Earnings call transcript: BICO Group Q1 2025 Revenue Misses Forecast

BICO Group AB (market cap: $276.4 million) reported its Q1 2025 earnings, revealing a revenue miss that led to a 4.21% drop in its stock price. The company posted $389 million in sales, falling short of the $448.4 million forecast. According to InvestingPro analysis, the stock appears undervalued, with multiple ProTips suggesting significant potential despite recent challenges. InvestingPro subscribers can access detailed valuation metrics and 10 exclusive ProTips for deeper insights. With a negative organic growth of 19% and an adjusted EBITDA of negative $12 million, investor sentiment turned moderately negative.

Key Takeaways

• BICO Group’s Q1 2025 revenue missed expectations by 13.25%.
• The stock price fell 4.21% following the earnings release.
• The company reported strong cash reserves of $684 million.
• Operational shifts include moving manufacturing out of China.
• North American sales were impacted by previous large orders.

Company Performance

BICO Group’s performance in Q1 2025 highlights several operational challenges, including a significant revenue shortfall and negative organic growth. With a beta of 2.78, the stock shows higher volatility than the market average. The company has been restructuring its operations by reducing its business segments and moving manufacturing out of China, aiming for greater efficiency. Despite challenges, BICO maintains a strong gross profit margin of 51.75% and a healthy current ratio of 3.25x, indicating solid short-term liquidity. Despite these efforts, sales in North America were weaker due to the aftereffects of previous large orders, and longer sales cycles in the pharma sector have also posed challenges.

Financial Highlights

• Revenue: $389 million, down 13.25% from the forecast.
• Adjusted EBITDA: -$12 million, reflecting a negative 3% margin.
• Cash flow from operating activities: $77 million.
• Cash reserves: $684 million by the end of Q1 2025.

Earnings vs. Forecast

BICO Group’s Q1 2025 revenue of $389 million missed the forecast of $448.4 million by 13.25%. The negative organic growth of 19% further exacerbated the financial performance challenges, indicating a need for strategic adjustments to meet market expectations.

Market Reaction

Following the earnings announcement, BICO Group’s stock dropped 4.21% to $39.42, reflecting investor disappointment. The stock’s movement towards its 52-week low suggests a cautious outlook from investors, driven by the missed revenue forecast and ongoing operational challenges.

Outlook & Guidance

Looking forward, BICO Group expects to shift to a net cash position by Q2 2025. The company is focusing on expanding its presence in Asia and India and aims to return its working capital to approximately 20% of sales. InvestingPro’s Financial Health Score of 2.89 (rated as "GOOD") suggests the company maintains reasonable financial stability despite current headwinds. For comprehensive analysis, including detailed financial metrics and growth projections, investors can access the full Pro Research Report, available exclusively to InvestingPro subscribers. Despite the current challenges, BICO is maintaining its commitment to innovation and operational efficiency.

Executive Commentary

CEO Maria Fors emphasized the company’s readiness for future scenarios, stating, "We have since before adjusted our manufacturing sites to have readiness for future scenarios." CFO Jakob Fortenburg reiterated the focus on shareholder value, saying, "We always consider how we can maximize shareholder value."

Risks and Challenges

• Continued negative organic growth and missed revenue forecasts.
• Longer sales cycles in the pharmaceutical sector.
• Reduced NIH funding impacting academic sales.
• Uncertain macroeconomic dynamics affecting global operations.
• The need to successfully integrate operational changes and maintain competitiveness.

Q&A

During the earnings call, analysts inquired about BICO’s collaboration with Sartorius, confirming its continuity. Questions also focused on the significant negative organic growth and the company’s strategies to address longer sales cycles in the pharma industry.

Full transcript - BICO Group AB (BICO) Q1 2025:

Maria Fors, President and CEO, BICO: and welcome to BICO’s earnings call where we will present the first quarter of twenty twenty five. My name is Maria Fors, and I’m the president and CEO of Baiko. And I will, together with our CFO, Jakob Fortenburg, present the report. Today’s agenda is divided into three sections before the q and a. We will begin to summarize the first quarter and comment on the market development.

We will then focus on the group’s financial performance, followed by a presentation of how our three business areas have performed during quarter one. These three sections will be in listening only mode. After the presentation, we invite you to participate in the q and a. The earnings call host will then be back with further instructions. I will start to summarize the first quarter of twenty five and will begin to comment on significant events and business highlights.

Quarter one is a seasonally weak quarter for BAICO. Business areas life science solutions and bioprinting showed growth, thanks to commercial as well as operational excellence, primarily in selling in Sionian. While our project business in lab automation was impacted by fewer project starts and closures in combination with a high comparison quarter. Like many of our peers, we saw continued uncertain macroeconomic dynamics, for example, changes to US policy focus and reduced NIH funding, which resulted in slower academic purchases. There were also industry cutbacks in CapEx budgets and the potential tariffs instilled further insecurity in the market.

To stay proactive, we have established a global tariff task force to ensure preparedness. We have also reduced our debt further by repurchase of convertible bonds in February to total nominal amount of 276,000,000 Swedish kronors. After the end of the quarter, we entered into an agreement to divest Mattek and Visikol, which Jakob will present more about later in this call. Due to the divestment, we expect to move into a net cat cash position during quarter two twenty twenty five. Let’s now move on to the key quarter one highlights.

On a high level, here’s the summary of quarter one twenty five. Sales amounted to $389,000,000, corresponding to negative organic growth of 19%. Despite the decline in sales, adjusted EBITDA was in line with quarter one twenty twenty four and amounted to negative 12,000,000, corresponding to a margin of negative 3%. This is due to the positive development in Life Science Solutions and bioprinting. The cash flow from operating activities was 77,000,000, and the net working capital per last twelve months sales amounted to 12%, which can be explained by the cash collection from quarter four sales in 2024 and less sales in quarter one.

If we move on to look at the market development sales per geography, as you can see on this slide, sales in North America are lower than last year, and this is attributable to the large Biosphere order won in late twenty three, which created a growth spike in quarter one twenty four. This impacted the sales distribution for Europe and Asia in quarter one twenty four. Asia is now up significantly compared to last year, many thanks to to Sellink. In addition, we are focusing even more on our commercial activities. And to name a few examples, we are accelerating our commercial initiatives to gain market shares in markets such as Asia and India and further strengthening our presence in Europe.

We’re also working on one focus area from our updated strategy, and that is the shift in focus to pharma and biotech customers at the expense of academia. I’ve already mentioned the continued uncertain macro dynamics and that we have established a tariff task force. Let me give you some more details on the measures we are taking in this volatile macro environment. We have since before adjusted our manufacturing sites to have readiness for future scenarios. For instance, we have moved a majority of the manufacturing out of China as well as adjusted our logistic routes.

Our outsourcing strategy presented last fall considers supplies with a global footprint, enabling us to have flexibility to produce in Europe or in The US. We have also in house manufacturing in The US. We’re working diligently with supply chain adjustments, allowing greater proximity to reduce or eliminate tariffs and to improve our logistic cost effects. I will now hand over to Jakob to present the divestment of Matic and Visicol.

Jakob Fortenburg, CFO, BICO: Thank you, Maria, and I will summarize the divestment of Matic and Visicol announced earlier this month on April 4. Mattek is a market leading provider of three d microtissue models and primary cells for in vitro testing, and VisiCol specializes in advanced imaging and digital pathology. The divestment follows our updated strategy with a focus on lab automation and selected workflows. The proceeds from the transaction will be used to strengthen BiCO’s balance sheet and further accelerate the growth agenda. Both companies were acquired in 2021, and in 2024, Visicol was integrated into Matic.

Sartorius will acquire a % of the shares in both Matic and Visicol for 80,000,000 US dollars on a cash and debt free basis, corresponding to a 2024 sales multiple of 3.7 x and adjusted EBITDA multiple of 15.3 x. The closing of the transaction is subject to customary regulatory approvals expected to be obtained during q two twenty twenty five. The effects on enterprise value in terms of net debt, working capital and other adjustments are expected to be limited. Mattek and Visicom will be treated as discontinued operations from Q2 twenty twenty five in Vicor’s financial reporting subject to timing of closing. The expected net cash proceeds in combination with our current cash position of $684,000,000 will be used to resolve the outstanding convertible bond, which matures in March 2026 as well as support the acceleration of Baikon’s growth agenda.

The divestment also means that we will report in new segments from q two. We are moving from the current structure with three business areas into a structure with two reporting areas, lab automation and life science solutions. This will further enable us to execute on our strategy and support us on our journey to be the first choice lab automation partner and provider of selected workflows to pharma and biotech customers. The updated strategy and the new business area structure have also affected our operating model, which Maria will present on the next slide.

Maria Fors, President and CEO, BICO: The operating model means that we have moved from a decentralized structure into an operationally integrated group. With this in place, we will achieve improved commercial as well as operational efficiencies. For example, we have implemented global harmonized functions for HR, marketing, and IT to name a few. In addition, we have just launched a project to centralize our finance functions. With the new operating model, we will hence strengthen our commercial capabilities, improve synergies and eliminate cost duplication.

We will now move on to the second section about our financial performance, and I will hand over back to Jakob again.

Jakob Fortenburg, CFO, BICO: Thank you, Maria. Before presenting Q1 twenty twenty five financials, I would like to highlight that all numbers presented are in 1,000,000. Sales in Q1, our seasonally softest quarter, amounted to NOK $389,000,000 and generated negative sales growth of 17% and a negative organic growth of 19%. Life Science Solutions and bioprinting showed growth, while we saw negative growth in lab automation due to fewer project starts and closures as well as a strong Q1 in 2024. Gross margin was 54% and improvements were related to the product mix, one offs in Q1 twenty twenty four as well as operational excellence initiatives.

And if we move on to profitability, adjusted EBITDA amounted to negative 12,000,000 in Q1, corresponding to a margin of negative 3%. Despite the decline in sales, adjusted EBITDA was in line with Q1 twenty twenty four due to the positive development in Life Science Solutions and bioprinting. However, the positive margin expansion that we saw in Q4 did not materialize in Q1, primarily due to the decline in lab automation as well as seasonal effects. And if we move on to the next slide and our cash flow. Cash flow from operating activities for the quarter amounted to 77,000,000 and primarily related to collection of accounts receivables from seasonally high sales in Q4.

The effects of changes in working capital amounted to $126,000,000 in the first quarter. Out of this, 165,000,000 was related to a decrease in operating receivables. Inventories increased by 18,000,000 and operating liabilities decreased by 20,000,000. Investments in tangible CapEx as well as intangible CapEx in the quarter amounted to $3,000,000 respectively. Total cash flow during Q1 amounted to negative $29,000,000 related primarily to the repurchase of convertible bonds in February 2025, amounting to $276,000,000.

In connection to this, I would also comment on Vicor’s cash position. We have made two buybacks in our convertible bond to a nominal amount of 118,000,000 in November 2024 and 276,000,000 in February 2025. Post buybacks, the convertible debt now amounts to nominal 1,106,000,000. Cash reserves by the end of Q1 twenty twenty five were $684,000,000. The closing of the divestment of Matic and Visicol for 80,000,000 US dollars is expected to take place during q two twenty twenty five and is not included in the numbers just mentioned.

The proceeds from the transaction will be used to resolve the outstanding convertible bond, which matures in March 2026. This means that Baiko will move into a net cash position during q two twenty twenty five as mentioned by Maria. The proceeds will also, as mentioned earlier, be used to support the acceleration of our growth agenda. Between q one twenty twenty four and q one twenty twenty five, net working capital has decreased by 175,000,000 from $4.00 2,000,000 to $227,000,000. In percentage to last twelve month sales, this corresponds to a decrease from 20 to 12%, confirming that the operational excellence actions implemented and executed during 2023 and 2024 to reduce working capital has been successful.

In terms of the development compared to q four twenty twenty four, the decrease is, as mentioned on the previous slide, primarily related to accounts receivables due to lower sales in Q1, but also good collection during the quarter. From Q2 and onwards, we expect working capital in relation to sales to be in line with previous quarters of around 20% again. Now back to Maria for performance per business area.

Maria Fors, President and CEO, BICO: Thank you, Jakob, and I will guide you through our business areas performance and begin with lab automation. The business area was impacted by fewer project starts and closures, as well as a tough comparable quarter generated by the large order won by Bioshero in late twenty twenty three, and that generated a lot of revenue in quarter one twenty twenty four. This affected both sales and profitability levels. The project nature of lab automation business results in significant revenue variations between the quarters. Sales amounted to 94,000,000, which resulted in negative organic growth of 58% and adjusted EBITDA negative 3,000,000, corresponding to a negative adjusted EBITDA margin of 3%.

Bicer is one of the few actors who can provide complex and integrated projects, and those projects involve changes during the project and requires flexibility, which can lead to delays. Actions have been taken to strengthen operations management, including project management. In addition, new commercial concepts to better balance the project portfolio have also been developed, and this will efficiently cater to customer needs with more standardized solutions and hence shorter lead times. The underlying demand for lab automation continues to be strong, although the sales cycles for larger orders from pharma are currently longer due to the macro environment. For the first quarter of twenty twenty five for Life Science Solutions, we saw a positive uptick in diagnostics, while we saw declines in sales for some companies affected by tighter CapEx budgets and reluctance to invest primarily in academia in The US, as also reported previously by our peers.

This mixed performance resulted in a revenue of 191,000,000 and an organic growth of 4% compared with quarter one twenty twenty four. The business areas adjusted EBITDA was negative 11,000,000 and a negative adjusted EBITDA margin of 6%. However, an improvement compared to quarter one twenty twenty four with 4.1 percentage points. Our actions during the past year to decrease the cost base and strengthen the commercial offering for Saienion have given positive results, which is pleasing to see. And if we move on to our third business area, bioprinting.

The turnaround activities in selling have had positive effects, and the business area bioprinting generated a revenue of hundred and 5,000,000, resulting in an organic growth of 41%. Selling was the largest growth contributor, and the business area’s consumables offering continued to perform well. A lower cost base as well as one offs in quarter one twenty twenty four contributed to an adjusted EBITDA of 15,000,000, which corresponds to an adjusted EBITDA margin of 14%. And as Jakob had commented before, following closing of the divestment, the remaining assets in the business area bioprinting, CellLink and advanced biometrics will transfer into business area life science solutions. And consequently, starting from quarter two twenty twenty five, Baiko will report in two reporting segments, lab automation and life science solutions.

So to summarize, in the past months, we have an updated strategy. We have launched a new operating model, and we have significantly strengthened our balance sheet by the divestment of NANESCRIPE as well as MATIC and VisiCol. And we also have a working capital in line with industry standards. And this was our final slide before the q and a. I will now hand over to our earnings call host for further instructions.

Earnings Call Host: The next question comes from Ulrich Trotner from Carnegie. Please go ahead.

Ulrich Trotner, Analyst, Carnegie: Good morning, Maria and Jacob. And a few questions on my end. And I’ll start with lab automation because in my view, that’s the parts deviating from my view. Can you give us some sort of highlights here throughout the quarter, if you’re seeing more sort of projects being planned for the future, but not yet sort of initiated or sort of concluded? As well as can you comment anything about your belief in terms of maintaining market share in in advanced lab automation?

That would be my first question, please.

Maria Fors, President and CEO, BICO: When it comes to to future projects to start, as you know, Ulrik, we never guide in the future. But I can I can say so much that in the projects that when we are bidding for different intenders, etcetera, we usually win in the tenders and also in different negotiations? There is a continuous strong underlying demand in lab automation. So, I think that’s the biggest conclusions in when it comes to lab automation.

Ulrich Trotner, Analyst, Carnegie: Okay. Great. And now with the divestment of Mabtec and well, obviously, I understand the logic behind it. You’re moving to a net cash position. But does this in terms on like, you’re selling to Sartorius.

Does this in any way impact your commercial collaboration that you you have with Sartorius in in the APAC region? No.

Maria Fors, President and CEO, BICO: It doesn’t. We have a continued close collaboration with Sartorius, mainly in the bioprinting field, but also in lab automation and in digitalization. And and at the recent SLAS Congress in January in San Diego, which is the Super Bowl of lab automation, we announced another collaboration area with with Sartorius, gave fruit. And I believe you have an example of that in our report as well. So we continue to work with Sartorius as as before, and they are a close collaboration partner, which was also stated in the press release announcing the the divestment of Matek and Visicom.

Ulrich Trotner, Analyst, Carnegie: Great. And last question on my end. You obviously now have a net cash position. Are you done in terms of optimizing the companies in your portfolio, or is it still sort of maturing as you go along, or are you happy with what you currently are operating at?

Jakob Fortenburg, CFO, BICO: I mean, we’re happy what we’re currently operating at. We’re, of course, very happy with our portfolio. But with that said, we we always consider how we can maximize shareholder value. But with that said, we’re we’re currently very happy with our portfolio assets.

Ulrich Trotner, Analyst, Carnegie: Okay. Great. That was all questions on my end, and I’ll get back into the queue. Thank you.

Earnings Call Host: Question comes from Richard Anderkrins from Handelsbanken. Please go ahead.

Richard Anderkrins, Analyst, Handelsbanken: Good morning. Thank you for taking my questions. So first one, maybe I know you’ve provided some information on Page 12 in the report, but maybe you could add, just so we don’t get it wrong, what the growth organic growth in the quarter, excluding Mattek and Wiskol, just trying to get a sense of the growth of the business sort of going concern or the remaining parts of the business. Thank you.

Jakob Fortenburg, CFO, BICO: So you want sorry, Richard. I’m not not sure I quite follow. So which numbers is it that you want to understand? Is it bioprinting excluding bioprinting?

Richard Anderkrins, Analyst, Handelsbanken: Yeah. Or or Maybe maybe maybe bioprinting and group would be helpful

Jakob Fortenburg, CFO, BICO: Yeah. If possible. Yeah. I I can provide you with those figures following the following the call, but I don’t have the figures in front of me right now.

Richard Anderkrins, Analyst, Handelsbanken: Okay. Cool. And I was also curious a little bit. We’re seeing a lot of headlines about reshoring or expanding pharma presence in The U. S.

Recently. Is that mainly relating to manufacturing? Or are you seeing any increase in the pipeline or the sales funnel for BioSero in lab automation based on increased investment activity into The U. S, where I know that BioSero has strong position?

Maria Fors, President and CEO, BICO: When it comes to pharma sales, BioSerra have a very strong footprint already, working with all top 20 pharma companies in the world. And usually, these pharma companies are global. And as we have successful projects in the past, they usually come back and want to have further projects. Whether those are in The US or in Europe or in Asia, that’s different depending on the on the project. So it’s difficult to say where the growth will happen.

It all depends on where they want to place their new updated automated labs.

Richard Anderkrins, Analyst, Handelsbanken: Okay. So no no real tangible change based on recent announcement of of, US, sort of investment in footprint then?

Maria Fors, President and CEO, BICO: No. I I wouldn’t say that. I mean, we have seen announcements from pharma companies that they will increase their presence in in The US, and other pharma companies have said that they will increase their presence in Europe. So as long as we have all the pharma companies as our customers, we will put our projects in the geographies where they want to have them.

Richard Anderkrins, Analyst, Handelsbanken: All right. Also based on recent FDA communication about accelerating move away from animal based testing to alternative testing models. Obviously, now you’re divesting Mattek and Viskol, but the remaining part with Cell Link and Advanced Biometrics. Maybe you could try to elaborate on how you see that opportunity. Have you seen an acceleration already in the funnel or pipeline?

Or how should we, on the outside, think about that commercial opportunity based on this? Is it do you think we should expect acceleration here in 2025? Or just help us put that in perspective, I think that would be interesting. Thank you.

Maria Fors, President and CEO, BICO: Yes. Thank you for that question, Likjad. I think when it comes to the FDA, there has been a move towards less use of animal testing for quite some time. And the recent announcement was that they will allow non animal testing for the production of monoclonal antibodies. And and we are serving our customers to to in bioprinting with both cell link and advanced biometrics.

And and hence, we will be continued to be well placed in that drive towards less animal testing. Whether that will materialize already in 2025 or not, that’s difficult to say, but it’s positive that the direction is in the right, order towards less animal testing.

Richard Anderkrins, Analyst, Handelsbanken: Okay. And a final question. Would be interesting, did we see positive EBITDA or positive earnings from both Cell Link and Cyanion in the quarter here?

Jakob Fortenburg, CFO, BICO: We did, yes.

Earnings Call Host: Okay. Perfect. Thanks for

Jakob Fortenburg, CFO, BICO: taking I can come back to your first question, Rico, because you you you caught me there. But on a quarterly basis, excluding Matic, for the total group, it was negative 20%. And on an LTM basis, it was negative nine and

Ulrich Trotner, Analyst, Carnegie: a half

Jakob Fortenburg, CFO, BICO: percent for the group. And then if excluding Matic from bioprinting, the growth, which which is basically done in selling, was 130%, but that’s off a very low base in q one twenty twenty four. And, also, the percentage figures comes out very high. So and that’s due to sort of quite limited absolute numbers in q one, which is our seasonally weakest, quarter.

Earnings Call Host: Okay. Very clear. Thanks for that, Jacob. Thank you. The next question comes from Ludwig Lundgren from Nordea.

Ludwig Lundgren, Analyst, Nordea: Hi, Maria and Jakob. Thank you for taking my questions. So on the market development in Life Science Solutions, you have seen some reluctance to invest in instruments from academia in The U. S. Due to the NIH funding uncertainty.

But can you elaborate a bit on the phasing of this during the quarter or if you saw any normalization towards the end of the quarter?

Maria Fors, President and CEO, BICO: I think there has not been any specific effects. I mean, the the uncertainty was there early in the quarter with the, the NIH funding insecurity that we commented already after the quarter four report. And, of course, the the effect of the tariffs didn’t hit the market until early, quarter two. So it’s rather the indirect effects with the security in the market that that have instilled, but we didn’t see any specific quarterly effects. Usually, we have seasonal effects, as you know, between the quarters, but always also within the quarters.

The last month is always the strongest. But

Jakob Fortenburg, CFO, BICO: I wouldn’t say that the sentiment has changed during the quarters, or the sentiment has been roughly the same, and it it’s been sort of a a high level of uncertainty related to academia and, of course, then more specifically, NIH funding on top of uncertainty related to macroeconomics and tariffs, etcetera. Okay.

Ludwig Lundgren, Analyst, Nordea: Very clear. Thanks. And then also on LSS, you mentioned diagnostics showing strength or relative strength at least. I wonder what type of laboratories are driving this and maybe what type of applications, in the laboratories that are the main drivers.

Maria Fors, President and CEO, BICO: The the uptick in diagnostic was mainly, that Cyanin comes back, and they are the, company within the life science solutions that are mainly catering to the diagnostic segment.

Ludwig Lundgren, Analyst, Nordea: Okay. Great. And then a final question from my side. You highlight that you have moved the majority of the manufacturing out of China, but do you currently have any goods that are sent to The US from China and or to China from The US? And if so, if you have a percentage of this, would be good to have.

Maria Fors, President and CEO, BICO: No. I don’t I I don’t have a percentage to provide. I will not give you those numbers. But given the movements we saw in the market when Trump took office last time around, then we we changed our manufacturing footprint in China to be prepared. So we now have an opportunity to manufacture in The US with The US market in Europe or in Asia, depending on where the customers are.

So with an outsourced production, we have that flexibility, but we also have in house production in The US. And you can, of course, reroute goods when needed.

Ludwig Lundgren, Analyst, Nordea: Okay. Thank you very much.

Earnings Call Host: Thank you.

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