CellaVision AB (publ)

Thank you very much and thank you everybody for dialing in to our Q4 report 2024. I have Magnus Blikst next to me, our CFO, and I'm pleased to present and we're pleased to answer any questions you may have after the report. So the report that we have announced today, we have entirely mixed regional performance, sales peaking in APAC. And I'm pleased to go through the results, both top line, our P&L, regional split, product categories, and a little bit around the strategic situation. So the quarter in brief, as I said, we highlighted the report mixed regional performance in the quarter. And that is certainly seen by swings negatively in Americas, pretty modest in Europe, EMEA, and all time high in APAC. So a lot of variability on the top line. So we already continue or we already reported in Q3 the situation in Americas, where we, given the presidential election, we saw hesitation to place orders. And that is our, that is continued to be seen. However, the market is changing, but we do have, I'll get more into it, but we have experienced a softer quarter also compared with the all time high we reported in Q4 2024. Decline in EMEA, but here we had an uptake in Q3, as we noticed. So here we did have a higher Q3 at the expense of a little bit lower revenue here in Q4. So that was just as expected. Before we go into the details, then let me comment on the progress of our strategic direction. So in 2024, in February, beginning of February, we announced our 15 year strategic alliance agreement with Sysmex Corporation. And we have really been working hard on both aligning in our innovation agenda and not the least, getting much closer on how we commercialize together in the field, how we our people assist Sysmex in selling the digital cell morphology solutions. As part of their total hematology offerings. And then we are also becoming much closer in how we launch products together as this is becoming more relevant, given our sort of substantial investments in innovation. So I'm proud to say that we've made a lot of progress. We've had essentially double digit growth with Sysmex Corporation. So the direction is right for Cellivision. We've made progress throughout the year on bone marrow. We are currently running three different trials that are part of the portfolio data that we need in order to obtain CMART for our bone marrow application that will run on the DC1. So that program is progressing. We have had some regulatory considerations. So we've previously reported that we expected CMART in 2025. And given the regulatory and the time for the regulatory, you can say, review of our notified body, then we expect to obtain the CMART at the end of the year 2025. Assuming that the trial and the data are, of course, positive. Also, I want to emphasize that we are investing a lot in the company as if you've been following the company for a while, we've been investing a lot in our innovation agenda. Not the least. The biggest program is our next generation digital cell morphology analyzer. And here we have previously announced that we have matured our four year titographic microscopy technology and we're lifting that into our next generation system. So that is really all the plans are in place and we're progressing solidly on that, which also gives us an opportunity now that we know the technology much better by bringing it on to next gen. We also have meaningful conversations to potentially diversify the company into adjacent areas such as cytology and pathology. So it's a good progress on that. By the end of the day, the quarter proved negative growth of minus seven percent. However, although we had a tough top line with variability, as we'll talk about, we managed to deliver 33 percent EBITDA margin. And I'll go through and explain sort of the key components also on the cost side. So why don't we take the next slide? So here we have our full year to the right and with the compare of 2023. And we have the numbers to the very left for the new numbers, so to speak, for Q4 2024 up against the compare last year. So I said net sales were landed at 187 million. For the quarter, again, a little bit lower than last year, where we reported all time high across all regions. And so negative organic growth, no effects impact this time around. So that is really organic growth and a strong gross margin. Sixty nine percent. And a good contribution here was also product mix and specifically within the instrument category. This is what contributed to a healthy gross margin of 69 where we lifted it. Operating expenses of 40 percent, 42 percent. And again, I think that's a little bit misleading versus 37 because that's a function of the top line. So I'd say we've been spending five million more. We are operating expenses of 78 million versus 73 million last year. And that's essentially it's a few more millions on compliance programs to comply with European regulations, CSRD. So we've spent money on consultancies and then one million more on R&D, one million more on sales and then R&D. We also have an increase of five million for that has been capitalized, given the maturity of our innovation pipeline. So that brings us to an EBITDA of 61 million versus 73. So the margin of 33 percent, as I mentioned, which brings us into an annual EBITDA just at our target at 30 percent for the year. And especially our target is 30 or more in terms of EBITDA. And we have deliberately decided to invest in our innovation agenda, which is why we're sort of at the lower edge of we're just meeting the target and not intending to go above in this year where we are increasing our investment significantly. The R&D spends versus sales 22 percent. So it's 40 million here this quarter versus 34. And that is the exact six million that I've in difference here. So that's five million being capitalized and one increased million on the R&D, which sits in the P&L. So that is according to plan and also with the maturity of bone marrow, etc. This is also our next gen, amongst other programs getting closer to launch. So that is exactly according to our plans. Cash flow wise, we I should say we have a cash flow from operating activities before we look at the changes in working capital. Very close to last year. It's 60 million SEC, one and a half million less in this quarter. And essentially you can see here we report the we show the operating cash flow of 46 million versus 76 million. That's difference is explained by the working capital impact. So this quarter we had an inventory build up of 14 million SEC, given the challenges we we all of a sudden faced in the U.S. Versus last year where we actually had inventory consumption worth worth 14 or 15 million SEC. So that is why we have this difference of 30 million in operating cash flow. And that difference is exactly what translated into a total cash flow difference of 11 million this quarter versus the 43. So taken together on the right hand side in the full year, we're reporting a total cash flow of 27 million. And we believe that's a pretty strong cash flow, especially also if you consider that we've spent 66 million on innovation capitalized R&D versus 55 last year. So that is really a sign that our development programs are getting to a level of maturity where we have all hands on deck and where we are doing clinical trials, et cetera. So that's the P&L. I will show here we go. So let me excuse me. Let's go to the regional highlights. Region by region. So America is our Achilles heel in this mixed regional performance, obviously, because we are continuing to miss orders from America. So we had 60 million coming in from America, which is really a big gap up against the 87 from previous year. So we landed at 269 million. So that's, of course, the disappointing component in our report. However, and that was exactly the same reasoning when it slowed down in Q3. However, we certainly anticipate a gradual recovery in order placements for our solutions in the coming quarters with regards to America. And I think that's also confirmed in the seismics Q2 report that they reported in November when they reported for their Q2, which is the calendar year Q3, where they really talk about that the delay in the timing of deliveries in the hematology field is taking place in North America. Although orders remain positive. So we do expect orders when they get orders. There's a delay until we get them because there is we're only getting the orders once they're ready to install. That is a function of when they install towards the customer, but also when is when are the hospitals ready to to install the entire block line. So bottom line, we do expect an uptake here. Canada and other markets like Latin America actually did pretty well. So I think that is lost in translation here if we don't spell it out. In here. Yeah, and I should say so the America on the full year basis actually brings us down by minus 14% growth, given the last two soft quarters. In here, here we had minus 4%. And again, approximately 10 million were sitting in Q3 that was actually supposed to be sitting in Q4 originally, but for logistic matters as warehousing was changed. That's why it was risk for delivery were mitigated by bringing it into Q3. So we land at a negative rate. However, looking at the full year for EMEA, we have 21% growth and if we just consider instrumentations, we have 28% year over year. I think we have had a relatively strong year for EMEA. And I'm confident that that is starting to be diversified across several countries. But also we had a pretty good solid, I should say, growth in the region business. APAC is the high flyer. Here we landed all time high at 52 million versus 36, which was also close to all time high. So that was definitely a good quarter where we saw deliveries going across APAC. We did have a large order going to Australia. And I want to emphasize that without that order, we would still be at all time high. But we had a boost given the fact that we years back won a tender that we were that we then finally delivered instruments for. So this is a good example of yet another network, digital network being set up in Australia. We've also via the alliance with Cysmax enhanced our marketing activities and improved our visibility across Southeast Asia and Australia. So we are really pleased with those efforts and the progress we gain in learning those market settings, market segments better while working together with Cysmax. So if we cut the numbers per product category, as I said, instruments were suffering from especially from America since it's a big chunk of our business. So we landed at 107, 407 million for the year versus 380. So that's 7 percent growth. Yes, we had a little bit of a tune in on the given given Australia. But I think actually in the context of instruments totally very solid performance across a very solid performance across APAC and overall really again healthy double digit growth. When we look at the DC one for for building the networks, we've previously reported our our volume growth. For this mode, and we are in the same category as has previously been reported. So really, really healthy double digit growth taken together despite the the challenges we had lately in America's going to reagents. We landed the quarter at 8 percent and 10 percent full year. And pleased to say see that if we zoom in on a near we actually have 12 percent growth for our reagent business, both on the quarter and on the on the full year. So that is 134 million out of the 141 million that we do for reagents. So in near is, of course, the majority of the almost the entire business. And we are working on our globalization strategy, as has been reported. And I really expect that 2025 will be the year where we will talk more about our globalization plans of reagents. Since we're also doing we also meaning some very pivotal type milestones in the context of maturing, especially our methanol free state. And so that's going to be exciting. But I will spare that a little bit. Software and others category here only 8 percent on the quarter and 4 percent on the full year. I think here we are. We're impacted by also the lower sales to the U.S. So product mix wise, this works in a different way. So since we're we're getting lower instrument sales, especially U.S., where there's a high proportion of software, then then we're impacted from that category. All right. Brings me into the key takeaways. So I think, you know, the ones who have been following the company for a while, of course, we have regional swings. And and when we talked a year ago, we were fortunate everything was in the right direction. This is where we want to be. And I think here we are reporting all time high and and and slow orders in America's. However, we're confident that orders will return despite these mixed regional performances. And we remain very confident about our ability to deliver long term value across markets. That includes our both our ambition and our proof in actually adding our small units, which is really unique to this segment, to build these digital ecosystem across lab networks. So we are nothing but very excited about taking that further on and given the learnings we've had and the expansion we've had with very solid double digit growth in that arena. That is really a testament to to our 30th anniversary that we celebrated in December in this quarter. So we do have more than eight eight thousand insta installations out there, which is really a strong foundation for for both the innovation agenda we drive, but also given where I started with the foundation of playing with the winning hematology company as SysMex. I think we have a bright future ahead of us. So it's going to be super excited. With that, I think I will pause and allow questions and we'll take it from there. So I invite anyone who's who has questions for me or for Magnus, for us to to to post those questions. Thank you. Thank you for listening in.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Ulrich Trattner from Carnegie. Please go ahead.

Thank you very much. And hi, Simon and Magnus. A few questions on my end. And if you start up with America's, are you experiencing any type of market share loss or anything from increased competition, mainly from from scope your labs or is it still the same situation that you have been for the last decade in terms of of your exposure and your market share development? Yeah,

no, we are seeing according to the data we are presented, we see increased market share for CISMEX. They are gaining shares in America. And we see limited clinical utility of competition on the digital sum of all the area.

That's very clear. And in addition, do you have like, I think we're all seeing the turbulence on the new administration and sort of the turmoil in the NIH. Can you just highlight, do you have an exposure to NIH?

No, we don't have exposure to NIH. So our communication goes via CISMEX primarily. And there it was a super vulnerable, you can say quarter, a lot of fluctuations in their ordering uptake. And this is where, but I even though they have not presented their quarterly reports, therefore, I don't feel neither obligated or I should sort of resist in answering too much. Having said that, we see a very positive closure on the quarter, which actually shows that there is appetite to from hospital to renew their hematology lines. We hear installation pace is a little bit of a challenge, both because of, you can say it can be both CISMEX capacity in itself, but more than that, it's also a function of the hospitals, as I alluded to. And that is actually because there appears to be a lot of lab equipment in the clinical chemistry, you know, assays that are also implementing. So at certain hospitals, there's really scarce resources in installation, which also impacts sort of the order, the timing. One thing is getting the order. Another thing is actually getting the installation slot. But the good news is that the leading indicator is that orders are starting to come in from hospitals.

Great. And on the CISMEX topic and your expanded collaboration, I know a few quarters ago we talked about this collaboration enabling you to address certain white spots mailing in Europe, which have not been addressed prior. Where are we at in terms of that progress? I

think it goes beyond Europe. It goes globally. The way we work and the way we've started to work together, where previously it has been somewhat more transactionally with a very, very good innovation collaborations over many years. But now we are deploying our resources in a much more targeted approach. And we're also throughout the year, we are we are providing trainings, online trainings, a complete suite of modules that are deployed globally by CISMEX. And in return, there is also coming more clarity and more information around where where they sell, where they need support, how we're doing. So I think on the transparency in terms of data sharing that has increased significantly, which means that we can actually target our our resources much more efficiently. That is what we start to see. We see it in America's. We've started to see it in Europe and certainly also in Asia, where we have very different conversations throughout the

year. OK, great. On your financial targets, you're supposed to grow a lot faster than you have done throughout the last three years. What is needed on your end to kind of meet your own targets here in twenty five and beyond? Obviously, you have the expansion pipeline. But for twenty five and for twenty six, if you can give us some outline on how you should how we should feel comfortable in you being able to reach that.

No, that's totally fair. I think we've had some vulnerable years, as many, many others, of course, seen from our side. I think the strategic direction we've taken where I share that we grow double digit with CISMEX. And that obviously means that with seven percent year over year growth, that means that we're losing elsewhere. And that is the price we pay in this transition phase where we are zooming in on CISMEX. Of course, we have a wash of other also because CISMEX are taking share from other vendors in the hematology arena. Apart from that, the innovations with a significant cash flow that we are significant investments impacting our cash flows that we throw in organically into this business. You should certainly see launches coming out in twenty twenty five, twenty twenty six. We talked about the bone marrow already, but there are probably things we will talk about in twenty twenty five as well. And those should really also help us replace and do some improvements in the workflow of the hematology labs. So I think we will not only talk about investing in innovation, but also talk about what is it we come out with. So I feel comfortable around that when you give me a one to year timeline.

OK, great. And last question on my end, we've been in an investment phase for the last three years. You talk about bone marrow coming to market sometime end of twenty five, FPM technology maturing. But where are we at in terms of that investment phase? Are we in the sort of latter part where we should see a gradual slowdown of investments or just where are we at?

Nothing, of course, the majority of our investments are going into the next generation instrumentation platform. And I cannot disclose the timing, but that would be a risk to the company significantly given if if our existing platforms are no longer sold. That's not going to happen. However, I can share that that the next gen is obvious for a company like Sellevision. We take pride in building the best solutions. So that's not a new program per se. What is new is actually acquiring the FPM and then sort of finding a way and assessing whether it is competitive and whether it is stable. And we are concluding that that is the case. So we're lifting it into our relatively mature engineering program. So we are we're well off. And of course, there are clinical trials that are clinical validation that needs to take place when you operate in this field. But we but we are we're looking into a maturing very much maturing engineering phase here. So so that program in itself is also coming along according to

plan. Great. Thank you very much, Simon. I'll get back into the queue.

Pleasure. Thank

you. The next question comes from Ludwig Lundgren from Nordea. Please go ahead.

Yes. Hi, Simon and Magnus. So starting off a clarification on the installations in the US. You state that you expect a gradual recovery of orders in the next quarters. Could you give some flavor on what you expect there and what does this imply for for Q1 sales number?

No, I should have spell out what is the expectations for Q1 also, because we are even though we're still a little bit in the early phase of Q1 also order placement wise. And also because when you zoom in on one quarter, and that's the nature of our business here, that we do have quarterly swings, as we've just seen, because we don't control. We can have a leading indicator as to when the hospital places orders with with Sysmecs. But it's very tricky for us to say when are we receiving the order, because we are the last piece of the pie. Sysmecs will have to get their cell counter in place and there has to be a place, a time with the hospital for the installation. And then they order our instruments and do the installation. Then they book the revenue. So that's why the funnel, we can see that they are starting to take orders in at a higher level, which is really we know it will hit us. But we actually don't know when. So the leading indicator is positive, but the timing for the outlook are sort of deferred to be super specific on that. But we are, as you can hear, we are reporting a positive outlook since we anticipate a gradual recovery in order placements for our solutions in the coming quarters, as we state in the report.

OK, just a quick follow up. What would be the typical lead times for these orders? Typically, I suppose it varies very much. Yeah, you're right. But I can't.

Yeah, you're right. I mean, we can have some orders, you get them and then you end up being 14 months. You saw the New South Wales one that we talked about years back. And then finally we're here. But however, if specifically I would say an interval around two to six months is probably a more general timeline. If I can if I can get that, that would be the time.

Without liars. OK, thanks. Very clear. Yeah. And then moving on to EMEA, you highlighted in Q3 that instrument sales was boosted by some pull forward orders and then resulting in Q4 being like relatively weak to that. But how should we think about EMEA then moving into Q1? Because what I've seen from Sysmecs, I believe the installation pace has been quite solid for the XR series in EMEA. Like it's an average of these two quarters than a good approximation for the future. Or how would you think about this?

Yeah, I think our business, it's I mean, we report one quarter we compare against the year ago. I think it's the moving average is actually more saying I think when I look at EMEA and I see 21 percent growth overall, 28 percent on the year over year with instruments. I've also alluded previously that that we are seeing an uptake also of smaller instruments. So I think we're on we've been the last four quarters. We've actually had a pretty good trajectory and that that's let's work hard to make that happen. So it continues sort of along those lines. And then, yes, there will be swings. That's the nature of it. That is the nature of it. But but I see no reason why we shouldn't sort of continue continue this solid performance. Also, because when you consider Europe, it's diversified across many markets, very different to America's region, which is obviously dominated by the US. Now, this is where we have the problem that will be fixed with a bit of patience. The Europe has shown a little bit more as we've started to work closer. We've seen a more sort of spread uptake. That's the report we get from from Sysmec. So we are we are we optimistic around the continuum we have in Europe.

OK, so basically, then no real change in market dynamics, maybe in EMEA. But but just yeah, it's very with the different regions.

Yeah, they have had quite a bit of traction on the XR series, as you also reported. That's true in Europe. That's lost in Europe and Japan. And and and that's part of the equation here that they also put extra focus on hematology.

Yeah, so far, final one just on the XR, because I think their Sysmecs is trying to launch this in the US in 25. But I guess it's basically just a facelift of the old version. Do you expect significant traction for this new model? Or is it not really dependent on that, so to say, when the when the replacement? No,

I will not comment on their launch plans in the US because I actually don't have a firm estimate and it's not it's not part of my territory. So I'll refrain from commenting on when they expect or whatever happens in the US. I really don't know.

OK, understood. Thanks for taking my questions. Pleasure.

The next question comes from Christian Lee from Pareto Securities. Please go ahead.

Good morning and thank you for taking my questions. You mentioned that you have reached an installed base of more than 8000 instruments, and I guess it includes both instruments for the large labs segment and DC1s. Could you please inform us of the penetration rate for within the large labs segment?

Yeah, so the penetration rate, we were, according to our model, we were around 27, 28 percent. That would be the number I would say for now. We're getting close to the 30 percent mark for the the small lab segment. We are only at few percentage points. We've just started that journey. However, we see very, very healthy double digit growth, as I said, both volume and revenue wise on the small segment. But but the potential is much larger than what we've covered so far.

OK, great. And this is perhaps a question for Magnus. You have previously mentioned that the total R&D investments as the chair of sales would be around 22 percent in 2025. Do you expect to keep this level evenly throughout the year or should we expect this ratio to fluctuate? We expect the level to be fairly flat over over this year, so no big fluctuations over the quarters. OK, perfect. Thank you. That's all for me.

Super question.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Yeah, thank you very much. And once again, also thank you for everybody for following the television and listening in today. So my closing comment, I have three points. I want to thank since we're coming here and reflecting on 2024, I certainly want to thank System X Corporation and the regions out there. For establishing our global relations and working much more transparent and closer with television during 2024. We will certainly we are super committed to continue that journey. I'd also like to thank our staff globally. I think it's been an extremely busy and also a tough year like many in the after 2020. But both commercially, but also innovation wise. I think we've been working extremely hard. Our team to progress our plans and which is now becoming very visible. Clinical trials out there and the maturity we see from within. Then one thing I want to emphasize here is that we have actually over the last three years cemented the potential of FPM that we acquired early 2021. So now we are very confident that we can protect our leadership position and grow that in hematology. And I'm also very, very excited about how it has opened up for meaningful conversations with partners for to explore adjacencies for the company. Then finally, as I said, we have celebrated our 30th anniversary at celebration with these more than 8000 installations. It's really a testimony and really will continue to strengthen our brand and our offering with the agenda that we have where we invest significantly amount of money in the company. You know, employees. So I really I'm really proud of our team. I'm proud of how they interact and they show up in different internal matters, but also in external matters. And as we've strengthened our external partnership with Sysmex throughout the year. So with that, I am actually when I look at 2022-2024, I'm pretty pleased given the challenges we've been met with, but also the way that the team are managing the challenges we see. So with that, I want to close and thank you for listening in. And I'm really excited to report on the progress we have in the coming year for 2025. Thank you very much.