CellaVision AB (publ)

thank you very much and thank you for to everybody for dialing in to the first quarterly reporting here in 2025 i have our cfo magnus blix with me and we are pleased to present the q1 results of the television So the heading of the quarter of our report is strong quarter in a rapidly changing environment. We are reporting a revenue of 195 million, so it represents a growth somewhat above 14% and 14.1% organically. So we believe and we are reporting a pretty strong start to the year. And that is really a contribution from the three regions, but also given the attractions of our solutions across many markets. We know that the nature of our business is really subject to some quarterly fluctuations, given our order-based sales processes, as you may know, the ones who have followed the firm for four years, but also the delivery timing of entire bloodlines is a function here. However, we are proud to get a good head start to the new financial year and I'm pleased to elaborate a little bit more on that and then we will do the Q&A. Essentially, with this result, it also emphasizes and it contributes to our strong financial position. We have very, very little debt on the balance sheet and now a very strong, still a strong cash position that is growing, including a pretty strong operational cash flow. In terms of the progress on our strategic direction, we have chosen to highlight some of the themes that we are investing in. We have increasingly invested in R&D as part of our power of focus. And we're in the midst of a very rich and valuable roadmap. So we are continuing our clinical trials for the application of a bone marrow module that will allow us to classify the different cell intermediates of bone marrow. So that's continuing, you know, according to plan. We're also today sharing that we have part of our R&D investment has also been upgrading our current solution. So we're actually running verification and validations of software solutions for our current hematology. solution which also comes with some workflow advantages and improved user interface. We will certainly talk more about that at the point and launch, but here you are certainly getting the hint that it's pretty nearby. And then again, we are very proud of what we reported in our annual report of 2024 in terms of our progressive development of the four-year titrographic microscopy solution, which is also part of our next generation hematology solution. And we still have traction and interest from new potential partners in the field of pathology and cytology. So our commitment to our R&D investments are continuing according to plan. Let's take a little bit of a look on the P&L. And I excuse myself with my voice. I have a little bit of a delayed cold. So as I said, we demonstrate and report the 195 representing 14% growth. It's a strong gross margin that it comes with. It's 70% versus 66% in our compare Q1 2024. I think the main sort of element here is that the compare was actually before we implemented the price increases of last year. We also in Q4 had a pretty decent gross margin of 69%. We are lifting it a little bit and that is also a contribution of our product mix. So both we had solid instrument growth with a reasonable gross margin, but actually also within our software and other category, we have contribution from software And actually a little bit decline on the spare parts and others, but a good contribution from software. So taken together, we have a strong gross margin. Our operating expenses, 41% of top line, they equal 80 million. We are increasing a little bit on the admin side due to commitment to regulatory requirements, but not the least following our investment plan on the R&D side with an increased investment on R&D where a quite big chunk of the raise is also capitalized. Our operating profit equals 57 million for the quarter, and then including the depreciation, we land at an EBITDA of 66 million, which is equivalent to 34%. So it's a strong EBITDA driven by our gross margin, strong gross margin, and of course, the scalability of our business as we are reporting a strong top line growth. In terms of cash flow, Here, on the working capital side, we do have an increase in cash receivable, slightly decline on the inventory level. So essentially a contribution of around 3.5% from working capital, which brings us up to 61% of an operating cash flow. And then we're investing as planned in primarily R&D. So that's 18 million out of the 21 million from investments. And then we have our financial activities, which brings us down to a total cash flow of 37% a million within this quarter. So that's the P&L in short. Let's take a look at the regional highlight. So essentially, as I said in the beginning, it's driven by pretty much all positive growth across all regions. Americas, no doubt we've had a little bit of a soft quarters in Americas given the previously reported insecurity when the American presidential election was on. I think here we are reporting that we are coming back both on the, you can say, the large instruments. We have seen contributions similar to the comparable quarter. and somewhat higher than Q4. And we're also seeing positive growth on the DC1 catering for the small lab segment. So overall, we report 8% growth in Americans. EMEA is 21%. It's 96 million in total. That's a very strong contribution from multiple countries. So we have really, we are seeing you can say output and success from our close collaboration with our strategic distribution partner in this region, which is good to see that also it demonstrates the attractiveness of our collective solutions, which resonates across different countries out there. We're also reporting a solid double-digit growth for our hematology reagents of 12%. So that is another driver which is also pending on our strategic distribution partnership. APAC, 12% growth, so 21 million. It's always a little bit, the APAC number can fluctuate quite a bit, given the fact that we, at times, we typically ship larger boats of instruments. So it's a little bit vulnerable. But by the end of the day, we see traction from both Japan, China in these numbers. And we see intensified activities also in close collaboration with our strategic partner. So that gives us a lot of appetite and motivation that we can actually really pursue growth across this region as well. If we cut our numbers, so here on the chart, it says sales per product group. So here we've chopped up our revenue into the different solutions. On the instrument side, in this quarter, it represents 59% of the total revenue. So no doubt that instrument is a strong driver of the strong results, which is a good basis for our solutions. And so in total, we had 115 million coming from from instrument versus 92 in the comparable quarter. I think in terms of reagents, I mentioned the double digit coming out of EMEA with a total growth of 5%. So a certain proportion of our business is our non-hematology, which is only growing modestly. But however, it's it's a good it's a good customer base and it's it's still a good contributor to our business. But it is obviously the hematology reagents where we bank on 12% growth and that is taking an increasing share of our reagent business in EMEA. We are working on expanding, of course, into APAC and we also have plans for the US. In terms of software and others, that's important. So we did 42 million in that product category versus 42 in the comparable quarter. We can say that we had a larger share of software, as I alluded to in the beginning, which means that especially the consumables like oils for the installed base, but also spare parts are a little bit low. So we had a little bit of an overflow of software, not overflow, but we had a little bit of a low software sales in Q4. So there's a little bit of a contribution from excess software coming into this quarter. Not that it's significant at large, but there's a little bit of a contribution there, which also explains the somewhat lower in Q4. So if we just wrap up here and say we do believe that in isolation, Q1 is a strong quarter. We actually think despite the fluctuations and what we define as the changing environment that we're all aware of, We think that the signals we get from our partner and the market are positive. We do understand that there is uncertainty sitting out there. And also the nature of our business, as I started alluded to, is changing. influencing the business for at quarter to quarter however the basis is that we we we really get the message that there's a strong traction for what we do and also our solutions across the different product categories and across the different markets We appreciate our enhanced collaboration. It takes time to get close when you go to market together. There are many interactions, many relationships that needs to be built, but we are really progressing on our results, but also on the trust level and the way we work together. So I want to thank our strategic partner for that indeed. We are fully committed to execute on the power of focus. So as mentioned in the beginning, I mentioned our focus on R&D, our spends, but also I really want to send a heartfelt appreciation to my staff, my team who are really executing according to our plans and our roadmaps. So they are taking the investments very seriously and working extremely hard to allow us to differentiate within hematology beyond overtime. And with that, I think we should go to the Q&A. So I will hand it over to the moderator, and I appreciate the interest you show in our company. Thank you.

To ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad.

Hi, can you hear me?

Yeah.

Okay. Hi, Simon. Hi, Magnus. This is Ulrik from Carnegie. A few questions on... Hi. A few questions on my end. And did I understand you correctly when you said you got a good head start on 2025 and giving the sort of high instrument sales in the quarter that there is some risk of sort of order stocking among your commercial partner and distribution partners or did I sort of misinterpret that?

Yeah, good question Ulrich. I would say I would say given the timing of when the orders were placed in Q1, let's say the first half and the first couple of months of Q1, I would say the order stocking is probably less of a signal. And here I'm really, my argument is, or my position is, my statement is based on when did the, you know, the tariffs and the insecurity really increase during, let's say, March and April. And here I would say that the numbers we report today here, we saw pretty much before. So I will probably argue that there can be a risk for it, but it's actually not something we've heard specifically anything about.

Okay, great. Thank you. And European development, it looks to be continuing to be very strong. Like Q4 obviously affected by orders that ended up in Q3, but if we were to sort of normalize those numbers, the momentum in Europe looks to be going really strong. Is there something special happening there, or is it sort of the effort in you combining sort of your commercial efforts with Sysmex paying off, or is there something exceptional that you're seeing, or is it just strong underlying demand?

Yeah, I think it's a long run. And I think the diversification, the effort across multiple markets is paying off. I think that's what we're seeing. So, because I think it's been robust and now it's pretty robust. And as I said in the beginning, it can fluctuate somewhat, but the trends in Europe are really growing. So I would, my sense is really that this is about the much closer relationship that we started a year ago on the commercial end. And it takes time to get results, basically. So this is part of the fruit that we are collectively harvesting here. Okay, great.

And then moving into the R&D efforts made, and you gave a bit of a teaser, and we talked about this historically, integrate technology into your own hematology systems. But I was just wondering, and again, we talked about this before, what are the sort of implications on the commercial model, a new hematology system line, and can you achieve any type of higher recurring revenue out of a new platform?

Yeah, I think the sort of in general, there are opportunities to optimize the current offering. That's that's what when I talk about the upgrade software version, that that is something we do occasionally. And here we are, we are flacking that there is actually more value add to be extracted in very short, very short while. And in terms of our next generation, and you're absolutely right it comes with that it it will be very very much more explicit around the the value proposition but but of course it's both on the on the throughput with the fpm technology and the image quality and we will we will explore the opportunities to commercialize that both in respect of where can we actually land the cox um um And also, can we implement, it is our intention to increase the software component, the applications, just kind of the same philosophy as we will launch with the bone marrow, where there will not be a non-perpetual license, but for applications, there may be an opportunity to gain more recurrent revenue from software licenses. So that's kind of

without going into the specifics that that's the that's the thinking that was great and then just in terms of your competitive position in the market does this move the needle additionally in in your favor where you believe that you are moving ahead of your competition and as well i guess that would play into discussions you were having with Sysmex on pricing in the US on the back of tariffs as well. So if you could give us some type of insights.

Yeah, I think in general, we are across many markets together with Sysmex. We are winning share in the hematology arena and I think we'll continue to do so. I think the The next gen will also make it more, let's say for the share of the market that are already running digital thermophility, it will be more compelling to actually purchase next gen when we get there. So obviously it cements our position on a more long-term basis.

okay just just a follow-up question on that as you say that the next gen like in terms of the ones that have already adopted digital cell morphology that they would be more prone to to replace their systems uh do you feel that like obviously a lot majority of your sales is generated streams pipelines are replaced and then added this censusmex or your partner adds this as a complement to that bloodline. But this, I guess, is still sort of a standalone system, and although it is a major upgrade, do you still believe that you can see faster replacement cycles among those who have already converted to digital cell morphology?

Yeah, I think it runs in contractually with a certain period of time, five years typically. And then the replacement cycle is we tend to say seven to nine years. And I think it becomes more attractive But it is a function of when is the entire bloodline exchange. Budgeting-wise, it's typically the entire bloodline, but certainly there will be an appetite to include and exchange the existing digital cell morphology system with a new one. I'm pretty convinced that will happen. But in the meanwhile, I think there is more we can do, and we will be very explicit around what we are doing with also software upgrades. as we sort of allude to today. I think there are still good opportunities there.

Okay, great. Thank you very much, Simon. I'll get back into the queue.

Thanks, Ulrich.

The next question comes from Richard Romanius from Red Eye. Please go ahead.

Good morning. I have one major question, which I'll begin with, which is the about foreign exchange rates. What do you think will be the impact from the strengthening SEC for the rest of the year, and how was it that you had no currency impact in Q1?

Yeah, maybe Magnus, maybe you can comment on the FX implications.

Yeah, I can start. Let's start looking at the year over year comparison. We could see that the exchange rates in the beginning of the year for the euro and the dollar was on par with last year. It was rather high. And then we saw a fairly steep decline of the exchange rate within the quarter. So the average rate for the quarter then compares to the average rate of the same quarter last year, even though at the end of the period the exchange rates were lower than the average last year. It's a little bit we've seen exchange rates changes before, but what was a little bit special this time is that the change was quite in a quite narrow time scope at the end of the quarter, actually.

OK, so I guess we'll see the effects starting from Q2 then.

yeah we've seen a little bit of re-strengthening of the currency especially especially the euros so of course they go up and down a little bit we follow it closely to see how we can monitor it Our price contracts are negotiated on a yearly basis. So in the short term, there's not much we can do. We are affected by FX changes. And we have the majority of our revenues are in euros, but also dollar is an important currency for us. Very little in second are the currencies. So the majority, the full, the euro and dollar covers almost all of it.

Okay, I understand. I have a last question. I'm interested to know if you could say something about the sales mix in Europe of instruments of large versus small instruments.

Yeah, so instrument-wise we have... We've gained a good traction on the large instruments, I would say. We see significant growth in this quarter. It has primarily been in the large instrument segment, a little bit higher on the small as well, but the bulk of it is in the large labs. The adoption of the small instruments has been a little bit slower in Europe because it's across multiple markets as opposed to the scalability of the U.S. where it really resonates in the U.S. with the integrated health networks that they've started with the... with the ITN and purchasing the DC one. There's a there's a great opportunity for us over there still. But we see starting to see the value and the differentiating opportunity for the small lab. But currently we are selling the DC one across the different countries. But we certainly think this is a growth time for us that that will play out as as we as we continue pushing the business Thanks.

That's all for me. Thanks, Richard.

Question comes from Ludwig Lundgren from Nordia. Please go ahead.

Hi, Simon and Magnus. Congrats on the strong numbers here in the quarter. So you highlighted that America's sales recovery was driven mainly by DC1 installations. So then I wonder how the Sysmex installation pace has been for the larger instrument, for larger laboratories, which you have been talking about before. Has this improved, so to say, quarter over quarter?

I think when we talk about the large and the small order pickup that has happened both at the very end of Q4 and also here in the beginning of the year. But again, the complexity here is one thing is the orders that our partner like Sysmex are picking up. But then the implementation is a function of when is the entire bloodline and when is the hospital ready to implement. And that is typically two, three months, sorry, two, six months. And it can be much more than that. But there is not a one to one relationship between that. We get the signals that there has been traction. I think I reported that also at the Q4 call that, hey, the outlook seems reasonable. And we actually see that we have a pretty good base of LASI instruments in this quarter. and then we do also have growth versus last year on the small instrument that that is definitely and that that is because the model really resonates with excuse me that is because the dc1 really resonates building the the the digital ecosystem across the americas

Excuse me. Okay, great. Thanks. And a follow up on America's instruments. So historically, this has been mainly US instrument placements, but you highlight that Latin America is growing fast. So maybe if you can give us an insight on the sales split between these two regions currently.

Yeah, I'd say Latin America, that is also growth coming out of Brazil and it's also DC1, which is a good driver in that region. Brazil is the majority of that. So it's not across the entire South America, but it is different as opposed to North America, which is really driven by high volume labs and large instruments. And then you tie in the DC one in those networks. So the scalability and the size of the markets are very different. That's important to say.

Okay, great. And one on reagents as well. You delivered strong sequential growth here, like looking Q over Q. But I wonder if you expect any seasonality effects for reagents in 2025 or is this Q1 number a good indication for how the year will unfold?

I think we certainly aim to continue growing in our largest footprint, which is obviously EMEA. It is less characterized by our region businesses, less characterized by seasonality. There is a little bit around when I test conducted during holiday seasons or whatever but it is much less seasonable versus versus the instrument software business which where which can really fluctuate whether we are getting orders or not and whether we are shipping a lot of instruments at the same time to a given jurisdiction and so a lot less sensitive I think it's a signal of our installed base that that grows that's how you should look at it

Okay, great, thanks. That was all of my questions.

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

Thank you, and good morning. I have a couple of questions, please. Could you please clarify regarding the growth of the instrument sales, which grew by 25%? Were there similar growth rates for both DC-1 and for the larger instruments?

Yeah, I'd say in general, that's growth rate rise, we're in the same ballpark area. That's very similar. But of course, the contribution revenue wise is much better on the large lab segment.

Okay, perfect. Did the strong demand in Japan and China result in material sales in Q1 or do you expect to see this in the coming quarters?

Yeah, I think the tricky especially China is our biggest market in APAC and and we we are still even though there is a competitive situation that is more pronounced in China than elsewhere. We certainly still have traction, I think, and are still winning deals. in in china i think the challenge is also it's not a direct market so our distribution partner would be working with local distributors so the transparency as to the actual demand out there at the hospitals very delayed very delayed and very invisible for us because there are two layers out there having said that we're continuing to see demand uh since we are getting orders so there are there are certainly uh There are certainly winds out there in China. So that's a significant market for us. And then we are starting to see a market like Japan, which has been, let's say, relatively slow, not slow, but the adoption of digital silver has been less than in other very developed countries. But we are definitely seeing traction and increased attachment rate out there. So that's a positive one. Then there are opportunities when we talk about APAC, which sits outside of Japan and China, that we're also trying to establish together with our partner.

Okay, perfect. Thank you. And the price adjustment seen in the gross margin improvement, have you reached the full impact already, or can we expect some gradual improvements going forward?

Yeah, as Magnus alluded to, then we, or maybe I talked about it actually, but we adjust once a year and in our compare, they were unadjusted. So we certainly have another price adjustment coming up. but it may not be in the, given the lay of the land, it may not be in the same magnitude as we were able to do last year.

We came out of a period with higher inflation last year. So it was a bit of a compensation for lost grounds last year.

Well, we still, we will still adjust our prices during the year.

All right. Yeah, so should we, review the growth margin of 70% this remainder of this year.

No, I think we've landed at a pretty decent spot. There are a number of variables within the gross margin. We talked about the FX impacts. We could have write-offs, et cetera. But generally, I think we've proven that we are strong coming back at the 70% mark. So that's a good proxy for the business. We came from, I believe it was 69.2 or so in Q4. i could be wrong on the digit but but kind of around that um so we've we've proven also the scalability here and so but of course can there be deviations there probably will be but but this is a pretty good um pretty good uh sort of guidance as to where we expect to be perfect thank you very much that's all for me pleasure christian

If you wish to ask a question please dial pound key 5 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.

Thank you very much. And again, thank you everybody for showing and paying interest in our company. We are we are we and I really want my team also to be proud on the strong quarter, despite this rapidly changing environment as we are all in the midst of. Despite that, I just want to reemphasize that I do think we we have a strong position that we can grow further. So we remain optimistic about our ability to actually drive growth. and deliver long-term value across our hematology business while also pursuing long-term growth pockets outside of hematology and so i want to thank my my sincere thanks to the entire team at celavision and not the least our strategic partner in terms of sysmex um for where we've where we've started the year and what we've built up over the last years um i'm very excited about where to take us in the coming year here. So thank you everybody for listening in.