Swedencare AB (publ)

Welcome to the presentation of SwedenCare's half-year report, led by our CEO Håkan Lagerberg and CFO Jenny Graflind. And we are pleased to have our European CCO Laszlo Varga joining us with the presentation during today's webinar. And as usual, we will have a Q&A after the presentation, so please raise your hand if you have any questions. Over to you, Jenny and Håkan.

Thank you so much, Emma. A warm welcome to everyone joining this call. Q2 2025 highlights, sales increased 3% and primarily affected a lot with negative effects, as you all know, due to low sales growth. Organic growth, 7% increase compared to last quarter. But definitely a disappointment for us since we thought we would be reaching the double-digit goal that we have. And I will explain that a bit later. But main driver for not reaching it was a big box order that was scheduled to go out in Q2, mid-Q2. But due to not caused by us, it was up to the customer to draw the order. It started drawing out in 1st of July. Organic, yeah, organic growth. And then resulting in 19% operative EBITDA, also lower than where we want to be and mainly affected by the Amazon transition of the NatureVet account. And Jenny will go through that in detail. And also, of course, if we would have had that additional order, that would have been a good margin boost also for the quarter. Coming back to the tariffs, nothing much has happened despite all the talks, but of course creating some turmoil and discussions with customers. But as we have explained, we have local manufacturing and local sales. So we are not heavily impacted in any case. Of course, we have had some discussions with our Vetio North customers since being produced in Canada and lots of the sales go to US customers, but we have a good setup and good plans. So regardless of what will come, we won't be that much impacted. Another big event was, of course, the transfer of the NatureVet Amazon account. As I said, Jenny will go into details about the financials. But from an operational point of view, it's been a success. Our in-house PetMD team has done a great job in taking over the account. And I will come back to that a bit later in the presentation. We started off the quarter by the acquisition of SummitVet, a specialty pharma operations primarily in the UK or compounding pharmacy as they call it in the US. Specialized business, niche business where we haven't been present before. Great fit for us and the inboarding of SummitVet has been good and we have already kicked off the potential development for Summit Vet, adding a completely new feature of their offering, our patented software process that we utilize in Veture North. We have already bought in equipment and started some trials. And if everything goes well, we schedule a launch of a couple of products in early 2026. Big box, exciting things, despite the disappointment of the actual shipment of the of the the order uh walmart uh despite the delay in the the order from a shipment from us there is no change in the actual launch date in 1400 walmart stores um so it's the last last week of july and we will be present with the 18 or 19 skus and with all the new design for branded products for So we're really excited about that and have made together with Walmart presented our marketing plan to pulling customers into the store. So I will be looking forward to tell you more about that, the launch in the next call. CVS will also be launching a smaller setup of SKUs, three SKUs nationwide, plus 1000 stores, also launching end of July. So I really would like to congratulate the team In NatureVet, they've been working very hard for these two accounts. Also, what will happen in Q3 is that we will expand with five new SKUs at PetSmart. That also will have a big effect on our sales going forward. So we are evening out, let's say, the... the differences between being dependent on a couple of few big retail customers. We are really expanding the customer list. Jenny and her team has been working for all the quarter with a new long-term finance plan that's in place. And Jenny will tell you a bit more about that. So really happy about that. And Jenny, over to you.

Yes, the finance. So revenue amounted to 647 million for the quarter, representing 3% growth. 7% of this was organic. We had a negative 9% currency impact for the quarter and 5% was acquired growth. The acquired growth came from Summit, which was acquired on April 1st and contributed with 26 million for their first quarter as part of SwedenCare, and also MedRent, which we acquired in August. For the first six months, net revenue amounted to 1.3 billion. That's compared to 1.2 last year, so we have an organic growth of 6% for the first six months. Our operating gross margin was at 58.9%. This is the highest gross margin we have had since 2022 and a good increase compared to the 27.9 that we had in Q2 last year and also for the full year 24. But this is also in line with our expectations. I will come back a little bit later and talk about the difference between the reported gross margin and the operating gross margin. The external costs are increasing. As we have mentioned before, with the growth in Amazon, some costs of the external costs are directly linked to sales. So this quarter, Amazon costs increased with 23 million compared to Q1. The majority of this is linked to the NatureVets Amazon account, which we have now managed in-house, and more on that in a little bit. We had 8.9 million in acquisition cost for Summit as well. And we also had some costs for ERP implementation for the quarter. The more variable external cost, so cost which is not related to Amazon, which is about 50% of the total external cost, has actually decreased as a percentage of sales. So that's nice to see some efficiencies there. Operational EBITDA amounted to 123 million for the quarter. That was a 19% EBITDA margin, which is a decrease compared to Q2 last year of 13%. For the first six months, EBITDA margin is 19.2%. And speaking about EBITDA, this will lead me into giving you an overview of the Amazon that we have moved in house. So this acquisition, which included the Amazon account and our partner's existing inventory, was completed on April 23rd. So for the first two months, this has generated an additional 24 million for the group. As we have been selling out our partner's inventory in the quarter, which we have less margin on, of course, this has a negative impact on our gross margin for the quarter. Marketing and selling costs associated with this additional Amazon sales amounted to 17.3 million for the quarter. When all the products we have sold have lower margin, the EBITDA was negatively impacted by almost 8 million. So excluding this transfer, our EBITDA margin would have been 21% for the quarter. So going forward and looking at Q3. In Q3, we will still sell the remainder of our partner's inventory. And that will take about a little bit more than half the quarter. And then the rest of the quarter, when we'll be selling the other inventory, we have significantly higher margin for the group since it's purchased from our production facility. Hence, we will both get the margin on the production level and also the margin from the Amazon sales. As a result, the gross margin is expected to still be impacted, but less than we were impacted in Q2. And the additional sales will contribute to a positive EBITDA compared to the negative EBITDA we had in Q2, but it will still be at a very low margin in Q3. From Q4, all sales will have stronger margin, hence it's expected to have a minor impact on the group's gross margin and EBITDA margin. Some other financial highlights. Net debt to EBITDA has increased to 2.9 compared to the 2.4 we had a year ago and from 2.0 last quarter. We communicated that with the acquisition of Summit, we expected it to increase to 2.5. In addition to the difference between the 2.5 and the actual 2.9 is that we have purchased this Amazon account and the inventory for 78 million. And here we do not contribute to any performer EBITDA as this was an asset deal. In addition to that, we have a lower EBITDA margin in QTH than we had in 2024, which then of course has a negative impact on this ratio. Our cash conversion for the quarter was low. It was 27% for the quarter. The main reason for this is a buildup of working capital where we increased inventory about 28 million. This is mainly linked to this inventory buildup we have in the preparation of the Walmart launch. Like Håkan said, this was moved to the current quarter. So that's why it's all in our inventory. In addition, it's been a quarter with large supplier payments. During the quarter, we made acquisition of Summit. We paid 350 in cash and 40 million in shares. We also did the Amazon deal. That was 78 million in cash. We have also, during the quarter, paid the dividend, which the AGM approved. That was 0.25 SEC per share, so a total of 40 million. During the quarter, like Håkan said, we have refinanced our external loans. We had in the past two bilateral agreements with two different banks. Now we have moved to a club deal with SEB and Danske Bank, and we have a total facility of 2 billion. So that's an increase of 200 million. And we of course have updated terms. Our interest costs are decreasing with the lower interest rates. For the first six months, we had 27 million in interest costs compared to 39 million last year. Our capex is still in good control. It remains at 1% for the quarter and 2% of sales for the first six months. At June 30th, we have the lowest cash level we have had actually since 2021. And we have a cash pool structure in place for the US entities. And we have also recently set up one for Europe, which this enables us to have a lower cash level so we can better use our cash in terms of lower leverage and therefore also have a lower financial cost. Rolling for quarters. As you can see, the revenue for the rolling four quarters or 12 months have increased slightly. However, both operating EBITDA and EBITDA has decreased for the reason I've already mentioned. If you look on the right graph, you can see that there's a difference between the operational EBITDA and EBITDA. The majority of this adjustment is actually both for the operating gross margin and the same thing for the operating EBITDA. And this quarter is linked to the fair market adjustment that we make of the acquired inventory for Summit. So the inventory value that we acquired is a gross margin cost. However, when it's valued during the purchase price allocation at selling price, there is an accounting entry of 24 million, which is then adjusted for in the operating gross margin. A similar adjustment will also be made in the Q3. Product and brand split. These graphs are not adjusted for acquisition or currency. And as you know, currency impact on revenue for the quarter is negative 9%. So for example, if you look at topicals, it looks like a decrease with 2%, but actually it's a positive. So we are going to work on making this transparent, a little bit more transparent going forward. But pharma, 39% increase is impacted by the acquisition of Summit, which falls into this category. However, the rest of pharma has a negative impact as a large project was moved to the second half of 2025. I think Håkan will mention a little bit more about that. Dental, an increase of 20%. This mainly includes the Protoplat Golf and a few other dental products. It's about 17% of the group's total now. The main contributor to this is the plaque of powder and also the dental bones, which has been a focus product during the quarter. The treat product group is still going strong, 56%, even though it's small levels, but it's driven by product launches within the brand. Then on the right, we got the brand split, same here, and not currency adjusted. So the strong Swedish crown has a negative impact on this growth. One example is Innovet, which in this quarter turned to growth. However, it's not visible in the graph. And Summit Acquisition is included in other for this quarter. Now over to Håkan to give some more details on the sales.