Good afternoon, and thank you for joining us today. Today we have the pleasure to present the Result For The First Quarter of 2022. My name is Jesper Söderqvist, and I'm the CEO of Boule Diagnostics. With me here today, I have our new CEO, CFO, Annette Colin. Thank you. Thank you. She will assist me during this call, and I think it was a great opportunity for you to meet Annette, and you will hear more from her in the future.
I hand over to you.
Thank you. During this presentation, you're welcome to ask questions. You can raise your voice, or you can raise your hands in Teams, and you may also use the chat function in Teams. But those questions we will take at the end of this call.
If you look at Boule's first quarter of this year, the highlights are that we again delivered a record quarter. This was an all-time high for a first quarter and the second best quarter in terms of revenue in Boule's history. We also see that demand for testing for both instruments and consumables are back at the pre-pandemic levels. The growth was mainly driven by India, but also a good development of our OEM business, and we actually recorded double-digit growth for all our product lines. However, a range of external factors have impacted our operations. The supply chain situation has been difficult, and it also limited the production and sales in this quarter, and it has also impacted our profitability, and I'll come back to that.
As always, our priority is on our customers, and we have done our best to continue to deliver and provide a good service to our customers. I must say that we have also seen that the market has opened up, and we have started to meet customers again. In January, we participated in a bigger conference, Medlab Middle East in Dubai, and it was really good to see that come out and meet customers. We met, you know, old loyal distributors, but we also met many new potential distributors that are attracted to Boule as we now are driving growth in the Middle East and Africa region.
Not only have we participated in bigger trade shows, but we also have seen that our distributors are also attending local trade shows, sometimes by themselves, but also sometimes with Boule staff joining. The image there on the right-hand side is from Vidarbha, where that hosted a pathologist conference, and this is in a progressive region in central India. It's really great to see that, you know, the energy is coming back to the organization, that we and now are able to go out and travel and meet customers in a way that we have not really been able to do the past two years. It's very good, and this create energy in the organization, and I think it will also help grow the business going forward. Let's look at our financials for this quarter.
Net sales was SEK 133 million. It is actually just about the best quarter pre-pandemic, and it's the second-best quarter after the historic quarter in Q4 last year. Gross profits generated was SEK 57 million, which is equivalent to a margin of 43%, but this was burdened by extra costs related to the supply chain disturbances and also an unfavorable region mix, as India and OEM are not our highest margin product. We are 1.5 percentage points below Q1 in 2021, but overall, I would say that this is still a good result. If you look at bottom line, we end up at 7.8%, which is one percentage point above last year. If you look at our spend, we have continued at full speed with our new platform development.
We have invested SEK 18 million in this quarter. In the end, I think this is a great result, and I think that in a more normal market with less disturbing external factors, we will deliver higher profits. If you look, you know, zoom out and look how sales has developed during the last few years. Here in this graph you can see instrument sales per quarter, but also the graphs are rolling 12 revenue for instruments and consumables. You can see here that, you know, for five consecutive quarters, we have seen that the rolling 12 month average have increased, and we're really now back at the sales at the pre-pandemic levels. This, you know, recovery is mainly driven by the easing of restrictions across the world.
I also would like to point out that not all markets have removed all restrictions. In particular, some markets, bigger markets in Southeast Asia is still experiencing restrictions. From this point of view, we can expect further growth later in the year as the pandemic eases. If you look at the revenue development, from the product line view, we saw double-digit growth for all our product lines, and the strongest growth is consumable sales to other manufacturers, which we refer to as our OEM business. If you take the OEM business and include also the CDS brands, the sales almost doubled versus last year. Instruments are up by 20%, and that was mainly sales to India. Very importantly is that our consumable growth continue to be strong, and we hit a 29% increase in this quarter.
If you look then how the business has developed in the various regions, we can see that the growth is related basically to two regions, the U.S. and Asia. In U.S., it's the OEM business that drive growth. In Asia, it's mainly India that drives the business. We have also seen good growth in countries like Pakistan and Kazakhstan. Overall, there are still some countries which have a much higher potential in Asia going forward. Eastern Europe, we also saw a growth, and the growth was driven mainly by Bulgaria, but also good sales to Ukraine and Russia in the beginning of the quarter before the war started.
In general, you could say that Africa and Middle East is a region that has developed very well for us, in the last year, and we are investing there. Unfortunately, we had one bigger orders to Egypt that was delayed due to some new policy when it comes to payments, so that order will be shipped now in Q2. We also saw that there was some new business, from new distributors in Lebanon and Saudi Arabia that started to generate results. If you now look at, you know, what the overall performance and look at the EBIT, we can see that our operating margin of SEK 10 million, equivalent to 7.8%, was a one percentage point improvement versus last year. The main improvement was the volume effect, but we also saw that the gross margin pressured, you know, the overall profitability.
In total, just the increased purchasing cost for components burdened the gross margin with SEK 5 million. We are now working, and started already working last year, with increasing prices to customers. As you can see, the price increases implemented so far has partly compensated these higher costs. The higher OPEX that we have is related to both that we have additional cost to mitigate these supply chain issues. It's kinda like a redesign of electronic boards to change to available components. Also that we have started to participate in exhibitions and travel and have an overall higher activity when it comes to marketing and sales. We have also done other hires to strengthen the organization overall.
If you look at the cash flow, it was weaker than normal. The operating cash flow was SEK 15 million. That was offset by that our working capital increased due both to larger sales volumes and also that several shipments was done late in the quarter. We have also increased the inventory levels, and much of that is related to that we want to make sure that we can secure future delivery, deliveries. We have continued to, at full speed with our product development, and continue to invest in the new, product platform development. At the end of the quarter, we had an available liquidity position of SEK 67 million. After the quarter in April, we took a new bank loan of SEK 35 million to ensure that we can maintain a high level of investments and a high speed for our product development.
Overall, I think we are well prepared, from a financial point of view, to deliver on our activities during 2022. Let's do a little bit of outlook and look at the market situation going forward. We entered the second quarter with a stronger order book than normal, and we are now delivering on that. However, we, you know, we see continued issues with the supply chain and logistics. There are component shortages, and there are lack of components, and we see increased prices. I think the biggest risk right now is that we see recurring lockdowns in China, in particular in Shanghai, and we do have some suppliers in that region that we are dependent on.
If you look how demand will develop in the various regions, we continue to see that the OEM business is performing in the U.S. That will be our growth driver there. India looks very promising, and we see that many other Southeast Asian countries will ease their restrictions, and that should generate increased testing and increased revenue for us. When it comes to Eastern Europe, we were all shocked by the Russian war in Ukraine. It's a terrible and tragic situation in Ukraine, and our thoughts are with all those people that are impacted. As all companies do, we follow all sanctions. But as healthcare products are not in the sanction list, we will, for humanitarian reasons, try to deliver product also to the people in Russia if possible.
We have implemented routines to make sure that for every future shipments, no products, no customers are on the then valid sanction list. We will monitor development and are ready to act, whatever it will be required. For Middle East and Africa, I think we have a positive outlook. We added sales directors there in, and we see now that our new opportunity is coming thanks to this local presence. We have already signed up a number of new distributors, and we see that we will get orders from this region going forward. Overall, the strategic direction that we've been on for some time remains intact, and we continue to invest in the future.
If you look at the key priorities for 2022, it's right now coming very soon now in May, is the implementation of the new European regulatory framework, IVDR, that comes in effect in end of May. That's a lot of activities ongoing there right now, and we spend a lot of resources on that right now. We will, of course, need to carefully monitor and mitigate the supply chain. I mean, there are a number of things that we are doing trying to increase our preparedness to deliver higher volumes going forward. I would say that it's not only about mitigating the, you know, the supply chain issues, but also preparing to our normal production in consumables, in particular the US, to be able to deliver higher volumes of OEM products going forward.
We are working with price adjustments to offset some of these higher operating costs that we see. We implemented a number of price adjustments end of last year, but also beginning of the year, and we'll continue to do so going forward this year. Of course, one of the more, you know, really strategic, more important, and very exciting project is the development of our new product platform, and the industrialization and launch preparations are ongoing. As part of this new platform, we'll have a cloud functionality, and we will deliver a first release of this cloud with some service functionality to the current installed base at the end of this year.
Of course, very important that we plan to grow sales by leveraging increased local presence in various regions, but very important, of course, in Middle East and Africa. Another important activity that we're doing is to increase our activities in Boule Academy, where we you know train our distributors and we train end customers. It's a way for us to deliver value to our distributors and all our partners, and also to make sure that we stay top of mind of them when it comes to you know to our products. In summary, I must say that I'm very proud of the organization, how we managed you know the difficulties that we've seen in the past two years during the pandemic and also the aftermath there with the supply chain disturbances.
I must say that, you know, we can really look ahead with confidence despite, you know, a range of external challenges. I think we have shown that we can manage, you know, this difficult situation, even very unexpected things that happens in this volatile market. We have now delivered two record quarters. You know, last quarter last year and this quarter are the two best quarters in Boule history. Also we see now with the restrictions that we start to see that increased testing, which for us means that we get a stable recurring revenue from a large installed base. However, we see that there's, you know, geopolitical instability, and that creates some short-term uncertainties going forward.
A little bit longer term, we see that Boule has grown faster than the market, and we expect that we can continue to grow faster than the market. The market will grow by 3%-8% per year. With the modernized product portfolio, we will address and penetrate the five-part diff market more than we can with our current portfolio, and that is the market that is growing faster. Longer term, I'm very optimistic about the path and the journey we're on. With those words, I would like to thank you for your attention, and I will open up for questions. Thank you. Jakob Lemke, please go ahead.
Thank you and good afternoon. I'll start with a question on the gross margin, where you in the report mentioned the continued negative mix effect from high sales to Asia and India in particular, I think. I'm just wondering, you know, if you expect this to
One minute.
-normalize, going forward or what the timing will be?
Okay. Sorry, we could not hear you. I'm sorry about that. That probably means that if anyone tried to ask questions during the presentation, I wasn't able to hear it. I'm sorry about that. Jakob, please repeat your question so we can hear it as well.
Can you hear me now?
We can hear you now loud and clear.
Okay, great. No, my first question was on the gross margin, and that you mentioned a continued negative mix effect, from more sales to Asia and I think instruments to India in particular. Just wondering sort of the timing of when you expect this to normalize going forward and if you expect it to normalize even since you have had this for a couple of quarters now?
I think it's difficult, you know, to put an exact time, but what we see here that, you know, the consumables sales has developed positively during the last five quarters. Of course, you know, the mix between instruments and consumables is a bit hard to predict. Going forward, we expect that, you know, consumable sales will continue to grow. Of course, the question is how fast will consumer sales grows versus new instruments. Short-term, of course, it's a large mix of instruments burden the gross margin. Little bit longer term, once those instruments are installed, they will generate, you know, higher sales of high margin reagents. I think it's, you know, it's not a bad thing to have a lot of instruments 'cause that will generate future growth.
Okay, understood. Second question on the gross margin. It sounded like the situation with the access to components and so on became worse towards the end of the quarter. Does that mean that maybe we should expect sort of a headwind in the same magnitude as you had in Q1 and Q2, or even maybe a bigger headwind in Q2?
Well, I think we have lived with this risk from component shortages, you know, during the last, you know, 15-18 months, and I think we have managed quite well. It's very hard to say to what magnitude that will, you know, hit us going forward. I would say that, you know, same level or, you know, hopefully improving, you know, towards later in the year. That's very, very difficult to say where we will end.
Okay, understood. On the Ukraine and the sort of Russia situation, can you say anything about how this has developed now more into April when the war has been ongoing for some while? If you maybe can say if you have any sales at all in the region?
We do have some sales in the region. Clearly right now there are, it's at a lower level than it was in the beginning of the, you know, this quarter, and it remains to be seen, you know, what will happen.
Okay. That was all the questions I had today. Congrats on the solid sales figure this quarter.
Thank you very much, Jakob. Christian?
Hello. Good afternoon. Can you hear me?
I can hear you loud and clear. Thank you.
Okay. Yes. Great. Thank you. I have a couple of questions, please. I would like to understand the order intake during the first quarter that seemed to be on a higher- level than normal and how much of the order intake is related to India?
Well, we never give outlooks on that detail level. We don't comment on the order intake in general, and you know, in particular, not on the market by market levels. I'll pass that question.
Okay. Fair enough. I was also wondering, you mentioned that, you had good sales in Ukraine and Russia before the war. Could you please comment if the sales was related to instruments or consumables?
I don't have the exact mix here, but what we saw was a good development of consumable sales.
Yep. Right. I was also wondering if you could comment on the investment level of SEK 18 million in the new platform if you will keep this level going forward during the remainder of this year?
Yeah, we will be roughly at this level, you know, during the remainder of this year. As you know, we are now entering a phase where we start to do clinical testing, and we're also preparing production, you know, buying production equipment, building pilot series, et cetera. It is slightly higher investment level than it has been in the past.
Okay. My final question, please. If you will, keep stocking up the components in Q2 as well?
Well, to stock up components is extremely difficult because we are trying to, you know, keep secure material as far out as we can. It is an even battle. When we have opportunities, we do secure it, and we really are now looking, even preparing forecasts to our suppliers going out all the way to 2024 to make sure that we have a, you know, good understanding of the supplies of components.
Some of these things that we see now in the market, particularly when we take like, you know, the lockdowns in Shanghai, many of those things you cannot really plan for, and they really just happen overnight with very short, you know, notice. In general, we are trying to, you know, make sure that we prepare ourselves for, you know, this difficult situation to continue during this year.
I mean, I just would like to add a bit there.
Yes please.
I mean, the stock up is not the quantity, or it can of course be the quantity, but it's the price level that is increasing as well. It's a mix of that, trying to make sure to have enough in stock. Actually, the world we live in now is that some components are much more expensive than it used to be.
Thank you.
Okay. Thank you. Thank you, Annette and Jesper.
Thank you.
That was all for me. Thank you.
Any further questions? If no one speaks up, I would like to thank you for your attention. We really happy that you joined us today. We're really happy about what we delivered the last quarter, and we look forward to see you soon again. Have a great afternoon. Take care. Bye-bye.