Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BioGaia AB (BGLAF, Financial) reported a 22% increase in sales for Q2, driven by strong growth in Asia-Pacific and the Americas.
- The company's EBIT grew by 42%, with an EBIT margin of 35%, indicating improved profitability.
- BioGaia AB (BGLAF) successfully launched direct business operations in Australia and New Zealand, expanding its market presence.
- The company won an arbitration with its former Italian distributor and signed a long-term contract with Recordati, enhancing its distribution network in Italy, Spain, and Portugal.
- BioGaia AB (BGLAF) is making strategic investments in marketing, sales, and R&D to drive future growth, including a global advertising campaign and new product development.
Negative Points
- Adult sales decreased by 6% in Q2, primarily due to lower sales of Protectis tablets in South Africa, Belgium, and Japan.
- Operating expenses increased by 13%, driven by higher sales and marketing costs and investments in subsidiaries.
- The gross margin for adult health products decreased from 67% to 61%, mainly due to a mix effect with lower-margin products.
- The company is projecting additional costs of SEK75 million to SEK85 million in the second half of the year, which may impact short-term profitability.
- BioGaia AB (BGLAF) does not provide specific guidance on future sales growth, creating uncertainty about the immediate impact of its investments.
Q & A Highlights
Highlights from BioGaia AB (BGLAF) Q2 2024 Earnings Call
Q: Can you elaborate on the nature of the SEK75 million to SEK85 million OpEx expansion and how it will be split between internal and external costs?
A: Theresa Agnew, CEO: The costs will be a mix of internal and external. Internal costs include setting up infrastructure and logistics for new markets like Australia and New Zealand. External costs will involve marketing and sales efforts, particularly in the US and Canada. We are also investing in clinical studies and new product development.
Q: What is the expected timeframe to see returns on these investments?
A: Theresa Agnew, CEO: We will monitor the investments quarterly and over the longer term. Some investments, like R&D and sales forces, are long-term, while marketing efforts may show quicker results. We have seen positive outcomes from increased marketing in the US, such as record sales on Amazon.
Q: Can you provide more details on the inventory build-up in China and Brazil?
A: Theresa Agnew, CEO: In China, inventory was built up for significant events in Q3, including congresses and e-commerce events, and to launch new packaging. In Brazil, inventory was prepared for events and the launch of our Protectis easy dropper.
Q: Given the strong 11% year-to-date growth, what are your expectations for the full year?
A: Theresa Agnew, CEO: While we don't provide specific guidance, we aim to continue our growth trajectory. Some investments will yield returns over the next year, and we hope to grow above market rates.
Q: Will operating costs be lower in 2025 compared to 2024, or will they continue to increase?
A: Theresa Agnew, CEO: We will evaluate investments on an ongoing basis and share more in the future. Our long-term target remains a 44% EBIT margin, but we are committed to making strategic investments to ensure healthy business growth.
Q: How will the new strain BGL47 translate into clinical benefits, particularly for colic?
A: Theresa Agnew, CEO: BGL47 is a new patented bifidobacteria strain. We are studying its synergistic effects with our reuteri strain for overall gut health. While bifidobacteria is not as effective for colic, we are exploring its benefits for gut balance and health.
Q: Could BioGaia have continued healthy growth without these additional investments?
A: Theresa Agnew, CEO: Yes, BioGaia would continue to grow, but these investments aim to accelerate growth and increase brand penetration and awareness. Initiatives like a global advertising campaign will help build brand recognition and drive future growth.
Q: Is the new packaging design in China a global initiative?
A: Theresa Agnew, CEO: Yes, we aim to roll out the new packaging globally over the next couple of years, with each market adopting it at different times based on regulatory requirements.
Q: How do you plan to monitor the success of these investments?
A: Theresa Agnew, CEO: We will use KPIs to track the effectiveness of our investments in driving brand penetration and sales growth. We have seen positive results from similar smaller-scale investments and are confident in our strategy.
Q: What impact did quarterly order variations have on Q2 results?
A: Theresa Agnew, CEO: The 22% growth in Q2 was positively affected by order variations, particularly in China and Brazil, as they prepared for upcoming events.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
