Revenio Group Oyj

Good afternoon and welcome to revenue group Q3 earnings call. My name is Jouni Toijala and I'm the group CEO and we have here as well Robin Pulkkinen, our CFO. Today I'm going to start by going through the highlights for the Q3. So a bit of a numbers, then highlights from the business and products. Then Robin is going to go through in more detail the financials and then finish up with the shareholders and reiterate the financial guidance. So let's jump to the Q3. So a good quarter in terms of the organic sales growth for us. Net sales, 23.9 million, an increase of 8.9% from the last year, which was 22 million. And it should be noted that we got quite a lot of currency headwinds. from the US dollar-euro exchange rate. So if you look at the growth from the currency adjusted point of view, so July-September Q3 growth was actually 15.1%. Operating profit, 23% from the net sales, so 5.5 million down from 6 million last year. And here perhaps a couple of comments related to profitability. So we got the headwind, FX headwind. roughly 0.9 million euros. So roughly a bit more than 50% actually goes through the EBIT line as well. And then this was really good quarter for us what comes to the launching the new product, so we have a new tonometer. Now, AutST 500, then we have the Tonovet Pro, also a new tonometer, so we have been spending quite a lot of additional marketing money for the global launches for these products. But Robin is going to cover in more detail the cost side in his presentation. Net cash flow from operations, 2.9 million down from 5.6. But if we then look the whole January to September highlights from the number perspective, so extremely strong cash flow. If you look at the first nine quarters, so 14.1 million up from 5.6. And if you look at the sales growth for the first nine months, so we are currently on 8.2%. And if looking at it from the guidance perspective, so currency adjusted growth on the sales side is 8.9%. But if jumping then next to the business highlights for the Q3 2024, so extremely good quarter from us, from the product perspective, from regulatory approval perspective, and couple of comments related to that one. So if looking at the sales in general, so the sales of Fundus imaging devices saw double-digit growth year on year. And again, the main growth products were ADON family and then also the DRS+. Then from the tonometer side, a good quarter as well. iCare Home again was actually one of the highest growing device from the tonometer and also from the imaging product portfolio point of view. I see 200 growing well, and then also the newly launched Tonovet Pro getting extremely good traction. And of course, probes have been showing particularly strong performance in terms of the growth as well. Then positive news from China. So we got the approval for ADON in China. Also the IC200 quick measure tonometer feature, of course, together with the hardware was then approved and got the marketing authorization in China. So actually really good news. So these are tending to take time. So as an example, in the Aden case, we started the project already almost three years ago, and these are really taking the time. So now we have a really good product portfolio available in China. So that's DRS+, that's ADON+, then the tonometers as well. So that's extremely good news for the future. Then news also during the Q3 from the AI perspective. So we acquired a Dutch company called Tirona. Retina, and the logic there was to get the assets on the AI platform. So we have been working with Tirona for a long time in the context of Retina screening, so meaning together with the Illum and DRS+. What this enables for us is that now we own the assets, we have a freedom to decide the business model, have a better margin, And in this context, nothing is going to change. So we are going to work with other AI players, plus we are going to guarantee that the support from the Tirona retina is going to continue also for other players like TopCon, like Canon, et cetera, with whom they are working. So there's no plan to change this one at all. Then in addition to having and using Tiruna Retina on a clinical decision support perspective. The other logic for the acquisition was that increasingly AI is increasingly also gaining importance inside the device and in the different functions of the device. So now we have skills and capabilities also in-house for that one and for the future. development for the devices. Then, not so good news from the CMS perspective, i.e. the reimbursement code for the hardware for the Home 2. So, the decision was not to grant the durable medical equipment reimbursement code for iCare Home 2, and the reason was that you already have a good set of the codes which you are able to use on your doctors are able to use. So the codes currently are code for training, then also code for then renting the device out and also code for telehealth and remote monitoring and the analysis of the data. So that was a logic. So what does that mean for us? So we are going to continue the work around those codes. and still wanting to remind everybody that if you look to Q3, so Home 2 was the highest growing product segment for us. Then we launched also during the Q3 iCarest 500 slit lamp mounted tonometer, and this is actually the continuation of of the things what we said, 2021 April in our CMD. And I'm sure somebody remembers from the call audience that we said that the goal in a long run on tonometry side for us is to make rebound grip-on technology as a golden standard for tonometry, which is currently the Goldman tonometer, which is more than 70 years old. So this is now also partly answered for that one. What we are going to gain from the slit-lamp-mounted tonometer is that we haven't had a fully-blown product portfolio for all patient workflows. So the patients which are going to go through the slit-lamp investigation, so mainly Goldman tonometers, meter have been used in order to measure the IOP. So now we have a product for that one. It's fully complementing our other rebound tonometers, IC100 and IC200 and HOME. Then another important part is that if we think the Goldman as a method of measuring the IOP, so it's not fully reliable so if you measure the patient at the clinic with the Goldman tonometer and then as an example with eye care home two at home so you get non-reliable measurements in most of the cases or at least not repeatable if you use the Goldman so now the we have clinical proof that actually the whole platform, whether you measure the IOP with IC100, IC200, HOME2, or with ST500, so they are fully repeatable, they are fully comparable, so it's going to improve then the patient care from that perspective. So really good. And then perhaps thirdly, I have to mention that this is not only the ST500, so what is inside the device, it's totally new. So we have a totally new hardware platform. inside the device which we are going to use in the forthcoming new tonometers in years to come so very significant product for us if we think it from the long-term perspective then we got also the timing timing right, so product is good to go, so we have orders already in, we are able to produce it, we are able to ship, and then we have, same time we have FDA clearance, plus we have the CE marked for the device, so from that perspective, really good news and good to go. So, let's switch the gears and move to the financial side. So, over to you, Robi.

Thanks, Jooni. So, going through a bit more in detail. Like Jooni mentioned, the sales were growing organically quite well. We're quite actually satisfied with the top line. Unfortunately, things that we couldn't control were the FX side, which did hit us quite hard during the quarter. It kind of shows on the top line, so the FX adjusted growth was more than 6% more than the reported growth. And due to our cost structure, a lot of that FX hits the gross margin line, which is the main driver for the gross margin to drop below 70 in the quarter, and also to the EBITDA and EBIT line. We did have some one-off costs during the quarter like we did in the comparable quarter, but they're quite minor. So you do have the operating profit here and the adjusted operating profit, but there's not a huge difference between those lines, but it's showed separately here as there were certain one-off costs which are adjusted. So year to date, 73 million in sales, and that growth is 8.2, FX adjusted 8.9. Showing a bit more history. So on the top line, the quarterly fluctuations. Looking at the last quarter, we would have been probably pretty close to the trend line without the FX impact. But seems like the FX has come down a lot since the end of the quarter. So end of September peaked pretty high. Now it's down multiple percentages again. So interesting to see how it plays out now during Q4 and what the impact will be. But if it goes down, it should have a positive impact on the Q4 numbers. So profitability slightly down. So the one big driver is the FX, which we've been talking here. But also we did have direct costs also that increased You only mentioned the marketing costs, so those together with the personal costs kind of accounted to roughly 85% of the cost increase year over year. And on the personal side, you might remember from From last year, we had very minimal bonus payouts, so the accrual levels are higher now for this year as we are within the guidance and holding to the guidance for the whole year. So that's one of the major part of the cost increase together with the marketing, which was actually quite significant. The clinical trials, we didn't have a notable impact on during the third quarter, we're still Looking and working with FDA to understand the scope of the trials and hopefully those will start to run again during this quarter, so Q4. But they haven't yet started, so I guess that's still to be worked out how that's going to play. So year-to-date net cash flow, it's actually on a record level. So looking at, it's actually quite interesting when you look at the net profit for the first nine months. We're actually exact same net profit than last year during the first nine months. But our cash flow from operations is up 150%. That improvement is mostly coming from working capital, so more effective management of the working capital and also a little bit lower paid taxes. But the working capital, basically, AR, AP, inventory is the major player there. And then, of course, the beginning of the year bonus payments were pretty low, which is one reason for the first quarter to be quite good. Balance sheet continues to be strong and get stronger. So the total balance sheet value went up slightly from 128 to 132 year over year. On the asset side, the Therano acquisition shows on the flip side of the coin, the cash is down slightly, equity up also, and the short and long-term liability is slightly down. So typically looking at the net gearing for our company, the dividend payouts bring up the number. So during the second quarter and then third, fourth and first quarter, we build up the cash reserves. Now in Q3, we did pay out for the Tirona, but basically looking into Q4, we would be pretty fair to expect that line to turn down again for the next report. On the shareholder side, there's not many changes. We have 23,324 shareholders at the end of the quarter. The Finnish ownership actually went down roughly from 49% to 47.7%. And on the top owner list, there's not really any changes. So the number eight has dropped to number 11, but that's like the only change in the top 10 list. And then the country split here, so Denmark equals almost fully demand, and then we have Sweden over 10%, US 8.3%, and France 4.3% ownership. In the guidance, revenue groups exchange rate adjusted net sales are estimated to grow five to 10% from the previous year, and profitability excluding non-recurring items is estimated to remain at a good level. So basically, When you do the math, we expect to celebrate our first 100 million year sometime during this quarter now. So hopefully it's sooner than later. But to keep the guidance means that we have to go over 100 million in sales this Q4.

Excellent. Thank you, Robin. It's time for the questions, please.