Boule Diagnostics (Stockholm:BOUL) Q3 2026 Earnings Call

0:00 Good morning and welcome to our Q3 2026 earnings call. My name is Michael A. Winkelfeldt. I'm the CFO of Bool Diagnostics. And with me today, I have our CEO, Johan Fullkonger, who has now been with us for his first full quarter. We will be recording this session, and after the formal presentation, we will open up for questions on the line and in the chat. With that, I will hand it over to you, Johan. Thank you, Michael.

0:28 As Michael said, the third quarter was my first full quarter as CEO of Bull. And this has given me a clear picture of both the company's strengths and the challenges we need to address. I will walk you through a little bit of the prime numbers and then later on hand back to Mikael. So sales in the quarter were significantly weaker than we expected. The net sales decreased by 24.4%, of which the organic decline was 19.4 and currency effects 5%. The main explanation in instrument sales were the number of instruments sold decreased from 834 to 363. And this decline has two causes.

1:23 The first is a shortage of components, which has limited our ability to deliver. This has mainly affected three-part human instruments and four-part veterinary instruments, and meant that orders could not be delivered within the quarter. The second cause is a weak demand during the quarter, particularly for five-part human and veterinary instruments, where we see restraints among both public and private customers in several markets. In addition, restrictions on payment and currency flows in certain markets in the Middle East and Africa have further affected development. We are working actively with our suppliers with production planning to resolve the component shortage, but I should say that we see a risk that disruptions may also affect the coming quarter.

2:16 Given these challenges, it is encouraging to see that sales of consumables to our installed base show stability with good development, for instance, in Latin America and Southeast Asia, amongst others. The OEM business also made a stable contribution with sales of 29 million SEK in the quarter. And the increased share of consumables and OEM in the sales mix helped keep the gross margin at 41% in line with the previous year and our recurring business is therefore a stable foundation at the time when instrument sales are weak.

3:01 The order backlog at the end of the quarter was 76 million SEK compared with 55 million SEK the previous year same period. and this partly consists of orders that could not be delivered because of the component shortage I was just mentioning. The outcome of the quarter and our liquidity situation requires clear priorities. These are to secure the supply of components so that we can deliver on the existing order backlog, to continue developing the recurring business in reagents and OEM. And adding to that, management and the board are now actively working on strengthening the company's financial position.

3:48 Finally, and also to mention, after the end of the period, we updated a license agreement with our Indian distribution partner, Q-Line, for the Indian market. So let's look a little bit more at the financials for the group and the third quarter. Group sales amounted to 96.2 million compared with 172.2 million in the same period last year, which is a decline of 24%. This is mainly explained by negative organic growth of a little bit more than 19% driven by the lower instrument sales I mentioned earlier and adding to that a negative currency effect of 5% due to a weaker US dollar.

4:44 Growth profit amounted to 39.5 million corresponding to a growth margin of 41.1 compared with 41.2 last year. So we are maintaining our growth margin in principle. The fact that the margin was largely unchanged despite the lower volumes is mainly explained by a more favorable product mix with a higher share of consumables and OEM and the lower share of instruments. Looking at adjusted EBIT for the quarter, this one comes in at minus 4.5 compared to 12 million last year, corresponding to an adjusted operating margin of minus 4.7.

5:32 And again, lower sales are the main reason for the deterioration while operating expenses were in line with the previous year. This is, of course, not something I am satisfied with. Operating cash flow was positive at 6.9 million compared to 1 million last year. Mikael will speak further on this topic later in the presentation. Available liquidity at the end of the quarter amounted to 21.6 million compared with 36.6 a year earlier. So I will now move into the diagnostics business segment and here we, as you have already heard, we see sales declining with now 30% to 68.4%.

6:33 and that 30% is split as an organic decline of 25.5 and currency effect of 4.6. This is to be compared with sales and diagnostic the same period last year of 97.8 million. This is partly due to component shortage, which as I also mentioned earlier, was affecting deliveries of three-part human instruments and four-part veterinary instruments, but also partly to a weaker than expected demand for five-part instruments. Growth margin decreased slightly from 37.4 last year to 34% in the third quarter this year.

7:27 At the same time, as sales declined, adjusted operating expenses increased to 31.7 million compared to 28.2 same period last year. And as a result of that, the operating margin was also negative at minus 12.3. compared to 8.6 last year. I will then move into the OEM business. And here sales was in principle stable. We came in in Q3 on 31.5 million SEC compared with 33.5 last year. So a slight decline of 6%, where negative organic growth of 5.5 was the main contribution to that.

8:17 Growth margin, though, increased from 47.4 to 51.5, and operating expenses also decreased from 8.5 to 8.5 sorry from 9.5 the previous period. The higher growth margin and lower OPEX improved the adjusted operating margin from 19.3 to 24.6, which is quite encouraging. And thereby also the adjusted operating profit increased to 7.8 from the 6.5 same period last year.

9:10 So overall, a stable quarter for the OEM business with improved profitability, which together with the diagnostic consumables forms a stable foundation for the company. Having said that, I think it's fair to say we need to further address our instrument sales going forward. With that, I will hand over to you, Michael, to take us through the financial summary.

9:38 Thank you, Johan. As Johan outlined, we had a significant decline in sales in the quarter, down 24% compared with last year. The main reason for this are the problems in supply chain for our instrument production in quarter three. The gross margin stayed basically flat, even though we faced a negative currency effect and also we of course have with lower production, we have a problem with under absorption. Operating expenses were higher than last year. There were some project costs in our OEM business, although we could push down OPEX on other ends in the OEM. We also had some non-recurring restructuring costs in the diagnostics business segment.

10:31 Given the very weak sales, EBIT was of course pushed down. Before restructuring costs, operating profit was negative 4.7, including the restructuring costs mainly in Russia, which was a positive 7 million. We had a positive operating profit of 2.8 million. Operating cash flow was a positive 6.9 million, and this is mainly driven by improvements on customer receivables. and operational cash flow was, I will come back to that. Looking at the trend for our operating cash flow.

11:19 As we have pointed out several times before, the operating cash flow is something on which we have strong focus. In Q2, the last quarter, our trend of positive cash flow was broken. And I said at the time that we will work hard to revert to the positive trend. I'm therefore very happy to report that we did revert to the positive trend in Q3. As I just mentioned, the main driver of the positive cash flow in the quarter was the improvement in receivables. This improvement was large enough to offset the increase in inventory. As we have pointed out several times during this presentation, we face significant challenges in the supply chain during Q3. Of course, when you have a lack of certain components, which impedes deliveries, the inventory level of other components and work in progress grow.

12:10 But as I said again, the improvement in customer receivables was enough to offset that and lead to a positive operating cash flow. Moving over to liquidity. And I'll say again, liquidity continues to be pressed and also a main area of focus for us. We ended the quarter with a total cash position of 22 million. We continue to amortize on our debt, which we did in the quarter, which of course also strains liquidity. As Johan communicated earlier, management and board are working actively as we speak to improve the overall financial position of the company. With that, over to you, Johan.

12:55 Thank you very much. With that, I'd like to open up for potential questions to me and Mikael. Okay, seems to be no questions. Do you have anything in the chat?

13:32 Then I'd like to thank you for joining us and for listening. And with that, I wish everybody a good weekend. Thank you. Thank you.