Release Date: July 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kinnevik AB (KNEVF, Financial) completed the second and largest step of the Tele2 divestment, significantly enhancing their financial resources.
- The company reported strong operational performance in core companies like Cityblock, Mews, Pleo, Spring Health, and TravelPerk.
- Kinnevik AB (KNEVF) ended the quarter with SEK12.8 billion in net cash, providing a solid financial position.
- 81% of their private companies by value are either profitable or funded to breakeven, indicating strong financial health.
- The company distributed the largest cash dividend in its history, amounting to SEK6.4 billion, demonstrating shareholder value creation.
Negative Points
- Net asset value (NAV) decreased by 4.7% in the second quarter, reflecting challenges in the market.
- The fair value of unlisted investments was written down by 7%, driven by significant multiple contraction in public markets.
- E-commerce companies in their portfolio, such as Oda and Job&Talent, have struggled post-pandemic, impacting overall performance.
- The company faced significant write-downs in investments like Oda, reflecting challenges in the e-commerce sector.
- Cedar's valuation was impacted by a 34% write-down due to multiple contractions and a new employee stock option program, indicating operational challenges.
Q & A Highlights
Q: Starting with your increased capital allocation here in the second half, could you help us with some sort of indication for what the ambition is here in relation to your current or your typical rate of investment?
A: In Q3, you'll most likely see us do probably as much as we did in H1 combined, driven by one or two larger transactions. In Q4, it's unlikely you see us ending this year with less than SEK10 billion in net cash, unless we're very successful across our follow-on pipeline during H2. (Samuel Sjostrom, CFO)
Q: Looking a bit closer at Spring Health, could you expand a bit on what they're doing right? What is market driven? What is driven by good execution?
A: Spring Health has constantly met or over-delivered on our expectations since our investment in 2021. It's a combination of a fantastic value proposition and a great founding team. They have demonstrated that larger customers can cut healthcare costs, which is now leading to more Tier 1 customers rolling out Spring services. (Georgi Ganev, CEO)
Q: Why do you continue to deploy cash into Oda and Mathem despite the investment being written off?
A: Mathem and Oda have disappointed us massively, but Oda has demonstrated a world-class logistics solution for online grocers. Combining these companies provides scale and helps Mathem increase efficiency. This investment is to protect some value in these businesses. (Georgi Ganev, CEO)
Q: Could you comment on the recent development with Walgreens and VillageMD and how you think about the growth prospects now?
A: Walgreens has indicated they may divest or separate from VillageMD. We believe VillageMD would be better off being autonomous. We have no concrete deal to comment on, but a separation would likely be positive. (Georgi Ganev, CEO)
Q: Could you give us an update on the exit environment and potential divestments going forward?
A: We see this as more of a buyer's market currently, making divestments challenging. We have ongoing dialogues with potential buyers but are not forced sellers. We plan to further concentrate the portfolio by divesting non-core businesses over the coming years. (Georgi Ganev, CEO)
Q: Could you provide more color on the increased revenue outlook for the core holdings?
A: The increase in outlook is mainly driven by changes in portfolio composition. We aim to leave room for continued over-performance rather than extrapolate the over-performance we've seen. Profitability improvements are more suitable for extrapolation. (Samuel Sjostrom, CFO)
Q: Given the route to EBITDA breakeven and the comment that 81% of companies are either profitable or fully funded, are the investment opportunities ahead more about increasing ownership rather than funding needs?
A: Yes, it's a mix of secondary transactions and M&A-driven funding rounds. Being funded to breakeven or profitable doesn't preclude additional capital raises, especially for pre-IPO rounds to introduce public market investors. (Samuel Sjostrom, CFO)
Q: How are you planning to reduce the private growth portfolio from above 90% to above 60%?
A: We are not looking to increase the share of public investments through deploying into public companies. The reduction will come through IPOs of portfolio companies and us remaining owners post-IPO. (Samuel Sjostrom, CFO)
Q: Could you give details about the dilution from Cedar's employee stock program and the company's operational outlook?
A: The new ESOP program caused a dilution of about one-third of the write-down, with the rest due to multiple contractions. Operationally, Cedar is performing well with expected growth of around 25% in 2025 and a low single-digit EBITDA margin. (Samuel Sjostrom, CFO)
Q: Could you explain the chart on page 6 regarding the core growth companies' portfolio concentration?
A: The chart shows the share of total portfolio value for our five core companies. The increase is driven by capital allocation, strong performance, and divestments. The same companies are tracked backward as core companies. (Samuel Sjostrom, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
