Earnings call transcript: Boule Diagnostics Q3 2025 sees stock surge 12.24%

Boule Diagnostics AB reported its third-quarter 2025 earnings, revealing a mixed financial performance that led to a 12.24% surge in its stock price. The company’s sales decreased by 2.4% to SEK 127.2 million, yet it managed to achieve a 1.7% organic growth. The earnings call highlighted important strategic shifts and operational efficiencies that are reshaping the company’s future. According to InvestingPro analysis, the company currently shows a "FAIR" overall financial health score of 2.27 out of 5, with particularly strong metrics in relative value and profit potential.

Key Takeaways

• Stock price increased by 12.24% following the earnings announcement.
• Sales decreased by 2.4% year-over-year, but organic growth was positive at 1.7%.
• Operating expenses were reduced by 30%, contributing to positive cash flow.
• New strategic partnerships and product innovations are expected to drive future growth.

Company Performance

Boule Diagnostics experienced a slight decline in sales for Q3 2025, with revenue reaching SEK 127.2 million, down 2.4% from the previous year. However, the company reported a positive organic growth rate of 1.7%, indicating resilience in its core operations. The reduction in operating expenses by 30% and staff by 63 full-time equivalents have bolstered the company’s financial health, resulting in a positive operating cash flow of SEK 1 million. InvestingPro data shows the company maintains a healthy current ratio of 1.02 and an Altman Z-Score of 3.04, suggesting financial stability despite recent challenges.

Financial Highlights

• Revenue: SEK 127.2 million, down 2.4% year-over-year
• Gross Profit: SEK 52.4 million, down from SEK 61 million
• Gross Margin: 41.2%, decreased from 46.8%
• Adjusted EBIT: SEK 12 million
• Operating Cash Flow: SEK 1 million
• Available Liquidity: SEK 37 million

Market Reaction

The market reacted positively to Boule Diagnostics’ earnings call, with the stock price rising 12.24% to SEK 5.5 from the previous close of SEK 4.9. This surge positions the stock closer to its 52-week high of SEK 10.6, signaling strong investor confidence despite mixed financial results. InvestingPro analysis indicates the stock is currently undervalued, with two key ProTips highlighting that the stock is in oversold territory and net income is expected to grow this year. The company’s strategic initiatives and cost-cutting measures appear to have reassured investors about its future prospects. Subscribers to InvestingPro can access 5 additional ProTips and comprehensive valuation metrics for deeper analysis.

Outlook & Guidance

Boule Diagnostics is focused on transforming into a higher-growth, higher-margin company. The company plans to launch a new veterinary instrument in 2026 and generic blood control products in 2027. Additionally, it is implementing selective price increases to offset currency headwinds, with an emphasis on expanding its technology partner portfolio.

Executive Commentary

CEO Torben Nielsen remarked, "We’ve returned to organic growth in a market that continues to face structural challenges," highlighting the company’s resilience amid industry pressures. CFO Holger Lembrér added, "We are working on compensating the weaker U.S. dollars by implementing selective price increases," reflecting the company’s proactive approach to managing currency fluctuations.

Risks and Challenges

• Currency fluctuations, particularly the weaker U.S. dollar, pose a challenge to revenue.
• The decrease in gross margin to 41.2% indicates potential pricing or cost pressures.
• The closure of the BM-900 development project may impact future product offerings.
• The ongoing site consolidation in Spånga, Stockholm, could disrupt operations temporarily.
• Market growth in the decentralized hematology sector remains low, affecting expansion efforts.

Boule Diagnostics’ strategic focus on innovation and operational efficiency, coupled with its robust distribution network, positions it well for future growth. However, the company must navigate macroeconomic challenges and market dynamics to maintain its upward trajectory. For detailed insights into Boule Diagnostics’ financial health and growth prospects, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro, which provides in-depth analysis of key metrics, peer comparisons, and expert insights.

Full transcript - Boule Diagnostics AB (BOUL) Q3 2025:

Holger Lembrér, CFO, Boule Diagnostics AB: Good morning, everybody, and welcome to the third quarter’s earnings call for Boule Diagnostics AB. I’m Holger Lembrér, CFO for Boule Diagnostics AB, and with me, I have our CEO, Torben Nielsen. After the presentation, we will open up for questions. Please also feel free to ask questions in the chat field. With that, I’m handing over to our CEO, Torben Nielsen.

Torben Nielsen, CEO, Boule Diagnostics AB: Thank you, Holger. In the third quarter, we’ve returned to organic growth in a market that continues to face structural challenges. Although we still suffer from currency headwinds, we’re starting to see early signs of stabilization, with slightly more balanced pricing of instruments and improved demand in our key markets as government tender processes resume. Our instrument sales were strong as we continue our focus on strengthening our install base. Reagent sales continue to suffer from unfavorable effects and delayed payments. We expect to see sales stabilizing as distributor inventories deplete. OEM sales were flat when adjusting for currency, and we maintain a positive outlook for the year. Despite high instrument sales, margin improved from last quarter, and we delivered positive operating cash flow for the second consecutive quarter. Finally, this month, we signed the technology partner supply agreement for a new veterinary instrument, which will launch in 2026.

Taking a closer look at the Q3 financials for the group, in summary, we reported Q3 sales of SEK 127.2 million, down 2.4%, and with a 4.1% unfavorable currency impact, leading to a positive organic growth of 1.7%. Gross profit landed at SEK 52.4 million, down from SEK 61 million, primarily due to lower instrument pricing and the impact of the weakened U.S. dollars. Gross margin declined to 41.2% from 46.8%, however, it showed a 2.4-point margin improvement over Q2. We reached SEK 12 million in adjusted EBIT and achieved positive operating cash flow of SEK 1 million. Available liquidity end of the quarter was SEK 37 million. To clarify our strategic direction and increase transparency, we will begin to report and steer our operations in two business segments going forward: Boule Diagnostics and CDS OEM.

This change will help clarify the drivers for each business area, increase strategic focus, and at the same time, make it easier for investors to follow the progress towards our long-term goals. In conjunction with the new business segment focus, you’ll notice that we are implementing a new brand identity with updated logos and a new and more contemporary look and feel. The two business segments are defined as follows. Boule Diagnostics, a global provider of high-quality diagnostic solutions for the decentralized human and veterinary market, specialized in hematology. Clinical Diagnostic Solutions, or CDS OEM, a contract development and manufacturing organization specialized in OEM reagents, calibrators, and blood controls. Our strategic priorities remain the same: to transform Boule into a higher-growth and higher-margin company, expanding the operating margins, accelerate organic growth, and building a stronger growth-oriented portfolio.

In our diagnostics business, our immediate focus has been on improving overall profitability while investing in better sales coverage and implementing a technology partner portfolio strategy. We have made significant improvements, reducing operating spend by 30% year-on-year, expanding our sales team, and brought in new technology partner products. We will continue this focus. In our OEM business, our focus has been on expanding our project funnel and defining a new blood controls portfolio strategy. Now, we focus on implementation and operational execution of our R&D pipeline and project funnel. Now, let’s take a closer look at each of the segments, starting with the diagnostics business. Boule Diagnostics seeks to leverage the following strengths: the legacy and brand recognition of Boule as a pioneer within hematology, known for reliable and high-quality solutions, the global reach and extensive distribution network.

Boule Diagnostics operates in over 100 countries through more than 200 distributors, supported by local sales and support teams. Finally, our suite of instruments, primarily within hematology, for both human and veterinary segments, supported by a complete range of reagents, calibrators, and blood controls. The decentral hematology market is attractive, and the business model is robust. We operate exclusively indirect, which allows us to have global presence and good market coverage. It is a razor-blade model, growing the install base to drive consumable sales with approximately 60% recurrent revenue. Today, we have more than 30,000 instruments in the field, the majority of them being RFID-protected and locked to our reagents. The market is generally split into human and veterinary hematology, three and five-part technology. The human market being the largest of the two, growing low single digits and dominated by five-part technology.

Here, we have a stronghold in the three-part segment, and we’re growing into the five-part market. The veterinary market is smaller but growing high single digits. This market is less regulated and easier to enter with new technology. Boule Diagnostics AB operates in more than 100 countries and has built up a vast network of distributors. Sales are set up in nine strategic geographical locations, allowing us to stay close to our partners and customers. We operate three manufacturing sites: in Sweden, in the United States, and in Russia, as well as one licensed manufacturing partner in India. Our revenue is fairly distributed, with Europe being our strongest region. The instrument portfolio consists of both proprietary three-part technology as well as instruments we have sourced through technology partners. Currently, we offer hematology and clinical chemistry solutions for both human and veterinary decentral markets.

Earlier this year, we made a strategic decision to focus exclusively on new portfolio adds through technology partners. The rationale for this decision is that it gives us access to the latest technology faster at significantly lower cost. In Q2, we added clinical chemistry in the U.S. market through our partnership with Vital Scientific, and this month, we completed a new technology partner supply agreement for a new addition to our veterinary portfolio, which will launch in 2026. In Q3, our diagnostics business realized organic growth of 1.8%, despite currency headwinds and delayed payments. Instrument sales were strong, growing 16%, supported by high sales of our five-part instrument. An adjusted operating margin was impacted by currency and mix, but improved from last year due to efficiency and cost reduction initiatives. Now, let’s take a look at our OEM business.

Our OEM business is founded in Clinical Diagnostic Solutions based out of our plantation site in Florida, U.S. The business segment focuses on contract development and manufacturing, specialized in OEM reagents, calibrators, and blood control. At CDS, we are unique in our ability to do custom design of reagents, controls, and calibrators for impedance, optical, fluorescence, imaging-based detection technologies, specifically for hematology, flow cytometry, chemistry, and coagulation systems. We offer flexible and scalable manufacturing services from small to large batches, serving both startups and large global IVD companies. We have deep subject matter expertise in the development and manufacturing of universal blood controls with extended in-use stability and shelf life. The OEM market offers significant opportunities for stable and profitable growth going forward. We’re convinced that with our ongoing investments and special expertise in these product areas, that we can become a reliable partner for more diagnostic companies worldwide.

In Q3, we finalized our new OEM strategy aimed at expanding our pipeline of reagent projects and developing a generic portfolio of high-quality, differentiated blood controls. The OEM business is characterized by long-term contracts that have delivered steady, sequential growth. Over the past five years, our business has grown 137%. The OEM market is vast. We break the market into two areas: OEM reagents and hematology blood controls. Both markets offer significant growth opportunities. Within the OEM reagent market, it is our assessment that we have capabilities that enable us to play in a sizable segment of the market. Focus here is on project funnel growth through new customer acquisition and maturing the projects that we have in the pipeline. In the hematology blood controls market, we’re now developing a portfolio of generic blood controls to take share in this attractive niche segment.

We will launch new generic blood control products in 2027. OEM sales volume was stable in Q3, with an organic sales growth of 0%, with a negative currency impact of 10% in the quarter due to translation of lower U.S. dollars. Gross margin was stable for the quarter at 47.4%. Operating margin declined due to increased operating expenses, with SEK 4 million R&D investments in new OEM products, blood controls, and reagents, as well as investments in our sales organization and customer projects. With that, I’ll hand it over to you, Holger, to go through the group financials.

Holger Lembrér, CFO, Boule Diagnostics AB: Thank you, Torben. Starting with the financial summary of the quarter, we returned to organic sales growth of 1.7%. Cost of sold goods increased despite lower sales and diluted our gross margin to 41.2%. This was driven mainly by currency headwind from the stronger Swedish krona and the weaker U.S. dollars. To some extent, also, sales mix and more instrument sales was impacting the margin. Given that about 75% of our sales is in U.S. dollars, the lower U.S. dollar will unfortunately continue to be some headwind to our business and gross margin. Operating expenses decreased significantly compared to last year, with 30%. We see a significant impact from the restructuring work we did in last year, and in total, we have reduced our full-time employees and consultants with 63 FTEs.

This is, of course, also a result of a closure of our development project BM-900 in the beginning of this year. We know we have more cost reductions to work on, and one example is a current ongoing site consolidation in Spånga, Stockholm, Sweden. If we’re excluding recapitalization last year, we increased EBIT to SEK 12 million, and now we are not capitalizing any R&D. If you’re comparing to the capitalized R&D last year, EBIT decreased slightly, mainly as a result of a lower gross profit and gross margin. Operating cash flow was positive for the quarter. Cost of goods sales increased with 5.6%, with headwind from currency as the main driver. Selling expenses compared to last year decreased to 19.9%. This is a result of structural changes in sales marketing as well as the service organization in the last year.

Administration cost was slightly up, mainly as a result of inflation and to some extent in investments in IT systems. R&D and QNR decreased significantly as a result of the closure of BM-950 in the first quarter 2025. Last year, we reported wild cost restructuring, and if we adjust comparable year for year, excluding capitalization, the operating margin improved from 1.7% to 9.4%. Adjusted operating margin, including capitalization, was still down, mainly as a result of a lower gross margin. If you’re looking into going forward, we are working on compensating the weaker U.S. dollars by implementing selective price increases. We have done some, and we’re planning to do more going forward. Looking at operating cash flow, our trend is positive, and we had ambition to get back to positive in 2025. We had some headwind from collection in the quarter, but it’s taking longer time than usual.

We don’t see any significant risk, and we partly collected some of the due invoices already. In the quarter, we had about SEK 1 million in payments for restructuring related to what was done in the last 12 months. Inventory was decreasing in the quarter, but we have more work to do when it comes to optimizing our inventory going forward. It was partly impacted by the buildup of inventory for the Vital Scientific business in the U.S., where we need to have a base level of consumable inventories. Moving over to liquidity and credit, we ended the quarter with a cash position of SEK 21 million and an unused facility of SEK 16 million. In total, liquidity decreased slightly from last quarter. With that, I’m leaving it back to you, Torben.

Torben Nielsen, CEO, Boule Diagnostics AB: Thank you, Holger. To summarize, our three strategic priorities are clear, and we are making progress. Gross margin improved 2.5 points quarter over quarter. We have realized 30% operating spend reduction year over year. We’ve delivered positive operating cash flow for the second quarter running. We’re back to organic growth in the quarter. We delivered 16% instrument sales growth year over year. We’ve signed a supply agreement for a new veterinary instrument that we plan to launch in 2026, and we have a new CDS OEM generic blood controls product planned for 2027. With that, I thank you for your attention, and now we’ll open up for questions.

Holger Lembrér, CFO, Boule Diagnostics AB: Please feel free to raise your hand if you have any questions. It looks like we currently have no questions on the line. We will give another few seconds for the opportunity to ask questions in the chat field or by raising the hand. It seems like we have no questions on the line, with that, I’m handing over to you, Torben.

Torben Nielsen, CEO, Boule Diagnostics AB: Yes. Thank you for your attention. This concludes our Q3 earnings call. I wish you all a very nice day.

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