AddLife AB (publ)

Hello everyone and welcome to the AdLife second quarter presentation. Thank you for spending some time with us here in the middle of the summer. We will take you through a presentation talking about how the performance is looking in the different parts of the business as well as some of the numbers and after the presentation we will open up for questions. So we will start now with a description of the development in the market, and then Kristina, our CFO, will share some of the numbers with you. We will dive right into the numbers, and we are happy to share with you the fact that AdLife continued to grow in a very, very strong way during the second quarter. So the strong development is true in all parts of the business, and we achieved a 14% revenue growth. The organic growth currency adjusted was 9% in Labtech and 8% in Medtech. Increased activity in the elective surgery sector continues. We see that the healthcare systems all over Europe are continuously very active. However, a significant backlog does remain mainly because of the staffing shortage that we see across the board. So this means that there is still a lot of patients to take care of before the backlog is handled. And that means for us, the outlook for a continued strong growth in this area. On the commercial activity side, that has certainly picked up. Our salespeople are again out visiting customers, doing demos and also participating in a lot of commercial activities such as trade conferences and so on. So that's a good sign, but of course also adds a little bit to the cost. We are very happy to see that we have been adding a lot of new supply agreements, a lot of new products being added to the portfolio with great potential for the future. We are seeing an increased EBITDA. We are defending the margins in spite of the price increases we have seen previously from suppliers. That situation is improving. We're seeing fewer price increases from suppliers in the recent months, and we have been able to pass on most of these price increases to our customers, even though not in all cases, because indeed many of a large part of our business is long-term contracts in which in some cases we cannot always change the prices on short notice. All in all, Adlife is quite well positioned for the current market position as we see it and as evidenced by the strong growth and also for the future market development as we expect it to evolve. Taking a look at a little bit more details on net sales and EBITDA, we can see, again, the growth was 14%. And of course, COVID is no longer a sales item for us. And that is a small reduction if you compare to the corresponding quarter in last year. Organic growth, a significant driver at 8%. And then, of course, we had a positive currency effect as well in the quarter. On the EBITDA side, we're happy to see that the profit did indeed grow by 3%, and the EBITDA margin arrived at 10.4, so slightly lower than the previous quarter. We continue to invest in digital solutions in the home care area, and for this quarter, it amounted to 15 million. So taking a look at the margin and how it has evolved over time, the lab tech margins, is in the higher or above actually the historical range of 10 to 12%. We arrive at 12.2 in the quarter. The COVID sales are of course gone, but that's partially countered by a strong organic growth. On the MedTech side, the strong revenue developed has been supporting the margins as well as the beneficial product mix. We are at the higher end of the previous range of eight to 10%, arriving at 9.7 in the quarter. The eye surgery business is reducing the average margin a little bit, but it's fair to say that all the companies in the hospital segment are doing very, very well and performing in an improvement way compared to previous quarter. The teams are doing an excellent job as it relates to price management. And thanks to our strong market position, we are in a situation where we can pass on most of the price increases to our customers and we have a strong pricing power position. Taking a little bit deeper look at Labtech, the organic currency adjusted growth was 9%, very, very strong. As I mentioned, the COVID-19 sales is now behind us. It was 36 million in the corresponding quarter last year. We're working a lot on developing the portfolio and introducing a lot of new products. At the same time, actively working with the price to protect the margins. If we take a look at the diagnostic side, we can see a solid growth. We have fantastic market position in this segment based on a very competitive portfolio as well as a market leading, I would say, service offering. The team is doing a fantastic job as it relates to managing the prices here as well. We do expect more tenders to start coming up again. Many of them have been delayed previously. but that seems to be changing now so we do expect that and that should be mostly a good thing for us and we are continuously as i mentioned evolving the product portfolio Looking at the biomedical and research side, we see a very strong growth. Fantastic job done there by the team. We do see that some of our competitors are seeing a little bit of a weakness in demand on the academic research side. That is not something that we have been suffering from. We think it's probably mostly in the instrument side of business, the major instruments, the consumables seem to be relatively untouched by this. And even if there is a bit of a reluctance in the demand, it's certainly completely offset by a very strong demand on the drug development and the side where we provide products to pharmaceuticals and the biomedical industry. And also here, We are very active in terms of price management and continuously evolving the product portfolio. Moving forward to Medtech, we had a strong organic growth here as well. Currency adjusted growth came in at 8%. As I previously mentioned, the healthcare markets are indeed recovering. Significant increase in elective surgery. Some countries and hospitals have been able to actually reduce the waiting lines a little bit, coming up to the levels of procedures conducted similar to 2019 levels. But that's not true across the board. So I would say many hospitals and countries are still behind the 2019 activity levels. And this means for us that there is plenty of room for continuous growth. And this recovery and the handling of the patients that are on waiting lists will probably continue for a number of quarters ahead. On top of this, we are very active in the field with the sales activities, but also selectively actually strengthening the sales team in the businesses where we are growing well and see great future potential. And again, adding a lot of new exciting supply agreements. Looking into the hospital more specifically, the surgical procedure is certainly growing and this is again the long term trend. All the companies within our hospital segments are performing quite well. The eye surgery business is growing. New products are launched to compensate for some of the products that were removed from the portfolio earlier. And we have also strengthened the sales organization. So a lot of things are falling in place there as well, even though in the quarter we have not yet seen the improvements that we're expecting. On the home care side, we see a very healthy revenue development. Here we have a very comprehensive portfolio and this is of course a key need in the society to handle more of the patients in their homes and certainly something for benefiting the patients as well. So here we have a good portfolio and future oriented and we have seen great performance in the quarter. We continue to invest in digital solutions in this area at the volume of 15 million in this quarter. So talking a little bit about the market trends, we are certainly in a post-pandemic environment right now. Elective surgery is recovering as we talked about. The staffing shortage that we see in the hospitals is certainly holding back that recovery. And in some countries like the UK, for example, We have also seen a lot of strikes and so on. And that's, of course, again, slowing down the recovery. This staffing shortage, as well as some concerns about budgets in the future of the hospitals, will indeed create an even stronger focus on clinical outcomes, the efficiency of the procedure and to make sure that the health care spending is spent where it has the most effect. And probably this will be a benefit for us in terms of providing, on the one hand, strong service and support, offloading some of the strain from the hospitals, but also, of course, leading products that indeed improve the outcomes for the patient and improve the efficiency of the procedure. On the distributor side, we do see a consolidation ongoing and continuing. We, of course, as a consolidator in this industry, see the value of belonging to a larger group like Adlife, and that is also seen by many players in the field. And there are others also taking the consolidator role, if you will. We do see that there is some movement in ownership in some of those bigger chains, and that's probably a benefit for us, as it may cause a little bit of a defocus from the customer. But the logic is certainly there. And finally, we see that a lot of larger manufacturings and suppliers, they are indeed looking through their go to market strategies and reassessing their portfolios. And that has a positive impact for us. It will open up for taking over the distribution of more products. And it also may cause some defocus from our competitors. So this is a healthy development for us. So as I mentioned, there is a change in the perspectives of the go-to-market strategy. opening up for us to take over new product portfolios and also leveraging our European footprint. So I wanted to share with you a few examples of that that have been announced during the quarter. So we have, for example, in the area of next generation sequencing, which is an area of focus for us, We have since long a collaboration between an important provider and supplier in this field called MGI. Our Italian subsidiary Euroclone have had a long-term relationship and a very successful relationship with this company. Now we have expanded this collaboration to also cover the Nordics, Finland, Sweden, Denmark and Norway through our subsidiary TrioLab. So we're excited about this new collaboration. This is a technology that is gaining more and more acceptance and used more and more in routine use. So this is a product portfolio with great potential. Another example is the collaboration we have with AndroDynamics. It originated with Healthcare 21 in the UK and Ireland, and now we have expanded that collaboration to also include Sweden and Denmark and the Benelux countries. So this is now collaboration that covers multiple countries in Europe and it's a very interesting product portfolio in the area of surgery and oncology with leading edge products that also contribute to what we see the need of and that is minimally invasive surgical procedures. So two examples of very very promising collaborations that we have established in the recent months. And with that, I hand over to Kristina to talk more about the financials.

Looking at the profit and loss for this quarter, comparing with last quarter, we had strong growth, 14%, of which organic was 8%. Our companies have received price increases from the suppliers. They have been handling this in a good way, forwarding the increases to the customers and also working with product mix. So the gross margin has been under pressure and we see that with a slightly reduction from 39% to 38%. But great job. Commercial organization is back in full swing. They are visiting customers, exhibitions, they are doing training. we are also strengthening the sales team where needed. Interest rates continue to gap, meaning that the financial net is increasing compared to last year. Looking at the cash flow during this quarter, we have paid dividends. Also, we have invested in growth. That means that accounts receivables has gone up and also inventory driven by the increased revenue. But also inventory has increased with the introduction of new suppliers and new products. And that means that often we will take on new product suppliers. We need to increase inventory in the beginning before we have started to sell the products, etc. So it is a short term increase. We still carry some buffer inventory, not due to the supply chain disturbances, but still to component shortages. So whenever we get hold of those rarely components, we need to buy them, meaning that we buffer for a while. Cash flow has been a focus area and it's still a focus area. We need to generate operating cash flow to deleverage. We will continue to work with this going forward, even though it doesn't show in the figures this quarter. But we have implemented some structured processes, etc. that we are working with. It takes some time, but for sure it will improve. What happened this quarter then, since we haven't been deleveraged? The leverage has gone up from 3.7 to 3.9. Looking at the size of our business area, Medtech is today definitely the larger one. Pre-COVID, pre-acquisitions, Medtech was just below 40%. Today is 60 plus of total revenue. That has some impact on the working capital. Because the companies that we have inquired is more focused into orthopedics. That means that we need to carry consignment stock, its fast deliveries, and also it's a broad product range. So that of course has an impact. We also have expanded into South and Europe. And even though we like it or not, but the payment habits in those countries are slightly different compared to the Nordic companies. And last but not least, The companies that we have acquired have been quite sizable companies. They have their own business models and KPIs, and they have not really been aligned in all areas with the AdLife ones. And it takes time to implement a new way of working. We are getting there and we are implementing the way we are thinking around working capital and tying capital, but it will take some time. And that has an impact on the working capital since the size of the business has changed and we are currently carrying more. So with that, I hand over to Fredrik again.

So now we move on to just the summarized picture of the second quarter. So all in all, we do have very, very strong market positions that are well aligned to the market development that we see right now. And this is clear when you see the solid growth that we see not just from a part of the business but from all our businesses so very very strong growth and we are very excited to see that the sales and marketing activities are indeed back to full scale which is a strong sign and a good sign for also the future growth of the company of course it does cost a little bit extra in terms of that travel expense and the and the trade shows and so on. We have also selectively, I would say, strengthened our commercial teams in some of the companies, but of course doing that based on a strong trajectory and a positive outlook. We are expanding the product portfolio with quite advanced products. This is something we have mentioned before and we were able to give you two quite concrete examples and recent examples. We do expect to see more of that and we have an increased strength with a new and stronger European network that we indeed have. The EBITDA has increased in spite of some of the little bit of challenges on the cost side. So we're happy to see that. The team is working very hard to protect the margins and we are in general quite good at passing on those price increases to the customers and we have been doing that successfully. But there are some longer term contracts where it takes a little bit more time. On the other hand, we are also for sure seeing much, much fewer price increases coming through from our suppliers. So that's a good thing for us. The margins are strong compared to what they were pre-COVID. So that's also an improvement. We are tying a little bit more working capital in the quarter. again related to the strong growth and that of course increases the accounts receivable and of course as also was mentioned by Christina the portfolio has changed a bit Orthopedics is nowadays a more important part of our business and there the inventory levels are higher and then of course when we take on a new product line with a new supplier That often means that we take on some inventory to be able to immediately start selling the new product line. So it is a short term effect that increases the inventory. But that, of course, should improve over time. So our priorities that we have previously mentioned, they remain valid. And that is, of course, to protect and improve the profit, to drive organic growth as a sign of the value to the companies of belonging to AdLife and I think we have proven that certainly in this quarter. The cash flow can improve and it will improve as we work diligently on the working capital initiatives that have been mentioned. Acquisitions are also a key part of our strategic agenda. And we run an interesting pipeline of potential targets for that. And with that, we are wrapping up the second quarter presentation. Thanks for listening into this in the midst of the summer again. And now we open up for questions. all right so thanks everyone thanks for listening in and i apologize for some challenges we had with the sound i think there was a mute during a period of the of the presentation but let's open up for questions now and we will clarify where we're needed so i think we see that carl you raised raised your hand here for for a question please proceed yes hi good morning a couple of questions here from my side