Swedencare AB (publ)

Hi and welcome to the presentation of SwedenCares Q4 reports, led by our CEO Håkan Lagerberg and CFO Jenny Graflind. We will have a Q&A after the presentation, so please raise your hand if you have any questions and we will answer them in the end. Over to you Jenny and Håkan.

Thank you so much. Welcome all to our highlights presentation or Q4 presentation 23. Håkan Lagerberg here and with Jenny Graflin, our CFO. Yes, the end of the year, finished strongly and we had another sales record growth in all channels and in all regions. I will present those later on. The organic growth was the 23%, the best for the year and full year was 15%. And for those of you that remember, we had Roughly 10% growth in the first half of the year and then in Q3 we had 17% and now we have 23%. So as we discussed and anticipated was that the second half of the year should yield better numbers and it sure did. Very strong cash flow continues, 93% cash conversion from ABTA. So we managed to amortize 75 million on our debt. And we also made a minority acquisition of Riley's Organics that I also will present a bit later on. Our process of... focusing to leave the external manufacturers and transfer them internally has continued. We have now 84% of the products that we sell are manufactured internally, and we have also improved the output in all our manufacturing sites, both in California and in Veteo South primarily, and also in Ireland, where we have made lots of new setups predominantly for the soft tube launch in Europe. We made an acquisition of Riley's Organics. It was finalized the 2nd of January, and it's a very new and interesting area for us. We haven't been in the treat sector previously, but we see that it's a really high-growing and very interesting area. area where we see lots of opportunities to be able to grow a lot faster than the market in that sector as well. We have been looking at different treat brands thoroughly, and we really wanted to find something that was a bit different than the normal MeToo products. And Riley's Organics have had a really strong a strong presence in the market a small brand but but been true to their objective of having really high quality products and we see we have a strong pipeline of new products being launched within that brand and we will also take that brand has been sold in online and um With some wholesalers, we see opportunities in the vet channel. We see opportunities in the pet retail space. So that would be a very interesting sector of our business. The proposal from the board is that we increase our dividend this year to 0.23 SEC per share and And this is predominantly due to the fact that we've had a very successful year and a very strong cash flow. So we see there's good room for this. Our ESG work continues. We have now completed the implementation of a sustainability platform where relevant KPIs have been carefully selected. And we will measure all of those in 2023. And then we will start communicating hopefully the improvements that we will be doing over the year in 2024. So it's been a big project and now being finalized. And now we're starting to implement it with all of our group companies. Jone Peter Reistadler, We also made a life cycle analysis for protein black off as most of you know, it is a organic. Jone Peter Reistadler, material in the product, but we have been looking at the whole process and see where we can we now know the imprint and and we will now look if we can make further improvements. Jone Peter Reistadler, And then we also obtained a certification of nasdaq is G transparency, we have been working very hard in. improving our communication when it comes to ESG. And it's great to see that we get this recognition from NASDAQ.

Okay, some figures. Let's start with revenue. The net revenue for the quarter amounted to 627 million. And that's about an increase of 26% compared to Q4 last year. This is including the, like Håkan said, 23% organic growth, 1% currency impact and 2% organic growth. And the organic growth came from Verio UK, acquired growth, came from Verio UK and Axiom, which we acquired both in November 22 and April of 23. And that revenue continues to grow quarter by quarter. The increase from last quarter was 4%, and that's with the same company structure. The operational EBITDA is the same as EBITDA because there was no adjustments except for a very small one this quarter. So that is 21.6%. Some other KPIs, operational gross margin is 58.2%. During the fourth quarter, this gross margin was positively impacted about 3.6% because we did a reclass between indirect and direct labor cost. We had a negative impact of gross margin due to write-offs of inventory. But if I exclude this inventory write-off and the reclass, the gross margin would have been at 56.9%, which is the strongest for the year. The operational EBITDA amounted to 135.5. This is an increase of 13% compared to last year. And the margin was 21.6% compared to 24.2% last year. And this margin was impacted partly by a write-off or a reserve of receivable, as well as a one-time cost, which related to the fact that we have relocated RX from New York to Florida. In addition to that, we have increased marketing spend with Amazon, which was higher than Q4. And we also have some double expenses for some positions, second part of the year, which is doubled because we have done a handover for some positions at year end. Adjusted for these, the one-time cost of the write-down and the EBITDA margin would have been a little bit over 25%. We also did in Q4, we did an annual tax expense for the US, which was recorded. And this had resulted in a negative profit margin for the quarter. However, excluding this depreciation on acquisition related assets and related deferred tax, the group has an effective tax rate, which is about 10.7% for the year. We had another strong cash flow for this quarter, 126.3 million. And this is, like Håkan said, 93% cash conversion against EBITDA. We further decreased our working capital despite that we are able to increase our sales, which is great. And yeah, just like Håkan said, we have done the majority acquisition and also amortized on our loans. And one other thing is that despite the fact that the interest rate has continued to increase, our interest expense has actually decreased due to the fact that we have now a lower debt. And our net debt to EBITDA is now at 2.63%. This is compared to 3.39%, which we had at December last year. Some annual numbers. Net revenue was a 2.3 billion, an increase of 27%, which of 15% was organic growth. And like Håkan said, all geographical markets have shown growth, which is great. And operational growth margin of 55.4% is a bit lower than last year, but that's mainly due to product mix. We have had raw material cost, which has increased, and we also had higher inventory write-off this year. The operational EBITDA is about 500 million, and this is an increase of 14% compared to 440 last year. OPEX is adjusted for the reclass and acquisition cost. If I adjust the OPEX for the reclass and acquisition cost, we are at the same level as last year. However, Amazon represents 35% of the external cost this year compared to 25% last year. So if we think about the remaining external costs, we have actually had a decrease as part of sales from 14% to 12.6%, which shows then a scalable operations. And operating cash flow is 444 million, a positive effect of working capital for the year of 60 million due to less inventory and also an increase of operating liabilities. Investments in tangible and intangible assets, or capex, amounted to 36 million for the year. That's about half of what we spent last year, and it's about 1.6% of net sales. Last year, that was 3.6%. And in addition, we have also amortized 200 million on our loans this year. Our rolling four quarters continue to show a nice trend. Of course, this is the four-year numbers. Product and brand split. I will mention a few. Nutraceuticals, which is the largest product group, has shown a growth of 24% compared to last year and 35% for the full year. The product Black Off has had a fantastic, just another fantastic year, increased with 46% compared to last year and 50% for the full year. It's mainly the powder, which is behind the increase. There has been efforts to remove third-party sellers at lower prices, and they have begun to yield results, which for us results in a higher sales price for the product. There's also been a very strong increase of soft shoes for the quarter and also for the year. And this only includes the launch of soft shoes on the US market because the launch in Europe will take place this quarter. And the topical end dermatology is up this quarter, but down for the year. And this is partly due to this ingredient chlorhexidine, which is found in many of our products that we sell online. This ingredient is a prescription ingredient for humans, but not for pets. However, Amazon's algorithms and guidelines are still influenced by this. So we had to do a necessary write-down of some of these products. And also, we have lost revenue because of this. It's about 20 million for the year.