Earnings Call: Q1 2021

May 6, 2021

So let's go back then to so in the Q1, we've seen a gradual recovery in the market and it's really related to the rollout of vaccines. And as you have read in the press that U. S. Has become furthest and that's also where we see the strongest performance in the quarter. We actually see reaching the same level as we did in the Q1 of 2020 there. Instrument order intake is good and sales are up quarter on quarter since the Q2 of last year. That's a global trend. Asia is still very slow due to the outbreak of COVID, which is where the pandemic is still prevailing. So overall, positive signals from the market, positive that we see increasing sales. We also see a strong order intake. And currently, we actually have a demand that exceeds our supply. We see some We have struggled a bit with managing the incoming material and component supply during the Q1 and that's kind of still prevailing in the Q2. In the last quarter, we talked about the important strategic initiative to establish local production in Russia. That was due to start right now, but it's been delayed due to that one of our suppliers were forced to take on some deliveries to the Russian government for COVID related equipment. But that project is now on a good traction and we expect to start local production this summer. In the Q1, we have also established a number of new suppliers in EMEA, in particular in the Middle East and Africa, which is a region where we want to grow going forward. And we have signed no less than 6 distribution agreements that we're now starting out. Another important work, which is mainly internal, has been our preparations for IVDR, which is the new regulatory framework that we need to adhere to starting in May 2022. And that's work is going according to plan and that's very nice to see. And then a big investment in our new product platform as has progressed also very well. And we have passed the milestones and keeping the pace in the project as we expected and we want to see. So that's very positive. And also in the quarter, we launched a new website and part of that is also a partner portal where we can give service to our many distributors. And as part of that, we have also updated the bull graphical profile. And we have also started to trainings in the Bolla Academy setup where we train both distributors and also in later, we will also train end users. So Lot of very good traction there and very pleased with the progress. So what does the numbers show then? Well, it's We're still in the pandemic and we're not back to the levels where we are in 2019. If you look, we are now seeing growth on compared to the last quarter last year, we're up 12%. So we see this recovery. In constant currency, we're still 6% below our sales last year. And our net sales is was SEK 100,000,000 in this first quarter. Gross margin is down by 2.2 percentage points a year ago. And that's explained by the low capacity utilization in our production plants. OpEx is down SEK3 1,000,000 versus last year. And most of that savings is related to marketing and sales. We also generated a positive operating cash flow of SEK 12,600,000 in quarter. And that money was used to invest in our new platform. And the investment there is was SEK 13,000,000 in the Q1, slightly up from the last quarter last year. And this is according to plan where we now intensify the work on the industrialization and start going into the preparing production, etcetera, for this new products. The result is an EBIT margin of 6 0.8%. And this is below our ambitions and below our capabilities. But we are very hopeful now when the market normalize that we will and continue to improve our profitability. So if you look at how the revenue developed, We have seen a recovery in instrument sales. And the biggest Loss in revenue versus last year is still in the consumables. There are many of our markets and particularly in markets in Asia where we have a large installed base, There are still significant restrictions. So that's really where we see the lowest the lower sales and where we not yet have recovered from the pandemic. And as you can see that basically across all regions with exceptions of the United States. We still have a sales which is high last year. But if you look in constant currency, U. S. Is actually up 6% versus last year. So clearly, there are very positive signals from that market. So let's then see what is the EBIT that we generate and what's explain it that has happened. So the biggest impact on the EBIT is really the lower sales. So the volume effect is a big thing. The other is that the gross margin that I mentioned, where we have a lower utilization of our in manufacturing capacity. But also we have a product mix, which is unfavorable, where we have more instruments, which is lower margin than our consumables, which really generates the higher margin. But we also have a cost saving that improves our profitability slightly in the quarter. So through this pandemic and during the all of last year, we have kept an eye on our cash flow. And we have managed to have resources both manpower, but also been able to finance our important growth initiatives. And we have continued to do so during the Q1. We had an operating cash flow, which is okay, I would say, in the Q1. And we have used that to invest in these new growth initiatives where the investment in the new platform is the biggest. So if you look at available liquidity, we are at the end of the quarter at the same level as we were when we entered the quarter. So our financial position is preserved. So what can we then expect going forward? Well, we see this sequential market recovery and we see a positive momentum in most markets outside Asia. And as you have read probably in the press, I mean, this is very much related to how the rollout of vaccine is done in the various markets. However, there are continued uncertainty going forward and due to the virus spread mainly in Asia. We hope that things will be the markets will recover there also, but it will probably take also the Q2. And as I mentioned a quarter ago, I mean, transport and logistics has been very challenging throughout 2020 and has continue to be so now in the initial part of the Q1. And we have also experienced like many other industries that there are shortages for the component supplies. So we are you know, we have been very busy in managing our supply chain, making sure that we can have all the material needed. But as I said, currently our sales is really limited by our production capacity and the production capacity is limited by material supply. But overall, I think we have things under good control. And with continued order intake and the strong order book that we entered this 2nd quarter with is very, very promising. And we also expect as restrictions are loosened in the major markets that also the consumable sales will come back. So what are we focusing on now going forward? And the priorities remain from a quarter ago. We are working intensely with our digital marketing and has our support to our distributors. And I think being there in the omnichannels, making sure that we are visible available through digital media is extremely important as we now want to help our distributors get back in business. Of course, we will work with these new distributors, make sure that they get a good start. A key Priorities to make sure that the local production in Russia now starts. We have or are also ramping up The production of the new OEM reagents that we have talked about that we have a new OEM supply agreement, long term supply agreement where deliveries is now starting and ramping up in the Q2. And then of course, a lot of our focus is going into our development of our new product platform. And that's a work that will continue for the next the coming year. But we are very, very excited about the progress that we're doing in this project and what that will bring to bolt in the future. So with that, I think I will end here today and open up for question. And I thank you very much for your attention. Hi, Jesper. Can you hear me? Viktor here from ABG. Victor, it looks like you are I'm ready to go at least. Can you hear me? Can you hear me? Yes, we can hear you now. Okay. That's great. Thanks a lot for taking the questions. Perhaps I missed it by the beginning of this call, but I'll ask it anyway. Just on the order intake side, it looks to have been Quite good at least in Q1 and indicates that it's a quite decent start to Q2 as well. Just if I understood it correctly that it's not only that you managed to deliver a good part of that order intake in Q1, but it's also That the order book looks quite good for Q2. Is that how we should read it? That's correct. We have seen it. We're basically entering the Q2 with an order book, which is bigger than it usually is at the beginning of the quarter. So that's positive. Okay. That's good to hear. And then just on the supply chain constraints, given that you should have had Some headwinds at least in this quarter as well from transportation and so forth. Is it fair to assume that From these, let's say, 900 or so systems that the risk is rather that you will not be able to deliver those numbers? Or is that sort of a fair baseline to assume if everything remains the same as it is at the moment For just Q2, very short term? Very short term. I mean, I think there is always slight risk. But I think we have things under control. But I think what I wanted to mention is that there are extra resources and we know that we see that transportation and cost is going up. So we're adding some additional costs that we wouldn't maybe have in a normal market situation. It's more the effort that is needed to deliver than the actual delivery. And on the component side then, Just curious if your current sort of inventory allows for deliveries Similar to what we saw in Q1 or if that's going to be pushed forward? I mean, absolutely, we can manage the level that we're at in Q1 and even beyond that. But I think we see that there are some uncertainties and there is really quite a lot of efforts. And I mean, this is I mean, you can read about it in basically for every company and we experienced that as well. I mean, it's additional efforts to manage. Sure. And just finally, I think I saw that you actually grew sales in Latin America, which perhaps is a bit surprising given the circumstances. Could you just Shed some light on that performance in the Q1 result? We received some bigger orders that have been delivered in the quarter. So I think it's related to a few important contracts. And otherwise in that region, would you say that It's more similar to what you experienced now in Asia or how would you describe that? I would say that at least in the markets we are. It is not as bad as in Asia, but clearly I think they have a they are still in the middle of the pandemic. I mean, I would say so. Okay. That was all for me for now. Thanks Jesper. Thank you very much, Victor. Christian? Yes. Thank you for taking my questions. I think Yes, Vittor covered a lot of many of my questions already. But since you have the challenges with Reduce the supply of materials. Are you considering some kind of expansion of your sourcing to meet the demand? I think we were clearly, I mean, we're working a lot with sourcing to get material. Expanding, I mean, I think it's no, not really. I mean, I think we We are working on when we have our suppliers. And I think we have a good collaboration and it's just a little bit challenging. And there's also some uncertainty given the logistics and get things on time, etcetera. So it's just a difficult period. But I think we have a good collaboration with suppliers. And I think we have attention to the bottlenecks that we see. Okay. And you have very good order intake in the beginning of the year. Could you please Give some color on in which markets you see the strongest demand. Clearly, I mean, I think the U. S. Was the market that stuck out in this quarter. And then I think, it's basically across all markets, except Asia. And clearly, India is a big market for us, which is now very much impacted by the pandemic. So there the order intake is lower than normal. But apart from you, U. S. Takes out and then the other markets are. And given that the demand is so strong from the US and vaccination program has progressed very Well, in the US. Do you see the demand for the consumables coming back in the US as well In the short term? Yes. Is there a straightforward answer? Yes. Okay. Loud and clear. Thank you. And my final question is regarding the new distributors in EMEA. Considering that you Have already around 200 distributors worldwide. How many are based in EMEA? And what markets will the new, distributors cover? I think I need to ask Christine, actually can tell us the number of distributors in the media. But I could tell you, the areas that we're looking for growth now is in the Middle East, where we don't have such a strong presence. And also Africa will be a future growth market and we think it's important to establish ourselves there. So we have some couple of distributors in Sub Saharan Africa that we are now opening up. And this is not so important, maybe short term, but we think that long term that this is a region where we want to be a strong player. Excellent. Thank you very much. Anyone else? No more questions. Then I would say thank you very much for attending today and you're always welcome to reach out to myself and Cristina Rubenhaag if you have any additional questions. So thank you very much and have a nice evening. Take care. Bye bye.