Revenio Group Oyj (REG1V) Earnings Call Transcript & Summary

Good afternoon from sunny Helsinki, Finland, and welcome to Revenio Group second quarter earnings call. My name is Jouni Toijala, and I'm the CEO of Revenio Group. In addition to me, we also have our CFO, Robin Pulkkinen, joining today. So I'm going to start by talking through the second quarter highlights. And after that, Robin is going to go through a bit more thoroughly the financial numbers. Let's start with the sales. So excellent quarter for us, especially supported by the growth of imaging devices. So the sales was up at 37.9%, so heading to the EUR 18.9 million. And really, if looking and comparing to the past performance, so we actually had the best quarter ever, what comes to the imaging device sales. So we are actually up about 20% even to the pre-COVID numbers. Then when we go back to the tonometers and probe sales. So in addition to the imaging device sales, also probes where the probe sales was growing steadily, also the tonometers during the second quarter, also during the first half. And if we do a bit more deeper dive to the products, so DRSplus on the imaging side, growth was extremely strong. Also EIDON family. So the whole family of the products. There were a lot of growth as well. And then also the perimeters and the microperimeters, that business was growing during the second quarter. And that was valid across almost all the key markets where we are present. So then if we go to the bottom line, so the EBIT part. So the EBIT performance was EUR 4.4 million, up 28.7%. But there, we actually missed the consensus. So Robin is going to go a bit more deeper on that side, but a couple of items to mention there. So one reason for that, one was the sales mix. Then for the personnel costs, we had one of -- personnel costs in a bit of a hit from the foreign exchange rate. And then I would like to remind also that we closed the Oculo acquisition during the April. So as we stated earlier, so we are going to invest to the Oculo SaaS platform. So in terms of the relative profitability, so during this year and next year, the relative profitability is going to be lower compared to the previous years because of the investments going to the software platform. Then if we go a bit to the product side. So the product -- from a product perspective, the second quarter was very active for us in the first half. So we launched a new iCare HOME2 tonometer, and there are a couple of significant improvements. So we improved the easiness of the use of the actual devices, so it's much more easier to the measurements. Then compared to the older HOME device, so we actually had to use the cables in order to transfer the results from device then to the cloud. So now we are using the wireless connectivity. And then we also support the iOS app. And the feedback that we have been so far received from the device, so that's very good. And it's actually already on the market in Europe, and we are in the process of applying the FDA approval for the U.S.A. Then what comes to the imaging device side. So we also have a new product coming out, so-called EIDON Ultra-Widefield fundus imaging device and also the lens so that we are able to upgrade the functionality of the devices which are already in the field. So with that feature, we are able to capture and increase the angle, so 120 degrees with a single shot. And then if we use the Mosaic functionality, so the feel of the view is going to be extremely large, around 200 degrees. And then as stated many times before, so we are continuing to receive a really good feedback related to DRSplus. So currently, looking from the product portfolio point of view, so good feedback coming across the board for the imaging product, which is then providing the long-term growth for us as well. So we believe even though that we are sure that there has been some pent-up demand, especially on the imaging side during the first half this year, but definitely, the growth rate has been so high on the imaging side that we are definitely also gaining market share as well. But with these words, I would hand over then speech to Robin. So over to you, Robin.

Hello, everybody. My name is Robin Pulkkinen. I'm the CFO of Revenio Group. So go through the numbers a bit more. So like Jouni mentioned, second quarter, EUR 18.9 million in revenue. And like we stated and Jouni mentioned that the FX has been playing against us quite a bit. So it's nearly a $1 million hit that we took on the top line in the second quarter. So without that, we would have been quite close to EUR 20 million in revenue, and the growth would have been actually over 40%, so 43% to be exact. For the first half, as a whole, the growth has been extremely strong. So EUR 35.6 million in revenue with a 39.2% growth and with the currency adjustments of 43.7% growth. On the EBITDA and the EBIT line, we have also the adjusted numbers here. For the second quarter, there wasn't much adjustments to be done. So the adjustments we have here are basically the cost related to the acquisition of Oculo, so the kind of the transaction costs. For the second quarter, there was less than EUR 50,000 that we had. But for the first half as a whole, it's almost EUR 700,000 that we have in the costs. And those have been adjusted out here. So the adjusted EBIT for the second quarter, EUR 4.5 million, up nearly 30% from year-over-year. It's 23.7% out of the revenue. And for the first half, EUR 9.7 million, and 27.3% out of revenue with a growth of 65.7%. Like Jouni mentioned, the consensus and the expectation was probably a bit higher for the profitability for us, so just open a few items. The FX, almost EUR 1 million on the top line, but also that hit our bottom line by over EUR 400,000 for the quarter. Also the product mix, the imaging devices have been growing really fast in the second quarter. And their share of the total sales were actually quite high. And that, as we've stated earlier and quite commonly known, is that the imaging devices have a bit lower gross margin and kind of that product mix hit when you look at the year back is also quite significant when it comes to profitability. And then we had certain onetime personnel costs, which will not continue going forward. And then, of course, the Oculo transaction that took place and with the numbers for Oculo have been consolidated since the 28th of April. And so we have pretty much 2 months in the numbers here. Some of the key figures. Our equity ratio continues to be very strong. Cash flow for the first half was very strong, actually up 80% from last year. The drivers for that were basically the increase in net profit and the changes in the working capital. Also, when you look at the net gearing maybe there where the bigger change is actually related to the Oculo transaction, which we paid in cash. So in the transaction itself was AUD 18.5 million. And in the purchase price allocation, we've allocated about EUR 2.5 million to the intangible assets and then EUR 9.5 million to goodwill. And all this was paid in cash, which resulted in a lowering of the net gearing. So kind of our cash and cash balances went down quite significantly during the quarter. Main shareholders, there's not been much change over the last months. The biggest change in kind of the go back 12 months from now or 9 months from now are kind of the U.S. ownership, which has been going up a lot. So on the top 10, we have Columbia Threadneedle, Capital Group, Vanguard, BlackRock, some of the world's largest investors who've joined our ride over the last year. So that's kind of the -- one of the bigger changes that's been taking place over the last year. Other than that, we have pretty familiar names on the list here. And then yesterday, we updated our guidance. So I just want to highlight here again that it's a full year guidance. So even though we now updated it, it's actually still for the full year. So the first half, we grew extremely strong, so 40% growth. But when you go back and look at last year, that was a COVID year, the first half and second quarter especially was quite weak. So it wasn't one of the best quarters for us. So -- but when we look at the second half last year, our performance was extremely good already there. So I would be -- I would kind of as an investor, I would not assume to expect similar growth from us for the second half that we've been seeing now in the first half. So the guidance here, even though it's a positive change, it's still a guidance for the full year. And that's it from me. Now we'll go to the questions.

Thank you, Robin. So we received plenty of time for the questions, so the floor is open for the questions, please.

[Operator Instructions] We have a question from the line of Julius Rapeli from SEB.

Yes. Firstly, one regarding guidance upgrade. So regarding this offer, has the outlook or visibility for H2 for you guys changed in some way? Or is this only a reflection of the super strong H1 you have now performed?

Well, our kind of -- our tonometer business traditionally is -- we don't have that much backlog over there and the imaging also. Our visibility like in backlog-wise in orders is maximum a couple of months forward. So we don't really have much visibility into Q4 and what that will be looking at, at that point. So it's also kind of -- we have our assumptions and forecast, of course. But of course, it's also backed up by the extremely strong first half. So that's kind of the reasoning behind it.

All right. Perfect. Then one follow-up question regarding gross margins. And you already mentioned that the mix change in second quarter, that was causing somewhat lower gross margin here. Do you see any headwinds from input material costs? And then on the other hand, do you see any issues with your supply of input materials?

Yes. So first, the cost -- so there's a clear indication that the costs are coming up. So that's a silver clear. So we have been trying to tackle that one by making a bit more longer-term commitments towards our suppliers in order to be a bit ahead of the wind so that we are a bit more aggressive of buying the components in and making the commitment so that we are able to keep the prices in a bit more better level in near future when going forward. And then we have also increased proactively the stock levels, and we have made a commitment in order to be able to guarantee the supply of the devices. And also, it's just a fact that there might be challenges that comes to the component. So we have had challenges, an example related to the Bluetooth components, but we were able to solve that earlier this year. So currently, everything is okay. And these are the actions that what we have decided to do in order to control the costs plus then the guarantee that we are able to have the products when the clients are needing them. So in one sentence, now everything is okay. But this is the weekly discussion with our operations team, that we are able to perform well.

Our next question comes from the line of Pia Rosqvist from Carnegie.

It's Pia from Carnegie. You said your imaging device growth was very strong in Q2. And you also said the tonometer business grew, but can you still clarify? Did the tonometer business grow? Or was it only the probe business? Or did both the tonometers and probes grow?

Yes. So the both probe business and then the tonometers, both were growing. But of course, not as much as the imaging devices. So the strong -- so we had a really, really strong growth on the imaging devices during the Q2 and throughout the whole first half 2021.

Okay. And the HOME business, how is the HOME2 sales developing?

Yes, it's picking up. And if we look now, it's easier to look not quarter-by-quarter in a way. So we have been selling HOME2 devices, of course, during the Q2. But if we look -- as an example, the first half 2021. So there's a quite strong growth on the HOME devices as well. But of course, it's a small amount still compared to the other business because the other business is growing so fast. So still more sales needed in the long run so that it starts really to move the needle.

Yes. Okay. Then do you have any news on Ventica and Cutica? How are these projects developing, taking into account that you said at the CMD that you -- your focus is on iCare business. So when can we expect news on Ventica and Cutica?

Not yet. So we have discussions ongoing, but not major news to be released yet. Hopefully, we are a bit more wiser when we go towards the end of the year, so towards the end of Q4, Q1. So discussions ongoing, but nothing concrete yet.

Okay. Good. Then Julius asked about the input prices. But how do you tackle the situation from your sales price perspective? So are you able to adjust your prices also upwards? Or is the competition at such a level that higher sales prices are not possible?

So we actually have managed to get the slight as a price increase for the Europe already. So that's basically already done and implemented. And then, of course, monitoring closely at what should we do in the other parts of the world. So I think the overall, there's a trend that the component prices are coming up plus the overall inflation. So in certain regions, we already have, we have had the price increases implemented.

Okay. And then still back to the cost. May I ask what kind -- what caused the nonrecurring person -- or what caused the personnel costs to be exceptionally high now in Q2?

We haven't really disclosed the reasons publicly for that, but it's kind of onetime costs, that it's not tens of thousands but in the hundreds of thousands.

Okay. Okay. And then maybe finally on your M&A agenda. Where do you stand on that point? Are you now -- you are, of course, integrating Oculo and investing into that business. But how active do you want to be on the M&A space now? Is it high on your strategic agenda?

I think there, the answer is yes, but we have to at first now take care that we do the proper work by integrating the Oculo. So on the Oculo front and from the integration point of view, so of course, the finance systems, so those are okay. So that integration is done, almost the whole IT integration is done. Now we are forming up to the joint solution vision ending up to the road map discussions and so forth. So there, the house is in really good order. And the plan is that we are going to finalize that one and then as before in kind of as earlier. So we are constantly screening and keeping the possible M&As high on the strategic agenda as well. So that's, in a way, a continuous work, what we do. Anything, Robin, to add on this one?

No, that's true. We've -- the possible targets are quite a few and far between. So we need to keep the kind of momentum moving all the time. So this transaction tend to take a lot of time like we saw with CenterVue. So we really haven't stopped at any point.