NAN (ASX) Conference call summary

Originally posted by Eire2011 ↑

Some general notes on the NAN conference call.

The lower half sales result was also impacted by MES sales to about $1.5 million. I also suspect that FX played a part. Remember despite being lowered by MES sales long term this more favourable for us. Especially once we drive more use.

EU sales are predominately U.K. At this stage.

The capital cost of the Trophon sold into the U.K. on MES is depreciated over 5 years as a cost of sales

The plan has always been to saturate the market by increasing installed base and then drive further use and number of cycles done a day through evidence and education.

John Hopkins (US) is an example of a hospital that already chooses to decontaminate their surface probes on a semi regular basis. NAN is working on clinical evidence that will show all hospitals need to do this. If all centres decontaminated their surface probes once a day it would add 30% to consumable sales. Current average number of cycles is 3-4 a day but the long term plan is to increase this.

Australia despite being close to 70% market share is still growing strongly. Surprisingly still has about 40% capital equipment sales and 60% consumables. This is the test case for where our other markets will be heading long term. It bodes well.

New and emerging markets generally have a 60% capital and 40% consumables break up. Exception is the UK which will be predominantly consumables (albeit with a much higher margin).

There are about 5000 centres in the US. Average number of Trophons is about 3 ish per centre and we are aiming for about 8. Some departments are siloed and don't know that other departments have Trophon and have had for years within their own hospital. (We need to go deeper!)

Guidance for Trophon sales in US only given for the first half in the hope that the second half may be better if health reform uncertainties are cleared up by then.

At least one and maybe two of the products to be released in the next two years have a bigger market opportunity than Trophon! Think about that. They also have a capital and large consumable component.

Interestingly the FY 17 sales contained very little in the way of replacement sales. This bodes very well for the next few years and also when T2 gets released. Thankfully nothing was mentioned of T2 as we don't want sales to stall in anticipation of its release.

Some small sales in Japan expected in FY 18 but not material. Doing the ground work with sales to pick up in FY 19. Doing local clinical studies.

China is on our to do list but much more to do before we take that on. Takes a two year registration process that we have not even started yet. We want to go slow and carefully into China.

We are bringing order fulfilment in house and reducing our need and reliance on third parties for this in the US (good).

It's all about education education and more education.

Europe should receive more guidelines in the next 12 months really applying pressure for countries like France and Germany to get on board.

We will thankfully not be paying any dividends for the next few years at least. (Seriously, if people want dividends invest in Telstra or even a CSL or ResMed). We have too many opportunities and need to leverage our balance sheet for growth.

Michael has re stated that we are at an early stage in our growth phase and Invesment in that growth now is much more important than dividends. (My comment - make no mistake this will be a cash cow pumping out cash and fantastic dividends in the next 5 to 10 years - no doubt about it.)

Investor roadshow over the next few weeks.

In summation I am a very happy holder and see tremendous opportunity for Nanosonics over the next 5 to 10 years. Great management, insider ownership, great R&D team, oodles of cash and growing, new products on their way, global geographic expansion really only beginning, excellent cashflow, investment in R&D and setting the platform for long term growth and success.

DYOR and Not advice.

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Appreciate your time to post your thoughts Eire2011....have been in NAN for a couple of years now and it is just pleasing to see Managements plans / strategies coming to fruition from their 2014 launch of their 3 year roll out initiative....the numbers look ok to me and have consolidated into a reasonably solid balance sheet....still nose to the grind stone though as traction can slide a little as take up in Europe and Asia build slowly but having said that the North American market is looking stronger as current users upgrade their processes and policies in regard to disinfection practices across, not only the internal probes, but the surface probes and sensors also....agree with your summation for sure...again thanks for your efforts.

Cheers WTF

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