AddLife AB (publ)

In early July, adding a new business to our group, Bonsai Lab, right in one of those segments that we have defined as our long-term strategic direction. So with that, we move forward and take a little bit of a deep dive into the numbers. Christina.

Thank you, Fredrik. So we saw continuous growth into this quarter, 8% in total. Organic growth was 7% in MedTech and 8% in LabTech. Stable gross margin and product mix was in favor of consumables with slightly lower share of instrument sales. OPEX grew only by 2%, and in addition to our companies being cost-efficient, we also start to see the positive impact of the cost savings within Advision and Camano. EBITDA growth, or profit expansion, was strong 21%, and margin improved to 11.7% compared to 10.4% in the corresponding quarter last year. Net interest was 75 million, meaning same range as we have seen for the last four quarters. So the variance in financial net relates to currency and other financial costs. Operating cash flow was significantly better in this quarter compared to the previous quarter, and that being despite sales growth, of course, rise working capital. Cash conversion improved to 82%, and that is a result of the focus on inventory reduction as well as working capital efficiency. Operating cash flow was 195 compared to 82 in Q2 last year. Working capital was negative 80 compared to negative 130. For the last three quarters now, we have seen inventory decrease, but in this quarter, it actually increased with 59 million. That is, of course, relating to sales growth, but also to the addition of new suppliers and new products, as well as buffer stock relating to supply chain disturbances that we still see within some areas. Other working capital that includes cost relating to project sales, but also accrued expenses. If we take a step back, during the first half of 2023, inventory increased. That was due to investment into future growth, adding suppliers and products. But also, we did have quite heavy supply chain disturbances. And we were able to deliver to our customer, gaining both new customers but also market shares when other competitors have problems. Then during the second half of the year, we implemented inventory reduction targets towards the larger companies. This was successful, and by end of the year, inventory compared to sales was 17%. And even though we have increased inventory in the quarter in million Swedish crowns, inventory compared to sales is still 17%, meaning same range as by year end. So inventory and working capital will be a continuous focus during this year. And with processes and tools in place, this is a strength of ours. Net debt decreased with 120 million in the quarter. In this quarter, we have paid also dividends as well as continued considerations, meaning earners' acquisitions from previous years. This was approximately 100 million in total. With the main part of the loans in euro, of course, FX had a positive impact in the quarter with 65 million. Net debt to EBITDA reduced to 3.6. Also, net debt to equity should be around 1 or below, and we bump back to 1 in this quarter. And as said previously, debt is to be reduced for a self-generated cash flow. The average interest rate was 5.9 in the quarter. That is the same as we have seen for the last three quarters. Moving into Q3, we will start to see a reduction in interest rates, and let's hope that continues going forward. The loans are across short-term, half-long-term. The long-term loans are due in Q3 2027, and the short-term Q1 2025. Dialogues regarding the short-term loans is ongoing, and an agreed solution will be in place during Q3. We have two covenants. Interest coverage ratio should be above 4. This quarter, it increased from 5.3 to 5.4. And we have equity ratio should be above 25. This quarter, it was 39. And with that, I hand over to Fredrik again.

Thank you very much, Kristina. Now we go to talking a little bit about the business area performance. So in lab tech, the organic currency adjusted growth was 8%. So as many of you remember, we had a bit of a weakness at the end of the first quarter this year, but that recovered as expected in a very strong way. In general, the consumable sales is quite strong. We see some delay in instrument projects, like many of our industry peers are also seeing. However, We are expecting them to come to fruition before the end of the year. So we're not talking about canceled orders here. There is some cautiousness in the academic research as well, driven by budget constraints. But that is more than compensated, I would say, by industrial research customers where demand is quite strong. And this is primarily within the pharma industry. We saw a stable EBIT margin, EBITDA margin at 11.6%. And the fast-growing segments that we're active in and we're growing in, some instances of major competitors withdrawing from some markets, and then new products that we continue to offer and add to the portfolio gives us high confidence in the growth opportunities in this business. Moving on to MedTech then. Here we had an organic currency adjusted growth of 7%. The patient waiting list that we've been talking a lot about, They remain long. Elective surgery is expected to continue to be a driver for growth in the long term. EBITDA increased by 37%, and margins strengthened to 12.3% from 9.7%, so we're very pleased with that. And it's really a reflection of performance improvement across most of the medtech companies, really. Of course, also, the actions we have been taking in companies like Advision, where we have restructured the business in a fairly strong way, is really yielding results in this quarter. And also the closing of the Camarnia business is progressing according to plan, and then the shutdown is expected to be completed in the third quarter of this year. So that is also showing in the numbers of Q2. So moving on to look at the market trends and their implications for ad life. We talked about the patient lists. They remain long, and we will see an increased demand for elective surgery for a long period of time ahead of us. The staffing shortage that you've all read about in the papers gives health care capacity constraints. So that means for us, of course, an increased need for time and resource-saving products and services, and this is an area in which the ad-live companies are really strong. Healthcare system budget constraints are evident in some countries, and that means also that capital-intensive projects may be a little bit further scrutinized and somewhat postponed. But on the other hand, we also see very clear government initiatives to target certain areas of the healthcare system with big investments. So that could be an interesting factor for us and the companies within the group. And combined with that, of course... showing the value of the technology that we bring and the productivity increase that it could bring to the healthcare system is, of course, extremely valuable. Again, an area of strength for the AdLife companies. The large manufacturers are indeed changing their go-to-market strategies, and that opens up for opportunities for the AdLife companies. We're seeing some companies pulling back from some of the smaller markets in which we're strong, and we're also seeing larger companies abandoning certain areas and reducing staff in the local organizations, and with that losing some of their credibility and strength in the market. Again, another opportunity for dead-life companies to enhance their positions. The priorities and actions for 2024, they do remain the same, protecting and improving profit, the organic growth, the cash flow, and then acquisitions. And I think it's fair to say we're making good progress in all of these areas in this quarter. We will talk a little bit about the improvement initiatives, starting with AdVision. Here, as many of you know already, we had a fairly comprehensive restructuring of this organization, going back to a decentralized business model that we really like. And with that, we are seeing a significant cost reduction. We had promised around $20 million in cost reduction on an annual basis. and we are meeting that target and we are exceeding it. We have dismantled the central functions, but also seen a lot of efficiency improvements in the respective companies. The product portfolio and sales efforts are now focused on profitable segments. We are seeing improved margins, and now the activities that we are driving within these separate companies are shifting focus more and more towards driving sales growth. Another important factor in improving our profitability is, of course, our initiative to progress with the closure of the Camagno business. I'm pleased to note that that is progressing according to plan, and in this quarter, in Q2, we did see significant cost reductions already. It is important for us to take good care of the patients and the users of this technology, and the end customer really is the municipality who takes care of these patients. The last municipality will migrate their users during the third quarter of this year, and with that we expect to be able to close down the business fully towards the end of the third quarter. And that means that all costs should be gone by Q4 of this year, And just as a reminder, we're talking about here a full year cost in 2023 of around $60 million and a cash flow effect of around $90 million. So as you can see, we're making great progress with the profitability improvements, and there is also significant work going in to working capital efficiencies and cash flow improvement. And that gives us confidence in moving forward with the acquisition strategy. This is a strategy that has been reviewed and updated in the past year. So I'm pleased to note that in early July we were able to close the deal to acquire Bonsai Lab, a leading Spanish distributor in the field of cell and molecular biology. This field, cell and molecular biology, is a fast-growing and profitable segment, and it is a prioritized one for AdLife, so it really fits the strategy well. The company has around 8 million euros in revenue, and 13 employees and has operations in Spain as well as Portugal. Bonsai Lab will be included in the lab tech business area and more specifically within biomedical research. So we're really excited to welcome the Bonsai Lab team to the AdLife family. Most welcome to all of you. So now we move forward to the summary and the outlook. So we are very, very pleased to note that our companies are growing strongly and with good profitability And this is true for almost all the companies within the group. We have a very competitive customer offering and well-positioned product portfolios. So that bodes well for the future. The restructuring and the efficiency initiatives, they are now yielding distinct results showing in the profitability numbers. We're very pleased to see that, and that will be continuously a priority for us. The cash flow improved significantly in the quarter. And with that, we have completed an acquisition, which is perfectly in line with our long-term strategy. The companies within AdLife have had a great first half of the year. So congratulations to all of you, dear team members. You're doing a fantastic job. And I think the prospects are really good for the remainder of the year and for the future. So thanks, everyone. And now we open up for a Q&A session. And again, I want to remind you to stay on after the Q&A as well to see a great video of the Biomedica company.