Revenio Group Oyj

Sunny, Helsinki, Finland, and welcome to Revenue Group's second quarter earnings call. My name is Jouni Toijala, and I'm the CEO of Revenue Group. In addition to me, we also have our CFO Robin Pulkkinen joining today. So I'm going to start by talking through the second quarter highlights, and after that, Robin is going to go through a bit more thoroughly the financial numbers. Let's start with the sales. So excellent quarter for us, especially supported by the growth of imaging devices. So the sales was up at 37.9%, so heading to the 18.9 million euros. And really, if looking and comparing to the past performance, so we actually had the best quarter ever what comes to the imaging device sales. So we are actually up about 20% even to the pre-COVID numbers. Then when we go back to the tonometers and probe sales, so in addition to the imaging device sales, also probes, where the probe sales was growing steadily, also the tonometers during the second quarter, also during the first half. And if we do a bit more deeper dive to the products, so DRS Plus on the imaging side, growth was extremely strong. Also Aden family, so the whole family of the products, there were a lot of growth as well. And then also the perimeters and the micro perimeters. That business was growing during the second quarter. And that was valid across almost all the key markets where we are present. So then if we go to the bottom line, so the EBIT part, so the EBIT performance was 4.4 million, up 28.7%. But there we actually missed the consensus. So Robin is going to go a bit more deeper on that side. But the couple of items to mention there, so one reason for that one was a sales mix. Then for the personal costs, we had one of personal costs in, a bit of a hit from the foreign chase rate. And then I would like to remind also that we closed the Okulo acquisition during April. So as we stated earlier, we are going to invest to the Okulo SaaS platform. in terms of the relative profitability. So during this year and next year, the relative profitability is going to be lower compared to the previous years because of the investments going to the software platform. Then if we go a bit to the product side, so the product, from the product perspective, the second quarter was very active. for us in the first half. So we launched a new iCare Home 2 tonometer, and there are a couple of significant improvements. So we improved the easiness of the use of the actual devices, so it's much more easier to do the measurements. Then compared to the older home device, so we actually had to use the cables in order to transfer the results from device then to the cloud, so now we are using the wireless connectivity. And then we also support the iOS app. And the feedback that we have been so far received from the device, so that's very good. And it's actually already on the market in Europe, and we are in the process of applying the FDA approval for the USA. what comes to the imaging device side. So we also have a new product coming out, so-called ADON ultrawide field fundus imaging device and also the lens, so that we are able to upgrade the functionality of the devices which are already in the field. So with that, feature we are able to capture and increase the angle. So 120 degrees with a single shot. And then if we use the mosaic functionality, so the field of the views is going to be extremely large, around 200 degrees. And then as stated many times before, so we are continuing to receive a really good feedback related to DRS+. So currently, if looking from the product portfolio point of view, so good feedback coming across the board for the imaging product, which is then providing the long-term growth for us as well. So we believe, even though that we are sure that there has been some pent up demand, especially on the imaging side. during the first half of this year. But definitely, the growth rate has been so high on the imaging side, that we are definitely also gaining market share as well. But with these words, I would hand over then speech to Robin. So, over to you, Robin.

Hello, everybody. My name is Robin Pulke. I'm the CFO for Revenue Group. So go through the numbers a bit more. Like Jooni mentioned, second quarter, 18.9 million in revenue. And like we stated, and Jooni mentioned, that the FX has been playing against us quite a bit. So it's nearly a $1 million hit that we took on the top line on the second quarter. So without that, we would have been quite close to 20 million in revenue. And the growth would have been actually over 40%, so 43% to be exact. For the first half as a whole, the growth has been extremely strong. So 35.6 million in revenue with a 39.2% growth. And with the currency adjustments, 43.7% growth. On the EBITDA and the EBIT line, we have also the adjusted numbers here. For the second quarter, there wasn't much adjustments to be done. So the adjustments we have here, are basically the costs related to the acquisition of Okulo. So the kind of the transaction costs. For the second quarter, there was less than 50K that we had. But for the first half as a whole, it's almost 700,000 that we have in the costs. And those have been adjusted out here. So the adjusted EBIT for the second quarter, 4.5 million, up nearly 30% from year over year. It's 23.7% out of the revenue. And for the first half, 9.7 million and 27.3% out of revenue with a growth of 65.7%. Like Jooni mentioned, the consensus and the expectation was probably a bit higher for the profitability for us. So just to open a few items, the FX almost a million on the top line, but also that hit our bottom line by over 400,000 euros for the quarter. Also, the product mix, the imaging devices have been growing really fast in the second quarter, and their share of the total sales were actually quite high. And that, as we've stated earlier and quite commonly known, is that the imaging devices have a bit lower gross margin, and kind of that product mix hit when you look at the year back is also quite significant when it comes to profitability. Then we had certain one-time personal costs, which will not continue going forward. And then, of course, the Okulo transaction that took place. And the numbers for Okulo have been consolidated since the 28th of April. And so we have pretty much two months in the numbers here. Some of the key figures, our equity ratio continues to be very strong. Cash flow for the first half was very strong, actually up 80% from last year. The drivers for that were basically the increase in net profit and the changes in the working capital. Also, when you look at the net gearing maybe there, where the bigger changes is actually related to the Okula transaction, which we paid in cash. The transaction itself was 18.5 million Australian dollars. And in the purchase price allocation, we've allocated about 2.5 million euros to the intangible assets and then 9.5 million to Goodwill. And all this was paid in cash, which resulted in a lowering of the net gearing. So kind of our cash and cash balances went down quite significantly during the quarter. Main shareholders, there's not been much change over the last months. The biggest change in kind of the go back 12 months from now or nine months from now are kind of the US ownership, which has been going up a lot. So on the top 10, we have Columbia Threadneedle, Capital Group, Vanguard, BlackRock, some of the world's largest investors who've joined our ride over the last year. So that's kind of one of the bigger changes that's been taking place over the last year. Other than that, we have pretty familiar names on the list here. And then yesterday, we updated our guidance. So I just want to highlight here again that it's a full year guidance. So even though we now updated it, it's actually still for the full year. So the first half, we grew extremely strong, so 40% growth. But when you go back and look at last year, there was a COVID year. The first half and second quarter especially was quite weak. So it wasn't one of the best quarters for us. But when we look at the second half last year, our performance was extremely good already there. So I would be As an investor, I would not assume to expect similar growth from us for the second half that we've been seeing now in the first half. So, the guidance here, even though it's a positive change, it's still a guidance for the full year. And that's it from me. Now we'll go to the questions.

Thank you, Robin. So, we received plenty of time for the questions. So, the floor is open for the questions, please.

Thank you. Ladies and gentlemen, if you do wish to ask a telephone question, press 01 on your telephone keypad now. That is 01 to register for a question. We have a question from the line of Julius Raffelli from SDB. Please go ahead.

Yes, thanks, Joon and Robin, for the presentation, and thanks for taking my question. Firstly one regarding guidance upgrade. So regarding this upgrade, has the outlook or visibility for H2 for you guys changed in some way or is this only a reflection of the super strong H1 you have now performed?

Well our kind of Our tonometer businesses traditionally is we don't have that much backlog over there and the imaging also our visibility like in backlog wise and orders is maximum couple months forward. So we don't really have much visibility into Q4 and what that will be looking at at that point. So it's also kind of we have our assumptions and forecasts, of course, but of course, it's also backed up by the extremely strong first half. So that's kind of the reasoning behind it.

All right, perfect, thanks. Then one follow-up question regarding gross margin and you already mentioned the mix change in second quarter that was causing some somewhat lower gross margin here. Do you see any headwinds from input material costs and then on the other hand, do you see any issues with your supply of input materials?

Yes. So first the cost. So there's a clear indication that the costs are coming up. So that's a silver clear. So we have been trying to tackle that one by making a bit more longer term commitments towards our suppliers in order to to be better ahead of the wind so that we are a bit more aggressive of buying the components in and making the commitment so that we are able to keep the prices in a bit more better level in a near future when going forward. And then we have also increased proactively the stock levels and we have made a commitment in order to be able to guarantee the supply of the devices. Also, it's just a fact that there might be challenges when it comes to the components, so we have had Challenge is an example related to the Bluetooth components, but we were able to solve that earlier this year. So currently everything is okay, and these are the actions that we have decided to do in order to control the costs, plus then the guarantee that we are able to have the products when the clients are needing them. So in one sentence, now everything is okay, This is the weekly discussion with our operations team that we are able to perform well.

All right, that's very helpful. Thanks, that's all from my side at this stage.

Our next question comes from the line of Pierre with Chris from Carnegie. Please go ahead. Yes, hello, it's Pierre from Carnegie. You said your imaging device growth was very strong in Q2, and you also said the tonometer business grew, but can you still clarify, did the tonometer business grow, or was it only the probe business, or did both the tonometers and probes grow?

Yes, so the both probe business and then the tonometers, both were growing, but of course not as much as the imaging devices. So we had a really, really strong growth on the imaging devices during the Q2 and throughout the whole first half 2021.

Okay. And the home business, how is the Home 2 sales developing?

Yeah, it's picking up. And if you look now, it's easier to look not quarter by quarter in a way. So we have been selling Home 2 devices, of course, during the Q2. But if you look the as an example, the first half of 2021. So, there's a quite strong growth on the home devices as well. But of course, it's a small amount still compared to the other business, because the other business is growing so fast. So, still more sales needed in the long run, so that it starts really to move the needle.

Yeah, okay. Then, do you have any news on Ventica and Cutica? How are these projects developing, taking into account that you said at the CMD that your focus is on eye care business? So when can we expect news on Ventica and Cutica?

Not yet. So, we have discussions ongoing, but not major news to be released yet. Hopefully, we are a bit wiser when we go towards the end of the year, so towards the end of Q4, Q1. So, discussions ongoing, but nothing concrete yet.

Okay. Good. Then Julius asked about the input prices. How do you tackle the situation from your sales price perspective? So are you able to adjust your prices also upwards or is the competition at such a level that higher sales prices are not possible?

So we actually have managed to get a slight price increase for the Europe already, so that's basically already done and implemented. And then, of course, monitoring closely that what should we do in the other parts of the world. So, I think the overall, there's a trend that the component prices are coming up plus the overall inflation. So, in certain regions, we already have had the price increases implemented.

Okay. And then still back to the cost. May I ask what caused the non-recurring person or what caused the personnel cost to be exceptionally high now in Q2?

We haven't really disclosed the reasons publicly for that, but it's kind of one-time costs that it's not tens of thousands, but in the hundreds of thousands.

Okay. And then maybe finally on your M&A agenda, where do you stand on that point? Are you now, you are of course integrating Oculon and investing into that business, but how active do you want to be on the M&A space now? Is it high on your strategic agenda?

I think the answer is yes, but we have to at first now take care that we do the proper work by integrating the Okulo. So on the Okulo front and from the integration point of view, so of course the finance systems, so those are okay, so that integration is done. almost the whole IT integration is done. Now we are forming up the joint solution vision, ending up the roadmap discussions and so forth. So, there the house is in really good order. And the plan is that we are going to finalize that one. And then, as before, as earlier, so we are constantly screening and keeping the possible M&As high on the strategic agenda as well. So that's in a way a continuous work, what we do. Anything Robin to add on this one?

No, that's true. The possible targets are quite a few and far between. So we need to keep the kind of momentum moving all the time. So these transactions tend to take a lot of time, like we saw with the center view. So we really haven't stopped at any point.

Okay, good. That's all for me. Thank you. I remind you that if you want to ask a question, you will have to press 01 on your telephone keypad now. We have a question from the line of Juha Kinnunen from Inderes. Please go ahead.

Hello, gentlemen. This is Juha from Inderes. I have a couple of questions that are regarding the future outlook, so you are probably excited to answer them. Could you give us any guidance on the sales mix going to the second half of the year? I'm just wondering if this second quarter was exceptional or is the similar mix going to continue?

Maybe if I start, Jouni can maybe continue. So if you look at last year, last year the The imaging was really struggling the second quarter, the third quarter pretty much as well. But every quarter has been better as we've moved on. But last year, the second half, still the second half was very strong. It was mostly driven by the tonometry, of course, which, of course, was also visible in the profitability in the bottom line. So for the second half, it is going to be difficult to get very high growth for the tonometry because last year it was extremely strong for the second half. So I guess that's kind of my two cents for the future look. But anything to add, Jan?

I think nothing to add. I'm spot on.

All right. Well, thank you for that. Second question. If I understood correctly, Okulo made an operating loss of 0.9 million in the first half. Is this rate going to continue in the same level or is it going to increase?

So hopefully we will, of course, we're following the, we have a plan in place, what we expect to receive on the top line. And then of course, if the top line starts to pick up quickly, there's a lot of resourcing and kind of R&D needs that we will start to staff, but we're very careful. So we kind of follow the plan that the profitability needs to stay within the frames we've agreed and what we've communicated out also that the kind of the impact on our profitability would be three to four percent this year so we're kind of following that carefully so we don't want to be too aggressive up front on hiring people and then figuring out that the revenue doesn't follow so we're kind of having our finger on the pulse on that one.

All right.

Our next question comes from the line of Rokko Takinen from Danske Bank. Please go ahead.

Hi, here. Thanks for having my questions. They were mostly answered before, but I would like to clarify, as you said that the sales mix has affected your margins, but do you have any, or can we expect a similar split in the future?

I think for, So it's a hard question. Our backlog is only a couple of weeks forward, so it's hard to say. The mix is different and then the growth is different. I think for the second half, I would assume the imaging to grow faster than the tonometry because the tonometry was so strong last year, second half. But what the mix will end up being, that's something I can't really answer.

To say on the detail level, but I think like Robin mentioned, so the trend is going to be following in a second half so that the imaging is going to grow faster than the tonometry business. So I think that's perhaps fair to say. And there's an implication then to the revenue mix as well.

Okay. Thank you. That's all from me.

Our next question comes from the line of Anssi Raussi from OP Markets. Please go ahead.

Hi, Jouni and Robin. First of all, can you hear me?

Yeah. Hi, Anssi. Really well.

Yeah. Hi. Yeah. This is Anssi from OP Markets. First of all, about your gross margin, we have already a couple of questions regarding that one. But I think when you bought or acquired Centerview, Centerview's gross margin was about 62% and you were aiming closer to 70%. Would you give us any updates where you are at the moment and are you closer to this 70% target at the moment?

Thanks. This is my first one. Yeah. So if I'll start, I think there's been definitely positive development on the Centriview side. There's not that drastic changes for the existing products, but I think the bigger changes and impacts have come from the fact that when we released the new version of the DRS, so the old DRS, for example, it had a higher bill of material and it was a lower selling cost or selling price. So when the DRS Plus, we're able to sell it for a lot higher price frame, it's a cheaper device to manufacture for us. So those kind of items are the ones where we see the bigger jumps in the profitability. Then, of course, we've also had more license revenue coming in from this interview business, but kind of the devices that have been outselling, there hasn't been significant changes in those gross margins, but other than the kind of price increases, but the cost of materials have been pretty stable.

Okay, thanks. And my second one would be about these personal costs you were mentioning a couple of times. Could you still quantify a bit more specially, are we closer to the 100,000 or 800,000 euros or?

Well, yeah, it's hundreds of thousands, but less than half a million.

Okay, great. Yeah, I think that is all for me. Thank you.

Thanks, Asi.

Our next question is a follow-up question from the line of Pierre Ouskvist from Carnegie. Please go ahead. Yeah, thank you. Thanks for taking a question still. I'm now thinking about the tonometer business again and coming back to the second half. So is it fair to... I expect that actually due to the very strong performance in the second half of last year, there is a risk that tonometer business, I mean the base tonometers, are not growing in the second half.

I think that currently if we look our view and forecast, so there's a gut feeling that there's still growth. So if you look at the forecast and if you look at the budget, of course, we budget for the full year. So still, in a way, we are kind of hitting the numbers in terms of the growth for the tonometers for the full year. But as Robin mentioned earlier, the backlog is small, I think that we still, so at least we have seen the growth. In first half, we have seen the growth in a second quarter, both for devices and both for probes. So, my gut feeling that I wouldn't make that statement right now, Pia.

Okay, thank you. There are no further questions registered at this time. Okay.

Hey, very well. So if there are no more questions, so I would like to say a big thanks for everybody who was participating and have an excellent continuation of the summer. Thank you very much and bye.

Thank you.