Translation: Original comment published in Finnish on 9/18/2023 at 7:10 am EEST

Nightingale Health will publish its financial statements bulletin for its deviating financial year (7/2023–6/2024) and the figures for the first half of the calendar year 2024 on Friday at approximately 9 am EEST. The company has successfully launched Terveystalo’s occupational health cooperation and established several significant partnerships, especially in the US, where the direction is toward widespread use of Nightingale’s technology in healthcare. We expect a small level jump upward in reported revenue and that the rate of cash consumption has remained stable. We consider more information on the progress of the successful cooperation projects and the steps in the regulatory path, especially in the US to be key in the report, as these provide additional insight into the likelihood and timing of the company’s commercial breakthrough, which we consider key drivers of the company’s value. The earnings call can be watched on September 20, at 2 pm (EEST) here.

Construction of the business serving healthcare is already reflected in revenue

We expect Nightingale’s revenue for fiscal H2 (1–6/24) to have increased by 55% to 3.0 MEUR from the relatively low level of the previous year and even more strongly from the previous half-year period (7–12/23: 1.7 MEUR, +75%). The growth driver has been the strategically important cooperation in Terveystalo’s occupational health, which started at the beginning of the year, where sample volumes have already been quite significant (1-5/2024: > 50,000 samples), although commercial conditions are unknown. The research business has still represented most of revenue, where Nightingale announced that it had exceeded its target for signed contracts already in the spring. The timing and magnitude of the income streams for the period are hard to predict, so even major forecast errors cannot be ruled out. Only a fraction of Nightingale’s significant commercial cooperation project pipeline is visible in revenue, so the significance of reported revenue for the company’s investment story is still limited.

Cahs is spent as should during the construction phase

Nightingale’s H1 profitability has remained clearly negative on all lines, and our forecasts are EBITDA is -4.5 MEUR and EBIT -8.5 MEUR. Some of the company’s expenses are share-based (no cash effect) and the cash produces interest income, so the cash impact of negative profitability is probably less severe. As a whole, we expect net cash adjusted for lease liabilities to be 65.9 MEUR at the end of June (12/2023: 71.1 MEUR, 6/2023: 78.0 MEUR) and thus cash consumption in the first half of the calendar year to be 5.3 MEUR. The company’s financial position will still remain strong. Nightingale uses its cash assets to build its growth and profitability is in line with this strategy.

Progress of key cooperation projects guides the speed of value creation

Since the strategy update released last year, Nightingale has focused on private and public sector healthcare operators with existing high-volume blood sample and patient flows. Given the news flow over the past year, the company seems to have clearly found a viable angle to open up the market. We believe that the ramp-up and materialization of customer wins, and if successful, the timing of this, has become the next key step in the company's investment story and a value driver. In the report, we pay attention to related comments and the targets for the financial year expected to be released again, which could also already be partially linked to the ramp-up of customers.

Nightingale’s key customers at this time are Terveystalo’s occupational health (in operation) and Pathology Asia (operations are expected to start later his year). In addition, the company has several other growth starts that are expected to mature in the coming years (especially the Japanese business acquired from Welltus, Mass General Brigham, Kaiser Permanente, Weill Cornell Medicine, Boston Heart, 23AndMe, Phenome Health). Many of these focus on the US, so an update to the company’s regulatory path is interesting, as its progress also affects the ramp-up schedule of these customers.