AddLife AB (publ)

Good morning, everyone, and welcome to the AdLife third quarter report. Christina and I will take you through a summary of the third quarter. And after the summary, we will have a Q&A session, as usual, where you have a chance to ask questions. And after the Q&A, we will also give you an opportunity to watch a brief video describing one of our companies within the home care business unit. This is Hepro, based in Norway. So with that, again, most welcome everyone. And now we will start with an overview of the Q3 performance. So we're going to start with an overview of the quarter. And as many of you know, the third quarter, the summer months are somewhat slower because there are fewer surgical procedures planned and the activity in the hospital as well as research labs are lower. So because of this, we saw a slightly slower growth, but still managed to report a 3% organic and currency-adjusted growth. So I think that's quite a strong number. And that has become increasingly clear as we start to see the numbers from our industry peers, showing that this has been a relatively slow quarter in the market, but we are showing solid growth. So we're happy with that. On the lab tech side, consumable sales are, as you well know, quite stable. And this is the case, of course, for Q3 as well. We saw a little bit of a weakness on the instrument sales side. But again, as we've talked about before, this is a temporary weakness. We think those deals will come through just a little bit later in later quarters. On the MedTech side, of course, fewer surgical procedures means somewhat lower sales. But still, we had a 3% growth there as well. And we're very pleased to note that the positive margin trend that we have been seeing now for a few quarter continues. So that's great. So all in all, a little bit of weaker profitability in lab tech, a little bit stronger in med tech. So overall, we retain a stable EBITDA margin between the quarters. The profitability improvement initiatives that we have communicated about earlier and that we will go through in more detail later are progressing according to plan. So we're quite pleased with that. And that means, as you well know, some further cost reductions in the coming quarters. The cash flow, again, a very important focus area for us, remains stable at the solid level we established in Q3 of 2023. So that's a positive. And finally, in July, we had a press release about the acquisition of Bonsai Lab, a very good company in Spain and Portugal in the area of cell and microbiology. We're super pleased with that acquisition, and we are pleased to note that the performance is strong, good market conditions, and very healthy margins. So with that, we move on, and I will ask Kristina to take us through some of the more details of the financials. Welcome, Kristina.

Thank you, Fredrik. We saw organic growth also in this quarter, 3% in both lab tech and med tech. Currency had a negative impact, minus 3%. while acquired growth added 1%. Our companies have made a diligent work with defending gross margins. This quarter was not an exception. So improved gross margins mainly come from product mix and price increases, and it's mainly with new tenders where we managed to increase the prices. OPEX increased with 2%. This increase includes both acquired OPEX transaction costs as well as restructuring costs from Camano. The total of the three of them is 9 million. Other income and expenses can vary between the months and you often have swings depending on reversal of contingent consideration. This was the case last year. Also, we did capitalization of R&D in Camano last year, which has not happened this year. So the adjusted EBITDA grew with 2%, and the EBITDA margin was 9.8, same as last year. If we look at operating cash flow, it was stable in the quarter compared to last year, and the accumulated operating cash flow has increased. Cash conversion has also improved compared to the last year's. And this is really due to the focus on inventory reduction and working capital efficiency. If we look at the different parameters within the cash flow, we can see that working capital was negative with 73 million. This is mainly due to decrease in accounts payables. Also, inventory increased a little bit, of course, driven by sales growths. but also by the addition of new suppliers, new products, and also instruments to be delivered in Q4. In the quarter, we did welcome Bonsai Lab to the group, which had an impact on the cash flow. So, if we look at working capital in relation to sales, there is a tendency that the third quarter is slightly higher, impacted by vacations. Normally, our customers are a little bit slow in payments, while we actually schedule payments to the suppliers. Inventory towards sales has been stable on the lower level, 17% for the last quarters. And the focus on inventory reduction implemented last year remains with the ambition to improve even further. Net debt was unchanged during the quarter. The acquisition of Bonsai Lab with paid purchase price and the booking of the continuing consideration was a total of 150 million. As most of you know, the majority of the loans are in euros. And this quarter, we had a small positive impact from FX. We pretty much unchanged net debt and EBITDA. The leverage remained at 3.6. And as previously communicated, debt decreased. is going to be reduced via self-generated cash flow. The short-term facilities that was going to be due in Q1 2025 has been prolonged at unchanged terms until Q1 26, with an extension option of another 12 months. The interest rate has gone down from 5.9 to 5.7 in the quarter, and it will continue to be reduced in the fourth quarter. We have two cabinets, Interest coverage ratio should be above 4. It was 5.4 this quarter as well. And equity ratio about 25%, and that was 40%. And with that, I hand over to Fredrik again.

Well, thank you, Kristina, for that thorough review of the numbers. Now we will dig into the business area, starting with Labtech. So in Labtech, we had an organic growth of 3%, and that's pretty healthy in this environment. And the consumable sales, as you well know, has a high degree of stability. And this was the case as well in the quarter. On the instrument side, though, we saw a little bit of weakness in demand. And this was in particular for the more advanced and expensive high margin instruments. In this case, we saw that some of these projects have actually been delayed. But it's important to note that they are delayed significantly. not canceled. So we do expect them to come in later quarters. Also, some of the new and advanced products that we're launching have been taking a little bit longer than expected to reach the goals we have in terms of sales. So both of these factors have been holding back the margin a little bit. So we reported the margin of 8.9% in the quarter, lower than we like to see, but we're confident that that will quickly recover. And also on a very positive note, we're really pleased that some very important and profitable tenders have been secured during the quarter in multiple countries. And we will start to deliver on those tenders already during Q4. So moving forward to MedTech, again, a 3% organic growth. And that's a pretty good number given the fact that the elective surgeries are indeed down during summer. And the summer months extend all the way into September, in particular in southern Europe. So the effect has been felt throughout the quarter. The EBITDA margin did increase by 7%, strengthened to 10.7 compared to 10 in the corresponding quarter last year. And this is driven by performance improvement initiatives that are taking place in all companies and, of course, good sales of higher margin products. The profitability improvement activities within Advision are progressing according to plan. That company is now back in profitability, as you well know, and we have taken a number of planned steps during the quarter, primarily focused on driving the commercial activities with bigger energy. So really pleased with that. And then, of course, the Camonio closure was completed during the quarter as planned, and this removes any around 15 million Swedish per quarter in costs. So that will be a big and important effect already in Q4. Our priorities and actions, they remain the same. And it is, as you well know, protect and improve profit, second, organic growth, cash flow, and then acquisitions. And I think it's fair to say we're making good progress in all these areas. Looking in particular at the profitability improvement then, the Camano closure, was indeed completed in Q3 in the month of September as planned. It's been quite important for us to take good care of all the users that have been using the system. Very, very important. And I think that has gone really well. So well done to the team that has been engaging in this. This means also that all costs will indeed be gone in the fourth quarter, giving us a full year savings of around 60 million. and a cash flow effect of 90 million. So this is a meaningful improvement that is now in place. So moving forward, we are super happy about the acquisition of Bonsai Lab. This is a leading Spanish distributor in the field of cell and molecular biology. And this is indeed a segment that we have chosen as a prioritized growth segment for the group. It's fast growing. It's a favorable market in many ways. and the profitability is good. So during the quarter, we have been spending a lot of time with the Bonsai Lab team, and we're very, very pleased to welcome them all to the AdLife family. So to conclude, the group delivered a 3% organic growth. That's fairly stable and probably quite healthy given the market conditions. We did see some delays in capital investments and some delays as well in new product launches. But we do think that that is a temporary thing. The deals are not lost. These projects will happen in the coming quarters. We're really pleased to note that the MedTech margins are continuing to strengthen. And if you take a look at the year-to-date numbers, we are now at 11.6 compared to 10.3 last year. And that is clearly above the previous range of 8 to 10% that we have been seeing. In parallel with that, the profitability improvement initiatives are progressing according to plan, both in terms of a division as well as Camagno, but also a number of other activities within the group. We are really happy that we are now back on the acquisition track with the acquisition of Bonsai Lab, and we look forward with confidence to a seasonally stronger fourth quarter. So with that, I'd like to thank you all for listening in. And we'll now be opening up for Q&A. But before we get into that, I would like to remind you all that there is a video after the Q&A that shows you one of our very interesting companies, HEPRO, an important part of the home care business. So please stay on for that as well. So now let's open up for questions. All right, everyone, so let's get going with the questions that you may have. So please raise your hand, and we will then unmute you as we get going. So let's see, who do we have here ready for questions? Is it Ulrik first?