Welcome to ADDvise Group Q3 Report 2023. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to the speakers, CEO Rikard Akhtarzand and CFO Oliver Humlen. Please go ahead. Hello, and welcome to today's webcast by ADDvise Group in connection with the release of the interim report for the third quarter of 2023. My name is Simon Tunstall, Financial Analyst, and with me today, I have Rikard Akhtarzand, CEO, and Oliver Humlen, CFO, who will provide their comments on the third quarter results. Our third quarter results were released earlier today, and the report is available on our website. We will also make this webcast available in due course. Today's agenda is divided into four sections: business update, financial performance, closing remarks, and finally, after our prepared remarks, the presenters will take questions. If you're participating through the webcast, you will be able to ask written questions, and if you're participating through a teleconference, you will be able to ask questions verbally. With that, I hand over the word to Rikard and Oliver to take you through the third quarter results. Thank you, Simon, and once again, welcome to ADDvise Group Q3 earnings call. The third quarter is normally harder to predict than other quarters. Several of our geographies have seasonality in the quarter, might result in negative effects. With that in mind, we were still able to deliver another solid quarter with double-digit organic top-line growth, coupled with margin expansion. Organic growth was driven by solid market trends, especially in US, and our relentless efforts to improve our existing businesses through our operational playbook. Our operational playbook is an important tool for us to create durable top and bottom line growth. Organic growth in the quarter came in at 18%, driven by robust customer demand in the healthcare segment. Year-to-date, organic growth is 16%, which is above our target to grow consistently in line with our underlying markets. Sales in the quarter came in at SEK 321 million, and that is the second strongest quarter ever for ADDvise. I'm satisfied with the operating margin in the quarter, a solid 29% with strong contribution from both segments. We continued to work hard on our value proposition in our segments to keep a sustainable margin in line with our long-term margin targets. We focus a lot on cash flow and our balance sheet and net leverage, leaving the third quarter, including the acquisition of Kolplast and DSI, came in at low 2x EBITDA in net leverage. Our cash flow in the quarter was somewhat soft because working capital build up, driven by strong organic growth in the quarter. My expectations is that cash flow at the back end of the year will bounce back. On a Pro Forma Rolling Twelve basis, we also reached our operating profit target for the year, SEK 5 million on a Rolling Twelve Pro Forma basis, which is an achievement, considering that we have more than tripled EBITDA in a year. The last two years, we've been able to accelerate sales significantly, combined with deleveraging. Year-to-date, growth is above 50% on group level, with an organic growth of 16%, which is above my expectations for the year. FX has been favorable for us, with a strong U.S. dollar, positively affecting organic growth with 6 percentage points. Where possible, we try to alleviate FX exposure operationally between segments and our businesses in group. But since we report in SEK and most of our sales are in other currencies, we will continue to have FX effect, affecting our P&L and balance sheet. We continue to invest in U.S. U.S. is our most important market. It's also the world's biggest healthcare market. Around 40% of world's Medtech spending takes place in U.S. ADDvise Group today have just below 60% of our operations and sales in multiple states in U.S. When looking at our acquisition pipeline, it basically shows the same pattern with a large portion of M&A prospects in U.S. Our sales mix today consists of more than 60% proprietary medical device products. Our goal is to have a blend of proprietary products and distributed products. However, we want to continue and increase the portion of own developed products. The main reason for that is the geographic scalability, where we can put proprietary products on more geographic markets where we have operations. Orders, orders received showed momentum in the quarter, and, year-to-date orders received is significantly higher than our sales, which gives us good visibility on the upcoming quarters. We also have been able to act agile in the market, and I'm proud of the gradual margin expansion that I see in our backlog. The increased value-add to our customer is actually showing result. The challenge for us is to pull as much as possible from our backlog without increasing working capital. That is something that Oliver will come back to later on in the financial slides. The healthcare segment continues to show strength. Sales and margin have significantly improved year-on-year. More than 80% of the sales in the segment is generated on U.S. soil. The market in U.S. has shown strength post-COVID, if you strip out capital equipment investments, that has been a bit soft, that part of the market. We finalized two add-on acquisitions in the healthcare segment in the quarter. None of these were consolidated in the Q3 numbers, since completion will take place in the fourth quarter this year. Kolplast is one of them, and Kolplast operates within women's health products, and will give us our first foothold in the LATAM region, with Brazil as Kolplast' main market. The good thing with our LATAM entry is that we will diversify our geographic exposure in the healthcare segment. That today is tweaked towards U.S., which, of course, is a very good market. But for diversify reasons, we believe that going into LATAM is a very good strategic decision based on the growth rate that we see in that geography. Laboratory equipment orders received came in strong organically in the quarter at 61%. However, sales were on the negative side at -17% in the quarter. Lumpiness in our project business, coupled with strong comparable numbers year-on-year, are the main reasons for the sales being organically soft. Margins are high in the quarter due to product mix. A large portion of revenues from clinical trial sales, combined with lower revenues from clean room projects, boosts the margin in the quarter. The geographic exposure in the lab segment is already well diversified. Most sales are made to Europe, different countries, where Sweden is one of the larger countries in that area. However, we do look for opportunities to increase our U.S. footprint in this segment through add-on acquisitions, something that most likely will happen not too long from now based on our M&A pipeline. With 61% organic growth in order intake during the quarter, I remain confident about the performance of the lab segment over the coming quarters. To grow both organically and through add-on acquisitions is a cornerstone of ADDvise Group's strategy. In the third quarter, we signed two acquisitions, as mentioned, Kolplast and DSI. Both these companies will contribute to continued margin expansion and growth. They both operate on markets with higher growth rate than the average Medtech industry. For us, that is a strategic choice to create durable organic growth over time. Kolplast is a market leader in Brazil when it comes to products used by gynecologists to treat women's health issues. And DSI is a U.S.-based supplier of CGMs and insulin pumps to patients diagnosed with diabetes. Kolplast and DSI are good examples of add-on acquisitions that fit well into ADDvise Group, and also good examples of what you should expect in terms of M&A strategy going forward, the type of businesses, size-wise, and geography. And now I would like to hand over to CFO Oliver Humlen to take you through the financial slides. Please, Oliver. Thank you, Rikard, and good afternoon, all. I'm pleased to present today a strong set of numbers for the third quarter. To start off, our positive profitability trend, which you have seen over the past few quarters, continued into Q3. We reported EBITDA of SEK 94 million, equivalent to a margin of 29%.... as Rikard has touched upon, this is driven by continued strong sales within our higher margin product categories, including pharmaceutical, as well as medical equipment. If you look at the rolling twelve-month basis, EBITDA amounts to SEK 390 million, with a margin of 30%. And as alluded to, this does not reflect any effects of the two acquisitions that were signed during the quarter. On an EBIT level, we see a solid improvement year-over-year, both in absolute numbers, as well as on the margin side. We have EBIT going from SEK 33 million to SEK 67 million year-over-year, equivalent to a 700 basis points margin expansion. If we dig into the numbers, we see that there are several drivers of this improvement. Top line growth has contributed, of course, but the principal contributors are gross margin improvement, which is primarily the result of higher margin sales within the healthcare segment, as well as operating leverage, where we have seen a positive effect from our cost base, growing at a slower pace than our revenues. This is the case both for personnel costs as well as for SG&A. What has held back even greater EBIT growth in the quarter is depreciation. We saw elevated levels of this in Q2, and that's a trend that has carried on into Q3. Effectively, this is driven by our balance sheets, where we have had a meaningful amount of leased assets booked related to certain customer contracts. Sometimes these contracts end earlier than expected, and whenever this happens, we unwind the lease positions, meaning that they are depreciated over a shorter period of time than what was envisaged when we booked them, which creates these somewhat disproportionate depreciation figures during the quarter. We do expect some of these effects to linger also going into Q4, but thereafter, we should see a normalized level of depreciation going forward. Moving on into cash flow. This is a business which generally generates healthy cash flows. That's a consequence of our limited fixed asset base and strong and continuous focus on working capital optimization. When we talk about cash flow from operations, as you can see on the slide, we refer to the underlying cash flow generated by our businesses, and then we deduct the change in working capital, as well as any investments which we make into our asset base, which includes leases. To give you a bit of perspective on the numbers in the year to date, cash flow from operations amounts to SEK 255 million, which is up more than 6 times compared with the same period of 2022, and cash conversion in the year to date is 85%. In the quarter, however, we saw weaker cash conversion at 31%. This is below our expectations and below the level where we would see ourselves over time. The principal driver behind this is working capital build up due to strong organic growth in the business. As you can see, there is a SEK 35 million working capital outflow in the quarter, which more or less offsets the inflows that we saw in the first half of the year. We also have meaningful effects from the unwinding of leases, which I referred to earlier. These impact both working capital as well as the column payment of lease liabilities. If you look historically, pre-Q2, the lease payments per annum have been around SEK 3 million-SEK 5 million. As with the depreciation I elaborated on in the previous slide, I would expect some effects from the lease unwinding on cash flow also in Q4, but not of the magnitude that we have seen in this quarter. Moving on to the balance sheets. We are in a strong financial position. Our net leverage quarter end stands at 2x EBITDA. This is pro forma for the acquisitions that we have made during the quarter, both as regards net debt and EBITDA. So this already takes into account the upfront cash purchase prices for Kolplast and Diabetic Supplies. We have a solid cash position, even after paying for these acquisitions, and in addition to that, we have credit facilities with our bank, which are undrawn. So from a liquidity perspective, we feel very comfortable. If we look at debt maturities, our long-term financing is a SEK 1 billion senior secured bond, which we put in place in May this year. This bond runs until May 2026. It's a bullet structure with no amortization until maturity. We have SEK 1 billion left under the framework of this bond and are well within our incurrence covenants, which gives us the financial flexibility to continue to pursue acquisitions which align with our strategic and financial criteria. That was all from me on the financials. I will hand over to Rikard for some closing remarks. Thank you. Just a quick summary of the presentation and key takeaways from the third quarter. As mentioned, solid organic growth on group level, continued margin expansion. We are working hard on improving existing businesses, which is the first thing we think of when we arrive at office in the morning, our existing businesses. Somewhat soft cash flow due to working capital buildup that is basically based on the strong organic growth we had in the quarter. Strong financial position, as Oliver mentioned, 2x EBITDA in net leverage, and in that, we have taken into consideration the cash flow effect of the two just recently presented acquisition, DSI and Kolplast, both on operating profit and balance sheet cash. And also an ample M&A pipeline for continued growth. This is a cornerstone of ADDvise to continue and leverage on the possibilities in the market to broaden our product portfolio within the segment of healthcare products that goes into the laboratory segment and the healthcare space, basically. Last but not least, a quick look at our forecast and my expectations for the remaining part of 2023. We set a target of SEK 1.7 billion in sales by the end of this year on a Rolling Twelve pro forma basis. Our pace leaving the third quarter was slightly above SEK 1.6 billion. So we are now working hard to catch up and leave the year with in line or above the target. When it comes to operating profit, EBITDA, we are now slightly or just above the target, which is something that I'm very happy with, based on where we were a year ago. So my expectations on the fourth quarter is, and the full year is that we both these targets, obviously, operating profit, we are already there, but I believe that the 1.7 is doable, and we are working extremely hard to reach there by the end of this year. So with that said, I would like to open up the floor for questions if there are any. Thank you. If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Christian Lee from Pareto Securities. Please go ahead. Yes, thank you. I hope you can hear me. We hear you. Okay, great. Good afternoon, Rikard and Simon, and Oliver, and thank you for taking my questions. I have three, please. I was thinking about the strong order intake you had in the third quarter. So you're likely to continue showing strong organic growth and perhaps need to keep building up the working capital. Do you see this continuing to have an adverse impact on the cash flow in the fourth quarter? I would say that, Christian, if you look at the third quarter working capital, there is some buildup there, but there is also a significant effect from the unwinding of the contract and the leases that we have, that we have referred to. So I would say that you should not expect to see a comparable outflow in the fourth quarter, but of course, given the strong organic order intake that we have seen, I think that, I think that, we will obviously see some, some effects of that as, as, as that manifests into sales. Okay, perfect. And I was thinking about the lab business unit, that has shown EBITDA margins of 40%-50% in the last two quarters. So how should we think about the margin level, considering the significant orders, this business unit has received? Do you believe that 40%-50% will be sustainable? I mean, if you, if you look at the lab segment, you will see some lumpiness in the margins, and it is, based on the product mix. As, as you know, we finalized an acquisition, by the end of last year, Clinitube, and they carry a very high, a very high margin. And when, when the sales in project business drops, that improves the margin in, in that segment. So it, it all depends on the product mix in that segment, basically. Okay, that's clear. Thank you. My final question. Given that there are some challenges for life science research and biopharmaceutical industry, do you see any risk for Clinitube to lose some business going forward? I mean, we don't see that. We see investments into research in the pharma industry continue. So, with that said, we haven't seen any change in the market sentiment when it comes to clinical trials so far. And the trend is to move clinical trials from the large pharma companies into the CROs, and the CROs, the clinical research organizations are the main customers of Clinitube, basically. So I think, I believe we have a strong foothold in that segment. Okay, clear. Perfect. Thank you very much. That's all for me. The next question comes from Christian Binder from Redeye. Please go ahead. Good afternoon, and thank you for taking my questions, two from my side. To begin with, when it comes to organic growth, except for currency, can you talk a little bit more about, you know, how much was increased volumes versus pricing, and how you see those factors developing going forward? I mean, obviously, pricing is a very important tool in our playbook. I mean, that is something that we work with all the time, and pricing for us, for us is not, is not actually just increasing prices, it's, it's I mean, trying to add more value for our, our customers, making it possible for us to, to, to improve our margins. And, in, in a decentralized structure like ours, it is extremely hard to, to monitor, the, the difference between, the difference between price increase and volume increase in terms of margins. So, that is one of the reasons why we don't disclose that in the market. But from, from high level, I would say it is a mix. We both see positive effects on the margin from acquiring companies with higher margin, our pricing projects, and other activities of operational nature that improves the margin in group. Got it. That's very clear. And then the second question, as you just mentioned, you know, you have your, your, playbook, including for organic improvements once you acquire a company. Can you just elaborate a little bit more on, you know, what are there any common denominators in terms of when you, when you, buy a lot of companies, what are the most common factors that you see, that these companies tend to be able to improve? I mean, one of the common factors is that we need to help the seller. I mean, the companies that we buy and acquire, they are fantastic companies with entrepreneurs very committed to what they do, but sometimes they need help to prioritize the activities that actually lead to the fact that they reach their KPIs. That is basically one of the things that I see in most of the businesses that we acquire, to link the daily activities in a business that you acquire with the KPIs that you want to reach. And of course, before that, we set a strategic plan with the seller, and we set the KPIs that we believe and that we kind of are on the same page with. We set the KPIs, and then we start working with the activities. Then, of course, I mean, leveraging on ADDvise headquarters best practices, I can go on with a long list of things that we do in order to improve businesses that we acquire. But we have a playbook that, I mean, our, the role model for our playbook is actually the Danaher System, DBS. We have a light version of that that we have implemented in our operations, basically. Perfect. That was all from my side. Thank you so much. The next question comes from Jan Glevén from Mangold. Please go ahead. Good afternoon, Rikard and Oliver. It's Jan from Mangold here. I would like to follow up a question from the speaker before me here, about prices. Earlier, you have been doing that, for a couple of quarters, and I'm wondering if you are still going to rise prices, if you could say anything about that. I mean, when it comes to pricing, that is. First you have the baseline price increases, the one that basically takes care of inflation and cost increases to mitigate and offset the basically the cost increases. And then there is the more kind of strategic pricing part of our playbook. That one is the most important one, and that is not only increasing price, it's linked to adding more value, a bigger or better value proposition to our customers. And that one is something that we work a lot with in our operational team to find ways to improve the quality in healthcare, and by doing that, making it possible for us to put a better price on our products. That, that is an ongoing project all the time, not in all businesses at the same time, but project-based in different businesses that we have in ADDvise Group. ... Thanks for that. Another question. You were talking about a trend in clinical trials. Are there any other trends that you have your eyes on? I mean, we are, we are always monitoring different trends and what, I mean, the reason or our mission is basically to improve and extend people's life, and, and one way to do that is to find the, the demographic megatrends. As you know, or as we have mentioned, we are weighted towards several of these trends. One of them is diabetes, which is a quite sad story in U.S., where the, the, the number of people with diabetes is increasing by the day, and the rates are much higher than in Europe. And we see a way for us to make diabetes products in U.S. more affordable, and accessible for these patients. That is one of them. But other than that, we see the large or the megatrends in demography, like more chronic diseases based on more elderly people. And we try to be a solution to these challenges in the healthcare system. Okay, thank you. Just a short question. You mentioned in U.S., and it's a, it's a big market for you, but, I'm wondering about Europe. Is it overlooked, or can you say anything about that? I mean, obviously, we have operations in Europe, too. But first of all, I mean, when it comes to our M&A strategy, the multiples in Europe, especially in Northern Europe, are basically 2x, 3x, 4x or 4 terms higher than U.S. So that is one reason why we have focused on U.S. But we have some operations in Europe, too, and many of our businesses that don't have people on the ground in different countries in Europe have distributors selling our products in these geographies. Okay. Thank you. But I would say that Europe is still a focus area for us. Yes. Okay, thank you. That was my question. There are no more questions at this time. I hand the conference back to Simon for any written questions from the web. Thank you very much. To start things off with the written questions, we have two questions from David K., and they go: Do you see any change in price expectations in the acquisition pipeline? And are you willing to go to net debt EBITDA ratio of three in a higher rate environment like this? I didn't fully understand the question, but my interpretation is that he's asking about the multiples, and I've seen the multiples drop, not significantly, but they have dropped since the beginning of this year. We have the pipeline right now, and the prospects are, I mean, much more out there, much more deals out there to kind of investigate than it was a year ago. So I would say, once again, that the M&A pipeline is ample. It's tweaked towards our healthcare segment, and in terms of geography, it's tweaked towards U.S., and the multiples have come down somewhat. Thank you. The second part of the question was, are you willing to go to net debt EBITDA ratio of three in a higher rate environment like this? We have- Maybe I can take that one. Yeah, maybe you can take that, Oliver. I mean, as you may have seen, we have a long-term financial target that net leverage should not exceed 3x. At the moment, we are at 2x. I think on a general basis, what you can say is that we feel very comfortable with the operational risk in this business, with the diversification and with the fact that we operate in markets which generally are not cyclical, but instead driven by long-term structural trends. So all else equal, you would expect to see the possibility to operate with slightly higher leverage than other business in other industries. That said, we are, of course, mindful of our leverage. We work very actively with the other components that we have in the financing mix, such as internally generated cash flow. We do always try to keep a sound balance between risk and, of course, being able to deliver on our strategy. Thank you. Two questions here from Oliver at Pareto Securities, and the first one is: When do you expect the announced acquisitions will be consolidated during the quarter? So I would expect that we would consolidate these, or I think that a closing will take place within... Rikard, please, fill in here, but that should happen earlier rather than later in the fourth quarter. And that consolidation will take place in accordance with that. Yeah, that is my expectations, too. I mean, we are very close to completion in both these two acquisitions, and depending on when in a month or when during a month, we might consolidate the full month, if it's not too far into the month. So but I would say quite soon. Thank you. And the second one is, what does the negative SEK 9 million in lab in North America during the third quarter relate to? The short answer there is that that is a reclassification of revenues which were previously recorded in the U.S., but which were later reclassified into another region. Thank you, and a few questions here from Alexandru. How come you have entered the pharma/natural supplements market, and do you sell to B2B or B2C? In that segment, we sell both B2C and B2B. And it's a very interesting segment. I mean, obviously, a large portion of that operations is generic drugs. And we, as I mentioned, when I talked about diabetes products, we want to be, we want to be one of the solutions to the challenges in the healthcare system, and the cost savings from being active in the generic drugs segment is one way to impact the system in a good way. So, yeah, that is a part of the healthcare system where we want to be. We don't typically invest in businesses where we spend a lot of R&D invest in R&D into new drugs, but generic drugs is something that we think and believe is a value add to the system and makes drugs more affordable for patients and people. Okay, and can you get a short overview of the funding needed in the next 18-24 months in order to keep the targeted growth rates? Do you expect new bond issues or equity issues? I mean, we have three different tools to use for our non-organic growth, and that is, of course, the cheapest one for the shareholders, operational cash flow. We put a lot of focus on improving our operational cash flow to utilize the cash flow and funnel that into our M&A activities. The second one is, of course, debt, and that is the second cheapest tool for executing on this strategy. And the third one, the most expensive, is, of course, equity. And we always try to avoid equity. I would say that is last resort for us, and especially in the stock market sentiment right now. But theoretically, we have all options on the table. Thank you. Could you please confirm whether the presented acquisitions is priced in equity value or enterprise value? Enterprise value. Great. I mean, they are actually, I mean, the bid is calculated on cash and debt-free basis, basically. Okay, thank you. And could you give us some more context around the top management compensation, split between fixed, slash bonus, or, and are there any share incentives? The split is, yeah, there is a, there is, of course, a fixed salary that typically is around 80%, roughly, of the total remuneration. And on top of that, there is a bonus scheme, and there is a short-term and a long-term bonus. And there are no stock incentives, no options or stock incentives in the kind of normal sense. Okay, and that was the last question from Alexandru, and we're moving on to Dragos, who, who's asking: Taking a long-term view, 5-10 years, I wanted to understand how much of the future acquisitions will, will be financed by issuing shares. I'm asking this as in the past 7 years, the total number of shares increased 10 times. Considering that now you now have a portfolio, they generate strong cash flow, and you can also finance M&A with that. Yeah, and I think I already answered that question before, but to kind of elaborate on that, as I mentioned, I mean, equity is the last resort for us. And the things, I mean, what we focus on every day financially, is to create as much value for our existing shareholders as possible. Most of the people in the management team are vested into the shares, so we are on the same page here as the rest of the shareholders. We don't want to dilute more than necessary, and if we dilute, we strongly believe that that will create more value for existing shareholders, otherwise, we don't. Thank you. From Thomas Östlund: What is your outlook on 2024? Are there any interesting companies in your pipeline? ... We have a lot of interesting companies in our pipeline. Any official, we don't have, we haven't disclosed any official outlook for 2024 yet, but I guess that will happen, somewhere, closer to year-end or beginning of next year. Okay. From Ahmed at SEB, what is the reason for Kolplast being acquired at the EV/EBITDA that is higher than previous acquisitions? Do you expect these multiples in the future acquisitions? I mean, multiples are often linked to size. I mean, the more structural capital you acquire in a company, the higher the multiple. And we see Kolplast as one of them - I mean, the, how to put it? I mean, one of the companies that has most structural capital among all the companies that we have acquired, it is, they have a lot of IPs, patents, and other things, other assets that kind of reflects the multiple of the company. And in combination with the size of the company, it's more than double than the average size of companies that we so far have acquired. From Lars: How do you view buying back shares in the current market environment? Since we are not listed on the main market, we are not allowed to buy back shares. In order to do that, we need to relist or change listing to main market. Thank you. Two questions here from a private investor. You mentioned depreciation have been higher in Q2 and Q3 due to disposals, disposals of leased assets. How significant is the effect, and will the depreciation come down in coming quarters, all else equal? Yeah, I can, I can address that. I mean, I think, looking at our, our, P&L for the past few quarters, you can see a significant increase in Q2, and that continued into Q3. As I said, we would expect some effects to linger into Q4, but thereafter, we would expect a normalization of depreciation. And then to identify a normalized level, I would suggest you look at sort of the quarters before Q2 of this year to see what the levels have been then. That is, of course, based on the current, the current business mix. Okay. Thank you. And, the last question, they already touched upon, Rikard, is: Can you elaborate on your view using the shares versus tapping the bond for financing growth going forward? I mean, as mentioned before, my first choice is, of course, operational cash flow. Second one is debt up to a certain Net Leverage, and then we are very careful in using the equity tool. Thank you very much. And that concludes today's presentation. Our financial calendar, which is shown on the slide, is also available on our website, where you will also find contact details if you would have any follow-up questions. And with that, thank you all for participating, and have a great day. Thank you. Thank you.