Vimian Group AB (publ) (VIMIAN) Earnings Call Transcript

Welcome to Vimian Group Q2 Report 2026 Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Alireza Tajbakhsh; and CFO, Carl-Johan Zetterberg Boudrie. Please go ahead.

Good morning, and welcome to Vimian's Second Quarter Earnings Call 2026. I'm Ali Tajbakhsh, Group CEO. And together with me, I have our CFO, Carl-Johan Zetterberg Boudrie, who will be presenting our results for the second quarter. We at Vimian continue building upon a good start of the year and report a second quarter with strong revenue and earnings growth as well as margin expansion. Our double-digit growth in the quarter is well ahead of the global animal health market, coupled with strong adjusted EBITA growth. We have also closed 4 acquisitions year-to-date and continue to advance our M&A pipeline with active discussions across all 4 segments. We've also achieved recognition for our ESG achievements with a new AAA rating with MSCI. Turning to the numbers a bit more in detail. We report 17% revenue growth and reached EUR 121.6 million in revenue in the second quarter. Organic growth was 12% with double-digit growth in Specialty Pharma, MedTech and Veterinary Services, our 3 largest segments, 6% contribution from acquisitions, and we had a 1% negative impact from currency movement. Adjusted EBITA grew 17% to EUR 29.7 million with strong earnings growth across all 4 segments. Margin improved to 24.5%, driven by the consolidation of acquired businesses in MedTech Dental segment. Moving into Specialty Pharma. Specialty Pharma delivered another strong quarter with organic growth of 14%. All 4 therapeutic areas delivered solid growth and the strongest contribution in this quarter comes from Specialty Pharmaceuticals and Specialized Nutrition. In Specialized Nutrition, we completed another successful sales campaign together with a U.S. retailer. A similar campaign took place in the third quarter of 2025. These campaigns make growth vary between quarters, but the underlying business momentum is continued. During the quarter, we also launched 25 new products and opened our new R&D hub in France focused on development of biological pharmaceuticals. Adjusted EBITA grew 13% to EUR 15.4 million, and we maintained a strong margin at 30.1%. Before we move on to the other segments, in our last quarter presentation, we gave you a short business snapshot about our MedTech Dental platform and Veterinary Services upcoming market expansion. In this quarter, we will continue our series of business snapshots by giving -- by having Carl-Johan giving some more insight into our innovation work within Specialty Pharma.

Thank you, Ali. And let me spend a few minutes on innovation as I've had the pleasure for the last couple of months to be close to the Specialty Pharma team and segment working as interim responsible for the Specialty Pharma segment. So innovation is really at the heart of Specialty Pharma's growth strategy. Innovation is one of the 4 pillars of our strategy. We focus on identifying unmet clinical needs and bringing differentiated products to market through internal R&D, scientific collaborations and selective partnerships. This approach is delivering consistent output. Over the last 12 months, we've launched 75 new products and have more than 60 additional products in the pipeline. These products span multiple therapeutic areas and technologies, creating a balanced and sustainable innovation engine. As you can see from the quarterly launch cadence, innovation remains a continuous process, supporting long-term organic growth and reinforcing our leadership positions in attractive specialty markets. Let me now make our innovation strategy a little bit more tangible by looking at 2 of our therapeutic areas, Allergy and Specialty Pharmaceuticals. In Allergy, our ambition is to further strengthen our position as a global leader in veterinary allergology. PAX2 is a great example of that and a further innovation of PAX, the Pet Allergy Xplorer that we launched 3 years ago. By incorporating an additional 25 novel allergens identified by Nextmune, we're further enhancing the clinical value of our diagnostics platform with commercial launch targeted around one of the world's largest dermatology congresses, ESVD-ECVD in the autumn of 2026. In Specialty Pharmaceuticals, our ambition is to build differentiated compounded drugs portfolio through internal innovation, combined with partnerships with biotech companies and leading universities. One example of how we're delivering on this ambition is through our newly established division Nextmune Bio. Nextmune Bio significantly strengthens our biological capabilities through a dedicated R&D team, a development facility and an established biologics pipeline, creating a platform for future prescription innovation across therapeutic areas. Our innovation strategy extends beyond prescription diagnostics and prescription drugs and into our OTC portfolio, where we continue to develop differentiated products addressing clear unmet needs. In dermatology, our ambition is to strengthen our leading position in skin and hair care through continued innovation while leveraging that expertise to expand into adjacent therapeutic areas. A good example is IryLac, our first in-eye ophthalmology OTC product. It expands our presence into eye care with a preservative-free formulation designed to restore tear film stability and improve patient comfort. In Specialized Nutrition, our ambition is to continue building a differentiated portfolio of nutritional solutions based on scientific evidence and targeted innovation. A good example is UNA 10, a microbiota-focused supplement supporting gut health. Its differentiated formulation enables targeted release and reflects our focus on translating science into products that address real clinical needs. Across our therapeutic areas, our approach is consistent. Focused R&D investments, a deep understanding of unmet clinical needs and a steady pipeline of differentiated innovations. Together, these capabilities provide a strong foundation for sustainable organic growth in Specialty Pharma.

Thank you very much, Carl-Johan. Moving on to MedTech. MedTech returned to double-digit growth of 11% with double-digit growth both in the dental and orthopedic business. As expected, our U.S. orthopedics business returned to growth on the back of our consistent efforts to strengthen commercial performance and operation despite unchanged market conditions. Our focus on education to unlock long-term market growth in both orthopedics and dental remains, and we educated over 1,300 veterinarians in the quarter. Adjusted EBITA grew 27% to EUR 11.2 million and adjusted EBITA margin improved to 25.8%, mainly driven by the consolidation of acquired businesses in the veterinary dental part of the segment. Moving on to Veterinary Services. Veterinary Service continues its momentum and delivered a strong organic growth of 10% with continued momentum in new member growth and strategic partnerships. At the end of the quarter, we reached 11,900 members across 4 continents. Adjusted EBITA grew 18% and the adjusted EBITA margin reached 28.2%. As expected, somewhat lower than previous year due to mix effects from acquisitions and our communicated growth investments in new markets and services. Looking into Diagnostics. Diagnostics delivered 7% organic growth in the quarter. Adjusted EBITA grew 32% and adjusted EBITA margin of 9% was driven by product mix with higher level of extraction sales. We communicated earlier this year that we entered 2026 with a strong M&A pipeline, and we see continued improvement in our M&A activities and momentum. We have year-to-date closed 4 acquisitions and continue to have a very active -- activity and pipeline going forward as well across all 4 segments. The latest acquisition is the crematorial business that Verona Pet, within our diagnostics business in Italy. From a sustainability perspective, we continue to deliver our sustainability agenda. In spring, we received further recognition through the rating upgrade from AA to AAA within MSCI. We are now among top 19% of MSCI-rated peers globally and a leader among 153 Health Care Equipment & Supplies companies. This concludes the run-through of the quarter, and I will hand over to Carl-Johan for deeper insights into the financials.

Thank you, again Ali, and let's jump into the -- more specifically on the numbers for the second quarter. Adjusted EBITA in the second quarter was EUR 29.7 million, corresponding to an increase of 17%, and that translates into an adjusted EBITA margin equal to 24.5%. The margin increase compared to the same period last year is primarily a result of positive margin development in our MedTech dental business. Central costs amounted to minus EUR 3.0 million, an increase from minus EUR 2.2 million last year. This increase is mainly a result of expenses related to our long-term incentive programs in total EUR 0.8 million in the quarter. And during the end of the second quarter, we implemented LTI '26 as approved by the Annual General Meeting in April, where we will see the full effect from the third quarter and onwards. These are non-cash IFRS expenses that will recur for the duration of the 3-year programs. We reported an operating profit of EUR 22.3 million, a significant 54% increase from last year's result of EUR 14.5 million. Items affecting comparability decreased in the quarter compared to the same period last year and totaled minus EUR 0.9 million. The majority of items affecting comparability relates to acquisition costs in Veterinary Services and in Diagnostics of total minus EUR 0.5 million. Net financial items amounted to minus EUR 8.0 million and consisted of 3 main parts. Financing expenses of minus EUR 3.1 million with an average interest rate of 3.9% during the quarter, partly offset by interest income of EUR 0.2 million. A quarterly discounting impact of minus EUR 1.0 million and a negative impact of EUR 2.5 million from probability adjustments related to contingent considerations, mainly relating to new acquisitions. A negative impact of EUR 1.6 million from exchange rate effects on the revaluation of debt. Income tax expense for the quarter was minus EUR 5.5 million at an effective tax rate of 39%. In the quarter, the tax expense as a percentage of pretax profit was negatively affected by probability adjustments related to contingent considerations and other non-deductible expenses. In total, this results in a profit for the period of EUR 8.8 million with an earnings per share of EUR 0.02 for the quarter. Looking at cash flow from the second quarter, where cash flow from operating activities reached EUR 3.8 million for the second quarter. The operating cash flow was negatively impacted by timing of taxes paid and net working capital effects. Net working capital amounted to EUR 114.1 million at the end of the quarter, equal to 26% of revenue, an increase from EUR 92.8 million at the end of the first quarter, which equaled 21% of revenue. The majority of the EUR 21.3 million increase in working capital relates to increase in receivables after a strong finish to the quarter as well as specific inventory buildup to support continued customer demand. Cash flow from investing activities amounted to minus EUR 22.9 million, primarily consisting of acquisitions and earn-out payments. And finally, cash flow from financing activities of EUR 20.5 million from proceeds from borrowings. At the end of the quarter, net debt amounted to EUR 273.7 million, which is up from EUR 258.4 million at the end of the first quarter. Cash and cash equivalents amounted to EUR 51.6 million, an increase compared to EUR 50.4 million at the end of March, with external lending of EUR 261.7 million at the end of the second quarter. All in all, this resulted in a leverage at the end of the quarter equal to 2.1x, unchanged compared to the end of the first quarter. And we continue to be well capitalized with an ability to execute on our strengthened acquisition pipeline. With this financial review, I hand the word back to Ali for concluding remarks.

Thank you, Carl-Johan. Summarizing the first half of 2026, I'm pleased to see that improved execution of our 3 strategic focus areas have been successful. The quarter was strong with double-digit organic revenue growth, strong earnings growth and improved margin, all well ahead of the global animal health market. We've closed 4 acquisitions year-to-date and have a highly active pipeline across all 4 segments. For the remainder of the year, during the second half, our focus will be on executing on our M&A pipeline while continuing to drive strong organic growth and building strong culture. Thank you for your attention. And with that, we can open up for Q&A.

[Operator Instructions] The next question comes from Kavya Deshpande from UBS.

I've got 2, please. My first one was on U.S. Vet Ortho growth. So your comps look a little bit tougher in the second half of the year or more like flattish growth versus double-digit declines in H1. Should we continue to see sort of organic growth at a low single-digit level here? Or is your strategy making you think that an acceleration actually might be possible here? And my second question was around the spread of margins between Dental and Vet Ortho. It seems like this is quite different today to where it used to be given the investments in Ortho and the margin expansion in Dental. Would be able to get a sense of sort of, yes, where they sit today, please?

Thank you for the questions. I think if I start off with your first question, we expect that the changes we've implemented to drive kind of continued growth in the U.S. Orthopedic business will continue, and we expect a continuous low single-digit growth in the second half of the year as well. We still see unchanged market conditions. The market is soft. So depending on how the market develops as well, that could, of course, impact that number, but we're very happy and confident with the management team and the execution of the changes we implemented in the last 6 months.

And on margins, so overall for the MedTech business, I think we have a good margin business within MedTech in total. If we take Orthopedics and Dental more specifically, in Orthopedics, as communicated, we have taken deliberate and focused investments to make sure that we get back to growth, as Ali just mentioned. But we do see, as we continue on the growth path, those investments -- or we will make -- those investments will make sure that we continue on the growth path and improve margin steadily over time within Orthopedics. In Dental, we continue to improve the margins, both operationally and in the second quarter, there's also been an impact with the addition of AllAccem that we acquired June last year, and we get the full effect this quarter that has a higher margin profile than the rest of the MedTech and the Dental business. But all in all, we see that MedTech is developing positively, and we are confident that with continued growth, we'll see steady margin improvement in the segment over time.

If I could just ask a quick follow-up on that Dental margin, please. How far do you feel you are from sort of the ideal margin for that business? I mean I understand the gross margin in general is a little bit lower in Dental than for Ortho. But I mean, could we feasibly ever see the Dental margin sort of in the 30s like that Vet Ortho used to be before the U.S. market decline?

So we definitely believe in the Dental part of MedTech that we will continue to see margin improvement, then we will continue to invest for future growth as well because I think as you see in this report and what we believe going forward, there are a lot of interesting opportunities in Dental segment where we want to make sure that we invest for continued solid growth in our Dental business. While having that said, we do see that margins will improve over time also in the Dental area within MedTech.

The next question comes from Arvid Necander from DNB Carnegie.

So the first one on Spec Pharma. I was just wondering if you can quantify the contribution from the national sales campaign? And I guess just overall, how would you characterize the underlying demand in the different subsegments here? And then secondly, on M&A, you seem to be increasingly positive on the outlook here and highlighting a highly active pipeline. So should we expect the activity to accelerate in the second half of the year? And I guess, overall, how would you characterize the size of the opportunities that you're more upbeat on for the near term? I'll start there.

So let me address the first question regarding Spec Pharma. So we haven't disclosed the sort of the total size of this national sales program that we did in Q2 of this year that we did Q3 of last year. The program implemented this year is a little bit larger than the program we did last year. So there is a positive effect from that sense. As Ali communicated during the presentation, we will see, you can say, an effect of the program being implemented in Q2, having a good contribution, whereas we will see, you could say, the flip side in Q3 where we had the program last year. Having that said, so the organic growth adjusting for the national sales program in the second quarter of this year was 9%. And going back to sort of your second part of the question, what I'm encouraged about is that we see a good growth and underlying momentum in all the therapeutical areas within Specialty Pharma. We did have sort of very strong growth in U.S. Specialized Nutrition on the back of the national sales program, but the other therapeutical areas grew well as also in the quarter and for the first half year.

Moving on to the second question. So as we said before, we enter 2026 with a stronger pipeline than before. We've built upon that pipeline in the last few months, and I feel positive about the opportunities of welcoming new strong businesses and entrepreneurs during the second half of this year. But it's difficult to speculate exactly when and how because key for us is always to make sure it's the right acquisition with the right valuation and so forth. So all in all, we are positive about the conversations and the attractiveness we can offer strong entrepreneurs in the animal health space. In terms of size, it's a mixed bag. We see both smaller bolt-ons and bigger acquisitions in the pipeline. Exactly when and how and if they materialize depends on how the development goes during in the second half of the year. But we remain equally optimistic about our business momentum we currently have as well as our M&A momentum.

The next question comes from Jon Unwin from Barclays.