17% organic growth with strong cash flow

Summary of the period

Numbers in parentheses refers to outcomes during the corresponding period of the previous year.

Third quarter: July 1st – September 30th, 2023

• Net revenue amounted to 602.0 MSEK (483.5 MSEK), corresponding to an increase of 25% (119%)
• Organic, currency-adjusted, growth amounted to 17% (8%)
• Operational EBITDA* amounted to 137.0 MSEK (101.5 MSEK), corresponding to an increase of 35%, and a margin of 22.8% (21.0%).
• Operational EBITA* amounted to 116.7 MSEK (84.5 MSEK), corresponding to an increase of 38%, and a margin of 19.4% (17.5%)
• Operational EBIT amounted to 115.6 MSEK (84.3 MSEK), corresponding to an increase of 37%, and a margin of 19.2% (17.4%)
• Profit after tax amounted to 38.1 MSEK (3.8 MSEK)
• Earnings per share calculated on 158 731 900 shares (158 111 805 shares) amounted to 0.24 SEK (0.02 SEK)
• Cash flow from operating activities amounted to 135.6 MSEK (67.8 MSEK)
• 75.0 MSEK has been amortized on the debts to credit institutions
• As of September 30th, 2023, cash amounted to 243.2 MSEK (194.3 MSEK)

*During the quarter, no operational adjustments have been made to EBITDA or EBITA.

First 9 months: January 1st – September 30th, 2023

• Net revenue amounted to 1 697.3 MSEK (1 332.1 MSEK), corresponding to an increase of 27% (159%)
• Organic, currency-adjusted, growth amounted to 12% (7%)
• Operational EBITDA amounted to 363.8 MSEK (319.4 MSEK), corresponding to an increase of 14%, and a margin of 21.4% (24.0%)
• Operational EBITA amounted to 306.0 MSEK (274.1 MSEK), corresponding to an increase of 12%, and a margin of 18.0% (20.6%)
• Operational EBIT amounted to 301.5 MSEK (273.4 MSEK), corresponding to an increase of 10%, and a margin of 17.8% (20.5%)
• Profit after tax amounted to 71.6 MSEK (78.7 MSEK)
• Earnings per share calculated on 158 731 900 shares (154 275 661 shares) amounted to 0.45 SEK (0.51 SEK)
• Cash flow from operating activities amounted to 317.5 MSEK (133.7 MSEK)
• 125.6 MSEK has been amortized on the debts to credit institutions
• Exchange gains amounted to 1.7 MSEK (13.3 MSEK)

Significant events during the third quarter
There are no significant events to comment on during the third quarter.

Significant events after the third quarter
There are no significant events to comment on after the third quarter.

Words from the CEO
The third quarter's net sales of 602 MSEK corresponds to an increase of 25% compared to Q3 2022 and is thus our strongest quarter ever, while our EBITDA result was137 MSEK, corresponding to a margin of 22.8%. Our very strong cash flow has resulted in that we are already below 3 in our net debt to EBITDA, which was our goal to reach after Q4. It has also enabled 75 MSEK in amortizations during the quarter.

Our organic growth of 17%, is, as I predicted in the last report, stronger than our first half, which is due to our customers' decreasing inventory levels and that the demand for our products continues to be strong among pet owners. Once again, the last month of the quarter became the strongest ever and for several subsidiaries Q3 has been the strongest quarter of the year. In the North American market, Online and Pet Retail have had a strong development, while the Vet channel is still somewhat tentative. However, I expect to see a change already during Q4 as both Vetio North and South look forward to once again contributing to the group with both growth and profitability going forward.

Strong growth and improved margin
We are growing faster than the market in all regions, but this quarter it is Europe and the export markets that stand out. All group companies in Europe contributed to the region's growth of 64% and those companies with exceptional growth figures were Nutravet, Spain, Greece and the Nordics. Also Italy have stronger growth than the local market with the help of, among other things, successful product launches. Our latest addition to the group, Vetio UK (formerly CVP), which is not yet included in our organic growth, had its best quarter ever and proves the eagerly growing demand for soft chews in Europe. Just as in the US, I expect this product category to already be the largest for dog supplements in Europe in 2-3 years.

Regarding the export markets, it is a combination of the fact that they recovered after Covid and that we are starting to see results from newer group companies making use of the skills and contacts which Swedencare has established over many years. Sales in China and the rest of Asia dominate, but Australia and South America also continue to increase. Mexico is a new country with a large and growing pet population that will be interesting to follow.

NaturVet®, ProDen PlaqueOff® and PetMD®
Our largest brand NaturVet® has had another record quarter from both Pet retail and Online. The growth we deliver would not have been possible without the investment we completed in 2022 with a third production line. The production line is not only used internally, but also for the increasing demand within contract manufacturing that we experienced from all production companies within the group. The increasing demand is derived from our market-leading competence and capacity regarding soft chew manufacturing for both dietary supplements and prescription products. During the quarter, our European trademark application was approved for NaturVet by Swedencare® and we are already planning to launch in the first half of 2024.

ProDen PlaqueOff® continues its strong development and grew by 54% during the quarter. It is our powder product that is growing the strongest together with our new soft chews, which so far has only been launched in North America. In Europe and other markets, they will be launched during the winter 23/24 and we expect high demand there as well.

We continue to build out our online team, and Pet MD, with its strongest quarter ever, is a great example of what we can achieve within our group. With more products, logistics, strategy work and other assistance from the group, the same management that sold the company to us in 2021 has managed to go from a revenue of 18 MUSD for the full year 2020 to 25 MUSD after three quarters in 2023 and probably well over 30 MUSD when the year is over. With the right support and tools, Swedencare can help entrepreneurs take their life's work to new heights and the team at Pet MD is a good example of this.

The global pet market and Swedencare
Despite geopolitical instability and financial challenges for the private economy, the pet market is standing firm. Products, such as beds and leashes, and some super premium brands on the feed side have seen a decline in demand but in the areas in which we operate it is still a good market. I expect that the part of the market in which we operate will show a growth of around 10% in the next years and considering all the business opportunities we have within the group, we should be able to grow faster. We have several internal and external projects that we expect will contribute to higher growth in the coming years.

We are well on our way and determined to deliver our long-term financial sales target of 4 BSEK in 2026, which will primarily come from organic growth. At the same time, we will activate our acquisition work in the coming years as there are still several interesting objects in a fragmented market worldwide.

Furthermore, we are carrying out some structural changes where we are moving RX Vitamins' operations from New York to our warehouse and logistics hub outside Tampa, which will result in lower overhead costs and higher efficiency and improvements in several areas. During the quarter, we completed the recruitment of a new CEO for NaturVet/Garmon, Geoff Granger. Geoff comes most recently from Petco and has a long experience of both the industry and NaturVet. Both myself and Scott Garmon, who is retiring, are confident that Geoff is the right person to continue to develop both the brand and the company to new heights of success.

Thank you for this time and I also want to especially thank the entire organization for the efforts during a strong quarter!

Håkan Lagerberg, CEO
Malmö October 25th, 2023

The complete interim report is attached to this press release and is available at www.swedencare.com

Swedencare invites shareholders and analysts to a presentation of the Q3 report where CEO Håkan Lagerberg and CFO Jenny Graflind will comment on the report. The presentation will be held at 10:00-10:30am CEST and can be followed via live webinar. The presentation material will be available on the website at 9:00am CEST.

Please use this link to join the webinar: https://zoom.us/j/96109369393