ADDvise Group AB (publ)

Thank you. Good afternoon and once again, welcome to Advice Q1 2024 Earnings Call. I will take you through the presentation together with Oliver Hamlin, CFO of Advice Group. So, isolated the first quarter this year, 2024, was robust. However, comparing to the first quarter last year and some of the quarters during 2023, we saw pharma revenues coming in significantly softer than last year. What we also saw during the quarter was some strong tailwinds in the laboratory segment, especially in the in the product segment where we provide research facilities and the pharma industry with clean rooms and climate rooms. We still believe that we are on the trajectory as we have been on for the last couple of years and our view on our long-term financial target remain the same. So overall we saw strong sales in the quarter, up more than 30%, which is above our long-term financial targets, driven by acquired companies consolidated in the quarter, and as mentioned, tailwinds in the lab segment. On group level, we saw negative organic growth, mainly driven by the pharma segment performing softer than last year. However, some of that were offset by the stronger performance in the laboratory segment. On group level, our negative organic growth came in at 10%, minus 10%. Stripping out the pharma segment and the pharma revenues, our organic underlying growth came in just shy of 4%. And if you compare the size of the pharma segment in the first quarter this year with the first quarter last year, pharma stood for around 9% of group sales in the first quarter this year compared to 23% last year. We are at the moment broadening our drug portfolio and we are expecting a few new products to be launched in the second quarter this year on the US market. And I believe that in the back end of this year, that will offset some of the negative organic growth specifically in the pharma segment. We also saw the capital goods market in US coming in a bit soft in the quarter. And the same thing goes for that segment. We believe that the second half, we believe that we will see a pickup in the second half of 2024 when US interest rates are cut. And that will effectively unravel the market. Organic growth excluding pharma as mentioned coming in slightly below 4% and except from the laboratory equipment sales being strong in geographic terms of exposure we saw the Nordics coming in very strong. We also in the quarter worked hard to make sure to mitigate some of the FX exposure that we have had historically. And by issuing a US dollar dominated bond, we are now much more prepared for the fluctuations in the currency market, making the lumpiness much less in the upcoming quarters in terms of FX. And also, when it comes to our presence in U.S., we have established our advice group U.S. Headquarters in Fort Lauderdale. And we are now ready to accelerate our U.S. presence by having people on the ground from headquarters in our largest market. As mentioned the Nordics performed well in the quarter and we saw strong demand for climate and clean rooms in particular from from the Middle East and this is obviously a business where we carry slightly lower margins but as you can can see we had a very strong tailwind in the laboratory segment the organic growth in that segment exceeded our expectation but at the same time we saw margins in that segment coming down a bit based on the product mix. When clean rooms and climate rooms increase in size obviously that pushes back some of the very high margin revenues that comes from our clinical trial business and that kind of affects the margin in the laboratory segment. We did consolidate all of our acquired entities or newly acquired entities in the quarter and these four acquired entities performed very strong in line or above our expectations and as you can see on the the pie chart up in the right hand corner, you can see that we have today a more diversified geographical exposure. And that means basically that North America and more so US are now around 44% of our sales in the quarter. And we now have a very solid footprint in South America, which obviously is our largest acquisition up until today, Coolplast, which is part of the healthcare segment. We also strengthened our operations in US, as mentioned before. We now have three people on the ground in South Florida covering the organization and operations we have in US. And that means that we first of all, can be very close to the businesses we have in US, but at the same time, we can accelerate our M&A strategy on US soil. Looking at the product split, as you know, we split first group into lab and healthcare, but below that, we have six revenue streams that we monitor. And what you can see on this slide and the key takeaway here is the lower slice of pharma revenues standing for 9% in the first quarter this year compared to more than 20% the first quarter last year. If you look at the historical numbers, we are on path with our long-term trajectory. If you look at sales CAGR the last three years, we are at 60%. If you look at EBITDA CAGR the last three years, we are above 100%. And net sales in the quarter came in at 413 millions, which is obviously the strongest quarter ever in terms of sales. We have slightly changed the the split between own products and proprietary products. Own products today stand for 60% of our sales which is very good for us because we believe that the scalability in own products is better than distributed products. However, we want to continue and have a footprint into distribution because we believe that we can utilize the distribution companies that we own to launch products that we own into new markets. Organic growth, as mentioned, came in at minus 10% on group level. Stripping out pharma, we are just shy of 4% in terms of organic growth. Order intake is a little bit more lumpy. The outlier here is Q4 2022, when we received our largest order ever in the back end of Q4 2022. And that kind of skews the number a bit. Other than that, we have had resilient growth in order intake over the quarters. Looking isolated at the first quarter 2024, stripping out pharma, our organic growth came in just below zero and overall minus 20% heavily affected by lower order intake in the pharma segments. Taking a step into the two segments, healthcare came in at 245 million in sales in the quarter. And the organic negative growth in the quarter excluding pharma was minus 9%. Including pharma, it was around 20%. and the delta is between zero and minus nine percent is to a large extent capital goods sales in United States where we believe that we will see a pickup later this year. Gross margin slightly lower than before but at a healthy 60 percent and that is a level where we believe or slightly above that where we believe that we will see the upcoming quarters Overall growth in the quarter plus 10% driven by acquired entities consolidated in the quarter. And our EBITDA margin came in at 23%. And here you can also see the effect on our geographic exposure in the segment specifically. US was almost at 80% on the full year or in Q4 last year, and now we are down at 62%, giving us a more diversified geographic exposure specifically in the healthcare segment. Laboratory segment came in strong in the quarters. Sales came in at 168 million with an organic growth of 26%. And if you take into consideration all acquired entities, we were above 90% in terms of growth. The margin was a bit lower than last year. The main reason for that is obviously the product mix, where we had a large portion of the revenues in the laboratory segment coming from our project business. And the project business normally carries lower margins than most of all, or more compared to the clinical trial business. So EBDA margin came in at 26% in the segment. If you look at geographic exposure in the laboratory segment, we are now proud to say that we have a foothold in North America, US. And in the laboratory industry and the laboratory space, U.S. is as important as U.S. is for the healthcare space. So having a footprint in U.S. is obviously a platform for us to accelerate growth within the lab segment in the United States, which we believe we can do over the upcoming years. So I'm handing over to Oliver Hamlin to take you through the financial slides.

Thank you, Eker. And good afternoon all. Diving into the profitability in the quarter, EBITDA amounted to 99 million kronors, which corresponds to a margin of 24%. As Eker has touched upon, this is lower than what we have seen during 2023 and is driven by a change in product mix. where we are seeing a normalization of sales of pharmaceuticals in the US, which has brought down profitability within that segment. And at the same time, very high activity within our clean rooms business in the first quarter. As Eken has already touched upon, this is a business which has somewhat lower margins and also a longer cash conversion cycle. So high sales within this category affected both margins and working capital in the quarter. As we have said before, we are going to see margin fluctuations between quarters depending on the product mix, but our long-term EBITDA margin target of 28% remains unchanged. Worth highlighting is that the four acquisitions that we completed during the back end of the quarter are now fully reflected in the figures for the first quarter and are all performing in line with or even above our expectations as regards both growth and profitability. If we take a look at our key profitability metrics, we have seen a broad improvement year over year compared with the first quarter of 2023. EBITDA is up 18%, EBIT is up 15%, and net income is up 21%. And we are delivering our highest ever earnings per share at 22 per share. You will remember that during the Q4 call, we discussed a number of initiatives which we're taking to improve conversion from operating earnings down to the bottom line. And I'm pleased to see that these initiatives have started to yield results. Our effective tax rate in the quarter was around 21%, which compares with 37% in 2023. I don't think one necessarily should expect a 25% tax rate every quarter. but I would certainly say that we're heading in the right direction and we'll see a lower overall tax rate this year compared with what we saw during 2023. During the quarter, we also took action to optimize our capital structure and currency exposure. We issued our first dollar-denominated bond, as I touched upon. Two-thirds of the proceeds from that bond were used to repurchase our existing bond in Swedish kronor, and through this, we have significantly reduced our currency risk through a better matching of assets and liabilities. This also should reduce the magnitude of currency effect in our financials going forward. Moving on to cash flow and capital efficiency. On the left hand side, you'll have our cash flow bridge for the first quarter. As a reminder, when we talk about cash flow from operations, we look at the underlying cash flow generated by our businesses. And then we deduct changes in working capital as well as investments in our asset base, including leases as well as acquisition related items. We had a bit of a soft quarter in terms of cash flow, which was primarily due to working capital built mainly in the lab segment, which saw strong growth in the quarter. Cash flow from operations came in at 55 million kroner, which corresponds to cash conversion of 56%. What is positive to see is that we're now back to normalized levels of depreciation and lease expense, as the large lease-based customer contracts, which we worked through last year, have rolled off the books. Depreciation in the quarter was around half of the levels which we saw during Q3 and Q4 of last year, and the pillar called investments, which is both traditional capex, but also lease amortization, is 60 to 70% lower. This should provide for better transparency and visibility on cash flow going forward. On the right-hand side, you have our return on capital employed, which is a KPI which we're publishing for the first time this quarter. This was 17.5% for the rolling 12-month period. Moving on to the balance sheets, our financial position remains solid. We have a net leverage standing at 2.4 times EBITDA pro forma at the end of the quarter. which is in line with our target of being below three times net leverage. At the end of the quarter, we had some 460 million kroner in cash and undrawn credit facilities, meaning that we feel very comfortable from a liquidity perspective. As I mentioned, as part of our work to optimize our balance sheet, we issued a $60 million bond after the end of the quarter. The bond is therefore not reflected in the first quarter numbers. but it does not meaningfully affect net leverage because most of the proceeds were used to repurchase existing debt. Besides reducing our FX exposure, the new bond also improves our maturity profile by pushing around a third of our gross debt maturity out by almost one year, from May 2026 to April 2027. The new bond has a $200 million framework, which gives us the financial flexibility to continue to pursue acquisitions which align with our strategic and financial criteria. That was all from me. I'll now hand over to Richard for some closing remarks.

So key takeaways from the first quarter. Growth came in at 33%, which is above our long-term financial target. Organic part of that excluding pharma came in just shy of 4%. Overall organic growth minus 10%. Profitability, as mentioned before during the call, our profitability was affected by the product mix. A slowdown in the pharma segment coupled with tailwinds in the laboratory segment, especially in the clean room side of that space, pushed the profitability a bit down. However, we were able to reduce the gap between EBITDA and net profit, increasing the EPS to the highest level ever in the quarter. Cash flow tailwinds in the laboratory segment project business also means working capital build up. And that put a little bit pressure on the cash flow in the quarter. And the comparable numbers were a bit skewed because the first quarter last year was extreme in terms of cash flow. Financial position, we have a strong financial position, net leverage at 2.4 times, giving us flexibility in terms of our M&A strategy. And on the M&A side, we see numerous opportunities to execute on. However, we are a bit more careful in terms of what we acquire within the life science segment. We have or are, as mentioned in the Q4 call, we are much more disciplined in terms of just focusing on businesses in already existing sub-segments to drive density in group and by doing that being able to even more find synergies between acquired entities. So these are the key takeaways from the first quarter and I would like to open up the floor for Q&A.