Kinnevik AB

STO:KINV B

Earnings Call Transcript 2022-Q1

[Georgi Ganev, executive]

Good morning, everyone, and welcome to the presentation of Kinnevik's results for the first quarter 2020. I'm Georgi Ganev, Kinnevik's CEO. And with me today is our CFO, Erika Söderberg Johnson; our Chief Strategy Officer, Samuel Sjostrom; and our Director of Corporate Communications, Torun Litzen.

Now let's move to Page 2. Before we get into the highlights of the quarter, I would like to say a few words about the situation we are in. The first quarter of 2022 was turbulent in many ways. Russia's invasion of Ukraine is causing massive human suffering and will have long-lasting effects on human lives and global relations. Kinnevik strongly condemns the war. And although we have limited exposure to the directly affected areas, we are, of course, doing what we can to ensure the safety of our company's employees in the region.

In the financial markets, the start of 2022 has seen rising interest rates and soaring inflation, which is putting pressure on valuations of growth and tech companies. This is having a negative effect on Kinnevik's portfolio and navigating the current market environment is challenging. However, it also creates opportunities for Kinnevik as an active investor, with a long-term investment horizon, permanent capital and a solid financial position. This is attractive to entrepreneurs looking for funding, and it puts us in a good position to continue backing high-quality companies that we strongly believe will continue to grow and create value.

As for the agenda for today's call, we will begin with the strategic highlights of the quarter and then move on to talk about the new companies in our portfolio. After that, we will go through our updated NAV statement, followed by the key valuation changes during the quarter. And lastly, we will go through our financial position.

Now let's move on to Page 3, where we have summarized the key highlights during the first quarter. At the end of the first quarter of 2022, our net asset value amounted to SEK 67.9 billion or SEK 244 per share, down by SEK 4.5 billion or 6% compared to the end of last year. Private market valuations are increasingly coming in line with public market levels, which is putting pressure on the valuations of our private portfolio. The value of our unlisted portfolio was written down by 10% in the quarter.

In the public portfolio, weak share price developments in Global Fashion Group, Babylon and Teladoc had a negative impact on our NAV. This was somewhat offset by a strong trading in Tele2. And Erika will take you through the development of our NAV in more detail as well as the valuations of our unlisted companies in a few minutes. In the quarter, we also doubled down on the investment theme we call Future of Work with investments in 2 new companies: Omnipresent and SafetyWing, and I will return to these companies shortly. We also invested in Transcarent, which we covered already in our year-end report. And in Agreena, a Danish ag tech start-up.

Agreena enables turning agricultural land into carbon sinks, using their technology to reduce greenhouse gases in our atmosphere at scale. They mint, verify and sell carbon certificates generated by farmers who transition to regenerative farming. With a green investment, we're dipping our toes in the upstream part of the food and agriculture space, and I'm really excited about this investment and look forward to supporting the founders, Simon, Julie and Ida on their growth journey, and to participate in the long-term sustainable transformation of the wider food ecosystem.

In terms of follow-on investments, we participated in the funding rounds of Lunar, Common and Joint Academy, and I will elaborate on Lunar in just a few moments. Finally, during the quarter, the international consulting firm, Equality Group published an index on the Equality, Diversity and Inclusion in Private Equity & Venture Capital Industry globally. And I'm very proud to say that in that index, Kinnevik ranked first in the VC category, a true achievement, and we will continue to be leaders and innovators in sustainability because we fundamentally believe it builds better businesses.

Now let's move on to Page 4. The COVID-19 pandemic accelerated a trend that we call the Future of Work in which we have been monitoring for some time. Our investment thesis is anchored around the 3 elements which we believe will last. Firstly, the rollout of new technologies and increased digitalization. Secondly, the mainstream acceptance of remote working and gig jobs. And thirdly, the war for talent and increased expectations for benefits and social security.

Over the last months, Kinnevik has invested in all 3 of these trends. Last year, we invested in Jobandtalent, the leading digital challenger in the temporary staffing sector. And this quarter, we invested in Omnipresent and SafetyWing, which we believe will ride, drive and build on these trends with their innovating -- innovative service offerings.

Omnipresent provides an end-to-end service that makes it easier for businesses to hire, pay and support the best talent from all parts of the globe. They enable companies to scale their operations into new markets in ways they simply could not achieve without the support of Omnipresent. Co-founders Mathew and Guenther have built a team that is uniquely strong and can deliver on the vast market opportunity.

SafetyWing's vision is to build a global social safety net. They help businesses with remote workforces to attract and retain talent by offering better benefits such as global travel and health insurance. We have been very impressed with SafetyWing's strong team and company culture, and look forward to support cofounders Sondre, Sarah and Hans on their continued growth journey.

Now on Page 5, we will take a closer look at our follow-on investment in Lunar. During the quarter, we participated in Lunar's funding round with an investment of SEK 211 million. We first invested in Lunar mid last year because we believe the company has all the ingredients to become a category winner. It is the only cloud-based digital banking platform to be granted a banking license in the Nordics. It also has a rapidly growing base of loyal users. And at the end of March, the company made a cash offer for the Norwegian digital bank Instabank. The offer has been accepted by more than 90% of the target's shareholders. And if approved by the customary governing bodies, Lunar's position will be cemented as the leading financial challenger across banking, payments and investments in the Nordics.

Now I would like to hand over to our Chief Strategy Officer, Samuel Sjostrom, for a deep dive on our new NAV statement.

[Samuel Sjöström, executive]

All right. Thanks. So we're on Page 6 by now. And this is something we've been looking forward to show you guys for quite a while. Firstly, we've been wanting to provide you with a better bird's eye view of our portfolio since it's pivoted quite a bit over these last years. But perhaps more importantly, this new way in which we slice and dice our NAV really forms part of another step in trying to increase the transparency around our private portfolio as this continues to have a bigger impact on Kinnevik as a whole.

So what are we doing? Well, we're breaking up health care into value-based and virtual care, considering the differences in models and underlying trends. We're grouping our software businesses into one distinct bucket considering their similarities and the success we've had in having that cluster of businesses emerge over these last few years. And we're also introducing sort of a catchall for smaller, early-stage investments and investments we draw from new and more emerging themes that are yet to reach that critical mass that we feel is required to direct your attention to it. And this, we believe, is a much more refined categorization of our portfolio.

However, our portfolio spans a very diverse set of businesses. So no categorization will be perfect. And trust me, we've considered a couple of options here. The platforms and marketplaces category, for instance, that's a category with a pretty wide spectrum of companies. Nevertheless, we very much feel that this is a leap forward from how we used to present our portfolio. And we hope you'll agree with us once you've had the time to digest and reflect on it. And we've posted some historical pro forma NAV statements going back to, I believe, Q4 2018 on our web page.

If we flip ahead to Page 7, these 5 core baskets contain 25 investments that represent around 90% of our growth portfolio. These are the investments that can move the short-term needle and that you'll see us spending time posting you on. For the smaller earlier bets, you'll have to live with our disclosure being relatively low until these investments become more material to Kinnevik as a whole. And that cluster today is around 10 companies making up just a few percent of NAV.

Now what particularly makes this a leap forward is not necessarily that we're shuffling companies around, it's the data points we're providing you with this quarter. And us giving you this data is largely enabled by this new categorization. So going forward, we're disclosing aggregated financial metrics and valuation multiples for each of these 5 key baskets. We're giving you top line growth, we're giving you gross margins and we're giving you revenue multiples. And these are data points we'll be updating as we go along. And the averages you see here and that you see in the report, these are weighted by value, all right, so they're not equally weighted averages. So an investment twice the size of another has twice the impact on these figures. And why is that? Well, it's to ensure a representable depiction of our portfolio as a whole, and again, to focus you, the reader, on what's important.

And in the report back in Note 4, which you're all acquainted to, you'll find the corresponding data for our unlisted assets only. And back there, you'll also find the same indicative data points for the peer groups that we benchmark these companies against. And this, we hope and believe, will give you a more distinct backdrop against which you can scrutinize how we value our unlisted investments.

So on the topic of the valuation of the unlisted investments, let's move on to Page 8. We wanted to help you really unpack the write-down of our unlisted portfolio this quarter in a slightly different way, because it's important you understand what's going on beneath the headline 10% number. So it hasn't escaped anyone that we saw this big correction in Q1, and you have some reference points on the left-hand side of this page. So what happened in our unlisted portfolio? Well, if you take the average change in value of all our unlisted companies, disregarding their respective weights in our portfolio, our unlisted investments were down by more than 20% in Q1. And this number excludes Lunar, where we've had transactions in late Q1. And with all our companies typically growing faster than their peers, I'm sure you all understand that the average multiple contraction in our models is higher than this 21% number.

Now luckily, we're not equally exposed to each of our investments. We tend to have more capital invested in companies that are high performers and have created a lot of value, and we tend to have less investment in companies that perhaps are struggling a bit. So when you weigh that 21% write-down by our portfolio composition, the unlisted portfolio is now down by around 14%. So then how do we get from 14% to 10%? Well, there's 2 factors.

Firstly, with write-downs pretty much across the board this quarter, as you should expect, downside protection provisions like liquidation preferences are coming into play in some of our investments. And these provisions are typically only or primarily relevant in companies where we've only invested in the most recent funding round, and they provide some protection for our investment against downside in case of exits at lower valuations than we've invested at. And this is why you're seeing more limited write-downs of the carrying value of our more recent investments. So that's what's bringing us from 14% to 12%.

And lastly then, there are some FX tailwinds in the quarter, primarily from the dollar. So this provides some cushion and is what completes this bridge to the 10% actual SEK fair value impact in Q1. Now this is kind of substantial. In fact, it's a lot more substantial than the write-down in Q1 2020 when COVID hit. And we're really conscious of the fact that we and I, in the previous quarter, referred to private markets lagging behind public markets as it relates to valuations.

Historically, this is a clearly observable tendency. There are less traders -- sorry, less trades and fewer traders in private markets than in public markets, and ownership changing hand as often leads to private markets taking longer to reflect what might be a new reality. This time looks different. Private markets seem to be catching up faster. So we're no longer leaning on that concept of a private market lag this quarter. Rather, we've carefully sought to reflect exactly where public markets were in end of Q1 when we value our private businesses. And this is challenging because there are very few private companies actually pricing rounds in this environment.

And Erica is going to cover the key valuation changes when I wrap up shortly, and we'll also be posting a presentation on our web page that outlines how we approach the valuations of our unlisted assets in more detail. And we hope this will further your understanding of a process and an approach that, to be honest, we feel is very, very robust and that we put some pride into.

Looking closer then at the public markets development, this speaks a pretty clear language. So if we move on to Page 9. This is data we pulled from Bessemer's Emerging Cloud Index. This is a stock index designed to track performance of emerging public cloud software businesses. And it's a pretty good albeit a broad proxy for tech stocks in general. So this chart is showing SaaS multiples of NTM revenue -- that's next 12 months' revenue -- over the last 5 years. I think this chart has 3 key points.

Firstly, you will see the correlation between multiples and rates. Secondly, a point is that all companies are not valued equally. There's still a considerable premium for high-growth quality businesses and you see the medium blue line in the middle, that's the median for the entire index and the dark blue up top is the median multiple for businesses growing by more than 30% year-on-year. And the light blue line down below, that's the median multiple for businesses growing by less than 20%. And as you can clearly see, there's quite a wide gap on both sides of that median valuation level.

The third point I'd like to make is that the median SaaS business is now valued below both pre-pandemic levels and the 5-year median, which is the dashed amber line. Let's see how this chart looks in a month, a quarter or a year from now, but just looking at where valuations are today, at least they seem a hell of a lot more derisked and sustainable than sort of peak 2021 does from a historical perspective. So with us trying to value our private portfolio against the rightmost data points in this chart as a sort of new normal, we believe this means our NAV statement provides a view of private market valuations ahead of this private market actually finding that bid-ask equilibrium as, again, very few rounds are being priced in this market.

So we're yet to see a lot of tangible data on how private valuations have shifted. But moving on to Page 10, we are seeing a couple of things more broadly. And what we're seeing is a materially cooled down exit market. We're seeing fundraising being down as a signal that companies may increasingly consider internal rounds, bridge financing and measures to decrease burn all to avoid pricing themselves in this market. And clearly, companies that raised large amounts of capital last year have no urgency to raise in the current environment.

Just by way of reference to that point, our company has raised in aggregate more than SEK 50 billion in new financing last year, and we have a SEK 5 billion net cash position growing to in excess of SEK 8 billion after the Tele2 dividends in May. But trying to look at this from a strict valuation point of view, I think there's at least some directional indications as to what's going on. We've heard platforms for secondary private growth equity saying prices on their platform were down 20% in Q1. And another sort of vague, but at least indicational signal and also a very company-specific one, is that we saw Instacart themselves take down its common stock valuation by 40% in their stock option program related filings a few weeks ago.

And amidst all of this uncertainty, we're still sensing 2 wedges in valuations that we touched upon in the last quarter. Firstly, we believe late-stage, slower growth businesses are impacted more significantly than early-stage, high-growth businesses. And this is the space that's sort of, to a further extent, feeling the pinch of crossover investors defocusing on private businesses and also a space that is priced on a more short-term basis with a pretty near-term exit horizon.

Secondly, we believe median businesses are impacted more significantly than the leading category winning ones. There were many companies that sort of rose with the tide last year, and as that begins to ebb away, we believe we might see this flight to quality supporting the valuations of the high performers and pressuring the valuations of the more average businesses. And as always, if you're growing at a high compounding rate and burning efficiently, you can stomach quite a lot of multiple contraction and still create equity value.

And these are all signs and beliefs that we're seeking to reflect in the NAV statement that we're putting out today. With that, I'm happy to take any questions when we get to Q&A. But for now, I'll hand over to Erika for the key valuation changes this quarter.

[Erika Johnson, executive]

Thank you, Samuel. The fair value of our unlisted assets was written down by SEK 3.3 billion or 10% in the quarter. This was partly offset by net investments of SEK 1.6 billion, and the private portfolio decreased in value by SEK 1.7 billion to SEK 31 billion.

Since late 2021, rising interest rates and inflation has caused valuations of publicly listed equity in high-growth technology companies to derate materially. Private markets have, as Samuel alluded to, in previous bear markets, taken 6 to 9 months to adjust, but we see clear signals of valuation levels between private and public assets reconciling at a faster pace this time around.

In assessing our valuations for end of Q1 2022, we are not taking into consideration private markets potentially lagging behind public markets but seek to fully reflect the end of March valuation levels of publicly listed peers when valuing our younger, faster-growing unlisted businesses.

In reflecting the public market correction, as Samuel also alluded to, we believe this impacts later-stage companies more adversely than earlier-stage companies. We also see clear indications of the public market contraction bearing less effect on companies regarded as leading businesses in their area. The best-performing businesses, typically but not always, overlap with the companies that have raised the most equity financing, and therefore, have the strongest balance sheets and largest -- longest runways. This makes them less dependent on the near-term funding climate and provides for more robust valuations.

And in our valuations, we take all these parameters into consideration. The material derating in public growth equities used as benchmarks for our private businesses was the single most driver of the downwards value change in our unlisted portfolio. Multiple contraction had a material negative effect of more than SEK 8 billion on our valuations in the quarter. Revenue growth offset slightly more than half of the impact of compressing peer valuation levels, with a positive contribution of around SEK 5 billion.

So now let's move to Page 12 where we provide some details on the key unlisted valuation assessments. We made broad-based write-downs during the quarter. The most significant NAV impacts were at Cityblock, Mathem, Pleo and VillageMD, which accounted for more than 65% of the aggregate write-downs. Lunar is the only write-up in this quarter, driven by in-quarter transactions. Valuations were unchanged in Budbee and TravelPerk due to more conservative valuations coming into the first quarter, combined with strong operational performance.

Pleo raised capital late last year and our fair value is down by almost 10% in the quarter from a mark corresponding to the valuation used in that raise. The write-down reflects the share price development of the peer group's top quartile in the quarter. The valuation still implies a significant premium to the peer group in the near term. but normalizes over the longer term, as Pleo is expected to grow significantly faster than even the best-in-class listed peers.

TravelPerk raised capital in late December and the fair value of our stake is flat in the quarter. The valuation is in line with where the company raised a new financing at the end of last year, and the unchanged equity value reflects TravelPerk's superior performance, benefiting from a sharp rebound in business travel as well as continued strong acquisition of new clients.

The equity value of VillageMD was down 11% in the quarter from a level corresponding to the transaction with Walgreens Boots Alliance during the fourth quarter of 2021. As a result, the forward-looking multiple contracts well in excess of the peer group average and a premium to peers contracts materially. VillageMD is valued in line with the top performance in its peer group on a 2023 revenue basis, and this reflects the company's structural advantage and stronger growth trajectory.

Our holding in Cityblock was written down by 17% in the quarter. The forward-looking multiple has been compressed by almost twice as much as the peer group average. Thanks to continued strong underlying performance, the write-down becomes more muted. The valuation remains at a premium to most but not all peers on a 2023 revenue multiple basis, which is also reflective of its higher growth rate.

Mathem was down by more than 40% in the quarter. The main reason for the write-down is that multiples of key peers contracted by more than 35% in the quarter. In addition, Mathem is still operating with its old logistics facilities with lower efficiency putting a pressure on margins. While Mathem's merger with Mat.se and its long-term strategic supply agreement with Dagab is a major positive, it's not enough to balance out the material correction in the market. The asset valuation implies a multiple of 0.8x the company's 2021 revenues.

Now moving on to Page 13. Our net asset value amounted to SEK 67.9 billion at the end of March or SEK 244 per share. This is down by SEK 4.5 billion compared to the fourth quarter and represents a net asset value decrease of 6% in the quarter. Compared to 1 year ago, this represents a decrease of 5% using pro forma numbers excluding Zalando. In the public portfolio, Global Fashion Group fell back by around 60%. And Babylon and Teladoc also had soft quarters coming down by approximately 30% and 15%, respectively.

We continue to reallocate capital within our growth portfolio and released SEK 1 billion from Teladoc in the quarter, adding to the SEK 2.2 billion released last quarter. Tele2 rallied 10% in the quarter as the markets are favoring value stocks. The NASDAQ Internet Index traded down 22% and the OMXS30 traded down 13%, while our total shareholder return was negative 24% in the quarter. And with yesterday's closing prices of our listed assets, our net asset value was SEK 67.8 billion.

Now please turn to Page 14 for an update on our financial position and capital allocation framework. During the first quarter, we invested a total of SEK 1.7 billion, where SEK 1.2 billion was deployed into new businesses. The largest are Transcarent, Omnipresent and SafetyWing. Our largest follow-on investments in the quarter were into Lunar, Common and Joint Academy.

During the last 3 years, including at the latest market peak, we have been net sellers releasing nearly SEK 22 billion from our portfolio, whereof we have invested around SEK 15 billion and distributed SEK 4.4 billion in cash dividends. The release of capital has strengthened our cash position and pro forma for the dividends to be received from Tele2 in May, we have a net cash position of SEK 1.8 billion.

Looking into the rest of 2022, we believe that as long as opportunities to back great founders and ideas arise, it is key to maintain our investment momentum, continue to back the winners in our portfolio and actively reallocate capital to ensure our portfolio remains vibrant and dynamic. And as stated in our year-end report, we expect to deploy around as much capital in 2022 as we have averaged during the last 3 years. That is in the region of SEK 5 billion.

With our strong financial position and proven track record of backing category-winning businesses, we feel confident that Kinnevik has -- the Kinnevik team has the right tools, strategy and perspective on business building to continue to create long-term sustainable shareholder value. And with that, I would like to hand back over to Georgi for some closing remarks.

[Georgi Ganev, executive]

Thank you, Erika. We end today's presentation where we started with the situation in the Ukraine. The war is a humbling reminder of how fragile peace really is and makes financial returns seem utterly unimportant. As I said at the beginning of the presentation, I do believe that our long-term investment horizon, our broad portfolio of growth companies and solid financial position makes us standing strong despite the current uncertainty.

Challenging times often spurs innovation. And thanks to our strong market position, we are ready to support founders who are building transformative digital companies that makes people's lives better. It's our firm belief that quality companies with innovative customer propositions and strong tractions will continue to grow and create value.

In May, we will host our Annual General Meeting and I look forward to welcoming shareholders in person for the first time in 3 years. And we are now ready to answer your questions. So operator, please open up for Q&A.

[Operator]

[Operator Instructions] Our first question comes from the line of Joachim Gunell from DNB Markets.

[Joachim Gunell, analyst]

So I really appreciate the improved transparency and granularity on how you assess the unlisted portfolio values. But can you just help us understand how here with regards to how we can get comfortable with the current EV revenue multiples actually reflect what you see in the public markets? Because I mean, if we take the, I mean value-based care segment, for instance, I mean, we know that Babylon is perhaps a company that you own that actually have the revenue growth profile, which you highlight the most, perhaps the gross margin profile that should potentially reflect also where your unlisted assets currently are, they're valued at a multiple that is a number of terms lower than your current value-based care segments, et cetera. So just a few comments on what we should factor into that, given that you weigh it towards growth and perhaps gross margin profile? As well as over what time frame do you expect to shift this EV quick revenue framework towards more DCF valuation-based -- valuation basically?

[Georgi Ganev, executive]

Thank you, Joachim. Let me start by addressing the question regarding Babylon and then I will shift over to Samuel for some elaboration around the valuation methods. So on Babylon, of course, we have seen a soft trading, but it's also very much related to the poor liquidity in the stock post the SPAC transaction that happened last year. So I would say that it's more of a specific case that does not generally reflect the value-based care market or the valuation methods that we use for valuating our companies. But maybe you, Simon, can go into that as well.

[Samuel Sjöström, executive]

Yes, sure. Thanks. Joachim, I mean a general point, over these last 18 to 24 months, we've seen this flurry of IPOs and SPAC transactions that has sort of broadened the peer groups we look at quite significantly. Babylon is clearly one of those companies going public throughout this period. As Georgi said, there are some technical sort of factors to take into account as it relates to Babylon. And that's sort of, in general, things that we consider when we compose our peer groups. So we tend to avoid adding companies that very recently listed or where there is sort of very low liquidity or there might be lockup provisions that might sort of have an impact on where the share price is at. So it's not as easy as just looking at businesses that do sort of the same thing and then benchmarking against an average number.

Speaking of average numbers, that's sort of what we're dabbling with here, right? If you unpack that peer average, you can see a fairly wide dispersion between companies being valued at richer multiples and at lower multiples than that average number. That's the general point. I think on value-based care, it's quite simple. We're growing twice as fast as the peer group, hence we feel a premium is warranted. And it's a pretty typical pattern that we see in sort of our high-growth businesses that it looks a bit rich. For instance, if you look at sort of 2022, but looking into 2023, all of a sudden we're in line with the peer group. And that's just the concept that we like and that is standard.

On the comment on sort of moving into DCFs, I'm not quite sure how helpful that would be. Firstly, I think the way investors approach these businesses is still largely on a multiple basis. Clearly, if you put a revenue multiple under a microscope, what you see is a DCF. But at this point in time, people are not sort of doing 10-year out projections on these businesses and then discounting [ home ] the terminal value, which makes up 90% of whatever intrinsic value you end up at. So we prefer to stick with multiples for that reason, but also for the reason that were we to do DCF in our businesses, we wouldn't be able to give you this sort of sense of relative valuations because we're not going to upload those spreadsheets on our web page. I think I'll pause there, and let's see, Joachim, if you want to sort of head in a different direction or zoom in on something.

[Georgi Ganev, executive]

We also...

[Joachim Gunell, analyst]

Yes, sure. No -- sorry, yes, but is the way to look upon this that, okay, from where we stand now, the best thing for us to scrutinize with regards to how to set the value here is to look at, okay, call it, EV revenue growth-adjusted multiples in order to take into account gross margin based on the peer groups you now highlighted to basically follow this on a more, call it, regular basis?

[Samuel Sjöström, executive]

Yes. That's exactly right. And I think ultimately, it's about risk reward, right? Where on that sort of -- where on that matrix of growth and revenue multiples does investors want to play at? And we're not a bottom left corner investor. That, we leave to other people. We're interested in investing in companies that are growing at a significant rate.

[Joachim Gunell, analyst]

Understood. And the final one for me. With regards to -- okay, you talk about that you want to factor in that there should not be as long of a lag effect in public markets versus private here. But can you say anything about what's the key message here to your various holdings? I mean many of which [ recap as late as ] 2021, should they continue to emphasize growth that's in line with their current growth strategies or basically extend cash runways to avoid down rounds in the, call it, this year?

[Georgi Ganev, executive]

No, I think we are a long-term investor, Joachim, and we are investing in growth companies. If we believe that the company has a very robust business model and we see strong unit economics, we want them to prioritize growth over profitability as long as they can, have a premium growth versus their peers. So that is, I think, the general statement. But obviously, we need to also look at cash runway. As Erika said, our well-performing companies has a strong correlation of large rounds end of last year. So we are luckily placed with a portfolio that has a very strong balance sheet overall. There might be exceptions. And if we have a long-term belief, we will also support these companies in tough times, not only good times. So we stick to the strategy and we would like to see premium growth.

[Operator]

And the next question comes from the line of Derek Laliberte from ABG.

[Derek Laliberte, analyst]

Yes. I really appreciate the clarity on -- the additional clarity on your methodology. I was wondering, I mean, obviously, private markets, you mentioned are down, but public peers have been falling for quite some time. You didn't do that much to valuations last quarter and you mentioned this dispersion. I mean where do you think the spread is? Now I'm not sure if you answered that, the spread between private and public valuations, and where do you think they're going under the assumption that the public markets are flat from this point?

[Samuel Sjöström, executive]

Derek, I think I'll refrain from comment where we believe that the markets are in terms of the private-public gap. I think I'd prefer to comment on how we approach it when we put together this NAV statement. And we're doing this on the assumption that they have now reconciled. That doesn't mean that every single private business is going to raise capital at whatever average peer group multiple you want to sort of come through. It's still companies we're talking about. These are sort of living organisms and they're all different. But as it relates to this lag, it's nothing that we incorporate in our Q1, and that contrasts again what we did in our Q4, where you heard us and myself arguing that there is a lag. Now we're saying the opposite.

[Derek Laliberte, analyst]

All right. Got it. Now that's -- certainly I understand that. And a follow-up on Joachim's question here regarding the -- I guess, the spread between the multiples that you present here for the unlisted groups compared to the public groups. I mean it is a pretty wide dispersion here between the 5.5 to 7.5 for value-based, 17.5 to 20x for virtual care. I mean shouldn't this be a bit risk adjusted despite the higher growth rates? I mean looking at the software category also, for example, I mean, I don't know what public software companies are trading at close to 40x sales. I'm just having a bit of trouble to see how this is justified. So if you have any additional comments on that would be greatly appreciated.

[Samuel Sjöström, executive]

Sure. I mean on the public side, there are a couple of companies that are trading way above that average number. I mean you have companies like Cloudflare, Bill.com, Snowflake. I think Atlassian is still trading north of 20, 25x NTM revenues. So this is not sort of a wild unprecedented figure also by public market standards. On software -- and I'm sorry to sound like a broken record, but again, on average, we're growing 4x faster than the peer set with strong gross margins. So that means this sort of premium that we're putting in the report now, it turns into a discount if you push your horizon just 12, 18 months out. And that's not something we're losing sleep over. That's sort of an integral part of venture investing and that we're taking execution risks on these companies continuing to deliver.

[Derek Laliberte, analyst]

Okay. Cool. No, that's clear. And I was wondering, could you -- apologies if I haven't found this in the report, but could you give some more detail on the Pleo valuation here with regards to the multiples applied? And if you have any peers that you could sort of name-drop in this case?

[Samuel Sjöström, executive]

I think the Pleo valuation, as evident by our returns that you'll see in our NAV statement is on the higher end. In terms of peers, I think we covered it at the last quarter and we put some fair amount of thought and time into Note 4, Derek. So I'd suggest you consult that where we emphasize sort of the concept of looking increasingly on software businesses with a high share of transactional revenue as opposed to subscription revenue. That's sort of the benchmark over time for this company. But again, another business that's just growing wildly faster than the peer set. So this is a very fast-moving situation. And these lofty multiples turn into something that looks very prudent and almost borderline conservative, just again looking 18, 24 months out.

[Derek Laliberte, analyst]

Okay. I'll definitely check that out in more detail, yes.

[Georgi Ganev, executive]

Yes. And as you know, Derek, we have this presentation on the valuation deep dive and also the session later on that we can drill down in some of those questions.

[Derek Laliberte, analyst]

Great. Great. I look forward to that. And finally for me, if it's okay, I'd just like to ask about Mathem, if you could provide some detail on what's going on there. I think I saw some comment about the company not growing in Q1. And if that's the case, is that pandemic related or macro or competition? Or if you have any details you could provide there on the state of the business, would be great.

[Georgi Ganev, executive]

Yes, sure. I mean I think the CEO of Mathem was pretty explicit as well when he was interviewed a couple of weeks ago that we see, of course, difficult comps post pandemic. It's a combination, I would say, of order size and frequency that has changed. So difficult comps for sure. On top of that, why we are taking the value down with SEK 555 million roughly is because they have less efficiency improvements because of the non-automized warehouse.

So that's basically -- the plan is to launch like warehouse end of this year. And if we then compare it with Oda, for instance, it's a company that is probably 1 or even 2 years ahead of execution on their strategy with both higher efficiency and a proven business model that they could also show us during the pandemic with strong growth numbers and faster growth because of the international expansion. So Mathem is written down because of the peer group, and we see that they are kind of lagging versus the other food businesses in our portfolio.

[Operator]

And the next question comes from the line of Nizla Naizer from Deutsche Bank.

[Fathima-Nizla Naizer, analyst]

I have a couple of questions from my end. Firstly, I'd love to get some more color from you on your portfolio. Which companies are more at risk when it comes to sort of rising inflation and risks to the consumer discretionary spending? And where have you seen most resilience, both in terms of behavior and sort of your company's ability to deal with this? Some color there would be great.

And secondly, we've spoken about the derating. Are you seeing more interesting opportunities to invest arising as a result of it? And would that mean your investment activity accelerates over the next couple of quarters to be more opportunistic on that regard? Some color there would be great.

[Georgi Ganev, executive]

Thank you, Nizla. I mean looking at our sectors, we're investing in a sector and overarching trends. So we think these are tailwinds for a long time ahead, right? And if we take health care as an example, it's nothing that will decrease because of the interest rates going up or down. It's basically a massive need in order to become more efficient in the health care value chain, right? What we see now is probably very much to the extent of almost 100% correlated to the peers and the market multiples.

Also in food it is something that will be kind of less sensitive for instance. There are, of course, pockets like home delivery of meal kits and so forth that might have -- it might see an impact over time if we have a different kind of macro-economical development. But overall, I would say that our portfolio is relatively resilient.

The second question of yours, if we are a net investor or net seller in the coming years, I would probably today argue that we have a lot of flexibility. Firstly, because we have a wide mandate. We don't have any fund maturity. We don't have any restrictions. And on top of that, we have a very stable cash position. With the Tele2 dividend included, it's SEK 8.1 billion. So I think we have a lot of firepower, and there will, for sure, be opportunities in the coming 6 to 24 months where we could invest in something that we think is truly exciting for the long term. So we are ready to invest, but we have no pressure do so because of any kind of maturity of cash or restricted mandate.

[Operator]

Follow-up question from Joachim Gunell from DNB Markets.

[Joachim Gunell, analyst]

Yes. So just 2 questions from me. Starting off with a follow-up with regards to -- I mean, when we talked about Babylon that the low perhaps liquidity was the reason for where the valuation is where it has been there. Would you say that the liquidity is in some cases better in your current unlisted portfolio? And yes, perhaps if we start there and I have a follow-up afterwards as well.

[Georgi Ganev, executive]

I mean I think it's partly the illiquid share that, of course, impacts the trading but it's also the peer group. I mean -- so it's both kind of reasons for that share price dropping. And I think -- I mean, I can't say that liquidity is higher in our private investments, but the peers we are using in our peer groups, they have higher liquidity than Babylon. That's basically how I would like to put it. And they're more relevant as peers when we look at companies for Cityblock, VillageMD and others.

[Joachim Gunell, analyst]

And with regards to the long-term emphasis here, that you will be able to -- or ready to commit your pretty stable cash position here into both new and current investments. Can you say anything if it would make sense to actually, I mean, pressure the valuation when you increase your pro rata in the current portfolio in order to basically create most attractive returns in the long term? So any comments on that?

[Georgi Ganev, executive]

I think a general comment from my end, Joachim, is that we provide you with a fair value because that should be fair. We can't use that as a technical tool to either put us in a better or worse position. That goes in both valuing companies to the better or to the worse. So it's always our intention to publish a fair value and be very transparent with that model. But maybe then to give a more nuanced answer on what I think you're alluding to, there's no point for us to actually try to keep up the value to save our portfolio if we are also investor in the company.

And I think Mathem is a clear example of that. We still very much support the company's long-term plan. We think and we know that looking at Oda that this business model works. And should we be ready to deploy more capital, we think it should be on fair terms.

[Operator]

And as there are no further questions, I'll hand it back to the speakers.

[Georgi Ganev, executive]

Yes. Thank you very much for listening and for your questions. And as a last reminder, we will report the results for the second quarter of 2022 on the 11th of July. So thank you very much. Bye-bye.