Modulight Q3'24 flash comment: Revenue missed expectations - profit and cash flow close to forecasts

Translation: Original published in Finnish on 10/18/2024 at 2:58 pm EEST.

Modulight released its Q3 results today, Friday, and the Q3 webcast will be broadcast on Monday at 2.30 pm EEST. We will quickly comment on the results now and update our views no later than Tuesday after the webcast. Modulight's revenue was well below our expectations, but profit and cash flow were close to our forecasts. Revenue was negatively impacted by the transition to the PPT (pay-per-treatment) model and delays in prototype deliveries. Modulight's year 2024 seems to fall short of the company's targets and market expectations. In our view, the report did not show clear signs of a return to growth, at least not yet.

Revenue improved from the weak comparison period, but below our forecast and first half level

Modulight's Q3 revenue amounted to 0.64 MEUR, up year-on-year (Q2'23: 0.46 MEUR). However, our forecast (1.30 MEUR), which was slightly below consensus, was clearly missed. Revenue also decreased compared to the previous quarter (0.96 MEUR). As in Q2, revenue was negatively impacted by the transition to a pay-per-treatment (PPT) model and delayed prototype deliveries, according to the company. The number of projects, a key indicator for the company, remained at the previous quarter's level of 30. The company said its order book has increased as projects progress, and these are expected to generate revenue in 2025. At this time, there were no concrete figures available on the development of the recurring revenue generated by the PPT model, which would make it easier to assess future developments.

Profit and cash flow close to our expectations

The operating result of -2.11 MEUR improved significantly year-on-year (-3.07 MEUR) and was slightly below our expectations (-1.93 MEUR). The improvement is explained by the exceptionally low gross margin and decreased operating expenses in the comparison period. We believe the latter is linked to the completion of the investment program. Cash flow from operating and investing activities was -1.49 MEUR. Cash flow was positively affected by the decrease in working capital (+0.52 MEUR). As far as working capital is concerned, we do not expect similar items in the future. Net cash at the end of the period amounted to 13.5 MEUR (Q3'23: 21.3 MEUR) and cash and cash equivalents to 18.5 MEUR: 28.3 MEUR). Compared to the previous quarter, net cash decreased by -1.5 MEUR. The company's cash position remains strong, but with the downward trend, financing risks are increasing.

Full year falling short of company targets and market expectations

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. The Q3 report suggests that the second year of the strategy period, 2024, will also be below target. We will update our view on the stock no later than Tuesday morning, following Monday's webcast at 2.30 pm EEST.