OssDsign: Good start but sales commission still too high - ABG

- Solid start in Q1
- Higher sales commissions weigh down on EBIT in '25e-'26e
- Fair value revised down to SEK 8-15 (9-16)

First quarter without the Cranial business
OssDsign reported a solid set of numbers in Q1 with sales of SEK 27.0m (0% vs ABGSCe at SEK 27.0m) and EBIT of SEK -12m (+10% vs ABGSCe of SEK -13.3m). The beat (lower loss) on EBIT was due to a higher gross margin and higher other operating items, as core opex was in line with expectations. As of Q1'24, OssDsign is only selling its orthobiologics product, Catalyst, in one market, the US. Sales of SEK 27m in Q1 is equal to 207% growth y-o-y, adjusted for the discontinued business, and flat sequentially compared with Q4'23, However, adjusted for some extraordinary orders in Q4'23, amounting to SEK 4m, the sequential growth was 18%. We forecast a continued ramp up in sales over the coming quarters with sequential growth rates in the range of 11-17%, adding up to SEK 131m in sales for FY '24e, equal to 102.8% y-o-y.

Estimate changes
We have raised our '24e-EBIT forecast by 2% following the Q1 results, but revised down our EBIT for '25e-'26e (larger losses) by SEK 14.4m-18.3m, due to higher anticipated sales commission levels to OssDisgns distributors in the US. The previously communicated sales commission range of 30-40% seems to have been shifted up to 40-50%. In Q1'24e, Ossdsign reported SEK -13.2m in US sales commission, equal to 48.9% of sales, a level we could also expect to see going forward for FY '24 according to management. With higher volumes and a broader range of customers, we expect the sales commission level to gradually come down to 45% by '26e (revised up from 35%).

Revised fair value range to SEK 8-15 (9-16)
We lower our fair value range to SEK 8-15 (9-16) on our revised estimates following the Q1 results. We arrive at our fair value range using a DCF model with a terminal growth rate of 3% and a WACC of 10%.