Revenio Group Oyj

Good afternoon and welcome to revenue group Q3 earnings call. My name is Jouni Toijala. I'm the group CEO and with me here today, we have also our group CFO, Robin Pulkkinen. The plan for today is following. So I'm going to go through the business highlights of the quarter. Then we have got a lot of questions related to sustainability. So we released the sustainability report, part of the 21 reporting package. But I'm going to give a short update on the recent developments on that one as well. And then Robin is going to go through the financials and then shareholder structure as of today, and then reiterate the financial guidance. But let's go to the highlights of the quarter. So Q3, a very strong reported growth. Followed by the strong profitability and especially the cash generation. So demand for the both product groups continue to be at a high level. A couple of highlights. Australia growing really well. Same for Japan. Same for Germany. Also India and Korea were among the top performance countries during the Q3. Then if you look at the product portfolio, so actually same story on Q1 and Q2. So DRS Plus was selling really well. AIDON family. selling well, so all the models actually, so basic ADON, ADON AF, and FA. And I would say even that the FA, it was clear highlight, so especially the ADON FA was selling really well during the Q3. Then we have been continuing receiving a good feedback from the iCare Home 2. So that has exceeded our own internal expectations also on the sales side, which is really good. And in addition to the usability, we have also received a good feedback related to the device durability. And why this is important? Because from the business model point of view, of course, the clients are able to do one time buy for the device but the rental model where you actually rent the device for a couple of weeks and then return it and then the device goes again to another client so that has gained importance on a kind of business model side as well so that's a good that we have received a good feedback related to durability as well. Then we have been Going to the market, we had a couple of big events across the globe, especially the ESCRS here in Europe, so good feedback and good attention related to the Illum platform. We have now quite many pilots going on and more in a pipeline, so good feedback related to the Illum as well. Then related to market conditions and uncertainty, so I think everybody is, as in earlier quarters, paying attention to the electronic components, so that remains still challenging. We haven't had any challenges on delivering the products, but it's still causing causing a hassle on two fronts, of course, the increasing cost pressures on the cost of goods sold point of view, and then also we have been constantly preparing that if there's a component shortage, so should we have Plan Bs and Plan Cs related to the actual design, so that has been a constant impact on the component side as well. Then, if we come and go to the visibility of the coming quarter, so Robin, of course, is going to reiterate the current guidance, so that has not changed, but of course, if you look at the geopolitical situation and then possible slowdown of the economy in coming months, so I think it's fair to say that the market is at least pretty turbulent when going forward. But let's switch gears and go through the numbers. So the reported net sales at 24.1 million, 24.6% up from last year, and then strong EBIT performance, so 7.7 million up from last year, 28.9%. And I think it's fair to say, as in Q2, so also Q3, we got a strong backwind from the US dollar exchange rate. So the currency adjusted growth rate was 12.2%. So we got roughly 2.5 million euros backwind related to the exchange rate. Cash flow very strong, so that's really good. So that is money which sits in the bank account. So 7.1 million up from 5.8 million last year. But Robin is going to go a bit more detail the numbers in his part. Then related to sustainability and the ESG. So we have got many, many questions related to this one. Plenty of questions from analysts, plenty of questions from our existing analysts. shareholders, so I'll spend a bit time on this one. So United Nations has declared the commitment to vision for everyone by 2030. And this resolution was adopted by all, so meaning all 193 countries in 2021. And the objective of this is to tackle the preventable site loss as part of the UN sustainable development goals. And already years ago, we have selected eight different buckets from UN Sustainable Development Goals. And then we further group them into four different buckets. And the first one is that our goal is to improve the quality of life by the products and services what we offer to our clients and patients. And why this is important, so if we think the mortality rate, so this is a study coming from the Lancet Global Health reputable study from the last year, so mild vision impairment increases mortality rate by 29%, and the severe vision impairment increases mortality rate by 89%. So I think that's the basis where everything starts. That's the basis of why we come to the work every morning. So we aspire to keep the wonderful world visible for all. And this is the basis why we believe that we improve the quality of life. Then if we go back to the strategy, so one of the key cornerstones had continued profitable growth. And the logic here is that our aim is to grow together with our partners, with our stakeholders, and bring the value throughout the whole supply chain as well. And then if we can grow in a profitable manner, all our business partners are able to do the same. So then we are able to invest money to the continuous development of processes, the product, so that they are going to be more sustainable in the long run. And then also we are able to better monitor also the whole supply chain, and that in the end is going to then lead to the much more better environment. Then last, but definitely not least, so we have a strong commitment to the responsibility and transparency, whether it is related to the code of contract, whether it is related to all the equality-related items. So, concrete things after the 21 ESG report. Sustainability is a key part of our operations. It's a key part of our strategy. I think the good illustration of that one is that already this year, so starting from this year, the total leadership team have had the sustainability ESG related items in a short term target setting. That's, of course, going to continue. next year. Then we have been conducting two independent sustainability-related studies. First one is the EcoVadis, so we run that one during the reporting period here in Finland, so we achieve the silver level status on there, so room for improvement, but we are on the top 75% of the companies, and the plan is to extend that study to the other locations as well. Then we have been working with the upright in order to understand the revenue of business impact to society, knowledge, human health, and the environment. And there the net impact ratio was 68 percent. And just to give a kind of a benchmark for that one. So the Nasdaq Helsinki main list index is minus 21. So definitely still plenty of work to be done on the ESG side for us. But I hope that everybody understands and perhaps hears a bit more light that this is core of our strategy and core on our operations as well when going forward. And the next report is going to be released as part of the 22-year reporting package. But with these words, I hand over to Robin to go a bit more detailed through the financial part.

Thank you, Jouni. You can jump to the next one. There we go. So, like Joni already covered a bit, the Q3 numbers, the full year so far, we've been really happy with the performance. So, the reported growth roughly 25%, reaching 68.7 million. Looking how we've done earlier, so 21 for the first three quarters are FX-adjusted growth, so basically for the comparable period. our FX adjusted growth was 34%. So we have been going against really tough comparables and still performing really well. We know that the FX has helped us a lot. So for the whole beginning of the year, the FX impact has been some 5.4 million euros. Even though it's FX, it still is real money. It hits our bank account every month. So basically, It is not just something that makes the numbers look nice. It also actually in reality flows through to the balance sheet and the cash. Profitability and gross margin at a really good level. So the FX also, so roughly half of our sales, just a reminder, is US dollar based. We do have also costs in US dollars, so all the FX doesn't flow through to the bottom line. So some of the gross margin or the cost of sales group that has some dollar based costs like the commissions in the US and some of the components in our product are US dollar priced, but also some of the operating expenses are in dollars, but basically more than half of that FX actually does flow through the P&L. The gross margin actually up 1.6% from last year is also having a positive support from the FX. Operating profit 7.7 million for the last quarter or the Q3. That's up roughly 29%. And then looking at the full year, we have also the adjusted operating profit here. So for just a reminder, we acquired the Okulo business last year in April. For that, we've adjusted for the full year numbers, the 0.7 million acquisition related costs. So the comparable number, not being the 15 million reported, but 15.7 against our year to date 20.3. So the adjusted comparable number, adjusted operating profit actually is up roughly 28.3%. EPS, 60, 61 cents. Full last year was roughly 65 cents. So we're some six, seven percent behind the full last year EPS after three quarters. Net gearing also back to below zero. Equity ratio really strong. So the balance sheet has remained at a really good and strong level. We basically hired some 30 people during the quarter compared to the year earlier. Some of the historical views. So you can see our net sales, how it's performed over the last quarter. So our top line does have certain seasonality. So typically we start lower, ending up with the stronger Q4. Not hinting what it's going to be this year, but historically Q4 has been the best quarter for us. And that you can also see on the profitability graph on the right. So you can see the operating profit going up very much with the hand in hand with the top line. So our business model is very scalable. So the operating expenses is 60% salaries. We have been hiring a lot of people over the years, but basically The model is very scalable as it goes, and you can see it as well in the operating profit and how that actually flows through to the profitability line as well. Next. Cash flow. Also following a typical trend, so we start the year off typically quite low. It's related to us paying out our bonus payments or the LTI and STI target settings and the payments are annual paid for the majority of the employees in the company. And also taxes go out in the first quarter. But basically then throughout the year, we hopefully improve also. And that's been the trend typically. So the Q1 is the worst and then it starts to get better towards the end of the year. So far this year has been following a quite typical trend. And then I think this also the working capital actually did go up a bit last quarter, but basically will continue. We'll work hard to make sure that actually in the accounts receivable, we'll be able to get that down by the end of the year. But there are certain drivers behind that, which it's not a surprise to us that it did go up. On the equity ratio, you can see it's actually at its strongest level it's been since the acquisition of Centerview. We used to have really strong equity ratios back in the day when we only had the tonometer business, but since the acquisition and the balance sheet changing dramatically, this is actually as good as it's been since 2019. The net gearing also actually below zero now. So if you look at the prior years, the net gearing has been actually 6.7% in 2020, more than 11% in 21, and now it's minus 1.1. So how it works is basically the dividends pull the net gearing up. And then Q2 last year, we also acquired Okula with the cash reserves. So the net gearing went up to 20. And now basically it's been Q2 this year, we paid dividends, and now it's been actually just coming down again when we're building our cash reserves. Some of the main shareholders, nothing much changed here. William Demant, the largest owner, has actually continued to buy some more shares. They were closer to actually exactly 15% if I recall right after Q2. So they bought some 0.4 or so percent of the company shares during the last quarter. Finland ownership, Finnish ownership is still the majority, but the nominee register and the foreign ownership has and has continued and does continue still to grow. So the foreign ownership, I think it was still in the last year, Finnish ownership was more than 50%. And this year, the foreign ownership has grown to become larger than the Finnish ownership. The guidance, like Jooni mentioned, hasn't changed. Our exchange rate adjusted net sales are estimated to grow strongly from the previous year, and profitability excluding non-recurring items is estimated to remain at a good level. And here on the right, you can see some of the longer trend, looking back how the companies performed.

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