Revenio Q4 on Thursday: Strong quarter behind

Translation: Original comment published in Finnish on 2/12/2024 at 6:43 am EET.

Revenio will announce its Q4 results on Thursday around 9:00 am EET. There has been a clear profit warning threat hanging over Revenio, but since the company has not issued one, Q4 has gone well. We expect the company's reported revenue to decline slightly from a very strong comparison period, but in comparable currencies we expect modest growth. We expect earnings to be down slightly from last year, but profitability remains very good in a seasonally strong period. Of particular interest in the report is the outlook for the current year, which should provide a concrete expression of the performance improvement we expect in the current year. The company has previously estimated that the weaker market situation will normalize in H2'24, which is also the basis for our forecasts in the big picture.

The end of the year has been strong given the market situation

Revenio has guided that the current year's exchange rate adjusted revenue will increase by 1-5% year-on-year. In the first 9 months of the year, the company's revenue growth at constant exchange rates was 1.3%, so meeting the guidance means that Q4 growth was also positive by this measure. Q3 revenue growth at constant exchange rates was -6.6% and Q4'22 was a very tough comparison period, so Q4 has again been very good. We expect reported revenue to decline by just under 2% in Q4 to 27.8 MEUR, which is probably around the lower end of the guidance range. About half of Revenio's revenue comes from the United States, through which the weakening dollar will continue to create a headwind. In addition to this and the challenging market situation, the Maia perimeter, which was still selling well in the comparison period and is now at zero sales ahead of the launch of the new version, is a particular headwind. We expect other imaging devices (notably iCare DRS+ and EIDON Ultra-Widefield) to continue to grow moderately well. In tonometers, we expect a small decline in revenue, although we expect probe sales to offset the decline.

Earnings growth still moving in the wrong direction

We estimate Revenio’s Q4 EBIT to be 8.5 MEUR (Q4’22: 9.3 MEUR) which would mean an EBIT margin of 30.6% (Q4’ 22: 33.0%). In other words, we expect the result to continue to decline, driven by shrinking revenue and margins under slight pressure. Revenio has high gross margins (over 70%), which means that the fall in revenue is also directly reflected in profitability. There is also a slight upward pressure on the company's fixed costs due to cost inflation and the company's own investments, which the company has also countered with tighter cost discipline. There were already promising signs of this in Q3. However, growth investments in digitalization (such as ILLUME and Oculo) have continued as normal. We expect EPS to have improved to EUR 0.24 (Q4'22: EUR 0.22) from the comparison period, when it was burdened by exceptionally high taxes.

For the full year, Revenio has guided to a good level of profitability excluding non-recurring items. Our 2023 EBIT margin forecast is 26.6%, which we believe is in line with the company's guidance. We expect Revenio’s board to propose a dividend of EUR 0.38 per share (2022: EUR 0.36). We believe the company wants to maintain its growing dividend despite the weaker performance, and the very strong balance sheet provides all the prerequisites for this.

Waiting for the outlook to confirm our earnings growth expectations

The report naturally focuses on the outlook and guidance for the current year. The company's guidance is usually in writing, and the growth range issued after the 2023 profit warning was an exception, at least compared to recent years. Our current forecasts expect Revenio's revenue to grow by 6% this year to 101 MEUR and EBIT to increase to 28.6 MEUR. Consensus forecasts are slightly higher (103.3 MEUR and 29.4 MEUR respectively), so the guidance should indicate growth in revenue and profitability at the traditional "good level" excluding one-off items. We believe that the expected slight improvement in profitability is within this range.

We expect Revenio's revenue growth to remain sluggish this year. In Q1, we still expect a clear decline in revenue, but we expect growth to accelerate clearly towards the end of the year. Key factors here are market weakness and a strong comparison period, especially in Q1. The company has signaled an easing of the market situation in H2'24, apparently driven by macroeconomic assumptions. Growth in late 2024 should also be supported by the launch of the renewed Maia product, although the exact timing is still unclear. These assumptions should be supported by the company’s outlook. In the big picture, however, we know that 2024 will still be a partial gap year due to a weak start to the year. This is reflected in the company's financial growth targets for the capital markets from 2025 onwards. But Revenio still needs to move forward from 2023 by all measures.