Modulight Q3'24 preview: Eye laser and clinical studies as revenue drivers

Translation: Original published in Finnish on 10/16/2024 at 7:23 am EEST.

Modulight will publish its Q3 results on Friday, October 18 at 1:00 pm EEST. We expect moderately growing revenue from Phase III clinical projects and ophthalmic lasers. We expect revenue to return to more normal levels from the weak comparison period figure. The result is likely to remain well in the red, but due to the calming of investments, we expect a clear year-on-year improvement as investments calm down. Of particular interest will be any new information on the development of recurring revenue and the progress of other growth projects.

Ongoing Phase III trials support recurring revenue - result still clearly in the red

There was no significant operational news from Modulight during Q3 and therefore no material changes to the outlook during the period. Our revenue forecast of 1.30 MEUR represents a relatively strong growth from the weak comparison period. However, revenue is still low relative to the company's cost structure and history. We expect the Phase III clinical trials reported in the second half of last year to continue to generate recurring revenue through ongoing patient enrollment. Modulight reported in its Q2'24 report that its recurring revenue is currently over 100 TEUR per quarter. Any additional information and data points on the development of recurring revenue generated by the PPT (pay per treatment) model would be very interesting, as Modulight's investment story relies in particular on the scalable growth of recurring revenue.

Our EBIT forecast of -1.93 MEUR represents a significant year-on-year improvement, mainly due to lower investments, but also due to higher revenue. We also expect operating costs to moderate as hiring growth slows and other costs remain roughly in line with the prior year. The company's cash position remains strong (Q2'24 net cash 15 MEUR), but due to negative cash flows, cash adequacy risks are increasing.

Overall picture for the strategy period begins to emerge with Q3

Modulight does not provide guidance, but the company's strategic goal for 2023-2025 is strong annual revenue growth and strong profitability at the EBITDA level. In the first half of the strategy period, the targets were not met, and the Q3 report already tells us a lot about what the second year of the strategy period, 2024, will look like. For the full year 2024, we expect revenue of 4.9 MEUR (was 5.0 MEUR). As part of this update, we have made a downward revision of -0.1 MEUR to our revenue forecast for Q4'24, based on the lack of news flow on the progress of the growth drivers. Our EBIT forecast for the full year is -7.9 MEUR (was -7.8 MEUR). Achieving our forecast will require a significant acceleration in growth compared to the first half of the year. Forecasts are subject to considerable uncertainty due to low visibility, and we have had to lower our estimates several times in the past. Revenue for the remainder of the year will be driven by a laser for macular degeneration, which is already in the commercialization phase in the US, and the Phase III trials announced last year. In addition, the company has announced projects with significant revenue potential that are close to commercialization, which we hope to hear more about in the Q3 report.