AddLife AB (publ)

Good morning, everyone, and welcome to the AdLife first quarter report. We're happy to take you through the presentation today with some highlights from the quarter. After the presentation, we will have a Q&A session. And after that, I want to encourage many of you to stay on to listen to a great story of Mediplast, actually our oldest company within the MedTech group and a company that has performed really, really well in terms of profitability improvement. So AdLife started the year in a very positive profitability trend, and this is, of course, very much in line with the previously announced priorities. On the lab tech side, the revenue development was slightly weaker after a very strong Q4 of last year, but the companies were successful in defending the margins. On the med tech side, there was a strong growth and also very pleased to announce an improvement in profitability adjusting for the one-off effects we saw in Q1 of this year and Q1 of last year. So the profitability improvement initiatives that we have spoken about for some time now, both in admission and in home care, they are progressing according to plan, and this is really, really important for us. And then finally, the cash flow initiatives do continue. Q1 is normally not a very strong cash flow quarter, But the operating cash flow was in line with the levels of the previous year. The release from inventory continues, which we're very pleased about. And then, of course, we have a currency effect on the net debt side. So moving on to the sales and EBITDA development in Q1. We saw a growth of 5% in the quarter. And, of course, we had a little bit of a currency tailwind. So adjusting for that. the organic currency adjusted growth was 4%. Looking at the EBITDA margin, we are in a positive trend comparing to the previous few quarters. And adjusting for the one-off costs we saw in Q1 of this year, as well as in Q1 of last year, we are roughly at the same level. So with that, I will hand over to Kristina, who will take us through a little bit more of the details.

Thank you, Fredrik. So, sales growth in the quarter was 5%, driven by very strong organic growth within MedTech of 9%. Growth in LabTech was minus 5% due to soft instrument sales explained by delays in projects. Growth margin was stable in the quarter, but we had a mixed bag between the two business areas. Within LabTech, with soft instrument sales, gross margin was higher and increased compared to last year. MedTech, on the other hand, had strong instrument sales, especially in the UK and Ireland, meaning that the gross margin was slightly below last year. Looking into other income and expenses, last year we had the reversal of a continued consideration of 83 million, as well as capitalization of R&D within Camaglio. Continuing to the one-offs in this quarter, they also relate to Camano and its restructuring cost. This means that we will see a cost decrease now starting in Q2 going forward, and the aim is for everything to be closed in Camano by end of September. If we adjust for the continued considerations as well as the one-offs, we have the EBITDA growth of 5% in the quarter. That meant that we had a margin of 11.5, both in this quarter as well as previous year. Looking at the financial net for the quarter, we had interest cost that was above Q1 last year. If we look at the last quarters, the last four ones, we are in the same range of interest net. Also this quarter, we had a negative impact from the change rate losses. compared to an actually exchange rate gained last year. Operating cash flow was just below 100 million Swedish crowns, following the seasonal pattern with normally a strong Q4 and a weak Q1. Inventory reduction continues, and the growth in accounts receivables is mainly driven by continuous sales growth. And looking at the different parameters within the cash flow, we can see that working capital was minus 134 million compared to 150 last year. And the focus that we have had on inventory reduction has been successful, and this continues throughout 2024. Account receivables is mainly driven by continuously growth in sales, and accounts payable can vary a bit between the quarters, but also clearly a reduction in inventory reduces the accounts tables. Net debt increased in the quarter by 245 million. The majority of the loans are in euros, meaning that we had a negative FX impact in this quarter, just below 200 million Swedish crowns. Also, an increase in leasing liabilities related to both new and but also renewed lease agreements impacted net debt in a negative way. And moving on then to the leverage that increased in the quarter from 3.5 to 3.8. Net debt driven by FX and increased leasing cost, but also the last 12 months EBTA now excludes the reversal of the contingent consideration of 83 million in Q1 last year, also having an impact. Net debt to equity ratio is 1.1, just below the internal guidance of 1. And as communicated earlier, the ambition is to reduce debt via self-generated cash flow. We have normal bank loans, approximately half short-term, half long-term. The short-term loans are due in Q1 2025. And we are now initiating discussions regarding those with the aim to have new agreements in place within the coming six months. The long-term loans are due in Q3 2027. We have two covenants. One is interest coverage ratio and the other is equity ratio. Looking at the interest coverage ratio, it should be above four times in this quarter if it was 5.3%. Equity ratio should be about 25%, and in the quarter it was 39%. Headroom in both cabinets. And with that, I hand over to Fredrik.

Well, thank you very much, Kristina, for that clear summary. So now we move on to the business areas. So in lab tech, the growth was negative 5%. However, we saw a good start of the year, and the weakness was primarily in the month of March, so we are confident that will be a temporary weakness. The margins at 11.5%, so in the higher end of that range of 10% to 12% that we have said that we should be in, so still a healthy margin. The company did a fantastic job with the good cost control. The gross margins were strong. And the weakness that we see is mainly in delayed instrument sales. We do think that those instrument sales projects are going to materialize just a little bit later in the year. There is some uncertainty around research budgets. We have communicated about this in the past as well. But clearly in the pharma industry, the demand is very, very strong. And it's also worth to note that we had a fantastic end to the year of 2023 in our Eastern European business, and now we saw a little bit of a slower start to the year as an effect of that. So all in all, a good quarter for the lab tech business, but probably a temporary weakness on the revenue side. Moving on to med tech, we saw a strong organic growth at 9%, so very pleased with that. The elective surgery activity that we have spoken a lot about, continues to increase and is now approaching levels that they were before the pandemic. But this is expected to remain a quite positive trend supporting our growth. We have taken a lot of actions within our eye surgery business. And in this quarter, we are very pleased to note that we are actually seeing a clear and tangible improvement. So the teams have done a fantastic job there and it's showing in the numbers. We are progressing with the closure of Camagno and it's progressing according to plan. We're not seeing that in the numbers as of this quarter, but we expect to be able to shut that down towards the end of 2024. Moving on to our priorities and actions, they are indeed unchanged. Protecting and improving profitability is a highest priority for us. Organic growth cash flow and acquisition follow in that order. So in light of the focus on the improvements in profitability, that being our highest priority, I want to share a little bit more of details around the situation in the eye surgery business. So we had good sales development, stable sales I would say, at the same time a significant cost reduction and that is now showing in the profitability. We went from negative profitability in the previous quarter to solid positive in this quarter. So quite an achievement there by the team. So the organization has really stabilized, and the product portfolio has been updated to a level that we now feel we have a competitive portfolio. Important to note also that the businesses in Poland and Switzerland are doing really, really well, so strong profitability there. We continue with the work with this dedicated effort, and now the companies are really, really focusing on delivering on the plans that we have laid out, so commercial execution is where the focus lies right now. So well done there, team. And moving forward to Camonio, as I mentioned earlier, we are progressing according to plan. The trade union negotiations have been completed as we had expected in the month of February. We have taken a restructuring cost in this quarter of $6 million. We have worked very diligently to support all the customers that we have, make sure they have a smooth transition into a new supplier, and that is progressing very well. All customers are now in the process of making that change. The cost reductions will start to show in the numbers in the second quarter of this year. and we hope to be ready to complete all of those cost reductions towards the end of the year. So I mentioned earlier the elective surgery procedures. They are continuing to grow. We have shown this slide previously at the Capital Markets Day when we saw that the elective surgical procedures were significantly below the 2019 level, the pre-COVID levels. We have seen a gradual increase, and now as we summarize the input from all the companies in which we are active, we see that we are now getting close to the 2019 level. So that's a positive. However, we all know that there are long waiting lists in the healthcare systems all across Europe. So the healthcare systems will need to get above that 2019 level to in an effective way start to reduce the waiting list. So there is still a lot of work to be done and we are working diligently to support our customers in that. an expectation here of a continued growth in number of elective surgery procedures during 2024. So in summary, we're very pleased to see the companies within the AdLife family are doing really, really well, really strong teams. We're super happy with that. We see favorable market conditions that will help us support our growth ambitions. The priorities are clear to us, and the highest priority is indeed to improve the profitability, and that is going quite well. We are seeing some strong progress in those areas, and actually moving the eye surgery business from negative to positive is a great achievement by the team. Cash flow initiatives are super important to us as well. Those initiatives continue, and we are pleased to see that in the quarter, We continue the positive trend of inventory reduction. Of course, accounts receivable is growing, an effect of the continued growth that we're seeing. So our ambition is very clear. We will continue to reduce debt over time, and once we get to a satisfactory level, our activity in terms of acquisitions will increase, and we are clearly preparing for that with an active pipeline work. So I can conclude by saying that AdLife is, off to a great start of 2024. So congratulations to all our companies. Job really well done. So now we will open up for a Q&A session. But again, I encourage you to stay on until after the Q&A as well. You will hear a great story about Mediplast, a very important company within the MedTech group and a company that has done a fantastic job in growing the profitability. Thank you.