Vimian Group AB (publ)

Good morning. This is Patrick speaking, and thank you very much for joining us on our quarterly call today.

We'll just jump right into it and talk a little bit about our highlights for the quarter. First and foremost, we delivered a strong earnings growth in the quarter. We're very pleased about how that developed and we'll talk a little bit more about where it came from and how it came to be. And as you might recall from our last time we met, we signaled that our organic revenue growth was going to be impacted by the adjustment in the annual program. Therefore, our organic growth is a bit lower than you might have expected and see us do in the past. The remaining operating units that we have, the three others, all deliver double digit organic growth in the quarter. And we also passed a very significant milestone here a few weeks ago when we started to trade on the large cap market on the Nasdaq main market here in Stockholm. It's a very important milestone for us as a publicly traded company. And in general terms and overall, we are very well positioned. We're in an attractive market. And there's some fundamental underlying growth factors there that we really like and we continue to see positive that. And we're also an agile business with an opportunity to steer and change our business as our world around us is uncertain and change. With that, let's go and dive a little bit deeper into the numbers for the quarter. We delivered 18% revenue growth to 107 and a half million euros. Organic growth ended up being 4%, again, negatively impacted by the adjustment in the annual order program, which is limited to our med tech orthopedic business in the US. The other segments delivered double digit growth. Our adjusted EBITDA for the quarter also grew 18% to 28.3 million. Our margins were stable at 26.3, exactly the same as we had last year, And remember, we consolidated a new medtech segment here in dental with our IM3 acquisition that at the time we acquired it, it has a lower margin profile than the rest of Vimeo. Now turning into our specialty pharma business, another quarter with great performance in terms of growth, 10% organic growth. And we had... growth across all of our therapeutic areas. We had significant contributions from our specialty pharmaceuticals and our dermatology part of the business. We continue to innovate in the part of our business and we see that the new launches contribute to growth. We had 23 new products that we launched this quarter. The EBITDA continued to grow nicely at 19% here and our margin improved from 27 to 28.8%. And that was driven predominantly by operational leverage and positive mix. Returning to MedTech for a moment here. As expected, and as we communicated in February, we saw an organic decline for our MedTech business, and it was primarily driven by the annual order program in our orthopedic part of the business in the US. We also, as we have noted since last summer, we've seen softness in the elective surgery market in the US, so that would be for our knee business and our hip business there. The other regions that we have in MEA and APAC continue to deliver high single-digit growth, and that's up from when we reported in Q4. We continue to invest in education, especially in the U.S., to access the untapped opportunity, the untreated animals and the untrained clinicians, so that they can help us expand the addressable market. In the first quarter here, we educated over 1500 professionals in orthopedics. That's about the same as we did in Q4. As you might recall, it was about 1600 back then. The target for us in 2025 is to return this business to growth, which we're confident that we will be able to do. When we look at our margin here, we have a clear sequential improvement, both year over year and the consolidation from Q4. We've phased out AUP, which has an impact on our margins and obviously the incorporation of IM3. At the end of the quarter as well, actually right after we finished the quarter, we completed our first Bolton acquisition with Dental Focus that we welcomed to our family. That's a New Jersey-based company in the Northeast part of America with revenues around $3 million. It's a great strategic fit for us. It complements the IM3 portfolio, and it also adds access to a new customer base predominantly in the Northeast of America. So we're very excited to have that team join us. We go to our veterinary services business, another double digit revenue growth, a quarter with phenomenal growth on EBITDA. During this quarter, and as we mentioned, we have started to do some investments to grow our business organically. And one of these initiatives was launched in the first quarter where we launched DVM Grow, which is a new services platform targeting an unpenetrated market segment in the US. This was launched mid-quarter and it's an important initiative for our veterinary services business to continue to strengthen our position in America and also tap into a market that we were unable to reach in the past. Our margins improved from 25.4% to 30.3%. And again, it was driven by the growth and also we have positive geographic mix for our vet services business. Now turning to diagnostics, again, second consecutive quarter, we delivered double-digit growth here at 16%, driven by our livestock segment. And also, as we have told everybody before, we are continuing to invest in rolling out a product in the companion animal space, which is why our earnings continues to be at this level. that it is. So we're making investments in further market growth. And before I let Carl Johan go through the financials, I want to spend a little bit of moment just to talk about our progress on ESG. First of all, during the quarter, we improved our ESG rating with MSCI from an A to a double A. So we're pleased about the progress that we're making there. Now, when we look back and reflect of 2024, we've reduced our emissions and we've strengthened our supplier controls. Both of those are very important focused initiatives that we've been running. We're continuing to create with the work to create a great place to work at Vemian and we trained all of our employees in business ethics. This is highly important to us. We also educated more than 40,000 veterinary professionals throughout the year. and that is also one of our key metrics and key methods in which we can unlock market growth we launched 82 new products during the the full year we continue to be committed to the esg strategy and drive positive change in the world and with that said i'm going to hand over to call you on to walk us through some of the details in the financials thank you very much patrick and good morning everyone

as said let me give you a walk through and some further insights to the group financials for the first quarter starting with the income statement adjusted eb a in the first quarter was 28.3 million euro that's an increase of 18 percent compared to the same period last year and represents a margin of 26.3 percent this margin is on par with the same period last year and that's after including and consolidating im3 from october 1st that has a lower margin profile than the rest of the group and also a clear improvement of 290 basis points from the fourth quarter of last year we report an operating profit of 15.6 million euro an increase of 17 percent from last year's result of 13.4 million items affecting comparability clearly impacted the quarter with a total of 7.0 million euro. This is mainly cost relating to the continued high level of legal fees in the US patent litigation, with the main hearing taking place in the first quarter, as well as acquisition activities within Medtech. The net financial items of minus 7.5 million euro consists of three main components. Finance expense of minus 5.0 million with an average interest rate of 5.1% during the quarter, which was to some degree offset by 0.5 million interest income. The quarterly discounting impact of minus 1.5 million euro and impact of minus 2.8 million euro from probability adjustments on continued considerations. mainly related to adjustment for boba australia and freelance given good momentum in those two businesses and lastly a positive impact of 1.3 million from exchange rate effects on revaluation of debt the income tax expense for the quarter amounts to 3.4 million euro and in total this results in a profit for the period of 4.7 million euro with an earnings per share of 0.01 euro cents for the quarter the q1 cash flow cash flow from operating activities reached 17.1 million in the first quarter an improved cash generation compared to the same period last year with a cash conversion of 70 percent defined as operating cash flow in relation tbta networking capital amounted to 94.3 million Euro at the end of the quarter equal to 23% of revenue, which is a decrease from 100.1 million at the end of December, which equal 25% of revenue. The majority of the decreased working capital is a consequence of higher payables in Medtech and specialty pharma. Cash flow from investing activities of minus 12.6 million. which is primarily reflecting earn-out payments of 9.1 million in the quarter and capital expenditures of 3.2 million. Cash flow from financing activities of minus 9.2 million euro, primarily reflecting repayment of debt. At the end of the period, net debt amounted to 212.2 million euros, which is down from 221.9 million at the end of the fourth quarter. External lending of 206.9 million euro, which is approximately 10 million euro less than at the end of the fourth quarter as we have continued to repay debt. Leverage in the quarter equaled 1.8 times compared to 2.0 times at the end of the previous quarter. With this financial review of the first quarter of 2025, I would like to hand the word back to Patrick for some concluding remarks.

Thank you, Karl-Johan. We live in a world and a geopolitical environment that continue to be uncertain with new developments almost every day. Vemian, however, is an attractive exposure to really resilient and well-growing markets. The final outcome of the tariffs is yet to be seen. We're monitoring this very closely as the rest of the world as well. Based on what we know today, it will have a limited impact on our four year earnings. We continue to execute on our strategy of building a company with leading positions in attractive global niches in the animal health market. We're well positioned in a certain world. we have great confidence in our strategy and our ability to navigate a changing landscape throughout the rest of the year and in the future. With that said, we can open up for Q&A.

Ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Kavya from UBS. Please go ahead.

Good morning. Thank you for taking my questions. I've just got two, please. The first one is on tariffs. So I appreciate that you say there's a limited impact on earnings this year. Would you be able to give us some more detail, please, on what you have baked into your assumptions so far? And then the second one was on specialty pharma. So very strong organic growth, evidently. Just because it's still the largest therapeutic area, could you give us a sense of how strong nutrition growth was in the quarter, please? And then just as a follow-up, cross-selling seems to be a lower proportion of organic growth this quarter. And when I back it out on my maps, the absolute revenue contribution from cross-selling was down fairly significantly versus last year. Would you be able to provide some color on this, please? Thank you.

Good morning and let me start to give some cover on tariffs and then Patrick can speak a little bit more on specialty pharma. So on tariffs and of course we're monitoring the situation closely and it's still uncertain to know how this will pan out in the end and where we will end up ultimately. Looking at the current situation and the tariff as they stand at the moment, roughly half of our sales in the US is impacted by tariffs and as a consequence we see a limited impact on adjusted EBITDA for the full year of 2025 and when we say a limited impact that's sort of low single digit percentage point on adjusted EBITDA as the tariff stands currently. And also maybe to point out, and of course we're looking into, and depending on the final outcome, how any impact from the tariffs can be mitigated, which could be a mix of right shoring supply chains, supply negotiations, price adjustments, and other activities that we're looking into. And the statement in terms of limited impact is also before we've taken any surreal measures on on limiting the impact of tariffs.

Yeah, thank you. And maybe I can take the second question on specialty pharma, provide a little bit of color in where the different growth contributions are coming from. So maybe the most the highest growth in that segment is coming out of the specialty pharmaceutical compounding business that showed just a phenomenal, actually yet another phenomenal quarter. So that part of the business is continuing to have strong momentum and there is nothing that we see that will stop that momentum from going. And that grows well over the average of specialty pharma as a segment. Dermatology and allergy together is at fleet average, if you like. It's a nice, healthy double-digit growth. And where we see a little bit of slower growth is in our specialized nutrition business, which just for reference was doing incredibly well in the fourth quarter. So as we mentioned there, we have quarters where some of these businesses are delivering phenomenal growth, and then you have, maybe a quarter where is is less stellar from a growth standpoint so it's a little bit up and down there and then on the cross selling is actually related also to that there it's an order timing uh that actually is driving cross selling down and there's uh it's been a delay of one one particularly large order that we're getting into the second quarter here so i expect the cross selling to come back and rebound to the levels that we have seen historically

Specifically, on your calculations, no, there is still a positive contribution from cross-selling. It contributed to a fourth of the growth in the segment for the quarter, which, yes, it's a little bit lower than what we've seen being around the third in the quarters of 2024. But to Patrick's point, that was more a timing than anything else. So it continued good momentum and growth support from the cross-selling initiative.

Understood. Thank you very much.

The next question comes from Stan Gustafson from ABG Sundal Collier. Please go ahead.

Good morning, everyone. So my first question would be on the MedTech business, and in particular the U.S. part of that. If you could talk a little bit about the growth outlook for the year, given the current situation in the U.S., if you could provide us with any color on what you expect the US market to deliver in terms of growth for the year now that we're at least what it sounds like done with the AOP part of the business. That would be my first question. The second one would be a follow-up on the tariff question. I'm not sure if I fully got the numbers right there in terms of how much of the U.S. sales is impacted by tariffs, but that would be obviously helpful if you could give us some sort of details on the shipments in and out of the U.S. for you.

Thank you. Yeah, let me ... Thanks for the questions. Let me start with your first question, and then we'll cover the second one. So when we talk about the med tech segment now, we have two parts. One is on orthopedics and the other one is on dental. So I'm talking about the orthopedics market business now. And I think that's where you wanted to focus your question as well. So in the first quarter, our assessment of the market was that it shrank by low single digits. And we follow that market or perform slightly better than the market. And if we were to think about what we think is going to happen in the remainder of 2025, we don't see any improvement in the market in the second quarter. So we believe that we can improve our performance in the second quarter and onwards so we can beat the market growth in our segment. And the reason why we believe that is that for quite a few quarters now, we have had an outsized effort to educate and train a vast amount of clinicians on the procedures. And we're reaching new customers this way. And although their volume may not be wonderfully high exactly when they get trained, we've built a relationship with them when they start to see more customers come through in their clinics and there are more of them being able to perform. We believe that will help us drive a growth above where the market is.

maybe uh call you one for the yeah just clarity on tariffs and and uh yes i said as it stands now with the current tariffs roughly half of our u.s sales are subject to tariffs and i said on on on the sales being subject to tariffs we see a limited impact for the full year low single digits and an impact that we see that we can further mitigate with with actions that we will implement

Okay, excellent. Thank you very much.

Question comes from Kavya from UBS. Please go ahead.

Sorry, just a quick follow-up from me on the MedTech business. Just given the wording around this being the final phase out of the annual order program, Could I check that this is definitely the last year you would expect AOP reductions to impact organic growth in MedTech, please? And would you be able to quantify for us what the reduction in the AOP program, in the AOP was this quarter, please? I believe it represented about €5.5 million of revenues in the prior year. Thank you.

Yeah, I'd be happy to. Yeah, I can confirm that it's the last quarter that we will talk about AOP. And just as a recap, we changed this program in Q1 last year, and we changed it kind of mid-quarter and have been consistent, I think, with saying that this is the quarter where we're going to do the last tail of it. So AOP is over now. So we have a normalized business with steady order flows where all of the 12-month orders are now either converted into monthly or quarterly order. We still have a few customers that are, you know, have the desire to do full 12-month orders, but that's up to them, and it's not us to kind of tell them what to do. It's their choice. And the impact in the first quarter was 3 million.

Thank you.

The next question comes from Rickard Anderkrins from Handelsbanken. Please go ahead.

Good morning, and thank you for taking my questions. Starting off, it would be interesting to hear a little bit, a high level on how you're thinking of framing the year in terms of organic growth for the group. Obviously, you had a strong performance, excluding the MedTech headwind here in Q1 in the remaining business areas. feel it's feasible, sort of that high single-digit type growth this year, or what's the working assumption on the group for the year? Would be interesting just to hear a little bit on the puts and take for 2025. Thank you.

Yeah, thanks, Rico, for your question. We're off to a good start. We knew it was going to be a little bit lower on organic growth because of the AOP program adjustments, but we feel very good about the full-year numbers. So in the range that you're indicating we're comfortable with.

Very helpful. I noticed you saw quite a healthy margin development in VET services. I believe previous quarters you sort of flagged that we should expect some growth initiatives that could burden the margin. Just wanted to see and hear a little bit if we should expect an impact in the coming quarters there that might soften or dampen the margin development in vet services? I believe you also called out having some geographical tailwind geomix in the quarter here as well.

Yeah, no, that's correct. And it's continued sort of strong or solid performance for veterinary services in the first quarter. And as you said, the margins were positively impacted by the continued good growth and then the sort of operational leverage in the business. There were some positive effects from mix, both from a geographical perspective, you could say in core versus clinics. And lastly, which will impact the margins slightly in the coming quarters. And to your point, yes, we are investing in new initiatives and geographical expansion in veterinary services to continue on the great momentum that we have in that segment. And that will have a way on margins in the coming quarters.

Okay, so a little bit of a margin to expect there going into the coming quarters then, good to know. And then final question from me, would be interesting to hear a little bit more on the drivers of the growth in diagnostics, how much is coming from the venture into the companion animal segment and of durability and of the growth and the margin trend you've seen here with the sequential improvements here in both growth and margins just trying to get a sense if this is a bit of a one-off or in a sort of a new trajectory you're on there thank you

In diagnostics, and we start from the big picture, the growth in diagnostics was supported by good growth and momentum in all regions and from all product areas where we see new customer acquisition and we see increased penetration from from new products so I would say the growth in the quarter has been from a very broad perspective there was some positive contribution to growth also from sort of you could say outbreak driven demands but overall a growth that's been across the line in diagnostics and on your question regarding our sort of diversifying the business towards companion animal diagnostics. That's an initiative that we are continuing. We're seeing sort of positive momentum in that initiative, but it is from a very low base. So the contribution in the first quarter from that in terms of revenue is very limited still.

Okay, clear. Thank you for taking my questions.

The next question comes from Arvid Nikender from Carnegie. Please go ahead.

Good morning and thanks for taking my questions. So just a couple of follow-ups on tariffs. So if relocating production to the U.S. proves the most viable option, How long do you estimate that transition would take for you to complete? And secondly, on M&A, what impact, if any, do tariffs and geopolitical uncertainty have on your ambitions for 2025? Have any of your more advanced processes been aborted or delayed due to the targets relying on production outside the US, for example? Is the broader macroeconomic uncertainty also a reason to be more cautious in the near term? I understand that there's also moving parts here, of course, but it would be very interesting to hear your thoughts.

I think I'm going to leave the tariff question for Carl Johan, but I'll cover the M&A in the near term here. If you just look at what we did here in the first quarter, we acquired one business. It was located in the US. We also, in our vet services business, built up this DVM Grow, which is another initiative to further penetrate the market in America. Of course, we're very interested in expanding our business all across the globe, and America is part of that. It's also the biggest animal health market in the world. We continue to make investments there. as we have planned in the past. I think what's going on now can be an opportunity for us. I feel very good about our business. I feel very good about how stable it is and where we can go. And as other people might be more nervous than we are, that provides an opportunity for us to maybe actually go acquire more businesses that we can incorporate into that has a good strategic fit and a value creation. So we don't see any aborted processes or anything like that. On the contrary, there's some sellers that maybe want to accelerate their speed of selling to avoid further uncertainty in the future. But I feel that we have a good strategy. We're well positioned. We have a good execution model and we have discipline on our M&A. All those are good things for us going into this uncertain world.

And on the tariffs, and I think, as you said, of course, there's a lot of different parts in that. I think, one, it's important to point out that there are other activities that we will implement and that we're looking into to mitigate the impact from tariffs. So reshoring supply chain is, you could say, one of many activities. Definitely not the only activity that we're looking into. In terms of reshoring, you could say supply chain. that's also depending on which segment and sort of which therapeutic Larry we're talking about in the different segments that will give you sort of a slightly you could say different answer but to try to give you some more understanding there are there are parts of the business where we see we're quite advanced in being able to move reshoring production to the us if we decide to do so and we could also see called the reassuring part of the supply chain. So it doesn't necessarily have to mean that we're moving the entire production or everything in the supply chain to the US. That could be sort of part of the supply chain that we move to the US to reduce tariffs. I think also important to say, of course, we're monitoring the situation closely because we don't want to make any actions or sort of decisions near term. that might not be the best decision long-term. Hence, monitoring the situation closely to ensure that we take the right long-term decisions for the business. But in short, there are certain areas where we quite quickly can reshore, you could say, reshore supply chain to the US. And there are other parts where that will be more of a mid-term initiative to reshore production to the US if we determine that's the best thing to do.

Great. Thank you, guys. That's very helpful.

The next question comes from Adrian Elmlin from Nordia. Please go ahead.

Hi. Good morning. A couple of questions for me here. Just firstly, a follow-up regarding Medtech. Could you help us think about maybe the organic growth going forward in terms of comparisons? Should we expect to see easy comps from Q2 now and onwards regarding the final reduction now of the annual ordering program?

I think the market, the underlying market is going to be negative low single digit probably. And I think the way I think about our business is that we'll beat that. And we'll beat that with anything between 200 and 600 basis points. So low single-digit, maybe, in terms of the comps that we have.

OK, perfect. Thank you. And a question here regarding the positive product mix in specialty pharma. Is this sustainable over the year, or how should we think about the positive product mix going forward?

I think as Patrick mentioned a little bit before, one, of course, there will be a little bit of fluctuations between the quarters, of course. So that could look a little bit different between quarters. But I think from a sort of full year perspective, one, we see a positive momentum in all our therapeutical areas and specialty pharma. But maybe having that said, we've seen a very good performance and momentum in the specialized pharmaceuticals business within specialty pharma, I said in the last two quarters, and we have a very sort of positive view on that therapeutic area within specialty pharma for the rest of the year as well. And they have a positive contribution from a mixed perspective on the margin.

Okay, perfect. Thank you. Lastly, it's very good to see increased operating cash flow, but could you give us some more guidance regarding the working capital that you expect throughout the year?

Yeah, sure. And I think as we've talked about before, working capital is one of the areas that we're focusing on to make sure that we continue to improve. In terms of improving the operating cash flow, of course, we're working We sort of continuously work to make sure that we see increased operational leverage in the business and that we drive life for life margin improvement and enhancing increased profitability. In terms of working capital, then we are especially working and focusing on inventory. There's some negative impact in the quarter due to tariffs where we sort of to mitigate tariff impact have increased inventory in specific areas to make sure that we reduce the impact from tariffs but we continue to work in a methodical way to lower working capital and we continue to see positive positive results from the areas where we are working on reducing working capital. So as we mentioned before, now in the quarter, we saw working capital being 23% of revenue, and that's a number that will continue to sort of slowly but steadily reduce throughout the year and over time.

Okay, perfect. Thank you for taking my questions. Have a good day. Thank you.

The next question comes from Marco Perez-Cox from Barclays. Please go ahead.

Hi, morning, both. Just one question for me, also on the U.S. medtech business and your assumptions of market growth in Q2 and beyond. You speak about expecting the market to decline in those single digits. It would be great to just get more of an understanding of the building blocks and your rationale behind this, what you're seeing on the ground. I suppose, how much of the US MedTech business is out-of-pocket payments and how much of a risk here is there that as we continue to see uncertainty in the US and the potential for markets to get worse, do you see a risk of customers continuing or increasingly postponing here? And then just kind of as a follow-on, do you have any assumptions around customers postponing and how long a customer can actually postpone before it's no longer viable to bring their pet in for treatment and actually these are revenues that you've now lost coming back in pent-up demand? Thank you.

Thanks. We assess the market to grow or to decline low single digits. And you know, it's not easy to predict what's going to happen in the future, obviously, but we don't think it will get better in the second quarter. And that's driven out of data that comes from consumer sentiments and some other sources that is probably impacting how a US based pet owner will react to that because 96% of dogs in the US are uninsured. So they would go out of pocket with that. So when the US consumer is more positive, they'll likely spend more money on this is our underlying hypothesis. Those general statistics are not showing improvement right now. That might change between now and the end of this year. So our underlying assumption is that we will continue to see a low single-digit decline. Could it be worse? I think it could be worse. If there is a large tariff implementation now and the dollar continues to be weakening, everything will become a lot more expensive for the US consumer. their disposable income is going to be squeezed. And then it's just a matter of priority. Where's my dog's hip or my dog's knee in that order of priority. And we saw that dog owners started to reprioritize that last summer and they will likely continue to do so. Your question about what if I don't do it now is a good one. They are elective, which means you don't have to do it. The dog will continue to live if they don't get a new hip or a new knee. On the hip side, you typically treat them with some sort of pain relief, which you can be on pain medication until you die as a dog. Although you might live a better life if you get a new hip. The same is true for the knees. You don't have to do a knee repair, knee replacement. The dog will continue to limp and have some pain for it. As the dog ages, there is a reward or return on doing it. You can extend the life of the animal by doing these surgeries earlier. But if you think your dog have another six months to live, you're probably unlikely to make this investment. Although if it's five more years, I think you'll go and jump at it. All the dogs that are untreated now ages. So it's a hard question to speculate about what's happening. It's clear that there's surgeries that are being postponed right now, for sure. We'll continue to do the education, and that's really our growth driver, where we bring new clinicians in who meet new dog owners who are unaware of this being a treatment alternative, because that's still an unknown procedure to solve the different problems that we have. And that's the reason why we believe we can grow, even if the market might be in a decline.

That's very clear. Thank you.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

thank you very much for joining us today and thank you for your questions um we had a good uh first quarter and uh we are optimistic about the remainder of the year and we look forward to see you here in the middle of the summer to report our second quarter numbers enjoy the rest of the day thank you again