Nanosonics Limited (NAN) Earnings Call Transcript

Thank you for standing by, and welcome to the Nanosonics Limited 2021 Full Year Results and Investor Call. [Operator Instructions] I would now like to hand the conference over to Mr. Michael Kavanagh, Managing Director and CEO. Please go ahead.

Thank you very much, and a very good morning, everybody, and thank you all for joining the call this morning. I am joined remotely by McGregor Grant, our CFO. Well, by now, you will have seen the FY '21 results announcements, which I believe demonstrate the company has successfully adapted to the challenges of COVID-19 and overall delivered an excellent set of results and particularly in the second half of the year as the market conditions improved. There are really 3 key takeaway messages I'd like to convey from the comprehensive set of results and information contained in the release, and you'll find the investor presentation, annual report and sustainability report, which were all posted this morning. And the first message really is around how the organization did experience a significant recovery in the second half of the year over the first half as market conditions improved. And this recovery was experienced across all key measures of the business, including installed base growth, total revenue growth, capital revenue growth and consumables and service revenue growth, and that revenue growth was even more pronounced when you look at it on a constant currency basis. The second message I want to leave you with is that there is still a significant opportunity for growth in the trophon business. And indeed, the opportunity in North America is larger than our original estimates with the total addressable market in that market now estimated to have increased by 50% to 60,000 units. In addition, the fundamentals for adoption in Europe have strengthened, where, coupled with our investments in the region, we witnessed excellent growth for the year despite the region essentially being on lockdown for the full year, and that's very encouraging for the future. And the third message is in addition to the significant trophon opportunity, Nanosonics has an exciting pipeline of new products. We've just launched AuditPro, which brings significant benefits to customers as well as opportunity for Nanosonics as we enter the new and important space of digital connectivity and data in infection prevention. And of course, in addition, this morning, we announced the next platform technology for the company that the company is working on, which is addressing what is probably recognized as the most significant issue in instrument reprocessing today, and that's endoscope reprocessing and, in particular, addressing the significant technical challenges associated with the cleaning phase of endoscope reprocessing that I'll talk about a little bit later. So what I'd like to do is just provide a bit more detail on each of these 3 areas, and then I'll hand over for questions. So as I mentioned, the first key message is really around the significant recovery achieved in the second half of the year. And as you will have seen, full year revenue for the year was $103.4 million. That was up 3% on prior corresponding period. In constant currency, however, total revenue was up 12%. But more importantly, looking at the revenue outcome in both halves, it does provide very important insights. And as market conditions improved in the second half and particularly in North America where access to hospitals improved and ultrasound procedure volumes trended back to pre-COVID levels, we saw revenue grow 39% over the first half to $60 million. And if you look at that on a constant currency basis, that growth was actually up 50%. And as you all know, installed base is probably one of the most important metrics for the business. And despite the impacts of COVID-19, the global installed base increased 13% to 26,750 units. So that's an increase of over 3,000 units for the year, with all regions, I might say, performing very well in that growth. Again, the second half of the year saw a significant recovery in new installed base adoption as the market conditions did improve, and particularly in North America, with 1,650 new units installed. So that was a growth of 20% on the first half, so back to a very positive growth momentum trend indeed in the second half. And if I look at that by region. In North America, the installed base increased 12% or just under 2,500 units for the year, where we now have 23,000 -- nearly 23,500 units installed across over 5,000 institutions. And the second half installed base was up 20% over the first half with 1,360 units installed in that second half. And that second half run rate annualized is just over 2,700 units, which is getting back close to the pre-COVID annual installations we've always been aiming for, which, as you know, is between 2,700 and 3,000 units per annum. Indeed, when I look at the second half installed base in FY '21, it was actually greater than the first half of FY '20 where there was no COVID impact, so again, demonstrating the underlying strong fundamentals for adoption in the North American market. In our European region or EMEA region, despite COVID-related restrictions really prevailing for the full financial year, the installed base grew 35% for the year, where the total installed base now reaching just over 1,500 units across the region. And this growth, I believe, reflects the strengthening fundamentals for adoption of trophon across the region. And in the investor presentation, you'll actually find some details around all those guidelines that now exist. We're supporting automated high-level disinfection, and they continue to emerge. Obviously, there's now a growing understanding of the risks of cross contamination. And of course, we're continuing to increase our investment in our infrastructure across the region. And both halves, actually, not just H1 -- H2 over H1, both halves of the year in the EMEA region demonstrated excellent growth compared to prior corresponding periods, where H1 in the first half, for example, was up 54% on the PCP, and H2 was actually up 73% on PCP. So certainly, we're beginning to gain a fair amount of very positive traction over in the European region. And in Asia Pacific, despite the Australia and New Zealand market being highly penetrated, we still had installed base grew about 9% or 150 units for the year. In that region now, there's 1,760 units installed. And that majority of that growth was actually experienced in Australia, New Zealand as Japan was effectively in a state of emergency, in lockdown, for the majority of the year. So back to revenue for a moment. And if I split the total revenue down to capital and consumables, despite a 13% increase in new installed base, the actual capital revenue for the year was down 11% to $26.7 million. This reduction was primarily associated with a reduction in the number of units sold to GE Healthcare in the first half of the financial year, which we reported during our first half results. And from that, you remember that, that reduction was really just due to a decrease in the installed base growth as a result of COVID-19, particularly in Q4 of FY '20 and Q1 of FY '21 and then the corresponding impact that had on GE's inventory level. So they didn't need to purchase capital when the amount going out to customers was down. But importantly, the capital revenue increased 84% in H2 compared with H1. As market conditions improved, the installed base growth recovered, and of course, then, GE resumed their normal capital purchasing pattern. So that was really a one-off impact due to inventory, and we saw a nice return to normal patterns of purchase in the second half. Of course, this impact of GE capital purchases was only felt in our North American region. For Europe and Middle East, total capital revenue for the year was up 91% to $2.7 million. And what's important to note here is as the majority of units placed in the U.K., which is our largest market in the European region, are under the managed equipment service model where no capital revenue is actually recognized, this increase in capital revenue in EMEA does reflect the growth in the markets outside of the U.K., so again, with strong indications for very positive growth momentum emerging in our European region. And of course, in the Asia Pacific, the total capital revenue for the year was up 143% to $2.7 million. Now if I exclude the capital revenue that was associated with upgrades, the overall capital revenue for the year in Asia Pacific was up 36%. But of course, upgrades are an important part of our capital revenue growth moving forward, so it was good to see upgrades come through in ANZ in the last financial year. From a consumables and service perspective, revenue increased 9% to $76.4 million. And here, I think it's really important to look at this on a constant currency basis as it better reflects the actual volume growth, and in constant currency, that revenue would actually have been $84 million or up 20%, which I think is important to understand. And as you all know, the first half consumable sales, they were impacted due to the effect of COVID on ultrasound procedure volumes. However, the second half saw a positive trend towards pre-COVID procedure levels with revenue for the consumables and service up 27% in H2 compared with H1 or that will be 39% in constant currency. And what is important, I guess, also is that towards the end of the financial year, all indications for that ultrasound procedure volumes were definitely approaching pre-COVID levels across most markets, and details on all the regional splits with respect to those revenue numbers are provided in the release and in the investor presentation. So moving on to the second key takeaway or message, and that is there's a significant opportunity and ongoing opportunity for growth in the trophon business, and indeed, the opportunity is larger than our original estimates. At the half year, we said that we were going to examine the North American market to get a better understanding of the total addressable market. And for many years, we've been quoting a 40,000-unit opportunity, which is certainly out of date. And the ultrasound market has not stood still and indeed has grown strongly. And we did commission work in the United States to better understand the current state of ultrasound installed base in the U.S.A. And as a result of that work, the estimated total addressable market for trophon units in North America has been revised up from 40,000 units to 60,000 units. And this takes into account the growth in the ultrasound market over, really, the last 8 years or so since we've been quoting that 40,000-unit number. What this means, of course, is there's an opportunity for strong ongoing growth in North America. Indeed, rather than being 59% penetrated, if we were still quoting 40,000 units, we are only 39% penetrated, which provides excellent runway for ongoing growth. We've not done a similar exercise for Europe and Asia Pacific at this stage as the same level of granular detail is not readily available, but we do acknowledge that the 40,000-unit opportunity in each of these regions is out of date and is likely higher just like in the U.S. as ultrasounds has certainly grown in those markets as well. But getting to a specific number, to be honest, is not a big priority for us at the moment, as you all know, that there's still a large runway to go even with the 40,000 opportunity, but we'll look at that at a later date. And speaking of growth in these regions, you've seen the growth being experienced in Europe, and certainly, we aim to continue to invest in that market to further stimulate growth on the back of the strengthening fundamentals. We know from our North American business that trophon can be a very successful business, delivering significant contribution margin, and our aim is to replicate what we have achieved in North America in the other 2 regions. In Asia Pacific, despite the challenges associated with Japan being in a state of emergency for the majority of the year, we did continue our market development work there with virtual education and training with relevant specialists, societies and, of course, our distributors. We did expand our local infrastructure over there, and we continue with our market development activities in partnership with our distributors, including GE Healthcare. We are currently finalizing, actually, it may be finalized, the registration of our wholly owned foreign enterprise in China or would be in China, and we are now preparing for regulatory submission to approve trophon2 for commercialization in that market. I think it will probably be an FY '23 market introduction, but there's a lot of work going on behind the scenes as we prepare for that. And of course, growth in capital equipment is only one dimension. There's also the opportunity for growth in consumables. I mean we did see, especially on a constant currency basis, very, very strong growth in consumables this year. And also, in the investor presentation, there's a slide in there that I think is quite informative in that it highlights that there is over 150 different types of procedures that use ultrasound probes across many departments that risk contact with mucous membranes, non-intact skin or sterile tissue, therefore, necessitating the requirement for high-level disinfection. And as education on this creates greater awareness, there's certainly the possibility that the usage of trophons will also increase, driving increases in consumable usage. And of course, another important aspect related to the significant growth opportunity for trophon is upgrades. And for obvious reasons, upgrades were -- there wasn't a big focus in FY '21 because where we did have hospital access, we were very much focused on the new installed base. But now that hospital access is back, there will be more of a focus in FY '22 on upgrades. Customers have been notified about the end-of-life notifications for the original trophon EPR, which is just a normal part of the product life cycle. And there are now over 6,500 trophon EPRs, I believe, that are 7 years and older in the market. And considering the value proposition of T2, the trophon2 over the EPR, the original device, together what I believe is a solid economic rationale, we'll certainly be informing customers of the upgrade opportunity over the next 12 months. And just to note here, as upgrades do kick in, so will the mix between capital and consumables, which, of course, then, can have an impact on gross margin, depending on the volumes of upgrades we get in FY '22. We expect the gross margin to rebalance closer to the historical levels of about 75%, 75-plus percent, that was experienced in the prior years. So that's important to note. So considering there then the increased TAM in North America, the Europe growth kicking in as fundamentals have improved, opportunities through our expansion in Asia Pacific, the potential for increased usage of each trophon due to a wide range of ultrasound procedures and, of course, upgrades, I think that there is definitely a significant opportunity for the trophon business alone moving forward. Of course, this leads to the third and final key message I wanted everybody to leave with, and that is at Nanosonics, we have an exciting pipeline, really, of new products. And as you all know, product expansion is a core aspect of our strategic growth agenda, and in FY '21, the company invested $17.2 million in R&D. So that's up 11% on the prior year. In June, we announced the launch of Nanosonics AuditPro, which is an infection control workflow compliance management system. And it's a result of a number of years of research and development and really opens up a significant opportunity to market a unique solution that really integrates infection prevention decision-making, track and trace and compliance into a single digital solution, and that product now is being rolled out in the United States with plans to introduce it into other regions over time. The AuditPro solution, it comprises of a mobile scanning device, coupled with a subscription to a browser-based application for users. And the first application focuses on ultrasound procedures, where the new handheld scanning device is actually designed to be coupled with every ultrasound console at point of care. So with over 270,000 ultrasound units in the United States alone, now you can imagine that AuditPro represents a significant new opportunity for Nanosonics. And it's important, I guess, one takeaway on this, it's important that some people were thinking about AuditPro, the ratio of AuditPro will be associated with the ratio of trophon. We're very much looking at AuditPro as a ratio to ultrasound consoles, not as a ratio to the number of trophon units that are out in the marketplace. So over time, we're not expecting significant revenue. It's like a service model, a subscription model that will generate revenue over a 5-year subscription model and recognize that revenue over a 5-year period. But obviously, as the installed base grows with AuditPro, then the revenue can become quite significant. In addition to AuditPro, there is our new -- next new technology platform, the Nanosonics Coris platform. And this new technology platform is directed at solving what is probably the most important and significant problem in instrument reprocessing today, and that's the cleaning of flexible endoscopes. Indeed, more health care-associated outbreaks have been linked to contaminated endoscopes than any other medical device, and it's a highly, highly complex problem to solve that has existed for many years. So a bit of detail around this, if I may. First of all, reusable flexible endoscopes, and there's a range of types of flexible endoscopes, they are highly sophisticated medical devices that enable advanced diagnostic and therapeutic interventions across a range of conditions. And these reusable endoscopes, they incorporate advanced technologies that give physicians, really, a sophisticated level of control in carrying out very complex and minimally invasive procedures and the ability to navigate challenging anatomical situations to deliver the highest level of patient care. And as I mentioned, there are many types of flexible endoscopes, including colonoscopes and gastroscopes, duodenoscopes, bronchoscopes, et cetera. And from a reprocessing or a decontamination perspective, the cleaning stage of the reprocessing or decontamination process, it's a critical step and has significant implications for the outcomes of the subsequent high-level disinfection stage of the process. Indeed, the father of decontamination, [ Aaron Spaulding ], a famous quote from him is, "You can clean without disinfecting, but you cannot disinfect without cleaning." And so people talk a lot about moving towards sterilization, but even still, without very effective cleaning, that won't make much of a difference. So -- but there are lots of challenges associated with manual cleaning combined with reports of persistent contamination from biofilm, which is really a very difficult contaminant to remove despite that routine cleaning, and this does represent a significant unmet need that's well recognized by regulators and customers. Now addressing this problem, which has existed for many years, it's a very, very complex issue. You're dealing with trying to automate what today has anywhere between 50 and 200 manual cleaning steps. You're dealing with sophisticated endoscope design and architecture that has multiple interconnected channels and complex ports. You're dealing with channels, with diameters that can be less than 1 millimeter, and of course, you're dealing with very complex and difficult soils to remove such as biofilm. So as you can imagine, it is a very, very complex technology development program. But the Nanosonics team, they've focused on very significant technical challenges for a number of years now with the aim of developing a novel automated technology designed to really revolutionize the cleaning process of flexible endoscopes. And our new Nanosonics Coris platform technology, like trophon, it will comprise both capital equipment and consumables, and in testing today, this new automated platform has demonstrated the ability to deliver significant superiority in cleaning efficacy over the requirements of the current standards, including those -- there are some new recent standards that are even stricter, and we can significant superiority even over those. In addition, testing demonstrates superior efficacy over manual cleaning against these difficult biofilm contamination, including in the smallest channels of an endoscope, so down to less than 1 millimeter in diameter. So a big technical challenge to overcome, and the R&D team has done an absolutely amazing job there. So the potential to address this, of course, represents a significant opportunity for the company. There are over 60 million flexible endoscope procedures being conducted across the United States and the largest 5 markets in Europe alone every year, and that number is growing at about 6% per annum. And we're very pleased with our progress in the product development. There's still some more development work to do, which will be followed by external clinical assessments to support the regulatory submission. We continue to engage with the FDA to determine the necessary requirements to support a successful regulatory submission, but all of that is going well. And the timing for initial commercial launch previously indicated, that is being revised and will be determined in due course, dependent on, of course, those technical, regulatory and operational milestones being met. And at the moment, we're currently targeting the first commercial launch in calendar 2023. There are some impacts of COVID at the moment with lockdowns here in Australia, but we're doing our best to try and manage those. And we'll keep the market informed as material, new information becomes available. But needless to say, it's a very exciting development, and we remain highly confident in bringing what we believe can be a transformational product to market that does address the most significant unmet need in instrument reprocessing today. And indeed, we believe, like trophon, can become a new standard of care. So all around, some very, very exciting things ahead for the business from a product portfolio perspective. In terms of outlook for '22. First of all, we do have to acknowledge that there is still uncertainty in the marketplace, especially with the Delta variant of COVID. However, assuming that positive market recovery trends do continue, and we're seeing that with vaccinations increasing around the world, et cetera, we do anticipate a return to double-digit growth. And I think you saw what our second half number was of $60 million. So we're expecting double-digit growth in total revenue in FY '22, and that will be driven by ongoing increase in the installed base globally, increased usage of consumables across all regions as ultrasound procedures return to pre-COVID levels. And in addition, of course, it's anticipated we'll see new capital revenue coming in from upgrades from trophon EPR to trophon2 during FY '22 as well. I did mention earlier on just on -- depending on the upgrades and capital and the growth now in capital in the second half or in this year from new IP and upgrades that the mix between capital revenue consumables will likely change, and that will result in gross profit margin more aligned to what it was in FY '20 but remain -- our estimates are remaining above 75%. So with the exciting opportunity -- growth opportunities outlined for the trophon franchise as well as opportunities in the broader infection prevention markets, we are going to be maintaining our commitment to continue to invest in the long-term strategic growth agenda with an emphasis, of course, on continuing investment growth in our regional operations and R&D. The operating expenses in FY '21 in the fourth quarter were $20.3 million as the business returns to its intended investment run rate. As you know, we originally at the beginning of the year were guiding towards $75 million to $78 million. Of course, with impacts of COVID, et cetera, that had come down. But in the fourth quarter, we got back to that intended run rate of $20.3 million. So that annualized alone is about $82 million, and of course, we expect some growth on top of that. So we are expecting our investments in the ongoing growth of the business to approximate $90 million for the year. So with that overview, I'm happy to hand over for any questions.

[Operator Instructions] Your first question comes from Josh Kannourakis with Barrenjoey.

Michael and McGregor, can you hear me okay?

Yes.

Well done on the results. Firstly, just a question about the core trophon business and with regard to your outlook. Can we talk a little bit about what you're seeing in terms of trends for the start of the year in terms of access into hospitals and just how that's been tracking in terms of your workforce and sales funnel?

Yes. Look, a good question, and it's obviously something we're monitoring very, very closely. In the U.S., what we're seeing is access to hospitals has certainly improved a lot as vaccinations have increased. There's pockets in North America in the southern states like Florida and Texas where the Delta strain and hospitals are under a bit of strain where access is more limited. But we still are getting in there. Our service people are getting in. Our clinical applications people are getting in. And even in those southern states at the moment, we're still seeing the ultrasound procedural levels back towards pre-COVID levels. So we're not seeing those big drops that we had seen originally. But ultimately, I think what's happening out there as vaccines are rolling out, there's also an acknowledgment that there are many other health care issues over and above COVID that have to be addressed. So the, hospitals are, I believe, better equipped. I mean this time last year was all around getting access to PPE and ventilators. They are a lot better equipped to manage it at the moment. So with that in mind, our access has certainly improved a lot. And a similar sort of story in Europe. Our German field force are out there now. Our U.K. field force are out there. Yes, there are new guidelines with respect to visiting hospitals, but these guys are able to get into the hospitals now.

Got it. No, that's great. And just in terms of upgrades, and you mentioned you do expect some of those to start happening into FY '22 and some good granularity there, can you just talk a little bit through the implementation of the EPR end-of-life strategy and also how AuditPro could potentially play into accelerating that upgrade cycle?

Yes. So normal part of product life cycle when you are going to, at some stage, obsolete products, and when you do go through an obsolescence strategy, you notify customers with respect to an end-of-life notification. We did notify customers quite a period -- some period time ago about the end of manufacturing and then more recently notifying them with respect to end of life. And now what end of life means is not that we no longer want to support customers who have EPRs, but there could be limitations for older devices in terms of being able to service devices because of obsolete parts and things. So -- and that is very, very -- that's the normal process medical device companies follow. So customers have been notified. So -- and I think then when we look at the upgrades, the EPR -- the T2 over EPR is certainly some very strong value proposition there, and economically as well, I think it makes sense to upgrade because remember, many of these EPRs are under service contracts, then when they get a new T2, that's warranted for the first year. So it's almost like they've got a discount to the value of 1 year of service contract from the T2 already. To your point on AuditPro, I think AuditPro can -- even though it's a discrete product in and of itself, but its first application is in ultrasound, the connectivity -- AuditPro does not connect with the EPR. And -- but it does with the T2. So it can certainly be a driver for upgrades as well when the teams are out there talking to the existing customers about AuditPro. But not just a driver for the upgrades I would say the other aspect that AuditPro could potentially impact over time is that this product, it has in-built in the product, in that handheld, is it almost ensures that as part of the clinical workflow that the customer is taking on board the necessary infection prevention requirements. So -- and it educates them and helps them understand what they need to be doing with the probe and whether or not it requires high-level disinfection, et cetera. So I think it can drive -- continue to drive that education. And of course, with over 150 different types of procedures -- ultrasound procedures that require high-level disinfection, there's a possibility that AuditPro could actually drive increased consumable usage as well as upgrades over time.

Great. And extremely quick one, in the essence of time, on the new product. Can we assume that because you've released or discussed it now that the major technical challenges are overcome? I know you've mentioned there's a couple of additional product enhancements to come. But are the major technical issues that you've dealt with, can we assume they're over now -- they're overcome?

Yes. The big thing here, we -- it is a very -- it's -- in one sense, it sounds easy, the cleaning of flexible endoscopes. But when you look at the architecture of endoscopes, and it's a purposeful architecture that enables the physician to have extreme control and be able to navigate internally into very, very small areas, that complex architecture is actually required. But you're dealing with endoscopes that have many different channels, and those channels of different diameters, and there's bifurcations in there and connectors and over 9 different ports and all of these other things. And so you can imagine the process, and that's why the current cleaning process can have anywhere from 50 to 200 different steps. So you can imagine trying to automate that. And all our testing today is now consistently demonstrating that we are achieving significant superiority over the required standards today and, very, very importantly, the ability to very, very effectively clean those very small lumens, which are considered to be the most difficult aspect of the cleaning and potentially one of the biggest contributors to the contamination. And our ability to be able to get rid of biofilm in those channels is -- has proven to be very, very successful. So we are feeling very, very comfortable. Yes, there's some more work to do, not in the product. You got to remember a product like this then got to be introduced into manufacturing. There's many test systems that have to be developed, et cetera. So there's a whole suite of elements associated with the development over and above just the product itself. But we feel very comfortable with the product that we have and that, indeed, it can be transformational when launched.

Your next question comes from Martyn Jacobs with Canaccord Genuity.

Congratulations on the strong result. I thought I'd just start with just asking what percentage of sales are represented by GE now, if you can share that with us.

I don't have it off the top of my head. I think it's probably in the order of about 55%, 60%, and you'll find that in the annual report under the significant customers. What I will say when thinking about that is, remember, the consumables. That we now effectively sell the consumables close to the ASP of what we sell directly to customers. But GE, they continue to provide consumables to their customers. So in one sense, you almost have to discount that percentage by the volume of consumables because if they were not up selling those consumables, we would be selling those consumables to those customers. But ultimately, today, including consumables, it would be in the order of about 60%.

Right. And on the OpEx, you're foreshadowing quite a big jump in the cost there. And I was just wondering if you can split that out between SG&A and R&D firstly. And secondly, you've notified a 9% increase in staff, and can you just talk to sort of where that's being attributed?

Yes. Look, a good question. As I say, originally, for FY '21, even with the COVID, we were looking to invest upwards of $75 million to $78 million. Obviously, we came in underneath that. But importantly, in the fourth quarter, we were able to get back on track as markets began to open up and with our investment strategy and exited the fourth quarter on a run rate of about $20.5 million. So annualize that, you're at $82 million straight away. Now the -- going into this year, we are looking to continue to invest out in the regions. It's more investment going out into the U.S. There's more investment going into the European region. We're doing investments as we're expanding our Asia Pacific infrastructure. Yes, there is more going to go into R&D as well this year over last year. The other thing I'll flag is we will very likely move to a new premises. We're close to signing a new lease on a new premises that is a larger premises that will support the next phase of the growth, so giving us a lot more capacity from a laboratory perspective and office perspective as well. So that will start coming in from an accounting perspective in FY '22 as well.

Okay. And on the upsides for the market, that's good to see you've adjusted that. But you also noted that pre-COVID, new units were sort of 2,700 to 3,000. That's what you want to get back to. But in the past, you have talked about 3,000 as a sort of a, I guess, a baseline that you can go year in, year out. So is there a subtle softening in your expectations going forward? Or has that just been casual robust?

No. I think we'd like to think -- I think I've always said there's not many pieces of medical technology getting out there with about annually 3,000 new units going in and then generating annuity revenue from it. And we'd like to think in North America that we'll be able to get back to that run rate of 3,000, and then we start seeing an accelerated growth in Europe. So really, what the 60,000 shows is there's still good run rate for ongoing growth as opposed to we'll get automatically a shift in growth from 3,000 to 3,500 or 4,000 units.

Okay. And just finally for me. In terms of the new endoscope product, pleased to see that you're acknowledging the problem with biofilm as a sinister factor in infections. And I was just wondering, if someone had developed a biofilm-disrupting agent and could coat it on endoscopes, et cetera, would that have an impact on your potential? And have you thought about that technology?

I'm sure many people are thinking about those types of technology. Biofilm, we could go into hours of lectures on biofilm and the intricacies of biofilm. But coating products to minimize biofilm formation, I think, nobody has been able to crack that, and it's a big, big area. At the moment, I think, Mart, we feel very, very comfortable in the opportunity in this technology that we have going, and we feel very comfortable that it will become a new standard of care.

Your next question comes from Chris Cooper with Goldman Sachs.

Michael, if you don't mind just first on the revenue guidance of double-digit. I mean I don't know whether you can help steer us a little bit here, but clearly, the second half, there's a recovery that's played out as foreshadowed. But for the year as a whole, I think it's fair to say that it's still a little bit below where you'd normally expect it to be. So a double-digit revenue growth wouldn't necessarily be a big surprise to people. Could you help to just narrow that slightly? I mean, clearly, it's a very broad range. I mean, consensus, I believe, is currently something in the high 20s. Is that something you'd feel comfortable with at this stage?

Yes. Look, we -- Chris, we've traditionally not given any guidance with respect to revenue. And I think a lot of companies actually, at the moment, are not giving much guidance with respect to revenue with the uncertainties that are out there. What we'd like to think is that -- I mean everybody is seeing what our second half revenue has been, and we would like to think that that's the run rate going into FY '22. And as long as the conditions continue to improve based on what I've covered this morning with respect to the opportunities that are out there for trophon, we would like to think that, that run rate is certainly achievable, which gives some indication of what the first digit is on that double-digit growth. But really, with the uncertainties out there, I can't give any more granular information than that.

Okay. So just to clarify that comment, an approximate doubling of the exit rate in fiscal '21 wouldn't be a bad starting point when we're thinking about '22.

Yes.

Okay. And look, on the relationship with GE, did the public -- sort of smaller questions in there. So up to 60% of revenue now. It's a fairly big increase in the amount of revenue generated through that relationship. Is that now the new normal? Or does that begin to fall back down again as the rest of the customer base continues to recover through fiscal '22? And the reason I ask is it does appear that there's been a material sort of pricing impact, negative, as we've seen those GE orders come back through the second half.

Yes. The orders came back in the second half. But again, I want people to -- GE are and continue to be a very important partner for Nanosonics, and we've got a close working relationship with all our colleagues with GE. But I don't want people to get fixated on this 60% associated with GE. Remember, a lot of that is associated with consumables. And as you know, the contract with GE a number of years ago changed where, effectively, we were taking the consumables back, but GE decided that they would continue to provide the consumables to their customers so they can offer the holistic solution, and it would be easier from a customer experience perspective, et cetera. But what we -- we sell the consumables to GE at close to the price of what we would sell them to the customer. So in one sense, you've got to discount the consumable volume when you look at that 60% being associated with GE. But without a doubt, as our direct business continues to grow -- but more importantly, how we look at things moving forward and particularly in North America, internally, we talk about our demand-generation strategy, that we've got a field force that are out there that are generating a lot of demand that can either be filled through us direct, can either be filled -- if we notice that it is a customer that's predominantly using GE equipment, we'll make sure that, that customer is aware -- they'll always have the choice, but we'll make sure that the customer is aware that they can get the equipment through GE because they may be able to bundle it into a contract they already have with GE, et cetera. So we're more focused on ensuring that the market installed base grows as opposed to whether it grows directly or indirectly because, ultimately, the consumables comes -- flows through to Nanosonics.

Okay. And is the plan of the stage for GE to help with the commercialization of Coris?