Boule Diagnostics AB (STU:8BD) Q2 2024 Earnings Call Highlights: Navigating Challenges with ...

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  • Net Sales: SEK137 million, down 2.5% year-on-year.

  • Organic Growth: Down 3.5%, offset by favorable currency of 1.1%.

  • Adjusted Gross Profit: Approximately SEK60 million, with a gross margin improvement of 0.9 percentage points.

  • Adjusted EBIT: SEK9.9 million, up 13.8%.

  • Adjusted Operating Margin: 7.2%, improved by 1 percentage point.

  • Cash Flow from Operating Activities: Improved significantly, up 306% compared to last year.

  • Number of Instruments Sold: 883 units, roughly 10% below last year.

  • 3-Part Unit Sales: Up 14% year-on-year.

  • 5-Part Unit Sales: Down 65% year-on-year.

  • OEM Growth: Up 12% year-on-year, with a 118% growth from Q1 2021 to present.

  • Adjusted Operating Expenses: Decreased by 5% compared to last year.

  • Liquidity: Stable cash position of SEK35 million with SEK47 million in unused credit facilities.

Release Date: July 22, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Boule Diagnostics AB (STU:8BD) has a strong foundation of skilled personnel committed to delivering quality medical equipment and services.

  • The company has unique capabilities in developing and manufacturing the entire hematology lifecycle, from analyses to aftermarket service support.

  • Boule Diagnostics AB (STU:8BD) has a strong brand recognition and loyal customer base due to its pioneering history in hematology.

  • The company has made strategic adjustments to improve cost efficiency, including an organizational restructure resulting in SEK8 million in annual savings.

  • Boule Diagnostics AB (STU:8BD) has achieved significant milestones in its portfolio strategy, including the inauguration of a new reagent manufacturing plant in India.

Negative Points

  • Net sales for Q2 2024 decreased by 2.5% year-on-year, with organic growth down 3.5%.

  • The company faced challenges in the Latam and Asia Pacific regions due to competition from low-cost Chinese manufacturers.

  • Hematology sales in Q2 2024 were soft, with a 10% decrease in the number of instruments sold compared to the previous year.

  • The operating margin was impacted by SEK8.5 million in one-time restructuring expenses and tax penalties.

  • The company is facing a competitive and decentralized hematology market, necessitating improvements in processes and operating efficiency.

Q & A Highlights

Q: Can you elaborate on the focus areas you've defined and whether you need to invest in building an organization to implement your action plan? A: We don't expect to build a new organization for strategic growth. Our focus is on expanding veterinary care by building a stronger distributor network. We have the commercial organization to support this but need to invest more effort in developing that network. Gradual improvements from these efforts are expected.

Q: Are these initiatives aimed at reaching your current financial targets, or will you need to update them regarding growth and margins? A: It's difficult to answer definitively now. We are investing in future growth, not just short-term performance. However, I won't make forward-looking statements about the expected outcomes of these initiatives.

Q: Can you provide any indication regarding growth in the second half, considering tougher comps? A: We are not providing forward-looking statements or forecasts at this stage. Orders are not long-term, and there's nothing specific to comment on for the second half.

Q: Will the cost savings on COGS be visible this year, or are they more long-term? A: The staffing reductions initiated in the second quarter will have an immediate impact, supporting lower costs going forward.

Q: Will there be additional restructuring costs in the second half? A: We are continuously evaluating the organization, and will update if further restructuring initiatives are taken.

Q: The installed base on a trailing 12-month basis appears lower than a year ago. Should we expect this to increase again? A: We cannot comment on forward-looking statements. The installed base count can be difficult to track accurately due to our indirect sales model through distribution channels.

Q: Is the lower D&A in Q2 a new level we should expect going forward? A: Some fixed assets have reached the end of amortization. The second quarter's run rate is a better proxy for future quarters.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.