Vimian Group AB (publ)

Welcome to the Vimean Group Q4 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 Carl Johan Zetterberg, Boudry. Please go ahead.

Good morning. This is Patrick, and thank you for joining us. We're going to jump straight into it and start with some of the highlights from the fourth quarter results that we just reported. We delivered an all-time high revenue for an individual quarter in the fourth quarter with strong organic growth, and that is well ahead of the animal health market. Our cash flow from our operations were very strong as well in this quarter, and it corresponds to a cash conversion ratio of 115%. We also increased our operating profit during the quarter. And we're very pleased to have incorporated and consolidated the animal dental business with IM3, starting on October 1st this year, last year. And they have made a great start and a good contribution to Demian in the first months that they've been with us. So now turning to the quarter in more detail. We delivered 27% revenue growth, which led us to this record sales of 104.9 million euros. We continue to see double-digit growth of 15% organically, with exceptional performance from our specialty pharma unit. We looked at the adjusted EBITDA. We grew 9% in the quarter compared to the fourth quarter in 2023. But remember that that quarter in 2023 benefited from a 1.5 million euro capitalization of our R&D expenses. that was related to quarters one, two, and three in 2023. If we exclude this one-time impact of the higher capitalization rate in Q4 23, the adjusted year-over-year EBITDA growth for us was 17%. We started to look at the margin bridge here. As you can see, our margin came in at 23.4%. And we wanted to show this bridge here, the impact of the R&D cap compensation is about half of this margin walk. And we end up with a like-for-like margin for 23 at 25.6%. We had a one-time impact from specialty pharma where we wrote off a customer receivable, a one-time nature that will not be repeated, that impacts us with 90 basis points. And then we have a margin decline in our MedTech business driven by two items. The first one is we decided to make investments in the fourth quarter to grow our market share in the orthopedic U.S. market to gain share there. And then that had a margin impact. And then secondly, we've incorporated now IM3. As you recall when we announced that, the margin profile of IM3 is a little bit lower than the fleet average of Vimeo. And when we combine it, we'll get this margin impact as well. The rest of our group had psychomotor improvement and accretion, and that was predominantly driven by our veterinary services group. We now turn to specialty pharma. It had a simply exceptional organic growth of 22% of the quarter. It was primarily driven by very good growth across each of our different therapeutic areas. Especially three out of the four were just stellar. The contribution that came from specialty pharmaceuticals and specialized nutrition was exceptional. And in our specialized nutrition, we ran a couple of sales campaigns in various states out in the U.S. for the first time that proved to be very successful. In 2024, about a third of our growth was generated from our cross-selling activities. initiatives, and this number has been very stable throughout the year, and we continue to see great benefits from the cross-selling programs. Our underlying margin development was stable year over year, and when we include the higher levels of capitalization, as we've highlighted a little bit, and the write-off of the customer AR. If we exclude these two, and adjust for it, the EBITDA for specialty pharma grew by 23%. Now turning to our MedTech business, we looked at the total revenue for MedTech, which would include our acquisition of IM3. We grew 41% in the fourth quarter. We will start to include IM3 in our organic growth number in the fourth quarter this year, and we're there off to an amazing start, as I mentioned previously. We reported 4% organic growth, and we continue to see challenges in the U.S. high-end surgical market. Our EMEA and APAC region, which constitutes about one-third of all orthopedic business, reported slightly lower organic growth in the fourth quarter, but delivered high single-digit growth for the full year. We completed 52 in-person trainings throughout the quarter, and we had 855 participants in those and had as many participants on top of that participating in various virtual trainings. And as we mentioned earlier, we've taken some investments in the U.S. to gain market share and to drive growth in 2025. And these investments include intensified education programs, sales, and marketing initiatives. We see an impact from the consolidation of IM3 on the margin for MedTech as well, and we report an 18% adjusted EBITDA growth for this segment in the fourth quarter. And as we have talked about about a year ago when we talked about our AOP program, the annual ordering program in the U.S., this quarter is the last quarter that we will continue to make reductions in the AOP program. And we expect this to have a slight negative impact on the revenue for MedTech 2021. But we fully expect to deliver full growth for the full year. Now turn to the veterinary services business. Again, a very strong quarter with 16% organic growth. We reached 8,400 members here by the end of the year and continue to cement the position as the global leader in service platform. The strong profitability that the team has shown here is driven first by the great growth that we see, and also we've had opportunities for a very positive mix. This part of our business is now preparing for new market entries, so we're reinvesting some of our margins in 2025 into further growth in this segment. And you should expect our margins to normalize in this business and be more like the first half of 2024 going forward than the second half that has exceptionally strong margins. If we turn to the adjusted EBITDA growth for our VET services, it was a remarkable 35% in the quarter. Now, turning to the diagnostics business, we're very pleased to see that this part of our business has now returned to double-digit growth, 12%. This is driven by some launches of new products, innovation that we've had in the pipeline. The team have worked hard to turn the business around, and we're pleased to see some of the fruits of that hard labor. We also want to note here that the livestock market continues to be unpredictable, but we're optimistic about this business and we think about diagnostics as a growing business for 2025. Also, before we leave this slide, just a quick comment to say that the commitment to diversifying this group into more companion animal continues. And we are committed in 2025 to continue that investment in launching products of share-side nature, point of care for the companion animal segment of diagnostics as well. So you can expect us to have the same sort of more detailed trial that we have shown so far. So with that said, I want to thank you for your attention here. I'm going to hand the mic over to Kalyan, who will go through our financials in a little bit more detail. Kalyan, over to you.

Thank you very much, Patrick, and hello, everyone. And as Patrick said, let me give you some further comments and details on the financials for the fourth quarter. Adjusted EBIT A in the fourth quarter was 24.6 million euro, which corresponds to an increase of 9%. This represents a margin of 23.4%, and as outlined by Patrick in previous slides, The reduced year-on-year margin is driven by quarterly effects, especially pharma and medtech. We report an operating profit of 12.5 million euro, a significant increase from last year's result of 2.7 million. Items affecting comparability clearly continue to impact the quarter, with a total of 6.2 million euro. This is mainly costs relating to acquisition activities in medtech and specialty pharma, as well as continued high level of legal costs in the U.S. patent litigation. In the U.S. patent litigation, the main hearing in the process is happening now in February, which will drive high legal costs impacting items affecting comparability also in the first quarter. Net financial items was 2.5 million euros and consists of three main components. First, finance expense of minus 4.2 million euro with an average interest rate of 5.3% during the quarter, which was offset by 0.6 million of interest income. The second element is the quarterly discounting impact of minus 1.9 million euro And a positive impact of 4.5 million euro from probability adjustments on continued considerations, which in the quarter mainly relates to an adjustment for Borough of Australia. And lastly, a positive impact of 3.4 million from non-realized effects on the evaluation of debt. The income tax expense for the quarter amounts to 2.4 million euro at an effective tax rate of 16%. In total, this resulted in a net profit for the quarter of 12.5 million euro, with an earnings per share of 2 euro cents for the quarter. Looking at the cash flow for the first quarter, cash flow from operating activities reached 24.4 million in the fourth quarter. An improved cash generation compared to the same period last year, as well as previous quarters of this year. Networking capital amounted to 100.1 million euro at the end of the quarter, equal to 25% of revenue. An increase from 80.8 million at the end of September, which equaled 23% of revenue. The majority of the increased working capital is a consequence of the IM3 acquisition, and the rest of the increase is mainly a result of lower accounts payables. Our efforts to reduce inventory in Medtech have continued to yield results with further reductions in the fourth quarter. Cash flow from investing activities of 30.5 million euro primarily reflects timing effect from financing of the IM3 acquisition. and litigation receivables, as two of the sellers have fully paid their settlement. Cash flow from financing activities are minus 29.8, as we have continued to pay down debt in the quarter. At the end of the period, net debt amounted to 221.9 million euro, which is an increase from 140.3 million at the end of the third quarter, due to the acquisition of IM3. External ending of €215.9 million, which is approximately €24 million less than at the end of the third quarter, as we have continued to repay debt in the quarter. Leveraging the quarter equaled 2.0x compared to 1.3x at the end of the third quarter, following the IM3 acquisition. 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.