Revenio Group Oyj (REG1V) Earnings Call Transcript

Good afternoon, and welcome to Revenio Group Q1 2025 Earnings Call. My name is Jouni Toijala. I'm the Group CEO. And then as always, we have here as well Robin Pulkkinen, our CFO. Plan for today is to go through the highlights for the Q1, and I'll cover that part, and then Robin is going to continue going through the financials for the Q1 and then shareholders and financial guidance for 2025. And then we finish up for the Q&A. But let's kick off. Extremely good start for the first quarter. The Q1 was very strong for us in terms of the sales and profitability. Net sales was EUR 26.1 million, up 10.5% from the previous year, EUR 23.6 million. If we look at the currency adjusted growth, so that was 12%. EBIT on good level, EUR 6.6 million, 25.4% out from revenue. If we then go more to the sales split, so imaging and tonometer business grew in every region during the Q1. So we got the growth from U.S., APAC, Europe, Middle East, Africa, Lat Am and Canada. Then if we do a bit more deeper dive into the specific countries. So in APAC region, China grew very strongly, same for India as well. Then we got a good growth also from Europe and Canada. Then I'm sure that there's a lot of questions related to the outlook and the pipeline. So as of today, we see healthy pipeline from the sales perspective in the U.S.A. as well. Then if going through a bit more detailed, the actual product lines. So from the tonometer perspective, probes selling really well, IC200 selling really well. And then we launched also the new TONOVET Pro version during the second half 2024. So that has been performing extremely well as well. Then on the Fundus imaging side, more or less the same story than in the last quarters. So DRSplus business growing well and the EIDON product family growing extremely well as well. Then during the Q1, so all the growth was organic. So we didn't have MAIA microperimeter sales in at all. And from the microperimeter perspective, everything is looking extremely good. So we got the FDA approval during the Q1. And then actually, we got also the CE certification end of March 2025. So we are good to go in all the regions. And we have been -- started the deliveries already, and then we have a good order pipeline also for the coming months and coming quarters. From the software solutions perspective business is moving well forward as well. So if we look the iCare ILLUME screening business, so -- and if we go in the details of the actual installed base and the sites, so we grew roughly 50% in terms of the live sites and live customers compared to the last quarter of 2024 and also the report amount has been increasing 30% year-on-year. And we -- and the plan is also, of course, to expand the business in other countries. Then I'm sure everybody is keen to understand where do we stand with the U.S. tariffs. So let's cover this one. I'm sure there's a lot of questions as well. So let's be sure that all the questions are tackled during the Q&A, but a couple of words regarding to the tariffs. So when comparing us to the comparable companies, so we are in extremely good and resilient position. And if we look first, the macro trends, so they are definitely backing us up still. And in all the regions also during the Q1, we have been seeing increasing amount of patients. And then if we look the product portfolio perspective, so we are well positioned, but in terms of the value of the products compared to the price. And currently, as said earlier, so if we look the pipeline in the U.S.A. and globally. So the pipeline is looking still very good. Also, the profitability is in good level. So if the profitability in Q1 was 25.4% out from revenue. So for us, this means that we are able to still invest and continue all our R&D project as in the last couple of years. Then we have a good toolbox to tackle the tariff. So let's go back to that topic. So what we have been doing already in order to be prepared. So we have increased inventory levels already during the Q1 and even last part of the last year. And if you look the inventory in more detail, of course, it depends product-by-product. But we have, depending on the products, the inventory from 2 to 6 months. Of course, that's having a slightly impact also to the net working capital. But in a nutshell, we are well prepared from the inventory level perspective. Then we have been estimated the tariff impact to the bottom line. Robin is going to come back to that one. But if we look to Q2, Q3, Q4 2025, so the hit to bottom line, if we don't do anything, is roughly from EUR 800,000 to EUR 1.4 million, and this is without any actions. And if we increase the prices, which is the plan, so then we have a strong view that we are able to mitigate the impact of the current level of the tariffs, which is as of today, 10%. So this is where do we stand in terms of the tariffs, and then I let Robin to go through financials, and then we come back to this topic for sure in the Q&A.

Thanks, Jouni. So Jouni went through the numbers there slightly. Great start for the year, best quarter in Q1 in terms of profitability and top line euros. 10.5% growth on top line, FX adjusted 12% growth. Now looking at -- people remember that we did some changes in the balance sheet, restructured a bit during the last quarter of the year. You can now see some of those FX impacts that we had before hitting the revenue line now hitting the financial costs. And by doing so, there's actually roughly EUR 500,000 of FX cost that is now hitting the financial expenses instead of revenue. So if we did not do those changes, the top line would have been lower. But of course, the FX adjusted number would have fixed it, but the reported number would have been lower. Gross margin also higher than what we're used to seeing for us. There's been some changes in the IFRS accounting, more related to how we treat the -- our own personnel commissions. In the past, they've been posted to cost of goods sold and nowadays, due to the changes we are now posting it in the operating expenses. So it has a slight improvement on the margin line, less than 1% impact. The tariffs will then again go the other direction. So it's an interesting -- interesting to see how this line is going to continue to develop during the year. But in general, the Q1 average FX was EUR 1.05 compared to EUR 1.085 a year ago. And now that we can see that the FX is moving towards EUR 1.14. So this will also have some impacts on our numbers going forward. So operating profit, EUR 6.6 million, up almost 30%, 28.6% and above 25.4% of revenue. And I'll come back to the other numbers a bit later. So Q1, a bit longer trend line here for the sales development. It's really good to see that the -- we're able to grow quite well in the first quarter after having a quite flat Q1 last year. Also keeping in mind that we didn't have the new MAIA in our product portfolio. So that will be now kicking in starting this quarter. And the demand pipeline seems very strong for that. The sales team is very positive about the product. And I think the operations team is pulling out as many devices from the manufacturing line as they can, and that capacity is also increasing quarter-by-quarter as we move towards the second part of the year. Operating profit also for the first quarter on a record level, EUR 6.6 million. There were no significant extraordinary items or actually either clinical trial costs within the quarter, which would have had an impact on the profitability. So for the bit more clarified from -- we've been expecting, I think the investors has also been expecting these clinical trial costs for the iCare ILLUME-based screening solution to start kicking in, and that's been our original estimation also last year. Currently, we're still kind of going through alternatives and the authorization process for the FDA and kind of reviewing clinical study alternatives for the authorizations. And our current expectation is that the trial costs will not start to run within the next 2 quarters either, so earliest Q4. Cash generation, very good. Looking at -- if you look at last year, Q1, okay, it's flattish. But then it's good to keep in mind that all our employees have a short-term incentive program. In '24, we had very little payouts for that program. Now we're back to normalized levels this year. And then you can look at back to '22, Q1, the operating cash flow was basically 0, same for '23. So the '24 was actually quite exceptionally good due to the kind of not very -- or very low bonus payouts, which is not the normal trend. So it's the first time in the last 10 years that it was close to 0. But that was a good reason for it. It's basically for the not so good performance in '23. But this year, basically, what that difference is, this year, the payouts were roughly EUR 2.5 million in the first quarter and last year, less than EUR 500,000 during the same time. And if those were kind of set at the same level last year also, if the payouts were normal last year, our operating cash flow this year would have been almost 50% higher than a year ago. The balance sheet continues to get stronger. We're again above 80% equity. It's actually the first time since the acquisition of Centervue that we are reaching this level. So the interest-bearing debt, it's actually down from EUR 16.6 million last year after the Q1, down to EUR 11.3 million at the end of Q1 this year. So we basically have twice as much cash in the bank than we have interest-bearing debt. In Q2, of course, the cash balance is going to go down due to the dividend payouts and the net gearing will go up slightly closer to the 0 range. Shareholders, no -- some actually changes here. So at the end of last year, the amount was still around 19%, 19.6%. And now they actually flagged in Q1 that they went above the 20% ownership. And actually looking at the top 10 list and logos are all the same, but 7 out of 10 of the largest owners have increased their ownership of revenue during the quarter, which is I can't remember such a positive movement in one quarter in any of the recent years at least. Overall, I think the Finnish ownership is slightly up. United States slightly down; Denmark, slightly up; Sweden and France, pretty flattish during the quarter. And the guidance remains the same. The exchange rate adjusted net sales are estimated to grow from 6% to 15% from the previous year and profitability, excluding nonrecurring items, is estimated to remain at a good level. And like we've said earlier, even though the range is quite large, we aim for the double-digit growth, but there is quite a bit of uncertainty in the market. So that's the reason for the wider range for this year for now at least.

Great. Thank you, Robin. It's time for questions.

[Operator Instructions] The next question comes from Nikko Ruokangas from SEB.

This is Nikko Ruokangas from SEB. I have a couple of questions relating to naturally tariff and then also another one. And maybe starting with question that you indicated in your report that your sales were supported by a couple of bigger one-off deals. So how big impact did these orders have?

So not as big as we have had, but a bit more bigger than the normal smaller deals. I think that's the best way to put it.

So are we discussing about 7-digit number or less than that?

Ballpark, yes, but not -- I mean, not the millions like we have had before.

All right.

And of course, less than the 1 million, but yes.

All right. Then on tariff and what's your take on that market and client activity since the announcement of the tariffs? You said that you have a good sales pipeline in the U.S., but have you seen kind of any changes in the demand environment before that? And then on the other hand, do you think that your Q1 sales were supported by prebuying ahead of tariffs?

So first answer to the pre-buying. So no. So if we -- especially if we look the U.S.A., so there's a tendency that nobody buys for the stock, tonometers 24 to 48 hours from order to delivery, 1 to 2 weeks for imaging devices. So the clients were not buying products in a stock. And then if we look it from the pipeline perspective, so last time we checked the pipeline on Friday and the pipeline is looking good. So we haven't seen any decrease on the sales pipeline side.

All right. That's good to hear. Then you estimated this EUR 0.8 million to EUR 1.4 million impact on earnings in Q2 to Q4 if assuming no actions taken to mitigate the tariffs. So just to get the estimate and ballpark of the impact, right? So given that you already have increased your inventory, so this kind of EUR 0.8 million to EUR 1.4 million impact would be if no other actions impacting Q3 to Q4, am I kind of assuming right?

Yes, yes. There could be also in some products, we have around 2 months inventory. So it could be some products going out the door with tariff impact already during Q2, but basically mostly Q3, Q4. And the idea is that we will be increasing our price. We did actually a global increase in price at the end of Q1, but we will be doing another increase actually in the U.S. due to the tariffs. And they will be in place as long as the tariffs are in place. So if they are withdrawn, we're kind of planning to withdraw the tariff increase as well.

Yes. I understand. And you haven't kind of seen that end of Q1 price increase impacting your client activity?

No, we do that every year around the same time frame.

Then last one for me, at least at this point. Your fixed costs increased like 10% year-on-year despite the comparable quarter having the higher FDA costs, which you didn't have now. So you already flagged change in IFRS reporting, but kind of how much did this change explain this increase year-on-year?

It's a couple hundred thousand. Then in general, we do have more people. Also the marketing costs were slightly up. But basically, it's payroll related for a big part. And also that the fact that some of that cost of goods sold is now being posted in the costs is driving the cost up from just looking at the OpEx.

Yes. Okay. But kind of if we clean those reporting related issues, but there is some kind of underlying cost as well.

Yes and more people...

Okay. I think, yes.

So, hired roughly the average number of employees is from 219 to 246 in Q1. So that also increases.

Salary increase.

Yes, plus salary increase, yes.

The next question comes from Jack Reynolds-Clark from RBC Capital Markets.

I had a few, please. So the first one, just on tariffs again. You mentioned obviously the price increases to offset the impact of tariffs. But what level of pricing increase do you think that your customers are willing to kind of accept? And is that kind of how much kind of demand elasticity to price do you anticipate?

So the plan is to -- so basically, the end user prices increase is not exactly 10%. So we'll be able to kind of split the pain to kind of borrow our Head of Sales comment on the fact. So we will be able to cover the tariff kind of euros. But kind of overall, of course, so if you say that we invoice EUR 1 million more and we get EUR 1 million more in COGS, so some of the percentages will see an impact in the percentages. But basically, single-digit increases we're looking at.

Okay. And do you expect demand to be impacted by those increases?

Well, the good thing is that all of our competitors mostly also manufacture outside the U.S. We're also the most profitable company. So it's -- many of the competitors have been struggling last year with the profitability and growth. So it's -- I would expect to see increases also from the other players, but it's a bit unclear to us, I guess, also how much different companies have inventory in the U.S. imported before the tariffs. So of course, having a close eye how things develop.

In general, Jack, so we have been extremely good when it comes to the price and value. So if you look at the competition in terms of the product, so the value which we are able to deliver in specific price points. So there's a flex on the price compared to values compared to competitors. And we are talking about the single-digit increase here. So based on the sales input, we don't see too much a risk on this one when it comes to the demand.

And I think we plan to communicate to the customers also that like I mentioned earlier. So if the tariffs are removed, the increases will be also removed that are being done for the tariffs.

Understood. Super clear. My next question was on MAIA. So obviously positive development on the launch there. Could you talk through how you're thinking about that from a kind of geographical perspective? And are you able to quantify, so what kind of contribution to revenue growth it could offer in 2025?

So a couple of topics. So the first topic is that now the approvals are okay in CE Mark countries plus the FDA. Currently, the pipeline, the order pipeline comes more from the drug research and drug testing side, which is extremely good. They are not so price sensitive in general. And for sure, they have had the will to buy the product already beforehand. And now luckily, we have a product in place. Then I would be personally extremely disappointed that if we wouldn't be selling more than we sold MAIA earlier. So we sold steadily EUR 2 million to EUR 3 million per year. So there's an expectation for higher amount during the Q -- during the 2025. But Robin, anything you would like to add on the expectation demand side?

No, it seems like everybody within the sales. The specialists in the Board are extremely positive about the product and its outlook. So we're quite optimistic. But it's -- time will show, of course, very still early. But we do have a good solid number of orders in the tens of units already in the system, so...