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Revenio Group Oyj
8/8/2024
From sunny Helsinki, welcome to Revenue Group Earnings Call. My name is Jouni Toajala, I'm the Group CEO, and with me we have here as well our Group CFO, Robin Pulkkinen. Today we are going to go through the highlights of the Q2. So I'm going to go through those. Then Robin is going to cover the financials and the shareholder structure change plus the financial guidance. So let's jump to the Q2. So good second quarter for us, exactly according to the plan. Net sales 25.4 million euros, so up 14.2% from the last year Q2. And the currency adjusted growth was 13.5%. So we got a bit of a tailwind. from the US dollar. Operating profit, 5.3 million, 20.6% from the net sales, up 12.6%. We had the write-off regarding to Ventica here, so Robin is going to go through the adjusted numbers A bit more in detail. EBITDA, really good level, so up 25.6%. And as well as in the Q1, so Q2, net cash from operations was extremely good, so 6.5 million and earnings per share up 6%. to 0.155%. If looking at the whole first half, so net sales, 49.1 million. It's an increase of 7.9%. On currency adjust terms, 6.1%. EBIT 10.4 million, slightly down from the last year. EPID up to the 13.3 million. And Nest gas flow extremely good, so from 0.1 million to 11.2, and of course reflecting then to slightly increased earnings. Then if we go back to the business highlights for the second quarter 2024, so the sales development in second quarter of the year was strong. And sales growth in the US, strong. And if we go for the Europe, Middle East, Africa and APAC, so the sales growth was very strong. If you look at the segments a bit more carefully, so sales of the fundus imaging devices, that was very strong. Also tonometers were developing and selling strongly during the Q2. Then if you go further into the devices, which were leading the sales. So IC200, including the probes, sold particularly well. Then DRS Plus, plus the Aden family, was selling really well as well. And then, if you recall, back to the Q4 last year, so we also updated the new software version for our fundus perimetry called Compass. So we saw nice growth percentages on the fundus perimetry side as well. Then we launched a new product called iCare Tonovet Pro. So that was launched during the Q2 and sales is picking up nicely on that one as well. And I let Robin to go through the financial part and also cover in more detail the Ventica write-off. So over to you, Robin.
Thank you, Jouni. So Jouni covered slightly the numbers that are earlier in the earlier slides. Maybe I'll give some more color here. So the sales up 14.2% in the second quarter. When going down to the second line, look at the gross margin, actually very much in line with the top line growth. So both growing for the full first six months in the second quarter in line with the top line. and gross margin also being very much in the similar level than it was last year. So there's actually very little surprises there on the margin side. We did have, so I only mentioned about the write-off. So during the quarter, we did the write-down for all the non-strategic capitalizations that we had in the balance sheet, mostly related to Ventica. and that was 730 000 so so looking at the operating income operating profit uh the adjusted the numbers maybe a better better line to look at if you want to get the get the pure business view how the performance has been uh coincidentally also last year in the same quarter we had the 800 000 one-time project costs that had an impact on the numbers then so Both of those numbers have been adjusted on the adjusted operating profit line. So 6 million for the second quarter and 5.5 for the 2023 Q2. Growth approximately 9%. And for the whole year, for the whole first six months, there's a small decline still on the adjusted EBIT number. I'll go through the other numbers in the later slides in more detail. So basically a good quarter, very much like I think we and the market expected. So we've also said earlier that we going into the year Q1 and Q4 were challenging from a comparable point of view. And then Q2, Q3 were the months or quarters where we saw that there's potential for better growth. So basically, looking at the numbers, how they came in, it was very much according to our initial and internal thinking also how we thought the year would be going. So year to date so far, going as planned. FX adjusted growth, 13.5, like Jooni mentioned. And also nice to see that the Q2 top line also coming back to the closer to the trend line. Q2 often has been actually below the trend line in the earlier years as well. 22 being one year where that was not the case, so exceptionally good year, 22 standing out here also in the graph. So looking at the profitability also with a bit of a longer tail. Now going back from 5.1 million to 6 million in the second quarter. And basically, typically looking at back in the earlier years, the second quarter is always stronger or has been stronger than the first quarter for us from a profit point of view. Last year was an exception there. So you can see here also that last year the Q2 was kind of soft from a performance point of view. So this year, just as a reminder, the cost side for us, the personal expenses are expected to grow this year, mainly due to the fact that for the 23 performance, there was very little bonus accruals in the numbers. So hopefully this year, we will will deliver as we plan and have guided so most likely those costs would go up and also we do have the the like we mentioned earlier the 1.5 to 2 million clinical trial costs planned this year still a bit open how that's going to play in the second half there was very little in Q2, quite a bit in Q1. So towards the end of the year, probably we'll have some costs hitting our numbers on the clinical trials. But those plans are still a bit open and we don't have full visibility into yet how that's gonna play out in the coming months. Cash flow, excellent. Looking at last year, Q1, 0.3 or 300,000 positive. Q2 was negative actually. This year we're above 11 million for the same two quarters. There's basically a few reasons. Looking at last year, typically in Q1, the incentive payments are paid out for the whole company. So that typically brings down the Q1 number. This year there was a lot lower payments related to those. Also, the working capital has been improved. The SEC Q2 pure results or net income was higher. than the comparable period playing into there. But maybe one, just a reminder from last year, the Q2 23 cash flow was impacted also by the Italian subsidiary income tax payments. So the tax system is a bit different there, and we did have some payments related to the earlier years. So not 23 payments, but for 22 also that hit the Q2 numbers last year. But overall, very good. if not record good first half for cash flow. The balance sheet remains to get stronger and stronger over the last quarters, approaching 75 percent equity ratio, net gearing below zero. We paid out the dividend, so based on the AGM on 4th of April, the dividend of 38 cents was paid out. The dividend payout ratio was slightly above 50 percent, and also that kind of is one of the reasons why the equity ratio has continued to grow. Shareholders, not much change here. William Demant bought some more shares, not a lot, but basically the foreign ownership has grown by 0.7 or 0.8% from Q1, end of Q1. First five companies' owners are in the same order, and same companies than Q1, a little bit different order from six to 10, but the ownerships there are also on a very similar level. And there's only one clear major shareholder being William Demant, and then the ownership splits into a lot smaller pieces after that. And our guidance. remains the same, so revenue group 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.
Great. Thank you, Robin. I think it's time for the questions, please.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Nico Ruakangas from SEB. Please go ahead.
Oh, this is Nico Ruakangas from SEB. Thank you for the presentation. I have a couple of questions. And starting with that, you mentioned in the report that you have seen increasing momentum in PA-driven clients, even though they have not realized the larger orders yet. So at what level is this segment now compared to, for example, two years back? And when do you expect those larger deliveries to realize?
Hi, Nikko. So thanks for the question. If you first go one year back, so it was in a total standstill. Then if you go two years back, they were quite active. And what's the difference now compared to the last year? So it's a twofold. So they are more active on putting the... rfis and rfqs out and and then they have been started to order smaller or way smaller amounts so rolling out way smaller amounts that they used to be two years ago but slightly higher than than one year ago and that's a current status where we are. So activity is definitely not in the level that it used to be two years ago, but way better activity than one year ago.
All right. So that is not only affecting the growth in Q2 then?
Yeah, if you were thinking that one. So that's a fully correct. So we were able to to grow the business strongly in the U.S. and then very strongly in the Europe, Middle East, Africa and APAC. Yeah. Yeah.
Great. Thanks. Then if you look at the demand environment in Q3, as you have now entered Q3 and compared it to Q2, so have there been any changes or how do you look at the environment for it.
We are executing according to the plan. So, of course, it's only the one month gone what comes to the Q3, but it's going according to the plan we set for the first quarter, for the second quarter and for the third quarter. So executing as we planned. So no hiccups so far for the Q3 or anything Robin to add?
Yeah, variation is big between single months, so it's difficult to say how the second half will be going, but no reason to be kind of alarmed from our end at least, so everything seems to be going pretty much like planned, like Joni said.
Okay, thanks. Then a question regarding competition in tonometers. So, well, you say that So far, no reasons to be alarmed. But have you felt your sales or competitive position has been pressured by increased competition? And have you seen increased price competition on that front?
I think it's good to structure this one perhaps in two ways. Perhaps looking even from the product perspective. On the tonometer side, we haven't seen any sign that competition is having an impact to the sales in Europe because the competition has been on the tonometry side already two years, so no impact Q1, no impact Q2. Then if we go for the US, we go for the tonometry side. So we have now had the competition full on during the Q2 so as you can see from the numbers so no impact to the Q2 numbers competition is pricing more aggressively than we are pricing but so far as I said and as we can see from the numbers so no impact in the USA as well then what comes to the funders imaging set up exactly the same than Q1 so fundus imaging products and then also the fundus perimeter called Compass. So we have been able to grow the business quite nicely also during the Q2. So no change on that front. And as you can see from the gross margin, so we haven't been getting the growth by lowering the prices. I think that's fair to say, Robi.
Yeah, I understand. Then one last from me. You mentioned about the SBA costs and that there weren't that much in Q2. So were there any of these related costs in Q2? And then how much there is left for H2? And do you expect, for example, the operating cost level in Q3 to be higher? than in Q2?
There's just very little. I don't have the exact number. Around 100,000 is probably a pretty accurate number, how much there was. But we're still working on the exact schedule with the clinical research companies. So it's impossible to give an exact split yet. It also depends a lot how they get the patients in, which is almost impossible to forecast accurately. So Sometimes it's easier, sometimes it takes a longer time. But we will advise as we move forward during the year how those are playing out. But so far, the schedule is not fixed yet for the second half.
All right. But we are talking some plus one million euros to be expected still to realize.
Potentially, or then it's very close to the year end. Could be January also. Hard to say exactly then how the schedule plays out, but around there. Maybe that's a good working number, and then we will correct if it changes.
All right. That's all from me at this point. Thanks.
The next question comes from Jack Reynolds-Clark from RBC Capital Markets. Please go ahead.
Hi there, guys. Thank you for taking the questions. Got going now. So I have three questions, please. So starting with revenue growth. So you talked about the strength across funders and tonometers. I was wondering if you could give a kind of a rough kind of quantification of the growth between those two segments and then kind of give a bit of colour around and the contribution to growth from iCare, Loom and Home2 in Europe. Thank you.
Should I start, Robin, and then you can continue? If we start from the fundus imaging, so growth on the fundus imaging was very strong, so we have an internal... guidelines what the very strong and strong means, but hopefully that gives some light anyway. So on the finance imaging side, the growth was very strong and If you look at the products which were selling well, so DRS Plus selling well, AIDON family selling well. And then in that package, we also calculate the COMPAS fundus perimetries compared to the last year. So we have had really good growth on the fundus perimetry side as well. Then if we look the tonometer side, so the IC200, including the probes, where the growth leaders on that front, and of course the, solution package, now I'm referring to DRS Plus, plus the Illum, plus Tirona Retina AI. So we were able to get many new clients in Europe on that front, but then because of the base business, so now referring to the fundus imaging, tonometry and perimetry business grew so much. So I would say yet that The Illum as such is not contributing in terms of the, compared to the growth of tonometry and fundus imaging, so not contributing too much yet, but steadily growing. And then if you look to home, so home growth bit like before, so also moving forward, growing, but then the base business, the way bigger base business has been growing extremely well, so it kind of undermines the smaller segments under. But Robin, would you like to add anything?
No, I think it was a good answer.
Great, that's super clear. Then my second question is just on guidance for the full year. So does the strength that you've had in Q2 kind of imply that the upper end of that 5% to 10% revenue growth guidance range could be more achievable for the full year. And then could you kind of share any detail about what kind of good profitability looks like?
That's similar that Joani was referring to on the top line growth. Unfortunately, we haven't opened our adjectives. Basically, it's... Well, we said it's good now, and we've said, yeah, it's been good for many years. So it's a quite wide range, but I can't give exact number what the range is. It's something we use internally only, which we haven't opened yet.
Fair enough. I thought I would try anyway. And then my third question is around the FDA trial for Ellume. So could you share kind of the feedback that I think you were due to get just after the previous call? And are you still expecting marketing approval in H2 of 2025? Yeah.
So if recapping our strategy related to the retina screening in the USA, so it's a twofold. So the number one part of it is that we want to guarantee with many AI players that our DRS Plus fundus imaging device works with all the AIT. dominant AI platform so that track has been going long time and hopefully we are going to see some movement on that one hopefully during the Q1 2025 but it's a slightly black box for us because we are not applying for the FDA approval so it's not too sure but we are transparently going that one again through in our next earnings call and then second part of the strategy is to apply the FDA approval for Illum DRS Plus plus Tirona Retina AI and we are going to submit that application by ourselves and there the schedule is still the same so working towards the second half 2025.
Fantastic, thank you for taking the questions.
The next question comes from Joni Sandvall from Nordea. Please go ahead.
Yeah, thanks for the presentation. Maybe still a question on the margins. I know that this could be a tough one, but is this, now you are just shy of 23% on EBIT margin level, not just EBIT margin level. So is this a good level or should we expect the normal seasonal pickup during the H2 on margins.
If you look at the objectives we use, then yes, it's in a good level, but basically the business is very scalable, so assuming that second half I think has always been better than the first half, that would kind of led you to assume that the profitability would also be higher, especially like the Q4 is typically, we do probably 30, 40% of our EBIT in Q4. I don't have the exact number, but that's a big part of the whole year profits that we make typically in the last quarter.
Yeah. Okay. Thanks. Then you had now the tunnel launch during the Q2. If we are excluding the Maya microparameter, how many new product launches should we expect during the H2?
That's an interesting question. So unfortunately, only very good question, but not able to answer to that one. let's keep our eyes and ears open and then let's do the counting when we go to watch the end of first half. So, sorry. I have a good question. I would be really happy to answer, but unfortunately I can't. But let's keep our eyes and ears open for that.
Okay. And then maybe second tough one, the 8 million contingent liability that you have in your books. And I know that it's you are aiming to give some info during the Q3, but any news on this front?
Yeah, I think that we are coming back at the latest on October related to that one. So when we are coming with the Q3 earnings release, so that's the kind of the back side of the comms. So we come back as soon as we know. And we have something to inform. Anything, Robin, to add on that one?
No, I think you said on the books contingent, but it's actually off the books, so it's not in the balance sheet.
Yeah, yeah, yeah. Okay. Then maybe question about the larger German deal that you announced in 23. Can you give any color on these deliveries and possible split, you know, how those have been affecting now Q2 and should we expect still positive impact from here in H2?
We have been steadily delivering. So, of course, the the one part of the growth of that deal has been visible on the first half, but I mean, it's only the one part of the growth. So hopefully looking that we are going to be still having deliveries during the second half and even 25, but that's the status currently. Just to mention that it's only the one part of coming growth, because there's a growth from US, growth from APAC, and that was a European deal. But it's going according to the set plan, so no surprises on that one.
Okay. Maybe one technical question for Robin about tax rate. What should we expect in 2024 and going forward?
That's a good question. Basically, I'd say that we're doing some IP rearrangements within the group between legal entities. which will enable us to take use of all the costs across the company, also in taxation, if it makes sense. So in my view, in the next coming years, the kind of the group income tax rate should go slightly down. Maybe, I don't have exact number calculated, depends on also the roadmap that we have, but zero to two percent, zero to one and a half percent down would be my estimate at this time.
Okay, that's clear. Last one from me. Any news on the M&A front? So how does your pipeline look on that front?
I'm actively still working on it. There are still slight differences of the view when it comes to the valuation. So I think that still is a bit of an issue. So if we compare us to almost all the other players, so I think almost everybody is... reporting declined sales and quite low profitability or even break even or even negative EBIT and still thinking that the valuation should be the same. So I think that has been still a bit of a challenge, but we are working with Robin and with the team on that front as well. Anything to add Robin?
Okay. Thanks, Jouni and Robin. That's all from me. Thanks, Jouni.
The next question comes from Pia Rosklis-Heinzalmi from Carnegie Investment Bank. Please go ahead.
Hi, Jouni, and hi, Robin. Thank you for the presentation. A couple of questions still left for me. First of all, I'm going back to last year and the trouble or the standstill you experienced with these private equity-driven optician chains. I would like to understand this segment in the US. Does it consist of many? Do we talk about many private equity-driven optician chains or do we talk about a few? which is causing this trouble or caused the trouble for you with stalling sales.
Maybe I'll take that one. So in the US, it's not one. It's maybe definitely more than a few. I don't know. We only maybe four or five chains, basically.
All right. Four to five chains. All right. Thank you. Yeah. All right. Thanks. Then I have the questions regarding the clinical trial spending for Q3 and Q4. I think you answered that already. Good. I think that's actually all for me. Thank you.
Thank you, Pia.
The next question comes from Daniel Lepisto from Danske Bank. Please go ahead.
Hi, it's Daniel Lepisto from Danske Bank. I have just one question from my side. Thinking about the sort of proportion of recurring revenues you have in your business, meaning the probes, software, and the AI, so has this sort of a proportion
increased compared to maybe a year or two ago or have the sort of devices still on the stack of these recurring revenues thanks yeah i think the the the probes is of course the massive majority of the recurring revenues at this time that we have um it has been like going back years and years it kind of when we only had tonometers it was something that When I started nine years ago, it was like 23, 24% of the sales, and it kind of continued to grow roughly to take up 2% more every year. So it was about 24 to 26 to 28% of the total. All the way until today, the probes actually have been growing very strongly for years, also after we stopped reporting. I can't give you the exact number, how much the total share of the recurring is, but it continues to increase.
Okay, that's actually quite helpful. Thanks. That's all from my side.
The next question comes from Niko Ruokangas from SED. Please go ahead.
Hello, this is Nick Rangas again. I have one additional question related to Ventica write-down. So as you now write it down, so has there been running any costs related to that which should now release costs or does it affect the P&L side anyhow?
Some minor costs for maintaining the patents, for example. We will probably still continue. It's a valuable technology. Hopefully at one point we'll still find a new home for that. So it's not like we totally threw it to the garbage. So we will keep the patents alive still and see if we can find alternatives for the business to move forward somewhere else.
We still have a couple of extremely good clinical studies ongoing, which are going to report really good results. That's our view, but those are not generating too much cost. So we only help to provide the devices and that's it, but not having a P&L impact at all.
Okay, I understand. That's all from me.
Thank you. Hey, seems to be that we are done for today. Thank you for participation. Thank you for the great questions. And let's come back when we have a Q3 wrapped up. So thank you. Have a good early autumn.
Thank you.
Thank you. Bye.