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Boule Diagnostics AB (publ) Interim report January–September 2020

Strong operating profit despite ongoing pandemic

Quarter July–September 2020

  • Net sales amounted to SEK 98.8 million (131.2), down 24.7 percent. Adjusted for the change in exchange rates, this corresponds to a decrease of 20.2 percent.
  • The number of instruments sold was negatively affected by the pandemic and amounted to 737 (1,108), a decrease of 33.5 percent.
  • Cash flow from operating activities amounted to SEK 17.8 million (23.9).
  • Operating profit, including conversion of government grants regarding payroll protection loan (SEK 11.6 million), was SEK 23.5 million (32.3) which corresponds to an operating margin of 23.7 percent (24.6).
  • Net profit amounted to SEK 20.2 million (20.3).
  • Earnings per share before and after dilution amounted to SEK 1.04 (1.04).

Interim period January–September 2020

  • Net sales amounted to SEK 307.8 million (369.6), down 16.7 percent. Adjusted for the change in exchange rates, this corresponds to a decrease of 16.6 percent.
  • The number of instruments has since March been negatively affected by the pandemic and was 2,213 (3,367), a decrease of 34.3 percent.
  • Cash flow from operating activities amounted to SEK 49.9 million (34.2).
  • Operating profit was SEK 35,7 million (54.9) which corresponds to an operating margin of 11.6 percent (14.8).
  • Net profit, including the write-off of the holding in the associated company biosurfit, amounted to SEK -15.4 million (30.4).
  • Earnings per share before and after dilution amounted to SEK -0.79 (1.56).

Significant events during the quarter
Boule strengthens innovation and product development and appoints CTO
On September 1, 2020, Helena Börjesson assumed the newly created position of Chief Technology Officer (CTO) with responsibility for Boule's product development and Boule's extensive investment in future product platforms.

Boule has signed a long-term supply agreement with one of the company’s major OEM-customers
Boule has extended a long-standing partnership with a leading global diagnostic company that provides products and services for the hematology market. The parties have signed a supply agreement with an initial term of ten years and a potential extension for another ten years for reagent consumables to be used with a new hematology platform that will be sold globally.

Significant events after the period
No significant events have occurred since the end of the interim period.

Comments from CEO Jesper Söderqvist
Good results, but a continued strong impact from COVID-19
Most markets opened after the initial COVID-19-related shutdowns, but then partially closed again periodically. The shutdowns have led to significantly fewer doctor appointments and medical visits and thus also fewer diagnostic tests. For us, this has led to lower sales of consumables while at the same time making sales and installation of new instruments more difficult. We saw some recovery and normalization in the third quarter, but given the current accelerating spread of infection, the future remains uncertain in many markets.

Net sales were SEK 99 million in the third quarter, which is an improvement compared to the previous quarter, but a 25 percent decrease from the record quarter, Q3 2019. Thanks to a favorable product mix with a high proportion of consumables, the gross margin landed at 46.4 percent.

Operating profit was SEK 23.5 million, which corresponds to an operating margin of 23.7 percent. The profit is strengthened by the conversion of government grants regarding payroll protection to retain personnel in the United States during the pandemic.

Our operating cash flow was SEK 17.8 million, of which SEK 13.3 million relates to reduced inventory levels. Given the tough conditions, it is positive that we generate a strong cash flow so that we can invest and keep the pace of our development projects.

The business develops during the pandemic
The pandemic has stopped all conferences and trade fairs, which during normal years are important marketing channels for us. These are now being replaced by digital meetings and webinars. We have conducted sales conferences, trainings and even team building digitally to ensure visibility and presence to our distributors and staff no matter where in the world they are located.

We work focused on strengthening customer care and support for all customers globally and as part of this our customer care group has been strengthened during the year, which has led to cases being handled faster and better despite the challenges posed by the pandemic. Offering the market's best customer experience is still at the top of our priority list.

The work to increase our internal efficiency continues with great energy and a high level of activity. The focus is continuous improvements, simplified processes and the development of our cross-functional collaboration.

In Q2 2019, we announced our investment to increase our presence in Russia by establishing a local support organization and our own manufacturing. The timing of this project was due to the pandemic not optimal, but despite all the challenges, the project has continued to develop, albeit at a somewhat slower pace. The production of reagents is expected to start in early 2021. Unfortunately, we also see a drop in sales during the quarter, which is attributable to both the pandemic and local competition by a former distributor that we suspect is engaging in unfair competition. A notification has been sent to the Russian authorities and we are now awaiting their reaction.

The OEM business continues to develop positively
Our effort in OEM sales is positively driven by our unique expertise in the development and production of high-quality consumables. A renewed long-term supply agreement for reagents with a leading global diagnostic supplier confirms that we have a leading position in this niche. The reagents will be used with a completely new product platform and the supply agreement, with an initial term of ten years and potential extension for another ten years, which creates a stable income with a potential growth over time.

Increased focus on innovation
There is a technology shift in the market and we are seeing an increased demand for instruments with more parameters. To date, we have supplemented our product portfolio through collaborations on simpler five-part instruments. Our long-term ambition is to continue to broaden our offering with related instruments and reagents – necessary for high-quality local patient diagnostics.

We are therefore investing in a completely new product platform and will over time market several different instruments based on this platform. To ensure progress in this development, we have over the past six months strengthened both the development and quality organization with new resources. We have also appointed a Chief Technology Officer to drive innovation and develop technology and new products to meet the future needs for blood diagnostics from both doctors, veterinarians and patients.

A stronger Boule
Boule has competent and ambitious employees, several exciting future projects and an attractive business model with a large and growing installed base that generates stable sales of consumables with a good margin. The COVID-19 pandemic has temporarily reduced demand and there is an uncertainty about how quickly the markets will recover. In the longer term, we see a continued stable growth in demand for blood diagnostics in all parts of the world.

We are ready to meet increased demand when the markets turn as we have maintained full delivery capacity and continue to invest to create long-term growth.”

THE INTERIM REPORT FOR JANUARY–SEPTEMBER 2020 IN ITS ENTERITY IS FOUND BELOW.

For further information, please contact:
Jesper Söderqvist, CEO and Group President, Boule Diagnostics AB, phone. +46 (0)70-689 05 90
Christina Rubenhag, CFO, Boule Diagnostics AB, phone. +46 (0)70-546 72 22

About Boule Diagnostics AB (publ)
Boule Diagnostics AB is a global diagnostics company that develops, manufactures and markets instruments and consumable products for blood diagnostics. The company serves hospitals, clinics, laboratories and companies within blood diagnostics, in both human and veterinary hematology. The company operates via subsidiaries in Sweden, the USA, Mexico and Russia. The company products are sold globally primarily through distributors, supported by Boule’s own local sales and support personnel. The Boule shares are listed on Nasdaq Stockholm since 2011. www.boule.com

This information is information that Boule Diagnostics AB is obliged to make public pursuant to the EU Market Abuse Regulation.
The information was submitted for publication, through the agency of the contact person set out above at 15:00 CET on November 5, 2020.