Revenio Group Oyj (REG1V) Earnings Call Transcript & Summary

Good afternoon, and welcome to Revenio Group Q2 earnings call. My name is Jouni Toijala, and I'm extremely happy to have Jukka Kainulainen joining in call with me today. So Jukka has started as a new CFO about a week ago, right?

Yes.

Right, Jukka? Two weeks in a row almost. So would you like to introduce you, first yourself, and then we get that to the agenda?

Yes. Thank you, Jouni, and of course, very excited to be here. It's exciting moment for Revenio after the strategic acquisition and starting totally new journey as a new combined company. So great to be here, and previously has been spending my last 10 years in the global technology growth companies, of course, focusing always on the growth, profitability and also capital allocation, and also acquisition a little bit earlier in my career and the related integration. So great to be here, and thanks a lot, Jouni.

Thank you, Jukka. So let's jump to the agenda. So we are going to run a bit more different earnings call today. So we start actually with the Visionix integration status, then we are also going to go through where do we stand regarding the synergy. So we discussed during the transaction closing and announcement regarding to the EUR 20 million EBITDA uplift target. So we are going to recap that one. Then, of course, going through the highlights of Q2, first half -- Q2 and first half 2026. And then Jukka is going to do a deep-dive for the finance part. And then of course, we have a guidance at the very end. Before jumping to the integration and synergies, so like Jukka said, so it's nice to join in for the company because we are having a quite historic moment now ongoing. So I would compare this one to the Centervue acquisition at the time, in terms of the significance. Of course, now the size is bigger, but of course, the old Revenio, if I may use the word, so that's, of course, considerably sizable compared to the 2019. So this is the first quarter when we now have 1 month numbers in from the ex-Visionix side. And based on the last -- or first 100 days, if I may use the 100-day word here, so everything is actually progressing well and according to the plan. So strategic logic, why we closed the transaction, it is still as strong as it was at the time of the signing and closing, which I found extremely encouraging and good. So from the integration perspective, integration is progressing really well. So we have a couple of scenarios here. So I would summarize that we are now leaning to watch the best -- kind of a best scenario in terms of the speed of getting the synergies in and the speed of integrating the actual organization. So if you look at a couple of key areas here, so first, from the overall integration perspective. So we have now nailed down, even end of May, the leadership team organization, of course, the Board structure, overall governance. And then during the summer time, we have been then moving further down to the organization in order to clarify the organization and operative model. So that's going really well. In terms of the culture, so we run an extensive culture audit also during the summer. And cultures are actually matching together extremely well. And this is, at least for me, this is a more positive thing that I was expecting. Then we have been putting a lot of effort to the commercial activation and to securing the business continuity. So the U.S. sales team, so we have actually combined already the U.S. organization, including the sales, and the new team has been running operationally from the beginning of August. And what we have done in the U.S.A., so we have also finalized all product training related to the different products to the team. And then also now bit by bit moving to cross-sales targets, et cetera, and really moving to the execution in the past 4 to 5 weeks. On the international sales side, which Umberto is running, so that John is running the U.S. sales organization. So from the international side, so we have a clear plan now how to start moving forward with the different countries, whether they are direct or through the distribution. So that has moved to the execution in the last 2 weeks' time. And I would say that the overall things have been progressing really well. Then on the -- coming back to the EUR 20 million EBITDA uplift. So we have already secured a bit ahead of time the EUR 5 million run rate savings regarding to the EUR 20 million EBITDA uplift. So there we are on track. And then we also have plans regarding the next steps, regarding the operating model and then also things related to the procurement, et cetera, in order to be able to get the remaining part of EUR 15 million EBITDA uplift in the coming quarters. So if summarizing the integration status in one sentence, so it's going well and according to the plan. Then to the numbers. So of course, top line up EUR 39.3 million, roughly 50% up. What we saw on the profitability side is, of course, we have been coming down due to the couple of things on the profitability. So the first one is the acquisition-related one-off costs, which during Q2 were roughly EUR 3.4 million. So Jukka is going to cover that one in a bit more detail. Then I think that we should pay also attention to the gross margin, which was exceptionally high in a previous year Q2 of 72.6% roughly. And if we go back to the Q2 last year, so we actually didn't have a tariff impact almost at all at the time. So we were stacking a lot of products into the warehouse, so we didn't pay any tariffs on the imaging products, we didn't pay any tariffs regarding to the [ tonometers ]. We started to pay a bit tariffs towards the end of Q2 last year regarding [ that approach]. And if you look then from the gross margin perspective through Q3, Q4, and Q1 this year, so I think we have -- we are able to say that we had the gross margin beyond the 70%. So that's partly explaining why gross margin is down. And of course, we have the Visionix dilution, but Jukka is going to cover this one in more detailed. Then regarding the whole first half. So net sales, EUR 66.6 million, up from EUR 52.6 million. Operating profit, EUR 4.8 million. And then we had in addition to the EUR 3.4 million, so we had roughly same amount of acquisition-related one-off costs during the Q1 as well. So the whole acquisition-related expenses were a ballpark of EUR 6.9 million. Then regarding to cash flow, Jukka is going to cover this one, but the cash flow was negative. And let's also come back on Jukka's presentation. So we had a really strong cash flow exceptionally strong Q4 last year, roughly EUR 15 million. So part of the costs were actually occurring during the Q1. Then after the Q2, so a couple of highlights from the other parts of the business. So we have been now receiving and working, of course, together with the iHealthScreen regarding the DRSplus and the FDA clearance. So we managed now to get the first FDA-cleared AI solution for the U.S.A. So that's an extremely good news. Now working closely with iHealthScreen in order to approach the customers and start pitching the product. And we look this one, of course, to boost the DRSplus sales in the coming quarters and years in the U.S.A. Then another thing where we have been active and working for the long time in the U.S.A. and, of course, in the other parts of the world, and this is really linking to the macro trends what we are seeing, i.e., the amount of the patients is increasing, the resources on the iHealth professional side is limited and we are not able to treat and diagnose all the patients. And in the constant communications, we have been emphasizing the easiness to use and then automation when it comes to the devices. And here we go. So this is a prime example of that one. So we closed a strategic partnership in the U.S.A. with a company called EyeCheq, which is providing the kiosk, where we have been integrating the DRSplus for autonomous use and for the screening purposes. And then this kiosk is connected to the back-end platform. And then the patient is able to come to the kiosk and then do the holistic screening of the eye. So extremely good thing for us in terms of the long run and just shows clearly where the market is going in the future. But with these words, let's move to more detailed finances. So Jukka, over to you, please.

Thank you, Jouni. And let's start on the key figures for the quarter and maybe starting first from the Visionix. It's good to remember that Visionix has been now consolidated to the Group numbers starting from the beginning of June. So 1 month Visionix in our quarter 2 numbers. And looking at the top line development, net sales increased 48.1%; currency-adjusted growth, 50.7%. And when looking at the underlying business, our organic growth, that was more or less flat for the quarter. Gross margin went down to 65% when rounding it up, comparing high, comparables of 73% for the quarter 2 last year. I'm going to go a little bit more in details in the following slides. And then when looking the adjusted EBIT for the quarter, it was EUR 5.8 million, so 14.6% from the net sales. And that included EUR 3.4 million acquisition-related nonrecurring expenses. So overall, this is quite a good start for the new combined company and it's a good build the future based on this one. Then let's look net sales development a little bit more in details. And the step-up in revenue, as you see in quarter 2, was coming from the Visionix impact, like I commented in the previous slide. So organic growth was more or less flat. And when looking at the net sales development in different geographies, it was negatively affected by the market environments when looking at the regions, Middle East and Asia. And then at the same time, we see some positive development in our Europe region overall. Then when moving to the profitability, like I commented, adjusted operating profit EUR 5.8 million during the quarter, 14.6% of the net sales. And then gross margin declined to 64.7%, compared to 72.6% during the quarter 2 2025. And it's good to remember that it was really high comparable in gross margin like Jouni commented when looking whole last year gross margin, it was 71%. So quarter 2025 was really high comparable. But then at the same time, when Visionix was consolidated to the Group numbers, that had actually 2 percentage points diluted impact due to lower margin profile in Visionix business. And then when looking the old Revenio underlying business over there, the gross margin in that business went down by 5 percentage points. And that was driven by, for example, the tariffs, which we didn't have in last year quarter 2 numbers. And then there was some increase in the unit cost, for example, in the electronic components side. And then also, overall, there was some increases in our fixed costs during the quarter 2 2026. Then moving on the cash flow. Cash flow from operations was negative by EUR 2.4 million during the quarter. And it's good to remember that that included around EUR 3 million of payments regarding the acquisition and the related project we are running. And then at the same time, our net working capital increased at the end of the quarter, especially relating to accounts receivables. And this is not kind of a normalized run rate, of course. It's more like temporary situation regarding the acquisition. And then when looking both companies' cash flow generation, like you know, Revenio has been always really strong cash flow-wise, H2, especially quarter 4. And there is similar kind of cash flow profile also in the Visionix business. So a major part of the cash flow is generated in H2 comparing to H1 for the calendar year. Then moving on the balance sheet and balance sheet metrics, of course, quite a lot reflected by acquisition financing and net debt now EUR 238 million, so temporary up, including the EUR 130 million term loan from what we closed in quarter 2, also bridge to equity financing EUR 80 million and the [ EUR 17 million ] [ vendor loan ] also relating on the acquisition. And then on top of that, we have a revolving credit facilities in use, around EUR 20 million at the moment. And when looking these metrics, our balance sheet metrics, equity ratio at the moment 31.2%, and net debt adjusted EBITDA is temporarily up in [ 5.3]. And then it's good to remember what we have communicated also earlier. So we are planning this post completion rights issue worth EUR 80 million. That will happen in the -- during the 2026. And the purpose in that rights issue is to pay out this bridge to equity facility, and through that, of course, strengthen our balance sheet and improve our leverage which metrics overall. Then briefly our shareholders base, so latest cap table. And as you note, Revenio is quite global when looking from the shareholders point of view, more than 50% of the ownership is outside Finland. And of course, recent changes you see in this cap table, in top 10, we have 2 new major owners, #2, [ Caravel ] Capital; and then #10, [ Mar Capital ]. These, of course, are the big changes and relating on this acquisition, Visionix acquisition, we completed during quarter 2 2026. Then as the next, let's cover the financial guidance for 2026. And in top line, we guide currency rate adjusted net sales to be between EUR 190 million up to EUR 205 million. And EBITDA excluding nonrecurring items, we estimate to remain at satisfactory level. And the assumptions behind the guidance, in the lower end, we continue to expect a little bit softer market environment and slower customer activity. And in upper end, we expect improvement in the market condition and then, of course, successful sales execution as well.

Jukka, if I may jump. I think that we have had the questions now regarding to the guidance, what the satisfactory means. And we have been long time in a good level. So would you open that one a bit?

Yes, sure. It's an excellent comment. We're looking -- for example, our last year operative adjusted EBIT for the year, so we were in 24%. And now when we look quarter 2 2026, adjusted EBITDA, we were 17%. And now we guide that we expect that to stay on a satisfactory level when we communicated last year to profitability to stay on a good level. So that's the way to give you conclusions on our profitability guidance levels. Then next one, a little bit also a reminder, 1 week from here, we organize Capital Markets Day, so 15th of September, where we, of course, will present our new strategy. We will present our combined company co-market plan, company product portfolio, our synergies, and then, of course, on top of that, the numbers, our new financial targets. So welcome, everyone, who is able to join to that event. Then at the end, also, like I already mentioned, we are planning this [indiscernible] rights issue. That's a worth of EUR 80 million altogether. Nordea is our global coordinator and actually underwriter for the rights issue as well. We target to arrange that during the mid to late H2 2026. And our main owners, William Demant and also the sellers of the acquisition, owning altogether close to 31% of the shares, have irrevocably committed to [ subscribe ] the shares pro rata based on that rights issue. And like I already commented, target is to use the funds to repay our EUR 80 million bridge to equity facility and reduce our leverage ratio and strengthen our balance sheet all together. Thank you.

Thank you. I think it's time to move for the questions, please.

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

Hello. This is Nikko Ruokangas from SEB. Thank you for the presentation. I have 3 questions and I'd like to go one by one, and start with old revenue or organic sales development, which was flat year-on-year. So to open that a bit more, given that it seems clearly lower than the original guidance you had entering this year in the winter. So has something changed in the market or your own performance? Or can you elaborate a bit more?

I would perhaps pick that one up. So if you look at Q2 old Revenio perspective, so -- and this one we have had also the earlier. So it might be that in the certain quarter, so the demand might be different or then we have one or 2 a bit more slower months. So if you look now, and we go a bit and we break down the performance. So like Jukka said, so APAC was lagging behind on the growth like it was Q3 last year, Q4 last year, Q1 this year, compared to the previous comparable quarters. But the positive side is that the situation is basically improving quarter-by-quarter. So part of the growth we were missing from the APAC. Then everyone knows the Middle East status. So Middle East side of the business was extremely slow regarding the Iran conflict. Then if we go for Europe, so Europe in reasonably good shape, I would say. So customer activity good and pipeline looks good. And the U.S.A., we saw a slight growth in the U.S.A. and tonometers were performing well, imaging slightly [ shy ]. So I wouldn't draw too critical conclusions based on 1 or 2 months inside the 1 quarter yet. But this is now the case. So Q1, old Revenio, we had a growth, and then it was reasonably stable and flat during the Q2. But now if we look how the Q3 has started, so I mean old Revenio back on the growth track. Hopefully that [indiscernible] to your question.

Yes. And just a follow-up, how much on rough terms was the impact from Middle East?

We don't give the country specific numbers, and also Visionix is having a Middle East business. So that's kind of visible on then on Visionix 1 month numbers regarding the June.

Yes, I understand. Then I'd like to go a bit deeper still on gross margin, which was down year-on-year in old Revenio, you explained a bit more already. But I was wondering whether you can go a bit deeper into the topic given that, I guess, that the gross margin was weaker than in Q4 and Q1 when price increases in the U.S. has not been implemented as well, so -- completely. So have you now been able to do all the price increases related to tariffs? And then can you a bit more open the component inflation situation and what will you do about it?

Maybe I comment on the price increases. So the price increases are in. Do you want to comment -- I shortly commented on tariffs, but do you want to comment on component?

Yes, I can. Yes. Of course, I can do that. Of course, the tariff impact when looking year-on-year was quite significant. So we are not talking only hundreds of thousands, but it was more significant impact. And then the unit cost impact on top of that contributed basically the rest, and like we commented, the component cost. And this is, of course, going further that, of course, we will review what kind of actions we do, either reducing the unit cost or from the pricing side. So those are the tools, of course, how we manage the situation going forward.

Okay. Then one last from me. You were reporting, I guess, EUR 13 million of adjusted EBITDA consolidated, but not pro forma in H1. And then the pro forma was EUR 14.6 million So is it so that Visionix generated only EUR 1.6 million of EBITDA from January until end of May? Has it declined in H1 year-on-year? Or is the profitability in Visionix extremely H2-weighted? Can you open a bit more?

Nikko, I can comment. This is a great question, and this is, of course, I know, challenging for the investors when January-May are not in the numbers. But actually, the -- in Visionix, of course, we know H1 numbers, so they have quite a high weight in the profitability, until the end of the H1. So that's the thing. And that's usually there's some seasonality in that sense in the Visionix business. More, of course, I don't comment about, let's say, May Visionix numbers. And then when looking at the pro forma, it's good, of course, to remember how pro forma is completed. It's based on the assumption that the deal is executed already 1st of January 2025. So there's some kind of the theoretical way also to build it up. So that gives some slightly differences when look at pro forma and where we are at the moment. But of course, it gives a good enough picture. But those I would highlight based on your question.

Okay. But if we look at kind of a year-on-year basis [indiscernible].

Yes. Overall -- that I can comment [indiscernible] answer. So when looking H1 Visionix comparing last year H1, even though we have only 1 month in, so no significant change in the profitability profile year-on-year.

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

It's Pia Rosqvist from DNB Carnegie. I've got a few questions, so I'll try to limit myself. If I start with the sales development now in the second quarter. And I know Jukka, you said, you don't comment on Visionix in particular for the first half. But is there any light you can share on how Visionix fared? Now in the first half of this year compared to the last year, last year's first half, did sales for Visionix declined in the first half of this year?

N. No. So on the top line perspective, flat. And so if we now look the competition and we compare the performance, so even though that iCare ex -- old Revenio accrued during the Q1, and now if we look kind of was flattish Q2, and then the Q3 now looking good and then Visionix staying on the flat in the market where we operate. So I would consider, of course, not the stellar performance, but it's a quite robust performance compared to the competition. But Jukka, anything you would like to add on this?

No, I fully agree. Nothing to add on that.

And still going back to your first quarter report, where you told that the price increases had been applied, and I think starting to impact from February onwards. And now you said you reported flattish sales for the old Revenio. So is it actually saw that the volumes declined in the first half and were compensated by the announced price increases?

I wouldn't say so. But we have also seen in the Q2, like Jukka mentioned, so we have been also seeing the increases on the component prices. So whether is it the memory, whether it's the CPU or whether it is increased prices on the [indiscernible], which is then used in the probes, so I wouldn't draw that conclusion. And what now comes when going forward, so we now start to go through the details, bill of materials now during the second half and then doing a decision in the remaining part of the year that should we adjust the prices if the memory and CPU and raw material prices are going to remain high. So that's the standard procedure what we do.

Okay. And then in general, looking at the market sentiment and demand and now given your broader footprint in the market, what do you see with regards to the market demand and your sales pipeline? I know you have always underlined that the Revenio sales pipeline is short, but in Visionix, you have slightly more visibility. So what is the current market demand?

So maybe I pick that one, and Jukka, please help me. So U.S.A. like we discussed in the earlier quarters, so that has been surprisingly robust. And now we have a new sales team in place. So the new combined sales team, we have split all the care [indiscernible] et cetera. Of course, there is a certain ramp-up time. But actually, if we look at start for the Q3, so it looks good. Then we have a lot of cases in a pipeline type of cases where we haven't been before because we have a combined portfolio. Of course, the key is to turn them to wins. So that's a crucial thing. Then if we go for Europe, so Europe has been steady. And then I hope that the APAC turns in a bit more better shape. So we have had a positive trend now quarter-by-quarter. So we have seen a bit more better activity, as an example, in South Korea, et cetera. We did a distributor change in Australia. So that's the reason why that part has been a bit sluggish, if I may use the world earlier, this year. So hopefully, that's going to help up the situation in APAC because that's one of the biggest countries for us in APAC. Of course, now we have to remember when we report now the Q3, so then it's going to be first month where we also have a Visionix numbers fully in a quarter. So that's going to be interesting to see. Anything, Jukka, you want to add?

No. Of course, was the highlight [indiscernible] businesses that -- Europe region developed quite positively when looking at quarter 2 overall.

All right. And still, sorry, coming back to the gross margin and the discussion about the factors burdening that. Can you -- do you have some kind of guidance for your gross margin for the remainder of 2026?

Yes. No. Like you saw, we were guiding the EBITDA and then, of course, the top line. But it's good to remember now when we consolidated Visionix, only 1 month, and then, of course, with the lower margin profile in the Visionix. Of course, we will now when we consolidate the whole company, that's generating absolute terms, lots of more gross margin. But then this dilution impact will be whole quarter starting from quarter 3. So that's a good remember when looking at the percentages.

And I don't know, Pia, is it helping on -- sorry to jump in, sorry to interrupt. If you think that we look the quarter 3, quarter 4, so I think the old Revenio side, we have been roughly 68, 69 depending on the quarter. And then we have a Visionix dilution part of the package, so further diluting. So I think that's all part, right, Jukka?

Yes.

Maybe it helps.

The next question comes from Daniel Lepisto from Danske Bank.

It's Daniel Lepisto from Danske Bank. I have a couple. Maybe starting still -- or continuing on the organic growth for [indiscernible] Revenio. If you didn't execute this Visionix transaction, would this previous guidance of 8% to 15% growth this year, would it still be in place after the Q2? That's the first question.

I think that, not too sure, is it a relevant question at this new state? But I wouldn't see. So we have also the big deals in the pipeline for the remaining part of the year, and Q3 or Q4 is basically strong. So I mean forecast looks good.

Follow-up would have been on those larger deals that you discussed. So they are still on the table. And I guess there would be a better second half [indiscernible]?