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Revenio Group Oyj
2/15/2024
Good afternoon and welcome to Revenue Group Q4 2023 earnings call. My name is Jouni Toijala, Group CEO, and with me here today, we also have our CFO, Robin Pulkkinen. Agenda for today is that I'll start by going through the highlights of Q4, including the short summary of financials, then also the same for 2023. So overall business highlights, uh, plus high level, uh, financial performance. Then Robin is going to do the deep dive, uh, to the numbers. And then we are going to go through the changes in shareholder structure, plus the financial guidance for 2024. So let's start with the Q4. Business highlights, so the quarter went exactly as we expected it to go. So if we first start from tonometer side of the business, so strong sales for IC200, including the probes. Imaging device sales, especially DRS Plus, ADON family. with the ultrawide field function, sales growth was strong for Q4. And then if you look at the overall progress on the screening side of the business, so referring to iCare iLoom, so also good take up on the iCare iLoom side. And if looking at the gross margin, looking at the EBIT, so good performance also. on profitability level. So if you look the numbers, so net sales up 3.5, sorry, 3.1%, up to the 29.1 million. Robin is going to cover the currency exchange rate part, but for the Q4, not major impact on that one. EBIT, 9.5 million euros, up 1.6%. And then cash flow slightly or quite significantly lower compared to the previous year. But we closed a couple of big deals. So this is due to the account receivables. So Robin is going to cover on that one. So nothing to be worried about. EPS up to two point, sorry, 27 cents up from 21 cents. So if moving back to full on 2023, So a couple of highlights here. So as you recall, we renewed the organizational structure February 1st, 2023. So that has been a good decision for us and everything is up and running really well. So if you remember, we structured the sales out from the product management and marketing, then we included all product management organization functions in one organization, same for the R&D. So that change has been going really well. Then on the screening side, we have been launching new disease modes to the ILWU. So now we have the AMD, we have also Glaucoma in, then we closed the AI partnership for the Illuum and then also new product releases couple of those. So I see 200 quick measure. Then we also launched new software version for the Compass perimeters and that the sales of the Compass picked up quite well also during the Q. Then on the positive note, end of last year, we also received the regulatory approval for DRS Plus in China. So we have been applying that one for a really, really long time. But finally, we got everything sorted out a bit before Christmas, so that's really good. good thing. Then a couple of big deals during the end of Q4, one in Germany and one in the USA related to the DRS plus, and also in the USA, also the IC200. And then as of end of November, we also kept the CMD and gave guidance for the long-term growth target, plus then we updated slightly the strategy. In terms of the numbers, so net sales for the full year, 96.6 million, slightly down. If we take the currency-adjusted numbers, so we had the growth 2.2%, and then EBIT down then from 29.7 to 26.3, so roughly 10% or a bit more than 10%. Robin is going to cover the cash flow part and the overall earnings per share, 0.7 euros down from 0.8. But with these words, over to you, Robin.
Thank you, Jooni. So a bit more details on the numbers. Like Jooni covered, 3.1% growth in the last quarter of the year. There was no FX impact on the last quarter, but for the whole year, looking at the whole year sales, almost at the same level as last year, reported sales is actually down by 0.4%. Also, the gross margin rather stable within the quarter and the whole year. Well, actually, the whole year is down 1.3%. But when you look at the FX impact during the last couple of years, there actually last year, The FX, there was a headwind for 1.6 million euros for us. Compared to 22, there's a tailwind for 6 million euros. So it's actually a quite big impact on our numbers. In the last quarter, we didn't have any non-recurring costs, but for the whole year, we incurred $1 million non-recurring costs for certain one-time projects. So when you look at the quarterly numbers, the reported and the adjusted are the same numbers. But for the whole year, the adjusted EBIT is actually $27.3 million. and 28.3% of sales. The EBIT percentage is down 2.3%. That if you look at the gross margin, it's down 1.3. So biggest part of that is actually the gross margin that has brought down the profitability. Also then the OPEX is impacting 41%. So the year end was extremely good, considering that, like we discussed earlier, we didn't have the microparameter products in our portfolio this year, so we ran out of stock, and we'd be kind of catching up that gap in Q3 and Q4, looking at the trend line. The Q1 and Q4 are pretty much on the trend line like we've seen in the earlier years, but like we know, the second and third quarter were below the trend, and that has been the challenge for us for the whole year. The Q4 sales performance actually quite good when you leave out the micro-parameters, so there was double-digit growth for the main products that we had in the portfolio that we could sell. It's double-digit, actually closer to 15 than 10, so a quite good finish for the year. Also, the profitability for the last quarter was the highest we've had so far, 9.5 million. Basically more than one third of the profitability for the whole year was generated in the last quarter. There's a few reasons, basically the sales mix, but also the operating costs increased during the whole year quite moderately. So for the whole year, our OPEX is up 3.3%. year over year. So there you can see the scalable business model going also the other direction, not only when we grow, but also when we have had a tougher time on the top line, we've also have been able to scale the costs. Most of that is actually, like we discussed earlier, the variable bonus payments are quite low for last year. So that is one driver for the higher profitability. Looking at this year, Maybe that's something that if we assume that we keep our guidance, the bonus pool is definitely going to be a lot bigger than last year. But also, like we've discussed earlier, the DRS Plus, Plus Illume, FDA clinical trials are ongoing. We have the new Maya coming out with the clinical trials, so we'll have We're going to have some more clinical trial costs in our P&L this year, which is something just to keep in mind going forward. So it's something that actually goes through the P&L and we don't put it on the balance sheet. So it's going to be impacting the profitability this year. But the good thing is it's one-time costs, so they will go away then the following year. Cash flow. So the Q4 wasn't as good as you would have assumed, but of course, it's maybe a good reason for that. So we did have a really good end of the year. The AR increased significantly. So due to these larger deals and overall, we have finished extremely well. And then, of course, the Q4 sales is significantly higher than the Q3 sales. So the AR did go up, and that's the main reason why the operating cash flow was lower on Q4. For the whole year, the working capital changes and then the certain tax payments in Q2 that were partly related to earlier years was the other reason why the operating cash flow didn't develop as favorably as we've seen before. But I'm sure Q1 hopefully will be then maybe a turn to the other direction when we collect the money that is outstanding. The balance sheet remains very strong. Equity ratio is again at its highest it's been, so 72.7%, net gearing minus 3.6, so we have 21.5 million in the bank at the end of the year, and then interest bearing debt of a little bit under 18 million, so the kind of net debt position is minus 3.6 million that we have at the end of the year. The board will propose to the AGM that we will pay a dividend of 38 cents per share. That roughly adds up to slightly above 10 million. On the shareholders, there's actually very little changes. Surprisingly, it's not often that it's so stable. Basically, the Finnish ownership has gone down 0.4%, and basically all the 10 names on the list are pretty much all the same, but maybe one or two have changed positions or places, so nothing much to report here. And then for the guidance, revenue groups exchange rate adjusted net sales are estimated to grow 5-10% from the previous year, and profitability excluding non-recurring items is estimated to remain at a good level. And then we're good for questions.
Yeah, thank you, Robin. Let's move to the question part.
If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Nico Ruakangas from SEB. Please go ahead.
Hello, this is Nikko Rangas from ACB. I have a couple of questions. I'll go one by one. So first of all, your sales growth improved from Q2 and Q3 quite a lot. So you earlier had slower demand from PE-driven optometric clients. So did these sales come back or did your sales improve in other segments?
Hi, Nikko. Thank you for the questions. We were able to find a new client, so optometrion in general ophthalmology. So, that was the reason for the growth.
All right. Thanks. And overall, if we think about your development, so Q4 has been traditionally quite big quarter to you. So, how do you see the market? in Q4 and maybe going to 24. So did you see the market improving or was this improvement in your sales growth only gaining market share?
So if we go back to last year, so the Q2 was the most difficult for us. And then we were able to turn the dial during the Q3, and then, as you can see, of course, during the Q4, and if we look the region, so the USA selling well, and then the Europe selling and growing pretty well, APAC more or less the stable, so I think that it, There has been a positive improvement also on kind of from the overall, from the market perspective in general, I think. But I mean, we have really good products, which are extremely competitive. So I think that has helped us a lot during the Q4. But do you have anything to add, Robin, on this one?
Yeah, I think April was the most challenging month probably ever for the company last year. So I think since then the development has been positive quarter after quarter and month after month. So of course going into this year, I think the comparables for Q1 are quite challenging. But we're quite optimistic that the Q2 and Q3, we should be reaching nice growth levels again and for the whole year to reach the guidance of five to 10%. So I think the sales team is also fully behind that guidance.
All right. I understand. So would you describe that the market environment is currently at least a little bit easier compared to maybe six months ago or?
I would say certainly more favourable than Q2 last year.
Okay, thanks. Then about some bigger deals you mentioned about. So could you indicate at least some kind of fallback, that how big impact did this have in Q4 and how much should we expect in 2024 and 2025?
So we had, yeah, there were a couple of deals that the size are seven digit, but still a lot lower than the Maya deal the year earlier. So nothing to compare to that. But the good thing is that they're not fully delivered. So we're going to be delivering against those agreements, hopefully for this year and maybe even next year some. But we don't have any kind of,
uh solid orders yet for the year but there's a good outlook that they should continue uh at what level and at what stage is still open yeah i understand uh then then on the costs so you mentioned about the clinical trials that will lead to increased costs this year so uh how much clinical trials were there in in 23 I mean, how much more is there coming now in 24?
There was very little last year. So we're talking about, in percentage it's a huge increase, but we're talking about probably above a million. 1.5 to 2 million, if I had to guess, somewhere around there. So it's more than a 1.5 million euro increase.
Okay, so 1.5 million increase in 24.
Yeah, but then not everything is done. We don't know all the details for all the Maya trials, for example, but that's if you have to forecast or model something, if you use 1.5 to 1.8 or 2 million, somewhere around there probably is going to be the cost increase.
And I think the one concrete addition compared to the normal run rate is the FDA approval and the clinical studies for DRS plus, plus the ELU and plus the AI. So that's roughly a bit more than a bit more than the million or between one and 1.5 million.
All right.
I understand. Sorry, Nikko, going back. So of course, that's a kind of a one
one off so not visible then then then 2025. yeah yeah i understand and then one final from me so you say that there were a good pick up in in in loom sales so is it at any kind of significant level that we could be seeing that that in your sales in in q4 already or
I would say that the percentages are looking good, but we start from so small base. So on that front, not moving the needle, but the trend is looking good and the level of interest is looking good. And I think this applies in general for the screenings. related cases, because if we go for these bigger DRS plus deals, so they actually went to the screening and not in a way in the traditional use cases where our clients are using our devices. So we have a competitive product, which is DRS plus for the forthcoming screening related client cases. So that's a really good thing and we are happy for that.
All right. I understand. That helps. Thanks. I guess that's all from me.
Thank you, Nikko. Thanks.
The next question comes from Daniel Lepisto from Danske Bank. Please go ahead.
Lepisto from Danske Bank. I have a few questions as well. Maybe going back to that. discussion on the margins and the margin guidance, you know that this would be remaining on the good level. But maybe still going back to the topic on the clinical trial cost, I guess you said that there would be an one and a half or two million headwind from these trials this year. So I guess quite a quick and dirty look on the sort of a cost base and so on with the bonuses as well.
coming this year I guess margin expansion with even five to ten percent sales growth it could be a quite a tough ask or what's your view on this yes it's hard to cover for one of costs it's we don't have any specific rabbits in the hat to cover for those so it's really something that is gonna hit this year the profitability and we didn't have it last year but we typically have clinical costs on and off, like for the earlier releases as well, so this is part of the business, and if you want to do deals or business in the US, we need to do the trials, so there's not really much we can do about it.
Of course, helping the long-term growth, so that's for sure.
It won't help this year's sales really, but it's a cost or investment for the future growth.
Yes, absolutely. Thanks. Maybe then on the sort of product launches, maybe on the Micro Perimeter, can you remind when exactly this year you're looking to launch the new product?
For Micro Perimetry, the new version of that one, we are shooting for Q4 on that one.
Okay. that won't have any sort of additional contribution to the growth outlook, if it's only for the Q4.
Let's have a see on that one, because if we would have a product, so we would have basically orders put in, so the goal is actually to have something to ship already during the Q4. and start collecting orders in some stage for sure.
Okay, that's clear. Maybe on the sort of the next topic, I guess, on the FDA approval for the Illume and the, I guess, Tirana AI, I assume this is the combination you will see to get the FDA approval on the sort of first track you have discussed. So what sort of status on that one as you will be doing clinical trials and so on, I guess. Any sort of news on that this year would be a quite tight schedule?
You have full-on money on that one. So clinical trials, we have been working on the pre-sub for FDA already, so good shape on that one. Then we have, based on the feedback when we receive it, we have to run the clinical studies and then do the application based on the clinical study results. So for sure, I'm pretty sure that we don't have the approval for 2024. So it's going to be first half 2025 earliest, hopefully Q1, but remains to be seen.
All right, that's a clear, I guess my final question, uh, maybe on the home to product, you know, that, okay, you, you submitted some applications for, for the reimbursement on, on, on plan schedule. What's the sort of next step here. When are you expecting to get a sort of answer? And so whether you will get the full or partial reimbursement for the product.
Yep. So the procedure goes so, with all the glaucoma specialists in the USA, we did the documentation, we passed the application on time for so-called HCPCS, which is the Healthcare Common Procedure Coding. So that goes to the so-called CMS, which is the Centers of Medicare and Medicaid. So the documentation is in and then we are waiting to feedback early Q4 from the CMS. Are the codes going to be received or not, and then at the same time and after that one, then we start the discussions between the payers or the insurance companies and so forth. So hopefully we are wiser on Q4 related to codes and then the final reimbursement early 2025. So that's a schedule and procedure how it goes.
All right, that's very clear. Thanks for the answers.
Thank you.
Thanks. The next question comes from Pia Rosquist-Heinzalmi from Carnegie Investment Bank. Please go ahead.
Hello, Jouni and Robin.
Thank you for the presentation. I've still got a couple of clarifying questions. First, with regards to your sales guidance for 2024, earlier you talked about a weak H1, but is my understanding now correct that you're no longer referring to a weak Q1 other than saying that the Q1 comparables were harder?
Yeah, I think the, well, hopefully I will see how the interest start to perform, but, uh, the expectation has been that they will start to go down, which will help them like the P driven optometry. Um, but yeah, definitely. I think that the Q1 is challenging due to the comparables. Um, then of course we have easier comparables in Q2, but I think in general we have certain new product launches coming out that will be supporting and helping the second half, uh, more than the first half. So that's also one reason. behind the thinking there, but I think in general, the economy and interest rates were one driver for those comments earlier.
So I would say, right, Robin, so no change for the earlier comment and view related to first half. So we see second half then in a way, in a better look what comes to the growth.
All right, thanks. And still a clarification on the expected launch for the new Mayan micro-perimeter. So your sales guidance as of now includes some expectation of micro-perimeters supporting your sales in H2.
Actually, not too much.
Some, but if it's zero, it doesn't really change the guidance.
All right. Okay, thanks. Then another question relates to these bigger orders you mentioned in the release. And I'm particularly interested in understanding the demand for the DRS Plus for screening purposes in Germany. So, first of all, is this solution now sold with Illum, or is this excluding the Illum offering?
That's only the DRS Plus deal. So if we go back to the strategy, so we have twofold strategy. So we want to maximize the device business as well. So if the combination or if there's a demand for screening solutions which require extremely good camera, but then the client has decided that they don't need, or they use, as an example, human grading in their screening solution and not AI-assisted. So for sure, we want to sell the best device for the purpose. And that's another part of the strategy, and this is linking to that part. And then, of course, the other part is the DRS Plus plus the Elune plus the AI. But to sum up, sorry to be long here, but this was the DRS Plus sale only.
Okay, thanks. And what kind of, or what type of client are we talking about? And does this kind of shed some new light on the potential in the European market? I mean, can we draw any broader conclusion about the demand for screening solutions without AI?
So this, I think we don't fully want to disclose the type of the client, but went for the client segment where we are already operating and where we have a strong position. And then the other segment where we have been especially selling during the 2023, the Illum plus the DRS plus the AEI. So those are going to the non-traditional segments like diabetic clinics and so forth, where we are not currently operating. But this bit more bigger deal, which we closed during the Q4, so that went to our existing client base.
All right. Then maybe, yeah, you mentioned China during the presentation and the the market approval there. So with this, what kind of sales efforts are you now doing in China and what kind of sales potential do you see in China for this year?
So if we go back on time, back for a long, long time, so at the time of the Centreview when we had the so-called DRS, so that was a product before the DRS+. So we had the China approval for the DRS fundus imaging camera. device went to its end of life. And of course, during the same time for China, we had the tonometer approvals. So we have been continuing selling the tonometers in China, but then now we have a DRS-plus device approval for China which we received during the Q4 last year which is of course extremely good because now we have competitive imaging product for China. What comes to the sales strategy sales potential in China so related to sales strategy so we established a sales office and we have a small team now in in China, and we have been working towards closing the distributors in China during the second half last year. And now, of course, we have now even the product for them to sell starting from Q1. I don't go to the numbers, what we have budgeted and planned for China, but again, if we are really able to get the sales up, so that's a nice upside for us, also for 2024.
Okay, thanks. And then finally, just to clarify, the extra or one-off costs for 2024, Can you still quantify what you now have seen? So, higher clinical costs, higher bonus accruals. Are we talking in total about 3 million for 2024?
So, looking at 23, our salary costs, actually, the personal costs came down, if I recall right, a little bit more than 1%. we didn't even hire some people during last year. So kind of, um, I wouldn't give you an exact number, how much the bonuses are, but they're in, in the millions, the whole pool. So depending what the payout is, how, what the performance is. So it's an anything between like zero and 4 million, depending what the, what the performance is. Uh, but in that, in that range and then the clinical trials, uh, but for last year, the bonus pool was, very small, and not even everybody received it.
All right. Okay, thank you. That's all for me. Thank you.
Thank you, Pia.
The next question comes from Joni Sandvall from Nordea. Please go ahead.
Yeah, thanks. It's Joni Sandvall from Nordea. Thanks for the presentation. Maybe I have a question related to how you expect the growth to be divided between imaging devices and tonometers in 24 and what should we expect from the gross margin?
I could comment a bit perhaps the product mix, then Robin perhaps comments the cross-margin part. So I think the same trend is going to continue also during the 2024. So if we go back to 2022-2023 as well, so constantly, the fundus imaging business has been growing faster than the tonometry business. And I think that's a relevant expectation for 2024 as well. And if you look at the growth drivers, On the tonometry side, I see 200 growing nicely because of the new features that we introduced. Probes growing nicely. Home, as before, growing nicely. Then if you go for fundus imaging, DRS Plus. one growth driver, ADON ultrawide field growth driver. Then we introduced the Compass new software version 4.0.0. So that has been selling well during the Q4, expected to sell this one and then this year as well. And then we have a micro perimetry. coming so those are more or less the growth drivers and of course the some back window also related to the screening solution side of the business so I think the revenue mix is perhaps the one thing to keep in mind and that leads perhaps to Robin related to cross-margin we haven't disclosed exactly what the different product line cross-margins are but if you go back before Centerville
I think the revenue group cross margins were even up to 85%. When we acquired Centerville, they're around 62%. We've been able to, of course, like we discussed earlier, improve the imaging business cross margins over the years now. But it's still like the gross margins on the tonometer side are extremely good on the device side especially. So I don't think the imaging device gross margins will probably never reach that same level. Just simply the weight of a tonometer is a couple hundred grams and the weight of an imaging device is, I don't know, 20 kilos. So simply there's so much more technology and hardware in there that reaching the similar gross margin levels are probably not doable in the coming years at least. So in a way, we'll be lowering the gross margin, the higher imaging growth, but then hopefully the software solutions and the screening will start to help in improving it in a couple of years.
Okay, thanks. That's clear. I think we went through the Maya quite well, but I think, Robin, you mentioned that there would be some some other products also coming online in H2. So can you give any
any indications what should we expect during 24 in addition to maya we spent 10 10 of our our revenue on r d so there's new stuff cooking all the time so hopefully we get something out this year i don't know if he only wants to comment not not too much but i mean plenty of work going to the new products so not nothing nothing else else to comment unfortunately at this stage okay
yeah sure thanks and then uh lastly on the on the on the mna side i think you have been screening screening the market all the time so so how is the market looking when considering the valuation levels currently and have you have you found something interesting in the market i think we still have a slight mismatch
between the valuation expectations that the targets would like to have, compared to what we would like to pay. And I think that still remains a challenge, but would you agree on this one? So, constantly working on the different opportunities, but that's still the case.
It's very attractive targets, but the valuation, I think, is the challenging side. for us now. Okay, thanks.
That's all from me.
The next question comes from Pia Roskvist-Heinzalmi from Carnegie Investment Bank. Please go ahead.
Hi, thanks for taking my question. A small and short one. With regards to the good demand you've seen in IC2, the tonometer. Do you know if that's driven by now replacement demand or new clients?
I mean, that's hard to say for sure both. So if we go back on time, so we still have quite a lot this so-called T01. So if you recall the original tonometers from 10, 15 years back, so they are still working really well and the clients are using and certain clients start to do the replacement. So that's one part. And of course, there's still untapped market for handheld tonometers still in a world. And we have to remember that the iCare IC200, that's the only tonometer in the world which is able to measure in supine position. So that's a unique feature now combined with the quick mode measure. So that's also the one reason that in certain cases our clients want to measure on supine or inclined position, and that's the only tonometer which is able to do that one.
Okay, thanks. And then another question came to my mind with regards to the different regions. You usually give an indication of which of your markets have performed well and which maybe have been quieter. Can you give a recap on Q4? So which markets were good and which may be quieter?
Yeah, U.S. performing really well, as always, during the Q4. Europe performing, growing really well. The APAC more stable, but growing.
Okay. All right. Okay, that's all for me. Thank you.
There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
I think we are done. Thank you very much for the interest and for all good questions. And I hope you are going to have a good spring and we are