Earnings call transcript: Arcticzymes Q1 2025 sees revenue decline, stock dips

Arcticzymes Technologies ASA reported a decline in revenue for the first quarter of 2025, driven by reduced sales to a major molecular tools customer. Despite this, the company noted a significant increase in EBITDA compared to the previous year. The stock price reacted negatively, dropping 5.83% to a close of 16.3 NOK, reflecting investor concerns over the revenue shortfall. According to InvestingPro data, the company maintains impressive gross profit margins and holds more cash than debt on its balance sheet, suggesting financial stability despite the revenue challenges.

Key Takeaways

• Revenue fell to 25 million NOK, down from 30 million NOK in the same quarter last year.
• EBITDA increased to 3.7 million NOK, up from 2.3 million NOK in Q1 2024.
• North America now accounts for over 50% of total revenue.
• The company is preparing to launch a new product, mSAN HQ GMP, by mid-2025.

Company Performance

Arcticzymes faced a challenging start to 2025, with revenue declining due to lower sales from a key customer in the molecular tools segment. However, the company demonstrated resilience with a substantial increase in EBITDA, indicating improved operational efficiency. The shift in revenue sources, with North America now contributing more than half of total sales, highlights the company’s strategic focus on this market.

Financial Highlights

• Revenue: 25 million NOK (down from 30 million NOK in Q1 2024)
• EBITDA: 3.7 million NOK (up from 2.3 million NOK in Q1 2024)
• EBITDA Margin: -16%
• Cash Balance: Stable at approximately 25 million NOK

Market Reaction

Following the earnings announcement, Arcticzymes’ stock price fell by 5.83%, closing at 16.3 NOK. This decline reflects investor concerns about the revenue drop and the company’s ability to maintain growth momentum in a competitive market. With a beta of 1.54, the stock shows higher volatility than the broader market. InvestingPro analysis indicates the stock is currently undervalued, with analysts setting a unanimous Strong Buy rating and projecting significant upside potential. For deeper insights into valuation opportunities, explore the Most Undervalued Stocks list on InvestingPro.

Outlook & Guidance

Arcticzymes is focusing on expanding its presence in the biomanufacturing market, particularly in viral vaccine manufacturing and cell and gene therapy. The company is also exploring M&A opportunities to enhance its product portfolio and drive future growth. The launch of the mSAN HQ GMP version is expected to bolster the company’s offerings in the enzyme market.

Executive Commentary

CEO Michael Arco emphasized the company’s strategic priorities, stating, "We are just tapping into the biomanufacturing nuclease market." VP of Sales Paul Blackburn added, "We are seeing real traction... customers are not just curious about our enzymes, they’re trying them, they’re starting to validate them, and they’re starting to adopt them."

Risks and Challenges

• Dependence on key customers for revenue growth.
• Potential US tariff risks could impact profitability.
• Competitive pressures in the nuclease market.
• The need for successful integration of new products and technologies.

Q&A

During the earnings call, analysts raised questions about the decline in molecular tools sales and the company’s strategies to address this issue. Arcticzymes highlighted ongoing marketing campaigns and potential CDMO partnership revenues as areas of focus. The company is also monitoring potential tariff risks in the US market.

Full transcript - Arcticzymes Technologies ASA (AZT) Q1 2025:

Michael Arco, CEO, Arcticzymes: morning, everyone, and welcome to Arcticzymes Q1 twenty twenty five Presentation. My name is Michael Arco. I’m the CEO of Arcticzymes. And today, I’m joined by Birge Schuerbo, our CFO as well as Paul Blackburn, our VP of Sales. As we present our Q1 twenty twenty five results, I want to start with a clear message.

Despite some short term headwinds, Arcticzymes is making strong progress in our strategic customer transformation. Revenue this quarter was impacted by a temporary drop from a major OEM customer within molecular tools. But looking beyond that, the underlying momentum in our business is clear. We’re deepening our customer relationships. We’re expanding our market reach.

And this quarter, we hit a record high number of orders, three forty two. Apart from that, we’re also expanding our customer base. Our customer base also hit an all time high. In The U. S, we are seeing a lot of positive momentum.

Sales were up 25% year on year, fueled by growth in the cell and gene therapy space. Notably, a new CDMO also took on SanHQ on their platform, a strong signal of future recurring business. We know that transformation takes time. The investments we’re making in our team, system and global footprint are deliberate and essential. Simply put, we are laying the foundation for sustainable long term growth.

And in today’s presentation, we are going to focus on showing how our strategy is progressing, talking more about our customer centric transformation and also sharing the early indications that this strategy is bearing fruit. And we are also going to underline that we believe that Arcticzymes is well positioned for future growth. And with that, let’s go into the agenda, Birgi. I’m going to start off like normally with our highlights for the quarter. Then I’m also going to recap our strategic priorities.

And then I’m going to give you an update on partnerships. Then Paul is going to share an update on our customer centric transformation and also give you insights into the progress we are making in terms of developing our customer base. Paul is also going to share the sales numbers on both segments, Biomanufacturing and Molecular Tools. Berger is going to go through the financials, and then I’m going to come back with an outlook and open up for questions and answers. Looking at the highlights for the quarter, then the total revenue was just shy of million.

The revenue was negatively impacted by a large molecular tools customer that ordered DKK9 million left, less than they did during Q1 last year. Nothing materially has changed with this customer. Paul is going to give you an update from his latest discussion with this particular customer. Taking away this customer from the equation, both Q1 last year and Q1 this year, then we grew just above 12%. The EBITDA performance was negatively impacted by currency effects as well as investments in our commercial transformation.

More details on that during Berger’s part of the presentation. I’m extremely pleased to see that yet another CDMO has on boarded one of our SAN nucleases, SANH2, in their platform process. It’s a leading CDMO in The U. S, where we have been working with them for the past couple of years actually. And now finally, we have been able to make the breakthrough.

So this is the second CDMO where we are on board in their platform, expanding our reach to much more customers. Also in The U. S, we saw a very positive development. During the quarter, we saw strong growth within the cell and gene therapy space, our nucleases, and sales are up 25% year on year. And in general, I can say that we are having a lot of great dialogues with customers.

We are seeing a lot of opportunities for the future. And what I’m also very, very pleased to see is that our customer base continues to grow. This quarter, we had a record high number of paying customers. And this really lays the foundation for future growth. We are getting in early at a lot of accounts.

The volumes might not be large at start, but there’s significant potential to grow long term. So a really, really positive development, both within the cell and gene therapy space and also in terms of the general customer base expansion. Scientific thought leadership, that’s key for Arctic Science. We want to be positioned as one of the strong scientific thought leaders out there. Our products need to be backed up by science.

We presented a poster in collaboration with Aesop at Bioprocessing International on one of our SAN enzymes, and this was very positively received. Next slide, Bergen. Our strategic priorities. We are going to continue to drive the customer centric transformation. We’re going to continue to work with commercial excellence.

We’re going to continue to get closer to the customer. And as mentioned, we’re seeing the first early progress in terms of delivering on that strategy, All time high customer base, all time high number of orders. Channel development through partners is also important. Two CDMOs onboarded. And we’re working with a third as we speak.

We’re also looking into possible distribution partnerships. In order to build the customer base as we have done and continue that development, we are also investing significantly in marketing activities and sales campaigns in order to generate more leads. Paul is going to discuss and show you our latest campaign and also share some very tangible results of that campaign. GMP upgrade of current enzymes, that’s been a theme ever since I joined the company. We’ve been working on that for the past two years, first with the DMF and then with developing and launching our first GMP grade nucleases.

We have a third in development, and that’s our flagship product, mSAN H2. And we expect that we’re going to be able to launch a GMP version of this product in a couple of months’ time. It’s essential to complete this regulatory run. In order to get into more late stage drug development projects, we need to have the appropriate regulatory approvals, guidelines in place. Just last week, I had a discussion with one of our BDs, and he told me that he had missed an opportunity due to the fact that we didn’t have an mSAN HQ GMP version on the market.

We are now removing this hurdle, and we are already now expecting that we are able to accelerate sales of mSAN during Q4 and on to 2026. It’s not all about cell and gene therapy. Our goal is also to build and expand our biomanufacturing portfolio in order to diversify. And here, we’re looking into RNA, as we’ve talked about earlier. Our first RNA restriction enzyme is in development.

We published a poster last year on this enzyme, generated a lot of interest from potential both customers and partners. And currently, we are in discussion with a number of partners in regards to go to market and possible co development opportunities. So a very, very exciting field, but also a field where we have to ensure that we develop the right product with the right specs for the right customer. And going into a collaboration with a potential partner might be the right way to do it for us. Long term, of course, 2026 and beyond, we’re going to continue to invest in innovation, also our molecular tools portfolio.

As we are seeing the customer base is growing at the moment, we also have to be very prudent in regards to operational scalability. We want to be able to meet the demand. So we are going to start to discuss upscaling possibilities of some of our nucleases in collaboration with an external CDMO partner. Last but not least, M and A opportunities has also been on the table for quite some time long term in regards to building a broader portfolio, strengthening manufacturing capabilities, strengthening our innovation capabilities as well as enhancing our commercial channels. Next slide, Birge.

This is an update on partnerships. As mentioned, it’s great to see another CDMO on boarded, this time with ZanEastQ on their AAV platform. This is done in their center of excellence in The U. S. We’re expecting the initial projects in Q3.

As already communicated, we are in close partnership with a CDMO in The U. K. That has implemented mSAN HQ in the lentiviral vector platform. Once mSAN HQ GMP is launched, they are gradually going to transfer to that new case. We expect initial projects to kick off Q3 to Q2Q3.

And an interesting development is also that we might be able to take this beyond early phase projects and also go into projects that are closer to later drug development stages and also thereby closer to commercialization. And that, of course, makes the revenue potential long term more interesting than we originally thought. As we speak, we are also working with the third CDMO to implement ZanageQ on their platform. Currently, the nuclease is being evaluated at an early process development stage. So a lot of positive momentum in regards to CDMO partnerships and a lot of positive momentum also in our ability to go direct to customers in terms of broadening our customer base.

In regards to OEM, we’ve talked about that previously. We’ve had a close collaboration with a potential partner. They did an audit in Trondstug on the fifteenth, and we passed that audit without any major deviation. But we have decided to discontinue this collaboration due to partner side operational challenges. The partner had to invest significantly in developing their own data, and that would prolong the launch date.

And the margins that we were able to provide the partner turned out not to make a collaboration feasible going forward. We’re still actively working with other partners. We have optionality. And we are also looking into if possible selected distribution agreements make sense. But what is the main message is that our biomanufacturing customer base is stronger than ever, all time high.

And the recent CDMO platform integrations as well as all the positive dialogues that our BDDs are having at the moment. That really instills confidence in me and the organization in general that we are going to be able to grow the biomanufacturing business for 2025. We saw a quarter on quarter growth also for biomanufacturing during this first segment of the year. And with that, I would like to ask Paul to share more about the customer centric transformation. Paul is in the process currently of building a world class team that work according to world class standards.

And I think we are seeing the first early indications that Paul and team as well as the whole organization that supports the customer centric transformation is making progress. Go ahead, Paul.

Paul Blackburn, VP of Sales, Arcticzymes: Thanks, Michael, for the for that introduction. So, yes, I’ve been in the company now for around seven months, and I’m really delighted to see the progress that we’re making and the impact that we’re having. It’s really quite significant. I’m seeing progress in our motivation, our customers’ motivations, general excitement, around our enzymes and massive improvements in how we do business and the rigour that we’ve got around that. So if you’d allow me to walk through some of those aspects before we get to the sales revenues.

Next slide please, Burger. So I’m going to take a moment to highlight where we are in terms of our commercial transformation, our commercial journey, because we are seeing real traction. So first on the left you’ll see that we’ve got foundations in place now. We’ve made real progress during Q1 and the commercial team and the wider team is executing with greater discipline. We’ve tightened up our internal alignment and we’ve laid this sales and marketing groundwork, and the expectations of how we’re going to scale the business.

Michael alluded to this, but what we’re seeing in the market at the moment is really exciting. So customers are not just curious about our enzymes, they’re trying them, they’re starting to validate them, and they’re starting to adopt them. We’ve got multiple mid stage, projects, underway and biomanufacturing is really leading the charge here. So we’ve got some great indicators of long term adoption. So we are really well positioned and our go to market investments that we’ve made so far are really expanding our reach and the nature of our customer engagements.

So we’re strongly influencing key accounts and we’ve got great internal alignment through the customer’s buying journey across our commercial, our product and our technical teams. So it’s really clicking. I’m really satisfied with the progress we’re making. We’re staying focused on what matters the most though, and that is, as I said last time, feeding the funnel, you know, and supporting our customers at every stage. So we’re driving adoption of our enzyme, we’re driving new projects, we’re accelerating what we’re calling designing, and we’re really positioning art exams for future reoccurring revenue as these customers’ programmes advance.

So, you know, we are planting a lot of seeds, but we’re also seeing a lot of growth, and we do know how to scale it. So the bottom line really is that we are building our business strategically, we’re gaining great momentum and we’re setting ourselves up for success. So there is no shortcut, however. You know? The only way we can build a sustainable business is to feed the funnel.

Next slide, please. So, you know, design in, I just wanted to, capture, you know, the core essence of how we grow, and really talk a little bit about how customers adopt our enzymes. So it’s really strategic and it takes quite a long time. Okay? So it’s all around customers’ projects quite clearly, and it’s fairly obvious that the more customers and the more projects we’re involved in, the more the greater the chances of, future commercialisation and success.

So as I keep saying, feeding the funnel is a critical part of of of this transformation. Typically what happens is in the first, few months, a customer would focus on the technical aspects of our enzymes. They perhaps sample and we do some kind of guided, incorporation and trial of our enzymes into their process. By about months three to nine, things really start to heat up. We would typically, allow them to see behind the curtain at ART exams a little more, access to our validation teams, to our quality teams, and we make sure that they are, gaining the data, they’re testing the right things and, you know, it’s not as simple as just giving a customer a sample.

It needs to be far more structured and far more rigorous than that. Between months nine, and perhaps fifteen, and again these are just guides, it’s really about scaling up with the customer. It’s about process development. And typically our enzymes move from a benchtop environment into a bioreactor. We tend to support audits at about this point and this isn’t theoretical, this is how we’re actually working at the moment, I just simply wanted to remind you.

And this is where customers’ confidence builds in Arctic Zymes as a supplier. So this is a really crucial phase and we’re seeing more accounts enter into these different phases. Then beyond fifteen months, this is where commercialisation and the real revenues start to happen. So our enzymes are adopted into validated workflows, they’re locked into, standard operating protocols and we start to see these repeat orders, at a meaningful scale and this is kind of the pay off. But to my original point, there is no, substitute to, building the the funnel and finding the opportunities.

And one thing I’d really like to highlight is the importance of being at the front of a customer’s mind when they come to do this initial technical sampling. So that’s why, you know, marketing is is is so critical for our transformation. And along the bottom here, you’ll see this is an example of a well known CDMO in The US where conversations actually started with our Sam HQ back in 2022 And, you know, the whole, team has done a fantastic job. Up until the end of last year where SunHQ, TF was validated for using their platform process. So a milestone success here.

And what’s really great here is that this CDMO now sees us as a true nuclease partner. This year they’re going to be trialling our GMP neo nuclease and they’re already putting plans in place, for next year to work with our mSanHQ. And again, this is slightly driven by the fact that we’ve got GMP coming in the next short term. So next slide, please. So what’s so exciting now is just how strong and diverse our commercial pipeline has become.

Our enzymes are embedded in platform processes at some top tier contract manufacturers, and our early stage research projects are can you see my slide? It keeps flashing out. That started years ago and now starting to mature into active clinical, and manufacturing, use cases. So this is exactly the kind of strategic depth that we’ve been building towards. Diagnostic companies are also another fantastic story, so they’re validating our enzymes for their cartridges, for their kits And, you know, these aren’t just, early experiments.

They’re actually, starting to make commitments for us to incorporate our enzymes. So I believe we’re in the right conversations with the right partners, and we are positioning our designs for future growth and future impact. You know, I’ve got a quote in front of me from another CDMO on the East Coast of of of North America, and that is we champion the use of SanHQ both internally and with potential clients. The data on the histone H3 protein block was particularly insightful and it provided a new perspective that we will incorporate as a quality control marker in our AAV purification workflow. We showed data and extrapolated a cost saving of 30 to 60% versus conventional nucleases.

So that is that is incredibly, impactful, incredibly significant, and it shows the the level of motivation that our customers have for for our our enzymes. Next slide, please. So q one has marked a a massive step change in the way that we do marketing and the importance of marketing in filling our funnel and supporting our commercial efforts. So we have invested more in marketing and and travel to events and and things like this. Marketing isn’t just a support function, it’s part of our commercial growth engine.

So we launched this fantastic No Love Lost campaign to really bring some emotional punch to the molecular tools side of the business. And it’s based around human relationships and human connections and it worked. It’s cut through the, what other life science providers are are putting out there. And this is testament to the to the marketing team that we have at Arctic Zions, which is truly, to use Michael’s words, world class. So you can see here that we we did some social media campaigning.

We got a huge number of impressions, but more importantly, 14% of customers that or potential customers that saw our posts engaged with our posts. And not only that, we got over 1,000 clicks through to our website and we we hit another milestone really because this is the first time a molecular tools page has overtaken the the salt active nucleos pages. We also brought this campaign to life for Eskmid in Vienna and customers really enjoyed engaging with us here. There’s several reasons for that. One is of course this fantastic booth design and we we continued this relationship theme and we got 93 warm or hot leads with customers that said they wanted to follow-up with us about our enzymes.

93, which is fantastic. This was helped massively by two talks that were given at this conference that where the, presenters referenced our enzymes, and these were metagenomics talks. So a fantastic example of a fantastic impactful campaign that’s going to help us to build that commercial funnel. So next slide, please. So I mentioned metagenomics as being the content for the presentation that those, those researchers gave and that this was quite a large part of this ESC Mid conference trade show.

And this is a very quickly emerging opportunity that we’re exploring at the moment for our enzymes. This gives diagnostic companies the opportunity to very quickly, use sequencing to determine not just the, the pathogen, the disease causing agent, but also what treatments might be appropriate for it without the need to culture the microorganism. So it’s a fantastic, diagnostic opportunity and it’s not a theoretical opportunity, it’s actually happening now. And our enzymes are positioned very nicely, within this. And, you know, we we’ve already, involved in, and mentioned in a patent regarding this, and we’ve already, at the early stages of a national rollout program, within a health service.

So this is this is really exciting for us. We’re still exploring it. And, we don’t wanna, we wanna get this right. We will get this right. So next slide, please.

And next one, please. So let’s take a a look at our our revenue performance during q one. So we reported 23,300,000 of sales, which does represent a drop from 30,000,000 NOK in q one twenty twenty four. So that decline is, and Michael mentioned this, almost entirely due to one large molecular tools customer who placed significant orders last year and smaller orders this year. In fact in Q1 they ordered 9,000,000 NOK less than in 2024.

So this was a known risk, this was not a surprise and it’s really important to separate this from the broader performance story. I’d also like to point out that I am personally handling this account and I can confirm that there is no material change to their needs. There’s no material change to their demand. It’s simply that they have enough stock in house to cover them until h two. Because when we look at the rest of the business, the underlying activity is really encouraging.

In America, we grew 20% year on year, and in APAC, we grew by a 45%. EMEA actually declined slightly by, 13%, and we’re taking action to to rebuild that momentum. They had a relatively strong q one twenty twenty four. But the real headline is that we’ve added 42% more customers during q one than we saw last q one. And we’ve seen a 14% increase in the order volume.

So that’s 37 more unique customers and that’s 31 more orders. So I believe that that’s proof that our strategy is working. We’re reaching more accounts and, you know, we’re we’re doing the right things. We’ve also seen a slight shift in geographical balance with North America now representing, just over half of our revenue, which is up from 31% last year. And this kind of tells me that our investments in the US commercial team and our investment in The US customer base is is paying off.

So, yes, the top line was impacted by one customer, but under the surface, this was a strong commercial quarter, and it showed healthy growth, diversification customer diversification and deeper customer engagement. Next slide, please.

Michael Arco, CEO, Arcticzymes: So

Paul Blackburn, VP of Sales, Arcticzymes: biomanufacturing, continues to be a major growth driver for us, and we saw a 21.4% increase in biomanufacturing sales reaching 13,600,000 this quarter. And that’s up from 11,200,000 in q one twenty twenty four. So this represents real commercial momentum. Geographically, North America led the way, showing 29% year on year growth, but EMEA also delivered a healthy 12% increase. So these are really encouraging signals given that a lot of this growth is coming from newer customer activity, not just from large repeat accounts.

So biomanufacturing now accounts for around 58% of our sales during q one. So this is one of the core engines clearly of of our business. So this has been driven by the expansion of our customer base, some new wins, some broad adoption and some more design ins. And we’re actually also seeing, demand for our nucleases beyond cell and gene therapy. So clinical adoption is starting to expand into broader virus manufacturing applications such as viral vaccine manufacturing.

So again, that’s something that we’re we’re strategically exploring, and it could open up a new addressable market. For molecular tools, our sales were took a step down this quarter with 9 and a half million NOK compared to 18,200,000.0 NOK. Again, this was due to this planned reduction by this one OEM customer, which accounts for 9,000,000 of the swing. So molecular tools still made up 41% of sales and it speaks to strong diversification in our in our in our product mix. We’re seeing significant growth in some parts of our portfolio here, for example, in COD UNG, which which rose almost 47% year on year.

But we are doubling down on our efforts here. 2024, was really focused on designing in and on initiating projects, with biomanufacturing customers very deliberately. What we’re now doing is we’re shifting our marketing effort and our some of our commercial effort to cover molecular tools in a more, rigorous rigorous way. Next slide, please. And just to to finish this section on a a real high, we have hit an all time number of unique customers, and this is a direct result of the traction that we’re building.

So you can see in the in the chart here, for biomanufacturing, we get we had a hundred and seven unique customers in q one twenty twenty five. That’s up from 86 in q one last year, and it’s, you know, double what we had just five years ago. So this isn’t noise. This is this is momentum, and this is growth for the future. On the molecular tools side, you know, it’s relatively stable post COVID, and we’re looking to to progress more customers through the molecular tools pipelines, to commercialization.

So, you know, it’s important that we’re not just filling the funnel, but we’re also moving customers through it. So we’re a company that’s building sustainable and scalable growth in a in a high potential market. And like last time when I presented on this call, I really do feel that we’re just getting started. And with that, I’d like to pass to Berger.

Berge Schuerbo, CFO, Arcticzymes: Thank you, Paul, that introduction and Michael here for the status of our sales and ongoing activities that we are ongoing in the organization here. And like previous quarters, I will take you through some of the headlines in our other accounts relating to our financial statements. Looking at the financials for the first quarter here. Our sales revenues ended up on SEK23.3 million, as they talked about. It’s a decrease of SEK6.7 million compared to the same quarter last year.

And as you heard from Paul now, the majority or basically all of this increase is related to one customer that purchased SEK9 million less in the first quarter compared to the first quarter last year. We had positive contribution on other revenues here. We were able to recognize almost SEK 1,600,000.0 in other revenues and SEK 1,300,000.0 of this is related to the grant we were awarded in the second quarter of last year. And with the sales and other revenues now in the first quarter here, we ended up with total sales just shy of 25,000,000 compared to 30,000,000 last year or a reduction of almost 5,000,000 here. Cost of materials and inventory is at normalized levels with SEK0.9 million this year compared to SEK1.3 million at the same time last year.

And as you remember from some previous quarters, we had some larger expenses on this one. But over the last three quarters, it’s been normalized now. Our personnel expenses, they are slightly higher this quarter compared to last year with SEK 18,800,000.0 compared to SEK 18,000,000 in the first quarter of twenty twenty four. We have, however, reduced some of our personnel expenses, especially for the Norwegian employees. Our salary our expenses for Norwegian employees are reduced by SEK1.2 million compared to the same period last year.

And this is primarily explained by the downsizing and the closure of the Oslo office that we did in the first quarter of twenty twenty four. You can see that on the other hand, we have increased our expenses for U. S. Personnel for SEK0.5 million, and this is also a part of the commercial transformation and investment we have done in added commercial resources here. Capitalization of projects and new product developments have been part of our statements for the last few years.

And the first quarter this year, we capitalized only NOK 500,000.0 compared to NOK 1,700,000.0 in the same period last year. Hence, there is a difference of NOK1.2 million that is part of this year’s personnel expenses. You can also say part of our personnel expenses are associated with variable remuneration and 2,000,000 are accrued in bonuses and commissions for the first quarter. If this accrual will be paid out, actually it depends on performance and achievement of predefined KPIs throughout the year. And as you might remember, in the fourth quarter last year, we reversed close to NOK 2,000,000 in the fourth quarter as we did not meet all the targets we were aiming for the end of the year.

Other operating expenses are also a little bit up from SEK 8,400,000.0 to SEK 8,900,000.0, and there are some pros and cons in this quarter. Property, plant and equipment was reduced due to the closure of the Oslo office, and there’s also been a reduction in the use of chemicals throughout the quarter here. Our external services are also reduced. And as you might remember, we had the ERP project going on for most of 2024, and we expensed SEK1.5 million on that project in the first quarter of last year, whereas now we expensed SEK0.4 million. Even though the project as such have been disclosed, there’s still a little bit need for support.

And the NOK 400,000.0 we spent on ERP in the first quarter is primarily related to the first half of the quarter here. We spent also 500,000.0 on recruitment. We have still had that recruitment drive ongoing to add commercial resources, and that is, of course, adding an extra expense to us that we didn’t have in the first quarter last year. We have also experienced a small rise in legal costs related to commercial and operational matters with a total of 600,000.0 for the quarter compared to SEK 400,000.0 in the same quarter last year. And as Paul alluded to, we have also increased our spend on marketing, commercial efforts, travels, stands and taking part in conferences are now up as well.

We ended up on SEK1.5 million in the first quarter compared to SEK1.2 million in the same quarter last year. But of course, currency has had an impact on our business as well as we work in a global market and our revenues will of course be impacted by currency fluctuations and our sales are primarily denominated in both U. S. Dollars and in euros. And for the first quarter of this year, ’50 ’8 percent of our revenues was in U.

S. Dollars and 41% was in euros compared to 7327% for all of 2024. Refrigeration in exchange rate that we’ve seen over the last year and especially towards the end of the first quarter this year has had an impact on our profit and loss statement. Based on The U. S.

Dollars and the euros that we had in our bank accounts, this resulted actually in a net loss of SEK0.7 million in the quarter compared to a profit of SEK0.5 million last year. So there is a delta of SEK1.2 million here. And on the other hand, our trade receivables are also impacted by currency fluctuations, and this can also be seen under other operating expenses. And for the first quarter this year, our other operating expenses were actually increased by 500,000.0 due to the strength in krona against the U. S.

Dollar and euro towards the end of the quarter here. At the same time last year, we had a reduction of NOK 600,000.0, leaving us here with a delta of SEK 1,100,000.0. And if we are to adjust our other operating expenses and take out the currency, our expenses would actually have been SEK 200,000.0 lower than the same period last year. With the sales that we talked about now and the expenses that I’ve touched upon as well now, our EBITDA ended up on SEK3.7 million versus SEK2.3 million in the same quarter last year, which is also a slight reduction from what we saw in the fourth quarter this year. And looking at the graph on the left hand side, you can also see that our EBITDA margin ended up on minus 16% as a combination of lower sales, higher expenses and some currency headwinds in this quarter compared to what we’ve seen over the last few quarters.

The cash balance and the changes in cash have been has been fairly stable over the last few quarters. And you see that from the graph here that our cash and short term investments has been around million on a steady base here. Changes in cash and short term investments were negative with SEK 1,300,000.0 in the quarter. And this is explained that we had a cash change of minus SEK 2,300,000.0, but our short term placements in low risk interest mutual funds were actually positive with SEK 1,000,000, leaving us with a net change of SEK 1,300,000.0 here. And with a strong financial position, still a lot of cash in our bank accounts, I would hand it over to Mikael now to round off this presentation before we take on some Q and A.

Michael Arco, CEO, Arcticzymes: Yes. Thank you, Berger and Paul, for giving us further insights in both the commercial activities as well as the financial statements. If we look into 2025 and beyond, then it’s very, very clear to us that the opportunities are still plentiful in a somewhat dynamic macroeconomic environment. What we are seeing is that we are having a lot of great positive dialogues with customers. And we are seeing that the pipeline, as Paul also alluded to, is growing.

But we also have to be absolutely clear on the fact that we still have a lot of ground to cover. We are just tapping into the biomanufacturing nuclease market. Today, the majority of companies out there, they use a conventional nuclease in order to manufacture their viral vectors. SAN is growing. We’ve seen competitors come out also with products that are salt tolerant.

And that has also been an important thing for us in order to ensure that there are more companies that are highlighting the benefits of using salt active nucleases. So we are just starting out in regards to capture more market share in the general nuclease market. I’m pleased with what we have seen in regards to the customer centric transformation. The customer base, as Paul also talked about, is expanding. It’s at an all time high today.

And that also means that we’ve seen early indications that our investments, our strategy in regards to focusing more on getting closer to the customer is paying off. This also means that we, in the future quarters, are going to continue to invest in the organization and also in commercial activities. We believe that this is the right thing to do even though it, on a short term basis, it might have an impact on the profitability. I’m also very pleased to see the CDMO progress that we’ve made, the two platform integrations that have been implemented. And I’m sure that we are going to be able in the future quarters to share some exciting updates with you on how those two partners are progressing in their usage of our enzymes.

We are working on onboarding more CDMOs as we speak. It is an important way for us to reach more customers. If we look at innovation, then we are going to launch our new GMP grade, a new case, the mSAN HQ GMP, targeted for mid-twenty twenty five. And furthermore, we have an RNA restriction enzyme in development. So to round things up, we are still confident in our ability to execute on our strategic priorities and create long term shareholder value.

And with that, I would like to thank you for listening. And now we are going to open up for ten minutes of questions and answers as we have a hard stop at 09:30. And I see we have a lot of questions. So if we do not manage to get around to your questions, please send an e mail to investorartysheims dot com, and then we are going to be able to get back to you. But let’s get it started, Birge.

Berge Schuerbo, CFO, Arcticzymes: Alright. We’ll get it started. Quick question here. How are sales tracking into the first the second quarter now? As we talked about, there’s been high activity levels already in the first quarter.

How are things looking into the second quarter?

Michael Arco, CEO, Arcticzymes: Yes. But that’s a great question. I think I’m going to give that question to you, Paul, to talk a bit about what you’re seeing, not just in terms of absolute numbers, but in terms of activity generally in April 2025.

Paul Blackburn, VP of Sales, Arcticzymes: Absolutely. So I think it’s fair to say that we’ve had an incredible April, a fantastic first month to the quarter, from a revenue point of view. So, what we’re seeing is where we have commercial effort, where we we don’t have a, where we have business development activity, we’re seeing incredible growth, especially in North America, and especially in biomanufacturing. So, we’ve had an incredible April is the is the short answer without getting into the details.

Berge Schuerbo, CFO, Arcticzymes: Okay. You’ve also seen you can see a a a consistent decline within the molecular tools over the last few years. Is what are have you taken some main actions to turn this around? Or what are the explanation behind this reduction?

Michael Arco, CEO, Arcticzymes: Yes. There’s, of course, been a clear focus on developing the biomanufacturing part of the business. We saw and see that we have a unique opportunity within that space. We are a small organization. And in order to capitalize on the largest opportunities, we have had a regulatory run-in regards to developing GMP compliant products.

Now we are turning the page, the campaign that Paul talked about, the DNA breakup campaign that’s targeted at molecular tools customers. And then it’s also very much to do with the fact that the largest customer we have has had a dip in sales during the last quarters. But as mentioned in Paul’s talk, we see that there’s nothing materially that has changed. They are still ordering the same exact enzymes, but we expect to see the next orders from this customer during the second half of Q2. So molecular tools remains an important business area for us.

And as you saw on the strategic priority slide, we are also lining up a new portfolio of R and D projects that we are going to be working on.

Berge Schuerbo, CFO, Arcticzymes: Okay. Thank you. Is it possible to quantify the impact of revenues of the two CMOs, CDMOs that you have enrolled now in the second quarter, Daryl?

Michael Arco, CEO, Arcticzymes: It’s still very early days in regards to that partnership. We know that it’s going to progress very positively over time. The majority of projects that are going to be implemented where our enzyme is going to be implemented at first, that is early stage projects. But as I also alluded to, we actually also now, after having dialogue with one of the CDMOs recently, see the potential of actually going in also in some later stage projects. So it’s going to be very exciting to track that development.

We are seeing that the results that CDMOs, and in general, we, our customer base are getting with our salt active nucleases compared to the dominant conventional nucleases out there are outstanding. Outstanding in terms of yield, outstanding in terms of cost reduction and outstanding in terms of a better safety profile for the patients at the end of the day. And if you look at the main drivers behind increasing the adoption of cell and gene therapy, then it is to lower the manufacturing costs. And our new cases, Salt Lake’s new cases, they tap directly into that trend, directly into that development. And that’s why we are really well positioned for the future development within this space.

Berge Schuerbo, CFO, Arcticzymes: Okay. Here’s a kind of a little bit of a broader question. Coming back to since 2022, you see our revenues has been on a declining trend. Can you reflect a little bit of what’s being done to kind of reverse this trend and kind of the actions that you plan on moving forward? I think you have talked about some about it as well, but

Michael Arco, CEO, Arcticzymes: Yeah. But I think going back to our strategic priorities, that are the main activities that we are taking to turn the trend around. It’s about having the right products, namely having GMP versions of our SAN enzymes. It’s about having the right team. It’s about engaging and understanding our customer base better.

It’s about working with the lead generation. It’s about having the right scientific documentation in place. So all those things, the right products, the right team, the right processes, and that is the core focus of our strategic priorities. It is a business where things take time, as Paul alluded to. I’ve been in the business now one point five years.

And as you can see, illustrated by the process development with one customer. Once you get in, it’s a two year project before you actually start seeing significant revenues. But we are on the right track. As mentioned, we have started on this journey. We are on the train.

We have left the platform, and we are getting closer and closer to being able to also show a tangible positive revenue development.

Berge Schuerbo, CFO, Arcticzymes: You talked about the increased commercial team here. Can you say a little bit about kind of the internal KPI settings per team member to drive growth here in the organization on commercial?

Michael Arco, CEO, Arcticzymes: That’s a question for you, Paul.

Paul Blackburn, VP of Sales, Arcticzymes: Yeah. Absolutely. I mean, of course, beyond that’s something that we’ve really incentivized the the entire commercial team to to do in 2025 is not just focus on the immediate revenues, important as they are, but we’ve built into their commission scheme a number of factors. New customer intake, quality opportunities created, customer retention, number of supported customer trials, so feedback on samples, and then additionally, forecast accuracy. So those factors are something that are are critically important, to to drive, the right business, to drive the right behaviors, and they’re things that we’ve incentivized the the entire commercial team on.

Berge Schuerbo, CFO, Arcticzymes: Okay. And then we have kind of a little bit regarding the global situation we are around. And if Trump adds, a lot of tariffs on our products tomorrow here, what would we do? And would we consider moving part of our production to The U. S?

Is that a possible solution?

Michael Arco, CEO, Arcticzymes: It’s at least not a short term solution. But I think, Berger, I’m going to give that question to yourself, what impact on the business you think that tariffs might have.

Berge Schuerbo, CFO, Arcticzymes: And I think we are, of course, monitoring this situation. And currently, there is not a huge risk, but the risk is definitely there in future here and we are not really sure what’s going to happen. We are continue to export our products to The US like we always did and we haven’t seen a major increase or any kind of a major upset in the way we have done our business. But is something that we need to monitor in the following quarters. And we are considering mitigating actions if there should be a major impact on our, you can see, on the way we import our products to The U.

S. Here. But we have not considered to move production to The U. S. At this point in time here.

Michael Arco, CEO, Arcticzymes: And I think we have to end now, unfortunately. I know that there’s a lot of questions that we haven’t been able to answer. But again, please, if you don’t feel you have got an answer to your question, write an e mail, investorarteximes dot com, and then we will get back to you. It’s important that your questions are answered. And with that, thanks a lot.

Thanks for your attention. Thanks for your support, and we look forward to continuing to give you updates in the

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