CellaVision AB

STO:CEVI

Earnings Call Transcript 2022-Q2

[Operator]

Good morning, afternoon or evening, and welcome to the CellaVision Q2 2022 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Simon Ostergaard. Please go ahead.

[Simon Østergaard, executive]

Thank you very much, and thank you, everybody, for dialing in for this conference call, where we present our results for the first half of 2022. I have Magnus Blixt, our CFO, with me, and we are pleased to have the dialogue and answer any questions you may have at the end of the presentation. But I will start by sharing our quarterly results here. So next slide, please.

The next slide really talks about the second quarter highlights. You can see -- it has not come up -- but I will start sharing.

Okay. Excellent. So here, we have the second quarter highlights. Essentially, the key message here is that we have had a successful second quarter, and in fact, our sales of SEK 184 million reached all-time high in the history of CellaVision. It presents a growth figure of 36% or organically 28% as we had tailwind from currency effect of 8%. That dribbled down to an EBITDA result of SEK 61 million, which is equivalent to an EBITDA margin of 33%. So a little bit lower than the comparable quarter last year. I will talk more about that in a few slides.

Essentially, we have progress on our updated strategic direction. We have -- the environment has changed, so now we have been able to intensify our commercialization activities, both related to marketing, but also working close with our distribution partners. We've had no limitations to elicit labs, essentially in Europe and America.

We have had face-to-face meeting with partners. And we've also really seen traction in expanding our R&D teams to execute on our strategic direction. We've enabled and initiated development programs. And we've been able to also work with laboratories on testing certain prototypes and getting sample retrieval. So essentially, the message is that there is really traction. We seem to get out of the woods from the more dormant period last year as a comparison.

We will, next week, introduce the complete workflow solutions for the low-volume hematology labs, which is exciting. And it's also exciting that the AACC show will be on in Chicago, which was not really -- which was hard for us to access last year. So essentially, really good market activities and good traction on the internal programs.

Amongst other news specific for the quarter, then there is no doubt that we are in the midst of a tough supply chain challenge. We're still working hard on mitigating the implications from the challenges. And we have, again, this quarter, thanks to the team, remained or have remained our capability structure to deliver. So we have no orders that were not handled as a consequence of the supply chain issues.

We see inflation is obviously going on for everyone, obviously. And we are working closely, both on the procurement side, but actually we are also investing in additional inventory to manage the supply situation there. And we're working with pricing activities with customers to manage the challenges that arises on top of inflation.

Other news. Last -- just actually a month ago, we had our first Capital Market Day and the materials are available on the ir.cellavision.com. And we were very pleased with it. And I really want to thank for the support and the interest that we've received, both during the event and after.

Going to the next slide. I just wanted to steal the moment for a minute. And before I do that, I'll have a sip. I just want to steal the moment and just share one slide on our Capital Market Day and some of the key messages.

Essentially, our power of focus strategy was outlined and elaborated upon. And here, we really communicated, again our 4 -- 5 pillars. But the 4 first pillars really relate to our game plan within hematology. So we are continuing to maximize our position in the large labs and tacking on the small, medium lab segment via our total workflow solution that we are launching, including the DC-1. And this is really where we -- our pillar 1 and 2, where we connect the labs, both network labs, but we also provide the entire connectivity solution, which is obviously also of benefit for stand-alone laboratories.

We have our reagent. We expanded upon our reagent business, where we accelerate our activities and aim for global leadership with geographic expansion, both via classic stains, but also our methanol-free stain, that we really think can be a game changer in this context.

And then finally, also on the hematology side, we announced the specialty analysis. We elaborated upon the opportunity here, where we are really dedicated to launch a separate instruments with new applications that really goes hand-in-hand and creates a new workflow that takes care of these more rare diseases, such as bone marrow and other blood-based diseases. So here, we see the opportunities of really trying to gather new stains, some new reagents, new applications with this particular instrument so we don't disrupt the large-scale workflow with many blood samples.

So essentially, it really goes hand-in-hand with our mission of providing workflow advantages and diagnostic certainty. And these 4 pillars, taken together, really offers an ecosystem to address all the clinical needs of the hematology labs, that being across large, small, medium labs, but also for stand-alone labs.

We also took the opportunity to elaborate on new areas and areas where we have previously announced our investments technology-wise, which is combined with our profound capabilities throughout the journey of CellaVision for the past more than 20 years. So we are really driving towards pursuing our vision of elevating healthcare through the evolution of microscopy. So here, we demonstrated the potential of our FPM technology that we carry the exclusive rights for and how we can retrieve high-resolution images very, very fast and rapidly to the benefit of the lab environment. So this is a potential also for hematology, but also going beyond and exploring new segments, new partnerships, which we will exploit throughout the strategic period.

With that, let's get into -- back to the financial development. I thought it was important to repeat our mission, because that is really what we do and that is what's behind the numbers obviously. But for the next slide, you will see our financial development. And as I said, we had a top line for the quarter of SEK 184 million, which was -- the organic growth was 28%. So again, 8% tailwind from FX as we trade most of our contracts in euro and in U.S. dollars.

We had a gross margin of 68%, a small dip. And we were -- as noticed, we were favorable in the FX. However, we had some onetime write-off of the inventory, equivalent to just short of SEK 2.5 million. And then we also had -- of course, we had increased costs by acquiring certain components at the spot market, so that kind of made -- that worked against us, so we saw a small dip on the gross margin unit.

Operating expenses-wise, we spent SEK 72 million in the quarter, which was SEK 17 million more than the comparable quarter last year. Essentially, they were spread across sales and marketing. We had about SEK 7 million invested more, which really signals the opportunity to activate the more market-related commercial activities. We had a little bit higher admin costs. And also R&D was up by SEK 5 million.

We landed the EBITDA at SEK 61 million. And that, as said in the beginning, that was a slightly shorter or lower, 33% EBITDA margin. So we maintained 35% for the year-to-date, but we dropped due -- primarily due to the drop in the gross margin that I talked about.

R&D expenses in total were SEK 32 million and we capitalized SEK 11 million of those.

And then on the cash flow side, we had an operating cash flow of SEK 40 million. And a year-to-date cash flow of almost -- we just doubled it, so it was SEK 78 million or is SEK 78 million year-to-date.

In terms of other cash flow activities we invested, capitalized R&D, as mentioned. We also invested in plant equipment in [indiscernible], where we have our reagent manufacturing. We paid out dividends, which was considerable amount of cash outflow. And we have the amortization of our loans. So essentially, our total cash flow amounted to a minus SEK 36 million. And we have a year-to-date total cash flow of minus SEK 21 million. So that's the situation.

Let's take a look at the regional highlight on the next slide, please. And here, the Americas actually came out very strong. Again, another strong quarter, 52% growth. We had sales of SEK 73 million. Of course, it's a somewhat easy compare as we were on the increasing journey recovery a year back. However, very, very good to see that we have normalized the market conditions across North America. And we really see traction on our DC-1.

We quadrupled our DC-1, of course up against a quarter in the beginning of 2021 where the instrument had just been launched. We got 510(k) in -- at the end of 2020. But good to see the traction, the confirmation of how DC-1 resonates with the lab systems to really build these ecosystems across the network structure.

We also believe that there -- in this quarter, we really saw a lot of orders for DC-1 for America. Could be a bit of stock -- or a bit of stock building, maybe security related to the supply situation in general. There seems to be line of sight for multiple opportunities out there. But again, there is probably also a bit of stock building there.

Trade shows, as I said, next week, we will be in Chicago at the AACC, American Association for Clinical Chemistry, which is really the biggest show across America. So it will be good to connect with partners and colleagues across the industry and across CellaVision.

In EMEA, we had a very strong quarter, 43% growth. Bear in mind, throughout '21, we had kind of sort of -- we were bouncing our revenues in the ballpark of between SEK 50 million, SEK 60 million. And here, we really demonstrated a growth of SEK 83 million, really carried out by large orders for the large instruments. So that was pleasant. We also saw some positive trends in terms of our -- especially our Remote Review.

And again, in Europe, you also see the lab structure where you have some network laboratories across countries but you certainly also see the stand-alone laboratories, and this is also where we have confirmation that the value proposition of the DC-1 with Remote Review targeted or tacked onto the entire offering of CellaVision is appreciated.

For APAC, we saw minus 6% growth throughout the quarter. And actually had a decent quarter, we would say, of SEK 28 million. We are up against a tough compare of SEK 30 million in the comparable quarter of 2021. So -- but since we had a relatively weak Q1, then our year-to-date growth rate for APAC is minus 15%.

We saw orders delivered to China, which was really good. We do see that there are still restrictions going on in China, partly in Japan. So that may hinder the -- both the market-related activities, but also the access to labs to actually do the installations.

Across APAC, there are more opportunities to move and the pandemic restriction seems to ease, especially in India and certain countries across -- or generally across the Southeast Asia.

All right. Going to the next slide, we've cut our revenue per instrument, reagent and software. And here, we see growth of instruments of 33%, so SEK 107 million when we kind of take all the instruments as a bulk. And here, again, the majority of the revenue is obviously carried by the large systems, but very, very pleased to see the traction of the small systems across Americas and EMEA.

Reagents was also a satisfactory quarter. We had 18% increase in total reagent sales, and we had 33% compared with Q2. That was somewhat lower compare in '21. And then we also had FX impact here. So 33% is very high, but it comes with exchange rate tailwind and it comes with a bit of an easy compare. But despite that, really good traction on our hematology product line. Really healthy double-digit growth.

Then again, the complete workflow solution that we can now sort of push more activity as opposed to the DC-1 as a stand-alone, it's really about positioning the entire workflow because it's about getting control of the pre-analytical steps, and this is where our launch of the RAL SmearBox and RAL StainBox, in conjunction with the DC-1 and our methanol-free reagents, will really cater for the small, medium lab segment, where you have a total solution to secure diagnostic certainty and standardize the workflow and provide cell classification at a very high level of quality. So we're really eager to position that story more actively, now that it's possible and also now that we are more comfortable around that entire workflow solution.

Software and others, SEK 53 million. So that was 50% growth. We really had, as said, again, everything ties together. Our Remote Review is really appreciated. And so is the Advanced RBC. So the fact that we can classify red blood cells into not just 6 categories, but actually 21 different cell types. So that's appreciated out there.

And then this bucket also entails our spare parts, consumables, such as oil. So it obviously also follows as we have traction on the instrument side. There's a linear, almost a linear call correlation there.

That actually brings me to the summary slide here. So taken together, we've been pleased with the quarter. As we've announced, sales are reaching all-time high. It is a business that is...

[Magnus Blixt, executive]

Next slide, please.

[Simon Østergaard, executive]

Next slide, please, Yes, it is a business where we are -- it's not just a consumable business, for those of you who may be new to the business. So quarterly -- we report quarterly. But we've seen really, really good traction with organic growth of 28%. So we're on to a healthy start of the year. Year-to-date, 21% growth.

We really are pleased to see the continued traction across America and also EMEA, being strong across multiple countries. And we're also pleased to see that business is continuing despite the COVID implications in certain Asian markets.

Good to be working much closer with our distribution partners, just as we're about to do also at the AACC show and other signals, as I've noticed. And then we are working very hard on actually securing our supply and investing more in inventory to be able to have a long-term delivery position in this somewhat volatile market and also working actively to manage the expectations, both in terms of how we can manage it, but also in terms of price increases that will come as we plan for, for the upcoming months and years.

So essentially, we're on our strategic targets, which was also presented at the Capital Market Day. We continue to have a long-term growth trajectory of 15% and meeting that target. We have our EBITDA of more than 30%. We managed to do this even though we did have a dip in this very quarter. But we're continuing our journey. And what you can see on the chart here is that halfway into the year, we're at SEK 346 million, with considerable contribution from instruments and software, but also our -- our reagent businesses is really following the plan as laid out.

With that, I would like to open for any questions you may have. You can take the next slide.

[Unknown Executive]

Appreciate it.

[Operator]

[Operator Instructions] The first question is from Ulrik Trattner from Carnegie.

[Ulrik Trattner, analyst]

Congratulations on a good quarter. I have a few questions, if I may. We can start off with the strong sales in EMEA and really a recovery from the last few quarters. Just wondering how much of sales is related to DC-1 in Q2 and how much is related to a recovery, so to speak, in the large lab segments.

[Simon Østergaard, executive]

Yes. Thanks, Ulrik. So for EMEA, we really saw the majority of the growth coming from the large instruments. And we are still -- we certainly saw traction also for the DC-1. But monetarily, it is the large instrument that carries the majority of the revenue here.

[Ulrik Trattner, analyst]

Great. And you also -- you mentioned that there could be stock building in the Americas on the DC-1. And given what you state with quadrupled sales, which is very impressive, just how much of that -- how certain are you that there is stock building? And could you give us information on sort of how much sales that could be that is sort of an inventory buildup?

[Simon Østergaard, executive]

What we've seen from the Americas, and that's where we are really pleased to see this quadruple, and it's not just in one quarter, kind of really what we see year-over-year, we can see gradually the DC-1s are really resonating with the American market. And -- but this quarter, we actually saw really, really high traction. And that's why we want to balance expectations also with ourselves and the community that maybe there is, in general, across the industry, it is really tricky with specific components.

And there could be -- part of the sales for this quarter could actually be really to balance and mitigate and secure that our partners can actually deliver DC-1s for the upcoming installations. That could be -- that could be the situation. So we're not -- we cannot see the stock level, but we speculate that, that could be the case.

But again, what we hear is there is line of sight for a good pipeline out there. So there's really traction for the actual product, which means that we don't believe that we will be sitting with an inventory buildup where they are just frozen in the stock, that's not the case. It's more to manage the delivery capabilities of our partners.

[Ulrik Trattner, analyst]

Okay. Great. And also you mentioned price discussions with customers. Could you shed some more light on that? What products are we talking about? And how much is these discussions sort of indicating in terms of price increases?

[Simon Østergaard, executive]

Yes. No, that's a totally fair question. And I'd say we obviously prefer to have this conversation directly with our partners first. This is -- what we do is that we obviously really track and monitor what -- how is the cost development? What direction? What parts are really challenging? What is the size of the increase due to inflation and due to scarce pools of specific components where we've had to source via the spot market?

So it's really a diligent analysis where we really try to be super tangible on what is the additional cost is. And then we will have that conversation both for our reagents, for our instruments and the entire offering that we have. There is generally an increase in our list prices on an annual basis, but this year calls for more than adjustments. So that's really a conversation we have with our partners.

[Ulrik Trattner, analyst]

And what has been the general price increase year-over-year?

[Simon Østergaard, executive]

Single digit, relatively low single digit.

[Ulrik Trattner, analyst]

Great. Next question would be on the -- what you call one-off effect on the gross margin side. And you mentioned that you had to buy certain components on the spot market. So my question would be -- as well as write-downs of inventory or write-downs -- write-down of inventories. So two questions there. Are you seeing still sort of problems sourcing components and that you still need to go out on the spot market to find certain components?

And secondly, on these write-downs, which products are these related to? As well as could you give us some estimation on how much, in terms of cost, these 2 items is sort of impacting results in Q2?

[Simon Østergaard, executive]

Sure. Maybe I'll invite Magnus into the conversation here. Magnus.

[Magnus Blixt, executive]

Yes. Thank you. So if we start with. Inventory write-downs that we did, the cost impact for Q2 was SEK 2.4 million that we kept there. And it's a part of a continuous job where we always keep our inventories current. And if we have anything that's on inventory that shouldn't be there, then that's a normal procedure for us to write it down. Normally, we don't have any write-downs, so that's why we mentioned it specifically this time.

And then second question was around the spot market and impact on gross margin from that. And yes, we had -- we've done some different measures to mitigate. We increase the safety stock levels whenever it's possible. And we also tried to -- we validate alternative sources for components. But we were -- we had to go out on the spot market and buy components at a higher price. And we see that, that's something that we probably will have to do also in Q3 and Q4 going forward because there's no line of sight of normal delivery patterns yet for all electronics. So we're going to have to do that.

The impact so far has been quite limited, actually, from that. We've had some inventory that we bought to normal pricing. But we're starting now to use some components that we bought at a higher price. So limited impact here, and we believe it will be manageable and not too much influencing also in Q3 and Q4, but still accelerating and impacting a little bit more in the second half of the year than in the first.

[Ulrik Trattner, analyst]

Okay. Great. Two more questions on my end, if you can bear with me. First one would be on the specialty analysis launch. And I'm guessing the first will be bone marrow. Could you talk about, first, the volumes of tests performed in bone marrow, perhaps setting it in the context of hematology analysis?

And secondly, when can you provide us with a bit more granularity in terms of when it's to be launched?

[Simon Østergaard, executive]

Yes. So Ulrik, good question. And we -- yes, we really appreciate you plug on the bone marrow. That has been really an important sample format. It really tells a lot about the diseases, especially for leukemia, but really the production of red and white blood cells. So it's a very, very important product for us.

We have been looking at it for quite some time. We believe that we will relatively soon have items where we can actually start work with labs. We've started to work with labs and prototypes, so that's really good news. We believe the launch could be up within 18 to 24 hours -- I wish, 24 months. But we will be more active throughout 2023. And then we will be really looking at and working with partners and external labs on how and when to launch it.

In terms of the sample size, we -- the estimate we have is that this is probably around 10% of the blood lab volume. It varies a lot, also dependent on the actual clinics. Of course, cancer clinics, they may be much more active in -- so -- but as a general assumption, we're looking at a 10% figure up against the peripheral blood volume. That's kind of the number of samples we anticipate will be out there.

[Ulrik Trattner, analyst]

Great. And then last question, and this is just regarding the cash flow. And you mentioned investments, sort of besides the acquired businesses and the dividend payments and purely looking here on the operational side, and you're talking about increased capitalized R&D. As well as on the investment side, you're talking about plant equipment. So just how much is sort of each of these components given that -- I note a 3% operational cash flow increase versus last year, I'm guessing it's related to inventory buildup. But could you shed some more light on that, please?

[Simon Østergaard, executive]

Yes. So in terms of -- Magnus, you can back me off here, but I believe that we invested -- most of it was actually in our manufacturing equipment for reagents where we expanded our capacity.

[Magnus Blixt, executive]

That's true, the majority of that, and that's around SEK 7 million that we invested in material assets this quarter, mostly related to manufacturing capacity and improvements in Bordeaux.

[Simon Østergaard, executive]

Exactly. And that came on top of the SEK 11 million that we capitalized. So the cash flow from investment activities was SEK 80 million, SEK 90 million.

[Operator]

The next question is from Felix Wienen from SFO.

[Felix Wienen, analyst]

Magnus, also from me, great quarter. Great to see conversations. A couple of questions, and I want to focus in a bit on the reagents side. And I really like -- I'm taking the volatility out, so looking at the first half, I can see 13% growth compared to last year which is great. I see a slight pickup in the Americas. So if you could shed some more detail on where that good result comes from. And in particular, is that the actual reagent? Or is it increased sales also from the slight smearers or sustainers or maybe even the same protocols? That's the first question.

[Simon Østergaard, executive]

That's a great question, Felix. It's actually -- primarily, it's the classic stains, so -- across Europe. That's -- so we really have traction in the core labs of hematology, if you like, who appreciates the RAL stains.

So that's -- and the -- I should say that the reagent numbers, when we show them also in the presentation here, they are cleaned off for the instruments. The instruments actually sits in the instrument bucket. I know -- we discovered that in terms of we had the comment around the RAL SmearBox and the RAL StainBox, and that kind of sits in the presentation on the reagents, but the actual revenue from those actual instruments sits in the instrument bucket.

So in general, really, really good reagent growth here. And we see that, that should continue because we -- it's really a recurring revenue piece. We are really curious also on the acceleration of the methanol-free. We think there is much more to be done both in Europe and, as mentioned previously, that's actually the lever where we believe also in Americas, that will be very, very important, to serve the community with more environmental friendly reagents such as the methanol-free. So we think we have a competitive advantage in terms of that.

[Felix Wienen, analyst]

Excellent. And then sticking with reagents there. I remember in the past and also after acquiring RAL, Zlatko Rihter talked about the potential to develop an own stain protocol. So I see that you've not been speaking about that for a bit now. So just a brief update on where we are on that and whether you're putting a lot of R&D efforts into that area at the moment or whether you're focusing on other parts of the business at the moment, like bone marrow, et cetera.

[Simon Østergaard, executive]

Sorry, Felix, was it own stain protocol? Or what was the...

[Felix Wienen, analyst]

Yes. Only the stain protocol, which I always understood would be the next phase of development of the reagents to make them -- to really lock the customer in on the CellaVision or the RAL reagent.

[Simon Østergaard, executive]

For all our new reagents under the specialty heading, such as bone marrow and some of the blood-based diseases that we will detect, those come with new reagents. We will -- so we are developing those reagents. Our solutions will only be validated for those particular reagents.

Now that does not mean that you cannot use other sorts of reagents. Our system will not be locked. We don't close the system. However, it will only be validated with those, which means that the laboratories, they will have a work -- tremendous workflow advantage just by picking up our reagents and running them off the shelf, so to speak. Because otherwise, they will have to validate themselves and they take the entire responsibility themselves. So in that context, we have our own protocol.

And then we also have protocol for our stains in terms of the methanol-free. So that will be very hard to -- it's covered by patents. That would be a tough one to compete against. And essentially, generally, our protocols that we present are optimized so then the lab can actually -- that's about the workflow advantage. So they can actually plug and play when they just follow our protocol and they use it in the right way.

This is what we are also demonstrating with our market support colleagues in the field, how should the lab actually utilize our reagents and implement our protocol. So our partners and our market support colleagues, they really work hard on conveying that message and making sure that the lab is working consistently according to our protocols.

[Felix Wienen, analyst]

Fantastic approach. I really like that. And then the last question on the reagent side and then I've got another one after that. But on reagents, I remember that in the past, there have been some worries in the market about the behavior of your large competitors, also your ability to place your reagents with your existing distributors and customers and also resulting in price competition from your very large competitors. So can you maybe shed again some more light on how you've experienced your -- all of these areas over the last year or 2 years and maybe that helps us alleviate these past concerns further.

[Simon Østergaard, executive]

Yes. In general, we truly believe that we don't take it for granted. We don't want to be complacent. But we truly believe that we have a competitive advantage by actually being able to combine the instruments, our software applications and the reagents, as I just -- an example was the specialty. So that is a very, very compelling position. And none of our other competitors are able to do so.

I think if we look at the industry as a whole, the one that -- the one thing that really stands out, especially for Europe, is the IVDR, so the in vitro diagnostic regulatory framework that has come into play at the end of May this year. This is something that the EU has worked upon for many years and they have announced, but that came into effect. We see that a number of smaller companies. They have -- it's more difficult to comply with the IVDR. We are fully IVDR compliant. And we see opportunities from actually -- from that extra requirements on how to sell reagents in places like Europe. And we see that our partners are also taking that as -- it's interesting that we are in compliance. So we think we can actually gain additional business from that perspective.

The stain itself, the RAL stains, obviously, we know it's -- as many people know, it's a franchise. It was a company we acquired in '19. It's been around for many years. So it's actually high, high-quality reagents. So I think there is a lot about marketing, it's a lot about telling why they are in demonstrating the quality of the stains. It's a conservative environment with the pathology. They really appreciate how cells are stained. And so we need to work hard on that transition.

And then I would also say the opportunities to actually implement reagents is really when new smearing devices are implemented or if there are burdens. One of the workflow advantage we offer is that running RAL stains pollutes the instruments a lot less. So we have a number of unique selling points that we need to convey and demonstrate. And then I'm pretty certain that we will see continued reagent growth in Europe, getting into Americas, but also expanding our classic stain launch across the countries in APAC.

But it's not going to be a hockey stick because that's not how it works with getting the regulatory approvals in place and evaluating the -- and then converting labs. But we have commitment from our partners and we really work hard on seeing that happen over the years.

[Felix Wienen, analyst]

Great. And then it can't be a conference call without me asking about the Pet and the Animal Hub space. So maybe you can share anything about that, order pipeline discussions with customers. Have you added new customers? Anything around that would be fantastic.

[Simon Østergaard, executive]

Yes, yes, that's wonderful. We see on the vet side, we've expanded our engagement with our largest customer network and really built a huge ecosystem. And in the vet -- and that has also justified the fact that we are actually expanding our product portfolio in that and upgrading our product portfolio to cater for those vet customers or networks who really share the vision that we have, where you can centralize the reading, but you can do decentralized slide making and scanning. So we are seeing growth across geographies within that particular network. And we are very open for business to expand in that larger model there. That's kind of our play.

[Operator]

[Operator Instructions] The next question is from Paul de Thierry from Arke Advisers.

[Paul de Thierry, analyst]

A general question, if I may. Could you briefly just mention whether there's been any changes in the competitive landscape in your 3 areas, EMEA, APAC and Americas, recently and -- say, over the last 6 months and whether you're seeing any emerging competing technologies, competitors coming out of the China region.

[Simon Østergaard, executive]

Yes. Essentially, there are smaller technology companies out there who would be aiming for hematology solutions, we believe. We think the largest change in the competitive environment has been the announcement of Mindray coming up with their own solution. That is something that we're monitoring closely. We haven't seen, let's say, much activities yet. In Europe and Americas, hardly anything. This is where we expect to see activities, in China.

And then we're monitoring the smaller technology players and -- and also there's -- what type of solutions, what specs may come out. That's actually one of the activities which will also be important for us to do some surveillance and intelligence on as we see the trade show AACC next week. So we will really take a close look at that as we always and as the industry does.

[Paul de Thierry, analyst]

Okay. And just for my benefit. I can see that Sysmex, what percentage of your business do they now represent?

[Simon Østergaard, executive]

Yes, typically, we don't carve out our revenues per partner in respect of our partners. But in general, the market share of the Sysmex in the hematology landscape sort of, kind of represents the share, at least the order, the size of the business we have with them. So it's a sizable business and we appreciate that profound partnership, where we also have the most sophisticated solutions across the entire industry as our flagship product is fully integrated with the cell counters of Sysmex.

[Paul de Thierry, analyst]

Okay. Fantastic. Is there anything else -- just I suppose the awful question that you get asked probably in a lot of sort of investor presentations, so what keeps you awake at night? I mean, are you having any issues in terms of employee retention or recruitment given the labor market tightness and any other issues that you kind of -- as I say, you -- that probably you're on a sort of daily basis.

[Simon Østergaard, executive]

Yes, that's a really good question. And also as we are on a growth journey, where we increased the number of headcounts. We've so far been pretty successful in actually hiring engineering talent, which has been good. We're almost on plan. We've combined it with the use of some consultants. But keeping me awake will probably be too much of a word in terms of talent acquisition. But what keeps me awake is the entire industry for the last 6 months has really been challenged on the supply side, as I talked about. So we've -- operationally, we've spent quite some calories on that, even though we managed to get through.

And then I think we shouldn't be complacent even though we are the one who offers the most proven and connected solution. Then, of course, we should be super alert on any competitive moves definitely, because it is unusual that you're in a situation with no competition, so we don't expect that will continue. But we do expect that we will have the most valuable and solution and offering. So we are really driving our strategy in terms of differentiation. That's our counterattack against keeping us awake at night due to competition.

[Paul de Thierry, analyst]

And yes, so you may have answered this in the previous question actually, but where do you expect the competition mainly to come from, regional and business sector?

[Simon Østergaard, executive]

Yes. I think there's so much happening in all types of industries where they utilize AI and ML. So I think competition will be most profound on companies with smaller systems. Not -- I don't expect on the reagent side. I see us having a pretty, pretty profound position also with entry barriers heightening due to the IVDR as I mentioned.

So I really see that it's more smaller technology and maybe venture-backed type of companies. But again, we -- we're here to really serve the clinical space and build this one-stop shop. And we think we can win long term by actually really clocking on the strategic pillars that I briefly talked about and that we elaborated upon at the Capital Market Day in June.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Simon Ostergaard for any closing remarks.

[Simon Østergaard, executive]

Yes. closing remarks is simply just by reiterating we're pleased to get halfway into 2022 with 28% organic growth. We -- it kind of confirms the value of our offerings and our partnerships. So we are very pleased with it.

We are getting ready for another half year. But with -- before coming there, I want to wish everyone on the call really a great summer. I think all, especially I should send my regards also to the CellaVision team, they've worked very hard. So I'm super excited for the next half year, and I want to wish everyone on the call a great summer. Thanks for listening in, and thanks for the very, very good questions.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.