BICO Group AB (publ) (BICO) Earnings Call Transcript & Summary

Hi, everyone. It's the 23rd of February 2022, 2:00 p.m. Central European Time, and it's lovely sunshine here in Gothenburg. So welcome to BICO's Earnings Call for the Fourth Quarter. And if we move on to the next slide, please. Today, we have presentations from our speakers, it's CEO and President, Erik Gatenholm; and EVP and CFO, Gusten Danielsson. They will be presenting a brief overview of the fourth quarter and a more in-depth financial update for the fourth quarter 2021 and full year 2021. We will also guide you on our sustainability platform and follow up on our focus on profitability. We'll also give you some updates about M&A, customers and product launches. After presentations, we will move on to a Q&A session, and I will be back with further instructions on how to participate. [Operator Instructions] And by that, I hand over to Erik for an overview of the quarter.

Thank you so much, Isabelle, for that introduction, and thank you everyone for attending today. I am excited to report our Q4 numbers. And of course, without further ado, let's hand over to our group overview slide. So first, we want to paint the picture and give you an overview before we deep into the details. So I will summarize essentially the fourth quarter and the full year 2021. We can report strong sales numbers for Q4 and for the fiscal year 2021 with SEK 519 million in quarter 4 and about SEK 1.25 billion for the fiscal year 2021. All acquired companies are contributing to these numbers except from Biosero, which was acquired late in December 2021. It's thrilling to see good demand from all business areas and all group companies for our products. And I would like to highlight strong demand for our liquid handling offering, primarily from DISPENDIX as well as selling development solutions, which are sought out after for identifying and developing new drugs where CYTENA has a very strong product offering. It's also very pleasing to see that the Group's bioprinting and bioprinting technology and workflows products continues to generate good sales and good demand. The sales are also driven by acquisitions made during the year. And as you know, who followed us, we have had a very, very exciting 2021 where we've built a strong foundation for BICO. For this quarter and onwards, we're releasing a new key metric, and that is adjusted EBITDA. The reason for this is to increase the transparency regarding items affecting comparability in the group's accounts. And if we move over to the next slide, we can see the full year, let's see here. Well, first, actually, let's summarize the challenges that we've had from Q3. So looking at the challenges that we had in Q3, these challenges were mainly short-term supply chain issues that we had experienced in our Q3 period. Now these challenges were mainly addressed throughout the fourth quarter, and we're, of course, very thankful and proud to see the hard work from our leadership from mainly the 3 organizations that were affected in Q3. So Echo, Nanoscribe and Ginolis. And we're very thankful for the hard work that was done. We've done great progress in operational improvements. We've done great improvements in supply chain strategies. We've increased inventory levels, sourcing on business area levels for shared components, but also individual components. We've also improved agreements and partnerships with key suppliers to ensure that these solutions are long term and sustainable. In terms of recruitment, we have focused heavily and, of course, recruitment of manufacturing personnel and with technical expertise, we have optimized our production processes to increase our efficiencies. And this has, in turn, of course, led to the continuous success in Q4. The success and improvements that we've seen in Q4, we are hoping to continue to see that through Q1 and Q2 as well for 2022. In addition to that, we've also done reinforcements in our financial functions. And if we're looking at for instance, the group level, our finance functions have been significantly strengthened to meet the growth of the group, both from the acquisitions perspective, integration perspective, but also the organic growth that the organization is experiencing. So with the new resources and improved processes, we have increased our transparency, and we will also ensure, of course, that the control over the subsidiaries, the reporting and their operational challenges is something that we'll continuously monitor on an improved basis moving forward. So with that, we're quite confident that the short-term challenges that we were experiencing in Q3 have been managed and improvement plans have been met, and we're seeing strong improvements already, as we mentioned in Q4, and we'll continue to see in Q1. With that being said, I will hand over to Gusten.

Thank you, Erik, and thank you for that. I'll start with walking us through our financial summary. For the fourth quarter, net sales amounted to SEK 519 million, an increase of 151% year-on-year. Organic growth was 25%, in an effort to increase transparency about the performance of our ongoing operations, we are from the fourth quarter reporting both adjusted EBITDA and EBITDA. The adjusted EBITDA amounted to SEK 24.1 million, corresponding to a margin of 4.6%, down from 22.2% last year. EBITDA amounted to SEK 13 million, corresponding to margin of 2.5%, down from 21.1% last year. Profit loss for the period amounted to SEK 25.9 million. The gross margin amounted to 72.3%, down from 74.2%, but in line with previous quarters. Net sales from consumables amounted to SEK 73.5 million, up from SEK 29.3 million, an increase of 151%. The share of total product sales was 16.1% in the fourth quarter. For the full year, net sales amounted to SEK 1,257 billion, an increase of 244%, up from SEK 365.8 million corresponding to organic growth, up 44%, down from 48% previous year. Adjusted EBITDA amounted to SEK 16.9 million, corresponding to margin of 1.3%, down from 8.4%. EBITDA amounted to negative SEK 45.1 million, corresponding to margin of 93.6%. Profit loss for the period amounted to SEK 229.2 million. The gross margin amounted to 72.2%, slightly up from 72% last year. Net sales for consumables for the full year amounted to SEK 214.4 million and increased from SEK 58.7 million corresponding to 265%. The total share of product sales -- the total share of order sales was 19.5%, an increase from 18.5%. For 2021, in total, we acknowledge that the IAC for option programs, acquisitions and integration as well as rebranding and the European implementation has been substantial. For 2022, there are no scheduled rebranding costs, while the ERP costs will continue due to implementation. The cost for option progress will continue due to the ongoing option programs that are running. Acquisition and integration costs will continue to run, but are, of course, related to our acquisition agenda going forward. In the bridge for the full year, we also had 2 additional IAC, mainly attributable by full year 2020 government support and cost for the stock listing back in April 2020 when we transferred from the First North Stock Exchange to Nasdaq main market. Going forward, we'll continue to use adjusted EBITDA as our primary APM for profitability. The total net sales and net sales per share are continuing to increase during the fourth quarter, both driven by organic growth as well as contribution from M&A. The organic growth in the quarter, excluding hygiene sales in 2020 corresponds to 30%. The organic sales in the Laboratory Solutions segment amounted to 83%. And excluding the hygiene sales last year, it amounts to 104%. Bioautomation had a negative contribution during the fourth quarter due to strong sales in Q4 2020. The weak growth is isolated to the fourth quarter, and the segment has grown in accordance with expectations during 2021. On a pro forma basis, net sales for 2021 reached SEK 1.768 billion. Looking at the companies that showed weak performance in Q3 due to mainly supply chain challenges, we see a significant improvement in Q4. This company shows between 43% and 145% higher sales in Q4 versus Q3. The gross margin amounted to 72.3%. We saw stable gross margin development during the quarter. The product mix has changed significantly during the year and will continue to change during 2022 due to the M&A contribution as well as growth. The share of revenue from consumables in relation to total sales -- in total revenue have increased during the year and is now 19.5% on an LTM basis, up from 12% last year. During the fourth quarter, 16% of the total profit revenue was consumables, lower than previous quarters due to the strong instrument sales in the end of the quarter. Breaking down the organic growth year-over-year per region for the fourth quarter. For North America, we can see that organic growth has been strong throughout the year and the market amounts to 50% are total sales. Europe has been lagging the U.S. market in growth throughout the year due to more long-lasting COVID effects as well as a newer sales organization. In the fourth quarter, the growth rate is hampered due to exceptional growth in Europe during Q4 2020. Asia delivered organic growth almost in line with our target and the rest of the world has increased organic growth substantially. This can be explained by low comparative figures for full year 2020, increasing sales in South America and the new sales office in Middle East has contributed to the organic growth. For the full year 2021, BICO delivered organic growth of 44% and 54% excluding hygiene sales in 2020. This is -- thanks to growth -- good growth in all segments and business areas during the year and where demand for bioprinting solutions, liquid management systems and equipment for cell line development excels. In 2021, the EBITDA margin amounted to minus 3.6%, which can be attributable to items affecting comparability such as acquisition-related costs, cost of option programs and change work linked to the brand, new organizational structure, and ERP investments. The adjusted EBITDA margin amounted to 1.3% for the full year. The Board of Directors proposes no dividend for the financial year 2021. During the year, the group raised a convertible loan of SEK 1.5 billion, which increased the group's nominal indebtedness. During the year, the group also carried out 2 significant share issues of SEK 1.5 billion and SEK 2 billion. We acquired subsidiaries and operations for a net of SEK 3.5 billion. All transactions had a significant impact on the group's net cash position. At year-end, the group had net cash, excluding leasing liabilities, of SEK 119 million. I would like to briefly introduce you to our sustainability platform. This is a preview of the sustainability report, which will be released as part of our annual report on March 16. We said during our Capital Markets Day last year that we would focus on sustainability during the year, tied in to the UN's sustainability development goals and set targets. The work shall be seen as evolving over time. We gain insight and information about expectations on BICO from shareholders, investors and external sustainability rankings. We integrate this information in our work and match it in the best possible way to requirements and expectations. BICO will drive change needed in the industry with cutting edge instruments and services based on Bio Convergence to create a sustainable future of health. In order to do so, we have defined 3 perspectives we will focus on. For the sustainability development goals, BICO is focused on goal 3, 9 and 12. Since these are the goals that BICO can influence the most and which in turn impact BICO the most. Our main focus is the third goal, good health and well-being, since it's highly connected to our offering and commercial focus. Our ESG platform connects Bio Convergence with 3 different perspectives that defines our operations, our people, our offering and our planet. They are interconnected by the midsection BICO Way, where you can find the code of conduct, whistleblower policy, et cetera. Our people is based on the Group's overall HR strategy, which shows that this part of sustainability is fully integrated in the business. It consists of group-wide initiatives and measurement tools such as employee engagement survey. Ultimately, this strategy commits to having prosperous employees that are offered opportunity to develop in an innovative environment where the work environment is safe and secure. Our offering is characterized by aspects related to business acumens, such as code of conduct and how we act in business situations, development of sustainable offerings and sustainable product processes as well as responsible collaborations and supplier relationships. Our planet is about environmental factors, the choice of renewable energy sources, et cetera. We spent the past year building the framework, introducing the group companies to the platform and establish a reporting structure to create a baseline and set KPIs for the upcoming years, which I will show you on the next slide. For 2022, we will focus on implementing sustainability initiatives from the subsidiaries, starting working with our Climate Action Plan, training employees on our new code of conduct, establishing code of conduct for suppliers for majority companies. Set non-financial targets for the BICO Group to be launched with the financial targets during 2022. We will also review the sustainability policy to name a few of our initiatives. On the next page, we highlight some of the KPIs -- we measure many parameters and our focus have been to establish a baseline. Our people, it is important for us to continue to make sure that our employees are engaged and that we can retain our talent and ensure that we can offer a safe workplace. For our offering, we will continue to measure that we keep our promises to our customers. We are proud of our rating, also KPIs relating to business acumen and our code of conduct are important. We're growing fast and with that comes a responsibility. For our planet, we will focus on initiatives initiating a Climate Action Plan for the group, where the goal is to be climate neutral by 2040. We believe that the group has potential over time to address more environmental aspects. This was a brief introduction, and I'm looking forward to communicating more on our ESG agenda in future calls and that I will continue to talk about it, our overall focus for 2020 profitability. We've already mentioned profitability. And in this section, we will address how this shall be achieved going forward. We need a two-folded focus, commercial and cost. Here are a few things that are working with, which we also highlighted in the CEO segment. Shifted, we will -- have shifted toward focus in our business areas and group companies according to the group structure, which has developed during the year. We scaled back on the group functions. Group companies will renegotiate supply agreements based on their increased volumes as individual companies, but also as part of the group. In order to release working capital and improve cash flow in 2022, we have initiated measures to improve the invoicing process to reduce number of days until payment accounts receivables, including all companies, which were acquired during the year. For a fair view, these should be proportionate to pro forma revenue instead of reported revenue. BICO made several major investments to build by the group long term during 2021, and we are continuing to invest in R&D to deliver on our ambitious agenda for product development. The group companies will work to ensure that our investments have the right price levels and it's necessary to make price adjustments. We'll review our service portfolio and further clarify our service offering to our customers. These initiatives together will help us on our path to profitability during 2022. And I'll hand over to Erik, who will talk about M&A, customers and product launches.

Thank you for that Gusten and please, you can go to the next slide. Our mission continues to be throughout 2022, when moving forward continues to be that BICO will continue to enable the organ and tissue printing industry. This is a mission that has been core to us since the beginning of our journey, and we'll continue to lay as a foundation as we move into the future. It's going to be an important foundation and is going to enable us to continue to see growth and profitability for our business moving forward. Next slide, please. If we're looking just briefly on our journey and what got us from the start, we started the company in 2016 as the first bioink company in the world, and we expanded quickly into bioprinting technologies. The company was then listed on the Nasdaq First North. A year or 2 later, we identified Bioprinting Workflows as a focus area and is a major driver for our growth moving forward. Already in 2018, we acquired our first bioprinting workflow businesses, CYTENA and DISPENDIX that enabled capabilities in selling development and sample preparation. This expanded our printing capabilities to nanoliter range and also single cell range. At this time, our desire to expand analysis and automation became an important part of our workflow. In 2020, we acquired SCIENION, an important acquisition that expands our capabilities to include both Diagnostics and Multi-Omics. These applications and offerings are now enabling us to become a leading bioprinting workflow company. Moving forward in 2021, several bioprinting workflow acquisitions were made. MatTek and Visikol opened up a tissues service business. Ginolis and QInstruments enhances automation business and Echo expands our analysis business. We've continued to identify automation software as a gap in our portfolio, a gap that was filled at the end of 2021 with the acquisition of Biosero. We're exciting to today report that we are the leading bioprinting workflow company, and we will continue to focus on this business moving forward, both through acquisitions as well as organic growth and development of products and technologies. We're also identifying to be leading in bioprinting. It's required for us to do a convergence of a wide range of technologies, hence, the focus on our Bio Convergence agenda, which will drive us forward for the next coming decade. Next slide, please. Looking at our core portfolio and what we offer as products, we have a portfolio of hardware solutions, including some of our bioprinters and liquid handling robots, reagents and consumables, including our nozzles, bioinks and cartridges as well as software solutions, which offer biological monitoring, design and simulation and now through the acquisition of Biosero automation capabilities. We see great potential and growth potential for the company moving forward, both in the software solutions area as well as service solutions, which is going to be an increasingly important aspect for our customers moving forward. Next slide, please. The acquisition of German QInstruments, which is a leading company in advanced sample preparation for biomedical and life science, research and clinical diagnostics, was completed on October 15, 2021, and the purchase price amounted to SEK 631.6 million. The second acquisition was done in Q4, which was the acquisition of American Biosero, a leading software provider for automation workflows and laboratory connectivity. This was completed on December 28, 2021. The purchase price amounted to SEK 1.514 billion. Now in the future, to continue our M&A agenda, we will prioritize smaller and complementary so-called bolt-on acquisitions in the areas of software, consumables and services. Next slide, please. In these areas, again, we will be focusing on our NXCIS, we are 4 areas of interest containing tissue engineering/bioprinting, multiomics, cell line development and diagnostics. In addition to this, we will also focus heavily on synergies in terms of technology and distribution. Technology enables us to enter current markets with new types of products, broadening our product portfolio or distribution enable us to expand into new untapped markets for our current product portfolio. Next slide, please. Looking at some of the exciting product offerings that were developed or launched during Q4, which is a wonderful example of the synergy effects within the BICO Group here a product Quantum X Bio, a combination of technologies from nanoscribes to photon polymerization together with CELLINK's and bioprinting technologies and application knowledge. This product is a beautiful example of the Bio Convergence and bioprinting agenda that we have developed and fits well into our customers' demands and will drive the bioprinting industry forward with the capabilities of printing better and more precise structures and tissues by our users. Next slide, please. As you can see, this technology has the capability in the research here at Boston University to print cardiac tissue and develop cardiac models that can then be used in a so-called heart-on-a chip platform that can then be used for drug discovery or new pharmaceutical treatment development. This is a very exciting area that paves the way forward for a lot of heart tissue applications and other treatment development applications. Next slide, please. Lastly, important to mention for the end of the year, we managed to sign 2 exciting and important partnerships, one of them now in the beginning of the year, where BICO's technology, specifically the bioprinting workflow technologies that have been developed over the last couple of years will be used for the development of sustainable implant type of products, both from a regenerative breast implant products in a collaboration with CollPlant as well is in a joint restoration implant program together with a company called Nanochon. We're excited about these types of collaborations and these types of partnerships will be important both for the company's progress and growth moving forward, but also for the industry and the world as a whole as we continue to show and develop applications that will drive the organization towards creating the future of health. With that being said, I would like to thank you so much for your time, and we will now proceed with questions and answers.

Thank you for that, Erik and Gusten. Wonderful presentations. And let's begin the Q&A session. If you join online, you can use the live and Q&A to the right and post your question. And if you're dialing in, you can ask questions directly to the speakers. We have a few participants that have addressed that they would like to ask questions. But first, let's kick off with some questions being sent in during the call. And I will begin with the first one, which I think is one for Gusten. Would you please explain the reasons behind the lower organic growth versus past quarters? And where do you stand for the first quarter 2022. Are we expecting a rebound?

As I addressed during the presentation here, we had about 25% organic growth in the fourth quarter. This has mainly been hampered by a very strong Q4 back in 2020 for signing in where we had several orders that came in on that end of the year. And this is -- the result of this is a negative 10% organic growth for signing in Q4, while they grew quite significantly over the full year. So this is not an impact we are foreseeing to have in quarters moving forward. To give a little bit more color on this, the rest of the companies classified as organic growth in the fourth quarter had over 83% organic growth and over 100% organic growth excluding the hygiene cells. So this negative impact is temporary.

Thank you for that Gusten and I think we will continue with one more question for you. And it's split in 2 parts. Firstly, when do you anticipate the company will deliver a sustainable positive EBITDA and a net profit after tax as in like 1 year or 5 years. And then secondly, what is realistic long-term EBITDA margin that you or like the management believe that BICO can deliver. If you can elaborate on that.

Yes. So in terms of the profitability development here, we are -- as we've highlighted during this presentation, focusing on improved EBITDA during this year. We have a target of least here from present EBITDA, and we think that we can achieve a lot higher margins than this. And that's something we want to achieve during 2022. And moving forward in 2023 and beyond, our focus is also more on the free cash flow, they want to generate through the business. And looking at more long-term horizon, what we can achieve as a company, I think I would address you to look at other companies in our sector and their kind of long-term profitability where companies such as Sartorius they are in our industry, you can have a look at them or just have a look at the companies with similar gross margins and how that can translate into long-term profitability?

Thank you, Gusten. And let's jump on a question for Erik. Could you comment on how we cross-sell our different products between the subsidiaries? Are we thinking to merge all these companies under one name, one day?

It's a very good question. Thank you. Today, the cross-selling that occurs is mainly within the business areas, and these 3 business areas are bioprinting, biosciences, and bioautomation and something important to note is that during Q1, we will also start declaring the different numbers specifically for those business areas that you can see the different growth rates and the revenue top line and profitability for the business areas. Now looking at the sales and commercial process within the areas, there are some business areas that have very close synergies in terms of the products they offer. There are technologies and products or companies within the group that have very close synergies with all the technologies and portfolios within the group, and then there's some that are more standalone. What's important to state is that what we are working on is building a larger consolidating group of organizations that enable our Bio Convergence agenda. That means we need to have a lot of different technologies and products to be able to achieve this big picture. Now in the future, there might be a future in the coming decades where we be one brand. But as of now, we will focus on a decentralized focus and decentralized organizational structure and architecture, so we can achieve our profitability goals and continue to grow.

Thank you, Erik. And now back to Gusten and a question about account receivables. Would you explain the jump in accounts receivables? Do we expect a significant decrease in the coming months? And for inventory, are we going to build inventory for the first quarter of '22? Or was Q4 enough regarding supply chain issues? You are on mute Gusten.

Thank you. Thank you for the question. In terms of the buildup on account receivables, there's a couple of driving reasons here. As you can see in the report, roughly SEK 180 million on the buildup is through the acquisitions we've done during the year. These companies has also grown quite significantly during the year, and the contribution to accounts receivables is roughly SEK 250 million of the companies that we acquired during the year. And if looking at this in relation to our revenue, you should consider the pro forma revenue, which is roughly SEK 1.77 billion. Moving forward, we have quite a big focus on decreasing net working capital as well as accounts receivables. We see that there's a lot of low-hanging fruit. A lot of the companies can improve the invoicing and dunning processes and we see that this will have a positive impact on net working capital or specialty accounts receivables over the next couple of quarters. And in addition to that, we saw that a lot of the revenue came late in the quarter and later in the year. So we had quite significant revenue in December 2021. And of course, since Q4 is the strongest quarter of the year, this means better cash flows in Q1 in relation to Q4. We also see that inventory buildup that we've done to protect ourselves from supply chain issues and we don't see that we need to continue this buildup, and we foresee that we'll be able to decrease our inventory levels in relation to our net sales during the year as we feel safer with the supply chain involved. So we have a lot of low-hanging fruits here, and we will see a lot of improvements in cash flow over the next few quarters.

Thank you, Gusten. And I think we have one last question here that has been sent in, and it's regarding to the path to profitability. What can you share with us regarding group cost growth relative to group sales growth in full year 2022 estimate. For example, should cost growth continue to exceed sales growth as in previous years?

The short answer is no. We see that the sales growth shall and will exceed the cost increases during the year. We see that the group in terms of the group company will not grow in size or cost base during the year. We've established an organization that will be able to handle a quite substantially bigger organization than we are today. Down on the daughter companies, we had a lot of recruitments in Q4 2021. And now in 2022, we've decreased the spendings in new recruitments in a lot of the daughter companies, meaning that we will -- we foresee net sales growth that exceeds the growth of our personnel cost as well as external costs during the whole year of 2022.

Thank you, Gusten, and thank you, Erik, for your answer. Now let's move on to the questions on the line. And I would like to welcome Ulrik Trattner from Carnegie. I get to ask your questions. [Operator Instructions]

Great. Hopefully, you can hear me?

Yes, we can hear you. Thank you.

Perfect. Great. I have 3 questions, if I may. Can I start off with congratulations on a good quarter? As you mentioned initially during this presentation, you had quite a significant improvement in Discover Echo, Nanoscribe mainly in comparison to Q3. How much of that revenue is attributed to the delivery issues in Q3, i.e., how much was pushed from Q3 into Q4, just trying to get some understanding on the performance of these businesses?

As we addressed in the report, we saw significant improvements in the companies that had supply chain issues in Q3 into Q4. And the performance was between 43% and 143% higher revenue in Q4 versus Q3. And I wouldn't say that you've seen a boosted Q4 because of delays in Q3, that's definitely not a substantial impact on the fourth quarter. I'd rather say that we came up to the levels where we wanted to be in Q4. And we are still to catch up over the next year in terms of what we missed out on previously.

Great. So next question, going back to the account receivables. And I've been doing my calculations looking at the pro forma revenues of your acquired businesses. But it looks like the old BICO selling to DISPENDIX and CYTENA have quite a bit more extended days sales outstanding compared to the acquired businesses as well as to SCIENION. Is there any reasons for why that is? And what is really done to lower accounts receivables over time here?

Yes. No, it's a correct observation. We see longer or DSOs in those 3 entities in relation to the acquired businesses. This is related to a few different aspects, and we've addressed a few of them previously here in terms of the cycles of sales. But also we see that there's been a significant potential for improvements of the invoicing and dunning process in a U.S. entity that maintain all our U.S. sales for these 3 companies. So there is a lot of low-hanging fruits that will improve this there. We also see this in relation to some of the deals and sales that we've done in terms of the payment terms that have been longer for a few bigger deals where they've been paying overtime and that we've been maintaining all our financing and leasing our own balance sheets. And so we will see significant improvements. We've done changes down to the sales organization in terms of what the terms that you're allowed to give all the way to the invoicing in terms of getting -- invoices out faster, reminders out faster and collection faster. It's very low-hanging fruit. We've been -- we're seeing both impacts from being understaffed and processes that hasn't been in place, and we see improvements already now in Q1. And to address this, additionally, we haven't seen any significant risks for that. Our customers won't be paying, they're very credit -- they have very good credit in terms of our customers. Most of them are pharmaceutical companies or academic institutions. So we're looking forward to show the improvements over the next few quarters here.

Okay. Great. Last question on my end, adjusted EBITDA. Looking at a few cost items integrated as a reserve in these numbers, integration costs, rebranding costs, option costs will obviously continue. Integration cost that has been running roughly at SEK 13 million per quarter, expecting this to continue over 2022, given that there are a few companies still being integrated as well as rebranding quite some -- an ERP, quite some cost. I'm guessing rebranded will be nonrecurring. How much was sort of the rebranding out of that total amount sort of i.e., which the amount won't be recurring, so to speak?

Yes. That's a good question. We spent about SEK 16.7 million on the European rebranding last year. The majority of that, more than SEK 10 million of that is for the ERP system. And I'd say we probably spend the same amount is here on the ERP system. Meanwhile, the whole rebranding restructuring, it's not just bringing out the brand it's because there is the whole restructuring in terms of how the group organization was structured, and we spun out selling at from BICO to new data company and so on. And so that cost is absolutely not recurring either. And in terms of acquisition and integration costs, I can address that as well, almost all of this is pure acquisition costs. It's just a very little part of this as integration cost. We don't really identify all the integration costs as it's mainly staff and operations here that are affected. So 95-plus percent of this is the actual acquisition cost.

Thank you for your questions Ulrik. And let's move on to Rickard Anderkrans from Handelsbanken. [Operator Instructions]

To start off here, could you just please explain the revaluation of the purchase price here seems to be boosting earnings a little bit in the quarter, if I'm not incorrect. The other operating income line was quite significant here. Just trying to understand that would be very helpful to start off with?

Yes. In terms of the transactions we did last year, a few of them had earned out or digital purchase price to be paid during the next coming years? And by the end of the year here, we reassessed the potential of all of this being paid out. Due to some of the supply chain issues to mention one aspect here. We've assessed a lower probability of having to pay out the fully assessed earnout. This is mainly related to both the earnouts that we could potentially be paid out for the performance during 2021 and into 2022 as they're connected in this earnout structure. So it's basically a lower probability of paying out the full earn-out, and it's a very small effect. I think this is roughly 10% of the total earnout potential over the next couple of years here?

That's super helpful. And on the new financial targets here that we can expect in 2022. Can you comment anything on the timing of those? And could you also comment if you -- how you will design them, you probably include in adjusted EBITDA, but would you also include anything on cash flows or any return measurements or anything like that?

We will come out with more information during the year here. I would say that it's most likely the second half of the year, we will address with new financial targets. I can't really say what they will be at this stage. I think there will be an increased focus on profitability. And I mean here in the company, our focus is to generate free cash flow as fast as possible to be able to finance our own operations and acquisitions moving forward with free cash flow if that will be part of the targets, it's too early to say.

All right. And just can you help us think about price increases and gross margins going forward because presumably, there's some supply chain and raw material headwinds that will continue a bit here or so?

Yes. We see that our daughter companies have quite significant pricing power for the products. We've done price increases all across the product portfolio. The lowest price increases we've seen in the portfolio is 3% to 5% in one company and the highest is 20%. A lot of them are around 10% in price increases for 2022. So it's a wide range of price increases and it depends on the product. So it's hard to translate to what it means in absolute terms. But we see that we have more pricing power than our suppliers have, and we do not foresee a decreased margins due to the inflation that we see in the market right now?

Fantastic. And the final one from me. Can you talk a little bit about the opportunity you see in various new production and licensing agreements with partnership that had because there has been some activity there that was mentioned in the report and the presentation as well?

Can you clarify your question?

Yes. So for example, the collaboration agreement that you signed with CollPlant or the joint restoration implant with SCIENION with Nanochon, for example, these types of agreements where you enter a more joint long-term with revenue upside to that as well.

Yes, absolutely. I can start a little bit. If we look at these agreements, the short-term financial impact is quite limited. Of course, the one with the Nanochon we're delivering services, and I think we've announced demands here. However, for all these agreements, both in regards to the breast implants, there where CollPlant is on, with the long-term opportunities, of course, more significant, if successful, but I wouldn't call them material at this stage. It's -- these news are, however, interesting to show because these are not just 1 or 2 agreements. We do a lot of these on an ongoing basis. And this is the kind of deals that will build up a lot of our growth in the next coming years. And so it's good to show to give an understanding on how these deals work, where we start with a small collaboration agreement, we help, for instance, we're producing our printing and new implants that both of these agreements are related to. And as our customers goes into clinical studies and try to go to the market, our relationship with them is more and more important and our products and the consumables are instrumental to their success. So hopefully, these kind of agreements will generate more money in the next coming years.

Thank you for your questions, Rickard. And let's move on to Jakob Lembke, ABG. [Operator Instructions].

I hope you can hear me. So I have 2 questions, and I'll start with your integration strategy. Maybe you can give some more color on that and how it balances with your decentralized model?

If we're looking at our integration process, the first step here is financial integration and aligning the companies with our reporting structures and requirements that we have, really all the way from our group accounting to controlling in order to be able to track and identify challenges that these companies have. And this is our first priority in terms of the must-dos on integration. Other aspects that we do and do integrate is IT systems. So we share a common IT system in the group in terms of being able to communicate more effectively within the group. And then for certain companies, we're rolling out ERP systems, sales force systems or CRM systems to better being able to collaborate across the portfolio. We have other kind of integration initiatives where we do lead sharing and bundling within the companies. We see that the companies are in charge of these. We facilitate the platform where they can start the collaborations. So when we initiate the synergies that we've identified during the M&A processes, then the daughter companies engage with each other and start and launch these different initiatives. A few examples that we've seen over the last couple of months are co-developments, where we had new bioprinters hit in the markets. We've seen co-developments, where we have product such as the C.STATION hitting the market and as well as different bundling that our companies are doing in the group. So the companies operate on a fully decentralized structure, and they are in charge of their own business. However, we facilitate an extensive platform for how they can collaborate and find synergies quite rapidly. And our focus on integration is systems, reporting and realizing the synergies among the group companies.

Just a follow-up on that, if I may. I mean how much of your investments in operational expenditure during the year has been to sort of build out that platform that you use to help the daughter company?

In addition to some of the items that we highlighted in IAC; this is a lot of the group functions establishments where we recruited a lot of personnel. So that's an ongoing expense. We've also done a lot of processes of being able to decentralize functions that we've had centralized when we were a smaller company. I can't give you an exact numbers. We haven't reported on this, but it's cost us some money to do these initiatives and build up this structure, and we will be able to benefit of that from this year and onwards.

Understood. And my other question was on the organic development in Laboratory Solutions during the quarter, which once again is very impressive. So maybe if you could just elaborate a bit more on what you're doing right there. And also to what extent this is an exceptionally strong quarter and how much we can extrapolate forward?

Gladly. Thank you so much for that. We fully agree. The organic growth for our Laboratory Solutions segments and mostly our bioprinting and biosciences products is fantastic to see, and we're very thankful for the work that our colleagues are done on the boots on the ground. With that being said, there's a continuous strong demand moving forward for specifically our multi-omics sample preparation products, our liquid handling robots that can deliver much better and much more precise droplets and results than competitors and peers. So for instance, our I-DOT platform now has since the launch of a few other products early this year has an even more competitive advantage with being able to integrate it as an improved volume handling and has an improved high-throughput screening platform, enabling in a new model. So I think it's mainly listening closely to the customers, understanding their needs, their expectations and very quickly turning that into sellable products and offering them to the market. So that has been really the success of DISPENDIX, CYTENA selling and a few other companies in these business areas.

But to what extent should we sort of expect this...

Extrapolate...

Organic growth to continue?

Very good question. So I can't give you exact on how we should extrapolate on these numbers. But what I can tell you is that the year has started off with a very important conference called SLAS. During the SLAS conference, we exhibited many of these products. There is a very strong demand for these products now. Sequencing, multi-omics, proteomics research, bioprinting, all of these areas are increasingly more important for both pharmaceutical, but also academic customers and end-users. I can't extrapolate for you, but I believe that there will be continued strong demand for these products and systems moving into 2022.

Thank you for your questions Jakob. And this was actually the last question for today. And before we end, just a brief update on our financial calendar on the next slide. So we have the annual report, which will be released a few weeks' time on 16th of March, followed by our AGM on 26th of April and report for the first quarter of 2022 on May 18th. And by that, wishing everyone a great Wednesday. Thank you and goodbye.