2/17/2023

speaker
Robin Pulkin
CFO, Revenio Group

2020 earnings release call. My name is Robin Pulkin, and I'm the CFO for Revenue Group. I'm joined by Jouni Tojola, our CEO. We plan to run you through the presentation where Jouni will go through the business summary, followed by my section where we run through the numbers. And after this, you will have a chance for any questions you may have. With these opening remarks, I will hand it over to Jouni.

speaker
Jouni Toijala
CEO, Revenio Group

Hey, welcome. Good afternoon, everybody. My name is Jouni Toijala, and I'm the CEO of Revenio Group. So, let's start by going through the effects of the COVID-19 pandemic for the Revenio Group during 2020. So we could divide last year in three different sections. So the first section is the time before the lockdown, and then the lockdown period, and then the life after the lockdown and the recovery period for us. So if we go for the early 2020, so January, February, our biggest concern was, is the supply chain going to be impacted by the COVID-19? That went really well. So we didn't have any disruptions to supply chain, no electronics, no plastics part coming from the China and so forth. So the supply chain was in really good shape and it has been in good shape for the whole time. Then if we go to March, we go to April, we go to the May time frame. So that was the hardest phase period for us. And in a way that was double-sided. So the tonometers were selling actually really well because of the COVID-19 and the hygienic requirements. But then we had really difficulties on the imaging product side because of the lockdowns and sales team was not able to see the clients. We were not able to deliver or install the devices. And then if we go for the Q3, Q4, so we saw bit by bit then recovery also in terms of the imaging devices. But let's jump in more detail to the Q4 performance. So net sales... strong growth there, so we ended up to 19.7 million euros, with roughly 32% year-on-year growth, and the EBITDA was 8.3 million euros, and the growth was quite significant, so plus 43.7%. And during the Q4, we also issued a positive profit warning concerning the July and December. And the big reason for that was was that we were expecting much more kind of a modest growth, especially in the USA for the second half, but it turned out to be that the actually US business was growing really fast for us in terms of the tonometers plus the probes. And we also saw on the imaging side that the Q4 was stronger than the Q5. And then the overall, we could say that the second half was a way stronger also in an imaging side compared to the first half 2020. And because of the growth, we were also scaling up the production also on the probe side. So these were the highlights for the queue. uh for the q4 and if you are looking at the overall performance of the year 2020 so really the hardest time for us was the april may time frame and especially on the imaging device side and then gradually we have been seeing that the q3 strong pull from clients in the tonometer and the probe side. Same for the Q4. And also, increasingly, we have seen that the imaging product sales is rebounding in the levels of the pre-COVID during the Q4 2020. So that's where do we stand today. And I let now Robin to go through in more detail the key financials for year 2020.

speaker
Robin Pulkin
CFO, Revenio Group

Thank you, Jooni. So like Jooni mentioned, our sales performance was in these conditions extremely good, especially the second half and the Q4, closing with 31.7% growth, and that's the reported number, of course. So the FX was giving us some headwind. So the currency adjusted growth was almost 36% for the fourth quarter. In this table, you can see there's some adjustment lines for the EBIT and EBITDA. Those are actually helping us to adjust the numbers to more a level where we can really compare apples to apples. So there's some one-time items in the reported numbers, which kind of mix the picture a little bit. So what we've adjusted for the comparing, so the reference period, meaning 2019, is that we've taken out the one-time kind of Centerville-related transaction costs. And for this year, we've adjusted the Kutika write-down. And then when you look at this adjusted EBIT line, for example, for the whole year, we've actually been able to grow over 24% the EBIT level. And then also the profitability has grown. And the same thing goes for the EBITDA line, 24.8% growth and also 35.5% out of the revenues. And also the profitability has increased during the COVID year. What we've done here is we have not let any people go. We have cut no running legs in the company. Actually, we have continued hiring some more people during the year. We continued all the R&D development project we had planned originally. So we haven't cut anything from the day-to-day business and the future investments we have been doing. The area where our spending has been a bit lower is the travel, trade shows, and marketing-rated cost for some part. And of course, maybe there's some people that we planned originally to hire more, which we didn't feel. So we did hire, but necessarily not all the positions that we originally thought. If you look at the Q4 numbers, I noticed that many of the analysts have already picked that there also was some one-time revenue or other income from the Centerville transaction related. So actually, we had a similar 1 million item also in last year Q4. So last year, there was a 1 million adjustment to the original purchase price of Centerville. And this year, there was some contingent considerations which we had accrued in the balance sheet which never took place. So we're able to release that accrual and now it's also sitting in the other income. So basically, in both years, we had that same 1 million impact. What's quite extraordinary is that when you look at the full first half versus the second half, and especially the growth. So if you remember, we acquired Centerview in the end of April 2019. So for the first half of this year, we had four months of unorganized growth from the Centerville business. And our currency adjusted growth for the first half was 25.5%. It's actually a little bit less than the reported growth. When you compare that to the second half, where we truly had Centerville in both year numbers for the full year, The second half reported growth 21.4%, with currency adjustment 26.6% is actually stronger. So we are able to grow on the second half, currency adjusted over 1% more than on the first half. And even in the first half, we still had the four extra months from the unorganic growth compared to Centerville acquisition. So a very, very strong second half for the year. Here's some of the key figures in their development. Of course, COVID caused uncertainty during the year, and it actually still continues to do so when we go into the new year. Our balance sheet has remained very strong. Also, our cash position has been improving, so our operating cash flow grew by 23%. It was over 15 million. Basically, we have more cash on the balance sheet than we have interest-bearing debt, so our net gearing is actually back to negative after one positive year after the Centerview acquisitions. so basically we're we're in a very strong strong financial position also from the balance sheet point of view and it's a important item that we'd like to keep it that way because we like mentioned earlier we also continue to consider uh unorganic growth opportunities if they emerge when we move forward Shareholders and share, our ownership table. Basically, there's been actually a lot of turnover over the year. So the revenue share liquidity has been really high. There's almost half a billion of turnover over the year, comparing to 125 million in 2019. So the turnover actually went up 260% year over year. And actually, the number of shares even. So, we have 54 percent of the shares traded during the year compared to prior years when it has been a lot lower. So, in 2019, 22.5 percent of our shares were traded. Some of the big owners. So, William de Munt has become the largest owner. They flagged that they went above 10 percent ownership in June. Also, another flagging on the ownership list is the Capital Group, which fell below 5% in October. Some of the new larger investors on the list, you can see Columbia Threadnail, number three, Tin Funds, number nine, BlackRock, and Artisan Partners, 14 and 16. Our nominee registered owners count to approximately a little bit over 42% at the moment, and the private individuals still hold about 40%. Our number of shareholders went up significantly during the year. So last year we had about 12,400 shareholders. Today, at the end of the last year, we had 20,200. So there's a big growth in the number of owners we have. Share price development, I'm sure everyone on this call knows how it's been performing. We started the year at 26.25, closed at 50.3. For the full year, 91.6% increase in the share price. If you look at the drop in March for the COVID pandemic hit really hard. There was a drop from the opening year. opening kind of share price of 26, 25. It actually dropped 30% to be lowest point at 18.48. From that low point, it's gone up about 175% to where it closed the year. And the market cap for the year end was 1.34 billion euros. financial guidance. So though the COVID pandemic continues to cause uncertainty related to the markets, revenue groups exchange rate adjusted net sales are estimated to grow strongly from the previous year and profitability is to remain at a good level without non recurring items. The board has proposed that dividend of 32 cents to be paid to the shareholders. That represents a 63% payout ratio. So also Kind of going back to the comment earlier on maintaining a strong balance sheet, also for the future opportunities that they may lay. But that's it from the numbers point. Thank you. If there are any questions, we would be happy to answer.

speaker
Operator
Conference Operator

Thank you. Ladies and gentlemen, if you do wish to ask a question, please press 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero to cancel. Our first question comes from the line of Julius Rappeli from SEB. Please go ahead.

speaker
Julius Rappeli
Analyst, SEB

Good afternoon, guys, and congrats on the great report once again. I have a couple of questions. Firstly, starting, is it anyhow possible you could provide some help for us on the split between tonometry and imaging sales now in Q4 and for the full year. Thank you.

speaker
Jouni Toijala
CEO, Revenio Group

We haven't... Hi, Julius, Jooni here. So, we haven't, of course, fully disclosed the detailed numbers about the division between the tonometry and imaging, but I think it's fair to say that if you look at the first half of 2020, Tonometer sales were up, but the imaging sales were significantly down compared to 2019. And then if you look, especially on the imaging side, Q3, so we started to see the rebound compared to 2019, but it was still a bit under. And then the Q4, we started to be on the same level. So there's a clear rebound now what we saw during the Q4 also on the imaging side. And now let's have a see. how it's going to go during the Q1. But these are, in a way, the levels that we are able to disclose, because we don't disclose the exact split between the tonometer business and imaging business. All right, perfect.

speaker
Julius Rappeli
Analyst, SEB

That's very helpful. Yeah, maybe if I can have another question as well. On the gross margins, I mean, your gross margin is still at relatively good levels in Q4, but slightly down from previous quarters. Was this due to the change in mix from increased sales in imaging devices? And I'm just thinking, how should we think in 2021 in respect of the gross margins?

speaker
Robin Pulkin
CFO, Revenio Group

Yeah, I think this is Robin. Hi, Julius. Basically, Yoni mentioned the imaging has been gaining and improving throughout the whole year, basically since April. So April was a really bad month, tonometers and imaging point of view, but basically since then it's been recovering. And of course, Q4 is a very strong month also for the imaging, or kind of back to normal month for the imaging. devices so so that also plays into the gross margin but also we we did have some some larger deals or not not specifically large deals but some some quite nice orders on on some of the older devices which have lower lower gross margins so which also played a little bit into the overall number for the company all right perfect thanks that's all from me for now

speaker
Operator
Conference Operator

And the next question comes from the line of Pauli Lohit from Nordea. Please go ahead.

speaker
Julius Rappeli
Analyst, SEB

Hi, I'm Pauli Lohit from Nordea. Thanks for the presentation. I would have a couple of questions. First of all about the fixed costs in Q4. I think the costs recovered bit sequentially after Q2 and Q3 costs being down a lot year on year. Do you see that you still got benefit from COVID-19 that there were less travel and marketing expenses?

speaker
Robin Pulkin
CFO, Revenio Group

Yes, those costs haven't rebounded at a full level, so they are and most likely will remain below normal, of course, for even the first half at least for this year. So that is not the case for Q4. There were some certain larger projects that closed and also some compensation-ready items that were a bit higher than in the earlier quarters, but basically There will be general spending in travel and trade shows, for example, is still quite low, most likely for the beginning of this year. So we haven't really started traveling heavily in the company.

speaker
Julius Rappeli
Analyst, SEB

Okay. If we exclude the COVID-related or travel-related costs, what kind of outlook you would have for the fixed cost in the coming one to two years?

speaker
Robin Pulkin
CFO, Revenio Group

So I think we plan to hire more people. So that is in the plan. Of course, we're now following carefully how the pandemic continues or develops. So even in the board level, we haven't really made a full decision on all the investments for the full year necessarily. So we're kind of keeping a close eye on how the pandemic develops. But the plan is if the world returns back to normal at some stage, of course, we plan to. continue to grow aggressively.

speaker
Julius Rappeli
Analyst, SEB

Okay. Then one more question about imaging. You commented that the demand was actually almost normal in Q4. Was that very clearly about the new product, DRS Plus, or do you see kind of broad-based demand increase and maybe pent-up demand after that? pandemic like in all products?

speaker
Jouni Toijala
CEO, Revenio Group

Yes, so if we look at the second half 2020 and the Q4, So they were quite high demand, of course, for the DRS+, because it's a quite unique product. It has true color confocal, which is really affecting to the image quality, and it's in a reasonable price point compared to the competitors. So we have had constantly quite high demand for that product. Then also so-called ADON family. So that was selling really well. And then we managed to clear a bit of older DRSEs actually from the stock during the Q4. So that was really good. We basically see also for the ongoing basis that there's continuing to be the demand for the Aden family and for the DRS+. So those have been selling pretty well.

speaker
Julius Rappeli
Analyst, SEB

Okay, thank you. No further questions from me.

speaker
Operator
Conference Operator

And the next question comes from the line of Pia Rusqvist, Carnegie. Please go ahead.

speaker
Pia Rusqvist
Analyst, Carnegie

Yeah, hello, it's Pia from Carnegie. Thanks for taking my questions. On tonometers and the exceptionally strong growth you saw in 2020, you have disclosed, of course, that part of the reason is a strong growth in US, and you also received some larger orders. But now looking into 2021 and particularly for tonometers can you describe the uh growth elements are there any particular elements uh driving uh driving growth on top of the very strong growth you saw in 2020 please uh i i that's why i picked kaibia yoni here so uh uh so i i think that what

speaker
Jouni Toijala
CEO, Revenio Group

has been the trend here is actually around the hygienic requirements and the easiness of the use. And I think that's, according to our understanding, that's going to continue still when going forward. So I think that there's definitely a trend now regarding the rebound tonometry. and related clinical workflow that it's quite easy to handle the increased hygienic requirements. So you only just change a probe and that's it when you change the patient. And I think this has been the trend already during the Q2, which was driving and in a way our growth and the resilience during the Q2, still on the Q3, Q4, and I think that's in a way a one single, if I had to point out one point, that would be it, what's perhaps the growth driver also for 2021. And then that, of course, impacted to the use of probes. during 2020, and our assumption is that it's also going to impact the probe usage during 2021. Anything, Robin, to add on here?

speaker
Robin Pulkin
CFO, Revenio Group

Yeah, and I think, or of course, we hope that the imaging also continues on the trend it's been, but it's hard to say. It's more delicate when it comes to any changes in the pandemic situation, clearly, so we need to keep a close eye on how that develops.

speaker
Pia Rusqvist
Analyst, Carnegie

Okay, thank you. And if I can continue then still on tonometers, can you help us understand how much of the demand is so-called replacement demand or is still most of your sales kind of new sales?

speaker
Jouni Toijala
CEO, Revenio Group

Sorry, Pia, I don't have a full answer on that one. So I would assume that the products that we have sold, so there's still the TAO1s, which they have been there for a long time, so they are still working. And then I kind of have a feeling that there's also now a trend that we are taking market share from the Goldman's and from the NCTs, i.e. the air puffs. But I don't have kind of full figures, but we have been gaining market share from others, that's for sure.

speaker
Robin Pulkin
CFO, Revenio Group

Anything you want to add? We have ongoing replacement campaigns in the US, for example, which is the biggest market for us. There we do get some tonometers back. It's a vast majority, of course, is new customer sales. But the good thing about the replacement kind of offers we have out also is we get a lot of competing technologies, which we replace with our instruments. So it's kind of working nicely there. But basically, it's still the big volume in new customer sales.

speaker
Pia Rusqvist
Analyst, Carnegie

Okay, very clear. Thanks. if I still may continue on tonometers. So do you have anything particular to share on the home device and how the take-up of that develops?

speaker
Jouni Toijala
CEO, Revenio Group

I think it's exactly the same status what we discussed after the Q3. So from the percentage point of view, the sales is increasing a lot, but then in terms of the euro, so of course compared to the other business, so we would be would be really willing to have more euros in as well. So, percentage-wise, growing fast, but there's still room to grow in absolute euros.

speaker
Pia Rusqvist
Analyst, Carnegie

Okay, thanks. Still a question on costs. So, can you quantify the so-called temporary cost savings, or cost savings from less travel, less marketing, less campaigns? during 2020?

speaker
Robin Pulkin
CFO, Revenio Group

Well, we haven't really disclosed it, but basically it's very significant, so we're talking about in the millions. I think I just try to remember what we disclosed in Q3, I think it was one point something million we disclosed there as the saving and on the travel side and marketing and the trade shows, that, of course, mostly also was true for Q4 and probably is, of course, because nobody can travel, it's probably true for the beginning of this year too.

speaker
Jouni Toijala
CEO, Revenio Group

I think the one change perhaps to that cost base is that, of course, we have been constantly increasing these investments on the digital marketing side. I think that's one caveat if taking out the travel and and kind of trade fairs and so forth. So I think their situation is going to be about the same, but the digital marketing, we are putting more money on that one during 2021 and during the Q1 and Q2. Yeah.

speaker
Pia Rusqvist
Analyst, Carnegie

Okay, thanks. Then to your capital allocation policy, or I try to remember, do you have a dividend policy? I'm just looking at the dividend and it... it's still sizable compared to the earnings per share, but is it fair to assume that looking at the changes in your ownership structure that the payout ratio is rather declining over time or should we assume it to remain at the current level?

speaker
Robin Pulkin
CFO, Revenio Group

My, maybe not fully studied answer would be that my feeling is that our current board is kind of, and us, we consider ourselves as a growth company, where the dividend payment is not necessarily the number one target for us, for what comes to dividend policy. So I think the ownership and the board seems to support the idea if we have better use for the money then that's also a consideration or an item to take into consideration. So it's not really something we can guarantee that we will continue to grow the dividend every year, but for the last four years, it's been growing with two cents a year. So from 26, 28, 30, now 32. So it's been on a growing trend, and I think if we don't have any better use for the money, it will continue to do so also in the future. But there's no commitment to that.

speaker
Pia Rusqvist
Analyst, Carnegie

Okay, clear. And then final, before I jump into the queue, the European medical device regulation, you talk about that in the report. What kind of, I mean, in practice, what kind of impact does it have on you now in 2021?

speaker
Jouni Toijala
CEO, Revenio Group

We of course started, so if thinking the MDR, so we were already doing the homework last year, then it was postponed one year. And then of course the work is ongoing. So of course we are going to be compliant based on that one. And I think one of the biggest change there is going to go then or what's going to happen is related to the software. So, as an example, software as a medical device regulations and so forth. So, of course, in the products that are requiring that part of the regulation. So, our quality team is already working heavily to be compliant on the MDR-related requirements. So, it's the, in a way, bread and butter what we do, because otherwise, we are not able to sell anything. Okay, thank you. Hopefully, that answers that.

speaker
Pia Rusqvist
Analyst, Carnegie

Yeah, thanks.

speaker
Operator
Conference Operator

And just as a final reminder, if you do wish to ask a question, please press 01 on your telephone keypad now. We have one more question from the line of Daniel Lepisto from Danske Bank. Please go ahead.

speaker
Daniel Lepisto
Analyst, Danske Bank

Hi, this is Daniel from Danske Bank. So I have a couple of questions. First about the guidance. So you state that you expect the profitability without non-recurring items to remain at good levels. So does this translate into that you expect no further margin expansion from the current levels, at least near term? Or how should we see this?

speaker
Robin Pulkin
CFO, Revenio Group

um i think the the i can't really open exactly what it mean in percentages wise but i think the the wording is pretty similar we've used in the full year guidance in earlier years and of course in this coveted environment we don't want to be too aggressive also in the guidance so i think it's kind of a it was a very long discussion in the board yesterday regarding the earnings so so i think our current earnings Probably kind of idea is that we don't probably expect to have a similar full year than we did, like, for example, Q4. So lower kind of guidance compared to the second half were kind of adjectives we used.

speaker
Daniel Lepisto
Analyst, Danske Bank

Okay. So the next question is that, is the VETS-related tonometer market included in your 200 million US dollar global market size estimate? How big is this vet business currently for you?

speaker
Robin Pulkin
CFO, Revenio Group

The vet is not in there. The vet is quite small market. Our product has a very, very large market share actually. But it's not in the 200 million, but it's a very limited market size in the whole. Our market share is, my estimate would be above 80%, my understanding of the market share, so. It's a very big share and it's a very profitable business because there is no regulations and no kind of sales permits that you need to apply from FDA or China or anywhere else. I think Taiwan, I think there's one or two countries that will require any sort of documentation or approvals for selling it. So it's the kind of the costs related to running the businesses are very efficient.

speaker
Daniel Lepisto
Analyst, Danske Bank

Okay. And finally, When are you planning to unveil your new strategy and are you still planning to hold the Capital Markets Day jointly with this?

speaker
Jouni Toijala
CEO, Revenio Group

Yeah, so we are going to have a Capital Markets Day 16th of March.

speaker
Robin Pulkin
CFO, Revenio Group

Right, Robin. It was in the release at the end. So the day before RAGM is the Capital Market Day.

speaker
Daniel Lepisto
Analyst, Danske Bank

Okay, I must have missed, but thank you. That's all from me.

speaker
Jouni Toijala
CEO, Revenio Group

Thank you, Dania. Thank you, Dania.

speaker
Operator
Conference Operator

And as there are no further questions, I'll hand it back to the speakers for closing remarks.

speaker
Jouni Toijala
CEO, Revenio Group

Hey, thank you, everybody, for your time. And of course, if there's questions popping into your minds later on, you can, of course, ping me and Robin, so we are happy to help. But with these words, I really hope that everybody is going to have a sunny spring. and we are definitely going to then meet when we have the CMD. So, for mid of March, so have a good start of the spring, and see you hopefully in Capital Markets day 16th of March.

speaker
Robin Pulkin
CFO, Revenio Group

Thank you, everybody.

speaker
Jouni Toijala
CEO, Revenio Group

Thank you.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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