Biotage AB (publ)

Thank you very much. Good afternoon, everyone, and thank you for joining us on our interim report Q1 call. I'm Thomas Lundqvist, president and CEO of Bytosh, and I'm here with Maja Nilsson, our CFO. Here you can see the agenda for today's call. But before Maja dives into the Q1 results, I will give you an overview of the quarter. We will also answer your questions at the end of the call. So let's start with our executive summary on slide five. Overall, our core business is developing well in most areas and regions, and two out of our three customer focus areas are growing. Looking at the regions, we had a double-digit growth in ASEAN and in the Americas, where we even had an all-time high record month in March. Also, Korea and our distribution business in all three geographies were growing. Going into our product focus areas, we saw a double-digit growth within diagnostics, analytical testing, and water and environmental testing. Also, the biologics and advanced therapeutics product grew in the mid single-digit range. For the first quarter since the ATD bioacquisition, we can now appropriately follow up on our oligonucleotide business and its performance. Most of this business is found in our diagnostics area. We work with a decentralized direct sales model, and during the past year, we've now got to know our new service business market, our customers, and new team members. And we're happy that our integration model works. We have won many new customers, and the Oligo business has achieved double-digit growth. But there are some bumps on the road, and we're not pleased with the results. What is impacting our results negatively is the decreased small molecules and synthetic therapeutics and scale-up sales due to a weakened CRO segment in China and significantly reduced COVID-19 business in Europe. During Q4 2022, we experienced a rapid slowdown at our biggest CRO customer, but we've also seen this issue becoming broader, now covering the entire CRO market segment in China. which is our largest end market in the country. We're now working together with leadership in China to allocate resources appropriately and steer the business in the right direction. We're focusing strongly on increasing the aftermarket sales, which is also part of our recurring revenue strategy. In Q1, the after sales share was 59%, which has closed our long-term target of 60-40. We're pleased with our service area driven by the oligo service with a triple digit growth in America and saw positive development in the Apex service core business. Naturally, the ratio was impacted by the significant decline of system sales that went down 19% from last year. This is again driven by the reduction of flash system sales in China and more cautious global customer behavior when it comes to system ordering. In line with our focus on digital transformation, we have launched new connectivity solutions supporting our world leading biotouch select flash purification systems. These solutions allow remote monitoring and integration of systems into any laboratory packages, supporting improved flexibility, control, throughput and efficiency in laboratories. In the next phase, we will focus on safety and data integrity. Our global research and development has developed the solutions at the rapid pace in close collaboration with our customers. The solutions have been developed in line with our sustainability goals as our customers will be able to monitor solvent usage and waste consumption to give some examples. Speaking about sustainability, we managed to achieve two important milestones during Q1. Our Morningstar Sustainalytics ESG risk rating has gone from medium to low, and our gender equality index in Sweden has increased from 97.3 to 101.0, while the Swedish average is 95.8. With that, I will now hand over to Maja to present our Q1 results.

Thank you so much. So let's go to slide number seven. to take a look at our sales per customer focus area. So we are happy to see that two out of our three customer focus areas are showing strong reported growth in this quarter. Red tech with the strongest reported growth of 24%, followed by blue and green tech growing with 8%. In white tech with the mentioned current challenges, we see a reported decline of 17%. Let's go to the next slide to look at the breakdown of our sales from a product area perspective. Our product area scale-up is significantly impacted by the reduced COVID-19 vaccine development business, also in this quarter. Still, we see the underlying business of scale-up when excluding the COVID-19 business at a healthy growth. The other big impact on net sales in this quarter is within our product area of small molecules and synthetic therapeutics, where the CRO market in China has had a negative impact. When looking at the rest of the business, I'm happy to share that a different picture Here we see healthy reported growth in four out of our six product areas. The highest growth this quarter comes from analytical testing and water and environmental testing. In analytical testing, it is great to see that we are reporting a strong growth in EMEA as well as in Americas. And that is also the case for water and environmental testing, where EMEA shows a positive trend. We're also glad to see our oligo business in our product area diagnostics reporting double-digit growth in the quarter, where Americas is driving the growth with successful customer base expansion. Let's go to slide number nine to take a look at our aftermarket sales. The decline in system sales is mainly related to the reduced COVID-19 and China zero business. The flat development of our consumable sales is reflecting the reduced COVID-19 business and scale-up, but the consumable sales have grown in all other product areas. It's offset by the scale-up business decline. We're glad to see our service business showing strong double-digit growth coming from the oligo business, but also a good growth within our product area, small molecules and synthetic therapeutics in APAC. Let's go to slide number 10. to look at the regional sales. Again, when we look at the sales development from a geography perspective, we can see the impact from the reduced sales in the Chinese CRO segment in APAC. And in EMEA, we see the impact from the reduced COVID-19 business in scale up. Aside from that, the other segments of the business are showing a healthy development. In EMEA, we're glad to see the growth of analytical testing and water and environmental testing. And in APAC, we're glad to see the strong growth in the ASEAN region and in Korea especially. In America, we still see double-digit growth, mainly coming from analytical testing, but also we are very glad to see that the Oligo business is really showing a nice growth with new customers coming in. Let's go to slide number 11 to see our profitability performance. We're glad to see a strong improvement of our gross margin in Q1 compared to Q4 last year, coming back to a level above 60%. mainly driven by a favorable aftermarket ratio in combination with sales price increases that we have implemented that are now showing in the P&L. We did not manage to defend the gross margins of Q1 last year though, which was a really strong quarter as it had high volumes of high margin products coming from the COVID-19 sales and scale-up. But it's great to see a positive trend as a Q1 compared to year-end 2022. OPEX is negatively impacted by currency impacts from the weak Swedish krona and the acquisition-related expenses from the Astraea acquisition. In the first quarter, there are transaction costs of $12.5 million related to the acquisition of Astraea included in OPEX. When adjusting for these costs, the adjusted EBITDA margin improves 3.5 percentage points in the quarter. To mitigate the short-term impact on our profitability, we are keeping a very stringent cost control as well. We can go to slide number 12, showing our financial overview. So I want to give you a brief comment on the cash flow, which has declined in Q1-23 versus Q1-22. The main driver is the lower operating results, where the acquisition-related costs are heavily influencing the results. but also that we in the first quarter this year also have made bigger tax payments in Sweden and in the UK, whereas in the past we have been able to utilize losses carried forward. Cash flow from working capital changes have had a favorable development from accounts payable as well as inventory, however not mitigating the reduced operating results and the tax payments. Still, the cash flow from operating activities is positive and it is contributing to building the future success of Bytash.

back to you tom thank you maya now we're ready to answer your questions if you wish to ask a question please dial star 5 on your telephone keypad to enter the queue if you wish to withdraw your question please dial star 5 again on your telephone keypad The next question comes from Ricard Anderkrans from Handelsbanken. Please go ahead.