Good day and welcome to ChemoMetec's conference call. All participants are currently in a listen-only mode. Following the presentation, there will be an opportunity to ask questions during the question and answer session. Please note that today's conference is being recorded. I would now like to turn the conference over to ChemoMetec's CEO, Martin Helbo Behrens. Please go ahead, sir.
Hello, everyone, and welcome to Q1. With me today, I have first, of course, a disclaimer we have to show everyone, but we will quickly move on to the next slide, where today I have our CFO with me, who will actually start here at first giving a presentation on the numbers from Q1, and then as usual, I will go over the commercial aspect. So over to you, Phillip.
Thank you, Martin. Let's jump into the financials. As always, all numbers I will refer to will be in DKK. Revenue for the quarter increased by 28% to DKK 160 million, while EBITDA increased by 46% to DKK 100.3 million. This resulted in an EBITDA margin of 63% compared with 55% last year. The development was mainly driven by higher revenue, providing operating leverage, continued cost discipline, and improved gross margins on our XM products. Looking across our product portfolio, instrument sales were the main growth driver this quarter. Revenue went up with 61% to DKK 65.6 million. The main driver for this area was the XM products, especially our NC-203 that accounted for DKK 20 million in revenue this quarter compared to zero in the same quarter last year. Consumables increased with 8%, while services increased by 22%. We saw growth across all of our geographical segments, regions.
North America increased by 25% to DKK 88.6 million. Europe increased with 24% to DKK 53.3 million, while the rest of the world increased by 71%. The increase in the rest of the world is mainly driven by distributors that built up their inventories of instruments. That also means North America remains our largest market with just above 55% of group revenue, followed by Europe with 33%, and the rest of the world with 11%. So overall, the geographical mix is quite stable quarter-over-quarter. Our core LCB business increased by 31%, so strong performance here. Revenue ended at DKK 153.4 million, and it represents 69%-96% of group revenue. And the smaller animal semen, beer, and milk business area declined by 11% and represented 4% of group revenue. Following the strong first quarter and the continued positive development into Q2, we upgraded our full-year guidance this week.
We now expect revenue to be between DKK 570 million and DKK 605 million, EBITDA between DKK 335 million and DKK 360 million, and investments, we still expect approximately DKK 120 million. The upgrade is mainly driven by the stronger-than-expected instrument demand, particular for the NC-203, and then the continued lower cost base. With that, over to you, Martin.
Thank you. Not the worst quarter. Over here to the market conditions, and again, we do see some growth in the CAR-T area. We are very excited, of course, about the previous generation, but again, as you can also see here, there is some competition, and as you probably also have read, you have Yescarta from Kite with some competition from some of the other ones, CARVYKTI and BREYANZI. Overall, what we like to see and what we also hear in the field is our customers are expecting growth, which means, of course, that we're also expecting to sell more instruments and more consumables and more services to these customers. Overall, it is quite important to see that the revenue keeps growing in this segment.
If you move over to patients treated, it's also something we follow because, as everyone knows, every time one patient is treated, basically, they'll use one cassette. Of course, we do not have all the approved cell therapies, but we usually say that we have nine out of 10 using our products. As you can see here, just as of Q2, it looks like an all-time record again for the approved cell therapies, and this is something which is, of course, very good for ChemoMetec. On the funding side, we still only have the numbers from first half of the year, but it seems like there is some recovery in the field. Also, when we're talking to customers, when we are basically in the field, we do also see some recovery.
I do remember a couple of years ago when I went with our team around the world, we did see a lot of layoffs. We did see many customers saying, "Yeah, well, we do not have the money right now to spend on instrumentation. We're not basically looking to scale right now." Where today, I will say it looks better. Also, the budgets are better. Definitely some recovery in the industry. Also what we're looking at, because you can probably imagine using our instrumentation, you need staff. If you lay off a lot of staff, it usually means you'll also cut some projects, which means less instruments, less usage, and which is also, of course, affecting our revenue. This is also in line with what we're seeing in the field, it looks better, and this is definitely something to follow.
Again, on the long run, it is very good to see that we are seeing an increase again in active trials. This is very important for the industry. Again, only 49 approvals in the world. We got nine in this year so far. We still see approvals coming out, and of course, we are looking quite forward to the future basically. If we move over to product and partnerships, this is an important part for ChemoMetec, but we have basically launched our new instrumentation here, which is also a decent amount of the growth you see this last quarter. If we are looking first at the XM40, we do have this instrument specifically targeted for the bioprocessing area. Also, in the last quarter, we actually have started to penetrate bioprocessing. We have sold a decent amount of instrumentation to the bioprocessing area.
This is, of course, something we are very happy for. Looking at the 40 and the 30, basically those instruments can be used in bioprocessing, but mainly the 40 is targeting that area since a lot of instrumentation previously and competitors are based on the carousel we also have in the 40. The 30 is meant for automation, and we have seen a lot of customers reaching out saying they are looking into automation. Again, it takes time with automation. They might have running manufacturing today where they are not used to manufacturing, so actually transforming from manual to automated setups takes time.
We do see many larger companies having specific departments now trying to develop automation flows, and we have a lot of inbound leads on the 30, and we do really believe the future is automation. The 203, which is an upgrade basically to the 200 and the 202, is based on the same platform technology-wise as the 40 and the 30. It is a cassette-based, which many customers like. Overall, when we go into the field now with the new platform, what our customers really love is basically that previously you had to validate one instrument, and then if you wanted to change that method, you need to do a revalidation.
Now we have actually made it possible to have different way of handling your sample. You can have the carousel, you can have the automated way with the satellite, the 30, and then the cassette-based 203, and you only have to validate the platform once, then they actually align across, and that is something our customers really love, and that is also some of the USPs when we are actually competing against other instruments out there. On the strategy partnership side, it is not a secret that penetrating bioprocessing can be difficult. It is a very established area, and you need good relationships with the customer to basically show your product. What we have learned is you need to build combined solutions, and we are trying to do that with Tecan, Hamilton, and Roche so far.
We have more coming up, some exciting partnerships. Basically, what customers want is they do not want to contact different vendors and then do the automation integration themselves. They want to buy off-the-shelf solutions. It has been very important part for us to basically team up with all these partners. Remember, you see the partners here today, but we have been working with them for a couple of years now to do the integration, the validation, to basically be ready to sell these products. More of that coming in the future for sure. We have product development, which is always an exciting area. As you know, not only in the future do we want to be a cell counting company.
It is important for us to basically show our capabilities, which means we can actually build end-to-end automated sample management systems, actually combined by hardware and software. Mainly what you see here is one of our ideas to customers. It is a modular end-to-end system where you can basically have a lot of high throughput cell counts, including other instrumentation than our own products, but also analyzers and whatever you need.
Mainly in the future, we hope that customers, which we already know, will implement these end-to-end systems so they can basically cut the cost, which is one of the biggest, you can say, the biggest issues today with manufacturing of CAR T-cell therapy. We have big hopes for these systems, and it is not more than a couple of weeks ago we showcased this product last time. It was our XM User Days where we fly in all our larger customers. This time it was in France, and we showcased our new technology. We got some feedback on this specific sample management system, and we hope to start testing next year with customers. Next up, we have software and integration. Last time, not sure if you know, but we only had software here, but now we added integration.
That is because what we have learned the last year and two is that many, many companies out there can do software. They can integrate, and they can show some data. But what we have learned is what the customers actually want is the data generated on our hardware. We have started to already sell API licenses in the field, which means if customer wants to get the data out of our computer, out of their computer, out of their system into another system, today they actually pay an API license.
Of course, in the future, we are going to add the XM Octopus on top of that. But today, we have already sold for a couple of million API licenses just for integration. In the future, all XM30s will come out with API license, so that is a new revenue stream for us. Then we are ready for some questions, which I guess there will be many of. Thank you.
Thank you. We will now move on to today's question and answer session. Please stand by while we compile the Q&A roster. Thank you. We will now take our first question. The question comes from the line of Mads Brinkmann from Berenberg. Your line is open.
Yeah, good morning. Thank you very much for taking my questions, and congrats on a really strong quarter. Just starting with two, please. If I look at the instrument sales, obviously they were very strong, but if I am just playing the devil's advocate here a little bit, obviously very much driven by the NC-203. I am just thinking, how should we think about the XM sales? Because if I look at XM year-over-year, I mean, it is more or less flattish. So I am just thinking about how should I think about the development of XM or XcytoMatic as a whole, excluding NC-203 for the remainder of the year? Then the second one, please, if I just look at your guidance.
I know you have just upgraded it again, but if I look at sort of the implied growth based on a very strong growth in Q1, the implied growth for the remainder of the year is 6% to 5%. I am just thinking what it would take for the guidance to reach the lower end. It seems quite cautious, especially given the sort of easy comp that you have in Q2. But that was all for me to start with. Thank you.
Yeah, thank you, Mads. I can take the commercial side, Phillip, then you can do the guidance. But first of all, when we are selling our new platform, it is important to say that previously, we went into the market with a 200 or a 202, and they basically implemented that for every single department. Now, we do see it very differently. We do see that customers might be implementing the 40 in R&D, then in clean rooms, in process, they like the closed container system, which is the NC-203, where they just have no way of basically having any contamination with our instrument. Then in QC, you have a lot of testing where you then want to automate that testing with a 30 and a liquid handler system. Right now, in process is the big part of the manufacturing.
From our point of view, when we go into the market, it's not important if the customer wants the 30, the 40, or the NC-203. The big USP is basically they can choose whatever they want, and what we have learned is they will actually want different instruments for different departments. Right now, the NC-203 is what they want, but also we have actually sold some 30s and some 40s. I will say the 30 is more long-term because it's automation, and you don't automate something overnight. Some of these sales you see right now is just for the validation, it's just for the first integration.
At some point, they will buy in bigger bulks, and of course, we're looking very much forward to that. But that can take a year or two before they really start buying a lot of 30s for those flows. Overall, I think you should look at it as a platform. Of course, there's a different pricing between the products, but from our point of view, it's just a big USP to sell a platform, so we're just happy whatever they buy. That will be the answer to the first question. I think, Phillip, you can do the guidance then.
Yeah, definitely. Thank you for the question, Mads. I just want to reiterate that Q1 was exceptionally strong, and we're not going to extrapolate the 61% growth on instrument sales mechanically for the full year, because the growth was primarily driven by the NC-203. We also had some delayed and postponed instruments order that was executed during this quarter. It is difficult to predict the future. We're really doing our best here, but our current guidance reflects, yeah, the current expectations for the year, including expected revenue and also the cost development.
I will add to that also that last year, we had a similar situation. This year, of course, we want to be conservative. We want to make sure that we don't have to downgrade. We have learned from the past, and I think it's only six months ago, we had a lot of, I won't say angry investors, but we had some. I think we have learned to basically be very transparent and say it's very difficult for us to predict the future here because our visibility is so low. Of course, we're hoping for the best, but it is crucial for us that we don't have to downgrade again. We have learned from the past, and that, of course, is also some of what you're seeing here.
Yeah, that is perfect. That makes a lot of sense. Just one follow-up, please, on the instrument side. I mean, and I think you mentioned it yourself as well, just the rest of the world, obviously very, very strong as well, but you also mentioned that some distributors are building up inventories. Maybe just if you could add a few comments on that. I mean, are you adding any distributors? Is that part of it, or is it essentially just distributors taking in more stock? How should we think about that for the rest of the year, or is it more sort of a very strong Q1 impact, and maybe we should expect it to come down a little bit for the rest of the year? Thank you.
Yeah, so to be very transparent, we have also made a strategic change in the rest of the world. So we have changed pricing from January 1st, so they align with Europe and U.S. from that point of view. So from that time, sorry. So of course, they have bought instruments now at the current pricing and to hope not to spend too much with the new pricing. So, it is a timing thing, but it is crucial for us to say, in the future, we sell to bioprocessing, we sell to global customers, so the pricing will be the same globally, and that has something to do with the pattern you have seen in Q1.
Thank you very much.
Thank you. Our next questions come from Jesper Ingildsen from DNB Carnegie. Your line is open.
Yeah, a couple of questions from me as well. On the NC sales that you recorded in the quarter, could you just elaborate a bit if part of that sales is benefiting from sort of like last buys ahead of the end of life of the NC-200 platform coming up here in April? Yeah, just more generally, sort of like, are you expecting this to play out ahead of that cutoff in terms of April? On the XM sales, including NC-203 and 30 and 40, could you maybe also just elaborate a bit on how much of this is related to some of the larger orders that led you to downgrade your guidance last year, and if that's something that's finally coming through? Maybe just a last one.
You do also comment that you have had a strong start to Q2, and as I alluded to before by Mads Brinkmann as well, I mean, you also have easy comps coming into November due to the U.S. government shutdown last year. Could you just elaborate a bit about this initial strong start and, to some extent, if you are seeing some larger budget flushes this year coming into the latter part of the calendar year? Thanks.
Yeah. On the order side, mainly, yes, one or two of the delayed order from last year has been realized this quarter. But again, they have only bought some of the instruments, some of these customers are major customers. So, of course, we're still expecting more. To be honest, this is only the beginning, and nothing has changed from what we have said over the last, I will say, since I started as a CEO. This takes time. We have some validations. We have learned that they are a little bit slower than we expected. Everything got basically postponed by one quarter. So, that's the basics here. On the last time buy subject, mainly what's going to happen now in here is we'll start selling a few NC-203s to many, many different customers.
They'll start their validations, and while they do that, they will have to buy NC-200s for the time until they do the transformation to the NC-203. So, every single NC-200 we sell right now will be replaced by an NC-203 in a year or two or three. So mainly, we have a lot of customers starting the validation now. We haven't replaced any manufacturing sites with NC-200s yet. This is only the beginning. They will have to buy the amounts they need of NC-200s until they can do the transformation.
So, we will see some bulk orders on the NC-200 in Q3. How many? It's almost impossible for us to say. We don't basically have the numbers, but of course, we have to expect some. Since this is their growth the next couple of years, they'll have to buy for. Later on, they will have to replace those 200s with the NC-203. That will be the answer to that. On the last one, Phillip, I think you can take that.
Sorry, I was not. Could you please take that?
Yeah, sure. I think everyone is basically looking at strong first four months. Again, I can only repeat what I said to Mads. It is very difficult for us to predict. We want to be on the safe side. I know if you just multiply Q1 with four, then you have a very different number. Basically, for us, very low visibility. We do not want to disappoint anyone. Do we hope for more? Of course. That is the case right now.
Okay, just quickly coming back to the last buys at the end of life here in April. Do you include anything from that in your guidance at this point in time? It sounds like you expect mostly to benefit from this in Q3 of your financial year, if I understand you correct.
Yeah, we have not included it in our guidance. Of course, we have the usual running business, but if you see a bulk coming in from many companies, no, we haven't included that because we simply don't have the orders. We have learned from the past, don't expect too much and then be disappointed. So, it will be hopefully a positive surprise.
Great. Thank you.
We will now move on from the conference call questions to those submitted via the webcast. I would now like to hand over to [Frederike Wittberg], who will read out the webcast questions. Thank you.
Okay, so the first question we have is from Søren Krogh, who is asking, "Can you elaborate on the XM30, XM40 sales figures in Q4 last fiscal year compared to Q1 this year?"
Phillip?
Yeah. We saw a slight increase in the XM30 and the XM40 compared to the last quarter that we ended in the last fiscal year. Again, the main growth driver here is the NC-203. It is kind of flat from last consecutive quarter to this quarter.
The next question is from Knud Bjarne Hansen, who is asking, "What is the percentage of your revenue used for future R&D?"
Again, we expect DKK 120 million in investments during the year. Half of that, I would say approximately, is for product development. Around 10%, I would say, is from the revenue, is spent on R&D projects.
The next question is from Ludvig Lundgren, who is asking, "Consumable sales recovered after a slower period. Is it fair to extrapolate this growth considering the rather easy comparisons in the segment ahead?"
Yeah, I think it definitely depends on the amount of treated patients, but again, as we showed in the presentation, it looks like it will increase. So, of course, when our patients are doing better, when funding is better, then, of course, our consumable sales will also be better. So, yes, we hope for continued growth on the cassettes, and it looked decent, yeah.
Then we have one more from Ludvig Lundgren, who is asking, "You highlighted some back order instrument deliveries. Is it possible to elaborate on the magnitude of these?"
It's difficult because I will say it's not a lot. Mainly what we sold this quarter is a few instruments to many customers, which is also what we actually want, because you can imagine if you want a lot of replacements of the NC-200 later on, you want to get started with a lot of validation. So we haven't received any larger orders. I think the largest one has probably been 20. So it's still to come, but it's very good to see many customers buying a few because we know what that means. It means selling a lot in the future.
Then we have one from Frederik Inala, who is asking, "NC-203 sales were about 4x the Q4 level, and you mentioned distributor stocking in some markets. How much of Q1 demand reflects end customer purchases versus distributor inventory, and what have you seen in orders since quarter end?"
We mainly sold a few NC-203s to distributors. It hasn't really penetrated in Asia yet.
Then we have a question from Michael Ravn, who is asking, "As the NC-203 gradually replaces the existing NC-200 installed base, what will sustain the current level of revenue?"
Yeah, hopefully it will mean that we can do more upselling because the whole new platform will also have what we call first the API license, which means you are able to integrate into our instrumentation. First of all, it means you can control the instrumentation, but you can also extract data. Mainly today, when we sell an XcytoMatic product, our customers are paying a fee for API licenses, which is 100% margin, so that's also why you see increased margins. And then afterwards, they'll basically also pay for a yearly subscription on service and support for that API license, and later on, we will be launching XM Octopus with a lot of features where we'll also do some upselling.
We have showcased XM Octopus to all our customers in France at the XM User Days, and we have a lot of demand for it, so we'll be starting the test very soon. Also because actually one of the customers came to me and said specifically what they do right now is they're doing a lot of testing worldwide, and we have this customer in Germany who are also testing in Singapore, he's also testing in California, and when they do the test today, they have to extract the data and send it. The problem was when he came in the morning, they forgot to send it, so he lost a day. And with XM Octopus, every time you do a test, a sample, you'll actually have it synchronized so everyone can basically extract it in real time. So, this is very useful for our customers.
We have big hopes for it. We need to make sure it works perfectly for them, but we will begin testing in 2027, and we have a big queue for it already. It is quite exciting, and basically that is the XcytoMatic platform in the future. You will basically be able to do a lot of upselling compared to today. So it will increase the consumable service and software spending per instrument.
Then we have one last question left, which is from Peter Pillerson, who is asking, "Following the Tecan partnership, are you actively pursuing similar strategic partnerships with other major players in the bioprocessing and life science industry, such as Sartorius, Thermo Fisher, and Danaher? And should we expect further partnership announcement as part of your growth strategy?"
Yeah, it is definitely a strategy, and what is important for us is when we do the partnerships, they are non-exclusive. So what we hope for is one day when our customers are approaching a liquid handler company, a bioreactor company, whatever, they will basically offer our XcytoMatic platform and be sold combined with the solution they offer.
So first of all, that will increase our margins because it is less cost per sale, and also you will get this huge exposure to a market where today, with the limited amount of employees we are, you will get a huge help here. So that is also some of it we have here with Roche. They will present our product, they will basically showcase it to customers, and just that, of course, will increase our inbound leads, and we definitely believe that that is how to penetrate the bioprocessing market is. All good?
That was the last question, so thank you everyone for joining.
Perfect.
Thank you for joining today's conference call. This concludes the presentation.