Biotage AB (publ)

Good afternoon, everyone, depending where you are joining us today for the Biotage Q3 2024 earning calls. My name is Frederic van der Hagen, CEO of Biotage. I joined the company a little more than six weeks ago, and I'm thrilled to share with you our solid Q3 2024 results. Joining me today on the call is Andrew Kett, our CFO. Here's the agenda for the call today. After a short summary of who we are as a company, I will provide the highlights for the Q3 results, and Andrew will second me in detailing those. I'm thrilled to join the company, as BioTage is a very resilient business model. It does equipment, services, and consumables that addresses sample preparation challenges across multiple markets. From applied markets such as forensic, food, and environmental, all the way to drug discovery and development for the biopharma industry. In that particular market, we have solutions from discovery all the way up to downstream processing. BioTage has continued to evolve its portfolio to capture market opportunities from small molecules to the new modalities. We are pleased to announce that Q3 has posted results that are aligned with the consensus on revenue and EBITDA. Barriotage delivered a solid 12% organic growth over prior year and a 9% reported growth. Astraea is now completely reported as organic. Our recurrent revenue, coming from services and consumables, continues to drive our overall results, while our equipment sales remains somewhat weaker, driven by China and conservative spending from our pharma customers in Europe. As many others have commented, we are seeing some customers deferring equipment spending decisions to quarter four. We have made some progress in addressing our backlog in peptide synthesis, but the demand continues to outpace our current manufacturing capability. As we speak, we continue exploring solutions to address A short note on our revenue split by geographies perspective. North America posted strong results benefiting from a diversified portfolio of businesses. In that region, the analytical testing and diagnostic business is delivering a steady growth year over year. We're also progressing well on our priorities. We did rescale our OPEX in China to a new normal. We are continuing expanding in the area needed to support our growth, such as expanding our manufacturing site in Il-Daman, aiming for commissioning the site in October. We did also open in Canton, nearby Boston, Massachusetts, our new clean room facility that will help us to attract an attractive cologne packing market. Lastly, we are pleased by the progress made in the market with the product we recently launched. like a Toxiclear used for endotoxin removal, AstraAdept trial-to-adoption focused on early adopters, which is an high-flow technology for antiviral vector verification. We have recently launched our BioTel Select ELSD detectors, which has been very well received in the market. And we continue addressing the opportunities on PFAS testing with the Medisa that is well received from a customer's point of view. I would be remiss if I didn't close by mentioning that we have signed up for the SBTI targets through the quarter three. Let me now turn it over to Andrew, who will provide you more color on our financials. Thank you.

Thank you, Frederick. Good morning, everybody. The Q3 report, along with the presentation, is now available on our website and the investor section, and then on actual reports. The business had a good Q3 performance. We delivered positive organic growth of 12% and had strong recurring revenues. Our underlying EBITDA was ahead of last year, and we were super efficient at turning that adjusted EBITDA into cash. Our business is in good shape and built on solid foundations. Our small molecule and analytical diagnostic testing businesses delivers predictable revenue stream, industry-leading gross margins, and solid underlying EBITDA and cash generation. Our large molecule business gives us access to higher growth by processing market and the ability to generate superior revenue growth and attractive margins. coupled with our expansive modality offering, our enviable broad suite of innovative must-have solutions and a balanced geographical profile gives us an attractive competitive offering. In the quarter, we saw similar trends to what we've seen and communicated throughout the year, a gradual momentum building in our key Americas and EMA markets and continued headwinds in China. Our drug discovery and development business delivered reported revenues of 349 million sec, up 13% or 16% organically for the quarter. For the first nine months of the year, it delivered reported revenues of just over 1 billion sec, up 25% or 4% organically. We are working at pace with our supply partner to resolve the previously reported production capacity constraints for our peptide systems. While we are gradually seeing a sequential quarter on quarter increase in production capacity, there is still work to be done to match supply with the current level of demand, with this holding back some reported growth in this area. Our analytical and diagnostic tested business delivered reported revenues of 141 million in the quarter, up 1% or 5% organically. For the first nine months of the year, it delivered reported revenues of 451 million, up 12% or 14% organically. In the quarter, geographical-wise, of core Western markets of America and EMA accounted for 86% of total revenue, with APAC accounting for 14%. China represents less than 5% of our revenue. In Q3, we had recurring revenues of 351 million, representing 72% of total revenue, up 20% over Q3 23. We saw FX headwinds in Q3 of approximately 50 million SEP, or 3%, holding back our revenue growth. The first nine months of the year, geographical-wise, our core Western markets of America accounted for 85% of total revenue, with APAC accounting for 15%. So a very similar trend we saw in Q3. We have recurring revenues of just under 1.1 billion sec, again representing 72% of total revenue, which was up 39% over 2023. Our gross margins at 63% year-to-date are robust and ahead of last year. In the quarter, which is traditionally quieter, we did see some transitory changes in product and customer mix. What I would say is do not get too fixated on one particular quarter as our business goes long. Yes, margins in Q3 were a little lighter, but in Q2, they were a little stronger with an averaging of 63%. Importantly, we continued to deliver attractive adjusted EBITDA. In fact, in Q3, we delivered an adjusted EBITDA of 124 million, up 6% over Q3 23. The first nine months, we've delivered adjusted EBITDA of 380 million SEC, 17% above 2023. In Q3, we delivered adjusted cash flow from operations of 153 million, up 18%, representing 124% of adjusted EBITDA. For the first nine months, we've delivered adjusted cash flow from operations of 399 million, up 61%, representing 105% of adjusted EBITDA, demonstrating clearly our ability to successfully convert profits into physical cash. We finished the quarter with gross cash of 370 million and net cash of 120 million. In the year so far, we funded acquisition and outpayments of approximately 220 million, dividend of 128 million, and investments in intangible and tangible assets of 132 million, approximately 480 million in total. We've been able to do that because we generate good margins, good profitability, and importantly, we can convert that profit into cash. We continue to invest in our operational facilities to increase manufacturing capacity to enable future attractive growth. In the Isle of Man, additional capacity will come on stream in Q4. In Boston, our new facility has clean rooms so we can more fully exploit the column packing market, as well as warehousing for rapid delivery of products to our customers. Additionally, Our continued investment in research and development underpins our steady stream of product launches and cements our reputation for thought and innovation leadership in the markets we operate in. To conclude, we've delivered a very solid Q3 and year-to-date performance, and the business is in good shape as we enter Q4. Nothing in this Q3 announcement alters our view of the business. The fundamentals are super strong and biotage is well placed and we're confident of delivering on our full year 24 targets. We're now open for questions. Operator, we're now open for questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Carl Noren from SEB. Please go ahead.