Welcome to the presentation of Swedencare's half-year report, led by our CEO Håkan Lagerberg and CFO Jenny Graflind. We are pleased to have NaturVet's CEO Geoff Granger joining us with the presentation during today's webinar.

As usual, we will have a Q&A after the presentation, please raise your hand if you have any questions. Over to you, Jenny and Håkan.

Thank you, Emma. Good morning, and welcome to the Q2 presentation of Swedencare.

Jenny and I are in Malmö, Sweden, a bit cloudy today, and Geoff is out in California, joining us later. Q2, we had a solid quarter that showed resilient growth and strong cash generation despite a volatile market.

Europe and Production segments deliver standout organic growth, while North America was disappointing, but is expected to, as previously communicated, strengthen in H2 and as delayed launches online and big box initiatives scale up. Organic growth was 7%, under our goal, and as we communicated, what we expected, but still better than market.

Operational EBITDA, same as ordinary EBITDA, was 129.4 million SEK with a 19.3% margin, and operating cash flow improved to 78 million SEK. Looking at our three segments, the growth profile is clearly mixed.

Europe and Production were really strong with organic growth of 19% and 25% respectively, while North America was down 3% organically due mainly to delayed FDMC or big box launch deliveries and temporary effects in the US veterinary channel. However, the North American segment would have been around middle single-digit without this, and that is still not where we should be.

Improvements to come. Export markets delivered their strongest quarter to date with China rebounding sharply.

End of quarter, I visited China, and we are planning to widen the production offering of ProDen PlaqueOff and are also looking at the opportunities to launch more brands there. The interest is high, but the regulatory framework for imports is complicated, and we are now in discussions with potential manufacturing partners to facilitate new brand launches.

ProDen PlaqueOff had another exceptional quarter and delivered more than 30% growth. Pharma deliveries, as expected, high-growth numbers both in manufacturing and development, and the activity level is high for the years to come.

Strategically, the quarter also moved the business forward with product offerings under many of our brands and cooperations and product launches. Interzoo was also an important event, of course.

It's every second year, the biggest trade show in the world. New markets opening up for ProDen PlaqueOff, of course new smaller markets since we're already present in plus 60 countries, but really nice to see new opportunities there.

For other group brands, some big opportunities are in discussions with the relevant distributors. We also had the first Capital Markets Day and strengthened the visibility around the group's priorities the coming years, and we are grateful that the event was fully attended and lots of interesting discussions with participants.

We had a new board elected at the AGM, including Thomas Eklund as new chairman, providing continuity with refreshed governance. The message is that the group is still growing organically above market, 9% first half year.

Cash generation is improving, and we have been working hard to prepare for a better and stronger second half year. Over to you, Jenny.

Yes, some financial highlights. Revenue amounted to 670 million for the quarter.

This represents 4% growth, and 7% was organic growth, and we had a -3% of currency impact. It's the first quarter since 2019 where we don't have any acquired growth because the most recent acquisition, Summit VetPharm, has been part of the group now since Q2 last year, and so it's included in the organic growth.

The currency impact is coming from the dollar, euro, and pound, which has all weakened against the krona compared to the second quarter this year. As Håkan said, we did expect another quarter with double-digit growth, and this is also what we communicated on our pre-close call on the June 17th, and that was based on the information we had at that point.

However, some unexpected things happened the last month, and mainly the second half of that month, including a delayed order from the new big box customers, and that resulted in that we came in at 7%, and that's the same level as we were in Q2 last year. As Håkan mentioned, the year-to-date organic growth is 9%.

Our reported gross margin is 61%, and there's no adjustments this quarter between operating and reported gross margin or EBITDA. This is the strongest gross margin we have had since 2020.

It came in stronger than expected, driven by continued stronger growth in Europe, where margins are higher compared to the other segments, as well as some inventory build-up. Of course, Summit VetPharm also contributed with a record quarter and also strong margins.

The external costs have increased compared to last quarter. We continue to have strong growth on Amazon, both in the US and in Europe, and that contributed to our higher sales-related costs.

In addition to that, it's been enhanced marketing initiatives this quarter, mainly online with Prime Day, for example, which occurred in June this year—last year it was in July—but also we have had product launches and intensified efforts to grow the NaturVet Amazon account and also win back some bestseller badges on Amazon. Personnel cost is stable; however, it did include 3 million of severance costs for the quarter, mainly for the final step of the reorganization that we had at NaturVet.

Operational EBITDA, same as reported EBITDA as there's no adjustments, amounted to 129 million for the quarter. This is an increase of 5% compared to last year and a margin of 19.3%.

Again, this is below the expectations and that's mainly impacted by this lower sales. However, it's a small increase compared to last year when margin was 19.0.

Net debt to EBITDA has increased to 3.1. This increase is due to the expected earn-out payment that we are planning for Summit VetPharm, which is included in the calculation from this quarter because this payment is now due within the next 12 months.

It also is impacted by the dividend payout that we did this quarter of 44 million. Our cash conversion increased to 60% for the quarter.

It's mainly higher inventory value at the close, which impacted the operating cash flow for the quarter. During the quarter, we have also started the Vetio South expansion, hence CapEx was 4% of sales for the quarter and year to date it still remains at 3%.

Regarding our loans, we repaid 5 million on our external loans this quarter, and in total we have repaid 55 million year to date. Rolling four quarters, on the left you can see the rolling 12 months trend, for which you can see revenues up slightly, but impacted by the negative currency impact, and also an improvement of the reported EBITDA.

On the right-hand side, you can see the trend of the Q2s. Here you can see that there's no change between the reported and operating EBITDA this quarter.

Turning to North America, this remains the group's largest segment, representing 55% of total net revenue, and had a -3% organic growth. The key point is that the decline is not a broad loss of competitiveness.

We knew that North America would be our weakest segment this quarter. In May, we noted, basically for the first time in many months, a softer consumer demand.

It was both in pet retail and online, affecting all brands. However, June bounced back nicely, and even though the turmoil in the Middle East is back and gas prices rising, we have not seen any new weakness in early July.

Hopefully May was a bump in the road and not coming back. The major factor why we came in in minus territory was, as we've said, the private label launch delivery to new big box customer was delayed because of substantial quality controls implemented by the customer, but performed by a third party, just before ship-out.

Production was approved by the end of the quarter, but the shipment they couldn't move out in current quarter. Second, the merger of the two largest US veterinary distributors led to lower inventory levels during the discovery process.

We knew about that, but we still had and expected some bigger POs than was delivered in the quarter. Hopefully, that process will end soon.

As said, we are expecting a stronger second half year and when it comes to both sales growth and profitability for North America. There are important positives also.

ProDen PlaqueOff remained very strong, even with a weaker May also for ProDen. New private label veterinary delivery started to leading partners, albeit with smaller shipment than expected.

These are expected to continue to grow month by month going forward. The NaturVet sales reorganization was completed, and Amazon sales badges have been restored for a couple of NaturVet products, and also Pet MD took back some lost badges.

This has been a very hard work for our online team in the US, and from now on, we should be able to focus on more cost-efficient and growth-oriented marketing programs online, primarily on Amazon, where we have worked hard to claw back market share. The implication is that Q2 was a weak North American quarter, but the underlying channel work is in place for a stronger second half, especially online.

Old and new big box partners, the ones we started last year continue to grow and we take market share from others, and veterinary partnerships together with a bounce back in the traditional pet retail with a partly new sales team at NaturVet. Europe was one of the clear strengths in the quarter, as said, 19% organic growth, and the region now represents 25% of group net external revenue and, of course, handles more than 90% of the group's internal manufacturing.

The growth was broad-based. The majority of companies in the European segment delivered double-digit growth.

Dental was the fastest-growing product group, fueled by Amazon mainly, while export sales through distributor markets also contributed strongly. China was an important highlight, as said, sales during the quarter exceeded last year's full-year level.

Operationally, this was also a high-activity quarter. NaturVet by Swedencare was launched in Europe with online just started, and deliveries to pet retailers will start in Q3.

Worth noting is that we're very happy to announce that the leading pet retailer in the UK will be launching the full line in Q3. The Amazon transition was completed across all European markets, and that has also had an effect on our profitability with the build-up of this operation, and going forward, we expect it to contribute at same level as the group.

Veterinary brands continue expanding on present and into new markets. Looking at the regions, UK, Italy, and Nordics and export markets were the champions this quarter.

The main takeaway for Europe is momentum. Europe is combining strong demand, channel execution, digital expansion, and pharma growth with Summit VetPharm.

With Summit VetPharm, we are also expecting second half year to be able to launch soft chews with pharma products, and that will be completely unique to the market, we're expecting a nice demand for that. Also, Europe will continue to lead the group's organic growth profile going forward.

The Production segment delivered the highest organic growth in Q2, 25%, and the segment accounted for 20% of group net revenue. Growth was mainly driven by contract manufacturing in Europe and strong pharma manufacturing and development in Vetio North.

This performance is particularly impressive because demand in dermatology remains softer than expected. In other words, the segment is growing strongly despite some weakness in one major area.

As said, the demand picture is strongest in the EU and North America pharma, supported by both existing customers and new customer inquiries. That is why we are investing in additional capacity and organization.

The pipeline also supports the outlook. With coming quarters of the years, new go-lives are expected to contribute to the ramp-up.

Lastly, the Anivario-VETi UK partnership is another example of how the production platform is becoming more strategically relevant. The takeaway is that production is moving from a mere support function to a growth engine and could also lead to new branded partnerships, providing a strong foundation for the coming years.

Over to you, Geoff.

There we go. Sorry about that.

All right. Can you you can hear me?

Can we go to the next slide? Perfect.

All right. All right, evolving in a hypercompetitive space.

Good morning. I'm Geoff Granger, CEO of NaturVet.

I've segmented today's overview into three sections. First, I'll share an overview of our key accomplishments over the past year.

Second, I'll provide an overview of our key learnings from the latest US pet supplements market and category insights. Lastly, I will walk you through how we are actively integrating these key learnings into our go-forward strategic approach.

Go to the next slide. It all starts with culture.

Starting with our key accomplishments over the last 12 months, of course, it all starts with culture. Our core strategic framework is comprised of four pillars: culture, revenue growth, EBITDA growth, and cash flow discipline.

It's no accident that we lead with culture as we know that unless we have a talented and engaged team, we'll never achieve our financial aspirations. Swedencare conducted a global employee survey the month before I started back in middle of '23, and the results for the survey happened to come through the week my first week, and I was able to review it.

The results at that point were not quite what we wanted them to be. They were at a 33 employee Net Promoter Score compared to total Swedencare about 41.

We quickly identified the biggest opportunities that came out of the survey, and we implemented new standards and processes aimed at addressing these opportunities over the following year. In early 2025, a new survey was conducted, and our employee Net Promoter Score improved by 20 points, to a 53, from a 33 to a 53, with anything 50 or above, especially in a manufacturing environment, considered to be excellent.

Our current employee Net Promoter Score ambition is now 70, which is considered to be world-class. That's that's our aim.

Additionally, over the last year, we've significantly improved our executive leadership. About a year ago, we hired a new chief operations officer with 25+ years of experience across the manufacturing, aerospace, and industrial sectors.

Eric Thomas is our first operations lead who is Lean Six Sigma certified, a key efficiency certification, bringing with him years of proven expertise driving efficiency through systematic process improvements and waste reduction. In March of this year, just a few months back, we recruited Christy Murphy, our new chief revenue officer, with 30+ years of pet industry expertise across sales and marketing.

She leads all things sales and marketing for us. Christy has extensive leadership experience across large, mid-sized, and start-up organizations, specifically in the pet space.

She's, what's really exciting is she's built enduring pet retailer partnerships, relationships over the last last 30+ years, which we will, of course, leverage. Go to the next slide.

Next, we needed to make some significant pivots to position the NaturVet brand for meaningful and sustained future growth. About a year ago, we launched a completely refreshed NaturVet brand, all-new packaging informed by exhaustive consumer insights and key retailer input.

We did this in around 6 months, something that's really traditionally a 12 to 18-month undertaking. The rebrand really was table stakes for not only maintaining our brand in legacy accounts, but it was a must for expanding into new channels and retailers.

On that note, we significantly expanded the NaturVet distribution in the back half of last year. We launched NaturVet supplements in the number one US pet retailer, PetSmart, approximately 1,500 locations.

We had some other categories in NaturVet in in, excuse me, PetSmart, but we never had core supplements, and and we do now, and continue to expand. We expanded We expanded into the number one US pharmacy chain, CVS, in approximately 1,100 stores.

We introduced our brand in the number one overall US retailer, Walmart, in approximately 1,700+ locations. Starting around that same time in Q3 of last year, we launched really our first ever ever 360-degree NaturVet marketing campaign, supported by celebrity influencer and veterinarian endorsements, and activating across social, digital, and influencer media.

Up to that point, we really did not have a marketing organization. We are not actively marketing.

You really could say within the past year is the first time we've truly marketed the brand. If you go to the next slide.

Lastly, within key accomplishments, through the implementation of our first fully integrated ERP system in Q4 of last year and our recent completion of SQF facility certification, we're ensuring that our operations efficient, competitive, and prepared to support increased scale. The implementation of Acumatica, our ERP system, last October, it's going to increase our efficiency.

It's going to reduce costs, and it's going to enable us to make real-time, data-driven decisions and have visibility we had not had up to that point. Our recent SQF certification, Safe Quality Food, is allowing facility certifications allowing us to expand into a major club retailer, which Håkan had alluded to a number of times, which is happening this month with a private label program.

That sets us up for further expanded market access across both private label and, of course, NaturVet brand NaturVet brand as well. We go to next slide.

We did a lot over the last 12 months. However, while we've been making significant strides to drive meaningful and sustained growth in the NaturVet brand, the US pet supplements category has become increasingly competitive and fragmented.

As we look to evolve our approach, we're pivoting our strategic direction to address the biggest opportunities that we've identified through the latest insights. Total category came in shy of $3 billion last year, US, and is forecasted to grow around 6% to 8% over the next couple of years.

This is a category that was up, double digits in in, '24 and '25. It's still up, but it's tightening, and there's a lot of competition.

I know, we alluded earlier just to the hypercompetitive category environment, a lot of work to do. E-commerce remains the dominant channel with over 80% of total market volume, with Amazon alone about 70% of that total channel.

The food, drug, mass, club channels driving the highest year-over-year growth rate, approaching over 20% approaching 20% growth, with Walmart growing even faster and approaching around 50% of the total channel share. The pet specialty channel, over time, is it's the most mature channel, and over time, it's generally flat to down versus prior year, with a lot of brand expansion in a finite amount of shelf space within the brick-and-mortar space.

The brands that are growing are focusing on focusing marketing spend on fewer SKUs, higher-conversion content, and leveraging Amazon as a primary marketing channel, which is kind of a consistent theme. I'll touch on it a few times.

The consumer is looking for new products that mirror human trends. The cats consumer specifically, and cat is disproportionately growing versus dog, much smaller volume, but the growth rate is higher.

Cat consumers looking for an expanded assortment of cat-specific solutions. It's imperative that legacy products are being regularly updated to address consumer demand for key factors like trending ingredients, higher active levels, natural preservatives, and high palatability.

While the the, innovation is often the fun and exciting part of it, the the core assortment is where the meat of the volume is, right? We got to continue make that part of the assortment relevant.

Lots of learnings, but what do we do about it? If we go to the next slide.

Let's start with the e-commerce channel. We're going to specifically focus on what we're doing around Amazon.

Amazon's the biggest portion of our business, it's essential that we're maximizing the platform as we continue our push for meaningful and sustained growth. We transitioned the management of our Amazon business to Pet MD about a year ago, a US-based Swedencare subsidiary with a lot of proven success scaling brands on Amazon.

They're great partners. However, as a result of our distribution expansion, bringing in folks that weren't quite abiding by our MAP, we got them under control now, but distribution expansion, MAP pricing change at the beginning of this year, and rogue seller proliferation, we did experience a significant decline in MAP compliance across the market, which did directly impact Amazon performance.

Additionally, the rebranding and repackaging push resulted in temporary inconsistent site experience, resulting in a combination of old and new packaging. Some growing pains, coming from the big changes that we made.

Over the last quarter, we've put a number of processes in place to get our Amazon business back on track through renewed discipline around MAP enforcement, enrolling key SKUs in the Amazon Transparency program to, effectively address rogue sellers, and a storefront refresh with a focus on ensuring that we're leading with our new packaging and messaging. These actions have resulted in a significant reduction in MAP violations, allowing us to consistently secure the Buy Box and bestseller badges, we were talking about that earlier, on our key products.

As we've seen over the last 60 days or so, we're now seeing steady consumption growth on Amazon. Our priorities moving forward: to further fortify MAP enforcement, continued expansion of Transparency across portfolio, but we have Transparency on around 80% of the volume already, which is great, and then curating a best-in-class site experience to leverage Amazon as as that primary marketing channel and ultimately driving performance improvement not only in Amazon, but across all channels.

As I always say, as goes Amazon, kind of goes total business. That's really what we're focusing on e-commerce.

If you go to the next slide. Walmart is our primary focus as we push to gain a foothold in the food, drug, mass, club channel.

As noted earlier, we launched in approximately 1,700 Walmart locations in the second half of last year, and even secured a temporary 2,000 location end cap for Q1 of this year. They believe in us, and and and they're giving us access.

However, despite the significant distribution expansion, the weekly consumption for Walmart continues to lag our original targets, right? We're seeing growth, obviously, but it's not quite where we need it to be.

It's imperative that we get on a steady path of of regular week-over-week improvement, start and and make meaningful inroads in a growing food, drug, mass, club channel. We're currently hyper-focused on Walmart marketing activation to drive short-to-mid-term performance improvement.

We've recently turned on full-funnel, top-to-bottom marketing for Walmart with the objective to increase not only awareness, but to drive consideration and ultimately usage, purchase, right? To date, the tactics we've deployed kind of overall focused on driving general awareness, not always include the necessary calls to action, haven't always been focused on, a handful of hero items, keeping the message simple, and that's all required to improve, consideration and ultimately that usage.

We're doing that now specifically with Walmart. We've been doing the last couple months.

For the first half to date, we've delivered 80 million+ targeted impressions for around Walmart activation, with the most success coming from targeted digital display, Walmart Connect, and then over-the-top streaming content. Now, we're also able to benchmark our performance across the different marketing funnel segments.

Since initiating the latest round of Walmart-focused activations, we've gone from lagging our competition across the key benchmark across the different parts of the funnel, awareness, consideration, and usage, now we're exceeding competitive competitor average awareness and consideration by 100 basis points and usage by 200 basis points. Where we've chosen to focus and alter our strategy, we're seeing a win.

You'll see in a moment, I'll kind of talk about how we're going to then kind of blow that out to the, in a larger way. Now, tangible sales impact, that can take, 6 months, give or take, to materialize in a meaningful way, but we've already seen significant run rate improvement in those in three of the four featured hero items.

Because again, a big part of this was also what we're doing here is focusing on that handful of items and not just focusing on general categories. We're seeing seeing movement.

The the data is telling us we're doing the right things. Ultimately the volume needs to come.

Go to the next slide. Now that we're starting to see success with how we're activating at Walmart, we're looking to scale the approach to other key accounts, with a focus on, again, driving brand clarity with a single unified message, focus on a handful of hero items, reducing the friction from awareness to usage through that full-funnel, top-to-bottom approach, continuing to transform our Amazon footprint into a best-in-class experience, leveraging the platform as that primary marketing channel, and again, driving brand growth beyond just Amazon by doing that, because a lot of people start on Amazon, right?

Holding ourselves accountable to measurable KPIs that, if met, will deliver our growth aspiration. I'll be honest with you, when we launched marketing in the last year, we had KPIs and we're hitting those KPIs, but it wasn't translating into the levels of revenue growth that we were that we needed.

Anything we do going forward, if we achieve a KPI that directly connects to it's going to directly connect to us achieving our, growth aspiration. Filling, and then lastly, filling the void as a partner of influence for the categories.

The category continues to be confusing and and difficult to navigate. We still have an opportunity to partner with key retailers to improve the consumer experience while also preserving and growing our brand.

It's really this idea of thought leadership, which we've been doing for the last couple years, and I think we've been winning there, and we have an opportunity to continue that. Go to the next slide.

Oops. There we go.

Talk about pet specialty. As noted earlier, pet specialty's been again the most mature channel, and it's really the weakest-performing channel over time in the pet supplements category.

However, the category remains disproportionately meaningful to us to NaturVet because it drives just shy of 40% of our volume. Again, that's where we grew, that's where we started, versus only around 30% of total market.

We're under-penetrated in the other channels, right? While we push to capture share across e-commerce and food, drug, mass, and club, it's also imperative that we're protecting protecting our position in pet specialty as well and being extremely surgical around where we choose to invest in the channel.

Our focus here is to, re-establish ourselves as the category authority through revitalized assortments, category thought leadership, and private label partnerships. I include private label here, even though this is a NaturVet conversation, I include private label in the conversation here as we see it as a natural path to strengthening our current partnerships and opening the door for the NaturVet brand with new partners.

Ultimately, we need to determine which pet specialty retailers we can scale and disproportionately invest in and where we need to reduce investments because retailers making decisions that are driving down their share and and their overall importance to the channel. Next slide.

All right, product. When it comes to our product portfolio, everything we're doing is directly informed by consumer insights.

The two new platforms that we're launching this year, Dual Action and Targeted Care supplementation, are directly inspired by key human space trends, with Dual Action featuring combined solutions that address relevant need states like immunity, longevity, inflammation, gut health, and allergy. Targeted Care is positioned as a more humanized approach to addressing core need states, featuring relevant solutions focused on muscle health—so it's not hip and joint, it's muscle health, right?—beauty care—it's not skin and coat, it's beauty care—and then expanding where we're playing in dental health.

In our new expanded cat-specific solutions offering was developed in response to the disproportionate growth we're seeing in the cat segment and direct insights that tell us that cat supplement consumers continue to tell us, this isn't, not a revelation, but cat supplement consumers are looking for solutions that are uniquely formulated for cats. These were actually solutions that were dog and cat combined solutions we've had in the assortment for a while.

We we we basically took those formulas and created cat-specific formulas and reformulated them and and made them more appropriate for for felines. Beyond new products, our core assortment revitalization initiative ensures we're staying ahead of our competition through ongoing formulation and palatability enhancements.

As I said earlier, the innovation part is the fun part, the exciting part, but you got to make sure you're appropriately evolving your core assortment along the way to remain relevant, to to remain competitive, as that is where the the meat of the volume is. Unlike years past where we were managing our assortment upgrades one year at a time, we're currently in the process of fortifying our long-term product strategy, leveraging new third third-party insights resources and mapping out our vision for the next 5 years and beyond.

Lastly, last slide, lastly, but certainly not least, we're continuing to transform our operations to support our growth journey. Starting this year, we're piloting automation on our production lines, that's going to improve efficiency, increase capacity, and ultimately reduce costs.

Based on the success of this year's pilot program, we'll be looking to expand automation deployment in '27 and beyond. As noted at the top of the presentation, our new chief operations officer is certified in lean manufacturing processes and has to date completed lean training for his entire manufacturing team.

This has driven transformations in our production planning and manufacturing processes, reducing excess inventory and improving cash flow. Additionally, and last, we rolled out we rolled our purchasing group into our operations team.

They were the So the folks purchasing raw materials and packaging and all that, they really weren't directly tied to our operations team, which is odd. We rolled them into our ops team, did that last year, and we transitioned them to a centralized supply chain function with a focus on strategic raw material sourcing and long-term supplier agreements.

It's going to drive cost savings, already is driving cost savings, improve payment terms, optimizing working capital, and probably, just as important or maybe most important, driving supply predictability, which is key. We're doing all this within a stringent supplier governance framework so that we can ensure we're building partnerships with best-in-class resources and exiting transactional relationships that do not support our financial and operational imperatives.

This concludes my segment for today's presentation. Thank you for giving me the opportunity to provide all of you with an update on our growth journey, and now I will pass it back to Håkan and Jenny for questions.

Thank you, Geoff. By that, we are open for questions, and your first one comes from Adela.

Please go ahead.

Thank you. Good morning.

Firstly, on the developments in North America, I believe, Håkan, you mentioned earlier there that you would have been somewhere closer to mid single-digit organic growth had you not had this delay. Can we confirm that that is the case, and if that was the case, then I would assume that your organic growth would have been closer to 12% versus 7% in Q2?

Low to mid. It would have been double-digit.

I see. Also, I guess your visibility as we move forward here, you say that this specific order will be delivered in Q3, but at the same time, we do have to be cognizant of the fact that there has been some volatile quarters, and this isn't the first time where revenues are being delayed further into the year.

I guess, yeah, are you doing anything specifically from a group level to have better control over throughput or, yeah, what's your view on that?

Absolutely. It's very frustrating, of course, and we've been working hard with forecasting and have monthly updates.

Probably need to have even more frequent updates when it comes to this and perhaps have a bit more margin when we present our expectations.

Okay. Then lastly on margins, gross margins did perform well in Q2.

You saw expansion also in operational EBITDA, but it was slightly below expectations. Now in Q3 and yeah, let's say start with Q3, you were above 20% and I guess how do you feel about managing that level, especially with maybe your Amazon-related costs being a tad higher in Q2 than implied?

I can start. We definitely expect margin going up Q3 going forward, and it's absolutely related to our Amazon costs, actually both in Europe and the US.

As I said, we've been building up for the transition in Europe. That's a smaller part of the margin contribution, but that has also been at a lower level than what we expect going forward.

Primarily for the US, we definitely have invested in the clawbacks of the bestseller badges, etc. We have seen improvements over the quarter, but we really had to push to get those in.

Now that we have them, we can transform the investments to more, let's say, campaigns that we know are more connected to ROI and the improvement in margin. I would say Amazon is the biggest contributor to the margin uptake Q3 and going forward.

We've also had a couple of, as we said, under the Production segment, the softness of the dermatology sector has been complicated for us when it hitting our margin as well. We're working very hard and have connections with all of our customers and our own internal brands.

The summer is a good year for those kind of products. With our new veterinary partnerships, market picking up and the inventory level as low, we do expect the dermatology sector to improve going forward as well, and that will be also a main contributor for us improving our margins.

Jenny?

No, I think you covered it.

I see. I guess then we should think of this expanded other external costs profile to be the result of maybe front-loading investments in H1, and those shouldn't be recurring in H2?

Exactly.

Great. Thank you.

Thank you, Adela. Your next question comes from Adrian.

Please go ahead.

Perfect. Thanks, guys, for the presentation.

I think I have three questions. Just firstly, touching again here on the revenue visibility going in the second half of the year.

My question is basically, do you have any larger orders now scheduled for Q3 and Q4 that have a similar risk of delayment that might be supposed to be in the back end of Q3 that could be pushed into Q4 or similar?

No, not the scale like this one. We are actively working with both partners and our internal organization to have a more equal delivery schedule going into a quarter.

That we are actively working with that. No, we don't have a major order that is scheduled for the last month of the quarter in Q3.

Perfect. Very clear.

Second question is basically on the rogue sellers on Amazon. Could we have any update on that?

As Geoff said, that has improved a lot, and that's a combination of our products going to having Transparency. That means that we are the only one that can ship in those unique SKUs.

Also, what Geoff alluded to, perhaps I should clarify that a bit because Europeans are not that used to the MAP pricing. That's actually a sort of a recommended price that sellers are not allowed to go under when selling our products on the market.

There has been a couple of especially some new collaborations with bigger partners undercutting, specifically on their own online web shops. Even though that's very small in volume, that make conflicts and problems with the algorithms of Chewy and more importantly, Amazon.

That really makes it problematic with keeping the MAP pricing on Amazon and Chewy. That's really a hard work from specifically the new team that has come on board on NaturVet.

They have really had great success with our major partners in following our MAP pricing, and we've seen improvements last part of this quarter. Going forward, we don't expect any major problems with rogue sellers.

MAP pricing is a constant, let's say, issue that we're working with. Better communication with our partners, we can avoid those kind of conflicts.

Thank you for that. Finally, my final question I think is for you, Geoff, regarding here the increased competition on Amazon, if you will.

I think you touched on this in your presentation, but perhaps I missed some of it. Could you be more specific about where the competition is increasing?

Are you losing ground? Is it primarily volumes or pricing pressure?

Kind of what are you doing here to address this? Sorry, go ahead.

Go ahead. No, I'm sorry.

Please finish.

Are you risking being in a pricing war against competitors? Is this you need to outspend them on marketing or anything?

No, it's not a pricing war, and you notice a lot of what I concentrated on was marketing, and I'll clarify, it's not just an Amazon thing. It's an overall thing.

The reason I emphasize Amazon a lot is as goes Amazon, goes everything. People use Amazon as a primary marketing channel to go on there and research the brand.

If we're losing Buy Boxes and bestseller badges, that puts us at a disadvantage as people are researching our brand. It is not a price war, and So again, a lot of the brands that are doing successful are digital native brands that launched over the last, let's say, 10 to 12 years.

They went heavy on social media and they went heavy on the .com pure-play sites. Honestly, it's a bit of a catch-up exercise with them.

As I'd said, we really did not truly market within our organization until around a year ago or so, and we're fine-tuning that. I think it is an awareness and it is not only an awareness factor, but it's going to that next level and getting compelling calls to action out there and telling tighter stories.

I think a lot of it is marketing, and that's part of why we brought our new chief revenue officer in, because she has a significant background in marketing and she's already brought in some folks who have worked with her multiple tours of duty to help turn businesses around. Our focus is on driving awareness and relevance and driving people to usage and purchase.

I believe it is a marketing challenge, and that's what we're all over right now. Hopefully, that helps.

Also worth noting is the brand change. That's a major impact when transforming a brand when it comes to Amazon sales with different look and feel of products.

That's really a project that we probably underestimated the complexity and the impact it would have.

Yep. It is.

Oh, anyway, I got it.

Yep, very good. Yep, sorry for interrupting you.

Thanks for that, Geoff. That was all for me.

Oh, great.

Thank you, Adrian. Your next question comes from Johan.

Please go ahead.

Yes, good morning, guys. Thank you for taking my questions.

A follow-up on the FDMC order. Does the delay have any impact on or put any potential impact on your pipeline, potentially delaying further projects, pushing them further out, etc.?

No, the whole order was more or less done by, third week of June. It was waiting to be shipped out.

It doesn't affect our manufacturing schedule.

Very clear. Thank you so much.

Then a question on the US veterinary distributor merger here. At what point do you expect these two distributors to sort of normalize inventory levels, and what's your revenue exposure to these two accounts?

They expect to have a decision on approval, I think, the second half year. I don't know exact month when they need to get that decision.

I think the inventory levels are expected to pick up already in Q3 due to the fact that we see the sell-out numbers of the products that we are supplying. Of course, our let's say our agreements with those partners is that they should at least have, let's say, 90 days of inventory at hand, and they were down to 30 days.

It's of course different kind of setup if we need to ship smaller orders all the time compared to shipping larger orders. We expect both from the, let's say, inventory rebuild up, but also that the partnerships for these programs is actually replacing another supplier for these kind of products.

Of course, they are selling out the old inventory and resupplying with ours. It's a gradual process, but would like to say numbers, but it's significant volumes, definitely from 2027 going forward.

Already this second half year will be a lot higher volumes than we've had this first half year. I would say we're not talking about hundreds of thousands of dollars.

It's in the million dollar range and upwards.

Got it. Very clear.

Then the final one maybe on the Amazon Prime Day, which fell in June this quarter versus July last year. What was the sort of incremental cost impact of that timing shift here in Q2?

You mean how much it was? I can't say how much it was, but it's two things that impacts it.

You have the cost in June instead of July, but you also have the result of the Prime Day because you kind of invest in one month and then the sales will follow in the future as well. We expect the investment that we did for Prime Day in June to also have a positive effect in July.

It's two things.

Yeah. Essentially lower cost than in Q3 as you took them in Q2, but also better sales contribution given your marketing spend in Q2.

That's the expectations,

yes.

Got it. Very clear.

Those were all my questions for now. Thank you so much.

Thank you, Johan. Your next question comes from Christian.

Please go ahead.

Yes, good morning, and thank you for taking my questions. My first question is regarding the gross margin of 61% that was impressively strong.

Could you please help us understand the relative contribution to the gross margin? You mentioned the favorable European mix and the inventory build-up effect.

Excluding this inventory build-up effect, what would the gross margin have been?

Oh, I don't have that number. Of course, when you build up the inventory and we're not able to ship it, you have less cost of sales contributed to that.

It's not the split, but I will stay with the expectations for the full year that we are expecting to be around 58%, 59% for the full year.

You are maintaining that communicated corridor of 58% to 59% despite the continued performance of Europe relative to North America?

Yes. It's not like we expect Europe to go down, but we expect the US to catch up, and they don't have the same kind of margins in the US.

It will have a negative impact, but it will not remain the gross margin that we had of 61, I don't expect.

Got it. Thank you.

My second question is regarding Europe, which grew by 26% organically in the second quarter. Could you please say how much Europe grew adjusted for the China contribution?

Let's see now. I don't have that

No, I don't have that number in my head.

Was that a significant No,

the China order in Q2 was around 8 million

SEK. Great.

Thank you. My third question is regarding ProDen PlaqueOff delivering a 32% organic growth in the first half of this year.

Could you please elaborate a little bit on what is driving this growth? Is it primarily new product launches or geographic expansion or a combination of both?

Do you expect the brand to sustain a high growth in the second half? No,

it's not so much, let's say, new markets, but you could say that, of course, our export markets was really strong, but that's a small portion of the total sales of ProDen PlaqueOff. No major new product launches under the brand.

We did launch ProDen PlaqueOff Crunch specifically for cats, but that was introduced at Interzoo, and the only sales we've had for that is some test sales on Amazon. It's in Q3 we start shipping to distributing partners and also to our local group companies selling out to pet retail.

I would say, and it hasn't launched on US Amazon yet. That will probably not be until Q4 due to delivery.

No, no new products. No, it's the momentum of, as we've said, ProDen PlaqueOff is a very attractive product.

It's very high when it comes to subscription rates from our partners like Amazon and Chewy predominantly. We're just adding new customers to current customer base.

We've seen fantastic growth numbers in Europe all across the Amazon channel predominantly, and we expect that to continue to grow because we haven't really marketed that much in the EU8 except for the UK. We have been kind of cautious when building up the organization for that.

In the US, it's going really well. We've had some challenges with our very popular ProDen PlaqueOff Dental Bones.

That's from supply issue, we actually been stocked out for many of the flavors for that, it could have been even better. We expect the momentum continue going into Q3 and Q4, and we're very excited about the ProDen PlaqueOff Crunch product, that we have another, let's say, product specifically for cats.

Perfect. Thank you very much.

That's all for me.

Thank you, Christian. Your next question comes from Javier.

Please go ahead.

Hello.

Hello?

Yes, can you hear me?

Yep.

Great. Thank you very much.

Thanks for your time. Sorry because I missed the first question.

Maybe you already answered this, but just wanted to confirm in terms of the US, everything is up and running now with the new customer, you are shipping already, you've been approved, just to confirm that. I wanted to understand how much can that new customer be maybe in terms of a percentage of sales there, how much can it contribute to growth in the third quarter?

All together, you have a lot of moving parts in the US: Prime Day, the merger, this new customer. It's difficult to understand what can we expect in terms of growth for the second half, and it's obviously a big part of your business, it would be helpful if you can help us understand the second half and the third quarter specifically in terms of growth in the US.

Also second question on Europe, you've grown very nicely in the second quarter. Part of that was China, as Christian mentioned, and wanted to understand how normal can that growth be.

Obviously, maybe not 19%, but can we expect double-digit also in third quarter, fourth quarter, if everything remains as it is today? Just the third question on margins.

Obviously, a lot of moving parts again. You improved a little bit quarter on quarter.

Can we expect the improvement in margin in the third quarter to be higher than the one seen in the second quarter, more than 30 basis points, just to at least maybe just a little or a directional hint, basically? Thanks.

Okay. Lots of questions.

I'll try to answer, and then Jenny can take. The expectations for Q3 and going forward in the US is definitely growth for the segment.

I expect it to be over or just under our double-digit target. We definitely do expect the US to bounce back.

Let's say high single-digit or hopefully double-digit. Let's see how it performs.

This order, of course, it impacts Q3, and should have been in Q2. That will impact nicely.

I don't want to say exactly the number of the order, but the setup is that we make a first initial order that we have shipped now in July or shipping some of it in July. More or less, it will be fully delivered in July.

Then there will be replenishment from the day that the products goes out to all the different stores, we will keep inventory and ship out products to their distribution center. This is an important new customer.

Hard to say the exact volume, but of course, it will have a nice effect on second half and definitely in '27. Hopefully, we can expand this program even further.

It's a private label program, not that many SKUs, hopefully, we can add new SKUs to this program. Then it was Then

it was Europe. We have had really strong growth now this quarter.

Can we expect it going forward?

Definitely expect double-digit. I don't expect perhaps 19% organic growth, but double-digit growth we expect, and the same goes for manufacturing that we expect double-digit growth, but probably not as strong as we had now in Q2.

Your last question about the margin. Yes, we expect profitability to improve in the second half of this year compared to the first half.

Thank you very much. Just to follow up on that, two questions more on the FX impact.

In the second half, it should smooth significantly versus the first half if we consider spot rates, right?

It flatten out more in the second half compared to the first half or the first quarter, yes.

Great. Thank you.

Thank you. Your final question comes from Johan.

Please go ahead.

Thank you. Just a quick follow-up on the gross margin guidance here.

Could you, Jenny, just clarify whether you expect the gross margin to be in the 58% to 59% range for Q3 and Q4, or is that for 2026 as a whole?

It's difficult to say, depending how fast everything or the moving parts are moving, but I expect to be around 58%, 59% for going forward. I think 61 were exceptionally high due to the fact that US came in a lot lower than we expected.

Yes, but

the implication whether this is on 2026 as a whole or for coming quarters is quite significant given the strong gross margin that you have delivered in Q1 and Q2. Just so we get everything clear.

Hopefully with the strong 61% in one quarter, we will be close to the 59%. Let's just say that we will be around 58%, 59% for the full year.

I expect it closer actually to each quarter, I don't expect it to be exceptionally low next quarter due to the fact that it was high this quarter. So 58%, 59% per quarter, I expect.

Going forward, yeah.

Yes.

Got it. Thank you.

Thank you. That concludes our Q&A session.

Back to you guys for any closing comments.

Thank you so much, and we wish you all a lovely summer if you haven't had the summer vacation, and see you next time.

Thank you.

Thank you.