AddLife AB (publ)

Good morning, everyone, and a warm welcome to the AdLife second quarter report. Kristina and I will take you through the highlights of the report. And after that, we will have a Q&A session as always. And as you may remember, we like to show you a little bit of a summary of some of our companies. So this time around, we are we have recorded the video with MBA, our Spanish and Portuguese company that are fantastic in orthopedic surgery. and now expanding into other fields of advanced surgery and hospital products. But let's get started now with the numbers. So I'm really pleased to share with you all that the AdLife companies continue to deliver on the priorities that we have set out. And the number one priority, as you may remember, is to improve margins and profit. So we saw a significant margin improvement in both business areas, actually, both lab tech and med tech achieving a level above 12 percent EBITDA margin, and that's a significant increase for both business areas. We saw a healthy customer demand, and the currency-adjusted sales increased by 5 percent. Organic growth was 3, and really pleased to note that we see a meaningful impact of the acquisitions we have made recently, so acquisitions contributed with 2 percent. In Labtech, we had a very strong revenue development at 9 percent, excluding currency effects. In Medtech, we had a little bit of fewer operating days, a little bit of change in product portfolio, and some reduced capital sales, but nevertheless, 4% increase excluding currency effects. So very healthy development there as well. We are working with a number of profitability improvement initiatives in a few companies. That is progressing well, but we also see that there is more potential in the future. And of course, cash flow and net debt is a key topic for us. We are now at 3.1, slightly above the ambition that we have set out of 3.0 or below. Cash flow was healthy in the quarter, and if you look at the full year or the year-to-date effect, it's a very strong growth in cash flow. But we also did pay dividend. We paid for the edge medical acquisition. We paid out an earn-out, and we saw some strong currency effects as well. But we remain committed to staying at 3.0 or below. So with that, I hand over to Kristina.

So thank you, Fredrik. Our companies delivered solid growth in the quarter if we summarize organic and acquired growth adjusted for currency. So looking at revenue, the organic and acquired growth summarized to 5% and EBITDA growth was 10%. In the currency, we have had exchange rate effects and in the revenue, it was a negative 4% and in EBITDA it was a negative of 5%. Looking at the profit and loss. We had sales growth including currency effects of 1%. The acquired growth was 2% and the organic growth was 3%. Labtech organic growth was 6% while Medtech organic growth was 2%. And Fredrik will give more details on the different business areas later on. The gross margin improved from 38% to 39%. This is a combination of price increases, but also a favorable product mix. This means that we have added advanced high margin products as well as pruned the product portfolio for non profitable products. If we look at total OPEX, the increase was 3%. Being a company With acquisition as part of the business model, that means that acquisition cost is included in the OPEX. And this quarter, we have acquisition costs of 8 million related to Edge. Also, of course, in OPEX, we include the acquired companies OPEX. So if we divide the OPEX from the acquired companies as well as acquisition cost, OPEX was pretty much flat thanks to good cost control in the companies. And with that said, that also means that the contribution from Edge in the quarter was set off by the acquisition cost. So the positive contribution will be seen from next quarter going forward. EBITDA margin was 11.9 compared to 11.4 in the corresponding quarter last year. Interest rate has come down, meaning that interest cost is lower compared to last year. Profit before tax was 29% growth. Lower interest cost also has an impact on the tax rate, depending on the rules on deduction of interest cost. Profit after tax increased with 39%. The EBITDA margin is clearly in a positive development. And the EBITDA margin in this quarter was 12.4 for both Labtech and Medtech. Labtech increasing from 11.6 last year and Medtech from 11.9. If we look at the year-to-date EBITDA margin, that was 12.3 compared to 11.5 last year. Accumulating operating cash flow improved with 25% compared to last year. If we look at the quarter, it was slightly lower compared to last year, and that is due to reduction of accounts payable and increase of accounts receivables. Inventory remains flat despite revenue growth in the quarter. And if we look at the ratio inventory compared to sales last year, it was 17% throughout the year, while this year it's gone down to 16%. Cash conversion is stable at the high level, about 90%. And inventory reduction and working capital efficiency is a continued focus area. The negative working capital is, as I said, a result of lower accounts payable, but increased accounts receivables. And that is due to sales, high sales in the latter part of the quarter. In the quarter, we have paid for the edge acquisition as well as earn out for previous acquisitions. And we have also paid dividend. The total sum of the acquisition for edge, earn out payments and dividends is 270 million. Those has been financed by using of catch and also increased utilization of the credit facilities. Net debt has also increased with earn outs related to edge and exchange headwinds. And with the majority of the loans in Euro, the negative impact from FX was 115 million in the quarter. When we summarize the net debt, we include bank loans, leasing liabilities, continued consideration, pension liabilities, provisions, and then we deduct cash. If we look at the financial net debt, that would summarize to 4.2 billion compared to the 4.9 billion as total net debt. EBITDA last 12 months has increased. Interest rates has come down and in this quarter it was 4.2. With the recent intrusivities, net debt has also increased with earnouts related to edge and exchange headwinds. And with the majority of the loans in euro, the negative impact from FX was 115 million in the quarter. When we summarize the net debt, we include bank loans, leasing liabilities, continued consideration, pension liabilities, provisions, and then we deduct cash. If we look at the financial net debt, that would summarize to 4.2 billion compared to the 4.9 billion as total net debt. EBTA last 12 months has increased, but with the increase in net debt in the quarter, the ratio net debt to EBTA increased to 3.1 from the 2.8 last quarter. The ambition remains to be at or below 3. Net debt to equity of 0.9 is below the internal guidance of 1.0. And as said previous, debt is to be reduced via self-generated cash flow. Interest rates has come down and in this quarter it was 4.2. With the recent interest cuts from ECB, we expect interest costs to be lower in Q3. We have two covenants, and we have good headrooms to both of them. One is interest coverage ratio, that was 6.8 in the quarter, should be above 4. And then equity ratio, that was 41 in the quarter, and that should be above 25. And with that, I hand over to Fredrik again.

Thank you, Kristina, for a great summary. Now we move into the business area, starting with Labtech. So Labtech had a very strong quarter, growing at 9% excluding currency effects. And really pleased to note also that we could see an acquired growth of 3%. The EBITDA margin improved significantly to 12.4, a solid improvement over 11.6 that we saw last year. The demand in diagnostics is as always stable but growing very nicely in this quarter and multiple companies have had tremendous success with tenders both new ones where we take over business from competition and others where we get a renewed confidence to continue for multi-year contracts and oftentimes with renegotiated terms that leads to improved margins. Demand in pharma remains quite high and high activity there so that's great and we see some hesitation as we've spoken about before in the academic research investment but that's mostly on the capital side reagents and consumables are continuing to be frequently bought and used so all good there The companies within Labtech are really renowned for their strong service provision, and that's a key differentiator in helping us to win the confidence of customers, but also helps us to launch new products and take over product portfolios from competitors and suppliers. So a great quarter for Labtech. Moving into Medtech also had a good quarter. The growth was 4% and really pleased to note that the acquisitions are actually able to add a meaningful 2% to the mix. The EBITDA margin improved to 12.4 as well compared to 11.9. in the previous quarter, and that is adjusted for contingent considerations as well. So overall, a very healthy development in demand for the business area. But we saw a little bit slowness in revenues in the UK. And as you know, UK is one of our most important markets. That is with all likelihood driven by uncertainty about the government budgets. And we have also seen some of our industry peers speaking about the same issues. And that has led to a little bit slowness on capital spend. However, we are confident that there is a strong will to invest in the healthcare system in the UK. So with all likelihood, this will improve going forward. We also saw a little bit of weakness in some areas as we shift the product portfolio towards more advanced and high margin products. That can in the short term lead to reductions in revenue and a little bit of inventory build up as well. But over time, this is one of the key factors to drive growth and higher margins over time. So back in 2022, we set the following priorities for the group. Number one, to protect and improve profit. Number two, to drive organic growth. Number three, to improve cash flow. And when we are delivering on those, get back into acquisition mode again. And now I'm really pleased to note that all the companies are performing really well and are delivering on these priorities. So that means that we are gradually getting ready for a more active acquisition agenda. And a great example of this acquisition strategy is, of course, the acquisition of Edge Medical, which we completed early in the second quarter this year. Edge Medical is a leading distributor of advanced products in orthopedic surgery, but also spine and neurology, and they are active in UK and Ireland. It's a fast growing company, revenues of around £8 million with really high margins. And this acquisition is perfectly in line with the strategy that we have laid out. We do want to grow in orthopedic surgery. And a good thing about this acquisition is also that we have a lot of competence in orthopedic surgery within the AdLife group, and other companies will be able to contribute with products and services to help Edge Medical grow faster going forward. So a warm welcome again to the Edge Medical team. And of course, we are keeping a close eye on the developments in the world and in the world trade in particular. So in this time of trade disruptions, we can conclude that AdLife is well positioned. We have more than 90 percent of our revenues in Europe and actually more than 80 percent of our suppliers also in Europe. North American products represent around nine percent and Asian products seven. And out of that, only four percent are products from China. This may be important also when we now have seen new regulation when it comes to tenders in Europe that restricts Chinese products. On top of this, we have limited exposure to changes in the business cycle due to our focus on the healthcare and hospital and diagnostics market. And of course, last but not least, our decentralized business model. This makes us able to act quickly and adapt to changes. And we have proven that previously, for example, during the pandemic. Of course, we remain focused on analyzing these things to prevent any negative impact. We are analyzing our subcontractors and component exposures. We are paying attention to academic research investment. We can sometimes slow down a little bit in times of uncertainty, and we are continuously evolving our product portfolio to further reduce reliance on suppliers that are more at risk. But overall, a great position that we are in, very little exposure to potential trade disruptions. So, to summarize the quarter, we are really pleased to note that we see significant margin improvement in both business areas, and on top of that, a quite healthy revenue growth. The work to continuously evolve our product portfolio continues, and we are moving towards more and more profitable, advanced products. We have been able to strengthen our balance sheet, And with that comes the ability to increase the acquisition activity. And in the quarter, we have worked a lot on various changes and updates to the organization so that we are ready for an increased organic and acquired growth going forward. And of course, finally, the acquisition of Edge Medical is a fantastic addition to the AdLife family. And we are also pleased to note that acquisitions are really meaningfully contributing to growth in this quarter. We have completed the presentation of the AdLife second quarter, and we are opening up for questions. Please stay tuned after the Q&A session as well, because we do have a fantastic video describing the MBA business coming up right after the Q&A.