Kinnevik AB (KINVB) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Kinnevik presentation of Q4 2024. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Georgi Ganev, CEO. Please go ahead.

Thank you very much, and good morning, everyone, and welcome to the presentation of Kinnevik's results for the fourth quarter and full year of 2024. I'm Georgi Ganev, Kinnevik's CEO. And with me today is our CFO, Samuel Sjostrom; and our Director of Corporate Communications, Torun Litzen. On today's call, we will walk you through the key events during the quarter. I will also give an update on our 2 most recent investments in TravelPerk and Enveda. Samuel will then cover our financial position and the development of our net asset value. Finally, I will go through our priorities going into 2025, as outlined at our Capital Markets Day. And as usual, we will end with the Q&A. So let's start on Page 4. Coming out of 2024, Kinnevik now has a predominantly private portfolio invested in growth companies, coupled with a strong cash position. While we have around 20 larger investments, our priority in the past 2 years has been on focus our portfolio towards our most promising assets. And as a result, our 5 high-performing core companies now make up more than half of our portfolio, showing attractive returns as a group. With our permanent capital-backed approach, we expect several of these businesses to remain Kinnevik companies for many years to come. In the fourth quarter, we continued executing on our strategic priorities, backing our company's long-term growth and investing our capital in a disciplined way. Our net asset value amounted to SEK 39.2 billion or SEK 139 per share at the end of the fourth quarter of 2024. The fair value of our private companies was up by 7% in the quarter, driven mainly by a large write-up in TravelPerk, significant multiple contraction in health care delivery and positive currency effects. With SEK 1.2 billion net invested in the quarter, the private portfolio increased in value by SEK 3 billion to SEK 28.2 billion. Our balance sheet remains strong, and we ended the quarter with a net cash position of SEK 10.9 billion. We see continued strong execution in our core companies: Cityblock, Mews, Pleo, Spring Health and TravelPerk. And during 2024, this group of core companies has grown revenues by 55% and improved their margins significantly. Our 2 largest investments, Spring Health and TravelPerk, were both profitable in the fourth quarter. These profitability improvements enable our core companies to increase investments into growth, a strategic decision we have influenced and gladly supported in several of them. In January, TravelPerk announced it had acquired expense management platform, Yokoy and raised $200 million in a new funding round. The round values the company over 50% above our underlying Q3 mark, and we will take a closer look at our journey with TravelPerk later in the presentation. We also see promising developments in our group of selected ventures, with Enveda and Agreena reaching key milestones this quarter. These are companies which are still early on their growth journeys, but where we expect to continue to invest meaningful capital in the coming years if they continue to track our expectations. We are convinced that some of them have the potential to generate outsized returns and emerge as our core companies of the future. We also know that not all of them will be as successful, but as a group, we have high conviction in their ability to create a number of exciting businesses. In the quarter, we invested an additional SEK 438 million in Enveda, and the company entered the clinic, which I will touch on shortly. Meanwhile, Agreena, the tech platform that supports farmers' transition to regenerative agriculture, received registration under various world-leading voluntary carbon standard. This is an important milestone not just for Agreena, but for the entire regenerative agriculture movement. It means that Agreena can now verify and sell their credits, unlocking the nascent soil carbon market. Finally, in December, Kinnevik held an Extraordinary General Meeting, authorizing new issues and share repurchases and electing 2 new Kinnevik Board and Audit and Sustainability Committee Directors: Hans Ploos van Amstel and Jan Berntsson. Moving to Page 5. At the end of January, TravelPerk announced it had raised $200 million in new funding round and agreed to acquire the expense management platform, Yokoy. We also welcome new partners Atomico, EQT and Sequoia to the cap table, and we look forward to working closely with them as TravelPerk continues its growth journey. TravelPerk is now achieving a combination of growth and profitability at scale, with annualized booking volumes of over $2.5 billion, annualized revenue of well above $200 million, growth of over 50% per annum in the last 2 years and reaching EBITDA breakeven at the end of 2024. The new funding will be used to accelerate TravelPerk's continued expansion into the U.S. alongside further developments in product and AI. The acquisition of Yokoy, a leading spend management platform allows TravelPerk to offer a deeper and more unified travel and expense offering to its clients while expanding its addressable opportunity. Kinnevik invested SEK 485 million in the round, including SEK 78 million in a secondary investment prior to the funding round, bringing our total investment in the company to SEK 1.4 billion. After the funding round and the acquisition of Yokoy, we remain the company's largest and most long-term shareholder, with an ownership of 15%. Moving to Page 6. While the funding round is an important endorsement of TravelPerk's vision and execution, Kinnevik's conviction in Avi and the team go back to the early days of the company. And the investments serve as a good case study on the strength of our unique model. Kinnevik first invested in TravelPerk in October 2018. And since then, we have made an additional 10 investments in the company. In financial terms, we have multiplied our capital invested 6x through follow-ons. So what was it that we saw in 2018 when we made the first investment? Some of the key attraction, having mapped all relevant European players in the sector at that time included a number of factors. TravelPerk presented a technology-driven product to replace legacy-driven offerings. The company had a top-tier CEO with solid track record and a strong management team focused on both product and sales. TravelPerk had a clear view of the opportunities to enhance monetization and improve unit economics over time. And it was a strong fit with the Kinnevik portfolio where we could leverage learnings from other companies in our portfolio, such as Pleo and Omio. With hindsight, we backed the winner in the sector and the best team, and we did it early. And as a result of this, we are now the largest owner in a growth company of scale that has emerged as a standout homegrown European software leader. Let's now move on to Slide 7 for an update on our investment in Enveda. We led a new funding round in Enveda in the quarter. And as you may recall, Enveda is unbundling live chemical code using AI and custom hardware to create breakthrough medicines. The process works on thousands of molecules at a time, speeding up the discovery of promising molecules for medicine. And Enveda founder Viswa and his team has built a $1 billion pipeline of 10 medicines in just 4 years at 1/4 of the usual time and 1/10 of the cost. The new funding will enable Enveda to deliver more clinical milestones already in 2025 and in 2026 across multiple candidates with strong commercial potential. They will also continue advancing their pipeline of development candidates and invest further in their platform. I will now hand over to Samuel, our CFO, to talk you through our private portfolio valuations and financial position, starting on Page 9.

Thank you, Georgi, and good morning, everyone. So as usual, I'll start on our financial position and capital allocation, and then I'll move my way into this quarter's NAV and the valuations of our private businesses. So again, starting on Page 9. Our investment pace in Q3 carried into the fourth quarter, with SEK 1.2 billion invested primarily into TravelPerk and Enveda. As Georgi mentioned, our SEK 485 million TravelPerk investment in the quarter consisted of our participation in their recently announced funding round as well as the SEK 78 million secondary investment that we closed in the beginning of the quarter before and separate from the funding round. Looking back at the full year, we invested SEK 3.6 billion during 2024. More than 80% of follow-on investments were directed into our focused companies, and we continued to actively pursue secondary acquisitions throughout the year, adding up to SEK 0.9 billion in total during '24 after a record high SEK 1.7 billion in 2023. This disciplined and focused capital allocation, obviously, in combination with our Tele2 exit, led us to end the year with a SEK 10.9 billion net cash position. And as we told you at the Capital Markets Day, our current balance sheet provides a long enough runway for us to start delivering exits again and prove the flywheel potential of our strategy and its capacity to finance itself. And these future proof points of being able to reallocate our capital will be coming on the back of us already having generated almost SEK 10 billion in exit from modern-day Kinnevik growth companies during our now completed 7-year transformation. So entering 2025, we feel great about our capital allocation capabilities. We have a record strong net cash position. The capital need in our portfolio is smaller than it's ever been. Our companies have good access to capital and are attracting new investors. And meanwhile, our pipeline of new investment opportunities is alive and vibrant across all our focus sectors. And our shareholders authorized the use of new capital allocation tools at our AGM 2 months ago. So in 2025, we will exercise these strengths and the freedom and flexibility we now enjoy with discipline and with surgical focus to work towards realizing the expectations we laid out at last year's Capital Markets Day and that you also find on Page 10 of today's report. With that, let's move on to Page 10 of this presentation and this quarter's NAV development. NAV was up 5% in Q4 to SEK 39.2 billion or SEK 139 per share. Three main factors drove this development. Firstly, our core companies continue to perform and grew in value by 10% before adding this quarter's investments and while facing significant multiple contraction in health care delivery, impacting the valuation of Cityblock negatively despite its reassuring operational progress. Secondly, our mature and profitable noncore companies continued their stable trajectory and added SEK 0.5 billion to NAV. And thirdly, we had strong currency tailwinds, providing a SEK 1.7 billion positive impact. The private portfolio was up 7% in SEK terms to SEK 28.1 billion, of which SEK 15.4 billion now sits in our 5 core companies. And all these core companies have been priced by other investors during 2024. Most recently, TravelPerk in this quarter had a 40% plus premium to our Q3 NAV assessment, which was already up around 15% year-to-date coming into Q4. Looking beyond TravelPerk and at the full private portfolio, we've seen price transactions in 71% of our private companies by value during 2024 at valuation levels that, on average, have been 10% above our preceding quarterly NAV. If we, as in previous quarters, again, unpack that number into primary transactions, meaning funding rounds, and secondary transactions, meaning transactions in existing shares, then secondary transactions have, on average, occurred at a 20% discount to NAV, and primary transactions have on average been concluded at a 28% premium. And as I've said before, these price levels that other investors are transacting at in our companies resonate not only with what our normal secondary discount levels in the healthy businesses and the current illiquid state of private markets, where you have to leave something on the table if you're getting liquidity ahead of everyone else. But more importantly, I think it validates 2 things. Firstly, that our valuations are both fair and balanced. And secondly, that not only are our valuations accurate here and now and in today's report, but they also serve as attractive entry points for new co-investors investing in funding rounds in our companies at almost 30% premiums relative to our NAV, with a conviction that they will make an attractive long-term return. On the next couple of pages, I'll try to give some color on the valuations in the private portfolio. And as usual, you can find much of what I'll be going through and more in Note 4 in today's report. And as we start reporting the 2025 financial year with our Q1 report in April, we're looking to continue to take steps towards more clarity and more transparency in our reporting on our private portfolio's performance and valuations to help our public market investors see and recognize the value of our portfolio that is so consistently confirmed by investors in private markets. But for now, let's start off with a very quick snapshot of what everyone can agree on, and those are the known external drivers, currencies and multiples, on Page 11. The U.S. dollar appreciated by 9% in Q4, leading our private portfolios valuated currency basket to be up by 6% or 5% when including our net cash position that we hold entirely in SEK. Trading in key peer sets of our private portfolio was a bit scattered, as outlined on the left-hand side of this page, and we saw quite drastic multiple compression in health care providers and value-based care-related benchmarks and positive or stable trading in software and health care technology. This combined to value-weighted average peer multiples being up 3% in Q4 for an overall stable quarter. That was very quick as promised. So let's now jump to the next 2 pages and to our 5 core companies. That means we're on Page 12, where we show a chart that has become a bit of a staple chart over these last year. For those of you who are new to us, what this chart does is it plots our 5 core companies' weighted average year-over-year growth rate on the Y-axis and their weighted average EBITDA margin on the X-axis. And as this chart shows, our core companies have made significant progress in maturing their financial profile over these last years while balancing the trade-off between growth and margins in an efficient way. The first red marker in the top left is the average financial profile of these companies in Q4 '21 when they were growing by more than 150% with 70% EBITDA loss margins, and then each red dot represents a subsequent quarter with growth being traded in for margin improvement. In 2024, our core companies grew by more than 55% on average and improved their margins by more than 20 percentage points. Notably, and as you heard from Georgi, Spring Health and TravelPerk, our 2 largest assets, making up 35% of our portfolio and 65% of our core companies, were both profitable in Q4 '24. Looking ahead, we now expect our group of core companies to grow revenues by 40% to 45% in 2025, with EBITDA loss margins in mid-single-digit percentages on average. Now as some of you will notice, this is an unchanged forward-looking growth margin profile from Q3 rather than the slightly slower growth and slightly stronger margins than we previously expected to see when looking into '25. And why is that? Well, it's driven mainly by 2 factors: first and foremost, the very large write-up of TravelPerk this quarter and our SEK 485 million investment significantly increases TravelPerk's weight in these average numbers. And more weight in TravelPerk moves the group's financial profile towards higher growth, but also towards negative margins. Because with their $200 million funding round and acquisition of Yokoy, TravelPerk is increasing OpEx investments in '25 and intentionally going back to controllable negative EBITDA margin territory after being profitable throughout Q4. Secondly, other core companies like Mews and like Pleo are doing exactly what TravelPerk is doing, namely increasing '25 investments into sales, product and market expansion-led growth. And they're doing this with our full support, and they're doing it on the back of significant margin improvements and strong unit economics. And they're financing it with their large cash balances and strong access to capital. To use a popularized expression, some may have preferred us to "soft-land these businesses," and quickly glide them into a mature, slow-growing, profitable state along this black diagonal line on this chart. But as we said at our Capital Markets Day, that is not what we nor our core companies are about. Their addressable markets, their potential and their cash positions are too big to not go for a larger opportunity. We are both comfortable with and, should I say, excited about many of our core companies investing in accelerating their growth. And we look forward to report to you how these decisions generate results in '25 and in '26 and see this red curve on the chart bending upwards. And judging by TravelPerk's recent funding round, other private market investors who take a fresh 5-year perspective on our businesses, they agree with how our companies are calibrating their financial profile. With that, I'd like to move on to the quarterly valuation changes starting with these 5 core companies on Page 13. On average, underlying constant currency valuations of our core companies were up 3% in the quarter or by 10% when excluding Cityblock where public market benchmarks pushed our assessed valuation downwards in a meaningful way. Going through each of them, that downwards push is where I would like to start by spending a minute or 2 on some reflections on Cityblock because our mark-to-market approach where movements in public peers affect our valuations and sometimes they misconstrued to imply that write-downs are always a consequence of companies not performing. And that is not the case here. Cityblock is a leading value-based care company, growing by 30% to 40% by adding high-quality revenue from partnerships with a diversified group of health care insurers, including several of the large nationwide players. Their care model's gross margin ramp-up is proven across several years of cohort data across markets, and the Cityblock team has proven their OpEx efficiency in navigating a difficult couple of years for the company and for their industry. They have more than $250 million in cash. They are debt-free, and we expect them to need less than half of that to reach cash flow profitability without compromising on the growth opportunity. So it's a company that has great long-term potential and that are attacking a huge TAM. We're co-shareholders with leading health care investors like General Catalyst and Town Hall Ventures who, by the way, carry the business at much higher valuations. And the business also has meaningful strategic value to the large national insurers. In our books, in Q4, we are valuing Cityblock using an established and quantitative approach at a 15% to 20% discount to what their growth and EBITDA margin warrants when performing regressions against the company's publicly listed benchmarks. And therein lies both the answer to this quarter's write-down and what we will be looking to refine in '25 because we are comparing Cityblock with, on the one hand, large slow-growing health care companies and, on the other hand, a group of health care companies with value-based care elements to them that remained on public markets during '22 and '23 when high-quality assets like One Medical, Oak Street Health and Signify we're all taking private at multiples 3x higher or more than where we are valuing Cityblock today. Now, our model is robust, and we're not planning on changing it. And this model is what provides this quarter's valuation corresponding to 1.2x forward revenue. But we will be looking to refine our approach in '25 to make sure that we're not projecting public investor concerns around companies that may face a variety of idiosyncratic troubles that may be less relevant for the valuation of a premium business like Cityblock. With that little exposition completed, I'd like to move on to cover off our other core companies on this page a lot more briefly. And next in line on this page is Mews, which was up 7% in the quarter in SEK fair value terms with multiple expansion offsetting us pushing some '25 revenues into 2026 in our projections. Pleo was down 10% as the aforementioned OpEx investments into 2026 revenue growth weighs on the margin improvement trajectory in '25 without adding much to the next 12 months' revenue. And this, in turn, points to a lower multiple in our regression models, which do not look beyond 2025 financials. Spring Health was up 18%, driven by continued strong operational performance and dollar tailwinds while we moved our multiple down by 5% to 10% relative to public software and health care tech benchmarks to calibrate towards a multiple we expect the future IPO to price in relation to these 2 peer sets. And lastly, TravelPerk was up 48% before adding our in-quarter investment, and we're valuing that business in line with the valuation of the recent funding round, which means a gross profit multiple 40% higher than our Q3 evaluation and a revenue multiple 45% higher than in Q3. And to put that in relation to our other core companies, the funding round values TravelPerk at a gross profit multiple, some 15% to 20% higher than our valuation multiples at Mews and at Pleo and 35% to 40% higher than our valuation multiple at Cityblock. Moving on to my last page then, Page 14. And there's not a lot of news here, but having covered off our core companies, I just wanted to quickly point out a group of companies that we talk less about, but that we tried to give you a sense of at last year's Capital Markets Day. That is our so-called mature noncore company. More specifically, it's Betterment, Cedar, HungryPanda, Instabee and Omio. During the last 3 months of 2024, these companies grew by 18% on average and generated a 2% average EBITDA margin. Now, these are great businesses, but they're not large enough to our NAV or growing fast enough to qualify as core companies. And in Q4, they grew fair value by 12% and provided some stability to their meaningful 17% share of our private portfolio. On the opposite side of the maturity spectrum, we have Enveda, where we saw a larger increase in fair value in the quarter as we increased our valuation to the level of the company's Q4 funding round that Georgi covered earlier. So to summarize my little fillet of today's presentation, I want to make sure to leave you with the following 3 messages. Firstly, we are in a great position from a capital allocation perspective, with very limited funding needs outside our focused companies, SEK 10.9 billion in net cash and an exciting pipeline of investment opportunities in new and existing companies. We have never entered the year with this level of financial strength and flexibility, and we will make sure to exercise this with focus and with discipline. Secondly, our core companies have demonstrated significant profitability improvements in 2024, with our 2 largest businesses, Spring Health and TravelPerk, both being profitable in Q4. In 2025, many of our core companies are intentionally and incrementally refocusing on growth, and these are decisions we're both happy and comfortable with. And thirdly, any debates around the accuracy and fairness of the valuations of our largest and most important companies should soon be concluded if they aren't already. It's been a tough couple of years. And an otherwise strong year of NAV development was in 2024, undermined by Walgreens' actions at VillageMD and difficulties at Mathem. We are entering 2025 without these types of at-scale risks. We've taken down valuations of our smaller-tail companies significantly in Q4, and the valuations of each of our core companies have been corroborated by other investors during the year. So having hopefully made clear that the CFO's 2025 outlook is positive, I would like to hand it back to Georgi for his concluding remarks.

Thank you very much, Samuel. So let's now move to Page 16. In 2025, we look forward to the strength of our strategy and our portfolio becoming more apparent and better reflected in our value creation trajectory. We're entering the year, as we heard Samuel say, with a strong cash position and with a portfolio of leading growth companies with limited capital needs. This provides us with a high degree of flexibility in how we invest, and we will utilize this flexibility and our new capital allocation tools with discipline. With a more concentrated stable and performing portfolio, we expect continued stability in operational performance, translating to a positive NAV development in 2025, of course, provided equity markets remain somewhat stable. And finally, with the portfolio recognized by leading private growth investors, but still undervalued by public investors, we continue to deliver proof points and work towards a better, more direct and more transparent and clear disclosure. Lastly, I would like to thank our shareholders for your support in 2024, a demanding and challenging year, and I look forward to reporting on our progress throughout 2025. We're now ready to answer your questions. So operator, please open up for Q&A.

[Operator Instructions] We will now take the first question from the line of Linus Sigurdson from DNB Markets.

So starting with a question on Spring and TravelPerk, as you said, both on positive EBITDA in Q4, back to prioritizing growth. Could you just help us understand what that trajectory looks like? Or how long should we expect them to deviate from profitability?

Linus, it's Samuel. Starting with Spring, as you heard from Adam at the Capital Markets Day last year, they are the company in our portfolio closest to IPO. That clearly makes them slightly less aggressive, whereas TravelPerk has a longer period ahead of themselves in private markets where you can be a bit more aggressive. Having said that, on Spring, the TAM of the core business is still very large and very much untapped, and there's plenty of expansion opportunities. But Spring is being, call it, a bit more careful than TravelPerk. So Spring will be profitable throughout 2025. TravelPerk, I think the company and Avi made it very clear in the announcement in and around the funding round that they are expanding quite aggressively into the U.S., both by the acquisition of AmTrav earlier last year and organically. And the gross margin improvements and the productivity gains and also the NPS improvements they've seen from their investments in automation and AI, they're going to continue to be a leading company in that space as well. So in TravelPerk, we're seeing them in, call it, high single-digit EBITDA loss margins to low double-digit EBITDA loss margins on a full year basis next year. When will they come back to growth -- sorry, to profitability? Let's see. Most likely in '26 when sort of the scale of the business generates sufficient cash flow to maintain that investment momentum without necessarily having a negative margin on the bottom line.

Maybe just to add on that, Linus. We should also remember that TravelPerk operates now at a gross margin level close to 80% as Avi disclosed, right? So I think this is very much in their own control, and they will not move away from kind of plus/minus EBITDA profitability territory. So we feel that they have good control of the business.

Okay. That's super helpful. And then just secondly and lastly, if you could give some color on the split of your near-term capital allocation or the pipeline of investments? Given the high tilt towards follow-ons in Q4, would it be fair to expect a higher focus on new investments in Q1? Or how should we think about that?

I mean, as mentioned, Linus, the pipeline has been growing throughout 2024. We have now great opportunities in our sectors. That said, if we look at companies like Enveda, for instance, that are hitting their milestones, and Agreena, we're, of course, ready to deploy more capital, meaningful capital in these businesses as well. We don't want to set out a target, but just knowing that our portfolio is well funded, and many of the businesses in this quarter, we name actually 7 have reached EBITDA profitability already last year, there will be naturally more room for new investments.

We will now take the next question from the line of Derek Laliberte from ABG Sundal Collier.

I wanted to start out on TravelPerk here given the acquisition of Yokoy. How do you view this sort of idea of integrating travel and expense management? And what does it mean for how you view Pleo going forward?

Derek, thank you for the question. So this Yokoy transaction is a way for TravelPerk to address especially the mid-market. So it's slightly larger clients. They will continue with a deep partnership with Pleo for the rest of the market and potentially with other ones as well. So that's part of the strategy to both use partners and an in-house solution. We see Yokoy being a very attractive acquisition for TravelPerk because it's broadened its TAM. And we also are allowing the company to broaden its cap table with investors such as Sequoia. So this is a pure equity driven deal, so that's why we also think it's a very good testament to TravelPerk. This is not where the journey ends. It's actually the start of the next phase, if you will, for the new investors and indirectly for Sequoia.

Okay. Interesting. And on Pleo, could you also there give some more details on what's driving the 10% valuation decline? I thought this seem pretty drastic given that I presume peers were up.

Sure, Derek. It's Samuel. It's fairly quantitative, but maybe I can just start off covering Pleo's performance so we're clear. They grew by around 45% to 50% in 2024. I think they improved EBITDA margins by almost 40 percentage points. So this is the leading spend management platform in Europe. And all the local competitors are smaller, and they're growing slower, if at all. So the goal now is to solidify this position, and that's why the company is increasing OpEx investments. I think in the range of EUR 20 million to EUR 30 million in 2025. And that's going into customer acquisition growth through marketing partnerships, tech-led productivity boosts. It's also going into the product and into the tech, mainly to improve the offering to the customers. And when we do our valuation, we just look 12 months out. So we're just seeing that OpEx investment in our numbers, and we're not necessarily seeing the gains on revenue, which will primarily materialize in 2026. And then we take that financial profile. We put it through our regression models where we look at all the software peers and, in particular, the high-growth ones, and that's what leads us to the multiple that we put on Pleo in this quarter, and that's what leads to the write-down here. So it's a bit of a one-step back, hopefully, 2 or 3 steps forward over the coming quarters. But -- so we like the approach. Software, in particular, is an area where we have this abundance of peers where you can really trust these quantitative models. And we sort of -- we stick to that, and we try to have separate brain halves where I love what we are doing right now in this year, but that doesn't mean that they get a write-up by default just because I like it. The model says otherwise.

Okay. Great. I appreciate the clarification. And I know Samuel, you talked quite a bit about the Cityblock here, but just trying to understand the background here, whether it's mainly driven by peer multiples because I would have thought FX should have provided some cushion here. Or is there anything else behind the valuation adjustment? Or is it mainly how you decided to sort of calibrate the valuation model as you talked about?

Sure. No. FX does provide some cushion. I think our underlying change in valuation of the business in dollar terms is at around 30%, and the SEK impact is 25%, 26% somewhere. Again, the company is performing the way we expected it to. The challenge here is that in the peers that we're using, and you can find it on our website, as you know, we have 2 or 3 constituents trading at almost like 0.1, 0.2x revenue. Is that because of their financial profile when you sort of pull that out in a comp table? No, it's because of very idiosyncratic issues where CEOs get fired. They miss guidance consecutively quarter after quarter and make the market disappointed. They lose analyst coverage and so on and so forth. And I think that's the challenge I was trying to sort of make clear in my prepared remarks that it's a peer set that consists of a few companies that sort of pulled down that regression line against growth and profits for reasons other than their growth and profits, if you see my point. And that's why I think me and the team needs to do more work and really understanding each of those constituents and why they're trading where they are and make sure that we're not projecting those types of very company-specific issues on to our business, which is performing in line with plan. So that's the nuance I tried to bring. In terms of how the company is doing, again, it's growing by 30% to 40%. The contract portfolio is so much more diversified now than was the case 3 or 4 years ago. So we're not seeing that churn that has sort of pained us in '22 and '23 and has pulled the valuation of this business downward on a, call it, 24-month basis. We're not seeing that any longer. So we're feeling very comfortable. But again, we're going to do more work on the comps, and I'll let you know where we end up in Q1.

Okay. Got it now. And then on the Mews, if you could comment on how the onboarding of Best Western is going and whether the company has signed any additional new hotel chains?

So, Derek, again. The Best Western onboarding is going very well. It's a different structure than, for instance, Strawberry that is more of a top-down approach where it's a kind of corporate decision to roll on this platform, whereas Best Western, you have the frame agreement or, call it, hunting license and then your onboard individual hotels. What's interesting to note is that in this case, with Best Western was actually the smaller hotels connected to Best Western who push the change to Mews because they knew that this system was superior to what they were using and what they actually understood from the broader market. So it's well above 100, small hotels onboarded, I think even more. And we saw really promising figures in the fourth quarter of the year when it comes to onboarding customers and also realizing and acknowledging revenue.

Great. I appreciate the color. And then briefly, if you could comment on, I think the other investment bucket was down quite a bit in the quarter. Just wondering what drove that.

Sure, Derek. The explanation is, I'm afraid, very simple and maybe a bit crude, but we have, in Q4, discounted smaller loss-making companies a lot more heavily than we've done in the past. And that brings, call it, SEK 450 million, SEK 500 million hit on NAV and those more, call it, top-down adjustments that aren't necessarily driven by individual company performance. So it's -- so part of that CFO Q4 attitude of trying to make sure that '25 becomes a good year.

Got it. Okay. And just finally, if you could share a comment here on looking at your 5 core companies, where do you see the largest risk to your operational targets over the coming year or 2?

We're not seeing a specific company risk. I think they all have ambitious plans. But given how they have performed, both in profitability improvements and top line growth, 55% on average, we're very comfortable that they will deliver. But each of the company have very clear milestones to hit. If it's kind of profitability improvements or kind of onboarding efficiency and so forth, that's something we don't want to disclose because these are private assets, but there is no specific company.

We will now take the next question from the line of Andreas Joelsson from Carnegie.

I only have one question. Georgi, you mentioned in your CEO letter that investments will be more disciplined going forward. Can you explain a little bit how that differs from how you have done investments before, if any difference?

That's a very relevant question, obviously, because one should say that we are always disciplined. What we're trying to say is that I think we have -- we've been coming out from a difficult period for Kinnevik and for other venturing growth investors. So at the end of 2021, we all knew that there were a lot of capital flowing into these businesses. Since then, we have written down on average, our portfolio with more than 60% on average and kind of changed a lot of our capital allocation focus. What we say here is that now the companies are either profitable or funded well to profitability. That will not change, that discipline that we've had over the years. So we don't foresee the market to become exacerbated in the way it was in 2021. So that's basically what we mean.

We will now take the next question from the line of Oskar Lindstrom from Danske Bank.

Well, 2 questions from my side. The first one is, I mean, you mentioned that the -- some of your core growth companies are accelerating growth and sort of refocusing on growth and sometimes at the expense of short-term margins and you -- maybe examples of Spring and Travel there. Is this partly this increasing focus on growth or refocus on growth a consequence or a reflection of kind of pushing out the timing of when you expect these companies to be listed? Is that one of the reasons why you can sort of afford to focus on growth for 2025, where perhaps previously that had not been the expectation?

Oskar, I think it's good observation. We feel that there's no rush to IPO these businesses in this market, if they have the ability to double in size in a couple of years by growing, both, I would say, in the markets, but also in the product dimension to have a better product or even increase addressable market. That's, you could say, a little bit more long-term approach. But nothing has really changed from last quarter to now. I think, there was not really on these businesses' agenda to IPO, let's say, mid-2025. I knew that there were expectations from some of our shareholders and the market that should happen, but that has never been the plan for these businesses. What they have said, however, is that they want to be IPO-ready. We see companies like Spring Health, for instance, go through this process of feeling that they could IPO. And then they will basically adjust their financial metrics to what the public market is looking for at that moment in time. My best guess right now is that they will be close to profitability. They will keep on improving their gross margins, so it's an entirely within their control, whether they should hit EBITDA growth -- positive growth again or not. So since these businesses have a very clear business model, we also feel that it's not even a risky thing to do. It's basically the accurate thing.

Right -- so -- but Spring is the only company that's really aiming to be IPO-ready later in 2025. Is that how we should see it? All the others are not sort of -- yes.

That's what they have communicated. I would say that next candidate is probably TravelPerk. So what Avi, the founder said, when the round was announced last week is that it's more likely that TravelPerk becomes a public company than not because they reach such a size that either they are acquired by a U.S. company or they would like to have an independent strategy and to continue to grow. And that where he sees the journey for TravelPerk. So I would say, most probably, they are the next in line.

All right. Just a final question from me. Final question for me would be -- maybe you addressed this and I didn't quite catch it. The multiple compression that we saw in the health care providers and value-based care peer groups. Did you say that, that was for sort of company-specific reasons in those peer groups?

Not necessarily, Oskar. It's Samuel. What I said was more that the trading levels as such relate to a number of complex specific issues that we will need to unpack and properly understand, again, to make sure that we're not projecting that on to Cityblock. In terms of the quarter-on-quarter movement in this quarter, that has been fairly homogeneous across peers. And that's what we're reflecting in our valuation in this quarter. So it's more of a look-forward thing where I just want to make sure that we're comparing apples-to-apples and not, call it, golden apples to rotten apples.

All right. So I mean, you have used those lower multiples for this quarter, but you're saying maybe you need to look at it a little bit deeper to make sure that there wasn't something kind of specific.

Exactly because our co-investors are asking me what I'm doing when I'm valuing the business at less than half of what we're carrying it at. And that's what we need to sort of, call it, improve in the level of sophistication with which we value. In this quarter, if you take all the comps that you have in the spreadsheet on the website and you draw a regression line between revenue multiples and growth and EBITDA margins, you'll see that we're carrying Cityblock at a 20% discount to what that regression tells us.

We will now take the last question from the line of Stefan Wård from Pareto Securities.

A follow-up on Cityblock. I'm actually a little bit puzzled. If you say that you are carrying the book value, half of that of other investors in the same company and at the 20% discount to your own regression methodologies, doesn't that sound overly conservative?

That's what I'm going to find out in Q1, Stefan, if I'm being overly conservative or not. I like being conservative, but we shouldn't be overly conservative. I didn't quite hear your sort of lead into that question because you sort of faded in, but was that the question?

A follow-on from an earlier question. I think that was what I said at least. Then regarding Cityblock, what sort of...

I'm afraid you're breaking up, Stefan.

Is this better?

Yes.

Sorry. Okay. So I had a problem. And just to give -- to me, it seems like Cityblock is becoming -- I don't expect any more sort of health care provider investment from your side or value-based care type of investments. So it looks a little bit part of the own strategy, if you see what I mean. Can you describe on how we should think about the possibilities for Cityblock, your investment in Cityblock going forward? Will you remain an owner until IPO? Or is there any other alternatives for you regarding Cityblock?

I think I can take that, Stefan. I mean we know this industry and this subsector very well. We've been investors in both VillageMD with some positive results and some negative results, as you know. What Cityblock have -- what they have built is a platform that have demonstrated to be the most efficient one to increase engagements among patients in this population. So it's primarily Medicaid and these duals that are entitled to both Medicaid and Medicare with special conditions. So what we see now is that the agreements with the larger national providers is basically the key for profitable growth. And looking at the cohorts of Cityblock, we see very promising gross margin levels compared to other value-based care providers. So if they continue to execute now according to plan, there will be value both for insurers, but also there will be health care investors that will acknowledge that efficiency that Cityblock has. So if the plan is to IPO the business in a couple of years or if it's going to be acquired, I think it's far too early to say today. But the important thing is there. It doesn't really matter what type of exit opportunity or future we see for the company. What they're focusing now on is actually what they need to deliver on anyways, which means to continue now to grow with having these cohorts moving into more profitable levels, the higher gross margin levels. So we don't have to make that decision today. But it's -- looking at their performance, it looks promising, and we can say already today that they are best in the class.

Okay. That's very helpful. And then one question relating to the Slide #12 with the Rule of 40 sort of line. And with the arrow pointing to Q4 '25, is that to be interpreted like -- to me, it says EBITDA profitability for the group or breakeven for the group at 2025. Can you add some clarity? And then I mean for all the core companies, I got the message that Spring Health will be EBITDA profitable for the full year. But then it's a little bit unclear for the rest. TravelPerk was negative, Pleo negative. So what would the total be, would you say?

No, exactly, Stefan. That little arrow is supposed to point towards a low single-digit EBITDA margin in -- on an NTM basis at the end of this year, meaning '26 financials. I think more importantly, and it maybe, not clear on the chart, we should have made it larger, the arrow is actually moving upwards, meaning that we're seeing growth accelerating in 2026. In terms of what the companies are on an EBITDA margin basis, Spring is the most profitable right now. Cityblock is closely behind on a full year basis. And then you have TravelPerk, Pleo, and then Mews is by far, the call it, the least mature asset of the bunch where they are investing the most heavily, I should say, in their product and in their platform.

Perfect. Regarding Spring, when we were at the CMD, the number of lives sort of covered or that they handle are responsible of -- was 11 million. Is that -- has that figure changed in a material way? Or how should we think about it? Because the ramp-up was so dramatic in the prior couple of years. And then it looks like it sort of slowed down in -- during 2024. Can you comment anything on that?

I don't want to give you numbers that Adam and April will scold me for providing. But growth is where we expect it to be. I think this business is a bit special in the sense that most contracts start on 1st of Jan every year. So you have a high level of visibility. But then sort of we sort of knew where they were going to end up already in the last quarter and the quarter before. And that you're sort of selling and then you're going to launch the new contract 1st of Jan in '26. So it's a bit of what I call it, it's a bit chunky in that way, the sort of LTM/NTM approach that is very sort of simple and useful when you look at more linear growth companies isn't necessarily applicable at Spring. But the company is performing in line with where we thought they would be, and revenue is in that 40%-plus growth territory whilst making a positive margin in '25. And that should correlate quite decently with the number of lives they cover.

Yes. Adam also hinted on gross margin expansion from -- or at least this is my impression that it currently is around 50% and that the potential maybe, was more like 55%. Is that a longer term? Or is that something that's helping EBITDA profitability already in '25?

We're not quite there yet in '25. We're above 50%, but we're not at that 55% level. I think getting to 55% will require both more scale. But also there are sort of different expansion opportunities that could help bring that gross margin up. For instance, you could sell the tech to independent therapists and basically as a SaaS product, where you would make call it, 75%, 80% gross margins, not on a massive piece of revenue, but that would also be gross margin accretive. But we're in that -- in '25, we're somewhere in between 50% and 55%. And let's see if Adam can do what he says he can do.

Yes. Perfect. Just one could be a repeat here on TravelPerk, but you say that gross margins are currently at 80%. You grew revenues by more than 50% last year. And then we again turn to prioritize growth over profitability. So EBITDA margin will go negative. What that does -- what does that imply in terms of -- will growth dramatically increase from the plus 50%? Or how should we think about the growth for next year?

We think they'll stay in that 50% territory in '25. Clearly, you don't want to sound sort of rash, but you don't raise $200 million and just put it in the bank account.

No, of course. Of course, I just thought if you're sort of driving down the margin, again, if you're accelerating the growth. So that 50% plus, 50% level moves materially higher, that was...

But it's also, Stefan, it's fair to say that the investments are more kind of sustainable investment to increase your product attractiveness to actually have fundamental improvements of your go-to-market model. It's not kind of marketing dollars only. That would, of course, result in higher growth levels short term, but would actually decrease as soon as you kind of switch that increased marketing budget off, right? So it's more kind of project to enhance product and also enhance their capabilities to grow with partners and grow in a new market.

Got it. And just one final question. It's been helpful to have this sort of core organization and improved level of detail for the core assets. How should we think about that going forward? Will you keep the core as a reporting segment? And then when new ventures or selected ventures become more core, will they move up into that bucket? And if it's something that you feel is not at core anymore, will you remove that? How will you treat that dynamic going forward?

I'll take that, Stefan. Yes, we will definitely use the terminology of core companies, and we'll continue to report on their progress as a group. And hopefully, we can report on that progress, again, as I said, in a more clear and transparent way. But exactly as you point out, and as I think we pointed out at the Capital Markets Day, you should expect companies to traverse these different categories of businesses that we now have. And for instance, you already mentioned on the newer ventures, the goal for each and every one of them should be that they become core companies in the future. And currently, we have 5 core companies. I think what we said at the CMD is that by 2030, we want to have 10 of them, and we want them to make up a larger share of the portfolio. But being dubbed, the core company comes with a couple of requirements and those companies need to pass that hurdle before they qualify. Similarly, of course, there's a chance that you'll see core companies being moved out of that group, either because we sell them or because we do not feel that they no longer qualified to remain in that group. I think for the 5 we have here now, the second reason feels very unlikely, looking at '25. But hopefully, by end of this year, we'll sit here and explain why Company X is now a core company.

I would now like to turn the conference back to Georgi Ganev for closing remarks.

Thank you very much for listening and for your questions. And as a reminder, we will report our results for the first quarter on the 24th of April 2025. Have a nice day.

This concludes today's conference call. Thank you for participating. You may now disconnect.