Good morning, everybody, and welcome to the second quarter's earnings call for Boule Diagnostics. I'm Holger Lembrér, CFO for Boule Diagnostics, and with me, I have our CEO, Torben Nielsen. After our presentation, we will open up for questions. Please also feel free to type questions in the chat field. With that, I'm handing over to you, Torben.
Thank you, Holger, and good morning, and welcome to all of you joining this Q2 earnings call. Let's begin by looking at the highlights of the quarter. The second quarter of the year saw the continued effects of the geopolitical instability, with longer than usual supply chain lead times, delayed payments from key customers due to continuing bank restrictions, and unfavorable effects developing from a weakening U.S. dollar. Q2 was overall, and relatively speaking, a stable quarter, with a 3.3% organic decline compared to last year. Instrument unit sales grew 17% year-over-year, however, at a lower average selling price. This is part of our strategic focus to grow our installed base as a way of investing in future reagent business growth. Our 5-Part instrument sales more than doubled in both the quarter and year to date, reflecting the higher demand for 5-Part technology in the market.
Consumable sales came in 12% below last year, largely due to the delayed payments, which then delayed shipments, and we ended up closing the quarter with a larger than usual backlog, like what we experienced in Q1. OEM sales were in line with our expectations and on level with last year's sales due to timing of orders. However, we do expect continued good development in the second half of the year. Gross margin declined in the quarter to 38.7% due to product mix. Our instrument sales grew, but at a lower average selling price, which diluted the gross margin. Cost control continued to be in focus, and because of all implemented restructuring initiatives in the past 12 months, we have now lowered our operating expense spend by 47%.
The operating margin declined to 4.5% compared with 7.2% last year as a direct result of lower sales and gross margin, a n adjusted EBIT closed at SEK 5.8 million. Despite a challenging quarter, we delivered a positive operating cash flow in Q2 of SEK 2.9 million. This is a critical milestone and a result of our diligent efforts to balance the structural cost, working capital, and position Boule Diagnostics AB to invest in the future. To support our strategic transformation, we are strengthening our executive leadership team with deep subject matter expertise in R&D and proven track records in project execution. In May, we welcomed Eva Sperling to our team as Chief of Staff. Eva brings significant project management and lean experience from heading up the R&D project management office at Cepheid, a world leader in molecular diagnostics.
In June, we promoted Lucy Yehiayan to Chief Technology Officer to support our strategic focus on OEM and block controls development. Lucy has a PhD in analytical chemistry and brings more than 15 years of industry experience as research scientist, lab manager, and head of R&D. In Q2, we made important progress in our instrument portfolio strategy. Here is a simplified overview of our current and future portfolio ads. Everything marked in blue are our current proprietary instruments. Everything marked in green are our technology partner instruments, and future identified portfolio ads are represented by these bluish icons. In our human portfolio, we have doubled our unit sales of the M51 5-Part instrument year to date, and we commercialized our VitalScientific clinical chemistry distribution agreement in the U.S. In addition, we have now identified the most important portfolio ads, which we are currently working on bringing in for validation.
In our veterinary portfolio, we successfully validated a new state-of-the-art hematology analyzer, which we intend to launch soon. With this portfolio addition, we add a product that will be able to compete with the market leaders in veterinary care and open segments of the market that are currently not available to us. This is the first instrument that has been validated by our newly established technology onboarding team in Sweden. In August, we expect to begin the validation of another instrument portfolio candidate in the veterinary portfolio. Taking a closer look at the Q2 financials, in summary, we reported Q2 sales of SEK 129 million, down 5.6%, and with an unfavorable 2.3% currency impact, leading to a 3.3% organic decline. Gross profit landed at SEK 50 million, down from SEK 59 million due to a mix, lower sales, and lower prices on our instruments.
We have begun to see the impact of a weakened U.S. dollar and increased materials cost due to tariffs. Gross margin declined to 38.7% from 43.1%. Despite declining sales, we achieved SEK 5.8 million in adjusted EBIT, and we achieved positive operating cash flow of SEK 2.9 million because of savings from restructuring efforts in 2024, now fully materializing. Available liquidity end of the quarter was SEK 39 million. Quick look at the overall sales by quarter. You can see that Q2 was down 3.3% organically due to lower average selling price on instruments and delayed payments and shipments on reagents.
From a regional perspective in the quarter, U.S. and LatAm saw a decline in our hematology and CDS reagent business. In these markets, high competitive pressure and lack of portfolio fit are the main challenges. Southeast Asia saw growth from strong sales in India, supported by a more stable performance in the region. Europe grew primarily due to strong veterinary sales, and the Middle East and Africa declined due to challenges linked with geopolitical unrest. Looking at our hematology business specifically, we had a soft quarter with a 6% organic decline due to lower ASP on our instruments and delayed payments and shipments on reagents. In total, instrument unit sales closed 16% above last year, however, at a lower average selling price as a direct consequence of a more focused approach to growing our installed base as a way of investing in future reagent growth.
Our 5-Part instrument sales more than doubled in both the quarter and year to date, reflecting the continued high demand for 5-Part technology in the market. Our consumable sales did come in 12% below last year, however, largely due to delayed payments, and we did close the quarter with a larger than usual backlog like we experienced in Q1. OEM sales were in line with our expectations, and Q2 was in level with last year's sales due to timing of orders and unfavorable U.S. dollar. We expect continued good development in the second half of the year. Our sales funnel continues to mature in line with our expectations. With that, I'll hand it over to you, Holger, to take a closer look at the financials.
Thank you, Torben. Starting with the financial summary of the quarter, we had a negative organic sales growth of 3.3%, and our cost of sold goods increased despite the lower sales and diluted our gross margin to 38.7%, down from 43.6% last year. This was mainly driven by the sales mix with strong instrument sales and price pressure on instruments and somewhat weakening U.S. dollars in the quarter. Last year, we spent SEK 80.9 million in operating expenses, where SEK 8.5 million was related to restructuring activities and a lost tax case, and another SEK 23.5 million was related to the R&D project BM950. If we compare that spend level to this quarter level of 43.1%, we reduced the spending by 47%. We also now see the full impact of the restructuring activities we have done in the last 12 months.
In total, we have reduced the full-time employees and consultants with a net of 59 FTEs. We know we have more to do when it comes to the cost structure. If we're looking on the changes so far, it has been transformational for the running cost base and for our target to bring us back to positive operating cash flow. Despite these decreases of our spend, the low gross profit impacted us negatively in the quarter and lowered our operating margin to SEK 5.8 million compared to SEK 9.9 million last year. Looking under adjusted cost as a percentage of sales, our cost of goods increased 4.4%. Selling expenses were down to 19.8% as a result of the structural changes we have done in both sales and marketing, as well as in the service organization. Administrative cost was down slightly due to a bit lower consulting costs on IT.
R&D and QR decreased significantly, and this is due to the fact that we closed the development project BM950 in the first quarter of 2025, and that cost was capitalized last year, as you see further below in the slide. In percentage of sales, we decreased the spending a little bit more, actually, than we capitalized in the last year. Adjusted operating margin decreased to 4.5% compared to last year's 7.2% related to the gross margin change. Looking into the operating cash flow then, we had ambition to come back to positive operating cash flow in the second half of 2025, but we were able to achieve it already in this quarter. This is despite that we had SEK 12 million in payments for restructuring closure of an R&D project in the quarter, as well as payments for the restructuring that we have done in the last quarters.
It remained about $4 million in the balance sheet to be paid for restructurings in the second half of 2025. The improvements we see on the other side in the working capital is coming from a little bit lower inventory levels, as well as slightly improved collection on the receivable side. This is shifting us back to a more positive trend, and to us, it's an important milestone in the transformation for us to bring Boule back to a cash-generating company. If we take a look on the liquidity and credit situation, we ended the quarter with $23 million in cash and unused credit facilities of another $16 million. In total, the liquidity was slightly up compared to the last quarter. With that, I'm handing back to you, Torben.
Thanks, Holger. In summary, we continue to make progress on our three strategic priorities. As Holger said, Q2 marked an important milestone in that we returned to positive operating cash flow. Over the past four quarters, we've taken significant steps towards reducing the structural cost, expanding the operating margins, and we've managed to reduce the operating expense spend by 47%. To fuel our organic growth, we've strengthened the executive leadership team with deep R&D subject matter expertise within reagent and controls development and years of experience within project execution and lean implementation. In addition, we focused more strategically on installed base growth as a way of investing in future reagent growth, resulting in a 17% instrument growth for the quarter.
Finally, we've made important progress in our efforts to build a stronger and more growth-oriented portfolio by successfully validating a new hematology instrument for veterinary care and commercialized our clinical chemistry distribution agreement in the U.S. That completes our formal presentation. Thank you for your attention, and we'll now open it up for questions.
If you would like to ask a question, please raise your hand in Teams. The first question comes from Michael. Please, Michael, unmute yourself and ask your question.
Yes, about the gross margin and the sales price for the 5-Part instruments, is this a new normal, or how should we see this lowered ASP?
Yeah, thanks, Michael. It is partly a new normal. We have taken a more focused approach to building up our installed base, and consequently, we are having to be more aggressive on our pricing on the instruments. However, in conjunction, we are also seeing in the market the prices deteriorating, probably as a maybe temporary measure to overcome some of the geopolitical challenges in the market. I think that what we should expect going forward is that we will see a lower ASP in general, especially on the entry-level 5-Part instruments, which is our M51. I think that partly this is a new normal and partly this is probably a temporary reaction to the geopolitical situation in the market.
Do you see further deterioration in ASP going forward? I mean, it's hard to quantify, but do you see a risk of further deterioration?
At this point, I do not see a risk of further deterioration. I think that we have stabilized on a slightly lower level than we have had historically on the 5-Part instruments. I think also the impact is further amplified by the fact that we have significantly increased our unit sales. I think that the 5-Part market price in the entry-level segment is stabilized at the level we are seeing now. It may be that it will bounce back slightly upwards as the market normalizes, hopefully, over the coming quarters, but for now, I expect it to be rather stable.
Okay, thank you.
Thank you, Michael. We currently have no more questions in line. If there's no more questions, we would like to thank everybody for participating and listening in to our call today. Thank you very much.
Thank you.