Revenio Q1 on Thursday: Net sales growth on track

Translation: Original comment published in Finnish on 4/24/2023 at 6:06 am.

Health technology company Revenio will publish its Q1 report on Thursday at around 9.00 am. We expect the company's net sales to continue to grow at a brisk pace, with profitability expected to remain largely unchanged, so earnings will grow broadly in line with net sales. We don’t expect significant changes in the market situation, so the demand situation should remain good. In addition to the development of the core business, we are interested in comments on the development of the company's new growth initiatives (in particular HOME2 and ILLUME).

Net sales continue on a good growth path

We expect Revenio's Q1 net sales to increase by around 18% to EUR 23.8 million. We expect growth to be driven again in particular by imaging devices (in particular iCare DRS+ and EIDON Ultra-Widefield). In imaging devices, the company continues to gain strong market share with a highly competitive offering, through which we expect the growth rate to be many times that of the market. We also expect tonometers to grow well, but at a slower pace than imaging devices. For tonometers, we expect strong support to come in particular from rising probe sales in line with growth in usage and strong growth in the HOME product family, although the impact of this on the figures is still limited. Almost half of Revenio's net sales in US dollars come from the US, and we believe that the US dollar has continued to provide a small tailwind to Revenio's reported figures in Q1. However, at current EUR/USD levels, this tailwind should be calming down towards the end of 2023. In the big picture, developments in China, which has so far played a minor role for Revenio, are a clear focus of interest.

We do not expect profitability to improve

We estimate Revenio’s Q1 EBIT to be EUR 6.5 million (Q1’22: 5.6 MEUR) which would mean an EBIT margin of 27.3% (Q1’ 22: 27.5%). The company has high gross margins (over 70%), so an increase in net sales is usually directly reflected in improved profitability. Due to the still significant cost inflation and the company's own investments, we estimate that there is clear upward pressure on the company's fixed costs. As a combined effect, we forecast an EBIT margin at the level of the comparison period. The slight strengthening of the dollar year-on-year is also positively reflected in profitability to some extent, as around 60% of the increase in net sales resulting from exchange rate movements flows into the EBIT line. However, the impact is relatively moderate this year. In the US, the margin level is also higher than normal due to own direct sales (vs. distribution channels), which is why the share of sales here is also reflected in profitability. Our assessment is that US sales have continued to be strong, but after a very good end to the year, a mild downturn is possible. We understand that growth investments in Oculo and digitalization have continued as normal.

Strong development continues this year

We expect Revenio to reiterate its guidance of strong year-on-year growth in currency-adjusted net sales and good profitability excluding one-off items. We estimate that strong net sales growth means a level below 15% and a good level of profitability below 30% EBIT margin, but we think these levels are realistic again this year (last year ended with Revenio raising the guidance). Our current estimates expect reported net sales to grow by almost 15% and to amount to EUR 111 million, where we expect a small headwind from exchange rates (EUR/USD) towards the end of the year. We expect the reported EBIT to increase this year to EUR 32.8 million (2022: 29.7 MEUR), which would correspond to an EBIT margin of 29.4%. We expect cost inflation and rising R&D costs to put some pressure on profitability. In the big picture, our estimates show that Revenio's core business and products will continue to grow strongly this year. At the same time, Revenio is maturing its future growth drivers (HOME2, ILLUME and Oculo), with which the company aims to transform itself from a high-quality equipment manufacturer to a total solutions provider. New growth initiatives are critical for growth, as the company's core business growth will gradually start to slow down in the medium term. Thus, comments on these growth initiatives are again of interest in the report, although the impact on the result remains limited for now.