CellaVision AB (publ) (CEVI) Earnings Call Transcript & Summary

Welcome to CellaVision Q2 report 2026. [Operator Instructions] Now I will hand the conference over to CEO, Steve Ferguson. Please go ahead.

Good morning, everyone, and thank you for joining us today. My name is Steve Ferguson, and with me is our Chief Financial Officer, Monica Jonsson. We appreciate you taking the time to join us this morning as we present CellaVision's results for the second quarter of 2026. Following the presentation, both Monica and I will be happy to take questions. As this is my first quarterly earnings call since joining CellaVision as CEO on June 5. I'd also like to take a moment just to very briefly introduce myself. Before joining CellaVision, I spent more than 25 years in international leadership roles across the life science diagnostics and health care industries. Most recently, I was serving CEO of Medix Biochemica in Finland, following senior commercial and operational leadership positions at Thermo Fisher Scientific or Phadia in Uppsala, and prior to that with Lundbeck based in Valby, Copenhagen. I'm really super excited to be part of CellaVision and to the challenge ahead, and I look forward to working together with our very talented team, our partners and all of you as we continue to build on the company's strong foundation to advance laboratory workflow, and diagnostic certainty through intelligent microscopy. I'm speaking to you this morning from Vancouver, where it's 2:00 a.m., so I'll do my best to keep our energy high during this call. So with that, please let's turn to our second quarter results. So CellaVision's second quarter represents a solid performance and recovery from the slower start to the year. The quarter resulted in net sales of SEK 200 million, an increase of 4.5% over quarter 2, 2025. Sales increased organically by 5.6%, where we saw a 1.1% headwind in currency and EBITDA for the period amounted to SEK 55 million, which corresponds to 27% EBITDA margin. EBITDA for the second quarter was charged with expenses of SEK 9 million associated with the initial cost of the CEO transition. Adjusted for these expenses, EBITDA increased compared to the same quarter last year. As we highlighted in the report, Americas reached an all-time high sales, fueled by large instruments, and this was driven by the accelerated workflow uptake among midsized and large laboratory networks. EMEA showed a sizable -- showed a stable result, but was still slightly affected by the now concluded inventory adjustment from our main distributor partner. And finally, in APAC, we maintained a steady development through -- though market conditions remain challenging, particularly in China. We see a notable uptake of the reagent business in both Japan and Australia along with a tender win for the UN, United Nations. The commercial launch of our Bone Marrow Aspirate application or BMA in EMEA marks an important milestone in our expansion into specialized microscopy. Initial customer interest and sales have been encouraging, reinforcing our confidence in this market opportunity and demonstrating our ability to translate our innovation, and our R&D investments into commercial results. We continue to progress outside of Europe with the FDA registration process for bone marrow with our aim of obtaining 510(k) clearance in the U.S. before year-end. And finally, the development of the FPM technology continues to progress through our development phases, forming the foundation of our next-generation hematology analyzers. And this strengthens our confidence in FPM as a platform technology for future innovation beyond hematology. These are exciting developments for CellaVision. And right now, let me hand over to Monica to present an overview of the financial development during quarter 2 2026.

Thanks. Let's unpack the P&L and cash flow. Net sales was SEK 200 million in the quarter, representing 4% growth or 6% organic growth against the same quarter last year. We had a gross margin of 70% and that entails also an increase in our amortization of capitalized development expenditures for bone marrow, and also the upgraded software program that we are amortizing throughout the full quarter. And here we are now amortizing SEK 4 million versus SEK 2 million last year. Operating expenses landed at SEK 100 million, equaling 50% of net sales. And if we unpack that, we see that sales and marketing expenses are kept on a stable level. Administration expenses were impacted by the costs of SEK 9 million, associated with the initial phase of the CEO transition. R&D costs before capitalization were SEK 45 million, just a little higher than last year. However, comparing to the same quarter last year, we have a lower capitalization of SEK 15 million versus SEK 20 million last year. And that results in an R&D cost of SEK 30 million. The lower capitalization is mainly due to different maturity stages of our ongoing projects and we expect to see some increase in capitalization from Q3 as projects are maturing. The EBITDA reached SEK 55 million with an EBITDA margin of 27%, and the increased operating expenses related to the initial phase of the CEO transition, of course, impact these results. Adjusted for this, EBITDA and EBITDA margin increased compared to the same quarter last year. We are continuing to invest in R&D with 22% of net sales. Our R&D investment programs are developing well and maturing according to plan. Finally, operating cash flow was SEK 29 million. Working capital increased by SEK 32 million during the quarter. Accounts receivable increased as a result of the higher sales and contributed negatively to cash flow, as did the increased capital tied up in inventory as a preparation for summer break. Total cash flow of minus SEK 58 million for the quarter included dividend to the shareholders of SEK 66 million. And our financial position remains robust with cash and cash equivalents of SEK 172 million sitting on the balance sheet. And let's go into the regional development.

Thank you, Monica. So just briefly a quick comment on the business by region. So if you look first at America, this is an all-time record high quarter driven, as I said earlier, by large instrument sales, tender wins and instrument refreshes. Sales increased to SEK 105 million, up from SEK 66 million last year. And really, this is a reflection of our strong partnership in the U.S. Our sales here are really being driven by robust demand in the large- and medium-sized laboratory segments but it's also boosted by strong order books in Canada and LatAm. And this reflects excellent marketing and commercial activities that have been carried out in the run-up to quarter 2 this year. In EMEA, sales amounted to SEK 75 million, which are slightly down on last year. Here, we see the full impact of the now concluded inventory adjustment from our main distribution partner. And we are confident that, that inventory adjustment has now been fully executed. The bone marrow launch that I referred to earlier, has generated initial sales and a lot of positive customer interest with commercial activities supporting customer evaluations at numerous sites. These activities have remained high throughout the quarter, supported by our presence of key industry events. And it should be noted that instrument sales in EMEA are above quarter 1 and above the same quarter last year. For APAC, sales amounted to SEK 19 million, significantly below quarter 2 '25. Now on the face of it, this looks extremely disappointing. However, there are underlying positives. Here, we see the double impact from China. We're trading market conditions today remain challenging for current trading. But also we have a tough comparison quarter for Q2 '25. This included significant instrument module shipments to enable us to locally produce in China, which, in the long term, will make us more competitive. But that quarter last year was particularly tough to compare against. If you look across the APAC region, reagent sales grew strongly, particularly in Japan and Australia. And this is excellent news for us because this is a recurring business. Sales were also boosted by a UN tender win, as I mentioned at the start. We quickly then look at sales by product line. Instruments really drove the quarter results up 7% to SEK 113 million. As I said, it was an all-time high for large instrument sales, particularly in America. Primary driver here is automated workflows of midsized and large laboratory networks. The order intake in EMEA is slightly affected -- or sorry, still affected by the concluded inventory adjustment from our main partner there. And there's a steady performance in APAC with sustained traction in key markets outside of China, as I mentioned. If we look at the reagents, sales increased by 11% to SEK 42 million in the quarter. EMEA reagent sales were in line with the same quarter last year despite temporary delays on shipments from our production site due to the recent heatwave in France. So due to excess temperatures, we had to requalify materials from the warehouse. And this led to some delayed orders, which had not happened, would have posted higher growth. In APAC with strong growth across all subregions, particularly in Japan and Australia. And then finally, if we look at software and other, the sales amounted to SEK 46 million in the quarter. And it should be noted that the software sales aren't completely synchronized with the instrument. Obviously, we sell the instruments, but there's then typically a lag or delay which would then be software would then be consumed once the instrument is actually installed at the customer side. So quarterly fluctuations in software sales have impacted the EMEA performance overall here. And then the other segment consists mainly of spare parts, consumables and currency effects. So if we move to Slide 6, just to summarize the overall picture for the quarter. Key takeaways this quarter, we delivered an increase in net sales of 4.5% to SEK 2 million. Sales increased organically by around 6% with 1.1% headwind on FX. EBITDA delivered a result of SEK 55 million, which corresponds to 27% EBITDA margin. And this is in line with typical returns given the costs associated initially with the CEO transition. The commercial launch of Bone Marrow Aspirate application marks an important milestone as we expand into specialized microscopy. We continue to progress the FDA registration process, and the aim is for F10 clearance in the U.S. before year-end. And from an innovation perspective, FPM technology, as I mentioned, it has progressed through our internal development fees significantly. FPM will form the foundation of our next-generation hematology analyzers. This progress strengthens our confidence in FPM as a platform technology for future innovation beyond hematology in adjacent markets such as pathology and cytology. These are excellent markets to be able to penetrate. The results that we're seeing reinforce are confident in the market opportunities we face and it demonstrates progress in translating our investments in innovation into commercial results. As I step into the role of CEO, I'm committed to building on this momentum by combining our strong innovation portfolio with more focused commercial execution. And with that, I'd now like to open up to questions. I will be ably assisted with by Monica today. So if there are any questions, I can answer, I'm happy to do so. Anything that requires more information or it's beyond my 5-week knowledge gap, I'll hand over to Monica. But very happy to receive questions.

[Operator Instructions] The next question comes from Christian Lee from Pareto Securities.

Yes. I have a couple of questions, and I will take them one by one. The first is regarding the exceptionally high growth in Americas. And since you already have a high large instrument penetration in North America. Was this growth driven by Latin America or by replacement cycle activities?

Okay. Thanks for the question, Christian. The main driver for sales here is robust demand for the larger instruments in the medium and lab segment. And this is -- the drivers here again were tender wins and instrument refreshes in those segments. The LatAm and Canada business are showing promising growth within that. But the main driver here is that lab segment, those 2 large segments.

Okay. If I remember correctly, I believe you have almost 100% translation rate in North America. So how come you can show this kind of growth rate in the second quarter?

Yes. I would say that we have a high market share in the large and medium lab segments. So there's refresh and tender wins that are coming up. They are continual. So there's a life cycle laboratory systems that we have an opportunity to win new business, but also to refresh. But there are other segments outside of that, that probably touching on commercial focus, I'd like to explore more. So the smaller labs where perhaps our partners aren't present. There may be more opportunities for growth here in the future for us. It's by no means saturated, I think there's still room for growth in America and that region.

Perfect. My second question is regarding EMEA and with the inventory adjustment now concluded at your main distributor there. How do you see the Q3 demand trajectory? And could you also perhaps give us color on the share of EMEA sales that this partner is representing?

Yes. So the share, we have a strong partnership with our main distributor partner and the majority of our business goes through them. Quarter -- the order book looks promising for EMEA. It looks like we have a strong order book for quarter 3 overall, but we're confident that the inventory the patient has now been run down, and we're seeing orders in Q3. Monica, if there's anything to add there?

No, that is correct. So inventory adjustment has been completed, and the orders are coming back to normal levels now in Q3.

The next question comes from Simon Larsson from Danske Bank.

Maybe also following up on the Americas print. Just wondering if you are aware of any channel stuffing in this very strong second quarter and maybe how you could help us line out the future here for the second half, if it is something to be extrapolated or if, yes, should this sort of be a more normalized pattern in second half for what you see in Americas?

. Yes, Simon. I missed a word there. Sorry, could you repeat the what stocking?

Yes. So if you're aware of any channel stuffing or like stocking effect in Americas, yes, given the strong print, I mean, how we should think about it when we think about our estimates for the remainder of the year in America specifically?

Yes. So I would say there's no evidence there at the moment, Simon, if anything, it's the opposite. The inventory normalization, if that's the right word, that impacted us in EMEA. There was also some of that in America as well. And we did see -- we've seen units being consumed. So we have -- as a response to this, we've had much stronger dialogue with our partners. And we have a set of processes that will give us much clearer, much more transparent visibility into their inventory levels. So we're confident that actually the order book for both America and EMEA will be robust for the second half of the year.

That sounds reassuring. And also on the Bone Marrow Application, which I think you sold your first couple of units here in the quarter, are you still sitting to your former statement on -- I think it was like 1 or maybe 2 percentage point incremental growth here for second half from that product? Or what internal expectations do you have for that product here in the second half?

Yes. Thanks, again, Simon. We maintain the same view. The initial feedback, there's obviously a long lead cycle in in vitro diagnostics, especially in diagnostics as customers evaluate new technology, they have evaluations on site, qualify the instruments and the analyzers on site. So there is a long lead cycle. But having said that, the news that is coming back from the market, the number of valuations and the customer reactions is extremely encouraging. And we still hold our position that by year-end, the bone marrow sales should account to 1% to 2% growth, that range.

Perfect. And also in APAC and the reagent side of the business, a couple of strong quarters in a row now. Just curious to what drives that adoption? What kind of users, if you can name any countries, stuff like that, just to get a grip of that business?

So the main -- in the quarter, the main customers are anyone who's producing or staining microscope slide. So that could be any laboratory, any research institute, it could be partners that we're selling through. The growth is encouraging. As you said, it's sustained now. We're starting to see momentum in that area and it's a role, it's a model for us to look at for the other regions. Looking at the country specifically in APAC, it's Japan and Australia that have -- are really driving the growth. And like I said earlier, this is pleasing because that is recurring business for us. So those are the 2 that would highlight in that. And that's despite significant headwinds in China for not just CellaVision, but for the industry broadly. So to see that the reagent growth in APAC is very, very encouraging.

Yes, and are these like pilot projects that are now transformed into returning customers, so to say? Or how is that sort of -- how was the development been like when it comes to...

Yes. Maybe, Monica, you can add to this, but the business that we see coming from Japan and Australia in Q2, that is definitely recurring. I think the majority of the sales elsewhere tends to be recurring. But Monica, if you want to comment on that?

Yes, you're right. And we have spent a lot of resources on really getting into those markets here in Japan and Australia, and it is recurring revenue.

Yes, good. Maybe a final one from my end to you, Steve, because I noticed in the CEO letter that you talk about commercial execution a couple of times. So I was just wondering what that sort of entails for you given the tight relationship with your main partner today. Maybe one would think that there's maybe not that much you can tweak in the go-to-market strategy. Please correct me if I'm wrong. I mean, what are you seeing when you speak about commercial execution, what can be done better or more from CellaVision side?

Great question, Simon. I think firstly, let me talk about our major distribution partner. This is in the fact that we want to be more commercially focused is actually a reflection that we want to invest more in that relationship. I think that partnership is successful for both parties. It has been a great relationship, and we want to make sure that we sustain that and nurture it. I think there's a lot more that we can do we are serving the customers that we jointly serve extremely well. But there are other segments out there and other -- so the laboratory segments, where perhaps our partner is not playing that I would like to get closer to. And that could in turn throw more opportunities for the partnership. But I want to make sure that every laboratory everywhere in the world that has a microscope is aware of the CellaVision technology. And that's an opportunity for us to take more responsibility in that, looking more at the horizon and really understanding the customer need more closely. But I would like to stress that we do that in partnership with our major partner globally. The other thing to talk about is as we expand through FPM, there could be other segments outside of hematology, that we really want to get to know better. So that's -- when I talk about commercial, I want to really understand that we understand the customer need, the end customer and that we're continually evolving our solutions to meet those needs fully.