BICO Group AB (publ)

Hello and welcome to BICO's earnings call, where we will present the first quarter of 2025. My name is Maria Forss, and I'm the President and CEO of BICO, and I'll together with our CFO, Jacob Thornberg to present the report.

Today's agenda is divided into three sections before the Q&A. We will begin to summarize the first quarter and comment on the market development.

We will then focus on the group's financial performance, followed by a presentation of how our three business areas have performed during quarter one. These three sections will be in listening-only mode.

After the presentation, we invite you to participate in the Q&A. And the earnings call host will then be back with further instructions.

I will start to summarize the first quarter of '25, and we'll begin to comment on significant events and business highlights. Quarter one is a seasonally weak quarter for BICO.

Business areas Life Science Solutions and Bioprinting showed growth, thanks to commercial as well as operational excellence, primarily in CELLINK and SCIENION, while our project business in lab automation was impacted by fewer project starts and closures in combination with a high comparison quarter. Like many of our peers, we saw continued uncertain macroeconomic dynamics, for example, changes to U.S.

policy focus and reduced NIH funding, which resulted in slower academic purchases. There were also industry cutbacks in CapEx budgets and the potential tariffs instilled further insecurity in the market.

To stay proactive, we have established a global tariff task force to ensure preparedness. We have also reduced our debt further by repurchase of convertible bonds in February to a total nominal amount of SEK 276 million.

After the end of the quarter, we entered into an agreement to divest MatTek and Visikol, which Jacob will present more about later in this call. Due to the divestment, we expect to move into a net cash position during quarter two, 2025.

Let's now move on to the key quarter one highlights. On a high level, here is the summary of quarter one '25.

Sales amounted to SEK 389 million, corresponding to negative organic growth of 19%. Despite the decline in sales, adjusted EBITDA was in line with quarter one 2024 and amounted to negative SEK 12 million, corresponding to a margin of negative 3%.

This is due to the positive development in Life Science Solutions and Bioprinting. The cash flow from operating activities was SEK 77 million and the net working capital for last 12 month sales amounted to 12%, which can be explained by the cash collection from quarter four sales in 2024 and less sales in quarter one.

If we move on to look at the market development sales per geography, as you can see on this slide, sales in North America are lower than last year, and this is attributable to the large Biosero order won in late '23, which created a growth spike in quarter one '24. This impacted the sales distribution for Europe and Asia in quarter one '24.

Asia is now up significantly compared to last year, many thanks to CELLINK. In addition, we are focusing even more on our commercial activities.

And to name a few examples, we are accelerating our commercial initiatives to gain market shares in markets such as Asia and India and further strengthening our presence in Europe. We're also working on one focus area from our updated strategy, and that is to shift in focus to pharma and biotech customers at the expense of academia.

I've already mentioned the continued uncertain macro dynamics and that we have established a tariff task force. Let me give you some more details on the measures we are taking in this volatile macro environment.

We have since before adjusted our manufacturing sites to have readiness for future scenarios. For instance, we have moved the majority of the manufacturing out of China as well as adjusted our logistic routes.

Our outsourcing strategy presented last fall considers suppliers with a global footprint, enabling us to have flexibility to produce in Europe or in the U.S. We have also in-house manufacturing in the U.S.

We're working diligently with supply chain adjustments, allowing greater proximity to reduce or eliminate tariffs and to improve our logistic cost effects. I will now hand over to Jacob to present the divestment of MatTek and Visikol.

Thank you, Maria, and I will summarize the divestment of MatTek and Visikol announced earlier this month on April 4th. MatTek is a market-leading provider of 3D micro tissue models and primary cells for in vitro testing and Visikol specializes in advanced imaging and digital pathology.

The divestment follows our updated strategy with a focus on lab automation and selected workflows. The proceeds from the transaction will be used to strengthen BICO's balance sheet and further accelerate the growth agenda.

Both companies were acquired in 2021 and in 2024, Visikol was integrated into MatTek. Sartorius will acquire 100% of the shares in both MatTek and Visikol for $80 million on a cash and debt-free basis, corresponding to a 2024 sales multiple of 3.7x and adjusted EBITDA multiple of 15.3x.

The closing of the transaction is subject to customary regulatory approvals expected to be obtained during Q2 2025. The effects on enterprise value in terms of net debt, working capital, and other adjustments are expected to be limited.

MatTek and Visikol will be treated as discontinued operations from Q2 2025 in BICO's financial reporting, subject to timing of closing. The expected net cash proceeds in combination with our current cash position of SEK 684 million will be used to resolve the outstanding convertible bond, which matures in March 2026 as well as support the acceleration of BICO's growth agenda.

The divestment also means that we will report in new segments from Q2. We are moving from the current structure with three business areas into a structure with two reporting areas; Lab Automation and Life Science Solutions.

This will further enable us to execute on our strategy and support us on our journey to be the first-choice lab automation partner and provider of selected workflows to pharma and biotech customers. The updated strategy and the new business area structure have also affected our operating model, which Maria will present on the next slide.

The operating model means that we have moved from a decentralized structure into an operationally integrated group. With this in place, we will achieve improved commercial as well as operational efficiencies.

For example, we have implemented global harmonized functions for HR, marketing and IT to name a few. In addition, we have just launched a project to centralize our finance functions.

With the new operating model, we will hence strengthen our commercial capabilities, improve synergies and eliminate cost duplication. We will now move on to the second section about our financial performance, and I will hand over back to Jacob again.

Thank you, Maria. Before presenting Q1 2025 financials, I would like to highlight that all numbers presented are in million Swedish krona.

Sales in Q1, our seasonally softest quarter, amounted to SEK 389 million and generated negative sales growth of 17% and a negative organic growth of 19%. Life Science Solutions and Bioprinting showed growth, while we saw negative growth in Lab Automation due to fewer project starts and closures as well as a strong Q1 in 2024.

Gross margin was 54% and improvements were related to the product mix, one-offs in Q1 2024 as well as operational excellence initiatives. And if we move on to profitability, adjusted EBITDA amounted to negative SEK 12 million in Q1, corresponding to a margin of negative 3%.

Despite the decline in sales, adjusted EBITDA was in line with Q1 2024 due to the positive development in Life Science Solutions and Bioprinting. However, the positive margin expansion that we saw in Q4 did not materialize in Q1, primarily due to the decline in Lab Automation as well as seasonal effects.

And if we move on to the next slide and our cash flow. Cash flow from operating activities for the quarter amounted to SEK 77 million and primarily related to collection of accounts receivables from seasonally high sales in Q4.

The effects of changes in working capital amounted to SEK 126 million in first quarter. Out of this, SEK 165 million was related to a decrease in operating receivables, inventories increased by SEK 18 million and operating liabilities decreased by SEK 20 million.

Investments in tangible CapEx as well as intangible CapEx in the quarter amounted to SEK 3 million, respectively. Total cash flow during Q1 amounted to negative SEK 229 million related primarily to the repurchase of convertible bonds in February 2025, amounting to SEK 276 million.

In connection to this, I would also comment on BICO's cash position. We have made two buybacks in our convertible bond to a nominal amount of SEK 118 million in November 2024 and SEK 276 million in February 2025.

Post buybacks, the convertible debt now amounts to nominal SEK 1,106 million. Cash reserves by the end of Q1 2025 were SEK 684 million.

The closing of the divestment of MatTek and Visikol for $80 million is expected to take place during Q2 2025 and is not included in the numbers just mentioned. The proceeds from the transaction will be used to resolve the outstanding convertible bond, which matures in March 2026.

This means that BICO will move into a net cash position during Q2 2025, as mentioned by Maria. The proceeds will also, as mentioned earlier, be used to support the acceleration of our growth agenda.

Between Q1 2024 and Q1 2025, net working capital has decreased by SEK 175 million from SEK 402 million to SEK 227 million. In percentage to last 12-month sales, this corresponds to a decrease from 20% to 12%, confirming that the operational excellence actions implemented and executed during 2023 and 2024 to reduce working capital has been successful.

In terms of the development compared to Q4 2024, the decrease is as mentioned on the previous slide, primarily related to accounts receivables due to lower sales in Q1, but also good collection during the quarter. From Q2 and onwards, we expect working capital in relation to sales to be in line with previous quarters of around 20% again.

Now back to Maria for performance per business area.

Thank you, Jacob, and I will guide you through our business areas performance and begin with Lab Automation. The business area was impacted by fewer project starts and closures as well as a tough comparable quarter, generated by the large order won by Biosero in late 2023, and that generated a lot of revenue in quarter one 2024.

This affected both sales and profitability levels. The project nature of Lab Automation business results in significant revenue variations between the quarters.

Sales amounted to SEK 94 million, which resulted in negative organic growth of 58% and adjusted EBITDA negative SEK 3 million, corresponding to a negative adjusted EBITDA margin of 3%. Biosero is one of the few actors who can provide complex and integrated projects, and those projects involve changes during the project and requires flexibility, which can lead to delays.

Actions have been taken to strengthen operations management, including project management. In addition, new commercial concepts to better balance the project portfolio have also been developed, and this will efficiently cater to customer needs with more standardized solutions and hence, shorter lead times The underlying demand for Lab Automation continues to be strong, although the sales cycles for larger orders from pharma are currently longer due to the macro environment.

For the first quarter of 2025 for Life Science Solutions, we saw a positive uptick in Diagnostics, while we saw declines in sales for some companies affected by tighter CapEx budgets and reluctance to invest primarily in academia in the U.S, as also reported previously by our peers. This mixed performance resulted in a revenue of SEK 191 million and an organic growth of 4% compared with quarter one 2024.

The business areas adjusted EBITDA was negative SEK 11 million and a negative adjusted EBITDA margin of 6%. However, an improvement compared to quarter one 2024 with 4.1 percentage points.

Our actions during the past year to decrease the cost base and strengthen the commercial offering for SCIENION have given positive results, which is pleasing to see. And if we move on to our third business area, Bioprinting.

The turnaround activities in CELLINK have had positive effects and the business area Bioprinting generated a revenue of SEK 105 million, resulting in an organic growth of 41%. CELLINK was the largest growth contributor and the business areas consumables offering continued to perform well.

A lower cost base as well as one-offs in quarter one 2024 contributed to an adjusted EBITDA of SEK 15 million, which corresponds to an adjusted EBITDA margin of 14%. And as Jacob has commented before, following closing of the divestment, the remaining assets in the business area Bioprinting, CELLINK and Advanced BioMatrix will transfer into business area Life Science Solutions.

And consequently, starting from quarter two 2025, BICO will report in two reporting segments: Lab Automation; and Life Science Solutions. So to summarize, in the past months, we have an updated strategy.

We have launched a new operating model, and we have significantly strengthened our balance sheet by the divestment of Nanoscribe as well as MatTek and Visikol. And we also have a working capital in line with industry standards.

And this was our final slide before the Q&A. I will now hand over to our earnings call host for further instructions.

Good morning, Maria and Jacob. And a few questions on my end.

And I'll start with Lab Automation because in my view, that's the part deviating from my view. Can you give us some sort of highlights here throughout the quarters if you're seeing more sort of projects being planned for the future, but not yet sort of initiated or sort of concluded as well as can you comment anything about your belief in terms of maintaining market share in Advanced Lab Automation?

That would be my first question, please.

When it comes to future projects or starts, as you know, Ulrik, we never guide in the future. But I can say so much that in the projects that when we are bidding for different tenders, et cetera, we usually win in the tenders and also in different negotiations.

There is a continued strong underlying demand in Lab Automation. So I think that's the biggest conclusions when it comes to Lab Automation.

Great. And now with the divestment of MatTek and -- well, obviously, I understand the logic behind it, you're moving to a net cash position.

But does this in turn on -- like you're selling to Sartorius, does this in any way impact your commercial collaboration that you have with Sartorius in the APAC region?

No, it doesn't. We have a continued close collaboration with Sartorius, mainly in the Bioprinting field, but also in Lab Automation and digitalization.

And at the recent SLAS Congress in January in San Diego, which is the Super Bowl of Lab Automation, we announced another collaboration area with Sartorius, which gave fruit, and I believe you have an example of that in our report as well. So we continue to work with Sartorius as before and they are a close collaboration partner, which was also stated in the press release announcing the divestment of MatTek and Visikol.

Great. And last question on my end.

You obviously now have a net cash position. Are you done in terms of optimizing the companies in your portfolio?

Or is it still sort of maturing as you go along? Or are you happy with what you currently are operating at?

I mean we're happy with what we're currently operating at. We're, of course, very happy with our portfolio.

But with that said, we always consider how we can maximize shareholder value. But with that said, we're currently very happy with our portfolio of assets.

Okay, great. That was all questions from my end.

And I will get back into the queue. Thank you.

Good morning. Thank you for taking my questions.

So first one, maybe I know you've provided some information on Page 12 in the report, but maybe you could add just so we don't get it wrong, what the growth -- organic growth in the quarter, excluding MatTek and Visikol, just trying to get a sense of the growth of the business sort of going concern or the remaining parts of the business? Thank you.

So -- sorry, Rickard, I'm not sure I quite follow. So which numbers is it that you want to understand?

Is it Bioprinting, excluding Bioprinting?

Maybe Bioprinting and group would be helpful, if possible.

Yes. I can provide you with those figures following the call, but I don't have the figures in front of me right now.

Okay, cool. And I was also curious a little bit, we're seeing a lot of headlines about reshoring or expanding pharma presence in the U.S.

recently. Is that mainly relating to manufacturing?

Or are you seeing any increase in the pipeline or the sales funnel for Biosero in Lab Automation based on increased investment activity into the U.S. where I know that Biosero has a strong position.

When it comes to pharma sales, Biosero have a very strong footprint already working with all top 20 pharma companies in the world. And usually, these pharma companies are global.

And as we have successful projects in the past, they usually come back and want to have further projects, whether those are in the U.S. or in Europe or in Asia, that's different depending on the project.

So it's difficult to say where the growth will happen. It all depends on where they want to place their new updated automated labs.

Okay. So no real tangible change based on recent announcement of U.S.

sort of investment in footprint...

No, I wouldn't say that. I mean we have seen announcements from pharma companies that they will increase their presence in the U.S.

and other pharma companies have said that they will increase their presence in Europe. So as long as we have all the pharma companies as our customers, we will put our projects in the geographies where they want to have them.

All right. Also based on recent FDA communication about accelerating move away from animal-based testing to alternative testing models.

Obviously, now you're divesting MatTek and Visikol, but the remaining part with CELLINK and Advanced BioMatrix, maybe you could try to elaborate on how you see that opportunity? Have you seen an acceleration already in the funnel or pipeline?

Or how should we on the outside think about that commercial opportunity based on this? Is it -- do you think we should expect acceleration in '25?

Or just help us put that in perspective, I think that would be interesting. Thank you.

Sure. Thank you for that question, Rickard.

I think when it comes to the FDA, there has been a move towards less use of animal testing for quite some time. And the recent announcement was that they will allow non-animal testing for the production of monoclonal antibodies.

And we are serving our customers to -- in Bioprinting with both CELLINK and Advanced BioMatrix. And hence, we will continue to be well-placed in that drive towards less animal testing, whether that will materialize already in 2025 or not, that's difficult to say, but it's positive that the direction is in the right order towards less animal testing.

Okay. And a final question.

Would be interesting, did we see positive EBITDA or positive earnings from both CELLINK and SCIENION in the quarter here?

We did, yes.

Okay, perfect. Thanks for taking my questions.

I can come back to your first question, Rickard, because you caught me there. But on a quarterly basis, excluding MatTek, for the total group, it was negative 20%.

And on an LTM basis, it was negative 9.5% for the group. And then if excluding MatTek from Bioprinting, the growth, which is basically then in CELLINK was 130%, but that's off a very low base in Q1 2024.

And also the percentage figures comes out very high. So -- and that's due to sort of quite limited absolute numbers in Q1, which is our seasonally weakest quarter.

Okay, very clear. Thanks for that, Jacob.

Thank you.

Yes, hi, Maria and Jacob. Thanks for taking my questions.

So on the market development in Life Science Solutions, you have seen some reluctance to invest in instruments from academia in the U.S. due to the NIH funding uncertainty.

But can you elaborate a bit on the phasing of this during the quarter or if you saw any normalization towards the end of the quarter?

I think there has not been any specific effects. I mean the uncertainty was there early in the quarter with the NIH funding in security that we commented already after the quarter four report.

And of course, the effect of the tariffs didn't hit the market until early quarter two. So it's rather the indirect effects with the insecurity in the market that have instilled, but we didn't see any specific quarterly effects.

Usually, we have seasonal effects, as you know between the quarters, but always also within the quarters, the last month is always the strongest.

But I wouldn't say that the sentiment has changed during the quarter. So the sentiment has been roughly the same, and it's been sort of a high level of uncertainty related to academia and of course, then more specifically NIH funding.

On top of uncertainty related to macroeconomics and tariffs, et cetera.

Okay. Very clear, thanks.

And then also on LSS, you mentioned diagnostics showing strength or relative strength at least. I wonder what type of laboratories are driving this and maybe what type of applications in the laboratories that are the main drivers?

The uptick in diagnostics was mainly that SCIENION comes back, and they are the company within the Life Science Solutions that are mainly catering to the diagnostics segment.

Okay, great. And then a final question from my side.

You highlight that you have moved the majority of the manufacturing out of China. But do you currently have any goods that are sent to the U.S.

from China and -- or to China from the U.S? And if so, if you have a percentage of this would be good to have?

No, I don't have a percentage to provide. I will not give you those numbers.

But given the movements we saw in the market when Trump took office last time around, then we changed our manufacturing footprint in China to be prepared. So we now have an opportunity to manufacture in the U.S.

for the U.S. market, in Europe or in Asia, depending on where the customers are.

So with an outsourced production, we have that flexibility, but we also have in-house production in the U.S. And you can, of course, reroute goods when needed.

Okay, thank you very much.

Thank you.

Thank you for the questions and for listening in. And together with Jacob, I would like to wish everyone a great Tuesday.

Thank you and goodbye.