Good morning and welcome to this call. My name is Jesper Söderqvist, and I'm the CEO of Boule Diagnostics. With me online here today, I have our CFO, Annette Colin. In this call, we cover the highlights and the results of the second quarter of this year. You can ask questions in the chat during the call, or you may ask questions after the presentation. I would like all of you to please mute your microphones to ensure the quality to everyone that is listening to this call. Let's start with the highlights of this quarter. The key highlight of this quarter is the all-time high revenue that we delivered, despite that it was an exceptional quarter with multiple challenges, in particular related to productions.
Sales for all our product lines grow, and the main growth drivers were both instruments and consumables. A range of external factors have impacted our operations, and we experienced several production stops due to material and component shortages that delayed many deliveries to the end of the quarter. In the end, we managed to deliver everything as planned, which I think was a great achievement of the organization, as our priority is always to serve distributors, users, and patients the best we can. That has not been easy in the current market with the very volatile supply chain, and it has implied that we have been forced to accept higher production costs and expenses in this quarter, which temporarily impact our profitability.
Another milestone this quarter was that the new European regulatory framework, IVDR, is now mandatory since end of May for sales in Europe. The new regulation is more demanding for the suppliers and for Boule, as for many other suppliers, it has been an extensive project to update the legacy documentation of our product, which has required extra resources and expenses during the time. Now, Boule is ready to operate in line with the new IVDR requirements, and it feels really good to have this work and the costs behind us. An important project is the development of our new product platform, and we are very pleased that we now have an instrument placed at hospital laboratory that is collecting clinical data.
This data will be used to fine-tune the algorithms that classify blood cells, and it's a really important development step on the way to prepare new solutions for clinical validation. We're also happy to announce that we have signed a new distribution agreement with Fujifilm in Europe for our veterinary products sold under our brand Exigo. The Boule hematology solutions, combined with Fuji's clinical chemistry offerings, create an attractive solution for veterinary laboratories. This is a market segment that Fuji in Europe has a strong presence in, and they plan to grow further. The initial distribution agreement covers three countries in Southern Europe, France, Spain, and Portugal, but we have already ongoing discussions to add more countries in Europe. We're both proud and excited that Fuji has chosen to work with us, and we really much look forward to how this will turn out.
With that said, let's turn to the more detailed financial result of the quarter. Net sales was SEK 141 million, which make this the best revenue quarter in Boule's history. The organic growth was 14% compared to last year. However, gross margin was only 38%, and that was impacted by extra costs related to the supply chain disturbances and production stops. Despite the lower gross margin, the operating margin increased by 1.5 percentage points compared to previous year, and we deliver 4% at the bottom line, which we are, of course, not pleased with. The development of our new platform has continued at full speed. We have invested SEK 20 million in this quarter. A great sales growth, but the profitability is a disappointment.
I would like to point out that these are related to extraordinary external factors, and we will deliver higher profits in a more normalized market. Let's zoom out if we do not just look at this quarter, but look how Boule has developed over the last few years. I would like to show you this graph. This graph shows the number of instruments sold quarter. These are the blue bars. The gray line is the revenue from instrument sales rolling 12 months in millions SEK, and the red line is the rolling 12 months of consumables to our own instruments, also in millions SEK. You can see here that thanks to our large installed base, our consumable revenue is growing every quarter, and the only exception is really the pandemic period here around 2020.
Even if there's some ups and downs in the quarter, I think this graph shows the strength of Boule's business model. Our large installed base, and we currently have around 29,000 instruments generate recurring revenue from reagents, blood controls, and calibrations during the lifetime of the instruments, which is around eight years. Placing instruments will create future consumable revenue. We have now seen five consecutive quarters where the you know revenue has grown both for instruments and consumables, which is very positive in particular that, given that this has happened in a very volatile market. Let's zoom in back in on the second quarter. The all-time high was delivered by increased sales for all our product lines, but the strongest growth came from instruments and consumables. Our OEM customer has shown a very strong growth in the last year.
Now the OEM business continue to grow, but at a more moderate 14%. If you look now how the various markets are performing, you can see here that LATAM and Africa and Middle East have strong growth. The US growth is mainly driven by our OEM business. In Latin America, sales increase mainly thanks to orders to Mexico and the Dominican Republic. Africa and Middle East performed very well, mainly related to some larger orders to Egypt, where we have a very solid market position. Overall, good growth basically in almost all markets except for Eastern Europe due to the war in Ukraine and the sanctions towards Russia. If you look at the resulting profitability, you can see here that sales growth and price increases implemented early this year drive top line and profitability.
Unfortunately, our profitability is not where we want it and expect it to be due to a number of external factors. The biggest impact on the profitability comes from the supply chain issues. Just in the second quarter, we purchased electronic components for SEK 8.3 million more than our standard cost. If you look at the first six months, this adds up to more than SEK 13 million. In addition, the production scope experienced lower efficiency, which further degrades our profitability. Without these temporary effects, we would have seen a profitability at a completely different level. Also, if you look at operational cost, you see that we have cost to mitigate the supply chain issues. These are activities like adding new suppliers and by doing redesign of electronics to overcome the shortages.
In this quarter, we have increased our marketing and sales activities, which means that we have higher costs for exhibitions and travel, which is very positive. As I said, initially, we also had some more consultants to finalize the IVDR implementations. I would like to point out that these extra costs are all of you know temporary nature, and the profitability will recover in a more normal market. With that said, we are of course taking measures to combat the current situations, which includes additional price increases that will impact the second half of this year. Of course, we're working closely with our suppliers and extend our forecast to try to avoid unplanned component shortages as much as possible. All in all, in a more normal market with less volatility, we will deliver higher profits. Going forward.
The cash flow was exceptional in this quarter, with low gross margin and multiple production stops. The working capital, many shipments were pushed late in the quarter to be received and paid for before we can invoice customer. And of course, you know, the larger sales volume, of course, accounts receivable. The inventory levels went down in this quarter, but in general, they are very high in this market since we have to make sure that we secure components for future production, particularly now during the summer where you have a vacation period with many suppliers down. We have continued investments in new product development at full speed, and we took a loan of SEK 35 million to finance our product development. If you look at available liquidity at the end of the quarter, we ended at SEK 67 million.
Let's zoom out and look at the market situation in a bit broader sense. We have seen a strong recovery in the first half year. The order backlog is not as long as it has been in the last year, but still at a very decent level compared to what we were used to before the pandemic. We see that there's continued risk with the supply chains related to cost, in particular, longer production stops. With that said, I would say that we have a very positive view a bit longer term, even if the near-term market is volatile. If we look, you know, here now, we see that the U.S. are growing and is mainly driven by our OEM business.
They grow, you know, more than double last year, and we don't expect to see the same type of growth the coming year, but there is still growth in that market. In Asia, we have seen strong performance from India, but we see that there are still opportunities in other South Asian countries. In Eastern Europe, we unfortunately don't see, you know, end of the war in Ukraine in sight, and the sanctions toward Russia will remain, so we expect a decline of this business, whereas in the Middle East and Africa, there are new opportunities thanks to increased local presence, and we have signed several new distributors in the last, you know, 6-9 months, which should deliver future revenue. One concern I have is really the increased spread of COVID.
You may ask, is that a temporary hike in sick patients, or will the pandemic continue to affect the business going forward? We have many opportunities in emerging markets, but we have seen that this market is very volatile, and the growth in many emerging markets rely on public investments to improve the healthcare. I think there's a risk that, in particular in Africa, some public tenders are either stopped or delayed for some time. Overall, I would say that the opportunities in these regions are long-term very positive for us with our current market position. What are we working on? Well, clearly, what has really impacted our operations and our profitability lately has been the supply chains. To continue to work on avoiding production stop is really essential.
We work with longer forecasts together with our suppliers. We have an agile organization. We have shown that we can do redesigns quickly when needed. We are working to reduce our dependence on Chinese suppliers. In the second quarter, we had delivery stops from Shanghai during very many weeks, and now we are in the process to reduce our dependence on those types of suppliers in China and establishing second sources in Europe. We're also working to increase our production capacity in our Florida facility so that we can continue to deliver in higher volume to our OEM customers. We did implement price increases in the beginning of the year, but they were not sufficient given the current market conditions, so therefore, we increased prices again in the second quarter.
As always, there is some lag in the realization, so the latest price increases will help us during the second half of this year. Given the market with rising inflation around the world, we will increase prices also going forward. We are, of course, carefully watching our cash flow and managing our expenses. In focus are our working capital, but also on the expense side, we have the high degree of flexibility with many consultants, so we can temporarily lower expenses to balance the operating cash flow. The extra cost that we have seen in the last year is of temporary nature, so we are confident that we can deliver higher profits when the market and supply chain normalize. With that said, we are determined to maintain investments in the new platform, as this will secure Boule's long-term growth.
To summarize, we have generated three quarters with record revenue, and the growth trends are stable. I think that the business model we have with sales of high-margin consumables to a large installed base is strong, and it will create stability in this volatile market. The gross margins that were weak are really held back by temporary events in the supply chain with high material cost and logistics challenges but also an unfavorable product mix where we have had now a few quarters with a high mix of instruments to lower price markets. The good thing, though, is that that builds an installed base, and that will generate higher-margin consumable revenue in the coming years.
The geopolitical instability, inflation, and component shortage create some short-term uncertainties and pressure the profitability. For all we know, all of these are temporary effects, and that will return to normal at some point. As we are a healthcare company, we will benefit from the macro factors such as the growing aging population that will consume more healthcare. If you look at the niche, the decentralized hematology market where we are operating, it grows by 3%-8% year-on-year. Boule has now shown, in the last year but also in many years before that we can grow faster than the market and we can gain market share.
Even if this was not a quarter where we are happy in terms of profitability, we move ahead with confidence, and we are determined that we will continue to grow and we will generate higher profits once we overcome these external challenges. With that, I would like to thank you for attending this call, and I will open up for questions. Who wants to start? Christian Lee, I can see you raised your hand, so please.
Thank you. Good morning, Jesper and Annette. Thank you for taking my questions. Hi. As of May, you seemed confident about being able to release the new, the product, the platform in the first half of 2023, and now two months later, you say that the launch will be delayed. What has happened during this period that changed your view?
I think there are two things. One is that we also, when it comes to supplies to our prototypes, we have seen delays in deliveries of and particularly on electronic components, even in smaller volumes. That are pushing some things forward. Also, we've had to reprioritize some of our internal resources, so that we actually have taken some of the resources that was planned to work with the project to fix some of these supply chain issues, particularly redesigns of electronics. Also what we have seen now, even if IVDR was implemented in May, the number of notified bodies in Europe is still very low, you know, there are very few, and the lead times for the regulatory approvals are very long.
I see. Thank you.
Longer than we expected.
Yeah. Management and the board will review business plans and financing as the cash flow in the first half has been soft. Does this mean that you do not expect the cash flow in the second half to recover enough to support the current investment pace?
Yeah, no, I think we are uncertain on that. I mean, I think we have seen now that there have been, you know, particularly this production stop is really hurting our cash flow. That's something that, you know, we cannot guarantee that we will not see going forward, even if we will do everything we can. I think it's a very volatile market. We need to make sure that we have, you know, we have to be a bit careful how we spend our money. That's also a reason why we are, you know, looking at what pace we can do investments in going forward. We expect the cash flow to recover, but we also need to plan for the worst.
Sure. Thank you. My final question, please. Do you plan to continue your business in Russia given that your funds there are being locked up?
Our current position, and that we may reevaluate, is that we try to operate according to the sanctions. You know, also in line with the sanctions, we should be able to get payments and our money that are tied up in Russia out of the country. Unfortunately, that's not really how the Nordic banks are operating currently. We have some funds locked up in Russia. Exactly how that will pan out remains to be seen. I cannot give you a better answer right now.
Okay. Good enough. Thank you very much.
Thank you, Christina. Anyone else want to ask a question? Was there any questions on the chat? Okay. Since that there is no more questions, then we would like to thank you all for attending and listening to us. We hope that you will all enjoy summer and look forward to see you soon again. Thank you very much. Goodbye.
Thank you. Bye. Bye.