AddLife AB (publ)

Good morning, everyone, and welcome to the AdLife first quarter presentation. Christina and I will take you through the numbers and the highlights of the quarter today. Then we will open up for a Q&A, as always. And then, as a reminder, I would like to ask you to stay on after the Q&A as well, because, as usual, we have a very interesting video of one of our portfolio companies, Holmen Halby, that we will be able to show you. So now let's dig into the highlights of the first quarter. So the companies within AdLife had a great start to 2025. We saw significant EBITDA margin improvements in both business areas and this is, as you probably remember, our highest priority. In lab tech, we achieved 12.1% EBITDA margin. That's a solid improvement over previous year. And in med tech, 13.5%. Almost two percentage points improvement over last year. So very strong development there. As we talk about the revenue development, that was healthy across the board in all geographies and countries. We saw slight weakness in the UK, but that was really due to a very big instrument order in the previous year. And in general, we are overseeing our product portfolio, removing some products that are less profitable, again, in alignment with our prioritization. We are driving a number of profitability improvement initiatives in a couple of companies. We see significant improvements happening there in those specific companies, but also, of course, in line with our business model of continuous improvement in all the subsidiaries. The operating cash flow is normally a bit slow in Q1 after a seasonally strong Q4. That was the case for us this year as well. However, the first quarter cash flow was significantly stronger than the corresponding quarter of last year. So great improvement there. So the strong cash flow helped us to reduce the debt level, but we also got a little bit of help, of course, from currencies. But this has helped us to reduce net debt to EBITDA to 2.8, which is significantly above the ambition we set out earlier to be below 3.0. So great improvement there. And now we will get into some of the details of the financials, and Christina will take us through that.

Thank you, Fredrik. So, sales growth in the quarter was 5%, of which acquired growth was 1%. This relates to lab tech. Organic growth was 4%, lab tech strong 12%, while med tech was flat, mainly due to strong instrument sales in the UK last year that was not repeated this quarter. With increased revenue, with improved gross margin, and Pretty much flat OPEX, we had an EBITDA growth of 18%. This converted to an EBITDA margin of 12.7%. With lower interest rates, also this resulted in lower interest costs. We had 58 million in this quarter compared to 77 in the corresponding quarter last year. EBIT margin have had a nice development. Full year 2023 was 10.5% and increasing to 11.3% in 2024. This year, we start off the year with 12.7% in relation to 11.5% last year. The EBITDA margin in both business areas increased. Labtech was 12.1 compared to 11.5 and Medtech was 13.5, almost an increase with 2% compared to last year. Also operating cash flow improved. Normally Q1 is the seasonally weakest quarter. This Q1 was though stronger than the last two years. Also cash conversion improved to just above 100%. Going forward this is probably to be too optimistic, so rather look at 2024 with the 90 plus percent as a more normal level going forward. And that is due to the fact that we are introducing new products into the product portfolio and building a few inventory due to that. With that said, there is still a continuous focus on working capital efficiency. And looking into the different pieces of the cash flow, operating cash flow was 239 compared to 97, of which working capital was negative 74 compared to last year, 134. This was due to an increase in account receivables based on strong sales in the latter part of the quarter. Also, cash was impacted by FX by negative 76 million in this quarter. Net debt was reduced with about 400 million in this quarter. Looking at the full 12 months, we have reduced net debt with about 1 billion. Majority of the loans are in euros, meaning that we had a positive FX impact in the quarter of around 250. Worth mentioning is that net debt is not only bank loan deducted with cash, but it also includes leasing liabilities, contingent considerations, pension liabilities, and provisions. And if we summarize the bank loan and cash, we end up at 3.8 million. With net debt reducing and last 12 months EBITDA increasing, leverage was reduced to 2.8, meaning that we have received the ambition of being below 3. Debt to equity was 0.9, which was below the internal guidance of 1. And as previously communicated, debt is to be reduced via self-generated cash flow. Interest in the quarter was 4.8 compared to 5.3 in the previous quarter. Interest cost is expected to continue to come down based on the recent interest rate cuts by ECB. We have two covenants. Its interest coverage ratio should be above 4. We are now at 6. And equity ratio, that should be about 25. And we are at actual 41, meaning that we have solid and increasing interest headroom to the Camernams. And with that, I hand over to Fredrik again.

So thank you, Christina, for a great summary of the detailed financials. Now we move on to talk a little bit about the business area, starting with Labtech. So Labtech had a strong growth in this quarter, achieving 12%, so very, very healthy. Of course, we had a little bit of a weakness in the corresponding quarter of last year, but nevertheless, very strong growth. And also, we had a component of acquired growth of 3%, again, driven by Bonsai Lab. the successful acquisition that we completed in the second half of 2024. they're doing really well. EBITDA margin has improved from 11.5 to 12.1 in this quarter. If we talk a little bit about the market dynamics, we see good activity levels in diagnostic. It's a stable business and it is growing. When it comes to demand in pharma, that also remains buoyant and high. There is some hesitation that we've been talking about in the past about investment in the field of academic research. We still see that. It's not as strong perhaps as before, but there's still some hesitation, but I think the underlying logic there is still very healthy as well. We have been making some really good progress with tenders. We talked in previous quarters about recently won significant tenders. We're starting to see the effects of some of those in the numbers, and also very pleased to note that we have been able to secure strong and important tenders for us in this quarter as well. In these cases, we're actually taking market share, so that's very exciting. Our companies are really known for strong service and support, and that is something that we are investing in. And it's interesting nowadays we see actually competitors are pulling back in those areas, reducing resources. And our service level and the trust that that generates with our customers is so important. And I think this opens up for us to make that relationship even stronger and position ourselves for taking market share in the future as well. So a good... solid quarter for Labtech. Then we move on to Mentech first quarter. So, we saw positive revenue development really across all geographies and companies. There were some weaknesses, however, in the UK we saw slightly lower revenues compared to Q1 of 2024. And then it's important to remember that in Q1 of 2024 we had some very big instrument deliveries, which were great, but we didn't repeat all of those at the same level. That being said, we're still quite positive about the development in the UK market. We clearly have a government with the intent to invest further in the healthcare system and we are well positioned to be part of that going forward. We see revenue decline in some areas due to conscious effort to actually prune the product portfolio and remove products that are not meeting our quite high standards when it comes to profitability. So very much in alignment with our priorities, we are focusing on improving the margins and we are ready to remove top line if that is required. So we have done so in some cases. And then finally in the home care area, we saw a slight weakness in demand. This is driven by external factors like governments a little bit hesitating to spend primarily in bigger construction projects. We are, however, quite positive about the outlook for home care. This is an area with huge demand, increasing demand, and great support of new technologies that are coming. We did improve the margin in the MedTech business to 13.5, a very good level and an improvement of almost two percentage points. So that's really pleasing to see. And it is driven by, of course, efforts in some big companies where we see big impact, but also the continuous effort we have. That is linked to our business model of the continuous improvement and the day-to-day tweaks to improve profitability as well. We are strengthening the product portfolio with advanced products with a high-tech profile. And I'm really pleased to note that during the quarter, we have added new products from new suppliers that we are very proud of and that are adding some really high-tech products to the product portfolio. So very good development there. We move forward to the priorities that you are familiar with. This we launched back in 2023, and they will remain the same in 2025 as well. protect and improve the profit, that's the highest priority, organic growth, cash flow, and acquisitions in that order. I think we can say that we have been making improvements on margins, on growth, and cash flow, and with that having reduced the debt, that means that we are now ready to move further with acquisitions at a higher pace than before. So we will be gradually increasing the activity in the area of acquisitions. So a great example of this is, of course, the acquisition of Edge Medical that was completed in early April. So we are very, very pleased to welcome the Edge Medical team to the AdLive family. So most welcome to all of you. This is a fantastic company active in orthopedic surgery, spine and neurology in UK and in Ireland. It's a fast-growing business with sales at around 8 million pounds and high margins, actually above EBITDA margin of 30%, so quite impressive. This is an acquisition that's quite in line with what we have said we want to focus on. This is in orthopedic surgery, a very interesting segment for us. Edge Medical, they're really committed to innovative products and strong service and they have fantastic partnerships with customers and leading global manufacturers that multiple companies within AdLife stand to be able to benefit from actually. and also other companies within AdLife can contribute with great products and great relationships with suppliers as well. So we have been able to assess this acquisition in a very good way with built-on strong geographical and product knowledge, and we will also be able to help the Edge Medical team to evolve further at a quick pace going forward. So this is an exciting acquisition, and again, a warm welcome to the Edge Medical team. Moving forward, I want to talk also about the global trade disruptions that we're seeing in the market and the uncertainty that comes with that. Adlife is well positioned to handle this situation. More than 90% of our revenues comes from the European market. More than 80% of our suppliers are indeed in Europe as well. Even if trade disruptions impact the business cycle, we are relatively insulated to that effect as well. Our business model is not that sensitive to changes in the business cycle. And then last but not least, we have a decentralized business model. This makes us able to adapt quickly to changes in the market. And we have also very, very strong customer relationships. So we have proven in the past that we are able to handle disruptions such as COVID. We are able to handle cost increases that came during the period of inflation. So we feel confident in our ability to handle this. Of course, we need to pay attention, and we are looking in particular at a few areas. One is, of course, subcontractors and effects further down in the supply chain that may affect us, so we are analyzing that. We are paying attention to academic research investment. That may be an area that can suffer if there is a pressure on the business cycle. And then, of course, we are continuously evolving our product portfolio and we are, of course, taking into account the potential emergence of new trading patterns and finding suppliers and components and products. that will be well positioned in a market that has disruptions in terms of tariffs. So I think we are paying attention to it, but I think it's fair to say we are well positioned the way we are set up. So to summarize Q1 2025, we are very pleased with the fact that we are seeing significantly improved margins. And this is, as you remember, our first priority, and we're seeing impact of it across the board, really. In addition, we see a healthy revenue development in most areas, and we have a positive outlook for the future as well. We are continuing to work with the companies to improve in various ways, and that includes improving the product portfolio, moving it towards more profitable products by pruning and taking out some less profitable products, but also adding some new and very exciting new high-technology products. We are pleased to note that the cash flow improvement trend that we have been seeing now for some time continues, and we are reducing the net debt in relation to EBITDA. And we are now at 2.8, and that means significantly below the ambition of 3.0 that we set out earlier. This strengthening of the balance sheet that we have been able to achieve helps us to move forward with an increased acquisition agenda again, and we will be gradually picking up the activity when it comes to acquisitions. And a great example of this is, of course, the acquisition of Edge Medical completed in April. And this is a business with great performance and potential. So with that, we wrap up the presentation of the first quarter, and we open up for Q&A. Hello everyone and good morning. Thanks for listening in. And now we are ready for the Q&A session. And as always, if you have time, please stay on a little bit longer after the Q&A to look at a very good video with our company Holman Halby. So let's get started here. I think we have a few of you have raised your hands. So I think let's start with Mattias. Don't forget to unmute. Mattias, are you there?

Yes, I'm here. I'm here. So thanks so much for taking the question. So you state in a report that most of the companies within MedTech improved margins, but significant improvements in some specific companies. So would you be willing to call out which were the specific companies in the quarter to help us better understand? where the source of improvement came from. And then secondly, in the very helpful bridge of how gearing improved, I would have thought FX played an even larger role, but there was one large component of provisions of 90 million krona So if Kristina could maybe help me understand what that was, and then I have two more follow-ups, but I'll stop there.

Okay. Thank you for that question. Let's start with the margins then. I think it's fair to say that we saw good improvements across the board. Of course, some of the factors that contribute more than others are things that we have talked about in the past. You know, Carmonio is gone. Advision is doing a great job in terms of improvement. The larger companies are gradually improving. I think we see a gradual improvement in margins for pretty much all of them in a very healthy way. And then we have a group of smaller companies that are really, really doing fantastic, both in terms of growth and the margin improvement. So the overall picture is quite positive. Everyone is contributing, and there are some that stand out a bit more. And then when it comes to the net debt question, maybe Christina is best positioned to answer that.

As you said, Mattias, net debt was reduced, and FX played a major part in that one. But also we had reduction of the provision, and that is a long-term provision since previously that was not settled. But we also had the corresponding receivables. So the liability was settled, and we had the receivables as well. meaning that there were no impact nor on cash flow or on profit and loss. So it's historical provision that was now, that was settled.

Okay. That's helpful. And then two follow-ups, if I could. Could you maybe elaborate on the strength in Spain and Italy, up 22% and 29% year-over-year, respectively, to help us understand maybe the cadence of that strength? to think about that going forward, or if there were any one-offs, so to say. And then secondly and finally, lab tech was very strong. You call out benefits from tender wins. Is it possible to quantify the benefit from those wins in this quarter? Thank you.

Yes, thank you. Well, so the question was the solid development in Italy and Spain. I think there are no major wall also I think our Spanish business is doing really well this is NBA is the big one here of course they have a solid growth and margin improvement and doing a fantastic job also continuously adding new products to the portfolio. Of course Bonsai Lab is there as well in Spain so that's part of the growth. Looking at Italy, our companies there are doing an excellent job. We had some good orders coming in on the lab tech side, and we had some healthy development on the med tech side as well. Nothing dramatic, though, there in Italy, but these are companies that are well positioned, and we have some interesting initiatives ongoing, and they're evolving as we hoped they would, with good growth and margin development. Is there something you would like to add to that, Christina?

No, I think that covers it.

Yeah, that covers it. And then the second topic was on lab tech. So, yes, we did mention tenders, and there were big ones won earlier, and that started showing the numbers. I wouldn't want to kind of put a number to that because I think it's a little bit difficult because there's a gradual – process as we install instruments and whatnot. So I think it's fair to say that the full impact of previously won tenders is not yet there. And then for sure additional tenders that were won in this quarter we're not seeing at all in the numbers. So I think from that standpoint there's a bright future in that sense. But I would not want to quantify it.

Perfect. Thank you so much.

Thank you. Thank you, Mathias. So I hope that was the answers you needed. I think we have Gustav as well. Are you ready, Gustav?

Yes, can you hear me? Yes, we can hear you. Perfect. Perfect. Thanks. So I was just wondering if you could go back to the MedTech margin here, and I would assume it's always possibilities for fine-tuning, but would you say that based on where you are today, are there still any low-hanging fruit, or have you picked everything you see?

I think we're really pleased to note that we are seeing just a gradual increase improvement in most of the companies. It's not like a one-off thing. It's the daily improvement initiatives and the cost consciousness and price management and the evolution of the product portfolio. that is really making the majority of this difference. And then, of course, as we have stated in the report as well, we're working with product pruning. We're actually consciously removing products that are not really up to the standard that we have for profitability. So that's another piece of the puzzle. So most of it is really... Just day-to-day diligent work to improve the efficiency of the business. But then of course we have the big things like Advision, which is really showing solid improvement in this quarter. And many of the subsidiaries, we're not looking at that as a group as much really anymore. We're looking at it as individual companies within different geographies. Many of those companies are actually now really back in solid double-digit margin, but not all. So I think as a whole, we still have work to do and for sure upside in that part of the business. So everything is not perfect. We still have work to do.

And then, of course, we should not forget that we have no come-on-you in the figures from this year going forward. And that, of course, also gives the props 1% on the margin.

Yeah, so that's a big improvement as well. Was that an answer to your question, Gustav?

Yeah, yeah, yeah, sure, sure. And also, I mean, you have previously been a bit nuanced when it comes to the margin in admission. Is it possible it's just a ballpark? Is it double-digit, as you allude to here, or is it still, you know, in the single-digit areas?

Well, I think some of the companies are, you know, some of them have been, you know, constantly in double-digit territory. Others have, you know, been below and now bounced back. Others are still not quite where we want them to be. So, you know, if we take a look at that previous structure, it's still single digits. We used to say, like, mid-single digits. Now it's in the upper half of that range. So it's getting better, but certainly more work to do.

Okay, that's clear. And then if we just move to lab tech here, I mean, obviously, quite easy comps on top line, as you alluded to as well. But did you see sort of a slowdown in instrument sales or diagnostics during the end of the quarter, or has it basically been stable throughout?

No, that's a good question. Like Q1 of 2024, we had a little bit of a slowdown during the month of March on the instrument side. That didn't really happen. It seems to be more stable throughout the quarter. You might expect that the instrument sales might be somewhat... low in Q1 and that may be the case, but this year was more of a normal situation where we had a little bit of a slowness and weakness towards the end of the quarter last year. So now it's a pretty I would say a decent amount of stability there. Diagnostics tends to be, by nature, fairly stable and with a nice underlying growth and also supported by some tenders. Like we mentioned earlier, this weakness in academic research is still there, but I don't think it's getting worse. So there is some hesitation there, but not dramatic, I would say.

Okay, thanks. And then just, sorry, the last one here as well. In terms of M&A, I mean, obviously, balance sheet strengthened here, and I guess you maybe are looking more actively now on targets. When you are now looking for targets, are you seeing increased competition now compared to, for example, two years ago?

Well, I think maybe you could argue that there are, you know, Slightly more people may have seen the attractiveness of this segment, but I don't think it's a drastic change. I mean, we have the players that have been around for a while and they're still there. We have our uniqueness in terms of really pan-European coverage, not only Scandinavian or Northern European presence, but we can confidently say we're present everywhere. all over Europe, from east to west and north to south. So that's a bit of a uniqueness for us. And then another uniqueness is, of course, our focus on quite advanced products, right? Big service component and strong customer relationship and the ability to make advanced technology work in the hands of our customers. So I think that's a uniqueness for us to further strengthen. And now we have a better balance sheet, so we can... move forward with some greater confidence and increased speed. But we have, of course, been preparing for this situation for quite some time. So I think we have a quite good list of candidates for this year, and we're working actively on the list for 2026 as well.

Okay, thank you very much.

Thank you, thank you.

And I think we have Ulrik, yeah?

Great, can you hear me? We can, yeah. Good morning. A few questions on my end. Again, sort of on the margin side. And you're driving this optimization program and throwing out a few less profitable products. But can you talk a little bit about the product mix in Q1? And as you mentioned, UK had a slightly weaker instrumentation sales. Is there any component of higher sort of off-the-market sales here that has played into this, or is it just structural improvement?

I wouldn't say that there are any clear swings or one-offs really in the quarter from that sense. I think, like you correctly stated, we had a huge boost in instrument sales in the first quarter of 2024, unusually high sales. We had decent instrument sales this quarter too, but not as strong as last year. Apart from that, there's nothing really drastic that changes the comparison, would you say, Kristina?

Gross margin is improving slightly, which is also due to product portfolio improving, etc. And then it's more efficiency work being done. So more than normal tweaking all the time. But no one else, no.

Okay, great. And in terms of calendar effects, you had Easter in Q1, but then you also had a leap year in Q1, and now we're entering Q2, and now you have the Easter effect. How much do you think that will quantify in terms of year-on-year comparisons here?

Well, that's a good point. We had Easter in Q1 last year, and now we have it in Q2, so that's true. It's a little bit difficult to quantify exactly the impact of it. I think it is mostly in medtech. It affects planned or elective surgery. So we might, in some countries, lose a day or two or even more. It depends a little bit on how how big the Easter is in different cultures. So one or a few days of less. So that's a good point.

Okay, great. And on lab tech, I've noted from your suppliers and larger diagnostic and lab companies positive comments on consumable growth while some reluctance on CapEx purchasing. You have for the last two quarters now been talking about higher tender activity and taking market share. Can you talk about sort of is there any structural change in terms of the tender activity that you're seeing? And do you share the view that it is strong demand for consumable across the board while some reluctance in capex?

Yeah. No, I think that's true. You know, if there is an effect on budget uncertainty and business cycle uncertainty, we might see it in bigger capital projects. That may not be an enormous exposure for us. I mean, I think other companies may have – much bigger CapEx products that they drive. But we can see that, too, and a little bit of a cautiousness around it, and more so, I think, on the research side. When it comes to the tenders, you're right. We've seen some good results of tenders in the past few months, and I think that's fantastic. So we're very, very pleased with that. I'm not sure what to make of it. I think it's been, you know, the tenders come up with... with a somewhat predictable frequency, but sometimes they're delayed and postponed and whatnot. Now a few of them have been concluded in our favor here, but these are long processes as well to get to that point. So I'm not sure if we can kind of draw any big conclusions from it other than that. Some of our customers stick to our partnership, even though we're not the cheapest option. And we're also seeing others switching to the AdLife companies because of the strong product portfolio and very trustworthy service. So I don't think it's like a big trend shift or anything like that. As in most cases, it's the daily activities and continuous work to help the customer.

Great, thanks. And last question on my end. You talked about moving towards more advanced products. And if you can give us some insight to this. I know that you recently or quite recently ventured into robotic surgery and distribution with MBA and CMR that you highlighted on your slide. But what trends are you following and what new sort of advanced products are you venturing into?

Well, I think robotics is one great example. And you mentioned the MBA and CMR. That's a great partnership. There are more partnerships like that that are in place and that we're working on in the area of robotics. And closely related to that is, of course, also imaging and so on. We are quite active, as we've talked about in the past as well, in the area of gene sequencing, adding new suppliers in more countries in that area. And we're quite pleased to note the collaboration between MediPlus, one of our important subsidiaries, and Johnson & Johnson in the Nordics. So that's another great example. So there are a lot of new and exciting products that are being added continuously.

Okay, thank you very much Fredrik and Kristina, and that was all questions on my end.

Thank you Ulrik, thank you. So let's see, do we have any more questions here? I don't see any more raised hands at the moment. Well, thanks everyone for calling in and listening to the presentation and for asking great questions. As always, don't hesitate to reach out to Christina and myself on email or phone if you have any follow-up questions. And if you have a few more minutes on this busy reporting day, please hang on to watch the Holman-Halby video. This is a great example of a company that's been... within the Adlife family for quite some time. They have improved significantly over time. They're great at service and they're a big supplier to the pharma industry in Denmark. So please hang on for a few more minutes. Thank you.

Paul and Halby have really managed to develop the business in a fantastic way the last couple of years. By implementing innovative solutions within digitalization as well as automations, they have managed to increase the business efficiency significantly. And if we compare numbers from 22 to 24, they have grown the revenue by more than 15%. But during the same period, they have almost doubled the EBITDA. And the EBITDA margin has gone from 9% to 15%. which is really an outstanding work for the business and the team from Holmen Albi.

Holmen Albi is a company that was founded back in 1964 in the center of Copenhagen, just behind the Copenhagen University. Today Holmen Albi is one of the largest laboratory equipment companies in Denmark. We have divided our sales department in three groups. It's a clean zone group with a lot of equipment for clean rooms and laminar flow cabinets. We have a cold storage team selling minus 80 degrees freezers and refrigerators and minus 150 degrees freezers. mainly for storing DNA in biobanks in Danish hospitals. And we are the number one with minus 80 degrees Celsius in Denmark. Together with that, we have a huge technical service department.

The service offerings we have, it is all from PN contracts to repairs, customer training, evaluation. a very wide range of different offerings and the special thing about it is that we are making sure that we have offerings from we install the products all the way when it's out there for maybe 10 years so have as low fall rate as possible then we have a environmental correct way of disposing the product added values with the technical service with the education with the seminars and all that things

This is actually creating a lot more loyalty by the customers buying from us. Our suppliers, they love this. At Holmenhalve, we are aiming very much at the pharmaceutical business or industry in Denmark. And we have grown from around 30% of our customers is up to 60% of all the customers we have in Holmenhalve is pharmaceutical industry today.

So if I look at what transformational change Holman Halby has done over the last couple of years, if I look at where they are on the market, what kind of offerings they have, the service they have, and the kind of added value they give to the customers, I'm extremely optimistic for the future for these companies.