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?