Earnings call transcript: Boule Diagnostics Q2 2025 sees revenue drop, stock falls

Boule Diagnostics AB reported a decline in Q2 2025 sales, with revenue reaching SEK 129 million, a 5.6% decrease from the previous year. The company’s gross margin also fell to 38.7%, down from 43.1%. This performance led to a significant drop in Boule’s stock price, which fell by 29.71% to SEK 7.24 in pre-market trading. While the company is currently unprofitable, InvestingPro analysis indicates expected profitability this year with forecasted EPS of $0.12. The market’s reaction was largely negative, reflecting investor concerns over declining sales and margins, despite the company maintaining a GOOD Financial Health Score of 2.67 out of 5.

Key Takeaways

• Boule Diagnostics reported a 5.6% decline in Q2 2025 sales.
• Gross margin decreased to 38.7% from 43.1% the previous year.
• Stock price dropped by 29.71% following the earnings announcement.
• The company successfully doubled sales of its M51 five-part instrument units.
• Boule reduced operating expenses by 47% and achieved positive operating cash flow.

Company Performance

Boule Diagnostics faced a challenging Q2 2025, with sales declining across key regions such as the U.S. and Latin America due to competitive pressures. However, the company saw growth in Southeast Asia, particularly in India, and in Europe through increased veterinary sales. Despite these regional gains, the overall performance was marred by a 6% organic decline in its hematology business. The company increased its instrument unit sales by 16%, with five-part instrument sales more than doubling, highlighting a strategic focus on expanding its product portfolio.

Financial Highlights

• Revenue: SEK 129 million, a 5.6% decline year-over-year.
• Gross Margin: 38.7%, down from 43.1% the previous year.
• Adjusted EBIT: SEK 5.8 million.
• Operating Cash Flow: Positive at SEK 2.9 million.
• Operating Expenses: Reduced by 47%.

Market Reaction

Boule’s stock experienced a sharp decline of 29.71% in pre-market trading, dropping to SEK 7.24. This reaction reflects investor concerns over the company’s declining sales and margins. The stock’s performance is now closer to its 52-week low of SEK 6.5, indicating a significant loss of investor confidence.

Outlook & Guidance

Looking ahead, Boule Diagnostics remains optimistic about the second half of the year, expecting continued development in its sales funnel and stabilizing instrument pricing. With a relatively low beta of 0.35, the stock shows lower volatility compared to the broader market. The company plans to continue cost optimization efforts and focus on strategic initiatives, including the development of OEM and blood controls. For deeper insights into Boule’s growth prospects and detailed financial analysis, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 stocks with expert analysis and actionable intelligence.

Executive Commentary

CEO Torben Nielsen highlighted the importance of returning to positive operating cash flow, stating, "Q2 marked an important milestone in that we returned to positive operating cash flow." CFO Holger Hoglenberg emphasized the company’s cost reduction efforts, noting, "We reduced the spending by 47%."

Risks and Challenges

• Competitive pressures, particularly in the U.S. and Latin America, could continue to impact sales.
• Geopolitical unrest in the Middle East and Africa presents ongoing challenges.
• The decline in gross margin may affect profitability if not addressed.
• Further deterioration in pricing levels could impact future earnings.
• Supply chain disruptions could pose risks to product availability and sales.

Q&A

During the earnings call, analysts questioned the stability of Boule’s gross margin and sales pricing. Management confirmed that current pricing levels are likely stable, with no expectation of further average selling price (ASP) deterioration.

Full transcript - Boule Diagnostics AB (BOUL) Q2 2025:

Holger Hoglenberg, CFO, BOL Diagnostics: Good morning, and welcome to the second quarter’s earnings call for Diagnostics. I’m Hoglenberg, CFO for BOL Diagnostics. And with me, I have our CEO, Torben Nielsen. After our presentation, we will open up for questions. Please also feel free to type questions in the chat field.

With that, I’m handing over to you, Torben.

Torben Nielsen, CEO, BOL Diagnostics: Thank you, Holger, and good morning, and welcome to all of you joining this Q2 earnings call. Let’s begin by looking at the highlights of the quarter. The second quarter of the year saw the continued effects of the geopolitical instability with longer than usual supply chain lead times, delayed payments from key customers due to continuing bank restrictions, and unfavorable FX development from a weakening US dollar. Q two was overall and relatively speaking a stable quarter with a 3.3% organic decline compared to last year. Instrument unit sales grew 17 year over year, however, at a lower average selling price.

This is part of a strategic focus to grow our installed base as a way of investing in future reagent business growth. Our five part instrument sales more than doubled in both the quarter and year to date, reflecting the higher demand for five part technology in the market. Consumable sales came in 12% below last year, largely due to the delayed payments, which then delayed shipments, and we ended up closing the quarter with a larger than usual backlog, like what we experienced in Q1. OEM sales were in line with our expectations and on level with last year’s sales due to timing of orders. However, we do expect continued good development in the second half of the year.

Gross margin declined in the quarter to 38.7% due to product mix. Our instrument sales grew, but at a lower average selling price, which diluted the gross margin. Cost control continued to be in focus. And because of all implemented restructuring initiatives in the past twelve months, we have now lowered our operating expense spend by 47%. The operating margin declined to 4.5% compared with 7.2% last year as a direct result of lower sales and gross margin and adjusted EBIT closed at SEK 5,800,000.0.

Despite a challenging quarter, we delivered a positive operating cash flow in Q2 of SEK 2,900,000.0. This is a critical milestone and a result of our diligent efforts to balance the structural cost, work working capital, and position Bull to invest in the future. To support our strategic transformation, we are strengthening our executive leadership team with deep subject matter expertise in R and D and proven track records in project execution. In May, we welcomed Eva Sperling to our team as chief of staff. Eva brings significant project management and lean experience from heading up the R and D project management office at Cepheid, a world leader in molecular diagnostics.

And in June, we promoted Lucy Yehian to Chief Technology Officer to support our strategic focus on OEM and blood controls development. Lucy has a PhD in analytical chemistry and brings more than fifteen years of industry experience as research scientist, lab manager, and head of R and D. In q two, we made important progress in our instrument portfolio strategy. Here is a simplified overview of our current and future portfolio ads. Everything marked in blue are our current proprietary instruments.

Everything marked in green, our technology partner instruments, and future identified portfolio ads are represented by these bluish icons. In our human portfolio, we’ve doubled our unit sales of the M51 five part instrument year to date. And we commercialized our Vital Scientific clinical chemistry distribution agreement in The U. S. In addition, we have now identified the most important portfolio at which we are currently working on bringing in for validation.

In our veterinary portfolio, we successfully validated a new state of the art hematology analyzer, which we intend to launch soon. With this portfolio addition, we add a product that will be able to compete with the market leaders in veterinary care and open segments of the market that is currently not available to us. This is the first instrument that has been validated by our newly established technology onboarding team in Sweden. In August, we expect to begin the validation of another instrument portfolio candidate in the veterinarian’s portfolio. Taking a closer look at the Q2 financials.

In summary, we reported Q2 sales of SEK 129,000,000, down 5.6% and with a unfavorable 2.3% currency impact leading to a 3.3% organic decline. Gross profit landed at SEK 50,000,000, down from SEK 59,000,000 due to mix, lower sales and lower prices on our instruments. We’ve begun to see the impact of a weakened U. S. Dollar and decreased materials cost and increased materials cost due to tariffs.

Gross margin declined to 38.7% from 43.1. Despite declining sales, we achieved SEK 5,800,000.0 in adjusted EBIT, and we achieved positive operating cash flow of 2,900,000.0 because of savings from restructuring efforts in 2024 now fully materializing. Available liquidity end of the quarter was SEK 39,000,000. Quick look at the overall sales by quarter. You can see that Q2 was down 3.3% organically due to lower average selling price on instruments and delayed payments, shipments on reagents.

From a regional perspective in the quarter, U. S. And LatAm saw a decline in our hematology and CDS reagent business. In these markets, high competitive pressure and lack of portfolio fit are the main challenges. Southeast Asia saw growth from strong sales in India supported by more stable performance in the region.

Europe grew primarily due to strong veterinary sales and Middle East and Africa declined due to challenges linked with geopolitical unrest. Looking at our hematology business specifically, we had a soft quarter with a 6% organic decline due to lower ASP on our instruments and delayed payments and shipments on reagents. In total, instrument unit sales closed 16% above last year, however, at a lower average selling price as a direct consequence of a more focused approach to growing our installed base as a way of investing in future reagent growth. Our five part instrument sales more than doubled in both the quarter and year to date, reflecting the continued high demand for five part technology in the market. And our consumable sales did come in 12% below last year, however, largely due to delayed payments, and we did close the quarter with a larger than usual backlog like we experienced in Q1.

OEM sales were in line with our expectations and Q2 was in level with last year’s sales due to timing of orders and unfavorable U. S. Dollar. However, we expect continued good development in the second half of the year. Our sales funnel continues to mature in line with our expectations.

And with that, I’ll hand it over to you, Hagrid, to take a closer look at financials.

Holger Hoglenberg, CFO, BOL Diagnostics: Thank you, Dorvan. Starting with a financial summary of the quarter, we had a negative organic sales growth of 3.3%, and our cost of sold goods increased despite the lower sales and diluted our gross margin to 38.7 percent, down from 43.6% last year. This was mainly driven by the sales mix with strong instrument sales and price pressure on instruments and somewhat weakening U. S. Dollars in the quarter.

Last year, we spent NOK80.9 million in operating expenses, whereof NOK8.5 million was related to restructuring activities and a lost tax case, and another SEK23.5 million was related to the R and D project BM950. If we compare that spend level to this quarter level of 43.1%, we reduced the spending of 47%. We also now see the full impact of the restructuring activities we have done in the last twelve months. In total, we have reduced the full time employees and consultants with a net of 59 FTEs. We know we have more to do when it comes to the cost structure.

But if we’re looking on the changes so far, it has been transformational for the running cost base and for our target to bring us back to positive operating cash flow. But despite these decreases of our spend, the lower gross profit impacted us negatively in the quarter and lowered our operating margin to 55,800,000.0 compared to 9,900,000 last year. Looking at the adjusted cost as a percentage of sales. Our cost of goods increased 4.4%. Selling expenses was down to 19.8% as a result of the structural changes we have done in both sales, marketing as well as in the service organization.

Administrative cost was down slightly due to a bit lower consulting cost and IT. R and D and QR decreased significantly, and this is due to the fact that we closed a development project, BM950, in the first quarter of twenty twenty five. And that cost was capitalized last year, as you see further below in the slide. And in percentage of sales, we decreased the spending a little bit more actually than we capitalized in the last year. Adjusted operating margin decreased to 4.5 compared to last year’s 7.2 related to the gross margin change.

Looking into the operating cash flow then. We had ambition to come back to positive operating cash flow in the second half of twenty twenty five, but we were able to achieve it already in this quarter. This is despite that we had SEK12 million in payments for restructuring closure of an R and D project in the quarter as well as payments for the restructuring that we have done in the last quarters. It remained about 4,000,000 in the balance sheet to be paid for restructurings in the second half of twenty twenty five. The improvements we see on the other side in the working capital is coming from inventory a little bit lower inventory levels as well as slightly improved collection on the receivables side.

And this is shifting us back to a more positive trend. And to us, it’s an important milestone in the transformation for us to bring Borg back to a cash generating company. If we take a look on the liquidity and credit situation, we ended the quarter with CHF23 million in cash and unused credit facilities of another CHF16 million. In total, liquidity was slightly up compared to the last quarter. With that, I’m handing back to you, Thaldur.

Torben Nielsen, CEO, BOL Diagnostics: Thanks, Holger. So in summary, we continue to make progress on our three strategic priorities. As Holger said, Q2 marked an important milestone in that we returned to positive operating cash flow. Over the past four quarters, we’ve taken significant steps towards reducing the structural cost, expanding the operating margins, and we’ve managed to reduce the operating expense spend with 47%. To fuel our organic growth, we’ve strengthened the executive leadership team with deep R and D subject matter expertise within reagent and block controls development and years of experience within project execution and lean implementation.

In addition, we focused more strategically on installed base growth as a way of investing in future reagent growth, resulting in a 17% instrument growth for the quarter. Finally, we’ve made important progress in our efforts to build a stronger and more growth oriented portfolio by successfully validating a new hematology instrument for veterinary care and commercialized our clinical chemistry distribution agreement in The U. S. That completes our formal presentation. Thank you for your attention, and we’ll now open it up for questions.

Holger Hoglenberg, CFO, BOL Diagnostics: If you would like to ask a question, please raise your hand in Teams. First question comes from Michael. Please, Michael, unmute yourself and ask your question.

Michael, Analyst: Yes. About the gross margin and the sales price for the third part instruments, is this a new normal? Or how should we see this lowered ASP?

Torben Nielsen, CEO, BOL Diagnostics: Yeah. Thanks, Michael. It is partly a new normal. We we have taken a more focused approach to building up our installed base. And consequently, we are having to be more aggressive on our pricing on the instruments.

However, in conjunction, we are also seeing in the market the prices deteriorating probably as a maybe temporary measure to overcome some of the geopolitical challenges in in the market. I think that what what we should expect going forward is that we will especially on the entry level five part instruments, which is our m 51. So I think that partly this is a new normal, and partly this is probably a temporary reaction to the geopolitical situation in the market.

Michael, Analyst: But you don’t see further deterioration in ASP going forward? I mean, it’s hard to quantify, but do you see a risk of further deterioration?

Torben Nielsen, CEO, BOL Diagnostics: At this point, I do not see a risk of further deterioration. I think that we are have stabilized on on a slightly lower level than we have had historically on the five cloud instruments. And I think also the impact is further amplified by the fact that we have significantly increased our unit sales. So I think that the the five part market price in the entry level segment, I think, is stabilized at the level we are seeing now. It may be that it will bounce bounce back slightly upwards as the market normalizes, hopefully, over the coming quarters.

But for now, I expect it to be rather stable.

Michael, Analyst: Okay. Thank you.

Holger Hoglenberg, CFO, BOL Diagnostics: Thank you, Michael. Currently have no more questions in line. So if there’s no more questions, we would like to thank everybody for participating and listening in to our call today. Thank you very much.

Torben Nielsen, CEO, BOL Diagnostics: Thank you.

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