Revenio Group Oyj

Welcome to Revenue Group first half 23 earnings call. My name is Jouni Toijala, and with me we have here also our CFO Robin Pulkkinen. Today, we are actually going to run this call in a totally different order, and we are planning to start the call by going through the background for the last week negative profit warning, and then moving to the First half results, then highlights from the quarter. Then Robin is going to go in more detail through the financials plus the shareholder structure. And then we are also going to have, of course, Q&A at the end. And the reason for this change in the order is that we got a huge, I mean, really huge number of calls. We got a lot of emails and contacts from private companies. investors, institutional investors and analysts. And unfortunately, during stock exchange rules, we were not able to have one-on-one interaction last week and earlier this week as we were in the silent period. So this is really the reason why we are a bit changing the order of the normal call today. So let's start with the new guidance, which we issued last week, August 1st. So the new guidance is following. So revenue groups exchange rate adjusted net sales is, growth is estimated to be between one to 5% compared to the previous year, and profitability excluding non-recurring items is estimated to remain. a good level. So what we changed? So we wanted to give a clear guidance on the net sales growth so that we are not using the objectives. So the guidance is one to five percent growth for the full year. And then we didn't touch the profitability part of the guidance at all. And then if we jump to the reason So it's a twofold. So the first thing is that we started to see slightly, but not too dramatic, weakening demand between the quarter one and quarter two. So we slightly flagged it during our Q1 earnings call, if you recall. But then when we went further down to the Q2, so we started to have more hesitation, especially on the optometric side of the business. And there, if I need to kind of pinpoint one, especially among the private equity funded optometric sector point of view. Then, secondly, we had a pretty big one-off deal, which we closed last year. during the Q3, so part of the deliveries were out the end of Q3, and then part of the deliveries were out early Q4 last year, so it's a one of five million deal for the micro-perimetry side for the clinical trials, and we actually sold the kind of end-of-life product, which we were thinking that we have a kind of a stock still for two to three years, so we actually sold the stock in kind of a bit more than two years, stock in one go, and that's now out from the kind of a sales portfolio, so we have a five million gap. And when we started the year, so we had a clear visibility that in the normal market conditions, we would be able to catch it up by selling the tonometry and the fundus imaging. Then we received a lot of questions that is this going to be permanent? Is this going to be temporary? So our current understanding and the view is that the challenging time is going to be roughly six to nine months. So we based this one with the discussion, what we have had with our clients and with our distributors. And then just to remind, everybody that even if we saw a quite significant slowdown in a demand during the Q2, so we have been able to grow during the first half. So we have been able to grow faster in the unit level and the emphasis on the unit level. So we have been able to grow faster than the tonometer market and faster than the fundus imaging market. So I think that's good to remind. So really wanting to emphasize that on a bigger picture point of view, the macro trends and the long-term outlook is unchanged. So the people are getting older. There's more people having a lifestyle related diseases like diabetes, myopia is increasing. So we are going to have way, way bigger amount of people with eye disease is also in the long run. So that's not changed. Let's move to the first half highlights in terms of the numbers. Robin is going to go in detail the Q2. So net sales 45.5 million. So it's slightly up from 44.6 million. So 2%. Then if we go back to the last year first half, so we got a Pretty big tailwind from the USD. Now it's actually in a different way. Robin is going to go through the details in his part. And then the operating profit was then $10.8 million. which was actually down from 12.7. And this is, of course, linking to the, we had a one 800K one-off, but then also links to the scalable business model. So when the business's top line is scaling up, so it really scales up really well up from the profit perspective. And then in a way on the other side as well. Then Robin is going to go through the cash flow in detail, but a couple of highlights there. So it was 0.1 million compared to 4.4 million last year, so significantly down, and that was true to the Italy side tax season, also kind of a pre-tax season, and then also the increased inventory. But Robin is going to go this one through in more detail, as I said many times. So a couple of highlights for the quarter. So first half results I went already through. So that was a two-folded. So started positively during the Q1, then down on Q2. Then we went through the kind of forecast on the demand side and so forth. But a couple of other highlights. So during the review period, We added a couple of new disease detections for the iCare iLoom. So the iCare iLoom package includes the DRS Plus, then it includes the iLoom, then it includes the AI. So the first expansion on the iLoom product portfolio was that we added the AMD and Cloud Coma. So, from the user perspective, experience is exactly the same than before. So, end user just presses a button, DRS Plus takes two images per eye, and then the images are sent wirelessly to Ilum Cloud, and then the AI is going to return a report back. And we can do out from these same two images per eye, we can now detect the AMD plus the glaucoma as well. Then in addition to that one, we also disclose the AI cooperation with OFT AI so that they are going to integrate their AI algorithm part of the ILUM platform, and they are extremely strong in France, also in Canada. So that's a plan. for us for the OFT AI. Then also we added the quick pressure feature for the iCare IC200, so improving the kind of a fastness and the workflow there. And then we have been working a bit more longer time related to iCare Home 2 in the USA. So we have had earlier the reimbursement policy for remote monitoring codes and remote measuring codes. But now we are working as well in order to get the reimbursement for the device. So based on the discussions with the experts and the KOL, that is looking pretty good, so that there's a need for that one. But of course, in order to get the reimbursement, it's a bit same than getting the approval from the FDA. So it might take longer time. So for this one, we are not expecting to have any progress during this year. And we come back to this one then early next year. Then we have also decided that we are going to keep the Capital Markets Day November 23. So invitations are going to be sent out. shortly so so that's decided internally and then i want to emphasize that we have currently up-to-date growth strategy in place and then we have good and strong global team who is capable of implementing it and then we also renewed the organization and and that's uh seems to be working well, and we are still fine-tuning that one, and in the final steps of hiring the new head of the R&D, so that's also moving forward, so no worries in that sense, so there the house is in order, and really looking forward to then see and hopefully also meet people then in the November CMD. But with these words, I would like to give a speech to Robin Pulkkinen.

Thanks, Jooni. We'll jump to the... Okay, I'll take the... Here we go. So a bit more details on the numbers. Net sales for the second quarter, 22.3 million, down 8.7% year-over-year. FX adjusted decline, 6%. And like Jokunioni mentioned, first half sales, 45.5 million, up 2%. FX adjusted, 4.3%. So on the top line, it's important to keep in mind last year was quite exceptional from the FX. So the whole year, the FX tailwind was almost 6 million euros. And also for the first half, the FX impact was almost 3 million last year. And this year is just over 100K. In the second quarter last year, the FX alone was roughly 2 million euros tailwind. The gross margin remained healthy throughout the quarter and throughout the beginning of the year. So even though we discussed about the growing faster than the market on the units, but also it hasn't been kind of cannibalizing our margin or we haven't been doing tricks there. So we've been constantly keeping our margin levels healthy throughout the quarter and the year. The profitability side has come down. We did have incur in the second quarter 827,000 euros of non-recurring one-time project costs, which have had a negative impact on the EBITDA and the profit and the EBIT. So the adjusted operating profit line is probably more comparable if you want to compare apples to apples. First, second quarter, 5.5 million, down from 7.1 million. It's roughly 22.9% decline, almost 25% EBIT percent compared to 29.2 last year. And for the first half, we're down 8.1%. And the profitability, 25.6% this year out of revenue compared to 28.4% last year. Our EPS, 12.2 cents this year. Last year Q2, 20.3 cents. And for the first half, 28.1 cents. And last year, 37.9 cents. On the next slide, you can see a bit more trend on the top line. The second quarter, like we've covered, was exceptionally weak in terms of demand. You can see it also clearly here falling below the trend line. But kind of looking back in history, the Q1 typically has been below. Q2 was below in 2020, roughly on the line 21. Last year, where we are now comparing and against, the Q2 was actually clearly above the trend line. So we are comparing against very strong Q2 last year. Last year Q2 grew 30%, profitability grew over 60%. So we were not kind of going out with against easy numbers or easy comparables. Of course, it doesn't explain what the numbers were, what they are, but the comparables were really, really tough. On the right side, you can see The profitability trends, you can see the EBIT percent also on the line. If we look at the Q2s a bit further out, so you can see Q2 2020, Q2 2021, the EBIT percent is roughly around the same area where we are now at this quarter. So actually last year also here stands out on the profitability as a quite exceptionally high year. also on the euros, but also on the profitability percent. On the cash flow side, on the left half graph here, you can see you only mentioned the Italian taxes. So the Italian tax system works is that you're taxed on the profitability of the prior year. So if you look at last year in Q2, didn't pay much tax in italy the reason was that the 21 result in italy wasn't very good so there wasn't much tax payments in the 22 last year 22 as a whole year last year in italy was quite profitable uh so so the taxation what we paid now in q2 this year is is the the kind of the taxes for the last year uh which is a big part of it and also the taxation for this year is based on last year's profitability which are also higher so we paid The Italian taxes are paid twice a year in kind of Q2 and then Q4 in November. So we pay like 40% of the pre-tax for this year and all the taxes that we didn't pay last year are also paid in Q2, which was the kind of the one biggest item running down the operating cash flow or the cash flow from operations. There is a chance to split those payments out to make this look nicer, but there's extra costs and interests related, so we haven't gone that way. The working capital was also impacted slightly by the increased levels in the inventory. Some of the components have long lead times and of course the sales wasn't quite at the level where we expected, but there's kind of no risk of any kind of write downs or anything in the inventory. So it's all good devices and materials and components that we have in there. The equity ratio is the highest levels to what we've seen since the acquisition of Centerview. So it went over 70%. The increase in the net gearing is due to the fact that the dividends for last year went out in the early Q2. So the equity ratio actually increased by 11% from just under 80 to almost 90 million. The shareholders, there's been some changes here. The Finnish ownership actually has bounced back slightly, had been going down for a long time. The US investors have been selling some of their shares. Then all the four other countries on the right here you can see have been increasing their share. So France, Sweden, Denmark, Finland have gone up and the US has gone down in the ownership. And then the guidance, which Joni already went through, I'll just read it once again. So, revenue groups exchange rate adjusted net sales growth is estimated to be between 1% and 5% compared to the previous year, and profitability excluding non-recurring items is estimated to remain at a good level. Good. And I think we have probably a few questions also.

Yeah, that's it. Thank you, Robin. So, let's open the floor for the questions, so please.