Polygiene Group AB

Good morning and welcome to the presentation of the third quarter Apollogene Group. I am Erika Bjork and I'm the CEO of the company.

And I'm Niklas Blomstedt and I am the CFO.

I'm going to start to show you some highlights of the quarter. It's been an interesting journey the last six months.

I'm going to show you here some of the The headlines.

So what we could see coming out of a quite poor Q2, we have seen improved performance and especially driven by a faster recovery in PolyGene. Admasters still have a little bit more time to come back after the drop in Q2. But we can see the businesses overall returning slowly. And Admasters have received some quite significant big orders in the beginning of October here. So we believe that the end, the year end will be very, very strong for us. We also held our first global agent and distributor conference in September. We had one in Malmo and one in Manchester, and that is to strengthen the external sales force we have. And then very, very interesting is that we've seen the first commercial orders for Stay Cool. And I will come back to that a little bit later when I go more in depth. And then tomorrow's news about the patent we filed for a new groundbreaking technology within mosquito applications. But first, we're going to have a summary of the financial updates.

Yes, if we start with a short summary, we can see that sales was 36.4% versus 40.8%. It's down with 10.8%. But the FX effect is 7%, so it's around 4 or 5% that's the volume driven, the rest is FX. We see a gross margin of 71.1 versus 71.6. But if you compare quarter to quarter, we can see that there is a negative FX impact of 2% versus last year. So without FX, the margin would actually be stronger this year versus last year. And that's mainly driven by the mix we have with stronger polygene sales versus atmosphere sales. And the operating cost is more or less flat, 21.9 versus 21.8. If you look on the fixed costs, they are actually lower in the quarter versus last year. So this commission is a little bit higher this quarter versus last year. And that's driven by sales and the customer mix that we have. We have an EBITDA of 2.9 million sec versus 5.7. Inebit of 1.5 versus 4.2. Cash flow of minus 1.2 versus 3.8. And at the end of the period, value of cash of 45.3. As we said, main drop of sales versus last year was FX. And Polygene has now 66% of the total sales versus that last year, 34%. And that's then an increase versus last year when it was 57% versus 43%. And overall, Admaster dropped with 28% versus last year, while Polygiene increased with 2%. EMEA, if you look on the regions, decreased with 24%, driven mainly then by Admaster. And we also saw a drop in APAC with 15%. But Americas increased with 48%, and that was both in Polygiene and in Admaster. And then I will say a little bit more details, but we touched on all of them already. As we said, a little bit lower sales driven by FX, still a strong margin, even stronger if we take out the FX. Cost more or less flat, fixed cost is lower than last year. EBITDA 2.9 versus 5.7, EBIT 1.5 versus 4.2, and cash flow minus 1.2 versus 3.8.

Thank you, Niklas. And now I will go into the different segments, and I will start with PolyGene, the textile side of our business. As Niklas says, we have 2% growth in the quarter. And year to date, we are still on a very good level on plus 19%. Yeah, the FX impacts Niklas mentioned before. And very interesting to see. It's a very, very strong recovery in the brand sales because in Q2, we were down on the brand sales quite significantly. that we managed to mitigate with the higher distribution sales. In this quarter here, you can see that the brand sales is actually picking up very, very well. And that is the core business. It is the brand sales. The distributor sales is more depending on the stock levels. So this is really, really good sign of that the worst part of this tariff disruption is a bit over now, and we can see the brands return and start to produce again. We onboarded a handful of new brands. We have this golf brand here from Japan and Per Se, and it's part of the Goldwing group where we have a very, very strong collaboration. They treat almost 90% of their collection, which is a really, really good sign and powerful sign of the value we add. And then we have another brand in Germany called Camel Active, who has substantially big sales to be a new brand. So that's also really, really satisfying to see. And then we hosted the Global Agent Conference here in Malmö in September, and that is to strengthen the sales force. So we had 22 of our sales agents here in Malmö, and we believe that this is a way to grow the business moving forward. To invest one hour in the agent network will give us a return of 22 hours if we can get them on board as strong as our own sales force. So this was worth the investment, and the feedback has been great. Extraordinary, very positive. And then high activity as always. We have trade show seasons. We had trade shows in Portland. We had in Germany and also in China. We've been to an investor road trip in August to try to attract investors abroad. We've been over to New York. We met around 50 professional investors and the feedback has been very, very positive so far. We just wanted to try and see the attractiveness of Polygene Group in other markets. And we believe there is a big interest because everybody can relate to what we are doing. Everybody knows the customer we work with, so it's very appealing for them. And then we had a collaboration with Bikesight. It's a German online retailer, and this is very exciting for us to get out there and spread the messaging. And you can see Bikesight as a online retailer who gathers brands from many different places. And then you can search for Polyjean specifically, and then you get all the treated garments in one search. And that is very, very powerful. So that's great news. I'm also going to talk a little bit about the project developments we had lately. We launched Stay Cool in March, and that has been overall expectation, I must say, because this is not normally how fast it goes from launch to commercial orders. But we introduce the technology to around 100 of our existing customers. And about 50% of those confirmed to trials, which is very, very strong. We only had a couple, like two, three who rejected because it didn't fit in their planning right now. But 50 already committed to say, yeah, let's go commercial with this. So we received the first orders in Q3, and they're going to be delivered here in Q4 as well. It's not massive, but it's a really, really good start. I think you could say the volume is around a couple of tons, I would say, in these first orders. But the main sales will be for 27, the summer and spring season 27. And that is in production next autumn. So for the second half of 2026, that's where we will see the main volumes. And then now we are working really hard on the marketing side to create all the materials, all the co-branding assets, all the hand tags, labels, everything to be able to support when these products will be in stores. Just a small, short update on Shellguard. This is the innovation project that we launched two years ago and it's been more slow than we thought because it's a very complicated technology. We have tested positive results for specific fabrics and that's the way we want to go. We're going to go with specific fabrics. We have approached a couple of partners and some of them actually decided to move on to bulk trials. We did lab trials before, but now we're going to do these applications in a real-world environment. And that's very exciting. I think it's ongoing now, and we have to wait another one, two months to see the results. So we have offered commercial agreements to partners, but we haven't signed anything yet, but there is ongoing discussions. So it's still absolutely very exciting. It's still alive, but it takes more long time than we expected. And then, of course, I want to just mention the new technology that we have filed a patent for. So this is a new mosquito technology, and it's an advanced textile treatment. So what we do is we remove the scent compounds that attract mosquitoes. And this is a new innovation that we have the IP on now. So we waited around one year before we talk about this technology. publicly because we wanted to file the patent, because we believe we have really, really strong findings here. And this is something we've been developing in-house with our expertise, with the PhDs, the chemists we have in-house who really found this new application. And we know that we have a lot of customers in these sports and outdoor where this is a highly demanded product. So we believe this also could be a next successful launch for us. And the timing is right because the regulatory challenges for traditional anti-mosquito products, it's really hard now in Europe. They already had banned some kind of products, active substances like the pyritmin and others. So that is why the timing is perfect for this non-biocidal technology. Yeah, the patent was filed successfully yesterday. So that's really, really interesting to see how this is going to turn out in the coming year here. And the test we've done, we've done many tests and in-control tests according to the standards, we can show that over 90% fewer landings on the treated fabric versus an untreated. And that's really, really strong results. So the discussions with customers will start now. We can talk about it openly and we're going to talk about this next week. We have a big trade show in Munich and we also have ISPO coming up. This is super interesting. I'm really, really happy to announce this. Moving on to AdMaster, who had, as I said, quite challenging last six months here. The quarter was down 28%. We also have an FX impact on the pound sec, as with the dollars. But what we can see now is that the industry has confirmed the same developments as AdMaster. We visited a big healthcare trade show. this week, and we interviewed around 10, 12 of our customers there, and everybody's witness of the same pattern. Strong Q1, strong beginning of the year, really, really struggling Q2, Q3, but they can also feel that the business is returning now. And as I said, we got some significant orders coming in here in October, and that is why we believe the Q4 will be a strong quarter for us. And in Q3, we also saw the distributors starting to stock up. This is a good sign because they are the one first in line to order from us. And then they have orders in their end as well. So I think this is a good sign. And then we also had the distributor meeting in Manchester. Also, again, to strengthen the sales force we have, the distributor network and the distributor sales in Admasters is very important. There is like 30% of the business go through these. distributors. And also high activity level we had, and this course is a big focus now to getting back on track to have the customers starting development projects again. So that is the main focus in that mastermind. So just the last slide, the outlook for the rest of the year is that this temporary setback has been caused by external factors. We are not going to change anything in our long-term plan. We're going to continue to grow that we started in 2024 when we had six, seven quarters in a row where we were growing. Even Q1 this year was strong with 20% growth. And then we had this disruption and it's not only in our industry, it's all over. It's all over the markets and industries. So I really hope that we can get it back now on track again. And I see signs, so I'm quite positive. We're going to focus now on commercialize the new technologies, especially the stay cool and the mosquito technology. We have to work hard to get everything in line, supply chain, marketing material, test data, everything. And then we are now to finalize the budget process for 2026. That's ongoing. And we have a very strong ambition to end the sales in 2025 in line what we had in 2024, and also to maintain a cost level that is flat. That is the mission for the last quarter. But I am positive. I'm positive. I've seen signs of recovery here. I think that was all.

And now we will have some questions, I believe.

Yeah, we have been some questions during the presentations, but we have some that's been done before. We can start with the ones that we had before. I think most of them we actually we had covered during the presentation, but there were a little bit discussion about what product area we see will be the next one that will bring increase in revenue. I think we touched upon them like the Shedguards mainly stay cool and not mosquito. That's the That's the official ones, of course. And we're also always working with development that's not official yet.

And I will say for the technologies we launched, we still have other things in pipeline. But what we launched now, I would say that Stay Cool has started off very strong. The interest is really, really high. So I would say Stay Cool will be.

Yeah. And then a little bit, when do you think we will be back? As we said, the master looks like Q4 and PolyG. And I would say we already see that in the report in Q3. We had some questions about Shedguard, and I think we said that we're doing field testing right now with the customers. And then there was also something about Stay Cool, and there we said we had the first order. So I think we covered that one. And then there were a little bit discussion about this big contract that we should see some signs of in queue.

Yeah, I mentioned that in the report. So due to the tariff war and all the disruption, this has been delayed. because they are producing in China and it's an American brand. So it's been delayed. We have started with the smaller collections already, but we are working on a new starting date for the big bulk volumes.

Then there were discussion about the drop. I think we touched upon that. It was mostly external. Factors, if we lost any customers, no, we haven't really lost any.

Not lost, but volumes are of course down on some of them.

And new customers, I think we touched upon that with Percy and Camel Active. And then also a little bit about the quarterly, how the pattern is for the quarterly when it comes to sales and cost. It's a little bit different if you look on PolyGene and AdMaster. PolyGene, I would say Q3 is normally the strongest quarter, while Q1 is probably the lowest one. AdMaster is more or less flat. Anything, I would say the Q1 is probably a little bit lower. The Chinese years always try. mess up the production pace for our customers in Q1. But otherwise, I would say the atmosphere is more flat while PolyGene Q3 is strong and Q1 lower. And for cost point of view, I would say the fixed cost are more or less flat. It's not really a big difference between the quarters. It's mainly the commissions, which is driven by sales and the customer mix. And then we have some questions here in the presentation. Given the recovery in Q4, what are our thoughts about the more normalized market conditions in 2026?

You never know, right, what's going to happen. Nothing is like we can expect, but from now we can see that the recovery started. We really hope that there is no other things that will disrupt our business for 2026. We really, really hope we can get back on track because I think that I said we're going to end the year around the same place where we were when we ended last year. So we will not lose a lot out of course from now on we want to create the growth.

Now I think it's if you look at the history of obviously this year Q1 was strong and especially I would say March was really strong and then I would say a week into April it just stopped due to the tariffs. So it's really difficult to have that to see in the future. The gross margins. What about the new products? Stay cool. Do we expect the margins to be in line with existing products?

It is a cheaper technology in terms of that it's a cheaper technology, but you need to add a little bit more. So I would say they will be in line slightly lower than the other business, slightly lower.

And then the key factors for commercial launch of Stay Cool and mosquito technology. I guess it's a little bit different because Stay Cool is probably easier and can be faster versus mosquito technology. I guess that takes a little bit longer.

On the other hand, we have so many customers in the fields where you're hunting, fishing, outdoors, which have a huge demand for these technologies. We already have discussions with companies who are highly interested in this because it's a sustainable technology, no biocidal And it's a new innovation, how we present this and how it works. So I think it could be really interesting.

I think that was all.

Okay. Then I would like to say thank you for listening and see you again in February when we're going to present the Q4. Thank you.

Thank you.

Thanks.