Biotage AB (publ)

Thank you very much. Good afternoon, everyone, and thank you for joining us on our interim report Q3 call. I'm Thomas Blomqvist, president and CEO of Bytosh, and I'm here with our new CFO, Andrew Kellett. Before Andrew goes to our Q3 results, I will share some highlights from the quarter. And as always, we will answer your questions at the end of the call. So let's start with our executive summary on slide five. Despite the market headwinds, we see many positive developments during Q3. For example, in Q3, we witnessed a reported all-time high phase of 449 million SEC, which is a growth of 12% year-on-year. An improved gross margin of 2.8 percentage points up to 62.9%. An improved cash flow from operating activities of 103 million SEC, which is 6 million better than previous year, and 52 million SEC from the previous quarter. And a lastly robust adjusted EBTA of 117 million SEC improved for the third consecutive quarter. And this despite the fact that we have increased our R&D investments to 58 million SEC to ensure that we continue to build an attractive future pipeline of innovative products and solutions to our customers globally. Our largest markets, the Americas and EMA, representing this quarter more than 80% of our revenue, have grown not only in Q3, but also year-to-date. The market situation is still challenging with reduced capex investments in general impacting our system sales. And in APEC, and in particular in China, where there is declined market demand for our small molecule systems. We're tackling this by diversifying our local business in China with, for instance, an increased focus on growing market areas, running key account management programs, and maximizing our geographic coverage through a strategic use of distributors. Drug discovery is a dynamic, innovative industry that requires new products and solutions for breakthroughs. And we're certain that capital expenditure will bounce back. We're already seeing some signs that the hesitancy among customers to invest in new systems has softened a little bit throughout the year, and our consumables destocking impact has also lessened quarter by quarter. Naturally, we keep working actively to ensure that all our businesses have the right size cost base to continue to trade profitably while we maximize the market opportunities. Four out of six product focus areas are growing during quarter three. Diagnostics, which includes our oligonucleotide business, grew 50%. This shows that our integration process is running according to our internal plans and that the customer awareness for our world-leading solutions for making and modifying complex oligos has increased the past year. We're now four months into getting to know our new group member, Asria Bio Separations, and are still confident in achieving our internal 2023 top-line targets, and we see a similar revenue seasonality as in 2022, with heavier sales at the end of the year. Asria Bio has had a positive impact on our performance since the acquisition by generating 120 million SEC in sales, a gross margin of 63% and an adjusted EBTA of 10 million. The biologics and advanced therapeutics product area accounted for over 20% of our business in Q3, contributing to the reported EMA and consumables growth and is in perfect line to our strategy to position ourselves in attractive niches and driving recurring revenue. Our aftermarket ratio was 65-35, with great double-digit growth in both service and consumables. Astrea shared some exciting news during the quarter by launching scaled-up versions of their disruptive nanofiber technology. These technologies have been tailored specifically for the purification of cell and gene therapies. In addition, Astrea announced the expansion of its manufacturing and warehousing capabilities in the US with a new 12,000 square feet facility in Canton, Massachusetts, to support the growing demand for its chromatography solutions and improving our speed of delivery in the Americas region. With that, I will hand over to Andrew, who will go through our Q3 results and present his own thoughts on the Bytosh Group business a month into his role as the new CFO.

Thank you, Thomas. The next couple of slides show the revenue composition of the group, firstly by product area and then by geography. One headline comment I'd like to make is the diversification of products and geography, which is a real strength for the group. Now, biotage has a strong position in the biologics and advanced therapies area. We're able to offer a broader range of products in more markets. Overall, we delivered a strong performance in Q3 when set against the backdrop of the market environment right now. We grew our revenues in biologics and advanced therapies, analytical testing, diagnostics, and water and environmental testing. With the benefit of Australia Bioseparations, our biologics and advanced therapies business grew from approximately 4% of our total business in Q3 2022 to over 20% in this quarter. We saw revenue declines in our scale-up and small molecule business due to the well-publicized challenges and the unwind tale of COVID aftereffects and near-term customer caution around instrument purchases. Although it is worth noting that the rate of organic decline in system sales eased in Q3 versus Q2 by approximately five points, from minus 25 to minus 20 percent. What I want to comment now is about the impact of Australia on the business. Australia is a growing business and not at a stage where it neatly fits into a stable non-seasonal quarter format like the core business. So you're going to see quite large quarter seasonality until the business achieves a larger scale and we can see the underlying real seasonal trading patterns quarter by quarter. Looking at an isolated quarter of just taking the year to date and divided by the number of months is not going to give you meaningful future core forecasts. That said, we expect Estrella seasonality in 2023 to be broadly similar to that of 2022. Over the last few years, significant investment has been made in all areas of the Estrella business, from R&D, commercial, operations, support, new systems and facilities, so that attractive growth can be delivered. So in the short term, this cost space will subdue profits. But as the business grows, profits will accelerate, i.e. we have a very scalable business where we can add significant revenue without a step change in the operating cost space. In Q3, Australia delivered 73 million revenue, 73 million revenue, 47 million of gross margin, and a break-even adjusted EBITDA. Since acquisition, Australia has contributed 120 million revenue, 76 million gross margin, and 10 million adjusted EBITDA. The reported negative EBIT of 45 million reported on page 21 of the Q3 report comprises DNA of depreciation amortization of 22 million, including 18 million of amortization of acquired intangibles, and 33 million of one-off transaction costs. So, to be clear, Astraea, since acquisition, has delivered positive profitability at the EBIT level when we adjust for amortization of acquired intangibles and one-off acquisition costs. Since the 1st of January, Astraea has delivered 229 million revenue growth 38% versus 2022. If we look at our regional sales slide, our Americas and EMA business showed reported growth in the quarter and year to date. Together, these contributed approximately 80% of our total business, with APAC accounting for the 20%. Like others, we are still seeing headwinds in this region, especially China. Chinese business has significantly benefited over the last few years from COVID. That has unwound in 2023. But we still have a business in China that is broadly the same size as it was in 2019. So while year on year we are seeing sizable revenue declines, we still have a scalable business there that we can build on. We have and will continue to take action to ensure all our businesses have the right size cost structure in place and continue to trade profitably. We are small enough to be nimble, make quick decisions, and refocus when we need to. We are introducing a new key KPI which Thomas and I will be using to assess the performance of the business, and that is adjusted EBITDA. This ensures we get clear visibility of real trading performance and can understand the trends not affected by either large or one-off unusual costs and non-cash accounting entries such as depreciation and amortization we have presented the adjusted EBITDA figures for the current year in Q3 year to date and the comparatives overall we delivered a robust adjusted EBITDA in Q3 of 117 million only 11 million lower than Q2 the Q3 2022 And that was despite having R&D investment of 58 million in the quarter, a 66% growth or an additional 23 million SEC versus Q3 22. Year to date, we have delivered 324 million of adjusted EBITDA of near 27% margin. A combination of stronger margins and intelligent cost control has driven this, while ensuring we are not cutting costs, which may help in the short term, but hinder our long-term prospects. Lastly, I want to take this opportunity as the new CEO coming in to give my first impressions. So here's what I see. A business that has attractive gross margins and has the strength to defend those margins, even in a cautious market. A business that year to date has delivered 324 million of adjusted EBITDA. Business that is continuing to invest meaningfully in R&D for future success and be at the forefront of innovation leadership. A business with a strong balance sheet backed by gross cash of half a billion sec and net cash of a quarter of a billion sec. Q3 cash generated from operations was strong at 103 million. A business that by combining with Australia Biosuperations has become stronger, more diversified better able to offer customers a broader range of products and services in more markets and be better able to withstand market turbulence now and in the future. Yes, there is a bit of market turbulence currently for us and everybody else, but we have a set of attractive assets focused on the right markets with a highly committed and engaged employee base with a passion to win. The future from where I'm sitting looks exciting. Back to you, Thomas.

Thank you, Andrew. We can now move to the Q&A session.