Revenio Group Oyj (REG1V) Earnings Call Transcript & Summary

Good afternoon, and welcome to Revenio Group Earnings Call for Q1. My name is Jouni Toijala, and I'm the group CEO. And with me here, as normally, we have as well our CFO, Robin Pulkkinen. Agenda for today. So I'll start with the highlights for the Q1. Then Robin is going to go through the financials, a shareholder structure plus reiterate the guidance. So let's move on to the Q1. So the Q1 started slightly softly, as expected. However, the cash flow was strong. So net sales ended up to EUR 23.6 million, reported growth 1.8%. If we look the currency-adjusted numbers, so that was slightly down 0.5%. EBIT down from EUR 6.2 million to EUR 5.1 million. The biggest contributor for that one was the FDA approval related costs, and Robin is going to do a bit more deeper dive to the cost side in his part of the presentation. Cash flow was strong. So EUR 4.6 million for the Q1 and the big contributor for the good cash flow was related to the nonpayment for the long-term incentive scheme plus also really, really minor payments for the short-term incentive schemes. So if going to the business highlights for the Q1. So sales in the U.S. and Europe, Middle East and Africa was strong. A couple of highlights from the product side, IC200 continued to sell really well like during the Q4. Also the DRSplus sales was really good during the Q1. Then as mentioned earlier, so we have started to work with the FDA approval related to the DRSplus iCare ILLUME cloud platform plus the AI, and that caused -- occurred partly during the Q1 this year, so roughly EUR 600,000. Then if going back to the Q2, Q3 last year, so we had a lots of headwind from the private equity-owned optometry sector in the U.S.A. So on the positive note, we saw some increased activity now during the Q1 from the private equity driven optometry. So that's clearly the positive side. On the product side, iCare MAIA microperimeter is progressing according to the plan. So based on the current plan, we have intention to launch the product towards the end of Q4 this year. And then as in all quarters -- so lots of activities, of course, related to sustainability themes and especially now during the Q1, lots of activities around the double materiality assessment. So that's working according to the plan as well. But over to you, Robin.

Thank you, Jouni. So like Jouni mentioned, Q1 sales slightly soft. Of course, just looking at the numbers, you may say it's a -- well, that's what we think when we say it's soft, but then we did have tough comparables and the good news is also that it did go pretty much like we planned. So we were not internally surprised. It has no impact on our longer-term guidance. So we knew Q1 is going to be challenging. Q2, Q3 are the ones -- quarters, where we are having easier comparables and then, of course, Q4, again, we have challenging comparables. So I think the Q1 and Q4 also internally were expected to be a bit softer year-over-year. Gross margin, we were able to predict well. So the -- not big change there, so 70.3%. And like Jouni mentioned, the profitability is down, driven by the FDA approval related costs. We did highlight at the end of the last year, or the Q4, that we do have some cost headwinds this year. So the FDA trials for the new products were expected to be roughly EUR 1.5 million to EUR 2 million this year. And then, of course, the salary side, where we did pay record low incentives this spring, but those, of course, were accrued last year. So in the costs in the books for last year, but the cash flow impact this year. Earnings per share of EUR 0.137 and the net gearing minus 7% versus minus 13% (sic) [ minus 13.1% ] last year. So here, you can see a bit more of the sales trend. Q1, again, slightly below the trend line, but that's been the case for every Q1, also, earlier. So the 1.8% reported growth, a slight decline on the FX adjusted and especially the EMEA and the U.S. sales were performing really well. And then the profitability side. So that we can see here that it did come down, but we did kind of anticipate this to happen also. So the FDA costs, I think, seems to be a bit higher than maybe the market was expecting for the first quarter. This -- the analyst report, I think they were, in average, expecting a lower cost for Q1. We haven't really specified what quarter these costs are coming in this year. And I think it's fair to expect that there will be quite a bit of quarterly fluctuations in how those costs come in. And of course, the bonus growth, looking at the profitability for this year. So like I mentioned, the bonus growth last year were pretty quite small. So looking at this year, expecting to remain within the guidance, the payroll costs will be higher this year compared to the last year. Cash flow, a record high. I think we haven't been even close to this level in the earlier years, for many years going back. So traditionally, all the STI and LTI incentive programs are paid out in first quarter. And now that those payments were smaller, that is the main reason for the increase in the operating cash flow. Of course, then also, we did pay taxes less than the comparable period and then the trade receivables came down. Which we also, at the end of Q4, discussed that the AR was quite high due to a really strong end of the year. So they are coming down was also pretty much what we have planned and foreseen earlier. The balance sheet remains strong. So the equity ratio almost 75%. It's up actually more than 10% year-over-year. One big reason there is that last year, I think the dividend was paid in Q2, like this year, but the AGM was in March. So the equity postings for the dividends were already in the balance sheet. So that was one reason. So Q2 this year, we'll also have the dividend payment in the equity. So the equity ratio probably will come down slightly. So EUR 0.38 of dividend paid based on the AGM decision on the April 4, and those payments went out around mid-April this year. Shareholders, a couple of changes here. The forum seem to be noticed also that the Demand Invest has increased their ownership. So went from slightly below 18% at the end of the year to 18.73% now at the end of Q1. And then also, we have a new -- not new shareholder, but embedded funds. They have been our shareholders for already a long time back, but then have now increased their ownership and become the sixth largest shareholder on the top 10 list. So other than that, all the others are in the same order and pretty much in the same level as they were at the end of the year. Foreign ownership also now slightly above 50%, again, after being just under 50% at the end of the year. The country split hasn't much changed. So nothing really to highlight there. The guidance remains the same. Revenue group exchange rate adjusted net sales are estimated to grow 5% to 10% from the previous year, and profitability, excluding nonrecurring items, is estimated to remain at a good level. No change here. Good. And I think we're good for questions.

Yes. Thank you, Robin, and it's time for questions, please.

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

This is Nikko Ruokangas from SEB. I have a couple of questions. So starting with that, can you say that you have seen some improvement in activity around the [ driven ] segment. So how much was this already visible in Q1 numbers? And what kind of level is currently contested level prior the challenges in the segment?

So some order activity and then increase on the pipeline related to the RFQs. So I think that's the current status, Nikko. And thank you for the questions.

Yes. Great. Okay. Then has anything changed? How do you view that market trends developing compared to Q4 conference call 3 months ago? So do you still see some light in the trends?

I would say that the -- if not -- so not too much change. So I think it's -- the private equity-driven optometry, that's more positive. Then if you go back to Q2, we go back to Q3. So I think that there's a bit more footfall on the optometry side. I think what we were expecting from the interest rate perspective, Q3 and Q4 last year. So we were -- perhaps we were expecting interest rates to come down slightly faster than now what is planned. But in summary, so be driven optometry now more activity. So that's not totally stand still. I think that's a good sign and perhaps a bit more footfall to the optometry as well.

Okay. Okay. Then still one question related to your costs, even though you already opened it a bit around the FDA cost. But in general, the fixed cost side, I understand the reason for the increase that -- and what kind of level do you expect the fixed costs to be rest of the 2024 compared to Q1?

I think the biggest variable items are related to the clinical trials we have ongoing and have starting this year. In general, as long as we expect to remain, and do remain, within the guidance, then the bonus accruals are going to be higher than last year. So the payroll costs are going up. We hired -- I think the average headcount went up 7 people last year, so from 212 to 219. So the total payroll package is also slightly increasing, but not that much. Of course, then the salary inflation has been around 4% or 5%. So those kind of together are probably the variable parts there. But I'd say the biggest [ bit ] open one still how the costs are coming for each quarter is related to the clinical trials, which is something we keep on working on. But we don't have a full schedule for every quarter of how it's going to hit yet.

Okay. And do you expect also salary inflation of 4% to 5% also for this year?

Sorry, the line was a little bit bad. I didn't catch the question.

So, you said that the salary inflation has been on 4% to 5% level. So do you expect for this year, or were you talking about...

It was this year. So...

Okay. Thank you.

That was for this year, the salary inflation roughly there.

The next question comes from Daniel Lepistö from Danske Bank.

Hi, it's Daniel Lepistö from Danske Bank. I have also a few questions here. Maybe on the cost side, on the R&D cost headwinds that I guess you highlighted already in the Q4 report, I do remember that the talked range was about EUR 1.5 million to EUR 2 million extra for this year. So are you still within this previously talked range, now after the Q1?

Yes, that hasn't changed. So it's still the same range, I think. But it seems like the market expected it to be more [ end ] heavy, but we did have quite a bit of cost already in Q1. But there is a good chance that there is going to be big quarterly fluctuations there. So it's hard to say exactly how it's going to play.

All right. That's very clear. And maybe just to continue that this MAIA-related R&D costs, are this included in this figure as well?

Yes, yes. Yes.

Okay. Then the second topic on the HOME2 reimbursement, I guess that as well in Q4, you talked about H1 '25, when you would be expecting the decision on that. So I guess you are seeing to get some news of this maybe a bit faster than previously anticipated. So has something changed, or more positive, or where it's just faster on your sort of submittal of the data and so on?

There's two milestones on this one, which is -- which we are following carefully. So first one is Q4, when we should get the information related to application for the codes. And the one key -- really the first step is to get the codes, so the reimbursement codes and that's time for Q4 this year. And then, of course, after that, one comes, the payer insurance company side alignment in order to be able to get the reimbursement. So then we are wiser on that one, Q2 2025. So I think those are the two things that everybody should be following up that those are going according to the plan.

All right. Thanks for the clarification. I guess also on that topic, I think it's still open whether you will be taking -- or whether you will be getting the full or partial coverage. I mean do you have any sort of scenarios on this one? And what's your view on this topic?

So we are looking the codes for the hardware. So currently, there's remote monitoring, training-related codes existing. But now we are looking at the reimbursement codes for the hardware side. And then, of course, we are looking as high as we can, but that's not fully on our control what's going to be the result. But really, the [ debt ] or the time period is Q4. So we have to come back to this one Q4.

All right. That's clear. I guess the final question on the ILLUME plus AI FDA approval and the time line on that one. Are you sticking with the time line of H1 '25 on that one as well? Or has there been any development on that?

There's a movement on that one. So we did the presub, then we got just a couple of days back. So we got the information related to the clinical trial requirements. So what's the scope of the clinical trials. We are analyzing the data, as we speak, and there seems to be a wish from the FDA that the clinical trial scope perhaps should be extended. So we are discussing with the FDA. So I think that it is going to have an impact to the time line. And I would say that most probably not first half next year. So that's my current understanding. I would perhaps, to be sure, push it to the second half next year. And of course, it's an FDA approval process. So they tend to have tendency to take time. But that's the latest and we just got the info from FDA a couple of days ago. So we are analyzing that one and being in contact with the FDA on that. But that's the latest really, I mean, really in a couple of days.

Okay. And this scope extension, it won't have any impact on the R&D cost side at least this year?

This year, no. So we were putting from 1.2 to 1.5 for ILLUME, then the remaining part for the MAIA, as Robin explained. So no change on the cost side for this year, for sure.

The next question comes from Joni Sandvall from Nordea.

Thanks for the good presentation. Joni from Nordea. You had some larger multiyear orders in Q4 too, if I remember correct in Germany and also some U.S. deliveries scheduled for this year. So can you give any comment on deliveries of these and time line?

So we did first deliveries for both countries, so imaging devices, tonometers already Q4. So during the Q1, we also continued to deliver DRSplus-es to the clients. So that's going according to the rollout plan.

Okay. Perfect. Then maybe a follow-up on the pipeline situation. You said that MAIA towards the end of Q4, and I think we went through the HOME2 FDA approval situation. But is there some other new product launches now scheduled for the '24?

That's an interesting question. I would love to give an answer to that one. So I think this is perhaps a bit teflon statement, but we have been working quite a lot on the R&D side related to coming years. So I think the time will show in the coming quarters, that if there's something new to come. Sorry for the bit unclear answer.

That's okay. That's okay. Then maybe lastly on the guidance. You are intact with the guidance and after the bit soft Q1, as you said, how is your visibility now going forward? How long visibility you have? And how confident are you with your guidance?