Revenio Q4'24: Outlook has more dark clouds than expected

Translation: Original published in Finnish on 2/14/2025 at 7:30 am EET.

We revise our target price for Revenio to EUR 30.0 (was EUR 32.00) and reiterate our Accumulate recommendation. The outlook for 2025 was a notch weaker than we had forecast, putting pressure on our projections for the coming years. In addition, the company's FDA processes with AI options will be delayed until 2026, weakening the near-term drivers. In our view, the valuation is partly contradictory: if there is no strong (earnings) growth this year, the valuation is still too high. If, on the other hand, growth accelerated to the top of the guidance range, the situation would be different.

Growth rate missed expectations at the end of the year

Revenio's reported Q4 revenue increased to 30.5 MEUR (+5%), supported by FX effects, but decreased by 1% in constant currency. This was disappointing for us, although the company made progress given the large individual orders in the period. The quarter also showed a positive trend towards the end of the year and the company achieved record sales in December, indicating that demand is generally healthy. According to the company, recurring revenue (software, maintenance and sensors) was approximately one-third of the total, in line with our previous estimates. Q4 EBIT was 9.1 MEUR (Q4’23: 9.5 MEUR) and fell short of our estimate (9.8 MEUR), which was natural given the revenue miss. When the gross margin is above 70%, the effect on the bottom line is significant, but on the other hand, the lever is also big in the other direction. The company's fixed cost structure has also taken a level correction upward, with personnel costs in particular increasing significantly due to increased bonus accruals (almost zero bonuses in 2023) and hiring. On the positive side, Q4 saw a strong cash flow at 9.8 MEUR (Q4'23: 5.2 MEUR). In addition, the dividend proposal (EUR 0.40 per share) remained on an upward trajectory.

Growth rate for the current year still uncertain

Revenio guided its comparable revenue to grow 6-15% in 2025 and that profitability would be "at a good level" excluding one-time items. The extraordinarily wide range includes very different scenarios: at the bottom, there is bracing for a possible trade war and US import tariffs on Europe, while at the top, the market is performing strongly. Tariffs on medical devices are a clear risk, as the US accounts for about half of Revenio's revenue and there is no way to avoid all the negative effects. However, the company said it is targeting double-digit growth and believes this is realistic without any further negative factors. We have lowered our own growth forecasts a notch and now expect 11% growth in 2025 (was 13%). Growth drivers include the return of the Maia microperimeter to the product range (on sale in Q2'24), growth in ST500 and HOME2 tonometers, and growth in software (ILLUME and Thirona Retina AI). Even a slight decrease in revenue will have a strong impact on EBIT, which we now expect to grow to 30.4 MEUR (26.4% of revenue). The 3% decline in the top line was -10% in the bottom line, meaning that our earnings guidance fell sharply. In addition, the outlook for 2026 was weakened by the fact that the company's FDA filings for both its own Thirona AI and its partner's AI are delayed until 2026. However, the reason appears to be positive: With the Revenio camera, the AI detects problems too well compared to the "standard" one.

Valuation is reasonable

The attractiveness of Revenio's valuation is strongly linked to the growth rate of its revenue and consequently its profit. With double-digit growth, profitability is scaling and Revenio's valuation (2025e right EV/EBIT 23x) is rather attractive. However, without significant earnings growth, the rate is not sustainable, although the longer-term outlook remains strong. We believe the relative valuation is reasonable, the cash flow model supports our view, and the risk/reward is sufficient for the Accumulate recommendation.