BICO Group AB (publ)

Hello and a warm welcome to BICO's earning call, where we will present our year-end report for 2024. My name is Maria Fors, and I'm the president and CEO of BICO. Now, all together with our CFO, Jakob Thorndenberg, present this report. Today's agenda is divided into five sections before the Q&A session. We will begin to summarize the fourth quarter and we'll further comment on the market development. Then we will focus on BICO's group's performance with fourth quarter, as well as the financial year 2024. This will be followed by a presentation of our three business areas performance. We will also present the development of our strategic priorities and comment upon the outcome of our financial targets. These five sections will be in listening only mode. After the presentation we invite you to our Q&A where the earnings call host will be backed with further instructions. I will begin to summarize the final quarter of 2024 where we generated sales on par with the corresponding quarter last year. 2024 was a year of transition. We successfully dealt with some key issues from previous years. Our updated strategy was presented during our capital markets day, focusing on opportunities and lab automation and integrated workflows, which our product portfolio uniquely addresses. We further strengthened the executive management team with several roles and further drove operational excellence in internal restructurings. And while doing all this, we achieved our revenue performance on par or even better than our life science peers, despite a continuing difficult and uncertain market environment. And thanks to less operating expenditures and seasonal effects, we generated an adjusted EBITDA resulting in a margin of 25%. This corresponds to a 12 percentage point improvement compared with the corresponding quarter last year. We finished the year with healthy double-digit EBITDA margins for all business areas. We also finished the year with a strong cash position of 946 million, and deducting for the buyback yesterday, cash amounted to 699 million, all else equal. We also saw signs of market recovery, where consumables have recovered first, and this is also confirming the positive trend that started in Q3. For the quarter, we saw mixed performance for our business areas, where life science solutions was positively impacted by seasonal effects. And it's important to keep in mind that Baikos sales, primarily for life science solutions and bioprinting, are affected by seasonal effects. Historically, the group has gradually increased sales and profit during the calendar year, with quarter one normally being the weakest quarter and quarter four the strongest. Bioprinting had a healthy demand from consumables in Matek, And selling showed an uptick in sales on the back of consecutive quarters of negative development. Lab automation was hampered by a few project starts in the quarter. We also divested Nonoscribe in November 2024, and this business is treated as discontinued operations from Q4 2024. The rationale for this divestment was that Nonoscribe was concluded to be non-core due to its significant footprint outside the life science industry, and the divestment impacted cash flow from investing activities net by 251 million. In addition, we have continued to reduce the convertible debt on the back of a strong cash position by further bond backs. In November 2024, we bought back 118 million of the convertible bond, and yesterday we announced further buybacks to an amount of 276 million. Post the buybacks, the convertible debt now amounts to 1.1 billion. we aim to further reduce our long-term debt and optimize our capital structure and we are actively working with various activities regarding the refinancing of the convertible bond which is due in march 2026. let's move on to the market development the purpose of this section is to comment on the market development and sales per geography year-over-year And look back at 2024, we can conclude a challenging year for our industry, characterized by general market uncertainty, CapEx constraints, as well as weak demand from China. Over the last months, the market has started to pick up, and as I mentioned on the previous slide, we have seen signs of gradual market recovery, where consumables are recovering first. This is something that we have seen for the second consecutive quarter, and it has also been reported by our peers. Year over year, we see a positive development in North America, which is attributable to the demand from large pharma customers in lab automation. Europe was flat year over year, and we saw a decrease in share of sales to Asia and primarily in China. Our Asian, including China, direct exposure is however limited, representing only 8% of sales for the full year of 2024. This is a decline with six percentage points compared to 2023. The slower market in China is also reported by many of our peers, and this is indirectly impacting our business. We're closely monitoring the development of any potential additional US tariffs and other continued macro and geopolitical uncertainties in the market. And we're also monitoring the development of the NIH funding in the US. Our focus for 2025 is to continue to execute on the BIPO 2.0 strategy. with commercial initiatives being one of our top priorities. And with that said, I will hand over to Jakob for a summary of our financial performance.

Thank you, Maria. And since we have reached the final quarter of the year, I will also comment on full year 2024. All numbers are presented in million Swedish crowns. And I would also like to remind you that from the first quarter of 2024, FICO reports in functional reporting and comparable numbers have been adjusted accordingly. Furthermore, all organic growth figures are in constant currency. As Maria mentioned, we generated sales of 571 million, which is on par with the corresponding quarter last year and in line or embedded in our peers. This resulted in a negative organic growth of 0.3% and I will present more sales data after the overview of the quarter and the full year. In the quarter, adjusted EBITDA amounted to 142 million and reported EBITDA to 122 million. The gross margin for the quarter amounted to 58%, which is an improvement quarter over quarter. and is explained by the product mix and less project-related business in lab automation, where the gross margin is lower than in our instrument companies, due to the significant share of third-party hardware included in Cox, resulting in a lower gross margin than the instrument companies in the group. On the next slide, I will comment on the financial performance for the full year 2024. And we generated sales of 1,946,000,000, which corresponds to a negative sales growth of 3.2% year over year and an organic growth of negative 2.8%. 2024 was a challenging year for our industry. In BICO, we continued our transformation with several initiatives in operational excellence, internal restructurings and organizational changes, as well as an updated strategy, BICO 2.0. Gross margin in the full year amounted to 52%, an increase of 2.4 percentage units compared to 2023. The positive impact can be explained by cost-cutting measures, product mix and extraordinary impairments prior years. Adjusted EBITDA for 2024 amounted to 197 million, corresponding to a margin of 10.1%, compared with 171 million and 8.5% for 2023. The increase is mainly attributable to gradually improved cost control and operational excellence initiatives. Operational cash flow amounted to 158 million in 2024, and with changes in networking capital excluded, the amount was 110 million. In 2023, operational cash flow amounted to 178 million, and if excluding the large influx of funds released from networking capital, operational cash flow amounted to negative 5 million. However, note that the operational cash flow includes discontinued operations. To conclude, Veiko has over the past two years taken significant steps in improving cash flow with divestment of loss making units, working capital improvements as well as internal restructurings and cost cutting initiatives. This while maintaining sales on a total level. For Q4, sales amounted to 571 million, which corresponds to a revenue level on par with Q4 last year, with a sales growth of 0.1%. 2024 has been a challenging year for the whole life science industry, and as Maria mentioned on the slide with market development, it was characterized by a general market uncertainty and soft demand from primarily diagnostics and academia and research segments through CAPEX constraints. Q4 is normally our strongest quarter impacted by positive end of year budget releases. And this pattern was confirmed in Q4 2024. And if we move on to profitability, It is pleasing to see the significant margin improvement achieved in Q4, where adjusted EBITDA amounted to 142 million, corresponding to a margin of 25%, an increase of 12 percentage points quarter over quarter. As previously mentioned, the full year 2024 adjusted EBITDA amounted to 197 million, corresponding to a margin of 10%, an increase of 1.6 percentage units year over year. Given the soft market, which has lasted longer than expected, we can conclude that the diligent work with keeping cost control in combination with seasonality effects are the contributors to the significant increase in profitability in Q4, indicating that Baico is well positioned for strength and profits when the market eventually recovers. And if we move on to the next slide in our cash flow, The cash flow from operating activities for the quarter amounted to 182 million. This is an increase with 20 million compared to the corresponding quarter last year, primarily related to margin improvements and funds released from net working capital. The positive effect from changes in working capital amounted to 43 million in the fourth quarter. Out of this, 2 million was related to increases in operating receivables. Inventories decreased by 19 million, continuing the positive trend of decreased inventory and operating liabilities increased by 26 billion. Investments in tangible capex in the quarter amounted to 9 million. Historically, our tangible capex levels have been elevated due to investments into facilities in Berlin and Oulu, where the facility in Berlin was divested in 2023 and the building in Oulu was called out in the divestment of Genolis. The now lower levels of capex, circa 2% of total revenues in 2024, is the result of being more selective in investments and our tangible capex levels are now balanced and close to steady state levels. Investment in intangible capex amounted to 11 million. To put this into context, we have during the year made a full review of all R&D projects and now have a much more focused R&D agenda, meaning that we're also being more selective in our capital allocation into intangible capex. Also worth to mention is that the group has now no remaining estimated earn-out payments related to acquisitions. Total cash flow during Q4 amounted to 264 million, whereof 251 million was related to non-scrab and negative 99 million was related to the bond buyback carried out in November. Excluding these activities, total cash flow in Q4 amounted to 112 million. Maria commented on our cash position earlier in this call, and I believe it's worth repeating that we have continued to reduce our convertible debt on the back of our strong cash position. In November 2024, we bought back 118 million of the convertible bond, and yesterday we announced further buybacks to the amount of 276 billion. Post the buybacks, the convertible debt now amounts to 1.1 billion. Cash reserves by year end 2024 was 946 million or 699 million deducting for the most recent buyback, all else equal. Our aim is to further reduce long term debt and optimize our capital structure. In addition, we are actively working with various activities regarding the refinancing of the convertible bond, which is due in March 2026. This slide shows the development in networking capital between Q4 2023 and Q4 2024. During this period, networking capital has decreased from 417 million to 375 million. For Q4, networking capital in relation to the last 12 months sales decreased from 21 to 19%. This shows that the work carried out and action implemented since 2023 and continued during 2024 has been successful. We will continue to work with operational excellence initiatives going forward to maintain a healthy level of networking capital. I will now hand over to Maria for comments on how our three business areas have performed.

Thank you, Jakob, and I will guide you through our business areas performance for the fourth quarter and briefly touch upon the full figures for 2024. Veiko has a new business area structure since last quarter, i.e. quarter three 2024. The new structure was introduced during our capital markets day and the purpose has been to better reflect the updated strategy and our commercial focus. Veiko now consists of the business areas lab automation, life science solutions and bioprinting. Let us now move on to see how the business areas performed. For quarter four, the revenue for the business area lab automation amounted to 122 million, corresponding to an organic growth of negative 17%. The adjusted EBITDA amounted to 19 million for the fourth quarter 2024, corresponding to a margin of 16%. And the project nature of this business resulted in significant revenue variations between the quarters. An example of this was the large order of 28 million US dollars won in late 2023, with a growth spike of 109% in Q1 2024 compared to Q1 2023, resulting in a high upcoming comparison for Q1 2025. Consequently, this business shall be viewed over a longer cycle rather than isolated quarter, and this is something that I will comment upon in the next slide. For the full year 2024, sales and lab automation amounted to 572 million, which corresponds to an organic growth of 14%. The adjusted EBITDA amounted to 93 million, which corresponds to a margin of 16%. Both sales and profitability levels were hampered during the second half of 2024 by fewer project starts. If we look at the chart to the right, you can see sales and adjusted EBITDA margin rolling 12 months with less variances, and over time, a positive double-digit adjusted EBITDA margin trend. As presented during our Capital Markets Day, the lab automation market has a growth rate indicated at CAGR of 6.3% to 9.3%, between 2023 and 2035, where the integrated automation solutions market expects to grow faster than the overall lab automation market. We continue to see a strong underlying demand for our integrated lab automation solutions, although the sales cycles for larger orders from pharma are currently longer due to the macro environment. If we move on to life science solutions, In Q4, Life Science Solutions net sales amounted to 344 million. The organic growth was 7%, thanks to a positive seasonal effect for the instrument-oriented companies, impacted by a year-end budget release. From a profitability standpoint, the business area delivered an adjusted EBITDA of 115 million, which corresponds to a margin of 33% in the fourth quarter. This can be explained by both seasonality as well as positive effects from cost control generated from operational excellence activities. For the full year 2024, Life Science Solutions performed as follows. The business areas sales amounted to 1 billion and 9 million, which corresponds to a negative organic growth of 7% year over year. Sales were hampered by general capex and spending restraints in the industry and a soft demand for the diagnostic segment as well as the academia research segment. For the full year 2024, the adjusted EBITDA margin amounted to 16% for life science solutions, which compared to the strong finish in Q4 and the weak development in mainly Cyanium, which has been reported about in previous quarters. Looking at the chart, we can see sales and adjusted EBITDA levels on a rolling last 12 months basis, where profitability levels have been positively impacted by strict cost control initiated from 2023 and onwards. If we move on to the business area bioprinting, this business area generated net sales of 106 million in Q4. The organic growth in the segment was 0.7% and the adjusted EBITDA was 29 million, corresponding to a margin of 27%. Matic, offering consumables within human derived tissues, continued to perform well. And Cellink also showed an uptick in sales on the back of consecutive quarters of negative development. Let's move to the next slide to look at the full year figures. For 2024, the business area sales was hampered by soft demand in Asia, as well as academia research in general and challenges in Cellink particularly. The business area generated sales of 369 million and a negative organic growth of 12%. Bioprinting achieved an adjusted EBITDA margin of 9% and was hampered by a weak Q1. The improved EBITDA over the year also shows that the restructuring of selling has gradually given effect during the year. And these effects can also be seen in the chart to the right, where you can see the business and profitability development rolling last 12 months. Worth to point out is the return to better margins levels in Q4. In November last year, we announced further rightsizing and launched a sharpened commercial agenda for selling. Actions such as new pricing strategy and a more focused commercial offering has begun to show effect. And as mentioned during the call, We divested Nonescribe by the end of November 2024, and this business is treated as discontinued operations for Q4 2024. And before we move on into the Q&A, we would like to comment on the development of our strategic priorities and the outcome of our financial targets for 2024. I will give you a brief update about the development in our four areas of strategic priority. These were initiated a year ago as during the capital market phase, these were reiterated with some further details within each area. In terms of commercial excellence and strengthening of the commercial capabilities to drive profitable growth, that is our top priority. We have focused our product portfolio offering. We have moved from point solutions to workflow offerings. We also started initiatives to increase the share of recurring revenue. 2025 our focus will be to continue to roll out sales and marketing related initiative such as cross-company lead generation and better leveraging the commercial synergies in the group for a second priority strategic review we completed a full review of all r d projects as well as the product portfolio and one of the outcomes was the divestment of nanoscribe in november 2024 we have also a more focused r d agenda which can increase our r d productivity and for 2025 we'll refine our r d roadmap further to meet our customer needs even better as well as optimizing our capital allocation within the area of people and culture we rolled out a global hr organization we launched joint corporate values and also several other people-oriented key global initiatives, which has created a foundation for more efficient operations. During 2025, we will continue to implement key HR global processes and solutions to support a continued successful execution of Bico 2.0. In operational excellence, we have successfully executed on several initiatives that has improved our profitability. We have also implemented a global operations organization, including a global project management office, as well as a global QAR organization to ensure improved processes and standards. This will also improve our regulatory readiness in the group, as well as providing a foundation for better R&D productivity. We're also rolling out strategic outsourcing initiatives to get a more consolidated, cost-efficient manufacturing footprint. And this will provide more flexibility in which geographies we are producing. All in all, many processes to scale our business and deliver shareholder value have been implemented. And I will now hand over to Jakob, who will go through our strategy on the page and the outcome of our financial targets.