Revenio Group Oyj (REG1V.HE) Earnings Call Transcript & Summary

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" SEB, Research Division

" RBC Capital Markets, Research Division

" Danske Bank A/S, Research Division

" DNB Carnegie, Research Division

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" Nordea Markets, Research Division

” Good afternoon from Finland, and welcome to the Revenio Group Q3 Earnings Call. My name is Jouni Toijala, and I'm the Group CEO. And as always, with me, we have here as well Robin Pulkkinen, our CFO. I'm going to go through the highlights for the quarter. Robin is going to recap the financial performance, shareholders, and financial guidance for 2025. Q3 so an extremely good quarter for us. Top line, EUR 25.9 million, 8.1% growth. From the currency-adjusted terms, the growth was 8.7%. Operating profit, EUR 6 million, up EUR 9.1 %. If you look where the growth came, so a really good quarter in Europe, especially France, Germany, and the U.K., they were growing nicely, and the growth was quite a lot dominated also by screening-related device and software sales. Also in the U.S.A., good growth, especially in dollar terms, but slightly muted because of the exchange rate impact. So Robin is going to cover a bit more detail the foreign exchange rates in the U.S.A. and also in the APAC. APAC fell short of the targets, and the logic mainly was related to the strengthening euro. So we sell in 2 currencies. So in the U.S.A., we sell in USD, and for the remaining part of the world, Europe, LATAM, and APAC, we sell on Euro terms. Then, good news from the software solutions part. So we also launched the Altus, our data management platform running on cloud in the U.S.A. during the review period. If looking at the whole first 3 quarters, we are currently in the middle of the guidance. So we are going to, of course, reiterate the guidance. So we are on the net sales perspective, EUR 78.5 million, reported growth, 7.5% currency adjusted, 9.1%. Profitability on a good level. And if we look at the other events, as I said earlier, we have been able to grow really well the screening-related hardware and software sales, and then also MAIA Micro perimeter was launched and was in sales already starting from the quarter. So I hand it over to Robin.

Thank you. So, going through the numbers a little bit more in detail. So like Jouni said, 8.1% growth in the third quarter and 7.5% for the whole year. Some might have thought the FX impact would have been higher in the third quarter. Actually, if you remember, the second half of last year, the FX was quite of a roller coaster. So the third quarter in the comparison period had quite a bit of headwind. And then vice versa in the fourth quarter, the last year, we had almost EUR 900,000 of tailwind in the numbers. So, looking at the fourth quarter, most likely the FX-adjusted growth, there will be a bigger difference compared to the reported number. Gross margin is at a very good level. Of course, dollars are pushing that down, but then we do have some costs that used to be posted in the variable costs related to commissions that are now in the OpEx side. But also, we've had quite nice deals, direct deals where we've gotten a better sales price and also saved in some of the outsourced reps' commissions in the U.S. and also in Europe. So the sales mix has had an impact there. Overall, profitability growth in the third quarter as well as the whole year. So if we look at the adjusted operating profit, up 11%, 11.5% and for the whole year, 16.1% Basically, there's been roughly as many adjusted costs in the reporting period as well as the comparison period. So $700,000, $800,000 in both. So in a way, it does not really -- if you look at the year-to-date number, it's the adjustments are pretty much as big in both lines. EPS is up this quarter if you're looking at the third quarter FX rate. So the bigger items when you look at the financial expenses for us are basically the euro against the U.S. dollar and the U.S. against the Australian dollar. Those were pretty stable throughout the third quarter. So there are, I think, basically very close to 0 financial expenses in the P&L. But in the first half, if you remember, there was like almost EUR 2.5 million of those. So those do pull down the EPS for the whole year or year-to-date. So in the third quarter, we didn't have those unrealized FXs. Sales growth in more of a graphical view. Basically, looks pretty similar to what we've seen before. I think the fourth quarter is always the strongest quarter for us. That's been at least for the last 10 years or even longer. There's no reason why we won't think that wouldn't be the case this year as well. And of course, we are looking to finish the fourth quarter well, also in terms of the guidance, to be able to keep the guidance that requires that we do well in the last quarter as well. EBIT improved. So same thing as the sales, the last quarter of the year typically is the quarter where we make the most profits. Looking at '23, it's roughly 35% of the annual EBIT was done in Q4 last year, and 36% of the EBIT was done in the last quarter. So, something similar, if we can. So the business model is quite scalable. It's really driven by the top line. So the OpEx is rather fixed or very fixed. So in a way, the higher top line drives profitability as well. The same for the guidance. So with the higher top line to keep the guidance, most likely, unless something very surprising happens, it should mean a very good quarter, also from the profitability point of view. Cash flow. So slightly higher than last year. There was some on the working capital, and the payable side went down. We haven't actually had many orders from the contract manufacturers in the third quarter. So that pulled it down slightly. Also, the finish for the quarter was very strong. So, actually, September was clearly the strongest month for the quarter, and that resulted in the accounts receivable going up. So those 2 combined had an impact on the cash flow as a whole for the quarter. The unrealized FX from the first half of the year actually doesn't have any impact on the operating cash flow. The balance sheet remains strong and unleveraged. The net gearing is back to negative. So it always jumps up when we pay dividends, and then we build the cash balances again, and it goes down to negative. So we're approaching again the recent history record highs in the equity ratio, almost 80% of the balance sheet at the end of Q3. On the shareholder side, William Demant is still the biggest owner. The whole top 10 list is more or less the same. But William Demant actually did increase its ownership in the third quarter. So at the end of the second quarter, they were below 22%. So they've bought basically 2.5% more shares during the quarter. The selling side is not really fully clear to us yet. So the shareholder registers don't show exactly where they bought them, but there are some of the bigger owners that don't have verified data for the last day of the quarter yet. So, probably in the next month or so, we should know where those shares came from. But basically, the Finnish ownership versus foreign ownership is exactly the same as at the end of Q2. And on the country level, the Denmark part, of course, went up while Demand bought more shares. But the other end of that trade is still a bit open in the systems. The guidance is basically unchanged. So the exchange rate adjusted net sales are estimated to grow 6% to 15% from the previous year, and profitability, excluding nonrecurring items, is estimated to remain at a good level.

Thank you, Robin. I think it's time for questions.

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

This is Nikko from SEB. I have a couple of questions, and I'll take them one by one. Starting with the MAIA microperimeter, which you mentioned that it has been very well received in the market in your report. So, how big was the contribution from that product in Q3? Are we talking about EUR 1 million or more?

We don't disclose the exact sales numbers. The MAIA is still selling only to the pharma. So it is there are not that many deals that we close, but they tend to be bigger in size. So there is a monthly variation quite a bit. But I don't know, Jouni, do you want to open more?

Nothing to add much on that front and except that we haven't started marketing the product much on the product. So we are delivering the orders that we have got and the new deals, which we have in the pipeline. But we haven't done aggressive marketing and sales for the product yet. But also from the production side, so no production limitations. So we are able to ship the product, which is, of course, good because it's a new product.

But there were some of those deliveries in Q3.

Yes, yes.

I was just wondering kind of the volume growth on the other portfolio than the microperimeters, so I was trying to figure out whether there is something that you mentioned the fundus imaging and the screening side was doing well, but was there something that wasn't doing as well? Or can you open those a bit more?

So if you look in general, so tonometer business was growing, the fundus imaging and perimetry business was growing, software business was growing. Where we had the differences was that Europe was very strong, the U.S. was strong, especially in USD terms, then because of the lower local in APAC. So the growth in the APAC was not as high as we were expecting during Q3. Now it looks better in October. But the growth in APAC regions for certain key countries was slightly muted, would you say, so Rob?

Yes, or even down during the quarter. So if the APAC had been able to reach even a flat year, I think we would have had a really, really strong quarter. So I think it's really APAC driven, maybe there's a bit softer, or that's what was the soft part for us within the quarter.

But out of the kind of product groups, if you would exclude the price increases, did you see growth in all the product groups as well?

Yes. Yes, we did.

Then continuing on the price increases, which you mentioned that you have already agreed on in the U.S., I guess, in addition to the one you already made at the beginning of the year for the whole portfolio. So were they already visible now in Q3? And is it still the plan that you are aiming for to cover the whole tariff impact with this price increase?

So we already did the slight increase for the probes during Q2. So in terms of the probe prices, the price increases have already been in already during Q3. And now we are bit by bit when we start to run out, as an example, imaging business or autonometry hardware. So then we are going to increase the prices.

Yes. I think we're very close to that now with many devices. So we are now starting to ship the tariff-impacted inventory, which will then, of course, increase the prices, but that does have an impact on the percentages, of course. So we will not be able to increase the prices with a margin. So basically, it's more or less a pass-through, if that's the right word to use. So we increase the prices to cover the additional tariff by product.

If specifically, Nikko, you were after the answer to the question that, as an example, did we have higher prices for tonometers and fundus imaging devices during Q3 in the U.S.A. So no. So we were shipping the tariff-free stock. Already increased.

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

I had a couple, please. I'll take them one by one. Regarding iCare ILLUME, you mentioned it was a strong quarter in Q3. Could you talk about the kind of where you saw the strength? Like, were there more accounts kind of using kind of signing up to iCare ILLUME? Or was it kind of greater usage in the existing accounts, or a mix of both?

So if you first recap the ILLUME solution, so it's a combination of the hardware DRS plus the ILLUME cloud solution, plus then the iCare RedCat AI. And where we saw the growth, so we saw extremely strong growth in Europe, it comes to the installed sites or new customer sites. So there were a huge amount of new sites in general now in use during the Q3, also Q2, Q1. So amount of sites is increasing. For us, that means that we have been able to then also sell quite a lot of new hardware related to the ILLUME sales, so an impact on the DRS+ sales. And then we have also been able to increase the actual AI report count. So that's also steadily growing. So not as high speed as the new sites. But I mean, it's a really strong growth related to the new customers and new customer sites.

Then my next question was on MAIA. You mentioned that it's currently quite focused on your pharma clients. I guess what is the plan for rolling it out more broadly to a broader range of clients to really increase the kind of sales force efforts there? Like, what do you need to see before you start ramping there?

So there's perhaps the first 2 things in a way. So we have been quite selective now to provide the devices to the customers who have been waiting for them for quite a long time. So we have concentrated on that, and those are going to go for pharma. Then we have been doing all the sales by our own. So we haven't yet trained, as an example, all distributors to sell the new MAIA and distribute the new MAIA. So that's the plan for the next year. Then the second topic is linking to the new drugs, geographic atrophy-related drugs, as an example, in the U.S.A. So now if you look to next year, especially, we are ramping that part as well when it comes to pushing the product, marketing it more aggressively, and then also thinking about the features and the user experience as well, and make that one simple in the coming year. So those are the 2 areas where we are especially going to focus during 2026.

I guess one very quick one just to follow up, if that's okay. Are you planning to do a Capital Markets Day at any point soon?

I think that the time starts next year.

We talked about it.

Yes, yes. So I think, Jack, that's the plan for next year, not this year anymore. I think Christmas is coming really fast. So next year, I think it's a good point, and we have been discussing that one already.

The next question comes from Daniel Lepisto from Danske Bank.

I also have a couple of questions. Maybe starting up with these costs related to the ILLUME RedCat FDA process. So, can you remind us how much you are anticipating of these costs? And how are these costs going to be phased when looking forward?

I think we'll start to see something now in the fourth quarter. But I think next year, there is going to be a bigger impact on that. We haven't fully disclosed what it is, but it looks to be a 7-number cost for next year, most likely. So we're still working on the full plan. So it is quite a big cost, and it's going to go through the P&L. But I think once we get clearer plans and also a guide for next year, we'll get back to that in more detail on how the impacts next year. But this year, Q4, if I give a number, maybe EUR 250 million, around EUR 250 million.

And then I think earlier, what we have been discussing, Daniel, is that the combined FDA clearance amount, perhaps we land somewhere around the EUR 2 million. But that's now more in the planning.

Then, on the Red Cat approvals in the big picture, I think you noted that you gained some new approvals during the quarter. I mean, can you walk us through what key regions you are still missing for this solution, apart from the U.S., when it comes to the regulatory side?

Europe is really well covered. We also got the TGA for Australia. And then, of course, in the APAC, it depends on country by country. So there might be interesting countries. But I think the main target is really to get the FDA clearance. So that would really move the needle.

Maybe the final question still on this MAIA microperimeter. Can you maybe discuss a bit about this addressable market and market opportunity for MAIA specifically? I mean, if we look at the ophthalmic perimeter market, how big of a portion that is? And how do you see yourself playing in that market with MAIA?

I think there's. So if you look at the overall perimetry market, we have been discussing a USD 300 million roughly perimetry market. So that's a traditional perimeter. Micro perimeter is bundled on that one. It doesn't include is that the microperimetry goes to clinical use and when the new drugs are coming. So the logic there is how to measure the efficacy of the drug. And that's not quantified. We haven't yet fully quantified that one either. I think it's a topic for the next CMD for us to come up with the number. And then, of course, the drug development and the approvals of the drugs hopefully are also a bit further away in other parts than the U.S.A. Anything, Robin, to add?

I think in the past, the prior MAIA generations, we were thinking that the MAIA market was like 10 million or so, so EUR 10 million to EUR 20 million. But if it gets into clinical use, it's clearly significantly larger.

The next question comes from Pia Rosqvist-Heinsalmi from DNB Carnegie.

It's Pia from DNB Carnegie. A few questions. And if I start with your sales pipeline, do I remember correctly that you have referred to some kind of mid-sized orders for screening solutions in earlier quarters? What's the status currently?

That's a very good question. The short answer is that, according to my memory, not too much discussed specifically about midsized orders for screening.

Maybe I don't remember either right now.

Maybe it's me, I'm not recalling correctly. Well, anyway, let's then discuss your guidance and your outlook. Given that Q4 is typically a very strong quarter and I'll try to get some hedge here. So are there any specific changes in your sales force in the U.S.? Or are you fully comfortable that with your sales force, you are again able to achieve this really strong Q4?

So if I comment on the first sales force. We have slightly renewed the sales force. So we have been getting extremely good and extremely professional new sales force members in the U.S.A. And that team has been clearly put us also on the new tables with the bigger customers. So that's going quite well. And then, of course, the question is when the pipe turns to sales. And there, I don't have a crystal ball to say.

Yes, I think Pia will probably ask why you didn't change the guidance at this stage, also. So as a result of these changes, there are actually very interesting large deals, quite a few we have in the pipe, which are very difficult to forecast if or when those would close, and that could have a big impact on the Q4 numbers. So we actually ended up being a bit reluctant to change the upper end or the lower end. So there are quite a big swing factors that we have in the pipe currently for the quarter and the next year.

Maybe these were the things, the larger or yes, larger.

Yes.

So, these orders are in the pipeline. And just to be clear, now for Q3, there were no kind of larger orders that turned into deliveries.

No, it was a very typical quarter. So nothing larger in there.

And then if I continue, you booked some nonrecurring items. I think you don't specify them, but do I read correctly that they possibly relate to some M&A projects which have not yet turned into news?

Yes. I will not comment on those specifically, but if we have M&A costs, we would allocate those as nonoperational costs because we are actively working on that side with Jouni and have really nothing to do with the day-to-day business. So any costs like that, we would categorize there.

With regards to M&A, how is your pipeline looking like currently? Is it drying up? Or do you have many active discussions ongoing?

Actually quite busy. There are a few discussions ongoing, very interesting opportunities, but I don't know if we can comment too much. Jouni, do you have any?

I think you covered it well.

Then, finally, two questions: can I still continue? So first of all, with regards to sales in the Asia Pacific, why did sales fall short of your expectations? So, if we disregard the FX effect, is the demand more muted for these specific products, or any other explanation?

So what we hear from the region, of course, it depends a bit quarter-by-quarter. So there might be certain fluctuations, of course, quarter-by-quarter, regarding the sales. But the main reason has been that if we go for, I mean, the Australian dollar or the Japanese yen or so forth. So we have had stronger euro development against those currencies, and that has slightly impacted our mind, the sales. Then again, as I said, it depends month-by-month, quarter-by-quarter. So then, if you look at October, so now, I mean, really good progress in APAC countries during October. So it might be that it's for sure, a bit currency-related item, but also maybe regarding the quarterly fluctuations. But anything you would probably, Robin, like to add?

Yes, I think the currencies have an impact. We have a number of distributors, for example, who have been asking about pricing and asking about payment terms and things, and clearly referring to the FX. So there's no doubt that that has an impact.

And then finally, if I can come back to something, Jouni. I think you mentioned with regards to a new product on the data management platform, which has been launched in the U.S. Any assessment on the market opportunity, the target market, and the size of that? And yes, any more color would be appreciated.

So if we first start with the target market. So, of course, we have a data management platform already existing. I mean, Choice Forum really high-end ophthalmology-related platform around the Choice ecosystem also covers the surgical workflows and so forth. So not where we want to play. Then, of course, we have a Topcon Harmony. It's quite a big platform as well, and the big change and so forth are partly covering that part. Where we are targeting is a bit smaller optometry stores at first. So there's a huge amount. So when we ran the study already long time ago, there was a huge and huge amount of clients that they don't have any data management solution. So, how do they manage the data? How do they connect the devices to it? So that's the segment where we are going to start first by integrating our devices, then, case by case, the others. And key also for our side is to enable the replacement sales at the beginning. So if you want to move from DRSplus to EIDON or so forth, or upgrade the fundus imaging device, so we can then handle the data import and export and all those things. And then what does this bring for us in the long run? So we have been discussing the software assistant clinical decision-making by combining the different modalities, whether it is the fundus imaging, whether it is the IOP data, et cetera. So now we have a platform which stores the data on top of which we are then, in the long run, able to develop also the AI functionalities with the Red Cat team from the Netherlands. So if we look, the strategy is that the ILLUME is fully focused on retinal screening, outuses, then going to manage the data coming from the devices. And then on top of the output, we are able to as well build the software-assisted decision-making tooling and the applications in the long run. So, this is the first step towards that story starting from the U.S.A., and the product is already FDA cleared. So, we are good to go, and we have had the product in testing for almost the whole full year, but now we launched it to a wider audience during Q3.

The next question comes from Sy Gode from Infosys.

I was wondering if you could maybe talk a little bit more about the business environment in the U.S. You touched on it, but just how is the demand environment looking? Are you seeing any change there in terms of demand? You talked about uncertainty before. Would you say it's stable or improving? Or how would you describe the environment? And I had a question on the probes side as well, you should have a pretty good understanding of the mechanics of the probes business. What kind of growth can we expect for the probes business over the next couple of years? Are we talking mid-single digits, high single digits? Or how should we think about it?

Maybe I take the first question regarding the U.S. demand, and Robin takes the probe part. And thank you for the question or questions. So, if we first take the U.S. demand status. So, we were slightly a bit more worried, of course, during the Q2 when all these tariff things came up. And then we more or less decided towards the end of Q2, Q3, that this is going to be the new normal. We have to ramp up our game by getting more competence and more sales force in the U.S.A. in order to be more efficient and more on the client's skin. And so far, that has been working quite well. So, we have been able to increase the amount of leads because of doing more investments on the marketing side. And if looking at the Q4, we are looking positively at the Q4 and also towards the next year as well. Of course, there's a lot of fluctuation, change, and so forth. But I think it's a new normal. We just have to live with it and plan accordingly, and execute more efficiently. Robin, do you want to comment on the probe side?

Yes, the probes have always been growing very well for us. Just trying to remember, when I started 10 years ago, it was over 20% annual growth on the probes and kind of slowly once the number of devices we have out is well over 100,000, closer to 140,000 and the size of devices outside is not growing, of course, anymore as fast, even though we sell a little bit more devices, the probe growth is still actually double digit and even high double digits. So, it's slowly coming down, but it's not hitting single digits in the next couple of years, hopefully. But it's one of the very fast-growing areas and consistently year after year.

The next question comes from Joni Sandvall from Nordea.

Joni from Nordea. Jouni, you were mentioning lower contract manufacturing now during Q3. Are you expecting this to ramp up now in Q4 because you are also speaking about increasing inventories in the U.S. So, should we expect relatively strong cash flows then in Q4?

Yes. I think the manufacturing is not really happening like systematically every second week, the same month. So, it's a bit varied how we make the orders in. But I think typically, yes, I would expect them to grow. But also the cash flow for Q4, I would expect it to be, again, the strongest of the year. That would be, unless something surprising happens, I would think that's the case normally. I think it's always been the strongest quarter for us in the cash flow as well.

So, nothing special to expect from that part. Maybe the second question is still coming back on the tariffs and the price increases. Actually, how large a price increase do you have to make to mitigate the tariff impact? And have you seen in the U.S. any resistance to these increases that you have announced?

The good news is that nobody manufactures anything in the U.S., basically. So that's helping us. Everybody is in the same boat. So, the tariff is put on, of course, the transfer price, which we import to the U.S., and that's significantly lower than the selling price. So, I would guess on average, maybe around 5% price increases would more or less cover the tariff impact if the tariff is 15%. So that gives an idea that the import value is 1/3 of the sales value.

So, no real resistance from there? The last question is still on the marketing spend. You have been speaking about this for some time, maybe now. Can you give any early indication of how much delta you are expecting for going into '26?

On marketing. We're actually still working on the budget next week. There's some work to be done, so we don't really have an answer for that.

[Operator Instructions]

Seems that we don't have any more questions. So, I wish everybody a nice rest of the autumn period. We resume back in early February, right, Robin? And thank you a lot for the participation and extremely good questions. Thank you. Thank you. Bye.