Kinnevik AB

Good day and thank you for standing by. Welcome to the Chenevic Q2 Report 2025 conference call and webcast. At this time, all participants will be on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please note that today's conference is being recorded. I would now like to have the conference over to your speaker, Georgi Ganev, CEO. Please go ahead, sir.

Thank you very much, and good morning, everyone, and welcome to the presentation of Kinevix results for the second quarter 2025. I'm Georgi Ganev, Kinevix CEO, and with me today is our CFO, Samuel Sjöström, and our Director of Corporate Communications, Torun Litsen. On today's call, we will begin by walking you through the key events during the quarter. Samuel will then cover our financial position, capital allocation, and net asset value. Finally, I will reiterate our priorities for 2025, and as usual, we will end with a Q&A. So, let's start on page four. Our net asset value was up 2% and amounted to 36.8 billion SEC or 133 SEC per share at the end of the second quarter of 2025. The fair value of our private portfolio was up 3% in SEC and 5% in constant currencies. We ended the quarter with a net cash position of 9.6 billion SEC after investing 0.9 billion with the addition of tandem health being the largest investment. Envera hit a significant milestone this quarter by successfully completing phase 1A clinical trials with its lead drug candidates. The drug targets eczema, a very common condition affecting around 200 million people worldwide. Despite that, current treatment options are limited and come with significant safety concerns. And if Invera is successful in developing a new oral and safe therapeutic, it could have meaningful impact for patients globally. The drug has also showed promise in treating asthma, and the successful completion of the study is a validation of the company's AI-driven drug discovery platform. During the quarter, Sinevik has also invested in a new tech biocompany, which will be announced during the second half of 2025. Before diving into Tandem Health, let's turn to page five for an overview of the performance of our core companies. Spring Health, Travel Perk, PLEO, CitiBlock, and Muse continue to demonstrate solid operational performance during the quarter. In the first half of 2025, they grew revenues by over 35% on average and improved EBDA margins by four percentage points year over year. Travel Perk continues its strong trajectory, passing $275 million in annualized revenues in the second quarter, up from $200 million at the start of the year. This was driven both by organic growth and the acquisition of Yokoi. The youth expansion is ramping up. with the company launching new key products during the quarter and opening a Chicago office. In the U.S. in early July, the U.S. Congress passed legislation which includes cuts to Medicaid. And while Citiblock partly relies on Medicaid, their value-based care model based on providing cost-effective and preventative care is very much aligned with the priorities of the administration and the American patient. The company captures a fraction of the addressable market in Medicaid and Medicare, but there's still ample room to grow despite these cuts. And year-to-date, the company is delivering according to plan. And while there may be bumps in the road as the healthcare system readjusts, we remain firm in our conviction in Citiblock's long-term value creation potential. For our core companies as groups, the shift from growth towards profitability continues. That said, these companies are addressing large, long-term market opportunities, and we are very much promoting them actively assessing and investing in future growth, both organic and inorganic. With improved margin profiles, they are making these investments from an increasingly stronger and more stable position. And while we have been focusing mainly on our existing portfolio of companies over the last years, we've also been active in the market, assessing new companies and seeking to ensure that our portfolio remains rich with candidates to become our core companies of the future. And on the next page, we have summarized the highlights from the newest addition to our portfolio, Tandem Health. Tandem Health is building Europe's most widely adopted AI medical assistant. Genevieve has been investing in healthcare across Europe and the US for a decade, and we know firsthand the urgent need for transformative innovation in this sector. With clinicians today spending 40% of their time on admin, combined with rising healthcare costs, shortages of clinicians, and an aging population, The situation is unsustainable. Tandem's key feature is an ambient scribe which listens during patient-doctor consultations, makes a transcript, and then instantly creates a draft medical note. After a 15-minute consultation, doctors typically spend 5 to 10 minutes drafting notes. But with Tandem's AI-powered software, that is reduced to one to two minutes, saving clinicians hours each day. Describe is already used by tens of thousands of clinicians across Europe, trusted by both public and private health systems. And the new funding will fuel Tandem's next phase of growth, which is to expand its footprint across Europe and build a complete AI-native operating system that supports the full clinical workflow. With AI advancing rapidly in recent years, the timing to execute Tandem's vision could not have been better. Thanks to the advances in AI and large language models, Tandem Health is now able to pursue a great vision with unprecedented speed. The focus is commercial from day one, and the entire execution is very disciplined. With Tandem, we're not just backing a familiar thesis, we're backing a team positioned to get it right. Finally, we're particularly excited to partner with a Swedish company at the intersection of healthcare, SAS, and a new technology like AI, Kinevix Areas of Strength. We look forward to joining Lucas, Oskar, Oliver, and the rest of the Tandem team on their journey using all our experience and networks to support their continued growth and expansion across Europe. I will now hand over to our CFO, Samuel Kerstrom.

Thanks, Jorgi, and good morning, everyone. So I'll do the usual run-through of our financial position and capital allocation, and then I'll move into this quarter's NAV statements. Starting on page 8 then, our investment pace in Q2 was in line with last quarter's, amounting to 860 million SEC. The bulk of that, some 0.7 billion SEC, was invested into new portfolio additions. First and foremost, our investment in Tandem Health, which Jorgi just covered, but also a new tech bio company that we'll tell you more about later this year, and another early-stage European AI-native software business. The remaining 0.1 billion was deployed into a handful of smaller follow-on investments, mainly in our focus companies. And this brought H125 investments to 1.7 billion, or 1.3 billion net of divestments. And that's a pretty good indication of the investment pace that we're targeting until we're seeing exits coming through at a more even clip, aiming for that 2.5 to 3.5 billion SEC investment corridor. That's a pace that's enabled by our 9.6 billion SEC net cash position, ensuring that we can capture opportunities surfacing for another three years, even in the extremely unlikely event that we don't see any capital inflows. While our new investment activity has picked up a bit the last nine months, we continue to spend a lot of time focusing inward and on continuing to push portfolio concentration towards the companies we believe have the largest long-term potential. In that spirit, during the second half of this year, we expect the balance of deployment to change and that the majority of our investments will be directed into the existing portfolio. In particular, if we're able to convert some more opportunistic situations in our focus companies that the team is working hard on. And with 77% of the portfolio being demonstrably profitable or deemed funded to break even, and that's a number coming down a bit in the quarter, mainly due to our new investment activity, we continue to plan and execute on our capital allocation from a very robust platform. With that, let's move on to this quarter's NAV on page 9. As you heard, NAV was up 2% in Q2 to 36.8 billion, or 133 SEC per share. In constant currency terms, NAV was up 4%, as currencies brought a 0.7 billion SEC negative impact this quarter, again driven by the dollar weakening against the Swedish krona. Year-to-date, the negative impact from currencies amount to around 3 billion SEC, or an aggregate 8% headwind faced by our underlying growth in NAV. Our private portfolio was up 3% in the quarter, or 5% in constant currencies, with overall stability across the full portfolio. The fair value of our core companies, which I will get back to, were up 3% as a group in SEC and up a meaningful 7% in constant currencies. As evident from where we deployed our capital in the quarter, transaction activity within our existing portfolio was a bit more limited in Q2 than in prior quarters. Looking back over the last 12 months, meaning the second half of last year and the first half of this year, We've seen transactions in 53% of the private portfolio by value. And on average, these deals have been clearing at valuations 22% higher than our preceding marks. Outside of the portfolio, however, our market environment began to pick up a bit in the quarter. We saw increasing M&A activity. We saw IPOs of digital health businesses, Hinge Health and Omada Health, And we saw companies like the U.S. travel management platform Navan and robo-advisor Wealthfront filing for IPOs. These are obviously valuable and important valuation references for companies like Spring Health, Travel Perk and Betterment. But perhaps more encouragingly, they are tangible signs of an increased public market appetite for more growth-oriented equity stories like those of our businesses. And those are stories that have grown more rare in public markets over the last years. With that, I'll move into some details on valuation movements in the quarter, starting with a snapshot of currencies and multiples on page 10. If we start off on the right-hand side of this page, the US dollar depreciated by 5% in Q2, and the euro strengthened by 3%. That led our private portfolio's value-weighted currency basket to be down by around 2.5% in the quarter. As I mentioned, these currency headwinds meant a negative impact of 0.7 billion SEC on our NAV this quarter, and they have meant a negative currency impact of around 3 billion SEC year to date. Meanwhile, trading in the key peer sets of our private portfolio on the left-hand side of this page was overall positive, with the average peer multiple in our private portfolio's benchmark universe expanding by a meaningful 14%. Most notably, perhaps, For Citiblock, we saw a wide dispersion in trading between our three peer groups, probably reflecting how the impact of an increased utilization of healthcare in the US during the first half of 25 was allocated across the healthcare value chain, where the spread in trading between providers of care and insurers of care was particularly wide. On a net basis, this translated into low single digit percentage multiple headwinds for Citiblock. In more general terms, we took an overall top-down careful stance in reflecting the more aggressively expanding multiples in areas like software. So while listed peers were up by 14%, we held back multiple expansion in our portfolio to around 5%. Now in the quarter, we held deep dive presentations on the process behind the valuations of our private businesses, detailing the main considerations involved. The presentation is available On our website, under the investor relations section, those of you who have already digested it will recall that we recalibrate our multiples each quarter against how public markets are valuing growth relative to profitability. And this calibration is typically the main underlying reason why our multiple movements differ from cruder peer averages. And the increased carefulness on multiples that we're applying in this quarter goes beyond this calibration. What we're doing is that we're increasing the headroom to public comps relative to where we would have been if we would just have done our standard calibration, meaning that we're increasing the like-for-like valuation discounts. So in summary, it's been another roller coaster quarter from a macro point of view, but overall ending at levels providing a good platform for our company's operating performance to shine through in their valuation developments when adjusting for currency movement. And on that note, I'd like to move ahead to our five core companies on page 11. On average, underlying constant currency valuations of our core companies were up 7% in the quarter, which translated into a 3% increase in fair value held back by the weakening dollar. As Jorgi mentioned, our core company's operational performance in the first half of 25 was reassuring, growing by more than 35% year-over-year on average and improving EBITDA margins by 4 percentage points. On the bottom half of this page, as well as in today's report, you have their financial metrics over the last 12 months, as well as our expectations on our core company's average profile over the next 12 months. In the quarter, our forward outlook matured by a 5% increment on both growth and operating margins. meaning a growth rate coming down by some 5% and a margin expectation improving by as much. For the core companies as a group, we're now expecting average growth of between 30% to 40% over the next 12 months, with an EBITDA margin somewhere between break-even and negative 5%. This trend is clearly something that we've been expecting, but it seems to be coming through a tad bit earlier than we expected. Financial profiles maturing towards profitability I'm sure reassures many, but what reassures us is that our companies are continuing to actively assess and pursue both organic and inorganic investments to sustain a high 30 to 40% growth rate at these stronger margins and at healthy unit economics. With that in mind, the valuation changes themselves were fairly straightforward in this quarter. But I'll spend a minute or two just going through each of them top to bottom. Our city block investment's fair value was down a percent in the quarter. And in underlying dollar terms, our valuation was up 4%, with multiple contraction being offset by solid performance and a pretty stable outlook. As I mentioned, care utilization picked up in the U.S. during the first half of the year, which naturally had an impact on gross margins. but preliminary results suggest that Citiblock's financial performance through this period was resilient. As we mentioned last quarter, we've published a write-up on Citiblock and the U.S. healthcare landscape on our website, and while it remains an uncertain situation, we'll keep you posted as it begins to clarify. Our fair value of Muse was up 19% in Q2, driven by both multiple expansion and very strong performance. New clients continue to progress through the pipeline. The company launched a cross-border payment feature that's showing strong traction, and they continue to invest heavily in expanding their product suite even further. The fair value of our investment in PLEO was flat in the quarter, where we held back multiple expansion in the broader software peer set to reflect the company choosing to mature their financial profile slightly, trading in growth for lower burn to ensure that unit economics remain healthy. Spring Health was also pretty much flat in SEC fair value terms this quarter, or up 4% in underlying dollar terms. We've again taken some further caution in our forward outlook for spring this quarter, and are now effectively only valuing the company's core profitable EAP business. We want to make sure that we're basing our valuation on expectations that we're confident that spring will beat, and there are several initiatives underway in expanding both their product and their go-to-market scope. In this particular quarter, however, that means a milder positive valuation development. Lastly, our valuation of Travel Perk was up 14% in underlying US dollar terms. As mentioned, we've held back multiple expansion this quarter, and for Travel Perk perhaps in particular, considering the significant 40% plus write-up in Q4. Despite the multiple remaining largely unchanged from last quarter, The company's strong performance and a slightly upgraded forecast driven by them beating plan year to date led to a meaningful write-up this quarter. So again, and in summary, for our core companies as a group, it was overall a non-eventful and stable quarter from a performance and valuations perspective, albeit as always with a mix within this group and some negative impact from currency. As usual, I'd like to end by quickly looking across the full private portfolio by both categories and sectors on page 12. And you have all of this and more in today's report. Our more mature companies, meaning Betterment, Cedar, Hungry Panda, InstaB and Omeo, remained in EBITDA profitable territory and grew revenues by around 10% on average during the first half of 2025. This group's underlying valuations were up by 9% in the quarter, mainly driven by a significant write-up of Betterment. As you all know, Betterment is a company whose assets under management and thereby revenue are highly correlated to U.S. equity markets. And those have rebounded meaningfully from where we were when we reported our Q1 in April, and as a result, so has our underlying valuation. In note four in today's report, we've added a dedicated page covering this group of mature companies, drawing on feedback received from our investors and analysts. So to sum up on my end, Q2 was a stable quarter where we saw the operational performance of our portfolio shine through and drive a 7% growth in value on an underlying local currency basis, translating into a 3% write-up of the SEC fair value of the private portfolio. And meanwhile, we continue to enjoy a high degree of discretion and flexibility in how we allocate capital and in how we position our portfolio and our companies for the future. With that, I'll hand it back to Jorgi to wrap things up.