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 Jocko Thordenberg 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 will further comment on the market development. Then we will focus on BICO'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 back with further instructions. I will begin to summarize the final quarter of 2024 where we generated sales in 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 goals and further drove operational excellence in internal restructurings. And while doing all this we achieved a revenue performance on par or even better than our life science peers despite a continuing difficult non-started market environment. Thanks to less operating expenditures and seasonal effects we generated an adjusted emitter 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 quarter three. 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 BICO 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 fewer products starting the quarter. We also divested Nanoscrabe in November 2024 and this business is treated as discontinued operations from quarter four 2024. The rationale for this divestment was that Nanoscrabe 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. 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 Asia including China direct exposure is however limited representing only 8% of sales for the full year of 2024. This is a decline with 6 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 are closely monitoring the development of any potential additional US tariffs and other continued macro and geopolitical uncertainties in the market. And we are also monitoring the development of the NIH funding in the US. Our focus for 2025 is to continue to execute on the Byco 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 Byco 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 .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 recorded EBITDA to 122 million. The gross margin for the quarter amounted to 58% which is an improvement quarter over quarter. And this 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 including in cogs 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 ,000,000 which corresponds to a negative sales growth of .2% year over year and an organic growth of negative 2.8%. 2024 was a challenging year for our industry. In Byco we continued our transformation with several initiatives in operational excellence, internal restructurings and organizational changes as well as an updated strategy Byco 2.0. Gross margin in the full year amounted to 52% an increase of .4% 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 .1% compared with 171 million and .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, Byco has over the past two years taken significant steps in improving cash flow with investment 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 the 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 of 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 the -is-well position for strengthened 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 million. 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 Ginoles. 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 are 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-up payments related to acquisitions. Total cash flow during Q4 amounted to 264 million, where of 251 million was related to Nanoscrub 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 resource 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. Byco has a new business area structure since last quarter, i.e. Q3 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. Byco now consists of the business areas lab automation, life sign solutions and bioprinting. Let us now move on to see how the business areas performed. For Q4, 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%. 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 an 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, no 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 a tagger of 6.3 to .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 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 live science solutions, in Q4, live science solutions net sales amounted 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, live science solutions performed as follows. The business area's sales amounted 1 billion and 9 million, which corresponds to a negative organic growth of 7% -over-year. Sales were hampered by general capex and spending restraints in the industry and a soft demand from the diagnostic segment as well as the academia research segment. For the full year 2024, the adjusted EBITDA margin amounted to 16% for live science solutions, which compared to the strong figures in Q4 and the weak development in mainly Sajenian, 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 .7% and the adjusted EBITDA was 29 million, corresponding to a margin of 27%. MATDEC, offering consumables within human derived tissues, continued to perform well, and SELINC 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 SELINC 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 quarter one. The improved EBITDA over the year also shows that the restructuring of SELINC has gradually given effect during the year. 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 right sizing and launched a sharpened commercial agenda for SELINC. Actions such as new pricing strategy and a more focused commercial offering has begun to show effect. As mentioned during the call, we divested non-described by the end of November 2024. This business is treated as discontinued operations from Q4 2024. 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, and 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. For 2025, our focus will be to continue to roll out sales and marketing related initiatives, such as cross-company lead generation and better leveraging the commercial synergies in the group. For our second priority, strategic review, we completed a full review of all R&D projects as well as the product portfolio. One of the outcomes was the divestment of non-described in November 2024. We have also a more focused R&D agenda, which can increase our R&D productivity. For 2025, we will 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 bi-contributing services. 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 QA 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 are 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 a page and the outcome of our financial targets.

Thank you, Maria. On this slide, BICO's strategic house and our updated strategy, BICO 2.0, is summarized from our vision to mission, strategic focus areas within commercial excellence, corporate values, and the impact we make, which boils down to our financial targets. We reiterated our financial targets during our capital markets day in September 2024, as we want to deliver on the existing targets before setting new ones. For the growth target in 2024, the outcome was negative 2.8%. The outcome was below target due to the challenging market described earlier. For the profitability target, the outcome for adjusted EBITDA was 8.7%, which is below our target, but has gradually improved. For the net debt target, we closed 2024 with 2x adjusted EBITDA in relation to the net debt. The divestment of non-oscran and a positive cash flow from operations has improved this ratio and is now well below the target. Looking ahead, we are poised to continue to execute our strategy in 2025. This was our final slide before the Q&A, and I will now hand over back to the earnings calls host for further instructions.

The next question comes from Rickard Anderkrans from Handelsbanken. Please go ahead.

Good morning. Thank you for taking my questions. First on, you mentioned the recovery in the market driven by consumables, but the share of consumables and services as a share of sales has remained relatively low. Maybe you could elaborate there and maybe also talk a little bit about the initiatives you mentioned in the report to increase the share of recurring revenues. Thank you

for the question. When it comes to consumables, when the market starts to recover, that's usually where you see the increases starting. That's the same for us as well as for our peers. We had a strong quarter format, and that's the main uptick when it comes to consumables. While selling, that also is part of the consumable sales, had a tough year. That's why you don't see a net effect positively overall. When it comes to the second part of your question about different initiatives to increase consumables as well as recurring revenue, we have several initiatives ongoing. For instance, we have some standardized operating procedures where we provide customers with protocols going from A to Z, which includes both instruments as well as consumables. Another area that we are working on is to increase the share of service contracts. These are a few examples of what we're doing to increase consumables and service in our offering.

That's very clear. You mentioned here softness in lab automation, fewer project starts, quite similar to the Q3 wording. How does the pipeline look for 2025 in terms of project starts? It would be interesting since you mentioned that the underlying trend remains very strong here for BioZero. I'll stop there.

Thank you, Richard. We never comment upon our order backlog, but again, the underlying demand is healthy.

Looking at the pretty extreme margin improvement in bioprinting this quarter, could you elaborate a little bit more on the key drivers there and how much seasonality should we expect from this business going forward? Also, how Q4 dependent is bioprinting margin development given that it's a relatively high share of consumables? Just trying to understand the dynamics a little bit, the drivers. Thank you.

I understand the question. Thank you, Richard. The bioprinting part of our business is quite seasonal. The margin uplift that you see is roughly in line with the margins that we had last year, but it's on the back of lower sales. But it's very much related to the fact that we have done quite significant cost savings in selling that we have communicated also during the year. But the business is indeed seasonal, just as Lifesign Solutions is also quite seasonal, with Q4 being by far the strongest quarter, which is then typically followed by a seasonally weaker Q1.

Very clear. I'll just squeeze one more question in if I could. Just following up a little bit on any restructuring initiatives that are still ongoing or left into 2025, primarily in terms of headcount reduction, or are you in a position where you can actually start to lift the gaze from the internal focus and focus a little bit more on R&D? R&D and growth, or sort of where are you in that process?

There are no decided additional internal restructuring.

Okay, that's clear. Thanks for taking my questions. Thank you.

The next question comes from Ulrik Trattner from Carnegie. Please go ahead.

Thank you very much. Hi, Maria and Jacob. If we can start off with focusing on the very strong cash flow and the trend that we have seen and improvement in working capital and that being tied to now the reduction in net depth, which is now down to what looks like a manageable level. How should we view your confidence in refinancing the convertible debt? Had that increased over 2024 and especially in the second half? Or how should we view this? You're buying back, obviously, the convertible. But how should we view it?

I think you should view it. And I think we have talked about this in our sign in the previous earnings calls. We are very confident when it comes to refinancing all the convertible on the convertible bond. I mean, it's now at the level of 1.1 billion, given the buybacks that we have done now in November, and the last one was announced yesterday. And we continue to have a strong cash position. As I mentioned, it was 946 million Swedish crowns. If you deduct for the most recent buyback, it was close to 700 million. So we're confident in our ability to refinance the bond. And we are actively looking into various options on how to refinance it.

And if we were to look at cash flow going into Q1, it is seasonally, as you mentioned, the weakest quarter on sales and earnings. And historically, if we were to exclude Q1 this year, it is generally a cash release quarter. But now cash flow is really strong in Q4. So how should we look at Q1 and potentially H1 cash flow in 25, given that your network in capital is really strong? And I think that seems very stable and earnings are expected to be a bit lower in the first half of the year versus the second half.

Yeah, I think what we have seen historically is that we have, as I also mentioned in the call, is that we have seen sort of significant funds being released from networking capital. And I don't expect the same level of funds being released from working capital. And from a cash flow profile perspective, H1 is also seasonal. And it's also sort of a weaker period in terms of cash flow generated from the P&L. And as I said, I don't expect any significant releases from networking capital. Great.

And a few questions on the market outlook. I know there's a lot of uncertainty and a lot of political topics that are sort of clouding the skies. But how should one look at the 2025 outlook? I know that consumable heavy companies have a more positive outlook versus more instrument heavy. And you are a bit more on the instrument heavy side, as well as how you have a few subsidiaries in the US, but the majority of your device companies are located in Europe. Do you see any risk of tariffs in the US and how are you handling this?

Thanks Ulrik. If we start to comment upon the industry overall, the broader life science industry still faces a weak demand and there is still cautious capital spending as well as geopolitical uncertainties. So there is a slower than expected demand recovery. And I think when it comes to what we will see further in the US, it's still early days. And of course, we cannot affect the geopolitical changes, but what we can do as a group is to prepare as much as we can. And we have launched several outsourcing initiatives during 2024 with footprint both in Europe and the US. And that means that we can transfer production to the US if needed, depending on how tariffs, etc. develops. We also have a more agile supply chain. Already when I joined late 2023, we started to look at both components as well as product supply from China, ensuring that we have a more agile supply chain so we can act dependently on how the winds will blow when it comes to tariffs. Another big thing to monitor, of course, is the development in NIH. At the moment, we have a direct exposure, which is quite low. But given that some of our customers are also competitors, we might have an indirect effect. So as presented during our capital markets day, the strategy is to increase our sales in pharma and biotech at the expense of academia, which will then decrease our exposure to NIH even more.

Okay, great. And two more questions on my end. A few years ago, like in the end of 2022, you got an investment from Satorius and that was expanded into commercial and distribution agreement into the APAC region. And ever since, the APAC region has been in an underlying market fairly weak and there's a lot of talks about stimulus packages that should be positively affecting China specifically in 2025. What should be expected from Satorius as a distribution partner in that region in 2025? Is there any potential that that could be a positive development there? I

can certainly not comment upon Satorius sales, but they are one of our many different distribution partners in Asia, where we have a very low exposure today. And so far, neither us or other peers have seen much effect of those stimulus packages yet. When it comes to our collaboration with Satorius, the main collaboration is through development, where we combine our products with Satorius products and we have a handful of different initiatives ongoing, which mainly are focused on digitalization as well as lab automation, which is then in line with our strategy.

Great, thank you. And last question on my end, and you touched upon the underlying margin improvements in bioprinting and you talked about improvements in selling specifically. Can you talk about how the profitability level have looked like throughout 2024 and how it looked like in Q4?

I think it's, I mean, if you look at the historical levels, we've had much lower margins in bioprinting in Q1, Q2 and Q3. And the combination that you see in Q4 is related to first off, cost savings that we have implemented during the year in selling. And additionally, also the seasonal effect, as I mentioned to Richard, where you have a quite significant spike in sales in Q4. And that pattern is also, you have also have a similar pattern in our life science solutions business area, where you also have a typically a seasonally strong Q4 followed by a seasonally weaker Q1.

So given sort of the lower volume, but the higher absolute EBTA contribution, we should interpretate that as selling being profitable in Q4.

Yes.

Great, that was all the questions on my end. All

right, thank you,

Rick. There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Together with Jakob, I would like to wish everyone a great Wednesday and remind you that our next report will be quarter one 2025, and this will be released on Tuesday, April 29. Thank you.