Revenio Group Oyj

deep dive to numbers, go through the current shareholder structure and then go through the guidance at the end. And the plan is to leave as much as we can time also for the questions. So if looking the highlights for the quarter, so the Q2 was a very strong quarter for us. So if you look the top 20 countries where we operate, so 17 out of 20 were actually growing, and the 15 out of those 20 top countries were actually growing in a double digit manner. Then if looking the tonometers, intraocular pressure measurement devices, and then the imaging devices, so both product lines were actually growing really well. So as I said, US growing well, European biggest countries growing really well. Then also, I think the highlight was also the Latin America. So they started to recover after the COVID, and this applies both for tonometer side of the business, plus the retinal imaging devices. Then in addition to the normal business, what we have, so device business. So we also launched the iCare iLoom platform for diabetic retinopathy screening. So the package includes the DRS Plus device. So we updated the software functionality for the device so that with the single button press, the DRS Plus Imaging device is taking the image, sending that one to the Illum cloud software, and then from there, it's automatically, images are transferred to the third-party AI software, which is Tirona, as we speak today. And then we get the results back to the Loom cloud software. And this software solution is based on the Okulo platform assets, which we acquired a bit more than a year ago. Then if looking at the current market conditions and uncertainties, so as said already during the Q1, So we have stopped all the business for Russia and Belarus. And the stopping here means that we have actually terminated all distribution contracts. So it's a full-on exit out from these markets. And then a couple of uncertainties. The components, of course, they have been there for the longer time. So according to our view, still the Q3 is going to be a struggle in terms of the components. So we have weekly challenges related to the components, but we haven't had any impact to deliveries during the Q2. So in that sense, everything is okay, but it requires a lot of planning, a lot of man and woman hours to sort out the challenges challenges week by week, but we have a view that because of the overall economic slowdown, so seems to be like perhaps during the Q4, Q1 next year, also the component situation is going to be easing up. But let's go through the first half numbers in a bit more detail. So net sales grew 25.1% up to the 44.6 million euros. So that was a good first half for us. And then I think we have to remember that we also had a backup from the US dollar. So if we look the currency adjusted growth of net sales in January to June, so the number was 17.6%. And if looking from the absolute Euro terms, so the first half backup in the sales was roughly 2.9 million. 2.9 million from the strong US dollars. And if you look the impact to the EBIT line, so which was 12.7 million, so roughly 60 percent, so roughly 60 percent out from 2.9 million and then falls down to the EBIT line. So also on the profit side, we got a nice lift up due to the US dollars. Then Robin is going to go more detailed, the cash flow and the other key financials. So over to you, Robin.

Thank you, Jooni. So like Jooni mentioned, we're extremely happy to be able to present these numbers for the second quarter. In sales, it's actually the best quarter ever as a company, as a medical technology company for us. Supported by the strong FX, of course, but basically comparing to even last year. In the first half last year, our growth was more than 40% for the first half. So being able to report again, and for the second quarter actually last year, the FX adjusted growth was 43%. So being able to... report 30% growth again, quarter over quarter, year over year is extremely good. So 25.1% to 44.4 million euros growth in the first half are also the dollar has an impact on the gross margin. It is actually slightly better than what we maybe thought even ourselves when we started this year. So a lot of our sales are in dollars. And of course, our manufacturing costs are in euros. So that all plays into the gross margin as well. So the gross margin improvement for the second quarter actually went from 69.1% to 71.3%, so 2.3% improvement. year over year, and much of that is actually dollar supported, but also a very good product mix. And actually, our manufacturing costs, also, we've been able to control those quite well and actually even improve them in some products. Our operating profit, 12.7 million, up by 40% for the first half. And just as a reminder, last year we acquired Okulo. So for Q1 last year, we did book roughly 700,000 of acquisition-rated one-time costs, which we have adjusted here out. So on the adjusted EB line, you can see the comparable number being instead of 9 million, 9.7 million. And there are, compared to the adjusted comparable number, are EBIT still grew this year more than 30%. And then also, as a reminder, last year, the Okulo acquisition took place on end of April. So basically, I think it was April 28th. So basically, our costs for the comparable period does not include the Okulo team costs roughly for the first four months. So those costs obviously are actually a lot more than the acquisition costs. So that also something to be kept in mind. EPS improvement very much in line with the EBIT. Net gearing better than last year. I'll actually cover that a bit more on the next slide. And then the average employee number also going up a bit. But there also the comparable period doesn't include the whole Okulo team for the full quarter. So as it's an average number or something, that's one of the bigger areas of where we got the number or the growth for the employees. So like I mentioned, the quarter really strong, 24.4 million. It's the best quarter in the recent or mid-term history of the company. Not going back, not stating back to the early 2000s, as I would have to go and check what those were there. But as a medical technology company, it's definitely the best quarter on top line we've had. Very good sales in all key regions, all key products, double-digit growth. And kind of here you can see the bit longer-term trend line, so our business is a bit seasonal. So typically the end of the year is in the Q4 is the best quarter in every year. It's more European and Asia Pacific is more stable throughout the year, but especially in the US, the end of the year tends to be quite good. Also, our business is very scalable. As we've mentioned many times, you can see when the top line goes up, the profitability goes up on the right side. So the blue lines over here. Also, you can see the EBIT profitability being more stabilized now. So in 2020, when the corona broke out, the the opex freeze like in many other companies traveling went to zero trade shows were were zero everything basically stopped marketing was low so the profitability did go exceptionally high in q4 2020 but basically since then when things have become more normalized we've been able to stabilize also the profitability but you can see as the top line grows the profitability grows with it. And also for the software solutions, we expect the cash flow from that business still to be negative for this and the next year. Our cash flow, similar seasonality a bit there. So we typically pay or always pay our incentives out in the first quarter. So that kind of is a big impact there on the operating cash flow. And then as we go into the other quarters of the year, the second half typically is the stronger time where we collect the cash and make more cash on the operations. equity ratio has been trending up slowly. So basically, we're now closer to 70 versus 60 a couple years back. And then the net gearing, we're now at 7%. So it's an orange line on the right-hand graph. You can see as it goes up and down, what it does basically, it's there's certain logic behind it. So when you look at 2020, when Corona broke out, our AGM was pushed out to June. Dividends were paid out in Q2 when the net gearing goes up. We collect the cash or kind of build up the cash balance in the bank for the rest of the year. Q1, 21, pay the dividends in Q1. Q2, we acquired Okulo with cash reserves. So the net gearing goes up. Then again, we build up the cash in the bank. And then Q1 this year, nothing special there. But then Q2, the dividend payout of roughly 9 million we had in the quarter actually brought up the net gearing up to 7%. So our Interest bearing, debts versus cash, the balance there, I think it's roughly 5.5 million. We have more debt than cash. Main shareholders. nothing really has changed on the top 10 list uh demand from denmark is still the largest owner they've actually increased their ownership during this year a little bit from i think it was just over 12 percent at the start of the year um for the q2 uh the bigger change i guess in in ownership was that the foreign ownership went up roughly one percent uh the shares went to Sweden, France mostly. And U.S. over the couple last years, the U.S. ownership has increased. So maybe if you go back a couple of years, that's maybe together with the demand coming in as an owner. Those are probably the bigger changes over the last three years. So U.S. ownership used to be quite small like three years back. And then the guidance, we expect our exchange rate adjusted net sales to grow strongly from the previous year and profitability excluding non-recurring items is estimated to remain at a good level. And here, just as a reminder, so the sales are the FX adjusted, not the reported sales.

Hey, excellent. Thank you, Robin. I think we are ready for the questions.

Thank you. And 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 02 to cancel. Our first question comes from the line of Daniel Lapista from Danske Bank. Please go ahead.

Thanks. It's Daniel Lapista from Danske Bank. I have just a couple of questions. First of all, you note that the component shortages did not impact your delivery capability in Q2. So is this something that has notably benefited you this year in terms of closing more sales or getting more customer interest as you have actually been able to keep delivering your products quite nicely? Thanks.

Hi, Daniel. I can pick that one up. It's Jouni here. So, we have heard that the couple of clients, sorry, not the clients, but the couple of competitors what we are having, so they have had difficulties to deliver, and the delivery times are longer than what we are having. So, our view is that perhaps at least slightly, we have been able to benefit from that one.

You said that the tonometer demand was very strong again in several different regions. So what's your view on the current total market opportunity with tonometers and the sort of competition in this segment? I'm thinking about the fact that the rebound technology should kind of soon be the globally leading one if you keep growing as you have.

So how we... Basically, see this one. So we have been indicating that the tonometers, including the probe, so that's roughly 200 million USD market. Last time when we checked our market share, so it was way over 30, but less than 35%. So our view is that we have been able to grow. quite significantly the market share during the first half as the overall tonometer market based on our data is growing only two to three percent. So that's definitely growing and now of course interesting to see when we get the latest analyst reports then during the late, kind of later in the 22. But anything Robin add on that one? So I think that's for sure that we have been able to gain the market share.

I think the Tonometer market share, I would expect it to be quite close to the AirPuff NCT technologies already. But the market studies are on their way. I think we're going to receive them in a few weeks, if I recall right. So we'll know more.

And then Daniel is coming back to the second part of the question related to the competition. So we haven't still got any rebound competitors in the human side. So we were, as in earlier calls, we expected to have the competition already end of last year, then we were expecting to have a competition in the USA during the May timeframe, but the probable competitors who have indicated and announced that they are coming on the rebound tonometry side, starting from the USA for the human side. So there's no clearance from the FDA for those devices yet. So that's where we stand today.

All right, that's very helpful. I think my final question is that can you sort of quantify the impact of these price hikes you mentioned and the volume growth behind the Q2 sales growth?

Sorry, Daniel, can you repeat the question? Line was a bit breaking down towards us here. Sorry for asking.

Yeah, absolutely. Can you give us the impact behind the price hikes and the volume growth for this Q2 sales growth?

disclose that in detail, but we have done price rises for 3% last year, November, and then again 4% in May. But yeah, obviously the unit growth wasn't as much as the dollar growth, because the FX also has a big play there.

Yeah, thanks. That's all from my side.

The next question comes from the line of Pia Rosqvist from Carnegie. Please go ahead.

Hi, Joni, and hi, Robin. Congratulations on a really strong report. On the super strong growth now in the second quarter, do you see any or do you hear any signs or any messages in terms of pent-up demand still after COVID? Or would you describe that the current demand situation is really it's normal replacement demand and new sales?

So I would say now, Robin, please help me if I'm not getting this one right. But if looking now, I go through the geography by geography. So if looking the USA, looking at the key European countries, looking the APAC, So I would say that mostly there's not too much pent up demand. So if you go certain Asian countries which have been in a lockdown, so I would say that there's slightly the pent up demand. Then if you go for the Latin America, so that was during the Q2, that was a quite nice surprise. So they started to to be more up and running. So if you look at the growth percentages, for example, in Latin America, so they were quite high. And I would consider that that's at least partly, that's a pent-up demand. But that's my understanding. Robin, anything to add?

Yeah, in the big picture, I think. It doesn't have a big impact, that part. So I think we're not much bent up demand anymore left in the pipe. It's more business as usual in other key markets, I guess, right? Mm-hmm.

Okay, so really US and Europe, the strong demand is really new sales and nothing left from the COVID.

Yeah, and replacement, so new and then replacement.

Yeah, all right, good. Hey, then I noted that You did not repeat earlier comments. I think it was from Q1 that in the coming years, you believe that the retinal imaging devices would grow faster than the tonometer business. Am I correct here that you've removed the phrase? And if so, does this signal that something has happened with the tonometer market for you to remove this comment?

just maybe having a bit new message in the report is the reason for removing that so i think in the big picture i think that's still true yeah yeah so if looking the q2 so so so i i think it's fair to say that uh both were uh

uh growing really well and and if comparing those two uh product uh segments so so the the final imaging side uh the growth was higher than the tonometers so okay all right clear and then if i still can continue on the thermometer side so just to understand uh

Can you share any information on which part of the tonometers are growing? I mean, probes, are they doing better than before, or is Home 2 gaining more tailwind or what's happening within tonometers?

Maybe I'll take that one. All the key products, like we stated, are doing really well. So the probes and the tonometers. And on the imaging side, the same thing. So not really anything special there. I think the home, too, in general, like Joni, I think you mentioned this, at this report we said that it's been really well received in the U.S., especially the Bluetooth connection has been a really breakthrough and really important addition for the doctors. So it does look very promising, and it is promising. Like we'd earlier said, it is the fastest growing single product for us. So we're very happy to see that the development has been like it has been and looking really closely how it continues from here on. But everything looks good now on the OM2.

Good. And then still to clarify, so these were the device-driven sales, but how about software? Can you say anything about software sales in the quarter? I'm thinking here about Ocula. So are you able to sell the product? Is it gaining traction?

So we have been putting now a lot of effort to the ilum, so if looking back times about a year ago, so we made a decision to focus on the diabetic retinopathy platform development with the Oculo team using the Oculo platform assets. So we have been now really heavily working in order to get the first end-to-end solution out, so meaning the new software for DRS Plus, then Oculo platform-based Elune platform, and then all the AI player components are now entering up to the piloting work for those in order to guarantee that in the coming quarters we actually have a product to market fit. Then what comes to the existing Okulo business, so that's as it stands and we have been able to grow that one in in Australia and New Zealand, but that's not visible in a big picture as such. And then what comes to the strategy, so the cornerstone of our strategy is to have a profitable growth, so what comes to the investment to the Okulo and the software in general, so we have a certain kind of a bucket of money, or how would I say it, so certain team size that we are carefully looking at so that we don't overspend and overinvest on the software platform development side. so that we are able to provide the profitable growth. And then if the team is limited, so if we have to pivot, so then we actually, with the same team, we do pivoting in terms of the software business and in terms of the development side. And now the focus in delivering and getting the market traction for Illum and the diabetic retinopathy screening platform and enhancing that one. So that's where the focus has been now the last three quarters. And now we have a product, first end-to-end product out and now heading for the pilots as we speak. Sorry for the long answer, Pia, but that's the full picture where we stand.

Thanks for the clarification. Then to the imaging devices. It seems that you are enjoying good demand for DRS Plus and the ultrawide field lens, as you've discussed earlier. But what about the other products within the imaging segment? What can you do to speed up growth also in those?

So if you look in the first half Q2 in general, so DRS Plus selling really well, the ADON ultrawide field selling well, but we also have the ADON FA and AF, so those have been selling as well. But then just why we put into the report the ultrawide field, so that's now kind of a door opening opener for us because we haven't had a product before on a ultrawide field segment. So that's the reason why we have highlighted that one as a kind of a growth spearhead for us in addition to the DRS Plus. But other ADONs have been selling also really well. We have been able to grow that side of the business. Then if looking at the perimeters, so the compass, so the perimeter business, that's growing as well. But then in terms of the volume on the perimeter side, so that's way smaller, but we have high percentages on the perimeter side, but it's a tougher market and the volumes are smaller than on the DRS Plus and on the Aden family side.

Okay, clear. Thank you. Then my final comment. I think Daniel asked about the market share situation in tonometers, and the line broke up there a bit, at least for me. So, Robin, could you please reiterate your comment about your estimate about your market share in tonometers?

We haven't had any new information for the last year, but looking at our sales percentages and the market growth in general, so the tonometer market growing roughly 2-3%, so obviously if we're growing double digits, so we are taking share and I would expect us to be quite close to the NCT market share, so they used to be the dominant, so still a year or two back they were 40% market share, we were two years ago like below 30. So I think last year we went to roughly 33, 34. And I think now we probably should be quite close. My guesstimate would be.

Yeah. All right, good. Thanks for that. That's all for me. Thank you.

And we have one more question from the line of Niko Rukengas from SCB. Please go ahead.

Hello from my side, and I hope you can hear me. I could continue with the AI team a little bit, and your comments that the DRS Plus was growing very strong. So even though you wouldn't have sold any or provided any AI solutions yet, so do you think that the potential to offer that in the future will boost demand for these devices already now in Q2 or this year?

I would perhaps say so, that if first thinking the dynamics and the strategy on the AI and in the context of DRS+, so that's following. So we have two We have two streams ongoing. So, the first one is to guarantee that DRS plus, of course, the ADONs, so they are compatible and especially going to be approved in coming quarters at least in the USA, so that the device plus third-party AI algorithm, so that's working together. In Europe, the process goes so that it's okay if the DRS Plus is having a regulatory approval and the AI algorithm is having a regulatory approval, so then you can use them. If you go to the US under the FDA, they should be approved as a package. And so our strategy is following. So we want to guarantee that our devices are working with the third party AI algorithms. So that's the goal number one. Then the second one is that we want to guarantee that the DRS plus, plus the Illum, plus the third party AI algorithm is approved by one package so that we are able to actually sell that package. And that's the second track which we are advancing. And then, if looking now in the future, so our view is that DRS Plus, as it's fully automated, so you just press a button, and it can access through the small pupil, it can access through the cataract and so forth. It's really easy to use and fully automatic. So in the coming quarters, in coming years, that's an excellent tool for different type of fundus imaging based screening applications. So we are at least in-house, we are believing that one and we have a first science of that one being true as well. So that's shortly the case and the strategy, how do we want to play.

All right, thank you. Then I have another question. So you had quite a big impact from Essex, as discussed earlier, and you told earlier also that you had strong growth across the areas in Europe and in the USA. But thinking about that strong impact from FX, so did you have exceptionally high share from the USA compared to other quarters? And if you had, so do you think that this is continuing?

No, it was quite typical, nothing special. on the kind of sales split between regions. So nothing there that would explain it.

All right. Thank you. That was all from me. Thank you.

And as a note for the questions, I'll hand it back to the speakers.

Okay, hey, great. Thank you very much for the interest. Thank you for your time. And I think it's now the shorter period when we meet next, so we come back after the Q3. So looking forward to that one, and have a good rest of the summer. Thank you. Thank you.