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.

Thank you, Samuel. So let's move to page 14 then. As we head into the second half of 2025, we continue to operate from a position of strength. with a strong cash position and a portfolio of leading growth companies with limited capital needs. While transaction activity was muted, as we heard Samuel say in the Sinovic portfolio this quarter, we're encouraged by the signals of a renewed public market interest in resilient, high-growth businesses, such as our core companies. While the markets revived their appreciation of growth-centered equity stories, we continue to support our companies as they prioritize investments in organic and inorganic growth. Our aim is to make sure our portfolio remains rich with candidates ready to become our next generation of core holdings, both by supporting our existing up-and-coming companies and by selectively adding new outstanding businesses to the portfolio. We're now ready to answer your questions, so operator, please open up for Q&A.

Thank you, sir. As a reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We are now going to proceed with our first question. And the first questions come from the line of Lionel Sigurdsson from DNB Carnegie. Please ask your question.

Thank you, and good morning. Looking at this almost 10% percentage point difference between pair multiples and your embassy multiples, now I'm well aware we should not expect a one-to-one relationship, and I appreciate you being prudent with this number, but could you just help us understand what it is you're doing when you, as you said, go beyond the standard calibration of your model. Thank you.

Thanks, Linus. It's Samuel. Look, let me be, I'll just be very direct. It's easier. Operating performance this quarter is so strong. So we've just taken the opportunity to increase the discounts across the portfolio. So there's no real particular reason other than call it a top-down step change in carefulness. I think what we're, Trying to aim for is that we want to let other investors re-rate our businesses like the case was with Travelperk earlier this year. And that's what we're trying to set up the portfolio to achieve going forward.

Okay, I appreciate the clarity there. And then I had a question on Tandem Health. Could you perhaps talk about what the market opportunity is of the next steps that the company is taking? I mean, I assume this is what you're being this kind of premium for? Or I guess in other words, what is the path for a business like this to become a unicorn?

Yes. Hi, Linus. I think there are two things that we need to understand with Tandem. First, the enormous traction we see currently. This kind of first product of Tandem being launched across Europe already and picked up and used by clinicians in many markets. So that's the tractions we're seeing that is absolutely outstanding. But the second part here is the potential of expanding the product suite. So when I say that they will cover the entire kind of workflow for clinicians, it's about integrating with systems and data for these hospitals and care providers. And that market opportunity is, of course, even larger. We think right now there's a window of opportunity to accelerate both actually streams. So while adding new customers on their kind of first tool, the Scribe tool, which is this AI assistant, they're also ready to actually launch these kind of product expansions. So the entire market is huge. Looking at the number of clinicians in Europe, it's actually larger than the U.S. market. And we also see a very fragmented market in Europe, which makes this particularly interesting, where you have a lot of providers, a lot of caregivers and so forth. So the mode that you create as a company, when you have established a product suite used by these different partners, is actually stronger compared to some of the equivalent players we've looked at in the U.S.

That's super interesting. And just to follow up, I guess it alludes to the last part of your answer. I mean, how differentiated is this solution from maybe that from some other Nordic companies or how high are the barriers to entry to support this like broader clinical workflow?

Yeah. So the thing is like this, I mean, as I said in the script earlier, We see kind of the changes, the platform changes using AI, you know, happening now, which means that in one way you can argue that the modes and the barriers to entry are actually lower because you could, you know, not replicate, but you could build a similar product. And there are more players than just tandem, of course, in this space. But what makes this particularly interesting is that we believe the team has the competence and even the roadmap and the kind of the first initiatives to expand the product, to integrate with care system, healthcare data and other things that are much more local. That together with a fragmented European market, you will create very strong modes. So I'm actually, I think it's a wide open market opportunity right now. to scale this out both by adding new customers, as I said, but also then launch these new kind of product tools. And when we invested or before we invested, we made a relatively deep technical DD on their ability to actually expand the product suite. Because if you're not doing that, then, of course, you're much more exposed for someone trying to replicate using the same large language models.

Okay, thank you so much. I'll get back in line. We are now going to proceed with our next question.

And the next questions come from the line of Derek Laliberte from ABG Central Collier. Please ask your question.

Thank you, and good morning. I was looking at your largest holding, Spring Health, and what impact the IPO of Hinge Health might have had on Your valuation here, you mentioned that the gross profit multiple aligns with Hinch Health, but theoretically, shouldn't this be a higher multiple given that Spring is growing significantly faster? I was also wondering if any other factors apart from being prudent and Spring being a private company sort of explains this relatively well. lower multiple and also are you weighing this sort of Hinge health heavier in the peer group assessment or are you using more of an average approach? Thank you.

Cool. Hey there, Samuel. So as you said, on a gross profit basis, we're in line with where Hinge was end of June. I think the issue with these new listings is that they tend to be very volatile. The float is pretty limited. Clearly, we'll have lockups expiring over the next couple of months. So for now, we're just including Hinge in the peer set, and that sort of gets factored into the average, but we're not overweight on Hinge. Having said that, clearly, we take a very close look at how that company is trading. But there are more peers out there, even though Hinge is the most accurate one. I think on the comparison between the two, yes, we're growing faster. Our EBITDA margins are slightly behind where consensus points towards for Hinge. But clearly, we've mentioned Spring as one of the more obvious IPO candidates in the portfolio. And we want to make sure that We also capture a potential IPO discount in that hypothetical scenario. So I think we're going to try to aim to be a bit behind, as I mentioned, overall for the portfolio relative to equivalent public comps, just to make sure we're on the right side of things.

Maybe to add on that as well, Derek. I think you remember when Adam visited our Capital Market State last year, he said that one thing that was still unknown is that how will the market perceive and value healthcare companies, given that there are a bunch of kind of 1.0 type of healthcare companies and these more kind of niched, very effective players. I think with the IPO hinge, it was very encouraging to see that investors seem to value the fundamentals, so the underlying performances of these businesses. And I think that is something we see also across the software space. It doesn't really matter what subsector you're in. It's more what the numbers are and what you produce. And that, I think, for Spring is, as I said, very encouraging.

Okay, great. That makes sense. And a follow-up on Spring there, if you could repeat or explain further, I think you mentioned here in your comments that you're essentially only valuing sort of the profitable part of Spring Health. Could you explain that a bit more if I understood that correctly?

Sure, Derek. No, I think it sort of resonates with my prepared remarks in terms of us trying to be careful in particular around our largest core companies here, where the company is actively investing in organic growth opportunities, both on expanding the product and in expanding the go-to-market scope. But we just want to make sure that when we see the actuals coming through from spring, it'll be above our expectations. What we're doing now is that In our forecast, we only include that core business, although we include the OPEX that the company is investing in, in R&D and in sales and marketing. So that's just the approach we've taken here, considering the core business is so robust as it is today, and they're sort of building on top of it.

All right. And I might have missed something here, but looking at Anviadaa, the company reached this important milestone with its lead drug candidate, but why is the valuation down in the quarter then?

It's flat in dollar terms. It's down because of FX. I think the signals we got this quarter clearly points towards the valuation increasing, but we'll be careful here to try to model that out ourselves and and see whether the market can reward this company over the next couple of years in terms of valuing the achievements they've put under their belt since their last funding run.

Okay, sounds prudent. Then I was wondering on the nature of these smaller investments out of the 860 million Total Investing had a large sort of other category, and I understand you have the undisclosed one standing for the bulk of this, but what's the nature of these other smaller investments, I suppose? Was it companies needing funding or more secondary shares, or what sort of was it?

So the big constituent of that other new investment line item was is a tech bio company where we're just being mindful that they've hit some important milestones recently and they want to make sure that they sort of announce all the news in one go. So that will come through in the next couple of months and we'll tell you more come our Q3 report hopefully on the name of that business and why we're so excited. Besides that one, we made one more new investment in this quarter and that was in a smaller early stage AI native software business that came through our pipeline via many of our core companies actually using that service. And again, that's a business that we'll tell you more about later this year. And I think overall, we'll be coming back to you with an overview on the efforts we've taken to make sure that the portfolio has strong candidates for the next generation of core companies. So we'll try to do that in a grouped way later this year.

Okay, and I just wanted to clarify, you mentioned in the report that your mature companies delivered growth of 10% and EBITDA break-even. I just wanted to clarify that this refers to the mature companies in that table called mature, including Betterment, SUDAR, Hungry Panda, et cetera. Is that correct?

That's correct, Derek. And it's a group that, again, we've tried to provide some more details on them in today's report.

All right. And then you said you had some downward growth expectations for a few businesses. Which are these? Is this also like a Southern Hungry Panda where the MTM outlook looks to be down or is it something else?

Cedar is progressing well. The sales cycles are very long in that business that we've gotten used to. But if we look at the contracted ARR, it's tracking to plan, but launching contracts is taking place. slightly longer than we would have hoped. Hungry Panda, clearly, as you understand, big exposure to whether Chinese people go and study abroad. And considering what's going on in the world, perhaps in particular in the US, that's a bit uncertain in terms of where those students will flow. Hopefully, if they don't choose to go to the US, they'll end up in the UK or Australia instead and will be just as happy. But it's a bit uncertain at this point in time. Other than that, I think the main of downward adjustment in growth outlook was at InstaB, where the company is gaining market share as we expected, but the market itself is not growing at the click that we thought at the beginning of the year.

Appreciate the clarity. And then just on these IPO filings you referenced for Travelperk and Betterment, what are those companies?

So for Travelperk, it's a business called Navan, which is effectively a US equivalent to Travelperk. And for Betterment, it's a business called Wealthfront, which is also very similar to Betterment, although there are some nuances in between them, but more accurate than the benchmarks we're currently using.

Okay, great. And finally, on recursion here, I mean, the stock has... It's been pretty weak, I think down close to 30% this year, but everything seems to be going well with this Sanofi partnership, etc. From your perspective here, why do you think it's been so weak and what would be the key drivers for changing this trend?

I mean, Derek, as one of the top 10 shareholders, we were in active dialogue about pipeline recalibration, and we were supportive of this. When they were cutting some candidates that created a negative trading in the short term, but this allows for a burn reduction and a longer runway, and that means taking a short-term pain, but having the ability to actually focus on their really important candidates. And we see, I mean, an acceleration of data generation, faster feedback loops, and more precise biomaps. This is basically, for us, fundamentals going in the right directions. But we know it's been a very difficult time for Recursion to be a publicly listed company and announce these cutbacks on candidates. So, of course, we don't like that share price development, but right now we think it's definitely the right thing for them to do in the long term.

All right. Okay. Thanks for answering my questions. I know there were quite a few. Thanks.

We are now going to proceed with our next question.

The questions come from the line of Lulia Angelistrand from Handelsbanken. Please ask a question.

Hi, thank you for taking my question. Given what you have written about Medicaid and city block, could you give us some color or possibly any broad indication of what the blue sky scenario or gray sky scenario could mean for city block given the current market condition?

Hi. So basically, as I said, I don't think that we see any changes in the long-term plan. And as Samuel has also said, the company seems to be very resilient to the turbulence that we've seen also in the first half of the year. Their total addressable market is 360 billion, and they are currently addressing or they're, you know, partly a fraction of that as of today. And since they can demonstrate value creation by being more efficient when they bring on board these lives, so in these populations, we also believe that there will be a lot of kind of positive development for city block to expand. That said, the entire sector is, of course, a little bit on its fence. We need to understand how these policies actually come out to play and the healthcare system, as I said, might have to readjust in the short term. How that exactly play out, we don't know. But we have not changed the kind of the two and three year plan for city block in our business case today based on these new legislations.

Okay, I understand. So is that a correct interpretation of your answer that we should assume that even if these conditions persist, I mean these cuts, it would still not impact the growth potential the coming three years?

Correct. So what we are monitoring carefully is how they roll out new lives with the national providers that they have agreements with. That is the most important part because the entire sector or the addressable market is so huge in relation to Citiblock's position.

Okay, that's clear. And another question, but on capital allocation, I know that the discount has decreased some. So I wonder what, would make you interested in utilizing the buyback mandate? Or is it simply just that the investment opportunities you see outweigh the benefits of buybacks? Or how should we look at that?

But firstly, your second point there, there are opportunities both within our existing portfolio, but also within our focus sectors. And I think we demonstrate that this quarter. Secondly, of course, we're having this discussion with our relatively new board and we have that tool in our toolbox. Whether it's the right timing to use it now in this very volatile external market or whether we should do it a little bit down the line, we're not ready to communicate that. But there is conceptually a tool that we think is appropriate for us to have and that is also supported by the new board. timing of this will be something we will return to.

Okay, understood. And just a final one. I might have missed this during your presentation, but is there anything you could share about the increased focus on core companies and becoming more concentrated towards certain segments? Should we anticipate that you have plans to divest assets that will boost your investment firepower, or are there any such discussions?

I think what we have said is that our core companies today, they make up more than 50% of the portfolio, despite us investing in companies outside that group of companies. So they are progressing in a good way. And we expect that ratio to actually increase further. And one of the reasons for that could be divestments in the other side of the portfolio, according to exactly what you just said, right? The market for those exits have been more or less totally closed in the last couple of years. We think that will change in the coming years. So yes, the concentration will continue to increase around these core companies, also because we are potentially divesting companies outside of that group.

Okay, I understand. That's all for me. Thank you.

We are now going to proceed with our next question. And the questions come from the line of Bharat Nagaraj from Canter Fitzgerald. Please ask your question.

Good morning. Thank you for taking my questions. Just a follow-up on city block, actually. I know you said that the opportunity remains quite significant in the medium term, despite the laws that were passed recently in the U.S., But just wondering, given that you've improved the near-term or next 12-month outlook by 6%, do you actually expect that to be the case in the sense that there's an improvement, or is there any potential for near-term headwinds given the uncertainty there?

Hey, Bharat. It's Samuel. So just perhaps to clarify one point, it's not necessarily that we've improved the outlook. It's more the fact that we've gone three months into the future. So when we look at the next 12 months worth of revenue, that's 6% higher than what the case was a quarter ago. But to Jorg's point, Citiblock makes up a microscopic share of a very large market here. I think we are under no illusion that the near term will not be bumpy. I'm sure it will. But when we look at Citiblock's contract portfolio, including most of the large national carriers and the cost reductions that Citiblock have been able to prove in those contract portfolios, we're pretty confident that these big national insurers will want to try to replicate what Citiblock is achieving in a very small share of their coverage areas across their fuller footprint. So that underlying secular positive trend of Citiblock actually being a part of solving many of the issues in U.S. healthcare rather than being an issue is what makes us medium to long-term optimistic on this business. But again, in the short term, I'm sure there will be more violent swings in performance than the case has been under a more stable regulatory environment.

Understood. Thank you. Just a second question for me. Could you speak a bit about Spring Health's profitability, how it's evolved over the years, given the rapid top-line growth? And also, previously, you had advertised for Spring Health that they had customers like BlackRock, Microsoft, and J.P. Morgan, but I note that these companies are not mentioned now in your report. Has there been any sort of churn in the business, or is it just that you're highlighting the new ones?

I'll start with the list of Spring clients. There hasn't been churn. What has happened is that the company has some preference on which clients we highlight, so we just sort of adapted to the comms team at Spring's preferences there. On the profitability, I don't want to get into too specific details, but they are profitable on a cash flow and EBITDA basis. And there are a few percentage points behind the pinch health, as I mentioned, addressing Derek's question, but we're growing slightly faster. So that's probably the indication I can give you.

Super. Thank you very much.

Thank you. As a final reminder, if you have any questions, please press star 1 and 1 on your telephone and wait for a name to be announced. To withdraw your question, please press star 1 and 1 again. Thank you. We are now going to proceed with our next question. And the questions come from the line of Jorin van Aken from De Groot Bieterkamp. Please ask your question.

Yeah, good morning, everyone. Only two questions remaining. The first one is a bit of a modeling question regarding your investment in tandem. Is it correct that today this line is in other investments and that the idea is that this one will move to health and bio once it becomes more sizable?

That's correct, Joran. It's currently in that other category, but we wanted to be very clear on the investment as such. I think, call it the rule of thumb that we're trying to apply here, is that once tandem raises more capital and becomes more significant to RNAV, we'll move it up and focus on it more. It's an interesting question whether this investment fits into software or health and bio, because it sort of sits in between. So let's see where we end up placing it when we pass that hill.

Okay, clear. And then a bit of an open question. I understand the net cash position is important in a time when liquidity is a bit scarce in the market, but imagine the IPO market opens up nicely in 2026. and you can IPO some of the more mature companies in the portfolio. Should we then expect a distribution in kind or should we expect some of the net cash position to be distributed? I'm just interested to know if there is like a preference between the two.

No, I think there's no preference and just to be very clear, Jeroen, that we see great opportunities both investing in new businesses but also doubling down on the existing companies that are performing. And an IPO doesn't necessarily mean that we're going to divest. We can be long-term holders also in a company that we find attractive over the long term, even if it's liquid. It will, however, demonstrate the value in our portfolio and will be easier for shareholders to evaluate Chinovic's portfolio. I think that's the main reason why we're also very supportive to these IPOs happening. I, however, expect that... the cash position that we have should act as our maybe biggest strategic asset as of today in this market when it's still a buyer's market and where I think we have the opportunity to allocate this with discipline and in a wise way in our sectors.

That's very helpful. Thank you.

Thank you. We have no further questions at this time. I will now hand back to Mr. Gannot for closing remarks.

Thank you very much for listening in and for many great questions. As a last reminder, we will report our results for the third quarter on the 16th of October 2025. Thank you very much and have a nice day.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.