EuroEyes International Eye Clinic Limited (1846) Earnings Call Transcript & Summary

Ladies and gentlemen, distinguished guests, and fellow visionaries, first, I would like to welcome all of you, all the investors and analysts who are able to join us today in this conference. I'm deeply honored to be your host today as we embark upon this exciting journey of discovery, innovation, and collaboration. My name is Leslie Richardson from Porda Havas, and it's a privilege to guide you through this remarkable event. Together, we are gathering here to celebrate a significant milestone and witness a new chapter in Hong Kong eyecare sector with the introduction of a renowned international eye clinic operated by German ophthalmologists in Causeway Bay. Before we dive into our exciting agenda, let's give a warm welcome to our officiating guests for the day, Dr. Jorn Jorgensen, Chairman, Chief Executive, and Executive Director of EuroEyes. We also have the company's CFO, Dr. Markus Braun; and Dr. Jannik Jorgensen. I don't know your title.

Just call me Jannik.

Jannik, yes, Executive Director. Okay, thank you. Please sit down. So let's again express a warm round of thank you to our presenters tonight and congratulate the company on the grand opening of EuroEyes flagship store in Hong Kong. Thank you.

Is your better than mine? Okay, yes, a warm welcome to all of you, and we are happy to show you here our latest baby. It had took a long time to come that far. We promised to do that after our IPO, but we did IPO in November 2019, and in February we had COVID. So, it was a difficult time. It was a difficult time in Hong Kong, and it was a difficult time in China. But I will try to go through the whole process. I will try to show you what we wish to bring into Hong Kong. Dr. Braun will show you the numbers so far, what we are allowed to show to you. So, let's get started. I think it's a good way to meet the investors while we are only doing that online, and so it's nice that we can come here in the neighborhood and really say hello to you and also show our equipment, show our technologies, and many of these things. So, let's get started with the first one. Yes, this is a little -- you know, that, but we have been on the market since 1993. It's a long time. It's more than 30 years, and so we have done refractive surgeries 30 years, so it's a lot of experience. And you see here through, we came to China in 2013, so we have been in China 10 years. It's a long time, and we have 8 clinics, and maybe the last 2 here is London, 2 clinics in London. One or 2 weeks ago we opened Brompton Road and also Knightsbridge, and I think that will be -- I'm not allowed to say so much, but I think it will get a fast breakeven, it looks like. It's a little like Russell Street. All of people on the street can afford to do it, and they are all curious, and they are all a lot of [indiscernible] (4:04). So, let's take the next one. Yes, I used that today. 2013, we had the opening in Shanghai, and the guy who did the ribbon-cutting was the Chancellor of Germany, Olaf Scholz, and he also did it 2 years later in Beijing. So, we are good politically connected. Next one. Yes, it's a little our different countries. Yes, Dr. Braun made Denmark very great. It's almost so big than Germany, but it's a small country. But you see here 8 clinics now, 9 clinics in China, 2 clinics in the United Kingdom, and Germany we are now building on another 2 clinics right now. They will open within half a year. One will be here, and the next will be here. So we are also growing there. So, you can say at the moment 4 new clinics will arise, and M&A I'm not allowed to tell, but it's something in there. Next one. Yes, it's a big moment, 2019, the IPO. Next one. And here our latest baby. We took it from Prada. They were in here a long time, and during COVID they decided to go up. So, you can see here what are we going to do here? I like Russell Street. 90% of people on Russell Street have myopia, [Foreign Language]. So, they are all our patients, and they all see us. They will not see me when I'm like my competitors. They are in the 18th floor. It will be like you are a beautiful girl and sitting in the 18th floor the whole day, nobody see you. So you need to be seen. Regulation in Hong Kong and marketing are very strict. You are not allowed to say anything. You cannot say anything, but here you can show your face, and this was a little our concept, 18 meter, booking, operation. Next one. 80% of senior high school students are myopic in China and in Hong Kong. In Germany, it's 40%. The reason that they have so high myopia in China, Gaokao. It's not like Germany, to get students, it's very easy. But in China, Gaokao, it's really students don't see the light, and when you don't have natural light, the eye will grow. So when the eye grow, it gets longer, you get [Foreign Language]. When the eye is 1 millimeter too long, it's 3.00 D, it's 300; 2 millimeter too long, 600. So very easy. So, this is like these days in Hong Kong and China. Next one. Okay. So, we wish to have Call to Action. Myopia can develop eye diseases. I will show you. Next one. That's very [ interesting ]. When you have myopia, I have here the level of myopia, 100 to 300, 300 to 600, and over 600. And here you have the diseases. So, when you have over 600, you have 5x bigger risk of getting a cataract, [Foreign Language]? Almost. When you have more than 600, you have 14x more risk of getting glaucoma. When you have minus 600, you have 22x more chance to get retinal detachment. And what's the macular degeneration on Chinese? Jessica?

[Foreign Language]

[Foreign Language]. So, when you are minus 600 and more, you have 41x more chance to get [Foreign Language]. You understand? So myopia, all the people traveling on Russell Street are all myopic, and I wish to tell them, you need a check. It's one of our strategies. Next one. So, what is that? That is business-to-customer. Business-to-business in our group don't work. Doctors don't send to doctors. Doctors are shallow. They are jealous. And they don't send to doctors. So, our concept by EuroEyes, also in Germany, you'll never get a colleague to send patients to me or to others. [indiscernible] let's do that. So, it don't work. And also, maybe some optician sometimes. But this is expensive. So, you can say all our patient in China, in Europe, in Scandinavia, is people who come to us. And when you have been in business for some year, it's mouth by mouth. They send their loved ones. They send their uncle. So, it's a very good business. When you are a good surgeon, it's a question of time when you get big. Well, they trust you. And they go mouth by mouth. But here, we are starting here from the ground. That's difficult. I can do M&A, but then I need to pay 15x EBIT. Here I don't have 15x EBIT. I only need to pay the construction company. But it takes time to build up the snowball. Only when they can see you. So, this little, our business model, it is in [indiscernible]. We have such a location. That's the most expensive one we have in Beijing East. But it's the same. They see us in Knightsbridge. So, it's business-to-customer. Next one. So, sometimes what we say, myopia develop cataract, get it checked. Next one. Myopia develop presbyopia, get it checked. So, it's a little what we try. And you have seen it's not marketing what I'm going to say here. It's really a big risk. So, you need all a check. Next one. And here. When you get 45 plus, this is how you doodle when you have [Foreign Language]. And this is, of course, that's half of our revenue in the group. It is [Foreign Language], Cantonese [Foreign Language]. We had a very famous German poet. He said the only way to escape presbyopia is to die young. Next one. So, what are we going to bring in into Hong Kong? Why are we coming here? Can we bring something in? Next one. I think we can. We have done 25 years of high-volume research and experience in treatment of presbyopia. I think it's a lot of presbyopia in Hong Kong. And it's a lot of people who are 45 who wish to pamper themselves. We see that in China. It's our main driver. It's people who wish to live. So we have done worldwide. And we know from industry, it's nothing what is done a lot here in Hong Kong. Next one. The next is [Foreign Language]. High myopia. Jannik got it. It was minus 800. I did it in Beijing to the opening. Like we have today, I went out. I say, okay, I come again, and he went in, and he had the operation and all the press saw that here on the screen. I'm not allowed to do that in Hong Kong. Otherwise, we will have done that. But I also needed to show it how easy it is and how fast it works. He went out. I gave him the microphone. I say, here I am again. And then he told about his operation he had had 10 minutes before. So, it's an easy way to do it. And it's something you should do by all people with myopia who have more than 600. You should not do laser vision correction where you remove too much of the cornea. Every time you remove 1 diopter more, you need to have the laser need to do more and more and more. In Hong Kong, they do minus 10, minus 11. When I do that in Germany, I will get arrested.

And to add 1 thing, I think that the trend is changing. So, in Hong Kong, it's going to come as well. They will start doing more and more and more ICL. But it's still new. We've been doing it for 25 years.

It will start in Russell Street.

It will start. Because medically, it's much better for the high myops. It's much safer. It's reversible. But it's also more difficult. It's intraocular surgery. But we know it very well. So, I think we have a great starting position there. We have a big advantage.

And also when you have dry eyes, you should not do laser vision correction. Well, then they will get even drier. There is also ICL. So ICL, so, why do we come here? We have done ICLs 25 years, and we have done most in Europe. So this is the reason. Next one. This young gentleman, it's a partner of ours, Dan Reinstein. He's sitting in London, London Vision Clinic. And he do [Foreign Language] not with the lens but with laser. He invented that together with Carl Zeiss. And he is our partner. He is our shareholder. He is our Executive Board Member. And he invented that, and he has done most worldwide. And we will also put that into here in Hong Kong. So, let's see. Some people will not get a lens. They will get a special laser treatment. And then you can see far and near without glasses. When I'm going to treat laser, a normal laser by, let's see, a myopic patient by 50, he will say to me afterwards when I don't do PRESBYOND, doctor, I can see very good far, but I cannot read anymore, while normally he will read with his myopia. But when I remove that, he can see far, but he cannot read it. So this you can do with this new technology from Zeiss or from Dan, Dan will be here tomorrow, and we will introduce that now in China. We do that together with Zeiss in a big campaign. It has started. We have already done the first one. We have a big agency called Golin. It's a marketing agency. And we will go on air with that. I will be in television here on Monday. I will fly from here to China to Shanghai on Monday, and they will bring it in and broadcast in the television. So, I think it will -- let's see. Next one. I have a strong Executive Board, International Medical Advisory Board, who I'm very happy, and I'm very proud of these guys. Well, they don't get big money. They are there while they believe in that. They believe in us. And this is the President of the Chinese Ophthalmological Society. He's sitting in Hangzhou. This is the President of the German Ophthalmological Society, sitting at Heidelberg. He is our CMO, as the Chief Medical Officer for China, Michael. And so, all we are meeting several times in the year and discussing what we are doing here in Hong Kong. That's something we are discussing together, not to make any wrong thing or anything. So that's really good guys. Next one. And it will be our new -- one of our doctors here in Hong Kong. He is living in London. He was knighted by the Queen. So, he's a sir. And he is born in Hong Kong, and he can do surgery in Hong Kong, allowed to do it. He will also come tomorrow, Christopher Liu. And he's a great guy. So, I'm happy he is onboard. He's a good lens surgeon. Fantastic. Have wrote books. And so, he is good. Next one. Yes. Mr. Braun.

Thank you very much, Dr. Jorgensen. Yes. I will just give a quick recap. I hope you all know by heart our half year results, which surpassed our goal in the year 2021 with a total revenue of HKD 350 million, up 10%, or margins at 20% and 41% EBITDA margin. So, I think, also compared to our peers, very strong margins we have achieved here. And we have a strong cash flow from our business model. We still have quite a lot of cash on hand in the balance sheet. So, we are able to shoot fast if anything shows up. Dr. Jorgensen already said, we are not allowed to talk too much about that. But we'll see. Next slide please. Yes. Half year results were already good. And as a CFO, I'm quite happy to say that our Q3 was even better. We had a voluntary announcement on our eye numbers. So that's really I guess -- with our business model, it's really the first indication, if you have an increase in the eyes, we have an increase in the revenue. And with our business model, that also means, yes, we have an even bigger increase in our EBIT, in our net profit after tax. Overall, we have an increase of 17% compared to third quarter of 2022. Again, with the trend we have seen over the last few quarters already that, especially our lens exchange surgery is growing faster than, let's say, the normal old laser surgery treatments with SMILE and LASIK. I think it's a good thing that we push more there because it's a more unique feature for us because our surgeons have done that for the last 25 years. For the last 7 years in a row, we have been awarded with being the company having implanted most trifocal lenses worldwide in the respective year. And it's a more expensive surgery, so I get more cash on my balance sheet. But also, refractive laser surgery numbers have increased. So, I'm really quite happy with that one. Next page, please. And I think some of you we have used that slide quite a few times now, just again to reiterate that. What you see here in this clinic, that's our investment we have. We pay our rent, we pay our salaries, but that's it. And so every additional surgery we are doing, once we have reached breakeven, the cost per surgery, the individual direct cost per surgery, it's really small. And that's why we have a huge increase of our operating profit once we have reached that breakeven because the revenue we have is going, not 100%, but quite a lot directly into our EBIT, into our net profit after tax. Okay, next slide. I would like to go a little bit into our countries and the development of our countries. So, China is really that rebound from COVID, that recovery is really going on and on and on. We have an increase of nearly 20% from a surgery perspective compared to third quarter 2022. And as you can see here as well, lens exchange surgery has really increased by more than 70%. And what Dr. Jorgensen already said, I'm very happy that we finally were able to transfer that PRESBYOND technique invented by Dan Weinstein, who is a Board member of us to China, together with Zeiss, have started a big marketing campaign, and we have actually done the first surgeries there in Beijing. Next slide, please. And perhaps to give a little bit more detail again on the PRESBYOND, what is it doing, what is it enabling with the patients, perhaps Dr. Jorgensen, you can give some more [indiscernible].

Yes, just a quick words for this, right. So, we are an aging world, right? Everybody's getting older and presbyopia is becoming more and more relevant by the day, I would say. Until now, we only did the trifocal lens exchanges. While we've done that for a long time, we've done most operation of this kind in the world. Very proud of that. But this PRESBYOND procedure, which is a laser procedure as well, I think it's a great addition to our current portfolio of operations because it's for younger presbyopic people, right? So if you have somebody who's 38 years old, maybe 40, and he's coming in for a laser operation, we will laser him, but he is going to struggle with presbyopia a few years later, maybe even right after the surgery, because it's looming there already right over his head, because it's the natural development of your lens. So, we have this product called PRESBYOND now, invented by Dan, which is a great intermediate path, right? So you do laser vision correction, but you induce a little bit of a spheric changes to the cornea which enable you to correct the future presbyopia at the same time, which is great, because you're going to postpone presbyopia 10, 15 years, while correcting the distance vision. So as a doctor, I think it's the perfect intermediate product between the typical SMILE and the clear lens exchange.

Yes, Jannik, thank you very much. Next slide, please. If you look at Germany, also, for the half year figures, it was still a bit weak, stronger than the first half 2022, but not looking so strong as China but also third quarter has done a great deal to improve 21% up year over year. Just keep in mind, we have acquired clinic of Professor Knorz in August. So even if I take that on a comparable basis, without Professor Knorz, we have a 12% increase of surgeries in Germany. Next slide. Acquisition of clinic of Professor Knorz, for me, and I think for the whole management team, it was not only about like an addition of a clinic in Germany. Professor Knorz has built up this FreeVis GmbH in Mannheim for also like last 20 years. But it wasn't only about having another clinic in Germany, but it was about having Professor Knorz, who was a longtime associate to us. He has been in China since 2015 I think as well, doing surgery for us. He's really a good friend, or he was a good friend, and he still is a good friend definitely. And to have him onboard now fully to have his clinic but also to have him really helps us a lot. He's our new Chief Medical Officer for Asia. He will be in China quite regularly, strengthening the management team in China, helping us to grow there on the one hand. On the other hand, he's very, very well connected in the ophthalmology world, not only in Germany but all over the globe. He was just in Australia, I think at the main Australian Ophthalmology Society Meeting. So that helps us building a little bit more strength to our brand, but also helps us with our M&A activities, because on the one hand he is a showcase of how we want to integrate our -- how we want to widen our network, and on the other hand, he knows quite well who might be interested in joining EuroEyes and who might not be interested in joining EuroEyes.

Maybe, Markus, just a word to this because I would like to emphasize how important these connections we get through acquiring surgeons like Dan, and like Michael Knorz actually are. Michael Knorz he's, as an example, the Secretary of the IIIC club, which is the most famous club in ophthalmology, I would say. It's the surgical implantation club. And through him, we're meeting so many different clinical leaders and surgeons who might be interesting for M&A activities. And we meet them through a very direct route, which I think is a big advantage. So it's the same with Dan. It's a big advantage.

And perhaps in addition to that, it's also that we approach them as doctors, as a doctors-run company, compared to, let's say private equity fund, if they are approaching a doctor, they're just thinking about, okay, I need to increase my revenue, my EBIT. And here they know that they are talking to somebody who knows the business. Next slide, please. U.K. was a little bit weak during the last few months, and I think there we got hit a little bit more by the economic downturn. We have seen in Europe, but especially in the U.K. On the other hand, we are very happy with our new clinic in Knightsbridge just opened that, so perhaps we can just go to the next slide directly. As you can see, and if you compare it here to Hong Kong, it's also a retail location. It's located right next to Harrods. It's on the ground floor, so we have walk-ins, we have this Call to Action that Dr. Jorgensen was talking about. And we see even after this short time of opening in Knightsbridge that people are coming in, patients are coming in, we are having the first surgeries now. November is looking really, really promising there already from a surgery perspective. So, as a CFO, I'm happy because we are generating more revenue there. Next slide. Last but not least, Denmark. As you know, we have opened our new flagship clinic there in the Parken National Soccer Stadium last year. And that really pays off now as well. We see how well accepted it is in the Copenhagen area. And that contributes quite a lot to the increase we see here in Denmark. So, next slide, please. Yes, before I hand over to Dr. Jorgensen, perhaps here just a picture. These are the 2 new powerhouses. We know, and we push for that, that's Russell Street here in Hong Kong and the Knightsbridge Clinic in London, that they in the short run for sure contribute to our revenue increase. But in the long run that they really become the new powerhouses, the new flagships of EuroEyes and contribute to our numbers. And I'm very, very confident that it will take place and that we will take off with these 2 clinics.

Yes, thank you, Mark. Yes, no, back. Well, these are my 2 babies. And I took this photo here, and it shows, I didn't take that on purpose, 4 Chinese passed. So you have in London 150,000 Chinese, and they know us from WeChat. While we have operated many, so we are a little brand in China also. And when you are 150,000 Chinese in Hong Kong, they come to us. So it's low-hanging fruits. They know it, they have all [Foreign Language]. And we see that, and they like Knightsbridge. Here's Harrods. I think everybody knows Harrods. So, we are next door to Harrods. And yes, and here, I think I have told everything about it. My dream has always been when you are doing M&A, that's easy, but it's expensive. You need to pay 10, 12, 13x EBITDA. Here I only, as I told you, need to pay my construction. But here I have, I don't know how many passing every day, but it's a lot of people and all have [Foreign Language].

Just today, we've been here 2 days now, in the clinic, we pulled all the stickers down on Wednesday and spent Thursday and today in the clinic. And we've had several people just coming in, right? We're not even open. And asking, hey, what are you doing here, right? And we'd say, well, we do laser vision correction. And they say, oh, right. like, how does it work? And I think this is a marketing asset, which is genius because everybody else is hidden away on the 17th floor of some anonymous building. So it's accessible and easy.

Yes. So, we hope these 2 babies, it's also easier as to life is short, and you wish to do the right thing. We are also now underway in Paris and we, of course, wish to go to the places where it is a huge need for all our services. And so this is a little also to tell you where your money is going at the moment. We are investing. We don't need to take any loans. We are doing all from our own accounts. And we think that with the current market, we are both here in Knightsbridge. It's a rich region. People can pay for it. And that's the same here in Russell Street. So, I think it will have a quick breakeven. You just saw, as Dr. Braun told you, when we have all our fixed costs paid, the rest of this will come is some consumables. That's all. And otherwise, the rest is cash flow. So when you have 19% more lenses, you have a lot of cash flow. And this is, I think, a good business model. And yes, it was a little to what we are doing at the moment and how much we can say. I would like to say much more, but then Hong Kong Stock Exchange is over here. So, I cannot say more. And so, we are open to questions when you have something. And I'm ready. Okay.

Thank you, Dr. J.J. and gentlemen. It was a very informative presentation. So, as Dr. J.J. mentioned, we are now opening the floor to your questions. And before asking your questions, please raise your hand and give your name and the company. We are also open up to our online guests. So, you can either answer, address your questions via Zoom, or type in your question in the box provided. So no questions from here? Okay.

My name is [indiscernible]. Okay. My question is very simple. How many patients you need for breakeven in Hong Kong office? Okay.

That's a good question. Well, it depend a little on its laser patient. But I would say, you need per month 40 patients. 40, maybe 50.

And we had 4 walkbys today within an hour.

So I think you have here a fantastic instrument, a platform. Now it's up to us. While everybody have [Foreign Language]. So it's a really -- and we do everything. We are not only doing laser. Somebody is only doing laser. We're trying to do everything. We're also doing [Foreign Language]. You know how long waiting list is this in Hong Kong to get a cataract operation? 2 years or something like this. So, we will go on the cataract market here. We need to talk with the insurance and so on, but I think that's something we will do now and go ahead. So it's up to the CEO. Yes. The next 1.

So we do have somebody from our online guests. We have [ Helena from CCBI ] who'd like to know about your expected annual profit. So, I don't know which 1 would like to take. I guess, any kind of -- you've given a quite a nice outlook for Q3 on the eye surgeries. If you can add anything to that, that'd be appreciated.

Yes. Dr. Jorgensen has already said, Hong Kong Stock Exchange is right across. So, I can't say too much about that one. You have seen our Q3 results or Q3 numbers from the surgery perspective. When I look at Q4, I'm quite positive that we will be above that one. So overall, I think we have some analysts report out, and I guess we will be somewhere around that.

But I think when you see these 2 locations we have right now, I think, you don't need much fantasy to see, you are in here and you know Russell Street. It used some years ago to be the most expensive street in the world. It's not that anymore. But then you need to sit in the bathtub and ask yourself, can you do 40 patients a month? And everything above is cash flow. So this is a question you need to think of that. You need to believe. I believe it. That's the reason our strategy is to go in these high-end good location where you are visible. It's so difficult to be in the 18th floor. Everybody do social media. Everybody do search engine advertisement. They're all the same. So, I think it's a good strategy. I don't hope our competitors are here.

Is there any more questions from the floor? Okay. With that, we would like to thank you. We will wrap up our investor presentation. As a reminder, a recording of this event is available on the company's website. Thank you very much for joining us this afternoon, and please help yourself to some refreshments.