Hello and welcome to the CellaVision Q4 2021 report. Today, I'm pleased to present the CEO, Simon Østergaard, and the CFO, Magnus Blixt. For the first part of this call, all participants are in listen-only mode, and afterwards there will be a question and answer session. Speakers, please begin.
Thank you very much and welcome everybody out there. This is Simon Østergaard here, and I'm pleased to announce that we have Magnus Blixt, our CFO, with me in the room here. Today, we are going to present our year-end bulletin for Q4 2021, and also obviously the full year consolidated results. We will hop right into the financials for 2021, and then we will actually jump into. We're very excited to share our strategic direction for our five-year plan. That's the agenda for today. If we go to the next slide after the financial, I can talk a little bit about the quarterly operational highlights. Essentially, we summarize our results as a strong finish to the year.
We landed our revenues of SEK 164 million from Q4, equivalent to 25% growth. That brings us to an annual result of SEK 566 million for the full year. Looking over the year, we have organic growth of 24%, but we had a bit of headwind on the currency effect of just over 4%. That brings us to 20% in Swedish krona. In terms of our accelerators of the business, we have obviously continued the journey of intensifying our activities for the small and medium labs, so getting our CellaVision DC-1 instrument out there. We can see that our activities are increasing.
There is an opportunity to actually go out and demonstrate them, which is really a healthy sign. Now, specifically on the sales side, we can report a 66% growth in unit growth for the full year of DC-1. In terms of the reagents over the year, we've had a relatively strong year. I think Q4 was a little bit weaker than the previous three quarters. However, we still have successful interest in our hematology reagents, and we landed at 13% in local currency for the hematology reagent pipeline. We're continuing to invest in manufacturing capacity, and we're also looking into what it takes to endorse our global expansion strategy.
It's been a pleasure to work over the past, let's say half a year and now being able to share the direction that we have outlined for the company, both to create value short-term, but certainly also on the more long-term measures. This will be part of the meeting, I say. If we take the next slide and hop into the financial development for the quarter. I talked a little bit about the top line and how we ended up. I think what I'd highlight on this slide is our gross margin that came out at 70% for the quarter and almost a 69% for the full year. I think the main explanation for the increase from 66% in 2020 was our product mix.
We had considerable growth in Americas. We really came back strong throughout the quarter in Americas, which has really showed high sales of software with higher gross margins. That affects our gross margin. Furthermore, our instrument and software sales collectively are growing at higher pace than our reagent business. That has also had a contribution to our healthy gross margin of 70%. If we take the operating profits, we landed for the quarter at SEK 52 million , which is equivalent to an EBITDA of SEK 60 million. On the year, our operating profit was just short of SEK 163 million, equivalent to an EBITDA then of SEK 196 million full year.
That's EBITDA margins at 37% for the quarter and 35% for the full year. We've increased our R&D spend when comparing with last year with a couple of percentage points. We have started to start up projects that have been on hold throughout the COVID period, and we've also started to ramp up activities in the direction of our revised and new strategy. Cash flow wise, we landed the year at a total cash flow of SEK 27 million. That comes out of a healthy operating cash flow of SEK 160 million for the full year. We've had big things. We capitalized SEK 39 million, and we acquired the Clearbridge, so the IP rights, of about SEK 31 million, and then we had dividends.
That's kind of the big chunks that brings us to the total cash flow. Next slide, please. Here we show the regional highlights split. As said, we start on the left-hand side in Americas. We had 94% growth on the quarter. Obviously a very high percentage. Of course, it signals also the low comparison from last year. However, having said that, this is the strongest quarter ever for Americas. We are seeing increasing activity levels which has not necessarily translated into sales, but we are really able to access the laboratories in North America. That's really coming back strong. Here we can really talk about post-pandemic situations.
We're also seeing traction in Latin and also in South America. Staying on the DC-1 side, it's worth mentioning that we actually were able to really continue our journey of building a what we call ecosystem, but also within the vet space. We've had large orders with DC-1 to support the vet business particular client. Going to EMEA, I think the highlights there where we lost 6 percentage points on the quarter, but actually had a really relatively stellar year throughout the quarters with a relatively high sales throughout the second year of the pandemic consistently landing at plus 17% for the full region.
As said, the reagent business takes us a little bit down here so that the instrument software business was actually growing more than 20%. What I'd like to highlight here, I think the intelligence we get also from the activities is really well on its way. Of course, Omicron, et cetera, is out there with some level of insecurity. However, we really think that we are back almost in line with the activities and the freedom to operate together with our partners in Europe. Going to APAC, here we saw on the quarter 6% growth, going flat, so SEK 103 million in total revenue for the region, same as for FY 2020.
I think here we had some timing, so there was this number in Q4 that contains a Japanese order or some orders for Japan that helps us a bit. Otherwise, there are certain markets, and this is where we are mostly affected by COVID. It's a bit scattered out there. We see that we don't quite have the same flexibility to visit and demonstrate our solutions, so we're still negatively affected by COVID on the activity level. On sales, we're pleased to see that we're able to maintain our sales also in China since we're up against the compare where we actually had shipments to migrate in the second half of 2020.
We have actually managed to mitigate that and come in at the same level here. In some of the smaller markets, we also saw strength. Korea is one area, and there were a number of the small ones where we actually had some placements. We're pleased with that. Going into the next slide that actually shows where we slice our results based on the product groups, instruments, reagents, software, and others, which also contains spare parts. On the instrument side, we had consistent 16% growth.
Of course, happy to see our activities and our numbers coming out now that we're still early days in the DC One launch, which was started in 2019 with CE Mark and in 2020 in the U.S. The conversations we have with our partners and the end users is positive. We hope to continue that journey. For the reagents, I already commented on the SEK 22 million on the quarter, which was a little bit lower than the first three quarters. We're exploring kind of specifically what those SEK 2 million or those couple of millions there doesn't seem to be a systemic situation at all.
What is really healthy is that our APAC expansion is on its way. We've tried this time around in the report to provide more transparency on what we work on, what is the status across the region. We're working on our partners to really get our classic stains into the region. So hopefully you will appreciate the take in the report. As said, on the software side, really healthy growth, SEK 39 million for the quarter, software and others, as said. And that actually translate into SEK 147 million for the full year. Plus 43%. We've really seen healthy software growth, and we are seeing our Remote Review software being our biggest contributor that really ties together our small solutions with our large lab solutions.
We're pleased with that product category, the growth in that. All right, that brings me into the next chapter here, which is our strategy 2023 to 2026. If we fast-forward to how we lead the way in digital cell morphology. There, I think it's important to pause here and really express my appreciation for what the team and our partners have accomplished over the years. It is a successful journey that has enabled investment and growth. We consider ourselves very fortunate and hardworking to be able to invest in our business and pursue our ambition of continuing to be the leading provider of digital cell morphology.
We're still around 200, and here we have a plan where we actually in balance with the growth on the top line, but we certainly wanna invest in innovation, as you will see. We have a global footprint, but now we're also on the verge where the pandemic is leveling off, so we are looking at where and starting our investments into our market support organization so we can support continued growth. I think we click the next slide where we actually share the five pillars of our strategy. This is how we are unlocking the full potential of CellaVision.
I think it's important to emphasize here that we are really continuing our journey of digitalizing and improving microscopy workflows in the world's medical labs. That consists of different levers here, or the pillars. First pillar is really our core business that we have brought us and created the position for digital cell morphology globally. That is where we wanna maximize and really spend the bulk of our resources to secure continued strong growth in the large lab segment. Here we're really maximizing, which also requires investments. We are having our accelerators that has been developed, and we're on the verge of really bringing them out there globally as well as within the dimension of lab sizes.
This is adopting our DC-1 into the small and medium labs and tying that together with our large labs. We are driving this growth based on the RAL acquisition back in 2019. We're only continuing now being hindered by a couple of years of disturbances from the pandemic. Nevertheless, we have progressed our plans of really growing in Europe, but also growing our classic stains for APAC, and we're certainly also working on how to get into Americas. We have the new agenda items where we bucket them under our expanding our activities and our focus to establish growth drivers in what we call specialty analysis. I'll talk a little bit more about that on the next slide.
This is a very, very interesting area that we think ties very well together with our position in the large labs and our accelerating levers we already have in [hematology]. Furthermore, we've sent a signal of acquiring new technologies throughout 2021. Here we are really explicitly saying that we're exploring how we can contribute and leverage our capabilities and our assets into new areas. That actually also includes, of course, the bulk of really assisting our journey within hematology. In essence, we're building the foundation to remain the market leader within hematology, and we are leveraging our journey to explore new areas.
So if we take the next slides, we kind of unfold it at a level slightly below the headlines. The value proposition that we've outlined here for the large lab is where we have the high volume routine analysis peripheral blood samples. This is really what has been attractive for us and a driver, both for hardware and software. Of course it goes hand in hand as we convert and get our reagents in. We also have consumable sales in this for this segment.
We have in the small, medium lab segment, we see the same type of analysis, but actually performed not in the large solutions where they also assist with the workflow, but where we are actually bringing digitalization into labs where it's totally manual today. It's new penetration of the DC-1 getting into that. But we certainly see hardware and software sales as a big thing here. Reagents, and here you should note that it's not just our classic stains and what we have for routine peripheral blood samples, it's also to support our new pillar on the specialty. What we are signaling here is that we are tying together reagents with software development, our new algorithms to assist the specialty analysis.
This is where the strategic move of actually acquiring our diagnostics comes to play. We can develop innovative solution that ties together instrument, software, and reagent. On the expanding agenda here, we see a number of opportunities for revenue streams. It's really important that addressing this low volume game that it is, it's actually to make an efficient workflow in the labs. Here we see opportunities to sell additional instruments to the large labs and also to the small and medium labs, but also to assist the large lab in not disrupting their workflow when they have to diagnose diseases that are not considered high volume, but which still exists.
When it may exist, and if you wanna digitalize that, it will interrupt the workflow. This will become a growth driver that consists of both new sales, new instrument sales, the DC-1, and even larger instruments, but also software and consumables. Here, there will also be opportunities for considering our recurrent revenue models. On the exploring pillar, as we have announced, we have novel technology that we are doing our feasibility work on. Really specifically, we are starting to progress that on the internal side, and we can see high speed and superior scanning performance, and we can leverage that in new areas. Here we are starting to invest and formalize a smaller team to make this happen.
Now it's time also to work with partners on technology maturation, but also on channels so we can look into opportunities for new strategic alliances. On the hematology side, we add up the addressable market to around SEK 5 billion across these segments here. In terms of the next slides, this is the ecosystem that we are able. This is our mission based on our strategic pillars. Here we are building an ecosystem with opportunities and synergies. It's a sticky offering where we tie together our instruments with software solutions, superior algorithm that has been trained on RAL reagents.
You can see that we have a value proposition that really goes along the lines of diagnostic certainty, the fact that we can control the sample preparation with our own reagents as well. Here there's a growth driver also for our reagent business, tied together with small and medium lab sizes. This is a focus for us. For the new innovative developments, we will develop our own reagents and tie them together so our algorithms are tied together and trained on our RAL reagents. That becomes a competitive edge by providing high quality and consistency accuracy in a standardized way.
Workflow advances, as I've talked about throughout this ecosystem of, with labs of various variable sizes, we tie that together, all the communication, the data flow of results, the interpretation done by medical doctors, wherever they may be, can be done with our Remote Review Software, and even also for these low volume analysis, so that we separate the workflow and make an efficient hematology workflow for the labs. This brings me into the next one where we are laying the foundation for the short and the long-term growth. Certainly, as we say, some of our levers here to be successful in executing and delivering on these pillars and across the value chain. One of the very important one is obviously innovation. It's in our blood, as we say.
Now we are ramping up and accelerating our development both for existing programs, the programs that have been on hold, and we're beginning to invest in these new areas. We still have our core business, and we are investing in that to remain the number one leader of digital cell morphology across the large labs. Supply chain is something which is really increasingly important with the growth journey we have, that has the expansion element to it also on the regional basis. This is a key thing that we are looking into and also to make sure we have our capacity in place, which is also why we this year and next year are investing in our facilities in Mantes-la-Ville, France for the reagent business as a starting point.
On the people side, of course, we have a very strong history together at CellaVision and now also with our RAL team, where we now have one corporate branding around CellaVision. We have a global team. We have different footprints, and bringing these companies and entities in our organization together, it's one mission about digitalizing and really building sufficient workflows. That's something that we don't forget the people component in our journey here. The people component also goes hand in hand with our partnerships. We are really looking at leveraging our capabilities and assets.
We're also very knowledgeable that execution of our agenda, in particular in the new areas we are going to exploit, partners who can, where we can, build synergies and develop the solutions while also getting general access. This speaks to the fact that we are considering the indirect model as a good direction to execute on this strategy going forward. Then again the end customers, we will invest in our presence. We are marketing our offerings directly in collaboration with partners. This is also time to revisit our market support organization to strengthen our organization where we can see market potential to contribute to future growth.
These are the five levers that we're working on with initiatives below to make things happen. That brings me into 13. Here I will just emphasize our financial ambitions behind the strategic direction. We are, although our base business is growing, and we are continuously growing, we are still having the aspirations of 15% revenue growth. We have changed from the old metrics where it was on an EBIT measure. We have changed to an EBITDA margin of exceeding 30%. This has been our performance for some time. We are allowing ourselves a room to increase investments to secure the long-term growth of CellaVision. We are certainly really eager to of course continue to exceed this metric.
On the capital allocation priorities, as you've heard me talking about, then we are investing in growth, people, innovation, capacity, channel, and marketing. On the acquisition side, we are focused on maximizing the value from the latest two acquisitions, so that's RAL Diagnostics and also Clearbridge BioPhotonics, the IP under that we're exploring within new areas. We're curious to explore M&A opportunities that can help us accelerate our strategic journey, yeah, definitely. On the return to shareholders and our dividend policy, we are proposing a raise to SEK 2 per share, which is kind of in the middle of our dividend policy, which is obviously to be approved by the AGM. This is where we landed that.
Then finally, before going to the Q&A, our summary. So hopefully, at least, from our side, we do believe we deliver a strong finish to the year, with 24% organic growth, for our business. It's been a privilege, joining the team personally, in early 2001, and now executing and working with the team to pursue our new strategic direction, which should really continue our growth journey but also lay the land for long-term growth of CellaVision, given the incredibly capable people we have within our team at a global scale. So I'm looking forward to discuss this in separate meetings, et cetera, but obviously also in the Q&A coming up.
With that, I will now, if we could open the challenge, Magnus and myself, we'll be very happy to take any questions.
If you have a question for the speakers, please press zero one on your telephone keypad. Our first question comes from the line of Ulrik Trattner of Carnegie. Please go ahead.
Great. Thank you very much. Good day. I have a few questions, if I may. This being one of the first times you're presenting sort of an overview or an updated view on the total addressable market, as well as penetration, two points. 22% penetration in large labs, that seems rather slow from the 21% that you reported back in 2019. If there's something we're expecting to continue, penetration is going to increase by 1-2 percentage points annually, is there something you can actually do in order to re-increase that? Secondly, you report as previously 17,000 labs that are addressable. Have you in any way increased your price assumption or changed your view on replacement cycles, or how do you just derive these numbers?
Even if I assume seven years replacement, which is quite aggressive, you will only come up to SEK 1.2 billion. What am I missing here? That would be my first question. Thank you.
Thanks a lot. Yeah, on the 22%, I think it's fair to assume that we will continue the journey of 1-2 percentage points to penetrate the labs, which we've done historically, and continue that journey. We see that. We don't see that necessarily slows down, so we're on that journey. Of course, the mix between the mature and the immature markets will be different. There are certain regions where we had a higher penetration, maybe somewhat slower, and then there are a lot of runway in other areas. I think 1%-2% is really where we are continuing to strive for growth.
In terms of the 17 labs, we are continuously updating our view from the market perspective per country, and we are still around 17,000, maybe a little bit higher in our assumptions as to the addressable markets. That's kind of where we are with the market sizing from a lab perspective. Then you had
Yeah, yeah, sorry. Just help me break down then sort of your assumption, how you're able to derive at roughly EUR 2 billion in total addressable markets if there's only 17,000 labs, because that is what I've been sort of assuming as well. If we're looking at a price per system of roughly EUR 100,000, your distributor taking half of that, and you have 7 years replacement cycle, you would not come up to more than EUR 1.2 billion. What sort of in those metrics have changed?
I think it seems like you are a little bit on the low side on the pricing side if you take end user pricing, yeah. I don't think that has changed.
If it's 40%-50% higher.
Yeah.
Okay. The price has had increases by 40%-50%.
No, I think you just need to be clear whether it's our revenue or it's the end user revenue.
Yeah, sure. The communicated out price to end customer has been for the last five years EUR 100,000. That price and the distributor margin has been 50%. Have the price system-
Yeah.
Have the price per system increased by 40%-50% or have the distributor margin come down? Or sort of where am I sort of doing my miscalculations here?
I can comment a little bit on that just generally. We need to add some software and spare parts and consumables into the equation as well. It's not only the instrument, there's also these consumables and other instruments that we have with the lab. If you add those on, then you have a higher average sales price, let's say, if you include all of that in the equation.
Let me calculate.
A good proportion of software comes in when the installation takes place.
Just sort of goes quite sort of into my second question as well. 17,000 labs, roughly five in U.S., five in Europe, and 7,000 in APAC. Majority of sort of your sales mix, and why Others is performing well, at least what it's been historically is that U.S. is driving sales. In U.S. they have a higher portion of upselling from software. What's the attachment rate of Others across the different regions, as well as are you expecting the U.S. market to outperform the other regions in the coming few quarters?
Well, I expect the journey in the U.S. was to be continuing. You're right that there is a higher attachment of software in Europe. We also believe that transition will also take place in the U.S. That transition of software and the adoption of our instruments will also continue in Europe. It's much more fragmented in Europe because it's many more countries. It's different organizations. It's different payment systems, so it's much more fragmented. This is also why it is a bit slower in Europe as opposed to actually penetrating one country with a few partners, same organizations.
Okay, great. Next question would be on your new financial targets as well as your new strategic agenda. Your financial targets, that implies that you're to double your revenues to 2026. If you could give us a split between sort of hematology sales or hematology analyzer sales, reagent sales, and expansion sales into these new areas by 2026, just to help us sort of understand where we should find this sort of doubling of revenues to 2026.
In the period, the bulk of the business will continue to be on the large labs. We will see increasingly contributions from the geographic expansion on the revenue side, on the reagent side. In addition, we do believe that the small lab segment, medium lab segment, the DC-1 tractions where we are now seeing 50% volume growth, we do believe that will continue. As we get five years back, we've not penetrated a very large proportion of the addressable market for the small to large lab segment. As we get into the period and as we get to...
As we've developed the specialty analysis, that will allow us for new growth drivers, because then we will be able to place DC-1s not just for the small to the medium labs but also to the large labs. Because they will take our these analyses supplement their the high-volume workflow.
Yeah. When do you expect to launch such a system?
The applications are obviously under development. We will not disclose the timing of them. We will have some of the applications coming out throughout this five-year time. They will come as droplets, if you like.
Okay. Just two more questions before I get back into the queue. How are we to get sort of reassured that this brings a similar value proposition to what you have been offering in hematology analyzers? Or is that too soon to call out? Because you have such a clear value proposition for large labs.
Yeah. Sorry, so your question is related to.
When are we supposed to get more details on exact segments and the value proposition that you bring to that specific segment? When are we supposed to get more information to get some reassurance?
The reassurance will happen as we launch the first application, where we will pursue researchers only strategy to begin with and then do the clinical validation, bring them into IVD solutions, but they will be out there. Of course, this strategy is based on conversations with the market.
All our users, we have more than 1,000 users attached to us. The specific need to solve this unmet need in the hematology lab, this is where we see that there's more than 90% demand for these solutions. This is where we are confident that it's the right thing to actually solve that issues for the lab, so they don't disturb the large lab workflow.
Okay, great. Two more questions sort of just popped up into my head. You're talking about 60% volume growth for the DC-1. What is the volume growth for the DM1200 and the DM9600? That was my last question is, you're moving away from an EBIT target to an EBITDA target. But what is your expected rate of depreciation and amortization over this period in terms of percentage of sales?
The biggest chunks of depreciations would be our tangible assets, and that could be related to the capacity expansion in France. And that is not a very heavy cost, I would say. And then the rest is coming from depreciation on capitalized expenditures, and that's the more significant portion of our depreciations. As long as we capitalize, as long as we develop, it won't affect our depreciation rates. As soon as we market launch our products, they will go into depreciation. It's still a bit in the future before we have any larger changes to the depreciation ratios.
Just to follow up on that one on a minus, because your depreciation rate has been around 6%, slightly higher in 2020 in percentage of sales. That's supposed to be a low number once these applications are launched.
It's actually a rather low number historically as well. We've been a little bit higher. It's going to be a phasing as we introduce new developments, new softwares, new hardwares to the market. When we start to sell those, that's when we start to depreciate them as well. Over five years for some and over 10 years for others.
Okay. Essentially, what you're stating here is an unchanged EBIT margin assumption of roughly about 20% for 2026. Essentially, you're reinstating your old financial objectives. You're changing EBITDA to EBIT or EBIT to EBITDA.
No. I think if we look historically, we've had around a 5% difference between our EBIT margins and EBITDA margins. So sort of in that area. I think this time around is 5-6%. Yeah, 5-6%.
Okay, to the other question that I had, talking about 60% volume growth for the DC-1, where are we at with the DM1200 and DM9600 in terms of volume growth?
We're not disclosing the specific number. We have a new environment, but double digit.
Okay. Just trying to decipher the numbers here again, the total instrument sales, I don't get it to really add up. If you're having 50% volume growth for the DC-1 and double-digit system sales for the large lab segment, then system sales would have been quite a lot higher. How certain are you that it is double-digit growth for the large lab segment?
The growth is also, I mean, on top of the instrument growth, we have the reagent growth, and we also have the software, which is considerable. That's kind of what
Yeah, yeah. I'm just looking at sort of the isolated instrument growth. Instrument being instruments, right?
The question was how uncertain we are?
Yeah. You're talking. You said that you were seeing double-digit system sales growth for the large lab segments. And just sort of trying to sort of decipher the numbers of system sales with 50% sales for the DC-1 coupled-
Yeah. We're a bit-
With what you're stating is double digits, then it should be higher, right? You reported growth-
Higher. Do you mean?
For system sales.
To derive the 15% total, you need higher increase in your calculations, Ulrik, in what areas?
It sounds like the sort of growth for large lab segment is below double digits if DC-1 is growing at that 50%+ in terms of its-
Okay. I see.
sales
I see where you're coming from. When you talk about percentage growth from a low base, you know, you, then the contribution comes gradually. In the beginning, the contribution in monetary, in absolute numbers is not so large. A little
But it still must have been a couple of millions, right? That could have sort of offset the entire growth for the segment if it's SEK 10 million.
Okay. I can get back to you on that, part.
Yeah. We could have a conversation around that, of course, offline, if you'd like. That is how we see it. On the large systems, it's a double-digit growth and then of course a lot higher growth rates on the small systems, but on a much lower starting base.
Yeah. Okay.
We have software that grow a little bit faster than our average instrument sales, and we have our reagents that we globalize. We still have good growth in Europe, but the growth rates will be a lot higher than 10% in the APAC region and the Americas region, but also there from a low starting base. In all in all
Okay.
It adds up to these financial targets that we have set out over time.
Okay. Well, thanks for asking me for referencing all of my questions. I know it's a lot of them. I'll just get back into the queue. Thank you very much.
Thank you .
Our next question comes from the line of Felix Wienen of SFO. Please go ahead.
Perfect. Yes, good morning, if one can still say that. Thank you very much for obviously very strong organic growth. Couple of questions, please. The first one would be on your supply chain, and you've maneuvered that very well over the last quarters given what other companies are reporting. In terms of your visibility and stability going forward, are you confident there?
Well, that's a great question. I'd say we are sending the signal here and really explaining that our numbers have not been affected by the supply chain, and we're really pleased with that. Having said that, we are working very proactively to make that happen. We are spending a lot of time on actually managing our component supply. We are spending efforts on trying to increase our inventory levels, and that's not just easy because there is another you can say competition for the components for the time being, and we're also spending calories on validating alternative components. I appreciate that you picked up that we've managed to manage it.
This is really a focus area to keep it that way. We do think going forward that we will continue to be challenged over the next year or two or so. This is really an area that gets a lot of attention in order not to prevent our delivery situation. There seem to be items that have never been an issue that are all of a sudden an issue. We are challenged in this area, and the team has done well in mitigating it.
Perfect. Thank you very much. The next question would be obviously with the prices going higher for virtually everything, in particular logistics costs. Does that have any impact on you in terms of your ability to raise prices towards customers? Have you had any negotiations yet? Are you planning anything? Any color you could give would be helpful.
Yeah. We are certainly planning to have that conversation. We see inflation rates going up. We see component prices. There are conversations with some of the suppliers, definitely. That's a conversation we need to have. This is really what needs to be baked into our price increases for the coming year. It's not like we can do it overnight because we are contractually bound on certain contracts, but there are windows where we can have this conversation. This is obviously something we're working on.
Great. Thank you very much. Obviously, I noted, and you commented on it, on the veterinary side, a larger order there in-
Sure.
First question, I'm obviously very satisfied about that. If you could give a bit more color on the market and whether anything has developed there. Secondly, whether it was in the U.S., where I think you're most advanced on the vet side, was that a one-off order or should we expect anything to record?
You're right. It was in the U.S. or is in the U.S. I think this customer has really picked up on the vision of building what we term as an ecosystem. They have done extremely well in streamlining all their working processes and digitizing everything with the use of our systems. We are very pleased with this. In this context, it was add-ons. It was a large order of DC-1s that were added. For this client, we have conversations as to can we actually expand in other geographic jurisdictions to have the same model. That's super exciting. We wanna continue in the vet space. We have a pretty healthy offering within the vet space.
We do believe that where we can see volume, this is where our solutions really serves the purpose, a combination of labs, DMs and DC ones. This is what we're positioning.
Very good. Let's quickly move over to the DC-1 system. In the press release, you mentioned that you had customer feedback in the U.S., customer insight, I think you call this. Could you share a bit more color there with us? What was the response? Do they have any areas of improvement for you, or have they just been very satisfied with the system and with its use? And also-
Yeah.
Yeah. Another question on DC-1 later.
Yeah, certainly. No, it's a great question. Yeah, we've actually tried to exploit the strength of the value proposition and why now that we are seeing the growth, and by then we have people every day at this very minute using the DC-1 out there, why is it value for them? And we see that it confirms that there is the certainty component that it's standardized, that is appreciated in the lab environment. I think the remote review, the software is really recognized as a very high value proposition for the labs where they are associated with other labs, so these networks.
Very interestingly, the amount of the network labs, the degree of those or the presence of those is larger in America as opposed to Europe and APAC. However, in Europe, we see the same pattern, but there's a larger fraction of standalone labs, and they really appreciate digitizing the low volume workflow on pure peripheral blood samples. The accuracy and the consistency, the independence of MedTech is something which is highly valued. That strengthen our confidence in that we have a product which is stable and which we can scale and attach to our large systems from a software perspective.
Okay. Also regarding the DC-1 and the press release, you state or talk about long sales cycles. Does that mean that your orders or your revenues from DC-1 have been below your expectations? Or does it mean that once a customer has verified the product, sales can be particularly strong because the-
Yeah.
Should we pick up or expect strong growth from DC-1 in 2022 or 2023?
This is back to our challenge, which has probably been the biggest challenge if we kind of reflect upon the pandemic period. That the DC-1 is positioned to labs who are not, if they're standalone lab, they're not doing digital morphology, these small, medium labs. Not only do we have to actually really have them understand the value proposition of DC-1 specifically, but also taking a step back and learning about the opportunities and the implications from going digital. That's the first step, and then the DC-1 comes in. Which means that it's really important that you're on-site, that you have the DC-1 with you. Our market support colleagues, they bring the DC-1 into the lab, and they demonstrate it.
This has been extremely difficult. That's the activity. When we talk about activity levels, that has not really happened. The reason why we add on and we emphasize that there's a long sales cycle that once you've conveyed this and the user understands and has the need, then there could be a year until the next sales budget cycle comes up at the hospital. Now we are seeing traction, as I said, on the activity side. We're really starting to believe that that will translate into sales, so we can continue this healthy double-digit growth even though we're at the early stage of the growth journey with 56% year-over-year growth FY 2021.
Of course. Yeah. Thank you very much. Then on the revenue side, please. After that question, I'll step back into the line. It's obviously shown solid growth, 8% in Europe. Now you're expanding 70%. How do you see, how do you view the development for Asia and the progress? I really appreciate the table, the new table that you've provided in the presentation or the press release, about the progress. So when should we be expecting these substantial sales in other regions outside of Europe? Is that something obviously part of your 2026 strategy? You know, if you could help us locate a bit when, you know, we should be expecting a couple of million revenues from other regions than Europe.
Yeah. I think the first step to start is really this region in APAC that we outlined here. Because as you can see, it's not just that we have registrations and links and so forth, we really need also the partners to substitute their current suppliers. And that is starting to happen. As you can see in Australia, we're on the verge of starting in China, New Zealand, Korea, Singapore. We are gradually adding markets where we can start penetrating the market. Then it's the other thing, once you start commercializing, and this will go gradually, essentially beginning in 2022 with these countries. But the sale will not be a hockey stick, because you also.
The timing of converting one supplier reagent to a new one when you're running a lab is also a better window for doing that when you're exchanging your instrument. We believe that as we convert and as our partners are selling cell counters, that's a beautiful window for us to also exchange their reagent business. That's really going to go gradually for this region. We are obviously working with our distribution partners to consider going outside of Europe, where we have healthy growth. We still expect that we can grow within Europe, but we also want to go to the Americas.
These are things we're working on, and we are especially looking into our methanol-free reagent, which is a really high value proposition from an environmental perspective. We're working on getting that in and substituting current suppliers in that market.
Perfect. Thank you very much for all the answers and I'll step back in line.
Sure, sure.
May I remind everyone that if you would like to ask a question, please press zero one on your telephone keypads. Our next question again comes from the line of Felix Wienen of SFO. Please go ahead.
Perfect. Just two, three quick ones more. First one will be if you can comment on visibility into the first half of this year, probably inventory situation at your customers pipeline. Anything about that?
Yeah. Here I'd probably comment on the activities. I can only say that we are also in light of Omicron and so forth. We are seeing activities together with our partners and lab access. We are not hindered by actually getting out there. I'd say we are seeing continued momentum, put it that way. That's relatively helpful.
Yeah, absolutely. Obviously you've got a very low comparison base in the first half, in any case. The last one on software in the fourth quarter. Was that due to specific software upgrades? I mean, the revenues there have been strong in all regions. Were there any material one-off effect in there that would be interesting?
Yeah. We had a lot of placements which drove the attachment rate of software to the instruments were relatively high. We've also sold additional software, especially the Remote Review has been very healthy. Our hypothesis is that that's likely also tied to DC-1. That you can combine the DC-1 with the lab systems.
Perfect. Thank you very much. I just want to say that it would've been a strong year. I've seen the software revenue was the highest ever in 2021, and also was the first ever quarter with more than SEK 100 million in instruments there. Looking forward to what you're bringing to the table in terms of growth, and yeah, good luck going forward.
Yeah. Wonderful. Thank you so much.
We have no further questions at this time. Please go ahead, speakers.
All right. With that, first of all, I really appreciate everybody listening in, and the questions. We are really happy to take further dialogue. We are super excited with the ending of 2021. We believe we really had a strong finish and strong momentum, and we are extremely excited internally to get going and execute on our strategic directions, 'cause we really intend to accelerate our efforts and protect our position by being the industry-leading provider of solutions that benefits both patients with bloodborne or blood-based diseases, but also the lab personnel throughout the world. We're super excited to come back and give you an update next quarter. With that, thank you very much.