Polygiene Group AB

Good morning and welcome to this presentation of PolyGene Group's first quarter. I am Erika Bjork and I am the CEO of the group.

And I am Niklas Blomstedt and I am the CD4.

Yes. So I would like to summarize the quarter. I'm very happy with this result coming out from 2024 with a growth of almost 40%. We were not expecting that we can continue to grow in these high numbers. So with 18% growth I'm really confident that this year will continue to be successful as 2024. So we saw continuous growth compared to last year. And as I said, that was really, really good to see that we can continue to grow. We know that the first quarter is always a smaller quarter because of the Chinese New Year. And the period was impacted by one-time expenses that Niklas will explain later on. We also introduced new technologies, both in PolyGene and in AdMaster. And we also had some discussions around the import tariffs and the volatile currency markets that I will just talk a little bit about in the end. And then the board have proposed to pay out the dividend to the shareholders for the first time in Polydynes history. And the proposed policy is that we will pay back 40% of the results after tax. And that resulted in 0.05 SEK per share for 2024. However, the board also decided to propose an additional one-time dividend payout of 22 0.22 sec, which amount to 0.27 sec per share. And this will be decided on the AGM in two weeks. And then we've been out on the first investor road trip in Europe. It was the first part of two. And we think that this year will be a year where we will continue to approach the investors. We need to attract more shareholders. And we have planned another leg in later in August this year.

If we then take a look on the Q1 financials, on a pretty high level, as Ulrika said, we had a growth of 18% from 35.1 to 41.5. We have a gross margin of 67.4 versus 68.7. We have operating cost of 22.4 versus 18.1. But I think it's important to note that Q1 last year was really low. If you would take an average quarterly cost for the full year, that will be 21.3. EBITDA was 3.1 versus 4.8. In this year, we have an FX impact of minus 1.4. EBIT was 1.6 versus 3.3. cash flow was negative with the minus 4.1 versus a positive of 2.5 in last quarter last year first quarter in this year we had the bonus payout of 3 million sec and then also we had some sales end of the quarter due to the early chinese year with the air flights and then we have shorter payment terms so in a normal case those would have fallen to q1 and q4 now q4 was extremely strong but It should have been, in normal cases, that would have fallen to Q1. And at the end of the quarter, we had a cash of 61.9 versus 48.9. If we then look a little bit more in detail on the sales side, as we said, we were up 18%, and in that increase, we see a positive FX impact of 2%. If you look at the shares of the sales, PolyGene increased with almost 42%. while AdMaster was flat. And then, of course, that will have an effect that the PolyGene share of the total will increase then from 45 to 54%. This will also reflect in the sales per region. As AdMaster is really strong and has a big part of the sales in EMEA, the increase in EMEA was fairly small, even if we saw a big increase in EMEA for PolyGene. And then on the same time, if you look at Americas and APAC, we saw a bigger increase there because there's very much related to the sales of PolyG products. And then some details, as we said, gross margin 67.4 versus 68.7 is driven by a sales mix and FX impact versus last year. As we said, the cost has gone up. If you compare quarters to quarters, it's not so much if you compare the average. But if you look at this versus last year, we have cost for the company meeting that in 2024 was the second half. This year is going to be the first half. We have much more customer testing and customer product development. We had some legal costs for setting up agreements. And as Ulrika said, we have spent quite a lot and invested a lot in the higher activities. And versus Q1 last year, we have five more people. EBITDA, as we said, 3.1 versus 4.8, but this year we have a negative FX impact of 1.4. EBITDA 1.6 versus 3.3. And the cash flow, the negative part was unexplained by the bonus and the payments. And we had a strong cash of 61.9 and as we said earlier in the presentation we are proposing a dividend of 0.27 or 9.8 million sec does propose for the annual meeting 8th of may and the payment will be done in two installment one in may and one in q3 okay thank you nicholas and now i will

Let's go into more details what happened in PolyGene and what happened in AdMaster during the quarter. Starting with PolyGene, we had a great momentum in 2024, and I would say it continues into 2025. As Niklas said, strong growth, 42% in this area. And as I also mentioned, the Q1 is historically a lower quarter due to the Chinese New Year, where we lose around three weeks of production. And I checked back 10 years in the history to see how much the Q1 normal is of the full year. And around 21 to 22% is normally the share of the Q1 in the full year. Polydyn's share of sales is now 54%, while it was last year around 50-50. But as Polydyn had a great momentum now, it has increased the total share of the sales. And the sales are mainly driven from EMEA who had a really strong growth this quarter, but also APAC show a growth and APAC is the biggest region in the textile side. If you go back two years, it's always been EMEA, but APAC driven by China Activities has been in the lead now for being the biggest region in the textile side. The growth was mainly driven by existing customers, but we also signed up some new brand partners. We saw a new customer in Turkey with a quite big order, and we also have seen some new brands onboarded in Europe this period. And we also saw a lot of successful brand campaigns during this period. For instance, we have this Cube, which is a German market leader in the bike industry who launched this protection gear for mountain biking. And that launch was made together with Cube and had a really, really successful reach. And this is the strength of working with Polygene that we can support in these sell-through activities. We also are onboarding a new sales agent in China. We have seen the great success of what the agents have been doing in the U.S. the last six months. So now we actually onboarded a sales agent from the same group as the one we have in US and they will start here in Q2. And then of course the biggest news from the PolyGene side was the successful launch of the highly demanded technology Stay Cool. And I will just explain a little bit what this technology is and what we see potentially what this could lead to in their business. So Stay Cool is the moisture activated cooling technology. It can lower the temperature up to three degrees on a fabric, which gives you a cooling sensation while wearing these garments. We made a global launch in March, April. We had the introduction at big trade shows in Munich and in Portland, US and in Shanghai in China. And there have been a massive interest from both new and existing customers. And this is a technology that exists already out there. Many of our brand partners already use this. So it's a very easy switch from another supplier to Polygene, since we're already working with these customers on the state fresh. And good test results. We are working on the certificates. They got approval, the blue sign, the good text, all these necessary certificates is in the process. And this is a non-regulated technology, which means that we don't have to follow any special regulations for this kind of technologies, which make it much, much faster and also easy for the brand parts to accept. And we have products shipped out to our distributors and trials are already starting as we speak. And we expect that this could generate sales already in 2025. 25, depending on which customers and which collections they choose. So this is really exciting. We believe that this could be a very, very big part of our sales moving forward the coming years. And I also would just give a short update on Shedguard. I have promised before that we will have results ready by now, but it is delayed. So I don't have any results from phase two. Today, it is expected any day. So as soon as we know more, we will let you know. But the Shedguard is an innovation project that we started in 2024. And it's a technology that can reduce microfiber shedding and to protect clothes from peeling, which can prolong the lifetime. So this fits perfectly with the PolyGene portfolio. And there are some small updates on the project. We had the fabrics treated from phase one. We have sent it back to the partners who are trying with us, and they have approved the hand fill, which is a very good hurdle to overcome because we were a little bit afraid that the hand fill could be a deal breaker for some brands, but they have actually accepted that the hand fill is not changing that much. And as I said, we're waiting for the phase two results. Any day we will have them ready. And we also need to find out what is the good results because we know we had really good results in previous trials, but we need to have those results consistently good. And that is the challenge here. Why do we get so different results? And we also need to find out what the brands believe is a good result. Is the 15% shedding, less shedding okay to launch or do they want to have 30% So this is something we find out with the partners we are working on this project with. And good news is that we have new brands coming to us and say, we would like to try it and we say it's not ready yet, but they say it doesn't matter. We would like to try it. We know it's an innovation project. We know it could fail, but we would love to try. And this is customers in both Europe and in Japan. And we actually think it's a good idea to let them try because if they are convinced it's much faster than going through the mills and the distributors. So we are going to go into new trials with specific brands that are not in the initial phase one and two. And then we're going to have Manchester University visiting us in Malmo. So the project is absolutely still alive and I don't expect any sales in 2025, but I'm sure we will get something ready to present to you latest in the Q2 report. Then moving into AdMaster for the first quarter. As Niklas said before, it's flat versus last year. And that could be alarming, but it's not. This is according to planned sales. And it's because some of the call-off orders we have, we know that they will hit later this year instead of the Q1 like they did last year. So we are still confident that AdMaster will continue to grow in 2025. We saw a slow start, but a very strong recovery in March. So March was actually the same amount of sales that we had both in January and February together. We also know that there is a challenge in the construction sector, which is one of the biggest segments in AdMaster. We have a lot of flooring companies and they have been struggling a little bit with the repeating orders. So we are following that very closely. EMEA still largest region, 67%, and last year we had 70%. So it's still the biggest region, but we are continuous to try to develop business in China and in the US even more in the future, because we believe there is a big potential in this market. Biomaster US, the distributor we acquired a couple of years ago, they are continuing to show strong growth. Even if the numbers are still small, we saw almost like a double sales in the Q1 this year. So it is positive, and we hope that it will continue to grow. I must also expand the product portfolio with two new technologies. So one is a medical grade for PVC, which we didn't have before, and this could open new doors in this healthcare sector. And the other one is enhanced and better performance of the VeriMaster technology, where we now can apply new services that we couldn't do before. So this is also very positive. And the new website that we launched last year is continue to generate leads. We also see a lot of other interests coming in. So to handle this in an efficient way, we have onboarded a new internal sales support in the office in Stanford. And this is because we want to free the time from the sales guys to be out there visiting customers to go to trade shows to generate sales for us so you think this is a good setup to free time because we know when we visit the customers and working closely with them we know that business will come it's a good example we were in portugal visiting the distributor there and key customers and they brought orders with them back home so it is key to be close to them. And this is why we decided to take on this internal sales support role. And then of course we have the 25 year celebration of Admaster this year. We had a ceremony in the office where the founder, Paul Morris, and the Lord Lieutenant from the Royal family and the staff and the board and other invited people were there. And it was very nice. And Yeah, very positive event. And then last, I would just like to comment on the import tariffs and how this could affect or if there is a risk that this could affect apologizing group. And as you know, there is still no definitive decision made. It's still very uncertain how this is going to end. So what we could say today is that there is no direct impact on the proposed tariffs. today because PolyGene Group is not exporting to U.S. It's very limited. It's less than 5%. This means that there are not a lot of production in U.S. Even if we have a lot of U.S. customers, they are producing overseas, mainly in Asia and China. So directly, there is no impact on our business. But of course, indirectly, there could be a risk if our customers are decreasing their production volumes. And as an ingredient brand, We can't survive without our partners' products. So if they decrease their production volumes that they treat today, of course, our volumes will go down if that happens. However, we have a global distribution set up, and that could mitigate the risk because we can easily move with the customer. If they are moving production to a country with lower tariffs, we move with them. We have a global set up. We have availability all over the world. That is the good thing with PolyGene Group's business setup, that we have this flexibility. So our strategy for now is to follow the development very closely and also, of course, stay in very, very tight dialogue with our customers to know what their next move is. And what we experienced so far by talking to a lot of customers, there were no changes. There's no impact in the short term. There is nobody who have canceled orders or alert to us that they will decrease the volume for the coming period. So we will update you when we know more, but for now we are quite confident at this stage that this will not impact 2025 so much. I still believe that the PolyGene group will continue to grow this year and to show the scalability that we have in the business model. And just a short slide for the new investors I know is listening now. Very short, we have main owners that are strong and long-term. As I said, the model is scalable. We know that the Q1 now, we had some extra costs that we had planned for. And if we take the full year, I believe we can Keep the level of cost base that we had last year and still grow the sales quite a lot. Asset light, we don't have any production in-house. We are not fixed to special countries or products. We are very flexible how we operate and this is a very good benefit these days. We have high margins and that enables that we have a profitable business. We have positive cash flow, and even if Q1 wasn't positive cash flow for the full year, we expect positive cash flow as last year. And this, of course, limits the financial risk. It limits that we have to raise money. It gives us a safety to operate this business in a good way and healthy way. We still don't have any debts. We have a very strong financial position. The balance sheet is looking very excellent. And as Niklas said before, we still have good, strong cash. And that is also one reason why the board decided to start to pay out dividends. And that is the first time in Polygene's history that that happens.

I think that was all. Thank you. So do we have any questions?

Let's see if there's been any questions that has arised during the presentation.

No, we did a very full, good overview.

No questions, we had a little bit of a question about Shed Guard before the meeting.

And I mentioned about that. People ask about Stay Fresh Bio. It's still there. It's ready to go. We have customers interested in this. And we're also waiting for permission to be able to treat fabrics in Europe. And that will take another six months, but that's ongoing. Yeah. Also in polygene, I mentioned in the report that we also launched wash-in technology together with Storm. So polygene is delivering chemistry to Storm aftercare. who are selling a wash-in to end consumers that you can treat with OdorCrunch in your washing machine at home. And this is a great compliment, but it's not Andropology's business. We are just delivering the chemistry. But we have a very good partnership with Storm Aftercare, which are doing a really, really good job.

Okay.

Yep. And we're done. And see you in July next time. Thank you.

Thank you.

Bye.