Vimian Group AB (publ)

Welcome to the Vimean Group Q3 Report 2024. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Patrick Erickson, CFO Karl-Johan Zetterberg-Boudry. Please go ahead.

Thank you very much and good morning and thank you for joining our third quarter earnings call. I'm going to jump straight into it today and maybe look at some of the highlights from the third quarter. We continue to show a double-digit organic growth and margin expansion in the quarter. We had a strongly adjusted EBITDA growth and we improved our cash flow from our operations and we passed an important milestone when we entered into an adjacent and an additional MedTech niche when we acquired business in the dental space there. I want to go through a little bit more in detail on what was driving this results. So first of all, a 10% organic revenue growth, and it's driven by our specialty pharma and our veterinary services segments, which both showed very strong growth. Our adjusted EBITDA grew by 20%. and ended up being 21.9 million. Our EBITDA margin came in at 25% year-over-year, and that's also an improvement. If we turn to our specialty pharma segment, we show strong growth here with 13%. We had very strong growth across all of our therapeutic areas here. As you know, we've talked about a growth initiative here as the one focus point to drive organic growth is our cross-selling initiative that yielded one third of the growth came by way from that initiative alone. And the positive margin development that we've seen here in specialty pharma is driven by continued focus on integration of our acquisitions and optimization of the business in general. The adjusted EBITDA grew by 24% in this part of our business. If we then turn to MedTech, Organic growth in this segment was 4%. And it's driven, it's slower than in Q2, it's driven by softness in the US surgical elective high cost market or high price market, which would be knees and hips. And today we don't see any sign of recovery in this part of the segment in America. We had continued high single-digit growth in our European and APEC businesses. The margin improvement here is driven by the annual order program, where we have now flattened out our sales of those products across each quarter. And that even now is our margin profile over quarters in the years as well. Our initiative to drive growth in MedTech is all about capturing the white space. We do that mostly by way of education and conducted over 20 on-site educations with almost 300 participants in the third quarter. Our adjusted EBITDA for MedTech grew by 19%. We now switch over to our veterinary services business. Very strong growth here of 17%. And we see positive momentum across all of our key geographies in the business. Our initiative for growth in veterinary service, as you know, is all centered around acquiring new members. And we added 250 new clinics to our membership for a total of 8,200 at the end of the quarter. Margins were up substantially here, and it's really because of our higher penetration of services on existing customers, and we're seeing good benefits of the scale that this business is now starting to drive. The EBITDA growth for veterinary services came in at 34%, which is an exceptional growth for this business. Now turning to Our fourth and last segment, diagnostics business, is about 5% of our total business. We continue to see decline in this business by 5%, and the end markets here, which is a livestock-focused market, has unchanged characterizations. The profitability in this business is lower as we have launched this parasitology test to the companion animal business where we're refocusing and diversifying this part of our business also into companion animals. We'll continue that effort in the future as well. And with that said, maybe switch over to the acquisition that we just did. We're very excited about having completed this. the IM3 acquisition. Um, it's in a global leader in the veterinary dental space. And just as a reminder of our strategy where we've, we've said that, um, M&A strategy is for tuck-ins that adds products or geographies into our existing platforms in specialty pharma and medtech or in veterinary services. We also said that we're looking for new therapy areas for specialty pharma and medtech, and this is exactly that, a new therapy area for our medtech business. We're excited to have acquired the global leader in the vet dental space, and IM3 has a very strong brand recognition in this niche. The niche grows very fast and has very high customer satisfaction. And as we've said before, but just as a reminder, this acquisition would add about 7.7 million in EBITDA. And we consolidated the business into our operations here on October 1st this year. We were to look a little bit closer at the company. It It's a family owned business that was founded in Australia about 30 years ago that has been a very, very successful building, um, customers in over 40 countries, uh, selling both direct and through distribution. We're adding 85 employees, uh, into the family of and welcome them to the family of Indian. And, uh, we have offices in the U S Australia Island and, uh, in the UK. Um, Just like we have in our orthopedics business, wide space capture and education is a key driver for growth here. IM3 has a number of state-of-the-art education centers that can be used both for dental and orthopedic education. So we're very excited to add more capabilities here. If we look at additional acquisitions in this segment, we are looking at driving acquisitions that will help us improve and increase the margin profile of the business. That includes consumables businesses, includes distribution businesses that will help us acquire that. If we look at our product portfolio in here, we have some very specialized dental units, x-ray units, instruments that are used for the actual surgical procedures or the dental procedures, some small equipment services and consumables. So today, about 32% of the revenue of this business is of recurring nature. So with that said, I'm going to end my piece here and hand over to Kalyon who will walk us through a little bit more details on the financials. Over to you, Kalyon.

Thank you very much, Patrick. And that's it. Let's take a more detailed view on the financials for the third quarter. Adjusted EBITDA in the third quarter was 21.9 million euro at the margin of 25.0%. This is a solid improvement from 22.9% for the same quarter last year, supported by positive margin development in all of our three largest segments. as we see effects from cross-sales, benefits of scale, as well as mix. We report operating profit of €10.1 million, a year-over-year growth of 2%. Items affecting comparability clearly impacted the operating profit in the quarter. In total, the items affecting comparability amount to €6.5 million, with costs for the IM3 acquisition, as well as continued high level of legal costs for the U.S. patent litigation. The net financial items of minus 9.3 million euro consist of three main elements. Finance expense of minus 3.8 million, with an average interest rate of 6.0% in the quarter, offset by 0.5 million interest income. The quarterly discounting impact of minus 1.2 million euro, an impact of 0.1 million euro from probability adjustments on contingent considerations. And lastly, a negative impact of 5 million from non-realized effects on revaluation of debt. The income tax expense for the quarter amounted to 2.7 million euro. In total, this results in a net profit for the quarter of minus 1.2 The negative result is a consequence of the high amount of items affecting comparability, as well as the negative impact from FX in the net financial items. Q3 cash flow. Cash flow from operating activities reached 16.7 million in the third quarter, an improved cash generation compared to the same period last year, as well as the second quarter this year. Networking capital amounted to 80.8 million euro at the end of the quarter, equal to 23% of revenue. A decrease from 82.0 million at the end of June, which equaled 24% of revenue. We see opportunities to gradually improve working capital and cash generation over time. During the quarter, we further improved our processes for inventory management across the group. And as a consequence, the decrease in networking capital of 1.1 million euro compared to the end of the second quarter is driven by the decrease in inventory in MedTech and lower accounts receivables as MedTech AOP customers pay their monthly installments. The decrease was to some extent offset by slightly lower accounts payables. Cash flow from investing activities of minus 89.2 million euro primarily reflects timing effect from financing the IM3 acquisition payable on October 1st. Cash flow from financing activities of 70.7 million where the proceeds of the rights issue in the second quarter of 142.7 million has been used to repay 142.4 million of debt. partially offset by the new loan of 78.5 million euro for the IM3 acquisition. At the end of the period, net debt amounted to 140.3 million, down from 144.1 million at the end of the second quarter. External lending totaled 240.1 million euro following the repayment of the proceeds from the rights issue, as well as the use of funds to finance the IM3 acquisition. Leveraging the quarter equals 1.3x compared to 1.4x at the end of the second quarter. With this financial review of the quarter, I would like to hand the word back to Patrick for concluding remarks before we open up for the Q&A session.