Earnings call transcript: Devyser Q3 2025 sees revenue growth but misses forecast

Devyser Diagnostics AB reported a 20% revenue growth in Q3 2025, reaching SEK 56 million. Despite this growth, the company missed its revenue forecast of SEK 72.17 million, leading to a significant stock price decline of 17.26% in pre-market trading. The stock fell from SEK 124 to SEK 102.6, reflecting investor concerns over the revenue miss.

Key Takeaways

• Revenue grew by 20% in local currency, reaching SEK 56 million.
• Gross margin improved to 75%, up from the previous year.
• EBIT turned positive at SEK 1.3 million, a substantial improvement from last year’s negative EBIT.
• Stock price dropped by 17.26% following the earnings release.

Company Performance

Devyser’s Q3 performance demonstrated significant improvements in operational efficiency, with a positive EBIT of SEK 1.3 million compared to a loss of SEK 22 million in the same quarter last year. The company’s direct sales channel showed robust growth, particularly in the Americas, which recorded an 87% quarter-over-quarter increase. However, the revenue miss against the forecast overshadowed these achievements.

Financial Highlights

• Revenue: SEK 56 million, a 20% increase year-over-year.
• Gross Margin: 75%, improved from the previous year.
• EBIT: Positive SEK 1.3 million, compared to a loss of SEK 22 million last year.
• Cash Position: SEK 85 million.

Earnings vs. Forecast

Devyser’s Q3 revenue fell short of the forecasted SEK 72.17 million. The EPS forecast was 0.27, but actual EPS figures were not disclosed. The revenue miss is significant, given the company’s efforts to improve profitability and operational efficiency.

Market Reaction

The stock price reacted negatively to the earnings report, dropping by 17.26% in pre-market trading. This decline reflects investor disappointment with the revenue miss and concerns about the company’s ability to meet future guidance. The stock is closer to its 52-week low, indicating a challenging market environment.

Outlook & Guidance

Devyser aims for 30% growth over the longer term, focusing on profitability and continued product development in transplantation and hereditary diseases. The company expects stronger sales in the second half of the year compared to the first.

Executive Commentary

CEO Jan Wahlström stated, "We are turning around the company to profitability," highlighting efforts to improve financial performance. CCO Theis Kipling emphasized the company’s strong growth drivers, including transplantation, while CFO Sabina Berlin expressed confidence in the returns from new product investments.

Risks and Challenges

• Revenue miss may affect investor confidence and stock performance.
• Potential market saturation in key regions could limit growth.
• Macroeconomic pressures may impact sales and profitability.
• Regulatory challenges in expanding into new markets.
• Supply chain disruptions could affect product availability.

Q&A

Analysts inquired about distributor sales patterns, the MolDX reimbursement process, and gross margin fluctuations. The company also addressed cost reduction strategies, indicating ongoing efforts to enhance operational efficiency.

Full transcript - Devyser Diagnostics AB (DVYSR) Q3 2025:

Speaker 1: During the questions-and-answers session, participants are able to ask questions by dialing #KEY5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Jan Wahlström, CFO Sabina Berlin, and CCO Theis Kipling. Please go ahead.

Jan Wahlström, CEO, Devyser: Good day and welcome to the Devyser Q3 2025 earnings call. I’m Jan Wahlström. I’m the new CEO of Devyser since August 2025, and I would like to thank you everyone for joining our call today. On the call today, we have, in addition to myself, also our CFO Sabina Berlin and our CCO Theis Kipling. I will start with a short summary of our quarterly result and then recap our recent activities that have resulted in an improved efficiency overall for the organization. I will then give an update on the recent product launches and present some additional highlights from the quarter before handing over to Sabina for a more detailed review of our financial results in Q3, and then to Theis for an update on our recent commercial activities. As I said, my name is Jan Wahlström.

I have now been the CEO of Devyser for my first quarter. It is a privilege to have joined such a talented team of colleagues, a team that over the years has delivered fantastic products in a very important field, and doing so with stellar growth. I have a background from several similar companies. Where I have delivered strong growth, both on top line and even more so on profitability, by assuring a clear focus, continuous improvements in how we work, at the same time as staying top in class on our offering. I’m looking forward to this journey at Devyser. Looking into the third quarter highlights. This quarter shows that we’re turning the company around onto a path to profitability. We have another record quarter based on revenue with SEK 56 million in sales, representing a growth in local currency of 20%.

60% in Swedish crowns compared to Q3 last year. Gross margin came in at 75%, which is also better than last Q3. Q3 is normally the slowest quarter of the year, and we believe that 20% growth is a strong result. We’re most proud in the quarter that we got an EBIT that came in at positive SEK 1.3 million. Crowns compared to minus SEK 22 million last year. We currently have a cash position of SEK 85 million. If I then look at the year-to-date. Financials, the reorganization we initiated. In February. Has given us a strong structure that we have been able to capitalize on in second and third quarter, shown that we can—we have shown that we can keep the cost low, and we have delivered a much improved result in Q3 as a result of that. Year-to-date, we are at EBIT.

Minus SEK 8 million compared to minus SEK 59 million in the same period last year. So the development is really strong. Sales year-to-date is SEK 179 million, which is a growth of 17%. We are turning around the company to profitability. During the second half, we are focusing on delivering continued strong growth, supported by the launch of new products. We launched Genomic Blood Typing and HLA Loss just before the quarter started. Now we also launched the IVDR product for CFTR. We continue to generate strong product roadmaps for the next years that quantify the opportunities and meet the needs communicated by our customers. We have implemented several internal processes to improve our organization efficiency. This is something that I’ve done several times before in other companies, and I see that we have a good opportunity to improve our efficiency and profitability going forward.

The product launches we had were mainly done in Q2, as I mentioned, the Genomic Blood Typing and HLA Loss. In Q3, we had fewer news, which is normal in Q3 for us. Yesterday, as you might have seen, we launched CFTR IVDR that is part of our focus to move products from research use only and IVD to IVDR, something that Theis will talk more about later on in the call. This is putting us in a better competitive situation in most markets, especially in Europe. More feedback on other topics, I would like to highlight a couple of activities from the quarter. Work continues in the CLIA lab and on the ongoing MolDX evaluation for our post-transplant test in the U.S. MolDX provided feedback on our application at the end of October and requested additional supporting data that we’re reviewing currently.

At the same time, we continue to work on our FDA project in transplantation. Over the quarter, we have been able to register more labs that are participating in the ongoing study that we do. This marks an important step in the process for us, as we now have all the number of leads that we need. The number of labs, sorry, that we need for the study. With that, I would like to hand over to Sabina to share more details on our financial results for the third quarter. Sabina.

Sabina Berlin, CFO, Devyser: Thank you, Jan. I’ll continue with a summary here of the financials for Q3. Revenue for the period July to September came in at SEK 56.4 million compared to SEK 48.7 million in the same quarter of last year. This amounts, as Jan mentioned, to a quarter-over-quarter growth of close to 16%, equaling 19% in local currency. Over the past two years, we have seen an increased lumpiness between separate quarters with softer third quarters due to order patterns and impact from the summer months, with a stable underlying trend. Theis will later go through more about the market dynamics during the quarter. Also, going forward, there will always be fluctuation between individual quarters. With two very strong quarters and two softer quarters over the past 12 months, we still see a stable rolling 12 curve that continues in the same tangent as previous years.

The Americas continue to show a very strong growth, also in Q3, with 87% growth quarter-over-quarter, although still from small numbers, with the main growth coming from the CLIA lab and US kit sales. Our EMEA region tends to be slower in the months of July and August due to vacation order patterns, but did pick up in September as usual. Q3 saw direct sales showing the strongest growth out of our two sales channels, confirming a healthy growth trajectory. Distributor sales were very strong in Q2, with this major contribution from the transplantation agreement with Thermo Fisher Scientific. Q3 had strong distributor sales last year. These factors led to a softer quarter growth-wise on the distributor side this year, as no major orders from Thermo Fisher Scientific came in in Q3. We are expecting also these channels to pick up soon again.

Theis will cover more details also about the channel markets shortly. Gross margin came in at 75% during the quarter, better than last year, with a year-to-date of 81%, well above our financial target. Our EBIT for the quarter of SEK 1.3 million is positive for the second quarter in a row. Although actual positive amounts are still just above zero, it clearly shows the effect of the savings program implemented early this year and confirms our ability to move forward a long-term sustainable cash flow positive business. We closed the quarter with SEK 85 million in cash, and the cash flow for the quarter of minus SEK 15.2 million is mainly impacted by capitalized R&D work, as cash flow from operating activities was only minus SEK 0.5 million.

We strongly believe that our investments in new products will continue to pay off and support future growth in both the transplantation field and hereditary disease business. I feel confident that our performance will take us to cash flow positive within the foreseeable future. With that, I hand over to Theis.

Theis Kipling, CCO, Devyser: Thank you, Sabina and Jan, and good morning from Stockholm. I’m pleased to share several promising highlights from Q3, which was another strong quarter where we continue to deliver in our respective markets. Q3 was indeed a good quarter, considering the lower number of orders from Thermo Fisher, which was just as expected. The quarter was focused on launching our new products within Genomic Blood Typing, as well as HLA Loss. We attended one of the main events of the year within transplantation, which generated a lot of promising leads for HLA Loss, which is often used as a reflex test for chimerism, and hence good for the overall demand for our transplantation portfolio. We have now managed to triple the number of customer leads versus last year, which reflects our focus on where our return on marketing investments is paying off the most.

We expect this to continue to grow as we move ahead, being a function of becoming more known and trusted as a company and laboratory partner, combined with how we focus our efforts. This is an important underlying component of growth of new customers. Our growth in North America continues as we are consistently onboarding new customers that, once they move into clinical routine, will further accelerate the momentum. The growth here in Europe is also continuing as per plan. As Jan mentioned already, we have some very strong fundamentals in Devyser. We have a wide, strong, and workflow-efficient product portfolio. We have a strong regulatory capacity, and we’re leading in Europe when it comes to IVDR. This new regulation is a structural change to our market, which I’m proud of seeing that we have under such control.

We have multiple strong growth drivers, including transplantation, across the largest markets of the world, but spearheaded by the US with our CLIA lab and our FDA project. We are partnering with some of the largest and strongest companies within our field, including Thermo Fisher and Illumina. Moving to an update on our partnership with Thermo Fisher. Q3 was, as expected, a slower quarter due to the strong Q2 performance, which we expect to see again in Q4, as per the previous pattern. During the quarter, we attended one of the main events within transplantation with the ASHI conference in Orlando in the US, which went really, really well. We had a well-attended customer and KOL event with lots of interest and several demonstrations already scheduled as a follow-up.

Our transplantation business continues to shape our company and will remain a significant potential and strong growth driver for the company future. Looking into North America. We had a strong quarter. And actually 10x doubled revenues over the same period last year, excluding transplantation, driven by Cyted and the new accounts coming on board. While it’s still early days, we are seeing RHD in the US driving a lot of the growth already, which is only expected to accelerate once Quest Diagnostics gets this product ramped up within their business. The collaboration with Cyted is developing well and is expected to grow further during the coming years on the back of their successful capital raise during this past quarter. We have additional accounts coming live within the current quarter and early next year, which we are also very excited about.

Next up is getting Canadian Blood Services in Canada to start their clinical routine work with RHD alongside the University of North Carolina in the US with our test for cystic fibrosis. Moving on to Europe, I’m pleased to share that Italy had a very strong quarter with 19% growth. Italy had a softer quarter, as you may recall, in Q2, but truly bounced back during this quarter, completely as expected. The fundamentals in this important market are strong, and we continue to succeed in upselling to existing accounts while still bringing in new accounts. Our new one-stop-shop strategy is working well. As mentioned, we are onboarding quite many new accounts while successfully increasing the number of products sold to existing customers.

As it has been mentioned in some analyst reports recently, we are working on an interesting tender opportunity with KU Leuven, focused on CFTR NDS, which was the product that just got IVDR certified yesterday. This tender is still early on, hence we honestly don’t know if we will win it. It will be, if we win it, an incremental and sizable addition to our business within the Benelux market. Jan and I attended a Global Diagnostics Conference in London early October, where it again was clear that many companies, large and small, are struggling with meeting the increased bar in Europe when it comes to IVDR. This is something that we, as a company, are driving hard as a strategic program. We believe that this will be a solid growth driver for Devyser Diagnostics in many years to come.

To close the commercial update, I would like to reconfirm that we have a very strong and very healthy set of fundamentals across the business that continue to serve us well. I’m excited with the early momentum that we’re already seeing here in Q4.

Thank you, Theis. Thank you, Sabina. We have now delivered another quarter with positive EBIT, the second in a row, and a much improved result compared to last year’s Q3. We continue the path forward, our long-term goals, leveraging our investments in new products and collaborations with big companies in our industry, at the same time as we now have a clear theme towards continuous improvement, increased profitability. At the same time as we maintain strong top-line growth. We are on a clear path towards cash flow positive results and also towards our long-term goals. With that. I would like to open up to questions.

Speaker 1: If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Ulrik Trattner from DNB Carnegie. Please go ahead.

Ulrik Trattner, Analyst, DNB Carnegie: Thank you very much, and good morning. If we can start off with distributor sales. Down quite substantially year over year, despite last Q3 was not a massive quarter on your end. Are you still confident in your previous comments on growth in H2 being or sales in H2 being higher than in H1? How should we look at the ordering pattern from Thermo Fisher Scientific for the end of the year, as well as if you can provide some type of granularity, how much Quest Diagnostics contributed here in Q4? That would be my first question, please.

Theis Kipling, CCO, Devyser: You want me to start? Let me start with addressing the part of distributor sales overall being slow. I mean, as we have explained. The contribution of Thermo Fisher Scientific is very significant within the distributor channel. And they did deliver a very strong Q2. We saw a very strong Q4. As a consequence, Q3 is slower. We do expect that, as per the pattern, it will be bouncing back in Q4, because there is nothing that would tell us that any demand has changed. On the contrary, we reaffirm that this is a growing business. We have very close dialogue with Thermo Fisher Scientific, so we feel confident that that will continue. We also think and believe that H2 will be stronger than H1. That is just the nature of how the business is growing.

Great. On the Quest contribution for Q3?

Unfortunately, very much restricted in what I can share in that sense. When we look at the US-specific market, we do see that RHD is quite a substantial contributor to the growth that we are seeing, which was very significant in the quarter. Year to date, we are up around three times over the last year on a year-to-date basis. This is already in Q3 driven a lot by and accelerated by Quest Diagnostics, but I cannot go into more specifics.

Fair enough. On MolDX, you’ve talked about this before as a big inflection point, especially for your post-transplant monitoring product. Like you stated in the report, they requested additional data. If you can provide some more information on what that implies and in terms of what that implies in terms of timelines, is it still expected to be in place with reimbursement before year-end, or what should we expect?

We just received the feedback from them just recently, and we’re evaluating and looking into that. We need to come back on a more exact result on that evaluation, Ulrik.

Is it possible to give us some type of hint of what type of data they are requesting? Is it additional clinical data? Is it sort of health economic data? What type of data are they requesting?

It is additional clinical data that they’re requesting.

Okay. On direct sales, strong development in the quarter, and you talk about slow summer months. What is sort of the functionalities behind the growth? Is it sort of expanding product portfolio, or is it just that you’re getting more traction in the market? What to—I assume, given that you stated you have good traction in the market and good commercial progress, that one should assume that it should be growing sequentially into Q4 from slower summer months, as you stated.

Yeah, I can add. I mean, that’s really what we’re about as a company. We have two doors that we walk into selling our products. One is within the clinical genetic labs, and the other one is within transplantation. We are, as a company, very strong in continuously launching new products. That in itself will drive additional growth. Then, as we mentioned, within the existing portfolio that we already have, we are successfully bringing in quite substantially a number of new accounts. With all of the existing accounts, we are increasing the share of wallet. That is essentially driving a lot of the—that’s a fundamental growth driver underneath the company. You have these core enablers, as you referred to before, with the transplantation on top.

Great. Last question on my end. The Canadian Blood Services, which is now expected to go live early next year and Héma-Québec by the second half of next year, these are quite substantial tenders you’ve been awarded. Is it possible for you to quantify what this means? Given that these are screening programs, would this imply that you carry a lower gross margin on these products?

On the latter part, I can say clear no. There is no dilution on gross margins in any way. These are pretty already a few years old since we got them awarded initially. They have taken some time before they go live. With that said, I will refrain from going deeper into the volume and the potential top-line effects. These are incremental businesses. We expect to be able to cover the majority of the Canadian market with our RHD test. That will, however you look at it, be a very promising opportunity.

Just a quick follow-up, and then we’ll go back into the queue. Is this a sort of gradual step up that you were expecting, or is it sort of fully live from January 1 and then Quebec by Q3, or is it something that will be progressed sequentially throughout the year and will be fully effective on your end by 2027?

Yeah. I mean, as much as I would wish any account would go from zero to 100 in a week, unfortunately. Even despite my best wishes, it does not happen. It will be a gradual increase as they get this test fully implemented across the country. The same we are seeing as we look at Quest Diagnostics across the US. It takes time. It needs to reach out throughout the full commercial organization, address all customers. Before you see a true ramp-up and consistent demand, it just takes time. When we will see that full commercialization effect is going to be guesswork. I am going to refrain from commenting on that, but you should expect that there will be a ramp.

Great. Just the last question to Sabina or the rest of you as well. SEK 85 million in cash end of the quarter. Do you still—and I’ve asked this before—do you still feel comfortable with the current sort of cash level to run your operations as you wish here in the coming years?

Sabina Berlin, CFO, Devyser: Yes, we do. Short and concise and very true.

Great. Thanks, Jan, Theis, and Sabina. We’ll get back into the queue.

Theis Kipling, CCO, Devyser: Thank you, Ulrik.

Speaker 1: The next question comes from Philip Wybird from Pareto Securities. Please go ahead.

Hi, good morning. Firstly, just a follow-up on the prior questions around reimbursement here. I get that you cannot say too much right now, but when do you expect to be able to come back with some more information around the feedback and the new timeline? Is it the end of this year, or is it more towards next year?

Theis Kipling, CCO, Devyser: We expect to be able to come back with some feedback before the end of this year.

Okay, perfect. Thanks. And then just a question on the financials here. First, on the gross margins, down at 75% on quite high COGS. Could you elaborate a little bit what has impacted this? Was there anything special in the quarter?

What’s the question on why the gross margin was lower than before? Do you understand?

Yeah, yeah, exactly. The COGS were quite high, and even though sales was not as high as in Q2, for instance. Was there anything specifically that impacted this?

Yes. The way that we are set up when it comes to COGS, that we do have some fixed costs that goes into that. As the quarter is lower than, for example, Q2, that reflects badly on the gross margin. If you look at the gross margin and compare it to Q3 last year, you do see a definite improvement. For us, nothing changed in if you talk about the product mix or the pricing and margins that we have. This is normal in that sense.

Okay. Yeah, I’m just thinking last year was quite heavily impacted by the move to new premises also, which should be out of the system. So it seems quite extensive, the effect here in this quarter.

I think that the COGS was not affected last year of that. Okay, so it was affected somewhat in that sense. I would still say that the margin that we have now is what we would have expected in Q3 given the sales volume.

Okay, perfect. Thanks. And then another one on the Opex here. Is it only an effect of the cost-saving measures that you’ve done, or was there anything other that affected it this quarter? I’m just trying to understand on what to expect going forward. This is your new baseline, so to say.

I would say there was nothing specific in this quarter. It was actually very much driven by the cost-saving done in the spring and then the continuous work on making sure to keep the costs on a good level.

Okay, good. Last question from me here. The financial target reaching 30% growth, it looks quite tough this year. With the delay of the reimbursement in the CLIA lab now, how confident are you about reaching that during 2026? Do you feel it’s a bit too high, or what should we expect?

When we look at the different targets, if you take the growth target and looking over a longer period of time, I think that we are actually about 30% growth. We see that we are in line with that. When it comes to the gross margin, we are also above 80% on average. The third target that we have when it comes to profitability is something that we are moving towards, and we still have that as our target to reach.

Okay, but is there anything that changes around your expectations for the next year now with the delay in the reimbursement in the CLIA lab, or?

No, there are no changes to that.

Okay. Okay, good. That’s all from me. Thank you.

Speaker 1: The next question comes from Ludwig Lundgren from Nordea. Please go ahead.

Theis Kipling, CCO, Devyser: Yes, hi, and thank you for taking my questions. Starting off in the direct sales channel, I believe you have quite a significant share of tender-based sales here. I wonder if you should have quite good visibility into this part of the sales channel. I just wonder if you can give some flavor on the outlook for this towards the end of the year and into 2026.

No, we can’t do that. We don’t give any outlooks looking forward, Ludwig. Sorry about that.

All right. Fair enough. Then jumping to distributor sales instead. You highlight no major orders from Thermo Fisher in Q3, partly explaining this year-over-year decrease. Yeah, so basically, Thermo Fisher has been working down its inventory here in the quarter. Do you have any visibility on their current use of kits, and if this has increased, so to say, year-over-year? Thus, looking here into Q4, if you get an order from them, will it be a larger order than last year?

We cannot comment on the size of the orders from Thermo Fisher Scientific. We do not have visibility into the inventory of what they have. What we do know is that they have good traction on the products and that they are delivering well in the market. I do not know if you want to comment more, Theis.

No, exactly that. We know that they are successfully onboarding several new accounts, both across North America, but also in Europe and even in the international markets. It is a very healthy business. And maybe just a side comment to your previous question. Since we are very much a tender-driven business, a lot of our business is tied up in long-term contracts. That means that it’s super sticky, right? We have very, very, very limited, if any, losses in any way across customer. On the customer side of things. You can look at our previous performance and also Q3 and look at that as the reflection of how our base business is going. If you ask me, I think we are representing a very healthy underlying base business based on some very strong fundamentals. Okay, great. Thanks.

Just a follow-up on the Thermo deal or the Thermo order or Thermo order last year, more specifically. Just set some reasonable expectations for Q4. Was there any initial volumes that you got there that you probably won’t see this year, or was that only products that have been worked down since then?

As we said there, Ludwig, we do not have visibility into the inventory of Thermo. We cannot comment on the size of orders that we get from them going forward.

Okay, thank you. And then just the final one on costs. So diving a bit more specifically into the SG&A part, which is a significant part of cost in the P&L. So SEK 26 million selling expense, SEK 11 million admin. Partly affected by these cost savings. But I guess there’s also some seasonal component in here. Just as we head into Q4, is it fair to expect both of these to come up a bit, Q over Q, or should we extrapolate this level ahead?

Sabina Berlin, CFO, Devyser: I mean. As Jan said, we’re very careful about guiding going forward. Yes, any company running IFRS does have a seasonal component over summer as the vacation period has a positive impact on OpEx. The main difference, if you compare to previous years, is the effects of the savings program. There is a healthy run rate underlying the numbers to take forward into coming quarters as well.

Theis Kipling, CCO, Devyser: Okay, perfect. Thank you very much. I’ll jump back into the queue.

Speaker 1: The next question comes from Oscar Bergman from Redeye. Please go ahead.

Oscar Bergman, Analyst, Redeye: Hi guys. I got a few crumbles left on the questions side. Just wondering if we can start off by continuing on the questions regarding OpEx because you have made some really, really significant changes compared to Q1 this year. I’m just wondering what more can you do here in the organization to reduce costs? Should we see this as fully implemented by now?

Theis Kipling, CCO, Devyser: I believe there was a very good job done in the beginning of the year, Oscar. Having said that, I still believe that we can continue to work on these improvements, continue to make sure that we are more efficient in what we do, and work on improving all our comparable numbers in that area. It is not something that is done in a quarter, but it is something that is going to be done and worked on in the next year and two years.

Oscar Bergman, Analyst, Redeye: Okay. And then considering a more focus on the US market, how should we expect a US organizational build-up to sort of reflect opex going into 2026?

Theis Kipling, CCO, Devyser: Looking at the way that our business is set up in the US right now. We do not foresee a huge build-up in the US organization today. We work with different partners, as you know, in areas, and we will continue to do that. It is going to be business in the US the same way as we do with our commercial organization in Europe and in Asia. It is not different in any way.

Oscar Bergman, Analyst, Redeye: Okay. I remember that a few years ago, there was a lot more focus on converting distributor markets to direct sales markets. Just wondering if you can provide some commentary on that and if perhaps the direct sales in Q3 is sort of boosted by any type of distributor to direct sales conversion.

Theis Kipling, CCO, Devyser: I can take that one. Last part of the question, no. There’s no effects of making any changes to the way we approve the market. There have been no impacts in the quarter. It’s not really something we are currently working on as a growth driver for us. We are very focused on doubling down on the markets where we are direct currently. As I’ve mentioned before, we do see that it’s going really, really, really well. We will see here starting January that we in Spain are moving fully direct. We have completed the carve-out of customers from the distributor and will be managing and serving them from our own part, which is very, very exciting because that market, if you look at it, is even larger than Italy, represents very much the Italian market in many ways, equally much tender-focused.

Latin part of the population, meaning the underlying prevalence of diseases, resembles each other. I’m really hopeful that we can do a lot of good things. Just mentioning Spain, I’ve said the same for Benelux. You heard about the tender that we’re working on. I think you were the one who picked up on that one, Ludwig, initially as well. Nordics, there is a lot of good and underlying momentum that is building. Just on the OpEx side, SG&A focus, I think that’s with the arrival of Jan, that also marks a new chapter. If you look at what Jan has done in the prior companies, it’s obviously sustaining and building growth, but it’s doing it while driving a very disciplined organization that drives EBIT margin, incremental EBIT margin building. I think that’s why we’re excited about what we are about to see there.

In the commercial organization, we have quite scalability still. We’re not, as Jan said, expecting any build-up.

Oscar Bergman, Analyst, Redeye: All right. Thank you very much, Theis. A very interesting part of sort of converting distributor markets to direct markets is that it can cut off the distributor margin and you can increase your prices. Is this a fair assumption then that the selling prices in Spain should be increasing quite a lot in the short term, or how do you expect to do those changes?

Theis Kipling, CCO, Devyser: No, not an assumption. We will, while it’s now us managing those customers, there is the upselling opportunity. Having that direct customer relation will drive a lot of the incremental growth in that market. No, not any effects on end-user pricing.

Oscar Bergman, Analyst, Redeye: All right. Italy. You reported 19% sales growth. Just wondering if you can provide some commentary on how Italy has progressed in Q4 and if we should look at the high growth in Italy as sort of a one-off occurrence in Q3.

Theis Kipling, CCO, Devyser: Looking at Italy, they have historically been driving high single, modest double digit. Very consistently. That is what we expect that market will continue to do.

Oscar Bergman, Analyst, Redeye: Okay. I know we have talked about the COGS, but I think I have to go back to that. Maybe it will be a repeating answer on this. If you look at the gross margin for the past quarters, it’s been above 80%. With increasing direct sales, in this quarter, I was quite surprised that the EBIT margin was, compared to the previous quarters, quite a bit below. Can you just provide some more clarity on this? Were there any one-offs here or any changes from Opex to COGS and so on?

Theis Kipling, CCO, Devyser: Coming back to the answer I gave before, I can maybe give some more flavor to it. The way that our COGS is set up is that we have, of course, the major part is a movable cost that goes directly to the kit that we sell. We also have some fixed cost in the COGS part. That part is equally big every quarter. When we have a quarter like Q3 with lower sales than other quarters, that portion becomes bigger in that sense. That is why you see Q3 last year and Q3 this year being with lower margin than other quarters. Looking at the, without going into details of every kit, looking at the kit pricing and the COGS that we have in the product we sell, we do not see any deviation in Q3 compared to previous quarters.

Oscar Bergman, Analyst, Redeye: Okay. I’ve seen some examples before of new CEOs coming in and looking at the financial targets and making adjustments to them. It seems like, I mean, I think you stated in the CEO word in the report that it would require some extensive work to reach the financial targets. What’s your confidence level on delivering on these for next year?

Theis Kipling, CCO, Devyser: I think that there has been a lot of good work done already this year, in the beginning of the year with the reorganization. There has been some good work also in second and third quarter moving us in the right direction. I do believe we have strong growth. It is, to reach the 20% EBIT is a tough target, and I write that in the CEO letter. That is our target, and that’s what we’re moving to reach for next year.

Oscar Bergman, Analyst, Redeye: Okay. All right. Thanks. Just a final question on the cash position. I suspect Sabina will be very concise in this answer as well. I mean, you burn around, I think, free cash flow was around SEK 18 million negative. If we suppose that you burn this amount consistently, the cash will last roughly five quarters. Do you have any comments on investments, particularly going forward? Is there anything here that is expected to go down?

Theis Kipling, CCO, Devyser: Looking at the investments, as you know, I can start there. Sabina, I can fill in that we did a lot of investments when moving to our new building with all the different systems that we had and so on. After that, our main investment that we’re doing is into our R&D. And that one is clearly stated in the report. Apart from that, we’re not looking at any specific investments going forward. We are looking at continuing growing the company, continuing to improve our profitability, and hence continuously improving towards a positive cash flow. Sabina?

Sabina Berlin, CFO, Devyser: Yes. I can add also there that guarding the cash position is one of my most important tasks as CFO. I do feel comfortable with the trajectories that I’m building. You have seen a change in both cash flow and in the numbers that we present over the past years. We do see a comfortable path forward that will not continue to drop at the same speed that we have right now, making us feel very comfortable with what we will be able to, how we will be structuring our cash.

Oscar Bergman, Analyst, Redeye: Okay. All right. Thank you very much. I look forward to talking to you again after the Q4 report.

Sabina Berlin, CFO, Devyser: Thank you.

Theis Kipling, CCO, Devyser: Thank you.

Speaker 1: The next question comes from Ulrik Trattner from DNB Carnegie. Please go ahead.

Ludwig Lundgren, Analyst, Nordea: Thank you very much. A few additional questions on my end. In Q2, you talked about customer growth in volume in the mid-teens up until sort of Q2. Where are we at in terms of that progress for Q3?

Theis Kipling, CCO, Devyser: We are continuing that line. We continue to grow the number of customers. As I mentioned, stemming from changes made this year on how we generate leads, that has created a lot more efficiency in bringing in new customers. That is what we are seeing across markets, including in Italy, actually.

Ludwig Lundgren, Analyst, Nordea: This might be more addressed to Jan or our overall strategic. You have quite an extensive portfolio of tests. Registration is very expensive, especially since the majority of your tests are either IVDR classified or implies to be IVDR classified. Is there any strategic decision here going forward to double down on certain focus areas to cut down cost or anything related to that?

Theis Kipling, CCO, Devyser: I think that what we’re doing is to double down on the transplant products and on the hereditary side. Not so much on the oncology side. That’s what we’ve communicated before, and that still is what we do. We are looking at every single now project on what to move to IVDR. We do see that as a competitive advantage to move in that direction. It is a priority for us. We do that, of course, with making sure that we don’t add too much cost, and we don’t do it on products where we don’t see the volume. At the same time as we’re doing this, we are looking at discontinued products that we don’t see that they add that volume and where the cost to move to IVDR would be too high.

Ludwig Lundgren, Analyst, Nordea: Okay. Great. On capitalized R&D, or net capitalized R&D, it is still fairly high. We have seen a few products here being approved recently, the Genomic Blood Typing and HLA Loss. Are we to expect continued high capitalized R&D? If high, what type of products are you then planning to move to market here within the next 6-12 months?

Theis Kipling, CCO, Devyser: We will continue to invest in our product pipeline and continue to do that in the two areas I talked about, hereditary diseases and transplant products. Exactly what products is something that we cannot comment here, but we will continue in that direction. We will continue to invest in our R&D pipeline going forward.

Maybe just a side comment.

Oscar Bergman, Analyst, Redeye: Okay. Thanks.

Theis Kipling, CCO, Devyser: Ulrik, check our capital markets day presentation because there we gave actually quite some visibility to the underlying pipeline development and advancements we are working on, which is also part of some of those expenses that you’re seeing being capitalized. From my point of view, very excited about getting some of those innovations out.

Ludwig Lundgren, Analyst, Nordea: Okay. Great. Thank you very much. That was all questions on my end. Thank you.

Speaker 1: As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time. I hand the conference back to the speakers for any closing comments.

Theis Kipling, CCO, Devyser: Again, thank you everyone for joining our call today. We certainly feel very good momentum and energy in the company today with many exciting opportunities ahead of us. Thank you all for listening.

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