Release Date: April 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• AddLife AB (FRA:1AD1) reported significant EBITDA margin improvements in both Labtech and Medtech business areas, with Labtech achieving a 12.1% margin and Medtech 13.5%, marking a nearly 2% improvement over the previous year.
• The company experienced a healthy revenue development across most geographies, with notable growth in Spain and Italy, which saw year-over-year increases of 22% and 29%, respectively.
• Operating cash flow improved significantly compared to the previous year, helping to reduce net debt to EBITDA to 2.8%, below the company's target of 3.0%.
• AddLife AB (FRA:1AD1) successfully completed the acquisition of Edge Medical, a company with high margins and strong growth potential in the orthopedic surgery segment.
• The company is well-positioned to handle global trade disruptions, with over 90% of revenues and 80% of suppliers based in Europe, reducing exposure to international trade uncertainties.

Negative Points

• There was a slight weakness in the UK market due to a large instrument order in the previous year that was not repeated this quarter.
• Medtech's organic growth was flat, primarily due to strong instrument sales in the UK last year that were not replicated this quarter.
• The company noted some hesitation in academic research investments, which could impact future growth in that segment.
• There was a slight weakness in demand in the home care area, driven by external factors such as government hesitancy to spend on large construction projects.
• Despite improvements, some subsidiaries are still not achieving the desired double-digit margins, indicating ongoing challenges in certain areas.

Q & A Highlights

• Warning! GuruFocus has detected 9 Warning Signs with FRA:1AD1.

Q: Could you specify which Medtech companies showed significant margin improvements this quarter? Additionally, could you explain the 90 million krona provision in the gearing improvement? A: We observed margin improvements across the board, with larger companies showing gradual improvements and smaller companies performing exceptionally well. Regarding the provision, it was a long-term provision that was settled, with a corresponding receivable, so there was no impact on cash flow or profit and loss. Unidentified_1 and Unidentified_2

Q: Can you elaborate on the strong performance in Spain and Italy, and were there any one-offs contributing to this growth? Also, can you quantify the impact of tender wins on Labtech's performance? A: There were no major one-offs in Spain and Italy. Our Spanish business, particularly MBA, showed solid growth and margin improvement. In Italy, we had good orders in Labtech. Regarding tenders, while we've seen positive results, it's challenging to quantify their impact as the full effects are not yet reflected in the numbers. Unidentified_1

Q: Are there still opportunities for margin improvements in Medtech, or have you exhausted all possibilities? A: We are seeing gradual improvements across most companies, driven by daily initiatives, cost consciousness, and product portfolio evolution. We are also pruning less profitable products. While some companies are back in solid double-digit margins, others still have work to do. Unidentified_1

Q: Did you notice any slowdown in instrument sales or diagnostics towards the end of the quarter? A: Unlike Q1 2024, where we saw a slowdown in March, this year was more stable throughout the quarter. Diagnostics remain stable with underlying growth, supported by tenders. The weakness in academic research persists but isn't worsening. Unidentified_1

Q: With a strengthened balance sheet, are you seeing increased competition for acquisition targets compared to two years ago? A: While there might be slightly more interest in the segment, the competition hasn't drastically changed. Our pan-European coverage and focus on advanced products give us a unique position. We have a good list of candidates for this year and are actively working on targets for 2026. Unidentified_1

For the complete transcript of the earnings call, please refer to the full earnings call transcript.