Earnings call transcript: Polygiene Q1 2025 sees revenue growth and stock dip

Polygiene AB reported an 18% increase in its Q1 2025 revenue, rising from 35.1 million SEK to 41.5 million SEK. Despite this growth, the company’s gross margin slightly declined, and its stock price dropped by 2.07% in early trading. The company announced its first-ever dividend of 0.27 SEK per share, highlighting confidence in its financial position. However, a negative cash flow and a decrease in EBITDA compared to last year present challenges. According to InvestingPro analysis, the company maintains a "Good" financial health score, with strong fundamentals including a current ratio of 4.37x, indicating robust short-term liquidity. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued.

Key Takeaways

• Revenue grew by 18% YoY to 41.5 million SEK.
• Stock price fell by 2.07% following the earnings release.
• First-ever dividend proposed at 0.27 SEK per share.
• Introduction of the "Stay Cool" technology, expected to drive future sales.
• Gross margin decreased to 67.4% from 68.7% last year.

Company Performance

Polygiene’s Q1 2025 performance showed significant revenue growth, driven by increased sales in the textile segment, particularly in the APAC and EMEA regions. However, the construction sector faced challenges with repeat orders. The company expanded its workforce and enhanced its product development capabilities, reflecting a strategic focus on innovation and market expansion.

Financial Highlights

• Revenue: 41.5 million SEK, up 18% YoY.
• Gross Margin: 67.4%, down from 68.7% last year.
• EBITDA: 3.1 million SEK, compared to 4.8 million SEK last year.
• Cash Position: 61.9 million SEK, up from 48.9 million SEK.
• Negative Cash Flow: 4.1 million SEK, compared to a positive 2.5 million SEK last year.

Outlook & Guidance

Polygiene anticipates continued growth throughout 2025, with expectations of positive full-year cash flow. The "Stay Cool" technology is projected to become a significant revenue driver. The company plans to maintain its cost base while expanding sales, reflecting a balanced approach to growth and operational efficiency.

Executive Commentary

CEO Ulrike Bjork highlighted the potential of the "Stay Cool" technology, stating, "We believe that this could be a very, very big part of our sales moving forward." Bjork also addressed concerns about potential import tariffs, emphasizing, "We have a global distribution setup, and that could mitigate the risk."

Risks and Challenges

• Declining gross margin could pressure profitability.
• Negative cash flow may impact short-term financial flexibility.
• Challenges in the construction sector could affect revenue growth.
• Potential tariff risks require careful management of global distribution.
• Competition in the textile industry remains intense, necessitating ongoing innovation.

Polygiene’s Q1 2025 results reflect a company in transition, balancing revenue growth with operational challenges. The market’s initial reaction suggests investor caution, but strategic initiatives like the "Stay Cool" technology offer promising future prospects.

Full transcript - Polygiene AB (POLYG) Q1 2025:

Ulrike Bjork, CEO, Polygiene Group: Good morning, and welcome to this presentation of Polidine Group’s First Quarter. I am Reike Bjork, and I am the CEO of the group.

Niklas Lomstedt, CFO, Polygiene Group: And I’m Niklas Lomstedt, and I am the CFO.

Ulrike Bjork, CEO, Polygiene Group: Yes. So I would like to summarize the quarter. I’m very happy with this result. Coming out from 2024 with a growth of almost 40%, we were not expected that we can continue to grow in these high numbers. So with 18% growth, I’m really confident that this year will continue to be successful as 2024.

So we saw continuous growth compared to last year. And as I said, that was really, really good to see that we can continue to grow. We know that the first quarter is always a smaller quarter because of the Chinese New Year. And the period was impacted by onetime expenses that Nicholas will explain later on. We also introduced new technologies both in Oligene and in Admester.

And we also had some discussions around the import tariffs and the volatile currency markets that I will just talk a little bit about in the end. And then the board have proposed to pay out a dividend to the shareholders for the first time in Polygon’s history. And the proposed policy is that we will pay back 40% of the result after tax, and that resulted in SEK 0.05 per share for 2024. However, the Board also decided to propose an additional onetime dividend payout of SEK0.22, which amount to SEK0.27 per share. And this will be decided on the AGM in two weeks.

And then we’ve been out on the first investor road trip in Europe. It was the first part of two, and we think that this year will be a year where we will continue to approach the investors. We need to attract more shareholders, and we have planned another leg in later in August year.

Niklas Lomstedt, CFO, Polygiene Group: If we then take a take a look on the q one financials, on a pretty high level, as Ulrike said, we had the growth of 18% from 35.1 to 41.5. We have a gross margin of 67.4 versus 68.7. We have operating cost of 22.4 versus 18.1. But I think it’s important to note that q one last year was really low. If you would take an average quarterly cost for for the full year, that will be 21.3.

EBITDA was 3.1 versus 4.8. In this year, we have an FX impact of minus 1.4. EBIT was 1.6 versus 3.3. The cash flow was negative with minus 4.1 versus a positive of 2.5 in last quarter last year first quarter. In this year, we had the bonus payout of 3,000,000 SEK.

And then also, we had some sales end of the quarter due to the early Chinese year with the air flights, and then we have shorter payment terms. So in a normal case, those would have fallen to to q one and not in in q four. Now q four was extremely strong, but it should have been in normal cases, that would have fallen to to q one. And at the end of the quarter, we had the cash of 61.9 versus 48.9. If we then look a little bit more in detail on the sales side, as we started, we are up 18%.

And in that increase, we see a positive FX impact of 2%. If you look at the shares of the sales, Polygiene increased with almost 42%, while AdMaster was flat. And then, of course, the the that will have an effect that the Polygiene share of the total will increase then from 45 to 54%. This will also reflect in the sales we have per g per region. As AdMaster is is really strong and have a big big big part of the sales are in EMEA.

The increase in EMEA was fairly fairly small even if we saw a big increase in EMEA for for PolyJet. And then on the same time, if you look at Americas and APAC, we saw a bigger increase there because there is very much related to the sales of Poligi products. And then some details. As we said, the gross margin, 67.4 versus 68.7, is driven by by a sales mix and the FX impact versus last year. As we said, the cost has gone up if you compare quarters to quarters.

It’s not so much if you compare the the average. But if you look at at this year versus last year, we have a we have cost per company meeting that in ’24 was the second half. This year is gonna be the sec first half. We have much more customer testing and customer product development. We had some legal cost for for setting up agreements.

And as Luca said, we have spent quite a lot and invested a lot in in the higher activities. And versus q one last year, we have five more people. EBITDA, as we said, 3.1 versus 4.8, but this year, we have a negative FX impact of 1.4. EBITDA, 1.6 versus 3.3. And the cash flow, the negative part was then explained by the bonus and the payments.

And we had a strong cash of 61.9. And and as we said earlier in the presentation, we are proposing a dividend of 0.27 or SEK 9,800,000.0, thus proposed for the annual meeting eighth of May, and the payments will be done into installment one in May and one in Q3.

Ulrike Bjork, CEO, Polygiene Group: K. Thank you, Nicolas. And, now let me just go into more details what happened in Polygiene and what happened in AdMaster during the quarter. Starting with Polygy, we had a great momentum in 2024, and I would say it continues into 2025. As Niklas said, strong growth, 42% in this area.

And as I also mentioned, the q one is historically a lower quarter due to the Chinese New Year, where we lose around three weeks of production. And I checked back ten years in the history to see how much the q one normal is of the full year, and around 21 to 22% is, normally the share of the q one in the full year. Polydene share of sales is now 54 percent, while it was last year around fifty fifty. But as Polydyn had a great momentum now, it has increased the total share of the sales. And the sales are mainly driven from EMEA, who had a really strong growth this quarter, But also APAC showed a growth, and APAC is the biggest region in the textile side.

If you go back two years, it’s always been EMEA, but APAC driven by China activities has been in the lead now for being the biggest region in the textile side. The growth was mainly driven by existing customers, but we also signed up some new brand partners. We saw a new customer in Turkey with a quite big order, and we also have seen some new brands onboarded in Europe this this period. And we also saw a lot of successful brand campaigns during this period. For instance, we have this Cube, which is a German market leader in the bike industry, who launched this protection gear for mountain biking.

And that launch was made together with Cube and had a really, really successful reach. And this is the strength of working with Pologee that we can support in these sell through activities. We also are onboarding a new sales agent in China. We have seen the great success what the agents have been doing in US the last six months. So now we actually onboarded a a sales agent from the same group as the one we have in US, and they will start here in q two.

And then, of course, the the biggest news from the Polygiene side was the successful launch of the highly demanded technology, Stay Cool. And I will just explain a little bit what this technology is and what we see potentially what this could lead to in the business. So stay cool is the moisture activated cooling technology. It can lower the temperature up to three degrees, on a fabric, which give you a cooling sensation while wearing these garments. We made a global launch in March, April.

We had the introduction at big trade shows, in Munich and in Portland, US and in Shanghai, in China. And, there have been a massive interest from both new and existing customers. And this is a technology that exists already out there. Many of our brand partners already use this. So it’s a very easy switch from, another supplier to Polygiene since we’re already working with these customers on the State Fresh.

And good test results, we are working on the certificates. They got approval, the blue sign, the good text, all these necessary certificates. It’s in the process. And this is a nonregulated technology, which means that we don’t have to follow any special regulations for these kind of technologies, which make it much much faster and also easy for the brand partner to accept. And we have products shipped out to our distributors, and trials are already starting as we speak.

And we expect that this could generate sales already in twenty twenty twenty twenty five, depending on which customers and which collections they choose. So this is really exciting. We believe that this could be a very, very big part of our sales moving forward the coming years. And I also would just give a short update on Shedguard. I have promised before that we will have results ready by now, but it is delayed.

So I don’t have any results from phase two today. It is expected any day. So as soon as we know more, we will let you know. But the Shed Guard is an innovation project that we started in ’2 in 2024, and it’s a technology that can reduce microfiber shedding and to protect clothes from peeling, which can prolong the lifetime. So this fits perfectly with the Polygiene portfolio.

And, there are some small updates on the project. We had the fabrics treated from phase one. We had sent it back to the partners who are trialing with us, and they have approved the hand fill, which is a very good hurdle to to overcome because we were a little bit afraid that the hand fill could be a deal breaker for some brands, but they have actually accepted that the hand fill is not changing that much. And as I said, we’re waiting for the phase two results. Any day, we will have them ready.

And we also need to find out what is the good results, because we know we had really good results in previous trials, but we need to have those results consistently good. And that is the challenge here. Why do we get so different results? And we also need to find out what the brands believe is a good result. Is the 15% shedding, less shedding okay to launch, or do they want to have 30%?

So this is something we find out with the partners we are working on this project with. And good news is that we have, new brands coming to us and say, we would like to trial, and we say it’s not ready yet. But they say, it doesn’t matter. We would like to trial. We know it’s innovation project.

We know it could fail, but we would love to to try. And this is customers in both Europe and in Japan. And, we actually think it’s a good idea to let them try because if they are convinced, it’s much faster than go through the mills and the and the distributors. So we are gonna go into new trials with specific brands that are not in the initial phase one and two. And then we’re gonna have Manchester University visiting us in Malmo.

So the project is absolutely still alive, and I don’t expect any sales in 2025. But I’m sure we we will get something ready, to present to you, latest in the q two report. Then moving into Atlaster for the first quarter. As Nicolas said before, it’s flat versus last year, and that could be alarming, but it’s not. This is according to planned sales.

And it’s because some of the call off orders we have, we know that they will hit later this year instead of the q one like they did last year. So we are still confident that AdMaster will continue to grow in 2025. We saw a slow start, but a very strong recovery in March. So March was actually the same amount of sales that we had both in January and February together. We also know that there is a challenge in the construction sector, which is one of the biggest segment in AdMaster.

We have a lot of flooring companies, and they have been struggling a little bit with the repeating orders. So we are following that very closely. EMEA is the largest region, 67%. And last year, we had 70%, so it’s still the biggest region. But we are continues to try to develop business in China and in The US even more in the future because we believe there is a big potential in this market.

BioMaster US, the distributor we acquired a couple of years ago, they are continuing to show strong growth. Even if the numbers are still small, we saw almost like a double sales in the q one this year. So it is positive, and we hope that it will continue to to grow. Advanced also expand the product portfolio with two new technologies. So one is medical grade for PVC, which we didn’t have before, and this could open new doors in this health care sector.

And the other one is enhanced and better performance of the Verimaster technology, where we now can apply new services that we couldn’t do before. So this is also very positive. And the new website that we launched last year is continue to generate leads. We also see a lot of other interest coming in. So to handle this in an efficient way, we have onboarded a new internal sales support in the office in Stackport.

And this is because we want to free the time from the sales guys to be out there visiting customers, to go to trade shows, to generate sales for us. So we think this is a good setup to free time because we know when we visit the customers and working closely with them, we know that business will come. It’s a good example. We were in Portugal visiting the distributor there and key customers, and they brought orders with them back home. So it is key to be close to them, and, this is why we decided to take on this internal sales support role.

And then, of course, we have the twenty five year celebration of ADVASTA this year. We had a ceremony in the office where the founder Paul Morris and the lord lieutenant from the royal, family and the the staff and the board and other invited people were there. And it was very nice and, yeah, very positive event. And then, last, I would just like to comment on the import tariffs and how this could affect or if there is a risk that this could affect the Politin Group. And as you know, there is still no definitive decision made.

It’s still very uncertain how this is gonna end. So what we could say today is that there is no direct impact on the proposed tariff today because Polygiene Group is not exporting to US. It’s very limited. It’s less than 5%. This means that there are not a lot of production in US.

Even if we have a lot of US customers, they are producing overseas, mainly in Asia and China. So directly, there is no impact on our business. But, of course, indirectly, there could be a risk if our customers are decreasing their production volumes. And as an ingredient brand, we can’t survive without our partners’ products. So if they decrease their production volumes that they treat today, of course, our volumes will go down if that happens.

However, we have a global distribution setup, and that could mitigate the risk because we can easily move with the customer. If they are moving production to a country with lower tariffs, we move with them. We have a global setup. We have availability all over the world. So that is the good thing with Polygiene Group’s business setup that we have this flexibility.

So our strategy for now is to follow the development very closely and also, of course, stay in very, very tight dialogue with our customers to know what their next move is. And what we experienced so far by talking to a lot of customers, there were no changes. There’s no impact in the short term. There is nobody who had canceled orders or alert to us that they will decrease the volume for for the coming period. So so we will update you when we know more, but for now, we are quite confident at this stage that this will not impact 2025 so much.

I still believe that the Polygiene group will continue to grow this year and to show the scalability that we have in the the business model. And just a short slide for the new investors I know is listening listening now. Very short, we have main owners that are strong and long term. As I said, the model is scalable. We know that the q ’1 now, we had some extra costs that we had planned for.

And if we take the full year, I believe we can keep the level of cost base that we had last year and still grow the sales quite a lot. Asset Light, we don’t have any production in house. We are not fixed to special countries or products. We are very flexible how we operate, and this is a very good benefit these days. We have high margins, and that enables that we have a profitable business.

We have positive cash flow. And even if Q1 wasn’t a positive cash flow, for the full year, we expect positive cash flow as last year. And this, of course, limits the financial risk. It limits that we have to raise money. It gives us a safety to operate this business in a good way and a healthy way.

We still don’t have any debt. We have a very strong financial position. The balance sheet is looking very excellent. And as Niklas said before, we still have good, strong cash. And that is also one reason why the board decided to start to pay out dividends, and that is the first time in PolyGene’s history that that happens.

I think that was all. Thank you. So do we have any questions?

Niklas Lomstedt, CFO, Polygiene Group: Let’s see if there’s been any questions that has arise during the presentation.

Ulrike Bjork, CEO, Polygiene Group: No. We did a very full Good.

Niklas Lomstedt, CFO, Polygiene Group: Good. Good. Good. Good.

Ulrike Bjork, CEO, Polygiene Group: Good. Good.

We have customers interested in this. And we’re also waiting for permission to be able to treat fabrics in Europe, and that will take another six months, but that’s ongoing. Yeah. Also, in Polygene, I mentioned in the report that we also launched a wash in technology together with Storm. So Polygene is delivering chemistry to Storm Aftercare who are selling a wash in to end consumers that you can treat with AutoCrunch in your washing machine at home.

And this is a great complement, but it’s not under Polygene’s business. We are just delivering the chemistry. But we have a very good partnership with Storm Aftercare, which are doing a really, really good job. Okay. Yep.

And we’re done, and, see you in July next time. Thank you. Thank you. Bye.

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