Kinnevik AB

Good morning, everyone, and welcome to the presentation of Kinevix Result for the third quarter 2024. I'm Jorg Eganev, Kinevix CEO, and with me today is our CFO, Saman Sjöström, and our Director of Corporate Communications, Torun Litsén. On today's call, we will walk you through the key events during the quarter, including our most recent investment activity. I will also give you an update on our two most recent investments in Spring Health and ERA, Samuel would then cover our financial position and the development of our net asset value. Finally, I will show you the agenda for upcoming Capital Markets Day next week. And as usual, we will end up with a Q&A. So let's start on page four. The third quarter marks the completion of the Genevieve transformation that we have been driving for the past six years. With the last step of the Tele2 transaction concluded, we enter our next phase with a strong financial position and a growth focused portfolio with a high performing core and several exciting early stage companies with the potential to create significant outcomes. Over the last quarters, we have seen encouraging development in our core companies, now representing more than half of our portfolio, up from 30% at the end of 2022. However, we have also had several disappointments that have clouded this strong development in our core, and we regret to bring you another downward valuation revision in the non-core part of the portfolio this quarter in Village MD, a subject that both I and Samuel will come back to. Excuse me. Our net asset value amounted to 37.4 billion SEC. or 132 SEC per share at the end of the quarter. The fair value of our private companies was down by 7% in the quarter, driven primarily by a complete write-down on VillageMD. The weakening dollar also bore a significant 0.7 billion SEC negative impact on the NAV. Excluding VillageMD, the underlying valuations were flat on average or written up 4% in our core companies. With 1.3 billion SEC net invested in the quarter, the private portfolio declined in value by 0.5 billion to 25.2 billion SEC. Looking back at our investment in VillageMD, we first invested in the company in 2019, supporting the founder's vision of building a primary care-led clinical model that produced high-quality care for patients and strong economic value to physicians. In 2021, we made a partial exit of $360 million at 3.2 times our total invested capital when Walgreens acquired a majority stake in the company. And during 2024, Walgreens has on several occasions stated that they are evaluating options for their village MD investment, including a potential divestment or restructuring. This is a process in which we have very little influence, and we therefore face significant uncertainty reflected in the lower valuation we ascribe to the company this quarter. But we have also seen continued strong execution in our core companies, Citiblock, Muse, Clio, Spring Health, and Travel Perk, and they have kept on delivering in 2024. Now representing 52% of our growth portfolio, these companies have grown revenues by more than 60% on average over the last 12 months. They have progressed on their path to profitability and are expected to generate positive EBDA as a group during 2025. And in this quarter, we invested more capital in Spring Health, which we will go through in more detail soon. We also see promising developments in our group of selected ventures. These are companies which are still early on the growth journey, but where we expect to continue to invest meaningful capital in the coming years, if they meet our expectations and milestones. We are convinced that some of them have the potential to generate outsized returns and emerge as our core companies of the future. We also know that not all of them will be as successful, but as a group, we have high conviction in their ability to create a number of exciting businesses. And in the quarter, we committed an additional €20 million in ERA, which I will touch on further shortly. Our drug discovery company Recursion deepened its capabilities with the acquisition of Exciencia, a company with a complementary AI platform. We expect the combination to accelerate the discovery of innovative treatments, making the process faster, more cost-effective, and delivering higher precision in targeting diseases. Spring Health is now the largest asset in our portfolio, representing close to 5 billion sets.

And let us have a look at why we are so excited about this company, starting at slide five. We first invested in Spring Health in September 2021.

And since our first investment, the conviction that we had at the time that not only does Spring Health represent an outstanding business opportunity, but also the opportunity to change lives for the better and to have a real life positive impact has proven right over and over again. The founders, April Koh and Adam Shekrud, are executing on the vision that the future of mental health care is going to be radically different. Instead of being a game of trial and error, it will be accurately tailored to each individual through data. And with super-focused execution, Spring Health has consistently surpassed expectations on both growth momentum and profitability improvements. growing run rate revenues by more than 15 times since our first investment in 2021, with clients including names such as Microsoft, Target, JPMorgan Chase, and Delta Airlines. And since our $100 million secondary acquisition in mid-2023, the company has more than doubled its revenues. The company is in parallel, overperforming by five percentage points on EBITDA margins in 2024 to date, and expected to make a small single digit loss margin. With profitability already demonstrated on an occasional monthly basis, the company is expected to be cash flow positive in 2025, with a large and expanding TAM, allowing continued high-paced growth. In the quarter, Spring Health raised $100 million funding round, strengthening the company's balance sheet as it prepares to become a public company. We participated in the round with a $35 million investment and acquired an additional $45 million in secondary from co-investors, making us now the company's leading shareholder behind the combined ownership of founders April and Adam. The investment in Spring Health is another manifestation of our strategic priority to accelerate the concentration of Genevix's portfolio to our core companies. And Spring founder Adam Sjekrud will be in Stockholm next week to present at our Capital Markets Day. And I hope many of you will be there to tune in to hear him tell the Spring story in his own words.