Boule Diagnostics AB (publ)

Good morning, everybody, and welcome to the fourth quarter's earnings call for Bull Diagnostics. I'm Holger Lembree, CFO for Bull Diagnostics. With me, I have our CEO, Torben Nielsen. And after our presentation, we will open up for questions. Please also feel free to write questions in the chat field. With that, I'm handing over to our CEO, Torben Nielsen. Thank you, Holger.

Good morning, everybody. The fourth quarter brought a challenging market environment. with currency headwinds from a weakened US dollar and lower instrument sales in India as a direct consequence of our planned transition to a licensed manufacturing model in India. At the same time, our OEM sales continue to perform steadily, providing stability and demonstrating the resilience of this part of the business. While sales performance reflects these external factors, I'm pleased with the sequential operational improvements we've made. From a profitability and cash perspective, there were several positive developments. Rossmargin improved year on year, supported by a more favorable product and geographical mix. We also delivered our third consecutive quarter of positive operating cash flow, which reflects improved operational discipline and working capital management. Finally, during the quarter, we inaugurated our new headquarters in Sweden, an important milestone that strengthens our operational platform and supports future growth. In summary, while Q4 had some short-term top-line pressure, we see progress in margins, operating cash flow, and strategic execution, positioning bull well going into the next period. Taking a closer look at the Q4 financials for the group, We reported Q4 sales of 120.2 million SEC down organically by 11.7%, primarily driven by lower instrument sales from the planned transition to licensed manufacturing in India and affected by a 4.3% unfavorable currency impact. Gross profit landed at 57.8 million SEC, down from 63.8 million due to lower sales and a weakened US dollar. Gross margin came in at 48.1%, an improvement of 3.5% over last year, driven by a more favorable mix. We reached 12.9 million SEC in adjusted EBIT and achieved positive operating cash flow of 5.5 million despite challenging collection, making Q4 the third consecutive quarter of positive operating cash flow. Available liquidity end of the quarter was 35 million SEC. Looking at the full year financials for the group, we reported sales of 489.7 million, down organically by 7.2%, primarily driven by lower instrument sales from the transition to licensed manufacturing and affected by a 5.1% unfavorable currency impact from the US dollar. Gross profit landed at 213.8 million SEC, down from 252.2 million. Gross margin came in at 43.7%, down 1.5% from last year. We reached 46.2 million SEC in adjusted EBIT and an operating cash flow of negative 0.3 million, which is a significant improvement from last year where we reported a negative operating cash flow of 33.7 million SEC. Please keep in mind that the closure of the BM 900 project in the first quarter cost us about 20 million SEC in Q1 and Q2 combined. Available liquidity end of the year was 35 million. As we have only recently begun reporting in two business segments, Bull Diagnostics and CDS OEM, let's make a quick introduction of each segment in turn, starting with our diagnostics business. We describe Bull Diagnostics as a global provider of diagnostic solutions focused on decentralized human and veterinary healthcare with a clear specialization in hematology. In this segment, our core customers are small to medium-sized laboratories, clinics, and remote healthcare settings, places where fast, reliable diagnostics close to the patients are essential. We operate through a strong global distribution network, which gives Boole broad geographical reach without relying on large direct sales footprint. This allows us to serve both developed and emerging markets very effectively. From a product perspective, Bool Diagnostics offers a complete hematology solution, instruments for both human and veterinary diagnostics, and a full range of reagents, calibrators, and block controls. Our integrated offering ensures consistent performance, regulatory compliance, and recurring revenue through consumables. Overall, Bull Diagnostics is positioned as a specialized, reliable partner in the decentralized healthcare supporting clinicians at veterinarians. Our diagnostics business is built on an RFID-protected razor blade model with approximately 60% recurring revenue from reagents, consumables, and service, providing strong visibility and margin stability. We operate in the decentralized human hematology, a market estimated at 8 billion sec, growing roughly 3%, and we operate in veterinary hematology, a 3 billion sec market growing faster at about 8%. During Q4, instrument unit sales declined, primarily due to the planned transition to licensed manufacturing in India, which expectedly affected both volume and top-line revenue. Reagent sales remained stable, reflecting the resilience of our install base and recurring revenue model. And service performance improved materially during the year, and in the fourth quarter, the service business turned profitable for the first time, reflecting improved efficiency, scale, and cost discipline. In Q4, Bull was selected as the number one of three preferred hematology providers in a nationwide tender in Italy, reinforcing our product quality and continued trust with large instance. institutional customers. In the quarter, we saw declines across most regions, reflecting a more challenging operating environment, including longer delivery times and delayed customer payments, which created near-term headwinds. Western Europe and the Middle East were notable exceptions, delivering year-over-year growth supported by stronger regional execution and a more resilient demand. In the US, we adjusted our go-to-market approach and transitioned to a more direct selling model, which is showing early positive momentum and encouraging customer engagement. To summarize Q4 in our diagnostics business, sales declined with 16.5% explained by strong comparative figures due to a combination of strong Q4 last year, a year of record instrument unit sales, and the planned transition to instrument license manufacturing in India. Organic growth was minus 14%, and currency was negative 3%. Gross margin improved because of favorable product mix, with higher sales of reagents and license fees relative to instruments. Operating expense was lower due to restructuring implemented in the last 12 months, and currency was negatively affecting the margin due to a lower US dollar. In addition to our branded diagnostics offering, Bull operates a strong OEM and contract manufacturing business under CDS, Clinical Diagnostic Solutions. CDS is a contract development and manufacturing organization focused on OEM reagents, calibrators, and blood controls for leading in vitro diagnostic companies. We support partners across the full lifecycle, from development to manufacturing, including both proprietary and private label solutions. A key strength is our deep expertise in block controls, particularly products with long shelf life and high stability, which are critical for global distribution. Operationally, we have the flexibility to run small, medium, and large production batches while maintaining consistently high quality and regulatory standards. Our OEM business is built on long-term partnerships, serving both large multinational IVD companies and innovative startups, providing a stable revenue base and strong customer retention. Overall, the OEM business complements Bull Diagnostics business by leveraging our technical know-how, manufacturing scale, and quality systems to serve the broader IVD industry. We operate in the OEM reagent market, which is estimated at around 350 billion sec, growing at around 6% to 8% annually. Our subject matter expertise allows us to play in a sizable part of that market, where our capabilities are a strong fit. In addition, we address the hematology block controls market, estimated at 1.9 billion sec and growing roughly at 3% to 5%. The business is characterized by long-term partnerships, typically structured around multi-year contracts. These partnerships provide strong visibility and have supported consistent sequential growth over recent periods. Our 2025 OEM business restated for restructuring and currency effects performed slightly better than 2024. An important feature of the OEM model is that new projects have a relatively long incubation period. Programs require development, validation, and regulatory approval before entering production, which means revenue builds gradually. As a result, growth in the OEM business tend to follow a stair-step pattern, with periods of incubation followed by clear step-ups in revenue as new projects are commercialized. While this requires patience upfront, it supports doable, predictable growth and attractive profitability over time. Recently, we extended and expanded our supply agreement with a leading global IVD player. This strengthens our long-term partnership, increases volume visibility, and reinforces Bull's position as a trusted OEM supplier. With an established pipeline, we expect to begin commercializing new OEM projects in 2026, followed by the launch of new competitive block control products in 2027. If we double click on the Q4 performance for the OEM business, sales declined in the quarter by 15%, but this was primarily due to significant currency headwinds from US dollar and timing of orders. Organic growth was negative 6%. Gross margin improved for the quarter from 53.3% up from 47% last year. Operating margin declined as we purposely increased our operating expenses by 4.6 million SEC. This is to be seen as an investment into commercializing new OEM products, building a new block control portfolio, and investments in our sales organization and project funnel build to help fuel future growth.

With that, I'll hand it over to you, Holger, to take a closer look at the financials. Thank you, Torben. Starting with a financial summary for the quarter, organic sales growth was negative in the quarter with 11.7% as a result of the lower instrument sales and partly driven by the impact of a conversion to licensed business in India. Stronger SEC against mainly US dollars impacted the sales with minus 4.3%. Our cost of sold goods decreased as a result of lower sales, a more favorable mix with conversion to license factoring in India, which in total improved our gross margin to 48.1% from 44.6% last year. Gross margin was negatively impacted from the stronger SEC against US dollars as we run a relatively high cost in SEC for the diagnostics segment given manufacturing in Sweden. Given that about 75% of our sales is in US dollars, the lower US dollars will unfortunately continue to be a headwind to our gross margin as the currency rate stands now in the coming quarters. Operating expenses decreased by 9% from last year if we include the restructuring cost we had in last year. If you also include the spend we had for the BM950 project platform, last year in Q4, the total operating spend decreased to 36%. If you're looking at our current quarterly run rate for operating expenses, it's about 45 million SEK per quarter, as you see on the table. In the last 18 months, we have done a lot of changes to bring down the spend and expenses, but we have more to do to further reduce our cost base. And one example is the recent site consolidation done in Spånga to right-size our facilities for the current organizations we have in Sweden. Operating profit was lower than last year, mainly as a result of the lower gross profit and the fact that we now expense R&D as we go and no longer are capitalizing any R&D. Operational cash flow was positive for the quarter. If you're taking a closer look to our operating cash flow, also including investments in fixed assets and intangible assets, we had ambition for the year to bring it back to a positive level, which we have now seen for the last three quarters. In the fourth quarter, we were able to bring down our inventory with 8 million SEC. However, collection remains a challenge from some parts of the world, and that is holding back the cash flow with about 6 million in the quarter. We do not see any risk for significant collection losses and bad debt, and we have partly also collected some of the due invoices now in the beginning of 2026. Taking a look on the liquidity and credit facilities, We ended the quarter with a cash position of 20 million SEK and an unused credit facility of 15 million SEK. In total, liquidity decreased slightly compared to last quarter, and that was an effect of amortization of debt in the quarter. With that, I'm handing over to you, Torben. Thanks, Holger.

So in recap, in 2025, we moved decisively from strategy to execution. Compared to where we started the year, Bool today is a leaner, more focused organization with a stronger growth platform and a more coherent portfolio. Starting with margins, we delivered concrete structural improvements. Through manufacturing initiatives, we reduced cogs and improved operational efficiency. At the same time, we lowered overall operating spend by 36% year over year, reflecting the disciplined cost control and organizational simplification. A key milestone was the consolidation of our Swedish operations from two sites into one. This has reduced complexity, improved efficiency, and lowered our fixed cost base. As a result, our margin improvements are not temporary. It is structural and repeatable. On growth, we strengthened our commercial foundation. During the year, we established new sales offices in the Philippines and Indonesia, expanding our local presence in attractive growth markets. We launched a new brand identity and strengthened our digital presence. This has translated into increased digital marketing activity and improved lead generation, supporting a more scalable and cost-effective growth model going forward. Compared to last year, we now have both a broader geographical reach and a stronger demand generation capability. Within our portfolio, we made tangible progress towards a more diverse and growth-oriented offering. We advanced the preparation for a new veterinary hematology instrument, which is on track for global launch in mid-2026. In addition, we expanded our footprint in the clinical chemistry through new distribution in the U.S., And we defined and launched a new block controls portfolio pipeline. Together, these actions strengthen our core, expand our addressable market, and improve long-term portfolio resilience. 2025 has been a year of significant change and improvement. And I'd like to take this opportunity to thank the entire Bull organization for all their hard work and dedication. This has truly been a team effort. Finally, and before we open up for questions, I'd like to take this opportunity to extend a big thank you to our current CFO, Holger Limbreer, who will leave Boole at the end of the month for all his valuable contributions. Holger has played an instrumental role in the significant restructure Boole has gone through in the past 18 months. And at the same time, I'm excited to introduce Mikael Winklerfeld, who will step in as CFO from today. Mikael, would you like to introduce yourself, please?

Yes, thank you. Let me first start by also saying thank you, Holger, for your great work, as Torben pointed out, during these years. Coming in, I see a very strong finance organization with very solid processes, and we're having a very smooth transition, I must say. Thank you also, Torben. for your confidence in me and for the onboarding, which is ongoing. Just as a brief introduction to who I am, I have long international experience from business in various finance roles in leading companies. I have now 10 plus years specifically in the life science sector and with medical device. And since 2019, I've worked as a CFO in Sweden for life science companies. Coming into Bull at this point, I'm very happy to join the company. I think it's been clear from both the comments of Torben and Holger that there is a very challenging environment for the company. But there's also quite clear that there are a lot of opportunities out there going forward. And just after a bit more than a week, it's also obvious to me that this is a very capable organization, a very now much leaner organization, and one that I think will be able to capture these opportunities. Thank you.

Thanks, Mikael.

And with that, Håkon, let's open up for questions.

Yes.

So please, if you have any questions, raise your hand and I will give the word.

It is also okay to write a question in the chat field if you prefer. It looks like we don't have any questions online for today.

So with that, we thank you everybody for listening in to our fourth quarter earnings release. Thank you everybody. Thank you.