Boule Diagnostics AB

Good morning and welcome to our Q2 2026 earnings calls. My name is Michael Avinklefelt. I'm the CFO of Bull Diagnostics. And with me today, I have our new CEO, Johan Folkkunger, who joins us for his first investor call. We will be recording this session and after the formal presentation, we will open up for questions on the line and in the chat. With that, I hand it over to you, Johan.

Thank you, Michael. So starting my new position on June 22nd, I have now been with the company for three weeks. I've spent this time familiarizing with the business and the organization to define priorities going forward. Despite the short time in the company, I'm impressed by the competence and commitment in the organization. There is a strong pride and engagement to continue the transformation to serve our markets and strengthen our business. In the near term, I will continue familiarising myself with the company and look forward to working together with the board of directors, management and employees to drive the transformation journey the company is going through. So let's look back at the second quarter, and I will conclude it has been a quarter characterised by a challenging market environment and geopolitical disruptions. And as we operate on a global market, this has clearly affected us. Sales so far in the year have decreased, much related to exchange rate fluctuations representing a significant headwind, but adding to that also a moderate underlying organic decline where the order intake for both instruments and consumables decreased compared to previous year. This is mainly due to the geopolitical tensions in the Middle East, including disruptions to shipping related to the situation in the Strait of Hormuz, but also related to limited access to US dollars for several key customers. Given these challenges, it is encouraging to see that our OEM sales after week first quarter is recovering with organic growth and improved profitability compared to the same period last year. at the same time as Vital Scientific US made a positive contribution to the quarter's overall result. We also see an improved overall gross margin of 2.2 percentage points compared to the previous year, partly due to an increased share of OEM sales. It is also gratifying to see that sales of instruments in the veterinary segment increased by 35% compared to the same period last year. During the next six months, we expect a number of procurements and this combined with lower inventory levels at several important distributors makes us look forward to the second year with confidence. Operational aspects of the quarter We strengthened our operational capability by expanding our commercial presence with a new regional sales manager in Cameroon to accelerate growth in French-speaking West Africa. We have also streamlined our direct service support organization in the US in both field and back office functions and established a dedicated LATAM task force to improve customer support and increase our ability to quickly respond to customer needs across the region. Furthermore, during the quarter, we established separate operations functions for CDS, our OEM business, and diagnostics, which creates fundaments for a strengthened focus in each segment. If we look at the regulatory aspects, we conducted three successful audits by BSI and FDA in the first quarter and in the second quarter we completed a fourth regulatory audit conducted by the Korean authorities without any remarks. The continued positive outcome confirms the strengths of our quality management systems The efficiency of our compliance process and the high and consistent quality of our manufacturing operations. So let me move out, move over to the Q2 financials for the group. Group sales amounted to 112 million SEC, compared with 129 million in the same period. A decline by 13%, primarily driven by negative currency effects of 8%, and a moderate decline in organic growth due to the reasons mentioned earlier. Gross profit amounted to 45.9 million SEK, corresponding to a gross margin of 40.9%, compared to 38.7% last year, which means an improvement of 2.2 percentage points. The improvement is mainly reflected in a more favourable sales mix, where an increased share of OEM sales contributed positively to the gross margin. Adjusted EBIT for the quarter was 3.3 million compared with 4.4 million SEC for the same period last year, and the result was impacted by weaker sales in diagnostics, which makes it hard to absorb the operational expenses. This is, of course, not satisfactory, and we will continue to work focused on increasing profitability going forward. Operating cash flow amounted to minus 1.5 million SEC compared with 2.9 million SEC in the same period previous year. Michael will speak further on this topic later on in this presentation. Available liquidity at the end of the quarter amounted to 26.2 million SEC. I will now move over to give a brief on the diagnostics business for the second quarter. Sales declined by 17.9%, as I mentioned earlier, much related to recurrency, headwind and market turbulence. In addition, the corresponding period last year included an extraordinary large order from India. The currency impact for the diagnostic business was 7% and the organic growth minus 10.8%. Reported revenue was 80.4 million compared to 97.9 million in the same period last year. While gross margin improved due to a higher share of reagent sales, this margin was also impacted by the negative currency effect. Adjusted operating margin in diagnostics was negative, affecting the overall adjusted EBIT as mentioned in the previous slide. Moving over to our OEM business. As stated earlier, it's encouraging to see that the CDS slash OEM business grew with 7.6% organically. This growth was, however, counter-forced by a currency impact of 9.5%, resulting in sales declining with 1.9%. Gross margin increased from 47.5% to 50%, primarily caused by product mix. Operating expenses was reduced by 48%, primarily due to lower project costs than in the same period last year. And looking at adjusted operating margin, that one doubled from 15 to 32%, which is a very nice development. So an overall good quarter for OEM business with profitable organic growth. With that, I hand over to you, Michael, to take us through the financial summary.

Thank you, Johan. Looking at the financial summary, as Johan outlined, sales decreased with 13% in the quarter. And as we discussed before, this was mostly due to currency effect, but also due to negative organic growth in the diagnostics segment. The reasons for that Johan outlined were mainly the geopolitical turbulence that we saw in the world and also that a lot of our customers, due to this geopolitical turbulence, they have low access to hard currency. The gross margin increased with more than two percentage points. This is mainly due to a mixed effect with a higher share of reagents and OEM sales. But let me also point out that on the gross margin, there is also a currency effect. where a strong Swedish krona and a weak US dollar put downward pressure on gross margin. So it's very gratifying to see that we actually, despite that currency headwind, that we managed to increase gross margin. Operating expenses were 5% lower than last year, which is a reflection of the cost cuts that have been acted. Strict management of costs continues to be an area of focus for us. Even though the operating expenses were reduced, the weak diagnostic sales in the quarter pushed down adjusted EBIT to 3.3%. Operating cash flow was negative 1.5 million in the quarter. Receivables increased in the second quarter, partly due to the difficulty for some of our customers to gain access to hard currency, as I previously mentioned. Inventory also increased as we built up buffer stock for the close of production in July. So a large part of that inventory increase was also in finished goods. In the quarter, we also had high interest cost, and that was a strong driver for the negative cash flow. If we then look specifically at the operating cash flow, we can see the trend. As we have pointed out several times before, the operating cash flow is something on which we have strong focus. As mentioned on the previous slide, operating cash flow was negative in Q2, breaking the positive trend that we have achieved during the four previous quarters. We will, of course, work very hard to get back to that positive trend. Moving over to liquidity. Liquidity continues to be hard pressed and is also, of course, an area of focus for us. We ended the quarter with a cash position of 20 million kronor and unused credit facilities of 6 million. In total, liquidity decreased slightly from last quarter as we continue to amortize on our debt. With that, I'm leaving back to you, Johan.

Thank you very much, Michael. From this, I think we open up for any potential questions from the audience.

No questions. No one in the chat.

OK. Well, then I think it remains to wish you all a very nice summer and wish you welcome back to our Q3 report in October. Thank you very much. Thank you.