Nightingale Health H2 on Thursday: Eyes kept on the horizon

Translation: Original comment published in Finnish on 9/22/2023 at 7:27 am EEST

Nightingale will publish the financial statements bulletin and figures for the first half of the calendar year on Thursday at around 9 am (EEST). In the report, we are particularly interested in the recently announced expanding Terveystalo cooperation, the steps of the new strategy, and the progress of the Welltus cooperation. In terms of company figures, our attention is, in addition to the development of revenue in Japan, on the development of the cash position.

A gap leg expected in revenue growth

We expect Nightingale’s fiscal H2 (1-6/2023) revenue to have strengthened by 94% from the comparison period to EUR 2.02 million but decrease from the previous six-month period of rapid growth (1-6/2022: 1.27 MEUR, 7-12/2022: 2.24 MEUR). In our estimates, revenue growth has still come from research customers, from whom we expect less revenue compared to the strong second half last year. We believe the Welltus cooperation in Japan may stimulate growth and this would be a positive sign of the progress of the cooperation. Presumably, this would still be small amounts in absolute terms (7-12/2022: revenue from other countries incl. Japan: EUR 213,000). In any event, H2’s revenue as a whole is low in absolute terms, and we feel its importance for the company’s investment story is still limited.

Cash is consumed but there is a long way to the bottom

Nightingale’s H2 profitability remains clearly negative on all lines, with our EBITDA and EBIT estimates being EUR -6.5 million and EUR -9.7 million, respectively. As a whole, we expect net cash adjusted for lease liabilities to be EUR 76.5 million at the end of June (12/31/22: 84.0 MEUR) and thus cash consumption in the first half of the calendar year to be EUR 7.5 million. The company’s financial position will remain strong. The company uses its cash to build its growth and naturally will not pay dividends. In the report, we look for signs of the impact of the updated strategy on the company’s cost level development . The resources freed up from the consumer business that is ramped down could, e.g., slow down the cost increase in businesses focusing on corporate and public sector customers.

Progress of key cooperation projects determines the direction in the near future

After a recent strategy update, Nightingale focuses on private and public sector customers. In the private sector, the company is launching the Terveystalo cooperation, where its technology is used in occupational health check-ups. In addition, in Japan, the company’s partner Welltus invested in marketing a service that utilizes Nightingale’s technology after building the distribution network. We feel further information on these projects is the most important contribution of the report and key to the company’s business growth outlook for the next 18 months. We also expect comments on the progress of the company’s sales efforts in the public sector. We see significant business potential for the company in this sector if a functional service and commercial model can be built for the sector.