ADDvise Group AB (publ)

Thank you, and once again, welcome to Advice Group Q3 2024 earnings call. We will take you through the business update and the group's financial performance, and then we will open up for a Q&A session. Q3 was a stable quarter. Our net sales came in at 404 a.m. X which take us to a year-on-year growth of 26 perhaps however we continue to see challenging and far my clinical trials comparables following last year's stellar performance this effect will remain but on the lower level during q4 no effect from q1 next year and onwards. That took us to a negative organic growth, isolated in the quarter of minus 25%. EBITDA came in at 88 million SEK, which take us to 22% EBITDA margin. To give you some color on the underlying business, and if we strip out pharma and the clinical trials, we saw an organic growth of 6% for the first nine months. We had a stable water intake in the quarter, up 17 year on year. The quarter saw one of the biggest orders in the Nordics ever, but otherwise no big outliers. EBITDA came in at 74 million SEC versus 71, a small increase of 4%, mainly due to normalized depreciation level in clinical trials. Looking at the cash flow from operation, it came at 32 million SEK, mainly affected by growth-related CapEx investments in production capacity and growth in our clinical trial business. Cash on hand is approximately 400 million SEK, and on the M&A side, we cautiously monitor the net leverage and have that in mind looking at new opportunities. Coming into the commercial and operational highlights of Q3, We saw some improvements in business momentum, but from a moderate level during the quarter. Our just recently acquired businesses are performing according to, or slightly above plan, and the lion part of them will start to affect organic growth in Q4. But we will still have some effects from the exceptional performance for the pharma business during Q4 2024. In terms of geography, 45% of our sales in the quarter isolated came from North America, and our second largest market in Europe excluded Sweden, and the third one is South America. Looking at our sales by product category, the top three years to date are medical consumables. followed by lab and then medical equipment. As you can see on this pie chart, pharma is now stabilizing around 7% of our sales year to date. And compare that to last year on the peak levels in pharma, pharma were about 20 to 25% of sales. We see clearly signs of improvement when it comes to demand for capital goods in the U.S. during the quarter. Our sales have been growing over the last four years. As you can see now, we are about 1.5 billion in sales. And if you look at the quarter isolated, we came in at 404 million SEC, an organic drop of minus 90% due to the things I just mentioned. We measure our revenues also in own products, products that we develop and manufacture, and products that we distribute. Q3 year-to-date own products came in at 56% of our sales, and that is a level we are satisfied with going forward. Order intake, the quarter recorded a healthy growth of 17% new orders received, came in at 442 million SEK for the quarter, As I said earlier, no single big contributor. However, the Nordics was strong, and we see an improving momentum in the U.S. Looking at the two segments, healthcare came out strong, but please bear in mind that love segment is more tilted toward project-related orders. Hence, bigger ones resulting in higher volatility between quarters. All in all, we have a solid order backlog to convert into sales in the coming quarters. Splitting the group into healthcare and lab and looking at healthcare, our sales came in at 249 million SEK in the quarter. an organic drop of 22%. The lab segment reported sales of 154 million sex for the quarter. Organic sales came in at minus 44, heavily affected by the one-off type revenue in the European clinical trial last year. Margin-wise, healthcare came in at 60% EDTA margin, and lab came in at 25% in the quarter. Looking at net sales by geography for the healthcare segment, North America is the key market and will continue to be that for a long time. Having said that, South America is a very fast-growing market compared to the other markets that are slightly more mature, and our operation in that region is clearly performing according to plan. The lab segment is very well diversified when it comes to sales by geography. The largest market is now Europe excluding Sweden. I'm now handing over to Johan Irved to take you through the group's financial performance.

Thank you, Staffan, and good afternoon all. I am pleased to be here today and take you through the numbers for the third quarter of 2024. EBITDA in the quarter amounted to 88 million SEK, which corresponds to a margin of 22%. This is lower than the same period last year and is primarily driven by a change in product mix. As Staffan just pointed out, we meet challenging comparable figures from the product segments pharmaceuticals and equipment to clinical trials, which has brought down profitability compared with last year. On a rolling 12-month basis, we are running at EBITDA of 416 million SEK, which equals a margin of 26%. Worth mentioning here is that the four acquisitions, which we completed during the back end of last year, are all performing in line with or above our expectations and are all contributing to group profitability. Looking at our profitability metrics, in the quarter we have seen operating profits on similar levels as in the third quarter of 2023. EBITDA is down 6%, while EBITDA is up 4%. The improved EBITDA in Q3 this year is explained by normalized depreciation levels in 2024. Last year, depreciation expenses were mainly driven by the high activity in our rental business for equipment to clinical trials. Net income is down from 35 million to 12 million SEK, driven by higher interest expenses on loans as well as high currency gains in the comparable quarter of 2023. Moving on to cash flow and capital efficiency. First here, as a reminder, when we talk about cash flow from operations, we look at the underlying cash flow generated by our businesses with deductions from changes in working capital, as well as investments in our asset base, including leases and acquisition related items. In the third quarter, we see lower working capital build compared to the first half of the year. Investments include 8 million in payments related to leases and 23 million in new fixed asset investments. These fixed asset investments are mainly related to the rental business areas and production capacity increases, both of which are growth driven. Return on capital employed, which is a KPI we have started to publish this year, was 13% for the rolling 12-month period. We have not communicated a target for this metric, but expect that we will level out around or above current levels of the high 20% plus return figures in 2023. Moving on to the balance sheets. Our financial position remains solid. Our net leverage stands at 3.3 times EBITDA pro forma. This is above our long-term target of being below three times EBITDA. The dollar bond issues earlier this year reduces our FX exposure and improves our maturity profile by pushing pushing about a third of our gross debt out by almost a year to April, 2027. The SEC bond matures in May of 2026. At the end of the quarter, we have more than 400 million SEC in cash and cash equivalents, plus on drawn credit facilities. So from a liquidity perspective, we feel very comfortable. This was all from me. I will now hand over to Staffan again for some closing remarks.

Thank you, Johan. So just summarize before we open up for questions. Sales growth 26% in total. Healthy order intake of 16%. 17%. Profitability on a healthy level. Cash flow affected from investment in growth. And with cash on hand, liquidity is strong. And we monitor the net debt level when we look at new opportunities. And we're talking about M&A. I mean, there's no stress. It has to be right. High quality coupled with a reasonable price tag, I would say. With that said, we open up for questions.

The next question comes from Philip Ekengren from ABG Sundal Collier. Please go ahead.

Thank you, operator, and afternoon, Staffan and Johan. To start, I would like some color on the healthcare segment. So both generic pharma and capital goods obviously negatively impacted sales and margins here in the quarter. But can you say anything about what you've seen during the start of Q4? Anything that might have an effect on the quarter?

I would say I mean the Q3 what we saw during Q3 I would say remains into Q4 I would say I mean it's good activity level I would say so nothing nothing big change okay and on on the you highlight in the report that you've seen some some positive well indicators on the us market for capital goods is that will that have an effect on on sales or or is that more towards next year hopefully it will have an effect during the rest of the year it's clearly more to you that the activity is picking up perfect thanks

And in lab, you seem to make investments into clinical trials equipment, yet it's faced some soft demand for several quarters now. Should we view this as a positive indicator of future growth, or how should we think about that?

Definitely, I guess it's a mixed picture here, looking at clinical trials US, where we have very healthy growth, and We have growth adjusted for the outlier year of last year in Europe, but it's clearly U.S. as a driver in clinical trials for organic.

Sure, sounds good. And then maybe perhaps my final question, at least for now. You've talked or previously last quarter we talked about a organic growth return at the end of Q4, maybe not on the quarter per se, but in the last month of Q4 at least. Is that still possible or reasonable, what we should call it? And maybe also on that question, would you like to remind us what happened last Q4, just so we know what type of comparables we're facing now?

As we have communicated earlier, I mean, the effects will fade out during Q4, but it still will be remaining Q4. So, I mean, we have a clean sheet when we go into next year. But of course, and also we have some effects on companies bought or consolidated during Q4, which means that they will also turn into organic calculations during the quarter.

Perfect. Sounds good. That was all for me. Thanks.

Thank you. The next question comes from Christian Binder from Red Eye. Please go ahead.

Hi, and thanks so much for taking my questions. First one is a follow-up on CapEx during the quarter. Should we expect that level to persist during the coming quarters, or was it more of a one-time investment, so to speak?

I mean, clearly, when it comes to CapEx, Production related growth, I would say that is, I mean, of course there could be quarters where we invest, but looking at the investment as such, we don't see that for now, but hopefully we will see that. But when it comes to the clinical trials business, it's clearly that they, that, We will continue to invest, hopefully, if we see the growth in that area.

Great, got it. And when it comes to cash conversion, can you elaborate a little bit on what has led to the soft cash conversion in recent quarters and any potential measures that you've taken to improve cash conversion going forward?

Thank you for the question. When it comes to cash conversion, the way we measure it, the investments we just talked about affect the cash conversion. And from the way I see it, those are kind of growth-driven investments. So it's a positive sign. In the quarter, we saw a working capital increase but on a much smaller basis compared to the first six months of the year. And working capital is something we work constantly on to optimize and be on top of.

And clearly, I mean, this is not any news at all, but we're working very hard on a daily basis, I mean, both on the growth level and on the company level in order to maximize cash flow.

Great. So just one last follow-up there. So should we, in the near term, expect any improvements in terms of networking capital efficiency, or should we expect it to remain at the current levels?

I mean, I would say you should expect to be at the same level or better. This is something we're working constantly to improve.

All right, perfect. That was all from my side. Thank you so much.

Thank you. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Okay, thank you for taking part of the earnings call and have a nice continued day and looking forward to speak next quarter. Thank you.