• Revenue: $93.6 million, up 18% over the prior corresponding period.
• Revenue Growth Guidance: Increased from 8-12% to 11-14% for the full year.
• North American Installed Base Growth: 940 units added, totaling over 31,000 units.
• European Revenue: Grew 37% to $5.9 million compared to PCP.
• Gross Margin: 78.5%, improved from 76.3% in the second half of FY24.
• Operating Profit Before Tax: $10.9 million, up 124% from the prior period.
• Net Profit: $9.8 million, 58% higher than the first half of FY24.
• Cash Flow: Generated $13.8 million, with a cash balance of $144.5 million.
• Capital Revenue: Grew 11% to $22.7 million.
• Consumables and Service Revenue: Grew 20% to $62 million.
• Operating Expenses: $66.7 million, up 10% versus revenue growth of 18%.
• R&D Expense: Reduced from 20% to 17% of revenue.

• Warning! GuruFocus has detected 6 Warning Sign with QUBHF.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Nanosonics Ltd (NNCSF) reported a strong start to the year with first-half revenue of $93.6 million, up 18% compared to the prior corresponding period.
• The company increased its full-year revenue growth guidance from 8-12% to 11-14%, with potential for 13-16% growth due to favorable FX rates.
• North American business continues to perform well, with a significant increase in the installed base and strong growth in consumables and service revenue.
• The company is expanding its infrastructure in North America to commence consumables manufacturing, which is expected to bring sustainability benefits and reduce exposure to tariffs.
• Nanosonics Ltd (NNCSF) reported a strong profitability in the Trophon-only business, with profit before tax of $25.6 million and operating leverage improving from 23% to 27%.

Negative Points

• The new installed base in the European region was slower than anticipated in the first half, with only 70 units installed.
• The company is facing challenges in Japan with guidelines still not in place, although early adopter sales are increasing.
• Operating expenses increased by 10% compared to the prior corresponding period, driven by ERP implementation costs and inflationary staffing costs.
• The company continues to face regulatory hurdles with the FDA's de novo review process for the Chorus system, delaying its commercialization.
• Despite strong cash flow and a hefty cash balance, Nanosonics Ltd (NNCSF) does not currently pay dividends, which may be a concern for some investors.

Q & A Highlights

Q: Can you provide more details on the growth of consumables and service revenue, and how should we view the service opportunity in the coming years? A: Michael Kavanagh, CEO: The growth in consumables and service revenue is driven by several factors, including core disinfectant consumables and the ecosystem of wipes and probe covers. Service revenue, which grew over 20%, is driven by new installations and upgrades. Approximately 55-60% of customers opt for service contracts, and upgrades present a significant opportunity as customers switch from GE Healthcare to Nanosonics for service contracts.

Q: How should we view the cost base into the second half and into FY26, especially with the ERP implementation? A: Jason Burriss, CFO: The ERP implementation cost about $1.8 million in the first half and will continue into the second half, but these costs will not repeat in FY26. While there will be incremental costs associated with the launch of Chorus, we aim to maintain operating leverage in the Trophon business.

Q: Can you explain the impact of US manufacturing on margins and any related CapEx? A: Michael Kavanagh, CEO: The US manufacturing of consumables is expected to improve margins slightly over time. The CapEx for setting up this facility is around $3 million, which will be depreciated over time.

Q: What is the status of the regulatory approval and distribution strategy in China? A: Michael Kavanagh, CEO: We are continuing with regulatory approval in China but are currently focusing more on Japan. There are no immediate plans for distribution in China as we prioritize efforts in Japan.

Q: With a strong cash position, why doesn't Nanosonics pay dividends? A: Michael Kavanagh, CEO: The board regularly reviews capital management strategies. Currently, building cash reserves enhances resilience and provides flexibility for investments in growth initiatives without needing to return to the market. While dividends are a future goal, the focus remains on strategic growth and potential acquisitions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.