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Welcome to CellaVision Q1 Report 2025.

[Operator Instructions]

Now I will hand the conference over to CEO, Simon Ostergaard. Please go ahead.

Thank you very much, and thank you, everybody, for dialing into the first quarterly reporting here in 2025.

I have our CFO, Magnus Blixt, with me, and we are pleased to present the Q1 results of CellaVision. So the heading of our report is strong quarter in a rapidly changing environment. We are reporting a revenue of SEK 195 million. So it represents a growth somewhat above 14% and 14.1% organically.

So we believe and we are reporting a pretty strong start to the year, and that is really a contribution from the 3 regions, but also given the traction of our solutions across many markets.

We know that the nature of our business is really subject to some quarterly fluctuations given our order-based sales process, as you may know, the one's who have followed the firm for years, but also the delivery timing of entire block lines is a function here.

However, we are proud to get a good head start on the new financial year, and I'm pleased to elaborate a little bit more on that, and then we will do the Q&A.

Essentially, with these results, it also emphasizes and contributes to our strong financial position. We have very, very little debt on the balance sheet, and now still a strong cash position that is growing, including a pretty strong operational cash flow.

In terms of the progress on our strategic direction, we have chosen to highlight some of the themes that we are investing in. We have increasingly invested in R&D as part of our power of focus. And we're in the midst of a very rich and valuable road map.

So we are continuing our clinical trials for the application of a bone marrow module that will allow us to classify the different cell intermediates of bone marrow. So that's continuing according to plan.

We're also sharing today that part of our R&D investment has been upgrading our current solution. So we are actually running verification and validations of software solutions for our current hematology solution, which also comes with some workflow advantages and an improved user interface.

So we will certainly talk more about that at the point of launch. But here, you are certainly getting the hint that it's pretty nearby. And then again, we are very proud of what we reported in our annual report of 2024 in terms of our progressive development of the Fourier Ptychographic Microscopy Solution, which is also part of our next-generation hematology solution.

And we still have traction and interest from new potential partners in the field of Pathology and Cytology. So our commitment to our R&D investments is continuing according to plan.

Let's take a little bit of a look at the P&L, and I excuse myself with my voice. I have a little bit of a delayed cold. So, as said, we demonstrate and report the SEK 195 million, representing 14% growth.

It's a strong gross margin that comes with 70% versus 66% in our comparison Q1 2024. I think the main sort of element here is that the comparison was actually before we implemented the price increases of last year.

We also, in Q4, had a pretty decent gross margin of 69%. We are lifting it a little bit, and that is also a contribution of our product mix. So, both we have solid instrument growth with a reasonable gross margin, but actually also within our software and other categories, we have contribution from software, and actually a little bit decline in the spare parts and others, but a good contribution from software. So taken together, we have a strong gross margin.

Our operating expenses, 41% of the top line. They equal SEK 80 million. We are increasing a little bit on the admin side due to commitment to regulatory requirements, but not least, following our investment plan on the R&D side with an increased investment in R&D, where quite a big chunk of the raise is also capitalized.

Our operating profit equals DKK 57 million for the quarter, and including the depreciation, we land at an EBITDA of DKK 66 million, which is equivalent to 34%. So it's a strong EBITDA driven by our gross margin, strong gross margin, and of course, the scalability of our business as we are reporting a strong top-line growth.

In terms of cash flow, here, on the working capital side, we do have an increase in accounts receivable, slightly decline on the inventory level so essentially a contribution of around 3.5% from working capital, which brings us up to 61% of an operating cash flow and then we're investing as planned primarily in R&D, so that's DKK 18 million out of the DKK 21 million from investments.

And then we have our financial activities, which bring us down to a total cash flow of DKK 37 million within this quarter. So that's the P&L in short.

Let's take a look at the regional highlights. So, essentially, as I said in the beginning, it's driven by pretty much all positive growth across all regions. Americas, no doubt, we've had a little bit of a soft quarter in Americas, given the previously reported insecurity when the American presidential election was on.

I think here, we are reporting that we are coming back both on the, you can say, the large instruments. We have seen contributions similar to the comparable quarter and somewhat higher than Q4. And we are also seeing positive growth on the DC-1 catering for the small lab segment.

So overall, we report 8% growth in the Americas. EMEA is 21%. It's DKK 96 million in total. That's a very strong contribution from multiple countries.

So we are seeing, you can say, output and success from our close collaboration with our strategic distribution partner in this region, which is good to see, that also demonstrates the attractiveness of our collective solutions, which resonates across different countries out there.

We're also reporting a solid double-digit growth for our hematology reagents of 12%. So that is another driver, which is also pending on our strategic distribution partnership.

APAC, 12% growth, so DKK 21 million. The APAC number can fluctuate quite a bit, given the fact that we typically ship a larger bulk of instruments. So it's a little bit vulnerable. But by the end of the day, we see traction from both Japan and China in these numbers.

And we see intensified activities also in close collaboration with our strategic partner. So that gives us a lot of appetite and motivation that we can actually really pursue growth across this region as well.

If we cut our numbers, so here on the chart, it's sales per product group. So here, we've chalked up our revenue into the different solutions. On the instrument side, in this quarter, it represents 59% of the total revenue. So no doubt that the instrument is a strong driver of the strong results, which is a good basis for our solutions.

So in total, we had DKK 115 million coming from instruments versus DKK 92 million in the comparable quarter. I think in terms of reagents, I mentioned the double-digit coming out of EMEA with a total growth of 5%. So a certain proportion of our business is our non-hematology, which is only growing modestly.

However, it's a good customer base, and it's still a good contributor to our business. But it is obviously hematology reagents where we bank on 12% growth, and that is taking an increasing share of our reagent business in EMEA. We are working on expanding, of course, into APAC, and we also have plans for the U.S.

In terms of software, and others, that's important. So we did DKK 42 million in that product category versus DKK 42 million in the comparable quarter.

We can say that we had a larger share of software, as I alluded to in the beginning, which means that, especially the consumables like oils for the installed base, but also spare parts, are a little bit low.

So we had a little bit of an overflow of software, not overflow, but we had a little bit of low software sales in Q4. So there's a little bit of a contribution from excess software coming into this quarter. Not that it's significantly large in number, but there's a little bit of a contribution there, which also explains the somewhat lower Q4.

So, if we just wrap up here and say we do believe that in isolation, Q1 is a strong quarter. We actually think, despite the fluctuations and what we define as the changing environment that we're all aware of, we think that the signals we get from our partner and the market are positive.

We do understand that there is uncertainty sitting out there, and also the nature of our business, as I started alluding to, is influencing the business quarter-to-quarter.

However, the basis is that we really get the message that there is strong traction for what we do and our solutions across the different product categories and across the different markets.

We appreciate our enhanced collaboration. It takes time to get close when you go to market together. There are many interactions, many relationships that need to be built.

We are really progressing on our results, but also on the trust level and the way we work together. So, I want to thank our strategic partner for that indeed.

We are fully committed to executing on the power of focus. So as mentioned in the beginning, I mentioned our focus on R&D, our spending, but also, I really want to send a heartfelt appreciation to my staff, my team, who are really executing according to our plans and our road map.

So, they are taking the investments very seriously and working extremely hard to allow us to differentiate within hematology and beyond over time.

And with that, I think we should go to the Q&A. So, I will hand it over to the moderator, and I appreciate the interest you show in our company. Thank you.

[Operator Instructions]

This is Ulrik from Carnegie. A few questions on my end. Did I understand you correctly when you said you got a good head start on 2025, and given the sort of high instrument sales in the quarter, that there is some risk of order stocking among your commercial partners and distribution partners? Or did I misinterpret that?

Good question, Ulrik. I would say, given the timing of when the orders were placed in Q1, let's say, the first half and the first couple of months of Q1, I would say the order stocking is probably less of a signal.

And here, my argument is or my position is my statement is based on when the tariff and the insecurity really increased, let's say, during March and April. And here, I would say the numbers we report today, we saw orders pretty much before.

So, I would probably argue that there can be a risk for it, but it's actually not something we've heard specifically anything about.

And European development looks to be continuing to be very strong. Like Q4, obviously affected by orders that ended up in Q3.

But if we were to sort of normalize those numbers, the momentum in Europe looks to be going really strong. Is there something special happening there? Or is it the effort in you, combining your commercial efforts with Sysmex, paying off? Or is there something exceptional that you're seeing? Or is it just a strong underlying demand?

I think it's a long run. I think the diversification and the effort across multiple markets are paying off. I think that's what we're seeing. Because I think it's been robust and now it's pretty robust.

And as I said in the beginning, it can fluctuate somewhat, but the trends for Europe are really growing. So, my sense is really that this is about the much closer relationship that we started a year ago on the commercial end, and it takes time to get results, basically. So, this is part of the fruit that we are collectively harvesting here.

Then, moving into the R&D efforts made and you gave a bit of a teaser. And we talked about this historically, integrating technology into your own hematology systems.

But I was just wondering, and again, we talked about this before, what are the implications for the commercial model in the new hematology system line? Can you achieve any type of higher recurring revenue out of a new platform?

Yes. I think in general, there are opportunities to optimize the current offering. That's what when I talk about the upgraded software version, which is something we do occasionally.

And here, we are flagging that there is actually more value added to be extracted in a very short while. In terms of our next generation, you're absolutely right. We will be very much more explicit around the value proposition.

But of course, it's both on the throughput with the FPM technology and the image quality. We will explore the opportunities to commercialize that both in respect of where can we actually land the COGS and also can we implement, it is our intention to increase the software component, the applications, just kind of the same philosophy as we will launch with the bone marrow, where there will not be a non-perpetual license.

But for applications, there may be an opportunity to gain more recurring revenue from software licenses. So, without going into the specifics, that's the thinking.

And then just in terms of your competitive position in the market? Does this move the needle additionally in your favor, where you believe that you are moving ahead of your competition?

And as well, I guess that would play into discussions you're having with Sysmex on pricing in the U.S. on the back of tariffs as well. So, if you can give us some type of insight.

Yes. I think in general, we are across many markets together with Sysmex, and we are winning share in the hematology arena. And I think we'll continue to do so.

I think the next gen will also make it more, let's say, for the share of the market that is already running digital cell morphology, it will be more compelling to actually purchase next gen when we get there.

So obviously, it cements our position on a more long-term basis.

Just a follow-up question on that. As you say that the next gen, in terms of the ones that have already adopted digital cell morphology that they would be more prone to replace their systems.

Do you feel that like obviously, a majority of your sales are generated by stream bot lines that are replaced and then added to this, and Sysmex or your partner adds this as a complement to that plot line.

But this, I guess, is still sort of a stand-alone system. And although it is a major upgrade, do you still believe that you can see faster replacement cycles among those who have already converted to digital cell morphology?

Yes. I think it runs in contractually with a certain period of time, 5 years typically, and then the replacement cycle is, we tend to say, 7 to 9 years.

And I think it becomes more attractive, but it is a function of when the entire bloodline line exchanged. Budgeting-wise, it's typically the entire bloodline.

But certainly, there will be an appetite to include and exchange the existing digital cell morphology system with a new one. I'm pretty convinced that will happen.

But in the meantime, I think there is more we can do, and we will be very explicit around what we are doing with software upgrades as we sort of alluded to today. I think there are still good opportunities there.

The next question comes from Richard Ramanius from Redeye.

I have one major question, which I'll begin with, which is about foreign exchange rates. So, what do you think will be the impact of the strengthening SEK for the rest of the year? And how was it that you had no currency impact in Q1?

Magnus, maybe you can comment on the FX implications.

Yes, I can start. Let's start by looking at the year-over-year comparison, We could see that exchange rates at the beginning of the year for the euro and the dollar were on par. Last year, it was rather high.

And then we saw a fairly steep decline in the exchange rate within the quarter. So, the average rate for the quarter then compares to the average rate of the same quarter last year. Even though at the end of the period, the exchange rates were lower than the average last year.

So, we've seen exchange rate changes before, but what's a little bit special this time is that the change was in a quite narrow time scope at the end of the quarter, actually.

So I think we will see the effects starting from Q2, then?

Yes, we've seen a little bit of re-strengthening of the currency, especially the euro. So, of course, they go up and down a little bit. We follow it closely to see how we can monitor it.

Our price contracts are negotiated on a yearly basis. So, in the short term, there's not much we can do. We are affected by FX changes. And the majority of our revenues are in euros, but also dollar is also an important currency for us. Very little in SEK and other currencies. So, the euro and dollar cover almost all of it.

And last question. I'm interested to know if you could say something about the sales mix in Europe of instruments of large versus small instruments.

So instrument-wise, we've gained a good traction on the large, I would say. We see significant growth in this quarter. It has primarily been in the large instrument segment, a little bit higher on the small as well, but the bulk of it is in the large labs.

The adoption of the small instruments has been a little bit slower in Europe because it's across multiple markets, as opposed to the scalability of the U.S., where it really resonates in the U.S. with the integrated health networks. They have started with the IHN and purchasing the DC-1.

There's a great opportunity for us over there still. But we are starting to see the value and the differentiating opportunity for the small lab.

But currently, we are selling the DC-1 across different countries, and we certainly think this is a growth driver for us that will play out as we continue pushing the business.

The next question comes from Ludvig Lundgren from Nordea.

Congrats on the strong numbers here in the quarter. So, you highlighted that America's sales recovery was driven mainly by DC-1 installations.

So, then I wonder how the Sysmex installation pace has been for larger laboratories, which you have been talking about before. Has this improved, so to say, quarter-over-quarter?

I think so. When we talk about the large and the small order pickup that has happened both at the very end of Q4 and also here at the beginning of the year.

But again, the complexity here is one thing is the orders that our partner, like Sysmex, are picking up. But then the implementation is a function of when the entire bloodline is and when the hospital is ready to implement. And that is typically 2, 6 months, and it can be much more than that.

But there is not a one-to-one relationship between that. We get the signals that there has been traction. I think I reported that also at the Q4 call, that the outlook seems reasonable. And we actually see that we have a pretty good base of last instruments in this quarter.

And then we also have growth versus last year on the small instrument. That is definitely - and that is because the model really resonates with that is because the DC-1 really resonates, building the digital ecosystem across the Americas.

And a follow-up on America's instruments. So, historically, this has been mainly U.S. instrument placements, but you highlight that Latin America is growing fast. So, maybe if you can give us an insight into the sales split between these 2 regions. currently?

Yes. Yes, I'd say Latin America, that is also growth coming out of Brazil, and it's also DC-1, which is a good driver in that region. Brazil is the majority of that. So, it's not across the entire South America.

But it is different as opposed to North America, which is really driven by high-volume labs and large instruments, and then you tie in the DC-1 in those networks. So, the scalability and the size of the markets are very different. That's important to say.

And one, on the reagents as well. You delivered strong sequential growth here, like looking Q-over-Q.

But I wonder if you expect any seasonality effects for reagents in '25? Or is this Q1 number a good indication of how the year will unfold?

I think we certainly aim to continue growing in our largest footprint, which is obviously EMEA.

It is less characterized by our reagent business is less characterized by seasonality. There is a little bit around when a test is conducted during holiday seasons or whatever.

But it is much less seasonal versus the instrument software business, which can really fluctuate whether we are getting orders or not, and whether we are shipping a lot of instruments at the same time to a given jurisdiction.

So, a lot less sensitive. I think it's a signal of our installed base that is growing. That's how you should look at it.

The next question comes from Christian Lee from Pareto Securities.

I have a couple of questions, please. Could you please clarify regarding the growth of the instrument sales, which grew by 25%? Were there similar growth rates for both DC-1 and for the larger instruments?

Yes, I'd say in general, that's a growth rate rise, we are in the same ballpark area. That's very similar. But of course, the contribution revenue-wise is much better on the large lab segment.

And did the strong demand in Japan and China result in material sales in Q1? Or do you expect to see this in the coming quarters?

I think the tricky, especially China, is our biggest market in APAC. And even though there is a competitive situation that is more pronounced in China than elsewhere, we certainly still have traction.

I think and are still winning deals in China. I think the challenge is also that it's not a direct market. So, our distribution partner would be working with local distributors.

So, the transparency as to the actual demand out there at the hospitals, very delayed and very invisible for us because there are 2 layers out there.

Having said that, we're continuing to see demand since we are getting orders. So, there are certainly wins out there in China. So that's a significant market for us.

And then we are starting to see a market like Japan, which has been, let's say, relatively not slow, but the adoption of digital has been less than in other very developed countries. But we are definitely seeing traction and increased attachment rate out there. So that's a positive one.

Then there are opportunities when we talk about APAC, which is outside of Japan and China, that we're also trying to establish together with our partners.

And the price adjustments seen in the gross margin improvement, have you reached the full impact already? Or can we expect some gradual improvements going forward?

As Magnus alluded to, we or maybe I talked about it actually. But we adjust once a year. And in our comparison, they were unadjusted.

So, we certainly have another price adjustment coming up, but it may not be given the lay of the land, it may not be in the same magnitude as we were able to do last year.

We came out of a period with higher inflation last year. So, it was a bit of compensation for lost grounds last year. We will still adjust our prices during the year.

So, should we review the gross margin of 70% for the remainder of this year?

No, I think we've landed at a pretty decent spot. There are a number of variables within the gross margin. We talked about the FX impacts. We could have write-offs, et cetera.

But generally, I think we've proven that we are strong coming back at the 70% mark. So that's a good proxy for the business. We came from, I believe, it was 69.2% or so in Q4. I could be wrong in the digit, but kind of around that.

So, we've also proven the scalability here. So, but of course, can there be deviations? There probably will be. But this is a pretty good sort of guidance as to where we expect to be.

[Operator Instructions]

There are no more questions at this time. So, I hand the conference back to the speakers for any closing comments.

Thank you very much. And again, thank you, everybody, for showing and paying interest in our company.

I really want my team also to be proud of the strong quarter despite this rapidly changing environment, as we are all in the midst of. Despite that, I just want to reemphasize that I do think we have a strong position now we can grow further.

So, we remain optimistic about our ability to actually drive growth and deliver long-term value across our hematology business while also pursuing long-term growth pockets outside of hematology.

So, I want to send my sincere thanks to the entire team at CellaVision and, not least, our strategic partner, Sysmex, for where we've started the year and what we've built up over the last years.

I'm very excited about where to take us in the coming year here. So, thank you, everybody, for listening in. Thanks.