CellaVision AB (publ) ($CEVI)

Welcome to CellaVision Q1 Report 2026. [Operator Instructions] Now I will hand the conference over to CEO, Simon Ostergaard. Please go ahead.

Thank you very much, and thanks for dialing in to this quarterly financial call, I have our CFO, Monica Jonsson, with me, and we are pleased to present our results and answer any questions you may have subsequent to the presentation. So we just released the first quarterly report, and it was with a header, soft quarter due to lower sales in EMEA. The quarter resulted in net sales that decreased by 14.6% to a revenue of SEK 166 million. So that's an organic decrease of 6.6% as we had almost 8% headwind on currency. EBITDA amounted to SEK 40 million, so that corresponds to 24%. And as we say in the report, the -- and given the title here, EMEA is affected by inventory adjustments with our main distribution partner and that is what has caused this significant negative growth compared to the comparable quarter last year. So that's the bad news. There are no fundamental changes to our business model or the market conditions but this is the situation that we announced today. We are also announcing that we have continued momentum in our strong region in Americas, and we continue to see double-digit organic growth in Americas. And furthermore, and this is getting more broader within APAC, we see traction to convert labs, and we see positive development coming out here in Q1. With regards to our strategic direction, since we've been investing in new product development for quite some years. Now we are at the -- we're starting to launch these new components. And there are good examples coming out here in Q1. So we have launched the CellaVision Bone Marrow Aspirate application after we received CE Mark that was planned for Q1, but we got it just before Christmas 2025. So we have started our SoMe campaigns, we've started participating at conferences, and we're in the process of training our distribution partner, Sysmex to really position this, I would say, great product to the clinical community. So we expect to see a funnel being built throughout 2026, and that will result in revenues contributing in the second half of this year. We've also launched, globally, our updated software. This is the largest software upgrade for our platform ever. So it contains both user interface, improved workflow features and also, in fact, for new DI-60s, a higher turnaround. So more blood samples can be processed. So it's a very, very powerful package that is now available, both to upgrade existing networks but also as part of the new DI-60's [ result ]. And then finally, in our investment program, it is important to emphasize that we are still extremely confident and we're pushing our next-generation solutions with FPM both for hematology and then we're exploring our opportunities very successfully to also be deployed in other areas such as cytology and pathology. So let's unpack the P&L. So as I said, SEK 166 million, representing minus 15% growth or minus 6.6% organic growth up against last year. We had a gross margin of 68% and that entails also an increase in our amortization of capitalized development expenditures, given the bone marrow and the upgraded software program that I just talked about. So here we are now depreciating SEK 3 million versus SEK 2 million. Operating expenses landed at 51% versus 41%. In fact, it's equivalent to a higher spend of operating expenses of SEK 5 million. And that SEK 5 million is actually also the difference in terms of what we are capitalizing. So EBITDA of SEK 40 million, as said, so 24%, which is, of course, lower than our expectations, just like -- which is a function of the miss in top line that I will explain a little bit later. We are still investing in our R&D, but there are changes also to the maturity or the early stage program that we are running, which is also a function of how much we can capitalize. So that's also part of the reason why you see a different capitalization of SEK 12 million this quarter versus in the comparable quarter, SEK 18 million. So we had a lot of hardware investments in the comparable quarter, which are not sitting in this quarter. So that's a function of the program. And then finally, operating cash flow-wise, SEK 62 million. We had a SEK 40 million and then plus the working capital. We had accounts receivable that contributed positively to our operating cash flow of SEK 62 million. And then we had investments and financing activities that are deducted and that results in a total cash flow of SEK 42 million. So still, as always, a positive cash flow. And now with cash and cash equivalent, the company has SEK 230 million sitting on the balance sheet. So the regional highlights. So America here, it is really important for me and the team and our partner to emphasize the strong momentum we have with 13% organic growth. So 2%, but negative currency effect of 12% gives us the 13% growth. We saw continued strong adoption of our integrated large instruments for the hospital community around the U.S. We are focusing and pushing the concept of connected labs to position the DC-1 in these integrated health networks. So we are working very strongly together with our American partner organization to push this. We also saw a little bit on speaking about the small lab segment that is served by the instrument, DC-1. We saw actually a little bit of instrument decline, but there was also a little bit of a pent-up purchase of small instruments given the tariffs and uncertainties throughout 2025. There's a lot of activities going on to really serve this segment, and there is a lot of appetite for that value proposition of connecting that with our integrated solutions. For EMEA, yes, we mentioned some market uncertainties. I'd say, demand-wise, there is still really an ongoing appetite to digitalize the labs across the different markets that are immature and mature in very different degrees. Say what we hear is that public funding is a little bit under pressure given the defense situation of Europe, which does delay certain tender specs. So that's kind of the market condition. The minus 32% growth or minus 26% organic growth is not related to the market. This is really a situation around the temporary reduction in excessive inventory that hit us in this Q1. So the root cause here is pent up a number of units sitting in multiple affiliates probably over some time that has happened to mitigate deliver risk from ERP implementations. So here, as our partner Sysmex comes to their fiscal year, which ends by the end of March, then there has been a strong push to cut down and really examine where they have inventories, and that has resulted in obviously less orders, significantly less orders for us in this quarter. And that is really what we are reporting here. It's important for us to emphasize that we flagged that -- is it over? Is all inventory done in Q1? We cannot promise that. There may be something that sits in the second quarter. So stock may still remain in Q2. However, we expect better installment sales in Q2. And we don't expect negative growth, but it's a little bit too early to say what growth will come in Q2. So we are being extremely transparent and conservative here, but I think it is really the best of the knowledge that we have currently. But as I said, it's early days with one month into Q2. APAC, here, we landed at 10% growth, so SEK 22 million, of course, up against the -- it's a smaller number, so to speak. Having said that, the positive thing is that we start to see traction across APAC. We have previously been very exposed in China and we are seeing diversification and a broader demand for our solutions across Southeast Asia, which is super positive. We'll take the numbers, which on this slide is cut per product category. And yes, for the instruments, I think what I'll highlight there is that the miss that amounted to -- so from the SEK 86 million in instruments versus the SEK 115 million in the comparable quarter. That is essentially the EMEA miss that we are seeing here. For the reagent business, a stable business. I would say what we have managed to do is over the years, if you followed APAC, which has been insignificant. Now we're getting to a level where it starts to really contribute. It's across multiple countries as we have launched our RAL classic stain portfolio across APAC together with Sysmex. And here, this quarter, we reached almost SEK 4 million versus a comparable figure of SEK 1.4 million. So we are starting to see some traction here, which is really the signal of a long journey, which is extremely positive. For software and others, minus 2%, so pretty much flat. I would say, though, that the software is less than it was in the comparable quarter, and that is a function of less instruments. And then there's a little bit more on others, which entails spare parts and also our FX. So on this slide, the final slide here, our key takeaways. Yes, we are extremely transparent around our softer quarter, which is really due to the lower sales in EMEA. And this is the root cause for having only minus 7% organic growth, which is, of course, not in line with our expectations. However, we still think that there is opportunities across EMEA, and that is also the signal we get from our partner that there are multiple opportunities across the different segments we operate in. For Americas, Strong momentum, it continues. And also here, I would say there are opportunities with new products, and that leads me into the Bone Marrow. And other news that we report is that we have filed to the FDA, our Bone Marrow Application. So we're in process of registering our Bone Marrow Application as a 510(k) and get clearance for that for the U.S., so we can start commercializing the Bone Marrow Application together with the DC-1 and our Remote Review software as a package to support the clinical that are diagnosing leukemias, lymphomas from bone marrow. And then again, I mentioned our software upgrade. There are multiple global training activities going on across the Sysmex organization to position our Software 7.2 which allows the hospitals to get improved user interface and a better workflow, more speed if they go with the new DI-60s. So that's really another pivotal thing. And then as also mentioned in the beginning, we are extremely confident, but also extremely committed development-wise to continue to push our relatively mature development program for our next-generation solution that entails our new microscopy technology under the name of FPM, Full Ptychographic Microscopy and which we're also exploring and seeing opportunities in adjacent segments such as cytology and pathology. So with that, I think I will close the presentation and then Monica and myself would be happy to take any questions you may have. Thank you.

[Operator Instructions] The next question comes from Simon Larsson from Danske Bank.

So maybe starting off with the obvious question here. on the inventory dynamic situation in EMEA. Could you help us understand sort of when the destocking take place? And how do you see your stock churn out here, given that you say that this could potentially also affect the second quarter? So any more flavor here would be very helpful.

Yes. Thanks, Simon. I think when it took place -- so you can say we were informed in this quarter. So I think the increase is probably throughout last year when there were ERP implementations. That's kind of how we understand the situation. And we believe that the majority of the stocking is probably digested throughout this quarter. but there may be somewhat of a spillover of a little bit stock left in the subsequent quarter. That's the best information we've gotten.

Got you. And also, if you could give any more color on the European public health care budget constraints that you mentioned also. What are your customers telling you now? And do you have any kind of time line for when things could potentially improve?

No, I think what we hear is that, in general, and I think we all know that there is a debate in all countries around investments into the defense, and that is driving a little bit of pressure also on the health care side. So that's what we also -- when we discuss this with our partner with certain countries, it's not all countries, but there are countries -- as an example, the U.K. where there appears to be a little bit of delay of tenders coming up as a result of the demand for financing other activities outside health care.

Makes sense. And also on the sort of focusing on America's margins, large instruments seems to be doing quite all right, but small instruments are still a bit muted. Could you help us understand, I guess, what initiatives you are taking in the go-to-market strategy to really sort of reach your full potential with the DC-1 instrument on the smaller customer side?

Yes, sure. Yes, I think it's doing okay. I would modify it. And I think they're doing extremely well. It's a large market where our partner has the vast majority of the market. So they continue to win across those mid and large segments. There is a lot of activities going on to embrace also the small lab segment and especially around the IHNs, the integrated health networks where smaller labs are connected and administered under the large lab umbrella. So you can do the block work distantly by placing these DC-1s, and then you can remote and take the diagnostic decisions centrally at the large labs. So that value proposition and the way to set out these digital networks both with a [ certain ] structure and so forth. That's an ongoing training exercise towards our partner, so all the reps but it's also a demonstration exercise towards the integrated health networks in the U.S. that takes place in a very sort of structured and a very focused way. And that value position has been, let's say, been -- increased focus has taken place as an example, also during our national sales meeting with our partner, Sysmex this year. This was a key focus. And this is what we believe will be part of the conversion of these labs over time.

Yes. Okay. Good. And maybe the final one from my end. On the Bone Marrow Application, I think you're writing that you expect it to contribute positively in the second half of the year, I mean what kind of volumes are you expecting? And should we read this as it will be sort of meaningful to group growth already this year? Or is it more a '27 story?

No, I think what we do here, it's always -- when you talk about launch, it's very important also to be aligned on what does launch mean. The first step in our launch was actually getting the registration in place so that we could start the commercial launch activities and that is where we are. We have positioned, we've made all the launch material. We've launched -- we've gone live on SoMe's channels, various SoMe channels. We are very active last week. Last weekend, we participated at the ISLH, a big European show for bone marrow and hematology. And here, we presented our solutions. So we are launching marketing-wise. And obviously, the exercise in parallel is to train Sysmex to explain how you -- the value of our product, how it's -- to demonstrate it and to persuade the clinicians essentially, that's the sale process. So we're in the process of really getting Sysmex trained and competent in conveying our product and our solution. And that's what takes place pretty much from now on and onwards. And that will gradually build a funnel, and that's what we say that we expect that to translate into sales. We have -- the first couple of sales are coming in but it's more meaningful to talk about it in the second half, I would say. But we hope it will contribute -- we expect it to contribute with 1% or 2% in terms of company growth, that would be our ambition level. But let's see as we start building the channel, we are very confident that we have a very, very good offering. That's the initial feedback we get from the community.

The next question comes from Christian Lee from Pareto Securities.

I have a couple of questions, please. I think you mentioned that you didn't expect negative growth in EMEA in the second quarter if I heard you correctly here. Does this refer to EMEA overall or specifically to instrument sales in the region?

Yes, I think my comment and thanks for asking that question because I want to be clear on that. So my comment relates to the inventory issue. So that relates to the instrument. So there -- but I would say that it probably translates to the quarter as well. That would be my initial feeling around that. It will not be what we've seen in Q1 but we are being very transparent that we don't necessarily see the actual stock level being depleted in Q2 but we do expect an increase if we compare Q2 to Q1. We do expect that we will sell more instruments, and we will have no negative growth on that.

Okay. Clear. And there also appear to be elevated inventory levels of smaller instruments in the Americas. Do you see a similar risk of inventory overhang impacting sales in the second quarter there?

For the U.S., specifically, Christian? Is that right?

Yes.

For the U.S., I don't foresee any inventory issues with regards to the large instruments, only the small instruments. That could still be the case. That is a little bit of a journey and also because of the major uncertainty and mixed signals that has come out with regards to tariffs, that has influenced the stock situation on the American side. Having said that, I'd say after the sales meeting, we ramped up and focused on this connected less concept and we -- and our Sysmex colleagues are really hanging on to that now and really doing a great job in pushing it. So we expect that the demand will increase throughout the year.

Okay. Perfect. And if we exclude the impact from smaller instruments and the currency headwinds in the first quarter, would instrument sales still have shown a double-digit decline or being closer to flat?

Monica, maybe you can help me out here?

Yes.

I would...

More closer to flat.

On the large instrument, right?

On the large instrumentals. In EMEA, we're talking about.

Yes, maybe [indiscernible] maybe slightly positive.

So flattish for the larger instruments or for the whole instruments?

I think it's fair also to emphasize here that -- so that's why I'm doing the math. We are up against a very tough compare. That's important to say. So the Q1 in 2025 was actually a very strong quarter in EMEA. Having said that, that's where we aspire to be. But just to get -- when we talk about growth, I think it's important to emphasize what we're up against.

Okay. And my last question here. R&D expenses almost SEK 30 million in the first quarter. Should we expect this level to persist throughout the year? Or was Q1 elevated?

[ Yes ]?

Yes. So maybe I can take that one. I mean the SEK 30 million on R&D spending is also related to that we are capitalizing less at the moment. We see that the organization is working on early-stage projects, and we are looking into starting to capitalize some of those coming up Q2, Q3 somewhere. So when we start capitalizing that, then you will see somewhat of a decrease on R&D costs at that stage. So Q2, Q3, you will see somewhat of a decrease. But that will come with an increased CapEx then.

Yes, Christian, it's a little bit of a portfolio shift due to the accomplishment of launching these products. So that's the process we go through.

The next question comes from Ulrik Trattner from DNB Carnegie.

Just essentially a few follow-ups on my end. Like looking in hindsight here for the EMEA region, I don't see a single quarter throughout '25 where we're supposed to see any type of elevated levels of inventory buildup, or does this gradually happen throughout the entire 2025? Because if I look at the first half of '25, you had SEK 88 million in sales. If I look at the second half of the year, you had SEK 88 million in sales. So where are we supposed to see the inventory buildup in historical numbers, is essentially my first question, please.

Yes. So it's spread out. And it's spread out -- to the best of our knowledge, the first event actually goes back. So there are two disruptions taking place. One was back in autumn '24 when Sysmex changed their inventory, their warehouse in Hamburg, which was a disruption and then followed by ERP SAP implementations. That has caused certain affiliates to -- or quite some affiliates to actually build up a little bit of local stocks, so they were able to supply and install the blood lines when the customers wanted to do so. And that has sort of persisted gradually over time during -- both to mitigate any disruption from SAP and the part of the pieces from the disruption of the distribution center. So that is what has been setting in apparently throughout quite a few quarters, small blips which adds up to now prior to this fiscal year closing then there was an attempt to really work on the capital tied up in instruments. So their working capital, their inventory level. And this is where we saw this major dip, which came a little bit as a surprise on our side but that is the situation.

Okay. So just to get some clarity, if we were to adjust for this, throughout 2025, we would have sort of reach ex growth? Or like you presented 5% growth in 2025. Yes, some negative FX effects, some headwind there, but there's not that much growth from EMEA in 2025. So adjusting for this, was growth negative in '25 by your estimates?

No, I'd say more flattish.

Okay. I understand your uncertainty here. And I guess, lack of transparency from Sysmex' side. But what's your sort of confidence levels that we have sort of churned out the built up inventory in the first half of '26 given the sort of prolonged buildup of inventory heading into this?

Yes. I think it's important for me to emphasize that we don't -- we would never excuse -- not for being transparent. I think this was also -- they're a much larger organization. So this is a symptom of running a global business -- in EMEA with multiple entities. So this also came to their attention. So -- and then they have been super transparent around the situation. I think that's important for me to emphasize. Having said that, and that's what we try to communicate, the biggest hit inventory-wise, we've already taken that and then there may be some spillover. So if they don't come down to quite the level, then there will be a little bit sitting in Q2. However, we already see that we're on a positive trajectory when we compare to this quarter. And this is why we are confident that we are at least not coming out with negative instrument growth in this quarter that we're in. We can certainly sort of emphasize that. Having said that, over time I still think that there is -- so we're still working on the market opportunity. That is also emphasized that the tender opportunities and the market opportunity, they remain. So there's a solid foundation for the business still. Of course, the macro environment, we sense that it's more influenced in Europe than what we see in the U.S. There's -- and that's not necessarily a macro piece. It's probably also the more private hospital setting with the networks, et cetera, where we have a working model with Sysmex.

And then just on the market environment. And as you mentioned some delays in terms of tender activities. But even from sort of absolute numbers here, Obviously, you have this sort of inventory churn but I'm trying to sort of find some type of confidence level here in absolute numbers. And I'm not really sure sort of which period historically to look at. Should we look at post-COVID, Should we look at 2025 year, are you supposed to have interest rate fear? Is it a worse macro environment now compared to '25?

Probably a little bit more unpredictable. That's kind of the signal we get, but it's getting a little bit more unpredictable as opposed to a year ago. That would be the -- I wouldn't go back to COVID and so forth, I'll just say sort of -- but if your question was also related to the inventory period, I would say, 6 quarters.

The next question comes from Ludvig Lundgren from Nordea.

A few follow-up on my end as well. So starting off in EMEA, I just wonder if there -- you saw any effects or weakness in the Middle East here in Q1? And if you expect any effect from this in Q2?

Yes. Middle East, we've actually seen effects from -- on the reagent side, where it's been very challenging to deliver. So we've definitely seen some impact there. That would be the majority or that would be the main point I would emphasize here, Ludvig.

Okay. Great. And is it possible to quantify that, the few million lost sales or something?

Yes, that's probably appropriate.

Great. And then secondly, I wonder on the Bone Marrow Application. You mentioned that you have filed the 510(k). So just when was this filed? And have you gotten any indication of when they could come back to sort of say, I think they typical aim for a 90-day period, right?

Yes. No, that's right. We follow also what is the process formally and so forth. So I think to the best of my logs, we filed on the 11th of March. And then we have started the interactions with the FDA. We are also sort of saying, okay, process-wise. I'd say in general, we get the feedback from the diagnostic community that the response with FDA has probably increased sort of lately, I'd say, over the last year or two. That's kind of the general sense in the industry. So if you ask me sort of when do we expect it to come, I'd say I'll emphasize, of course, we need to qualify to get the 510(k). That's the first thing. So there's always a little bit of profitability there. Having said that, we expect it to go well and to have this in 2026. Best case would be mid-26. That's a little bit on -- that's the best case. But assuming we get it, then we do expect to get it sometime in this year. There is some phases in terms of question and, et cetera, and they stop the clock. And so we're up against a time line, which is pretty controlled. But I'd say 2026 is what we aim for. And hopefully, we have good news at some point as -- the earlier, the better. So we obviously also started our launch considerations with our partner on this pivotal products to supplement our offering. Thanks.

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 first of all, thanks to everybody for taking the time to dial in and following us here at CellaVision. So I will close the call by saying that the QS1 results. They, of course, represents a mixed bag across the regions. It is important to confirm that they -- we have momentum in our strong market position in the U.S. We are reporting an unforeseen inventory adjustment in EMEA. So we said this is a temporary blip, which is also the nature of our business model, I should say. Not that we like surprises, but that is what we need to deal with. And then I think it's also important to emphasize that we are really expanding across Southeast Asia. So I'm looking forward to share other further development in those regions. And then finally, you've seen that things are starting to come out of the Power of Focus with the product launches. So we are very excited about that. And I want to use the opportunity to close the call also by thanking our partner organizations both on the development side during the -- when we have assessed our products, but also now that we are launching and we are training the staff, and we are rolling it out to build pipelines that can translate into additional sales. So there is -- we can just emphasize that our leading product offering and the underlying market demand, it remains intact and unchanged with this report despite this blip on the inventory side. And with that, I'll close the call, and I'm looking forward to report the next time. We will have our Annual General Meeting here in Lund on the 28th, so on Tuesday. And then the next interim report will be launched -- published on the 17th of July 2026. So I'm looking forward to present that report and to take any questions you may have. With that, I wish you a good day. Thanks for listening in.