BioGaia AB (publ) (BIOGB) Earnings Call Transcript & Summary

Welcome to BioGaia Q2 Report for 2026.[Operator Instructions] Now I will hand the conference over to CEO, Theresa Agnew, and CFO, Alexander Kotsinas. Please go ahead.

Hi. This is Theresa Agnew, CEO of BioGaia, and I'm here with Alexander Kotsinas, and we are here to present our Q2 results for 2026. So some of the highlights of the quarter. Our growth, excluding currency effects, was 12% versus a year ago, and our EBIT margin is 30% with an adjusted EBIT margin of 33% for the quarter. Overall, our net sales reached SEK 441 million, as I said, with growth, excluding currency effects of 12%. Specifically in the regions, in Europe, Middle East, Africa, our sales increased by 21%, excluding currency effects. In the Americas, increased by 16%, excluding currency effects, while Asia Pacific decreased by 6%, excluding currency effects due to order variability. Our operating profit in the quarter was SEK 132 million, which is an increase of 22% and our EBIT margin was 30% versus the 27% last year for Q2. Our adjusted EBIT margin was 33% for the quarter. Overall, our net sales year-to-date reached SEK 813 million, which is growth excluding currency effects of 13%. Our BioGaia company strategy remains the same. Our first strategic pillar is Grow the Core, the core being our core health areas of the business, of which Gut Health, which includes colic, oral health and immune health are our biggest priorities. Our second strategic pillar is what we call Expansion through Direct Markets, where we look at particular markets to take from a distributor partnership to a subsidiary or a direct market. We currently have 12 direct markets. And our third strategic pillar is Breakthrough Innovation. This is market creation opportunities for probiotics where people don't routinely use probiotics today. The foundations of our company are People & Culture, Investing for Profitable Growth, using Digital as an Enabler, both in how we go to market through our omnichannel approach as well as digitizing our business internally, Driven by Science, which has been a foundation for over 30 years and Sustainable Solutions, highlighting the importance of sustainability to our business. So how are we delivering on our strategy? In terms of Grow the Core, in the quarter, we drove growth for both the Pediatric and Adult segments. We are investing in our marketing and selling activities to grow strong growth in our direct markets. We are continuing to roll out our new products. We had originally launched BioGaia Gastrus Pure Action in October of 2024. We continue to roll that out this year. We also launched last year BioGaia Prodentis Fresh Breath. We're continuing to roll that out to more markets this year. And we just recently, in May, launched our next-generation patented probiotic drops called BioGaia Protectis Plus. BioGaia Protectis Plus will be available in addition to our original Protectis drops. And in terms of Expansion through Direct Markets, we continued our launch in Germany and Austria in Q2, that originally launched in January this year. One of our largest direct markets, the U.S., had record sales in Q2. And we've seen strong performance in France in Q2. In terms of our Breakthrough Innovation, skin health is one of our exciting new areas, and we expanded our portfolio in the quarter with 2 additional new products and updated our design across the full range. So some of the launches that we had in the quarter, as I mentioned, we launched BioGaia Protectis Plus. We launched that in the U.K., Ireland as well as in Sweden. We launched our Pharax drops in a number of markets. And as I said, we launched our 2 new skin care products, so a Face & Body lotion and a Balm-to-Milk Body Wash, both microbiome-friendly and organic containing ingredients. And those launches happened in the U.S. and China. Some of the key events for the quarter. On April 28, we published some new scientific findings on one of our patented technologies. It's called LongevityGuard. It is a desiccant technology that goes into our drops products and our probiotic ointment that improves the stability and shelf life of our probiotics so that they live throughout the shelf life. May 7, we announced our launch of BioGaia Protectis Plus, which is, as I mentioned, a proprietary patented combination of our strain DSM 17938 as well as BG-R46. Also on May 7, at our Annual General Meeting, we elected a new Board member to our Board of Directors, Amy Byrick. And then on June 18, we announced the new product launches that I mentioned, the Lotion and Wash for the BioGaia Skin Care portfolio. Our growth, as I said, for Q2 was 12% organic growth. As you look at it from a Pediatric and Adults segment standpoint, pediatrics grew 9% organic growth and adult segment grew 23% organic growth. And a little bit more on the segments. If you look at the quarter, as I said, excluding currency effects, Pediatrics grew 9%, Adult Health 23%. But if you look at the total for the year-to-date, Pediatrics grew 11% organic growth and Adult grew 21%. In terms of Pediatrics for the quarter, sales mainly increased in France, U.S. and Brazil. In terms of Adult Health, sales increased in our Protectis tablets and sales also increased in Asia Pacific, mainly in Indonesia and Japan. So overall, our Pediatric segment for the quarter is 75% of our sales and year-to-date is 74% of our sales. Now by region, as I said previously, Europe, Middle East, Africa increased by 21%, excluding currency effects, mainly in France and Poland. These were strong markets for us. In addition, other strong markets in EMEA were Germany as well as U.K. In Asia Pacific, our sales decreased by 6%, excluding currency effects. It was lower in our sales in the Pediatric segment, while the Adult Health segment did increase. And as I said previously, the sales were lower mainly in China and South Korea. This was due to quarterly variations for individual orders, so order variability. And in the Americas, which includes Latin America as well as North America, our sales increased by 16%, excluding currency effects. This is due to higher sales in both the Pediatric and the Adult Health segment and sales increased mainly in the U.S., Canada and Argentina. I will now turn it over to Alex to go through the financials in more detail.

Thank you, Theresa. So to summarize, as we heard Theresa mentioned, we had a sales growth of 9% from SEK 405 million to SEK 441 million in the quarter. Our gross profit also increased with 9%, and our operating profit increased with 22% and we had a margin of 30% in the quarter compared to 27% 1 year ago. If we look at the sales, as we heard, we had a growth of 9%, and we had a negative currency effect of 3% and thus, growth, excluding currency effect of 12% in the quarter. Our gross margin in the quarter was 73%, which was at the same level as last year. We had 1 percentage point higher margin in the Pediatric segment. And 1% lower in the Adult segment. That variation is mainly due to mix effects. There are some movements between different products and geographic markets that explains the variation. And then if we look year-to-date, we have a margin of 72% versus 73%, 1 year ago. With a slightly lower margin in the Adult Health segment. If we look at our operating expenses, our total operating expenses were SEK 189 million versus SEK 186 million, so 2% higher versus 1 year ago. Our Sales and Marketing expenses increased due to higher expenses for sales and marketing activities, mainly in our subsidiaries, for example, in France and Germany, which are new markets where we were spending less 1 year ago. The Sales and Marketing expenses also include a onetime expense of SEK 11.3 million. Our R&D costs decreased mainly due to lower cost for clinical studies. It's a normal variation between the quarters. And we have a positive effect in the Other OpEx due to some exchange gains on receivables of SEK 7 million. And therefore, we have an OpEx of SEK 189 million versus SEK 186 million, 2% higher. And on an adjusted basis, our OpEx was SEK 177 million versus SEK 186 million, which is then 4% lower compared to 1 year ago. And then if we summarize and look at our profit and loss statement, again, we see an increase in sales of 9%, an increase of OpEx at a lower extent of 2%, and therefore, our EBIT then increases with 22%. And on an adjusted basis, our EBIT increases with 32%. And we then have a margin of 30% in the quarter. And on an adjusted basis, our margin is 33%. And profit, earnings per share of SEK 1.02 versus SEK 0.87, an increase of 17% in the quarter. If we look at our cash flow, cash flow from operating activities amounted to SEK 51 million. The decrease in cash flow from operating activities compared to the same period last year is mainly due to a negative change in working capital. It is also, I would say, a normal variation between the quarters, whereby we have some higher receivables, a bit higher inventory and lower payables, and all 3 giving a negative effect in the change in working capital. And the cash flow from financing activities amounted to minus SEK 466 million. That then includes the additional purchase payment that we did for Nutraceutics, our U.S. company, of SEK 59.5 million, which we paid at the 1st of April in this quarter. And we also had dividends in the quarter of SEK 405 million. And then the net effect then is the cash flow for the period of minus SEK 428 million versus minus SEK 624 million in the same quarter last year. And we have a cash at the end of the period of SEK 446 million. So with that, I hand over to Theresa for some concluding remarks.

So in summary, as we said, our second quarter showed growth, excluding currency effects of 12%. Both our segments grew for the quarter. So Pediatric segment growing 9%, excluding currency effects and Adult segment growing 23%, excluding currency effects. And the increases were primarily driven by our Protectis drops, our Prodentis and our Gastrus Pure Action products. Europe, Middle East, Africa is regaining momentum, as you saw, in key markets, following a period that we had a transition from when we went from partner distribution to direct market operations in France and Germany and Austria. So our sales overall increased by 21%, excluding the currency effects. France, as I said, was established as a direct market in April 2025, Germany in January 2026, both contributed to the strong performance in Europe, Middle East, Africa. For Asia Pacific, our sales decreased by 6%, excluding currency effects. This was mainly due to the lower sales in the Pediatric segment. The Adult Health segment increased, as I mentioned previously, but the sales decreased mainly in China and South Korea and our partners in those markets, and that was due to quarterly variations in the individual orders. The Americas delivered strong performance with a 16% growth, excluding currency effects. Both Canada and the U.S. had robust growth in sales of our adult products, specifically Prodentis and Gastrus Pure Action as well as double-digit growth in sales of our Protectis drops. Our operating margin for the quarter was 30%. Our adjusted operating margin was 33%. So overall, our year-to-date adjusted operating margin is 30% compared to 27% last year. We are announcing that we will host a Capital Markets Day in London in December of this year with more information to come on that. And we remain, of course, focused on driving our growth by leveraging our strong scientific foundation that we have built over many years. We are expanding our presence in key markets by continuing to launch new products in these markets and, of course, investing in increasing our brand visibility and our brand recommendations through health care professionals. So we will open it up now for any questions that you may have.

[Operator Instructions] The next question comes from Kristofer Liljeberg from DNB Carnegie.

I have 4 questions, but they are short, I promise. So first, the higher investments compared with the first quarter last year -- or yes, the second quarter last year, if you could just comment on that. And I wonder about the gross margin improvement second quarter versus first quarter, if that's just mix effect or if it's something else? The third question is if you could give this figure of direct sales market proportion of total sales in the quarter or year-to-date? And finally, if you are willing to comment about when you expect the China distributor to start ordering again?

What was the fourth question?

When do you expect the distributor in China to start order again.

Okay. So the first 2 questions, I'll have Alex address.

So the investments in the quarter, yes, that's mainly BioGaia production, and we are ramping up our investment levels. We are expanding our manufacturing capacity. So we will see a higher CapEx level for this year and also next year. And that is why you have a higher CapEx. We've actually had an abnormally low CapEx for the last year or two because we have been preparing.

Is this -- yes. Is this the level we saw in the quarter, is that you think a good representation for the remainder of the year or...

It will vary a bit going a bit up and down, but it's a bit difficult to say. It depends on the speed of that deployment of those investments. But I think for this year, we could have investments around SEK 30 million to SEK 40 million in total.

Okay. That's helpful.

Yes. And then for the gross margin, yes, as you guessed, it's mainly due to normal or variations between geography and products, not really that we have changed any pricing or anything similar.

And then in terms of the direct market percentages, so for the quarter, our direct markets are 41% of our growth. And then year-to-date is 45%. And then in terms of...

The growth -- do you mean of the growth or of the actual sales?

I'm sorry, of the sales. Apologies. Of our sales. So 41% for the quarter is direct market, 45% of our sales for the year-to-date for direct markets.

And yes -- but I guess if you have a quarter, and that leads us into the -- my final question. So if APAC is picking up again, I guess, that number should go down? Or is the trend so strong that the direct sales proportion will still continue up this year, would you say?