Boule Diagnostics AB (publ)

Good morning everybody and welcome to the first quarter's earnings call for Bool Diagnostics. I'm Holger Lembert, CFO for Bool since the last three months. With me I have Torben Nielsen, our new CEO for Bool Diagnostics, that will present together with me the first quarter's earnings. After the presentation we will open up for questions, but please also feel free to write questions in the chat field. With that, I'm leaving over to you Torben. Thank

you Holger, and good morning everyone. I'm excited about this opportunity. I'm excited about being able to speak to you today. I joined Bool on April 16th and I bring with me more than 20 years of commercial experience in the medtech industry, where I've held leadership roles of increasing responsibility, complexity and geographic span. Most of my leadership experience I've gained within the Daner Corporation, an organization that is very committed to building a culture of continuous improvement and operational excellence, and I intend to bring these values and skill set with me into my new role as CEO here at Bool Diagnostics. I would like to take this opportunity to thank the former CEO Jesper Sødergren for all the work that he's done bringing Bool to where it is today, and for his active support in the transition process. Bool Diagnostics is a great company with a great team and a strong following. I believe there is significant opportunity to create value for all stakeholders. I understand the work we have ahead and I'm energized about this opportunity. I believe in this company and I've voted with my feet. Much more to come in the following quarters as I complete my immersion and form the direction of the company. Now let's take a look at the highlights for Q1. Despite challenging market conditions with uncertainties and geographical disturbance in some of our key markets, we had a good start to the year. Organic growth was .4% and I'm pleased that we can report improved profitability, growth at the gross profit level as well as for EBIT. We've extended our successful partnership with Fuji with five more European countries and we are seeing positive results. The supply chain situation is stable and we closely monitor the situation in the Middle East to mitigate any future risk. We continue to focus on improving our profitability and efficiency across all areas of our operation. If we take a little closer look at the financials, net revenue totaled 147.8 million, up .3% with organic growth of 5.4%. Gross profit improved 3% to 68.3 million, gross margin was flat compared to last year at 46.2%, with lower margins and continued deliveries to our strategic customer in India. Operating expenses were in line with last year when including a one-time redundancy cost of 3.7 million Swedish crowns related to the CEO change. EBIT was 15.4 million, an improvement of 27%. Operating margin improved by 2% to 10.5%. Cash flow from operating activities improved significantly to 12 million and liquidity strengthened in the quarter. Looking at sales from a longer perspective, we continue to see sequential growth in sales with Q1 up .3% and reaching an all-time high revenue performance. Growth in Q1 were supported by a large one-time unit order to India with deliveries to be completed early Q2. From a regional perspective, Europe and Asia delivered strong growth. US and Middle East were stable, while Africa and Latin America declined. In Africa, we are challenged with payment restrictions and weak currencies, and in Latin America, the demand for 3-part technology is declining in favor of 5-part technology. If we look at sales by product area, two-thirds of our revenue comes from consumables, including OEM and others, which is in line with our business model. Double-clicking on our instrument sales, Q1 performance was strong. We sold 1,377 units, supported by a large order from India and continued growth in our vet business in Europe. Consumables slightly declined -over-quarter as India switched to a reagent-licensed business model. On the OEM side, we saw a small decline in the first quarter of the year, primarily driven by some customers reducing their inventory level. In general, our OEM business is very stable. The sales funnel for new projects continues to grow and mature, creating significant growth opportunities going forward. Turning to our next-generation 5-part hematology system for humans, we continue to make progress on the system. Based on our current timeline, we expect that the instrument will be submitted for validation during the second half of 2024. FDA has requested a larger test sample than initially planned for, and we now expect an FDA approval and CE marking to be completed during the second half of 2025. With this timeline, we expect the first sales from our new platform BM900 to be reported in the beginning of 2026. With that update, I hand it over to you, Holger, to walk us through the financials.

Thank you, Torben. Starting with the financial summary, we had a good organic sales growth for the quarter of 5.4%. The cost of goods sold increased in line with the sales, which made the gross margin to stay stable at 46.2%. Operating expenses remained in level with last year, and other operating expenses improved due to less currency impact than last year. Altogether, it resulted in a strong increase of operating profit for the quarter, and if we adjusted for the one-time redundancy cost for the previous CEO, operating margin was 12.9%. Net financial items increased slightly in the quarter -over-year due to a bit higher interest rates than last year. Earnings per share increased with 25% to 25 öre compared to 20 öre last year. The cash flow from operating activities improved up to .5% compared to minus 9% last year. If we're looking at the operating margin over the longer trend, we see that the operating margin continued to improve -over-quarter for the last eight consecutive quarters. Adjusted for the one-time cost for the CEO redundancy cost, operating margin was the highest for us since the pandemic period. If we're looking then on the operating profit in terms of value, we reported out 15.4%, adjusted for the one-time cost it was 19.1%, giving us a rolling 12% profit of .5% compared to .7% last year, which is an increase of 38%. If we're looking on the cost as a breakdown of percentage compared to sales, cost of goods remained at 53.4%. In the quarter, we continued to deliver on the large order to India and this put pressure on the margin with about .9% points. So the margin that was kept flat and the dilution was offset by increased efficiency gains in the production as well as high capacity utilizations in the quarter. The selling expenses was up mainly due to salary increases and FX conversion from US dollars to SEC. Administrative expenses was up due to the redundancy cost for the previous CEO. R&D expenses was down in percentage of sales, whereof our quality expenses decreased with 42% in the quarter. Most of our R&D work is currently done on the BM 900 project and those costs are capitalized. In operational expenses, if we adjust for the one-time cost, our operational expenses was decreasing with 7% compared to last year's first quarter. Our operating income and expenses supported the margin of .9% due to less headwind from FX. Moving over to cash flow. The cash flow developed in the quarter. We increased inventory 3.9 million and that is mainly due to some buildup from low level last year to be able to deliver on the large order for India. We also had an increase in operating receivables mainly related to accounts receivables, which is the backside of having growth of sales. The adjustments of non-cash items mainly relates to depreciations and currency impact. Altogether, we reached a cash flow from operating activities of 12.5 compared to minus 9 last year. It's a good improvement, but we still have more work to do and continue to work on our working capital levels. If you're looking on the chart to the right, we see a continuous trend here of positive development for the cash flow. It's a result of both improved profitability, but also good work that has been done on the working capital side. Moving over to liquidity. We ended the quarter with a solid cash position of 41 million SEK. If including the additional untapped credit facilities, the available liquidity was 100 million by end of the quarter and the net cash to EBIT was 0.2. With this liquidity situation, we confirm that we have the financing required for completing our ongoing development of a platform BM900. With that, I'm leaving back to you Torben for final conclusions.

Thanks Holger. So, concluding on the first quarter, I think it's fair to say that Q1 2024 marked a good beginning to the year. Our priorities are clear. We need to bring the BM950 to the market. We need to continue to grow our vet business. We need to invest in future OEM growth. We need to continue to optimize working capital and efficiency in production. That concluded our formal presentation and we will now

open up for questions. We have one question coming in from Sten. Please, Sten, you can unmute

yourself.

Great. Thank you. Sten Gussarsson from EBIT. Sten, can you hear us? Yes, I can hear you. I can hear you. I have unmuted.

Can

you hear me? Now we can hear you, Sten. Excellent. Okay, great. So, a few questions. First of all, with regards to the order to India, how much of the shipments in this quarter was related to that order and how much is left to be delivered? I think you had a bit of shipments also in Q4 last year. That would be my first question.

So, thank you for your questions, Sten. If we're taking a larger order to India, we delivered the majority of it in the first quarter this year. We had, let's say, 20-ish percent in Q4 and 20 percent probably remaining to be delivered in the second quarter. And then about 60 percent was delivered in the first quarter.

Okay, thank you. And then when it comes to the install base, I'm trying to understand what has happened from Q4. It looks like you're, I don't know if you have made any adjustments or anything because you had 31,700 systems installed at the end of Q4. And now you have 30,314, but you delivered a very high number in the quarter. So, you must have deleted something like 2,700. Is that correct? But we deleted 2,700. From the install base. I mean, how do you get to that number, the 30,314?

Given that it's hard to track exactly how the install base is situated, we have an estimation of the lifetime of the product to be out in the field between seven and eight years. And then we also, of course, adjusting the total volume of installed instruments on the market. I think that's related to

the

adjustment you see.

Yep.

Final question then is on this delayed launch, how much do you expect to spend on this additional tests

you need to do? The

major impact of increased sample tests that is required by FDA is mainly impacting the timeline of a project as such. Because we need to have a bigger sample than we initially had in the plan. There is, of course, also related a little bit of cost to it, but it's not, I would say, a significant impact on what we have assumed to be the cost or the spend for the project.

So when do you expect the capitalization to start to come down again?

As we said when we released Q4, we expected the investments for Q24 to be about in line with Q23, given that there is a requirement for a little bit of additional studies. So the cost might be a little bit higher than compared to Q23 just by mathematically. But when we're coming into 2025, the spend will, of course, come down

without

giving you specific numbers, but

for sure. Sure. OK, excellent. Thank you. Thank you, Stan. Any other questions on the line? We have a question from Christian Lieb. Please, Christian, you can

go ahead and unmute yourself. Yes, good morning.

Thank you for taking my questions. I have one, please. You mentioned that increased efficiency in production supported the gross margin to improve. In what product area did you see the most significant impact?

I would say it's in two things. We have in general increased output per headcount in the manufacturing. There is also, of course, work that has been done on the material side, but it's also so that we have been running the factory on a very high capacity utilization. And that by overall also taking down the fixed cost, of course, for a per instrument.

So it's a combination. OK, thank you very much. Any additional questions?

That

we are thanking everybody for

calling in today and for questions and looking forward to continuing discussions going forward. Thank you very much.