loss per share -0.14 -0.05 -0.32 -0.24
(euro)

Consolidated condensed comprehensive income statement

In thousands of euro Q4/2021 Q4/2020 2021 2020
Loss for the period -1,936 -652 -4,249 -3,177
Other comprehensive income
Items that may be subsequently
reclassified to profit or loss
Foreign currency translation -119 9 -253 77
difference
Other comprehensive income, net of -119 9 -253 77
tax
Total comprehensive income for the -2,055 -643 -4,502 -3,100
period
Total comprehensive loss -2,055 -643 -4,502 -3,100
attributable to Owners of the
parent company

Consolidated balance sheet

In thousands of euro Dec 31, 2021 Dec 31, 2020

ASSETS
Non-current assets
Goodwill  4,256  4,256
Development costs  6,338  5,667
Customer relationships  1,386  1,608
Technology  636  738
Other intangible assets  358  485
Total intangible assets  12,975  12,753
Tangible assets  433  359
Right-of-use assets  1,205  1,165
Deferred tax assets  13  11
Total non-current assets  14,626  14,289

Current assets
Inventories  2,936  2,539
Trade and other receivables 4,631  3,637
Cash and cash equivalents  6,804  10,608
Total current assets  14,371  16,784

Total assets  28,998  31,073

In thousands of euro Dec 31, 2021 Dec 31, 2020
EQUITY
Share capital  80  80
Share premium  504  504
Reserve for invested non-restricted equity  38,526  37,470
Translation differences -88  166
Retained earnings -17,721 -14,970
Profit (loss) for the financial year -4,249 -3,177
Total equity  17,052  20,073
LIABILITIES
Non-current liabilities
Borrowings from financial institutions  3,813  3,520
Government loans  1,940  2,670
Lease liabilities  818  782
Deferred tax liabilities  463  540
Total Non-current liabilities  7,034  7,512

Current liabilities
Borrowings from financial institutions  1,071  0
Government loans  193  328
Lease liabilities  396  425
Trade and other payables 3,252  2,736
Total current liabilities  4,912  3,489

Total liabilities  11,946  11,001

Total equity and liabilities  28,998  31,073

Consolidated statement of changes in shareholders' equity

Equity
attributable
to
owners of the
parent
company
In thousands Share Share Reserve Translation Retained Total
of euro capital premium for differences earnings
invested
non
-restricted
equity

Balance at 80 504 37,470 166 -18,147 20,073
January 1,
2021
Comprehensive
income
Loss for the -4,249 -4,249
period
Other
comprehensive
income
Translation -253 -253
differences
Total -253 -4,249 -4,502
comprehensive
income for
the period

Share options  1,055 340 1,395
Total 1,055 340 1,395
transactions
with owners
of the
company
Other 86 86
adjustments
Balance at 80 504 38,526 -88 -21,970 17,052
December
31, 2021

Equity
attributable
to
owners of the
parent
company
In thousands Share Share Reserve Translation Retained Total
of euro capital premium for differences earnings
invested
non
-restricted
equity

Balance at 80 504 37,341 89 -15,376 22,637
January 1,
2020
Comprehensive
income
Loss for the -3,177 -3,177
period
Other
comprehensive
income
Translation 77 77
differences
Total 77 -3,177 -3,100
comprehensive
income for
the period

Share issue
Share options  129 406 535
Total  129 406 535
transactions
with owners
of the
company

Balance at 80 504 37,470 166 -18,147 20,073
December
31, 2020

Consolidated cash flow statement

In thousands of euro Q4/2021 Q4/2020 2021 2020
Cash flows from operating activities
Loss for the financial year -1,936 -652 -4,249 -3,177
Adjustments:
Depreciation, amortization and 565 533 2,689 2,173
           impairment losses
Finance income and finance expenses -206 69 -472 343
Other adjustments 671 92 992 284
Cash flows before change in net -906 42 -1,041 -377
working capital
Change in net working capital:
Change in trade and other receivables 248 -80 -1,409 496
          (increase (-) / decrease
(+))
Change in inventories -9 259 -340 -2
          (increase (-) / decrease
(+))
Change in trade and other payables 235 350 -22 -2,483
          (increase (+) / decrease (
-))
Cash flows before finance items -432 571 -2,811 -2,367
Interest paid -27 -17 -66 -75
Other finance expenses paid -25 -249 -64 -725
Interest received 0 78 1 366
Net cash from operating activities (A) -484 383 -2,940 -2,801
Cash flows from investing activities
Capitalization of development expenses -789 -546 -2,112 -1,553
Acquisition of tangible assets -92 -105 -462 -268
Net cash used in investing activities -882 -651 -2,574 -1,820
(B)
Cash flows from financing activities
Proceeds from share subscriptions 149 57 1,012 92
Proceeds from loans and borrowings 367 4 1,366 -167
Repayment of loans and borrowings -124 0 -327 -3,233
Repayment of lease liabilities -100 -95 -414 -390
Net cash from financing activities (C) 291 -34 1,637 -3,698
Net cash from (used in) operating, -1,075 -302 -3,876 -8,319
investing and financing activities
(A+B+C)
Net increase (decrease) in cash and -1,075 -302 -3,876 -8,319
cash equivalents
Cash and cash equivalents at beginning 7,827 10,899 10,608 18,866
of period
Effect of movements in exchange rate 52 11 73 61
on cash held
Cash and cash equivalents at end of 6,804 10,608 6,804 10,608
period

Selected notes

Corporate information and basis of accounting                                            

Corporate information

Optomed is a Finnish medical technology group (hereafter `Optomed' or `Group') that specializes in handheld fundus cameras and solutions for screening of blinding eye diseases, established in 2004.

The Group's parent company, Optomed Plc. (hereafter the `company') is a Finnish public limited liability company established under the laws of Finland, and its business ID is 1936446-1. It is domiciled in Oulu, Finland and the Company's registered address is Yrttipellontie 1, 90230 Oulu, Finland.

Basis of accounting     

Optomed's consolidated financial statements has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The preparation of this financial statement releasealso takes into account the amendments to IFRS standards that have become effective by January 1, 2021.

All presented figures have been rounded. Financial ratios have been calculated using exact figures.

These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, and should be read in conjunction with Group`s last annual consolidated financial statements as at and for the year ended 31 December 2021.

Critical management judgments and related estimates and assumptions

The preparation of financial statements under IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the end of the reporting period as well as the reported amounts of income and expenses during the reporting period. These estimates and assumptions are based on historical experience and other justified assumptions, such as future expectations, that Optomed management believes are reasonable under the circumstances at the end of the reporting period and the time when they were made.

Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. The estimates and underlying assumptions are reviewed on an on-going basis and when preparing financial statements. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based, or as a result of new information or more experience. Such changes are recognized in the period in which the estimate or the assumption is revised.

Use of judgment and estimates

Judgements that management has made in the process of applying accounting policies and that have the most significant effect on the amounts recognised in the financial statements, relate to the following areas:

- Determining trade receivables credit risk

- capitalisation of development costs: determination of development expenditure eligible for capitalisation

- impairment testing of development expenditures

Reportable segments

Q4/2021

In thousands of euro Devices Software Group admin Total
External revenue  1,329  2,223 0  3,552
Net operating expenses -565 -579 0 -1,144
Margin 764 1,643 0  2,407
Depreciation and amortization -500 -153 -1 -654
Other expenses -1,962 -1,127 -845 -3,935
Operating result -1,698 363 -846 -2,182
Finance items 0 0 226 226
Loss before tax expense -1,698 363 -620 -1,956

Q4/2020

In thousands of euro Devices Software Group admin Total
External revenue  1,738  2,303 0  4,041
Net operating expenses -748 -484 0 -1,232
Margin 990 1,819  0   2,809
Depreciation and amortisation -384 -148 0 -533
Other expenses -989 -1,184 -697 -2,869
Operating result -384 487 -697 -593
Finance items 0 0 -69 -69
Loss before tax expense -384 487 -767 -664

2021

In thousands of euro Devices Software Group Admin Total
External revenue  5,839  9,011 0  14,850
Net operating expenses -1,700 -2,592 0 -4,292
Margin 4,139 6,420 0  10,558
Depreciation and amortization -2,168 -608 -2 -2,778
Other expenses -5,153 -4,565 -2,843 -12,561
Operating result -3,182 1,247 -2,844 -4,780
Finance items 0 0 453 453
Loss before tax expense -3,182 1,247 -2,392 -4,327

In thousands of euro Devices Software Group Admin Group
External revenue  5,097  7,913 0  13,011
Net operating expenses -2,235 -1,820  0 -4,055
Margin 2,862 6,093  0   8,955
Depreciation and amortization -1,569 -603 0 -2,173
Other expenses -3,113 -4,167 -2,408 -9,687
Operating result -1,820 1,323 -2,408 -2,904
Finance items 0 0 -341 -341
Loss before tax expense -1,820 1,323 -2,749 -3,247

2020

Revenue

In thousands of euro Q4/2021 Q4/2020 2021  2020

Finland  2,262 2,263  8,939 60.2 %  7,777 59.8 %
China 131 1,031  2,165 14.6 % 2,443 18.8 %
Other  1,158 747  3,746 25.2 %  2,791 21.4 %
Total 3,558 4,041 14,850 100,0 % 13,011 100,0 %

Other operating income

In thousands of euro Q4/2021 Q4/2020 2021 2020

Other operating income 57 40 810 157
Total 57 40 810 157

Other operating income consist of received grants, profit from sales of fixed assets and Business Finland loan conversion to grant. During the financial years 2020-2021 Optomed has received government grants from various organizations, such as Business Finland. 2021 operating income include Business Finland waived loan of 538 thousand EUR.

Tangible assets

Machinery and equipment Machinery and equipment
In thousands of euro 2021 2020
Cost
Balance at January 1  2,257  1,992
Additions  464  265
Balance at End of  2,721  2,257
Period

Accumulated
depreciation and
impairment losses
Balance at January 1 -1,898 -1,585
Depreciation -390 -313
Balance at end of -2,288 -1,898
period

Carrying amount at  359  406
January 1
Carrying amount at   433 359
December 31

Leases

Leased tangible assets
In thousands of euro 2021 2020

Additions to right-of-use assets  449  484
Depreciation charge for right-of-use assets -409 -394
Carrying amount at the end of the reporting period 1,205  1,165
Leased tangible assets comprise business premises and are
presented as a separate line item Right-of-use assets in the
consolidated balance sheet.

Lease liabilities
In thousands of euro 2021 2020

Current  396  425
Non-current  818  782
Total  1,214  1,207

The above liabilities are presented on the line item Lease
liabilities (non-current / current) in the consolidated
balance sheet, based on their maturity.

Intangible assets and goodwill

At December Goodwill Development Customer Technology Other Total
31 2021 costs relationships intangible
assets
In thousands
of euro

Cost
Balance at  4,256  9,709  2,222  1,023  945  18,156
January 1
Additions  2,195  -   -   6  2,201
Balance at  4,256  11,904  2,222  1,023  952  20,357
December 31
 -  
Accumulated  -  
amortisation
and
impairment
losses
Balance at  -   -4,043 -614 -286 -461 -5,403
January 1
Amortization -952 -222 -102 -43 -1,408
Impairment -482  -   -   -89-  -571
losses
Balance at -5,566 -836 -387 -593 -7,382
December 31
 -  
Carrying 4,256  5,667  1,608  738  485  12,753
amount at
January 1
Carrying 4,256  6,338  1,386  636  359  12,975
amount at
December 31

At December Goodwill Development Customer Technology Other Total
31 2020 costs relationships intangible
assets
In thousands
of euro

Cost
Balance at  4,256  8,246  2,222  1,023  859  16,606
January 1
Business  - 
combinations
Additions  1,463  -   -   86  1,549
Balance at  4,256  9,709  2,222  1,023  945  18,156
December 31
 -  
Accumulated  -  
amortisation
and
impairment
losses
Balance at  -   -3,029 -392 -184 -340 -3,945
January 1
Amortization -854 -222 -102 -121 -1,298
Impairment -160  -   -   -  -160
losses
Balance at -4,043 -614 -286 -461 -5,403
December 31
 -  
Carrying 4,256 5,218 1,829 840 519 12,662
amount at
January 1
Carrying 4,256 5,667 1,608 738 485 12,753
amount at
December 31

Financial assets

Current financial assets
In thousands of euro 2021 2020

Trade receivables
Recourse factoring  740  131
Other trade receivables 2,917 2,509
Total trade receivables  3,658  2,641
Cash and cash equivalents  6,804  10,608
Total  10,462  13,249

Due to overdue trade receivables, financial assets are subject to an increased risk of credit loss.

Exposure to credit risk and loss allowance

In thousands of euro Gross carrying amount Weighted av. Loss

loss rate % allowance

At December 31, 2021
Current (not past due)  1,143 0,5 % 6
Past due 0
1-30 days  67 1,5 % 1
31-60 days  10 4 % 0
61-90 days  2 9 % 0
More than 90 days past due  40 12 % 5
Specific loss allowance  2,382 30 % 715
Total  3,644  727

Optomed considers it has heightened risk regarding Chinese customer's trade receivables. The credit risk concentration has been formed and is associated with an increased credit loss risk due to overdue trade receivables.

Financial liabilities 

In thousands of euro  31.12.2021  31.12.2020 

Non-current financial liabilities 
Borrowings from financial institutions  3,813 3,192
Government loans  1,940 2,998
Lease liabilities  818 782
Total  6,571 6,972

Current financial liabilities 
Borrowings from financial institutions  1,071 0
Government loans  193 328
Lease liabilities  396 425
Trade payables  944 595
Total  2,604 1,348
  
Total financial liabilities  9,175 8,320

In the financial year 2021 the Group adjusted the repayment schedule for borrowings from financial institutions and negotiated new loan from Nordea

Fair values - financial liabilities measured at amortized cost

Optomed considers that the carrying amounts of the financial liabilities measured at amortized cost substantially equal to their fair values. This estimate corresponds to the fair value hierarchy Level 3, as the measurement of the said liabilities is based on Optomed management view.

Financial covenant

Optomed's borrowings from financial institutions contain a financial covenant (equity ratio) and Optomed also has to meet certain key operative targets. The borrowings will be repaid in accordance with the new repayment schedule.

Optomed has to comply with the financial covenant terms specified in the loan agreement terms at the financial year-end. Equity ratio is calculated using the agreed formula. The table below summarizes the Group's financial covenant term and compliance during the reporting period.

Covenant term Actual ratio Applicable level
Nordea loan
At December 31,
2021
Equity ratio 50 % 56,44 % Optomed Group
Cash amount 2 million 6,8 million Optomed Group
At December 31.
2022 and
thereafter
EBITDA 0 Optomed Group
OP loan equity
ratio
At December 31, 35 % 59,04 % Optomed Group
2021
At December 31, 25 % 69,03 % Optomed Group
2020

Company's Equity ratio is calculated as follows depending on the lender:

Nordea loan equity ratio calculation formula:  Adjusted equity/(Balance sheet total+ Leasing liabilities)

OP loan equity ratio calculation formula:  Adjusted equity/(Balance sheet total- received advances)

Optomed was in compliance with the covenant as at December 31, 2021.

Related party transactions

In thousands of euro Revenues Trade receivables Other expenses
Jan 1 - Dec 31 2021 1,704 2,382 -87
Jan 1 - Dec 31 2020 2,685 1,389 -103

Revenue and trade receivables and some of the other expenses relate to the major shareholders of Optomed Ltd considered to be related parties to the parent company.

Other expenses consist of consulting fees and travel expenses paid to the Chairman of the Board of Directors.

Events after the review period

On 25 January 2022, Optomed announced the proposal of the Nomination Board to the next Annual General Meeting.

The Nomination Board proposed that Simon Guo, Seppo Mäkinen, Petri Salonen, Reijo Tauriainen and Anna Tenstam are re-elected as Board members.

On 7 February 2022, Optomed announced the results from the prospective, multi-center clinical trial intended to assess its handheld fundus camera Aurora together with AEYE Health's AI for autonomous detection of more than mild diabetic retinopathy (mtmDR). Among patients positive for mtmDR, the combined product, Aurora AEYE detected 91,9 percent (sensitivity), while patients without the eye disease were correctly identified 93,6 percent of the time (specificity). The observed imageability was over 99 percent.