Boule Diagnostics AB

Good morning, everybody, and welcome to the third quarter's earnings call for Bull Diagnostics. I'm Holger Lambert, CFO for Bull Diagnostics, and with me, I have our CEO, Torben Nielsen. After our presentation of the third quarter's earnings, we will open up for questions. Please also feel free to type questions into the chat field. With that, I'm leaving over to you, Torben.

Thank you, Volker. Good morning and a warm welcome to everybody who has decided to join this Q3 earnings call. We'll begin by taking a look at the Q3 highlights. Overall, it was a stable quarter in which we delivered slightly below last year. Sales was negatively impacted by lower instrument and consumable sales. Consumable sales was as expected, impacted by the transition to licensed manufacturing model in India. And we should expect to see this impact increase as we ramp up production in India for both consumables and in the future also instruments. OEM compensated partly for the lower sales and once again delivered a strong quarter. We delivered significant improvements in both operating profit and margin. And we begin to see the impact of all the initiatives we've taken to reduce cost and increase productivity. This quarter, we continued our extensive reorganization work, recognizing another 16 million in annual savings potential. Consequently, we incurred higher restructuring costs, which adversely impacted our cash flow. On the portfolio project front, our licensed instrument manufacturing side in India produced the first couple of instruments. And our team has been on site to validate the production line. We're on track to ramp up manufacturing in Q4 2024 as planned. As it relates to the BM900 project, the team is working hard to complete the BM950 for performance evaluation. which is scheduled to run in the first half of 2025. In Q3, we also reported two significant one-time costs related to the evolving market situation. We see a continued shift towards five-part technology in the market. And based on that analysis, we've made the decision to narrow the BM900 project scope to not include a premium three-part option, which was initially planned for. It is our assessment that our current BMA50 technology platform can meet the three-part demands in the market. This decision, together with the extensive delays that the project has suffered, have adversely impacted the valuation of the project, leading us to do an impairment and a one-off non-cash cost of 265 million Swedish kronos. The PM950 continues to play an important role in our portfolio strategy as we move forward. As it relates to Russia, we have continuously evaluated the geopolitical situation and have now concluded that to ensure the future sustainability of our business, we must divest our manufacturing plant in Russia. We have initiated the complex and lengthy process of divestiture in Russia, and consequently, we are reporting a write-down of assets in Russia to the tune of 27 million Swedish crowns. In summary, we reported Q3 sales of 130.4 million Swedish crowns, down 6.6%, where 4.6% is related to currency, leading to a decline of 2% organically. Adjusted gross profit improved by 6.1% to 61.3 million Swiss crowns, and adjusted gross margin improved to 47%, up from 41.4% as a consequence of favorable mix and efficiency gains. Adjusted EBIT significantly improved by 93.7% to reach 15.3 million as a result of the improved gross profit and lower operating expenses. And adjusted operating margin reached 11.8% up from 5.7%. Cash flow from operating activities was 5.2 million and available liquidity end of the quarter was 48 million set. If we look at overall sales year to date, we are flat. In more detail, we're declining 0.1% organically and currency was negative 1.6%. If we adjust for the license model impact in India, our year to date organic growth was slightly positive with approximately 1%. If we take a look at our sales growth by region in Q3, Asia and South America continue to be our weakest regions. In these two regions, we are continuously challenged by low-cost Chinese manufacture, a market that is gradually switching from three-part to five-part technology, and policies that are favoring local manufacturing. We did see growth in North America, Europe and Middle East. And if we look at how our business is constructed, our OEM and consumables revenue continue to outgrow our insurance revenue. Focusing in on our hematology business specifically, we did have a soft quarter. Sales declined by 17.7% for the quarter and year to date, we are 6% below last year. Instrument unit sales in Q3 totaled 716 units below last year by 29%, but this was largely driven by a strong comparison from a couple of one-off tender wins we had in North America and Latin America in Q3 of last year. Year-to-date instrument unit sales are 6% below last year. Our reagents and controls business is down 8% for the quarter and 5% year-to-date. The India license model impacted sales negatively approximately 1% year-to-date. And from Q4, we will begin switching our instrument sales in India to a license model, which will have a negative impact on our top line of estimated 30 million annually, but with a positive margin impact. On the OEM side, we see continued good performance. In Q3, sales grew 51%, and year-to-date, we are growing 17%, which is very encouraging. From Q1 2021 to present, OEM has grown 144%. We see future growth opportunity here, and our funnel continues to grow and mature.

Thank you Torben.