Vimian Group AB

STO:VIMIAN

Earnings Call Transcript 2023-Q2

[Operator]

Welcome to the Vimian Group Q2 Report 2023. [Operator Instructions]

Now I will hand the conference over to the speakers, CEO, Fredrik Ullman; and CFO, Carl-Johan Zetterberg Boudrie. Please go ahead.

[Fredrik Ullman, executive]

Good morning, everyone. Welcome to Vimian Second Quarter Earnings Call. I'm Fredrik Ullman, CEO. And with me today, our CFO, Carl-Johan Zetterberg.

So today, we present another quarter with strong organic growth of 14% and positive momentum across all segments. And our EBIT margin, operating profit grew by 28%. We delivered EUR 81.3 million in revenue and grew adjusted EBITA by 15%, reaching EUR 20.3 million.

I'm especially proud to see how the team in Diagnostics have navigated the past year's headwinds in COVID, and we delivered double-digit growth, thanks to strong sales execution on the ground and innovation. We strengthened our underlying cash flow from operations and continuously strived to improve performance with the aim to deliver margin expansion in H2 as we gain leverage from our investments and we see some cost measures materialize.

Our positive growth momentum continues, and we see sustainable demand for animal health over the coming years. With that, I'd like to hand over to Carl-Johan.

[Carl Johan Boudrie, executive]

Thank you very much, Fredrik, and good morning, everyone.

As Fredrik said, we continued our strong growth with 21% revenue growth, achieving EUR 81.3 million in revenue in the quarter. Organic growth was 14% [Technical Difficulty] market performance in all segments. Acquisitions contributed [Technical Difficulty] negative impact from currency movements of 2%.

For the first 6 months, revenue increased to EUR 169.4 million, and organic revenue growth was 13%, primarily driven by MedTech and Specialty Pharma. [Technical Difficulty] grow 13% in the first half, and there was no impact on currency movements. [Technical Difficulty] 15% to EUR 20.3 million at a margin of 25.0%. The lower margin compared to the same period last year reflects the mix effect from faster growth in U.S. Specialised Nutrition and investments to drive growth.

During this year, we have seen a positive market development in all segments over last year. While we continue to see a stable or improving gross margin in a high-inflation environment, excluding impact from fast growth in U.S. Specialised Nutrition, gross margin increased by 1 percentage point in the quarter.

We have 5 geographic footprint with Europe and North America, which are accounting for approximately 45% of revenue. With our successful growth in the annual order program, as well as the strong performance of Specialised Nutrition in U.S., we have increased our share of revenue from North America during the year.

With the recent acquisition of Bova of Australia and Vettr, we have also strengthened our business in Australia in Specialty Pharma and Veterinary Services in the region. The strong development recorded in the last couple of quarters continues, and as of the second quarter, our pro forma revenue was EUR 329 million. Since 2020, we have more than tripled the business through organic growth and continued with the strategic acquisitions.

Revenue growth has also supported a strong profit increase. We have grown our profit ahead of revenue, almost quadrupling adjusted EBITA at EUR 86 million. We continue to actively drive several organic growth initiatives and synergies within and between our segments and acquired entities to support continued strong revenue and profit development.

Back to you, Fredrik, for some further insights to the quarter and business update per segment.

[Fredrik Ullman, executive]

Thank you, Carl-Johan.

So if we look at our segments, all 4 segments delivered above-market growth, as Carl-Johan said, and I will dive into the largest segment, Specialty Pharma.

The Specialty Pharma organic growth accelerated to 18% in the second quarter with strong growth across therapeutic areas and regions. We see exceptional performance in our U.S. Specialised Nutrition, driven by regional expansion within the U.S. and the launch of new products.

We grew adjusted EBITA with 18% and the adjusted EBITA margin is at 26.4%, primarily reflects the mix effect from the strong growth in Specialised Nutrition. We continue to deliver on our strategic agenda, launching 20 new products during the quarter, taking the total for this year so far to 45. We are progressing our innovation projects and are preparing to establish direct distribution in Spain during the second half of the year.

We made a small CapEx investment in pharmaceutical manufacturing facility in Australia to strengthen our production footprint and gain access to additional sterile and non-sterile production capacity for the segment. To summarize, positive momentum continues with a very exciting product development and innovation pipeline in Specialty Pharma.

Moving on to our second largest segment, MedTech. In MedTech, we delivered 8% organic growth in the second quarter despite the pull-forward effect from the annual order program in Q1. Year-to-date, we delivered 17% organic growth, well ahead of the veterinary orthopedics market. We see solid growth across regions with an acceleration in growth in this quarter in Europe and Asia Pacific.

The adjusted EBITA grew with 13%, and we continued to expand our margins to 28.4%. The rolling 12-months margin to adjust for the effect of annual order program is solid at 31.6% from 30.2% at the end of 2022 as the segment successfully integrates acquired companies and streamlined the organization.

Operationally, we continue to optimize the supply chain and have centralized warehouses in U.S. and Europe during the quarter. We implemented a new organizational structure with the clarified responsibilities and reporting lines to enhance efficiency and employee satisfaction. The quarter marked a high level of sales and marketing activities and our strategy -- sorry, our surgery trainings for veterinarians continue to be highly appreciated. We see solid demand for veterinary orthopedics across the globe and are excited about the development within MedTech.

Moving on to Veterinary Services. We delivered organic growth of 9% in the second quarter with record level member recruitment, especially in our new markets where we now have over 600 clinics. In total, we have over 6,000 member clinics in 12 countries, cementing our position as a leading veterinary service platform in the world.

The adjusted EBITA margin is at 26%, and that is the third consecutive quarter with margin expansion up from 22% in Q3 last year. We have, in this quarter, onboarded the Vettr team in Australia, a GPO we acquired during the spring, and we're excited to now have a stronger platform in the region. We also continue to work on our digital platform, Heiland.com, and have during the quarter strengthened the digital tech team. In summary, we see solid development in Veterinary Services as well.

Moving on to Diagnostics. The team has successfully navigated the past year's headwinds from COVID. We delivered 16% organic growth in this segment, well ahead of the market, driven by team's strong sales execution and new product launches developed during the past years. We have solid growth across regions and product categories and are taking market [Technical Difficulty].

The improved adjusted EBITA margin at 24.3% reflects operating leverage and progress on our cost optimization program initiated last year, which will also continue to improve during the second half of this year. In the first quarter, we launched our new AI innovation platform, Ovacyte, to detect and analyze parasites among animals. The platform is being well received among veterinarians, and we see good ramp-up in installations during the quarter. Going into Q3, positive momentum continues in Diagnostics with healthy trading during the summer period.

Handing over to you, Carl-Johan, for more detail about our numbers.

[Carl Johan Boudrie, executive]

Thank you, Fredrik. And let's have a look at the second quarter financials to give you some more color on the numbers for the second quarter.

The good revenue growth supported the adjusted EBITA increase of 15% in the quarter to EUR 20.3 million, and the operating profit improved from EUR 7.9 million to EUR 10.2 million, an increase of 28%, equal to an operating profit margin of 12.5% in the quarter, which is 0.7 percentage points [Technical Difficulty]. The operating profit includes items affecting comparability, which decreased to EUR 4.3 million, primarily due to lower acquisition-related costs, as well as PPA-related amortizations of EUR 5.8 million, increasing from the same period last year with new acquisitions completing during the last 12 months.

Net financial items amounted to minus EUR 3.2 million, which consists of 3 main parts: financing costs of EUR 4.4 million in the quarter with an average interest rate of 5.7%; the positive impact from adjusted contingent considerations, earn-outs, including the discounting impact of EUR 5.5 million, which reflects the technical adjustment of the purchase price of one acquisition. This is offset by a negative exchange rate impact of EUR 4.3 million.

Financial items in the second quarter of last year includes a probability adjustment of contingent considerations of EUR 6.6 million. The tax expense for the quarter amounted to EUR 3.7 million. The high tax expense reflects a taxable result higher than the net result due to tax losses without recognition of deferred tax assets and nondeductible expenses, which [Technical Difficulty] currency impact, recognized with high financial items [Technical Difficulty] continued by business.

Profit for the quarter amounted to [Technical Difficulty] adjusted for items affecting comparability, earnings per share amounted to [Technical Difficulty]. Looking at cash flow [Technical Difficulty] actively to improve cash flow [Technical Difficulty]. The reported cash flow from operating activities includes the litigation payment as per the [Technical Difficulty]. [Technical Difficulty] EUR 75.6 million at the end of June, which is up from EUR 72.9 million at the end of March. The increase is driven by slightly higher inventory, higher level of [Technical Difficulty], partly offset by lower accounts receivables as Annual Ordering Program customers pay [Technical Difficulty].

Cash flow from investing activities primarily related to earn-out payments decreased compared to last year to EUR 42.2 million in the quarter. And cash flow from financing activities of EUR 126.2 million reflects the drawdown of the credit facility to finance the litigation payment and earn-outs paid.

Cash and cash equivalents amounted to EUR 50.8 million at the end of the period, up from EUR 45.9 million at the end of the previous quarter. During the rest of the year, we will continue our efforts to improve cash flow and specifically net working capital. We start to see positive effects from our focus on supply chain in especially MedTech with centralized warehouses in Europe and U.S. We will continue our supply chain improvements, optimizing the product portfolio, distribution and further digitalizing the supply chain.

Looking at net debt and leverage. At the end of the period, net debt amounted to EUR 296.1 million versus EUR 292.8 million as of 31st of March this year. This results in a leverage net debt to last 12 months pro forma EBITDA of EUR 3.1 million, which is in line with our long-term financial targets. The reported net debt is not impacted by the settlement in the U.S. patent dispute as we have a contractual indemnification protection through the purchase agreement from the acquisition of VOI. Therefore, the amount of the receivable under the indemnification is deducted from the net debt.

And some news on the current trading. We have started the year strong with good development in all segments. The positive momentum in the business have continued in the summer with mid- to high-single-digit growth on the back of a very strong June. The global economy and macro-economical outlook are still uncertain, and we continue to monitor demand very closely. But overall, we are positive about the development in our business, and we aim to deliver margin expansion during the second half of the year, both sequentially and year-over-year.

We even hosted the Annual General Meeting on the 2nd of June, electing Robert Belkic as a new Board member. Robert brings extensive experience from his role as CFO of Hexagon and will be an important addition to our Board and to Vimian. The process to retrieve compensation on the indemnification protection in the U.S. patent dispute is ongoing with filings to the court, and we are naturally working hard to finalize this.

Back to you, Fredrik.

[Fredrik Ullman, executive]

Thank you, Carl-Johan.

Moving over to our ESG agenda. We continue to develop our ESG agenda. And in the second quarter, we completed our first group-wide employee survey with a positive outcome. We see very high levels of engagement and strong entrepreneurship across the group with a good employee Net Promoter Score of 32. We also -- I was also encouraged to see that there is a strong sense of belonging in our teams, which is a key driver for employee satisfaction.

So to conclude, Vimian delivered a good second quarter and first half of the year. We remain well positioned, and the overall sector continues to show resilience despite the wider macroeconomic environment. Our focus remains the same, and we continue to build leading market positions in attractive niches of animal health, and we are committed to strengthen cash flow and margins over the coming quarters.

As you know, I took a difficult decision in June to step down from my position as CEO, and the recruitment process is now ongoing. Vimian has, over the past years, almost tripled in size. And now that all 4 segments are performing well under strong leadership teams and good systems in place, I found the time right to eventually hand over. I do remain a committed investor and a strong believer in the potential of Vimian, and I look forward to following the company and the team's progress in the years to come.

With that, I would like to open up for any questions.

[Operator]

[Operator Instructions] The next question comes from Blanka Porkolab from Barclays.

[Blanka Porkolab, analyst]

My first question is on Spec Pharma and Diagnostics. How should we think about the sustainability of the double-digit organic growth seen here? Is this reasonable for the remaining quarters? And what do you expect the key drivers to be?

My second question is on margin expansion in the second half. Could you provide some color around the magnitude you expect here and which businesses are likely to be the key contributors?

[Fredrik Ullman, executive]

So we don't give any guidance on specific -- I mean we don't give any guidance. But can we expect to see good growth in those segments going forward? Yes. What is it -- what are the drivers? Mainly innovation and geographical expansion. We are launching numerous new products in both of these segments and that are so far well received, and we're quite excited about those products.

Your second question was about the margin expansion. We're not -- we cannot give you a quantification of that, Blanka. We can say that it's mainly driven by the fact that we have -- we expect to see returns from the investments in growth that we have put in place. And on the central, we see expansion of margins in the underlying businesses. And we have put a central team in place that is now fit for purpose that we don't expect to expand. And so with continuous organic growth, we expect to see operational leverage.

And we also have some cost containment programs, especially in Diagnostics, where we are consolidating production. We will see the financial impact on our savings from that in the second half of the year.

[Blanka Porkolab, analyst]

Great. And I just have a follow-up question around the July commentary you gave. So how should we think about that mid- to high-single-digit growth across the different businesses? Are there any that at the level or higher end of that range?

[Fredrik Ullman, executive]

No, there's -- it's actually quite even, I would say. There are no outliers there. But it's very early to tell. I mean it's a slow -- typically a slow month in July when people are on vacation. So it's very early to predict the quarter just based on July.

[Operator]

The next question comes from Rickard Anderkrans from Handelsbanken.

[Rickard Anderkrans, analyst]

First one on Specialty Pharma, I just wanted to check on the strong organic growth there if there was any particular pull forward or stocking effects. It seems like perhaps June was particularly strong. It would be interesting to hear if there's anything exceptional driving that growth that we should be aware of.

[Fredrik Ullman, executive]

It was exceptionally high growth. I mean we cannot expect that type of growth every quarter, but it's not a pull forward. It's just that when we enter a new geography in the U.S., we -- it's typically high volumes that we deliver. So for every geographical expansion or account expansion, it drives high growth. But it is -- we cannot guarantee that type of growth every quarter, for sure.

[Rickard Anderkrans, analyst]

All right. Makes sense. And just a follow-up on the margin improvement question asked previously. How should we think about the cadence of margin improvement? Should we expect perhaps a bit slower development in Q3 with a big pickup in Q4? Or should it be more of a linear improvement? Just to get a sense of how you're thinking about the margin expansion trajectory.

[Fredrik Ullman, executive]

I would see more a linear development. That will be my assumption. There's nothing -- it's not like there is a onetime effect of something that will just hit in Q4.

[Rickard Anderkrans, analyst]

All right. And just a question on leverage. Are you sort of committed to deleveraging the balance sheet? Do you have sort of a target leverage level for the end of the year? Just to get a sense of how we should think about the leverage development in the coming quarters.

[Carl Johan Boudrie, executive]

Yes. As I said, we are focusing on sort of continuously improving cash flow and especially improving net working capital. And as we expect cash flow to improve during the year, that should also drive organic deleveraging. Then on sort of the exact extent, sort of that, we don't give specific guidance on a specific number. But definitely, I said, focus on improving cash flow, which drives the natural deleveraging of the business.

And as to acquisitions, relating a little bit to your question, we continuously work on making sure we have an attractive acquisition pipeline, and I think we have a number of interesting opportunities. But our focus as it is right now is making sure that we integrate and maximize the impact from the acquisitions we already made.

[Rickard Anderkrans, analyst]

Just to squeeze in a final one, any update on retrieving the compensation for the U.S. litigation process? What's your sort of thinking on time lines and probability of success and sort of the status update would be helpful.

[Fredrik Ullman, executive]

I said, the process is ongoing. And we're sort of -- we're working intensely and hard to making sure that we finalize this as quickly as possible. In terms of timing, we don't want to speculate in any exact time. As said, it's booked as a current receivable, which gives some indication on our view on timing. And as we communicated before, we believe that we have sort of a strong position given the indemnification we have in the agreement where we purchased VOI. So we're working intensely to make sure this is finalized as soon as possible, but I don't want to give any specific guidance on the exact time line.

[Operator]

The next question comes from Adela Dashian from Jefferies.

[Adela Dashian, analyst]

Let me maybe just start on congratulating you on the strong quarter, especially on the organic growth side. And going off of the questions that have already been asked, I do appreciate the comments surrounding July, what you're currently seeing there. But you also mentioned that July typically is a seasonally weaker or lower volume month. Should we then expect growth to amplify in August, September? Or you've already seen the first few weeks of August already. So could you give us any more, not guidance, but just color on what the -- if growth in Q3 has improved month by month or not?

[Fredrik Ullman, executive]

Again, it's still too early to tell. Month-to-month can vary quite a bit because depending on timing of orders. So I really don't want to guess anything. What I would say is that I feel comfortable or confident in our business. And the only risks I would see are macro-economical ones that are common to every sector. And I think that our sector is probably more resilient than most sectors even in turbulent macroeconomic environment. So that's pretty much all I can say. I mean, to predict Q3, I cannot do that. I'm sorry, Adela.

[Adela Dashian, analyst]

Okay. No problem. And that was actually going to be my second question. Is there any area within your business where you are seeing early signs of down-trading due to the macroeconomic environment?

[Fredrik Ullman, executive]

Not really, actually. This -- I mean, right now, this quarter, we've seen really all segments, all regions growing strong. And yes, we -- I cannot pinpoint anything that I -- we're not seeing those type of signals yet. And we monitor it, of course, very precise. We look at it very closely, and we have live data every day on pretty much every product in the company. So we can see it, but we're not seeing that as we speak.

[Adela Dashian, analyst]

That's good news. And then Specialty Pharma and the U.S. expansion there, you speak about going into a new geographic region. Who are your customers there? Is it the veterinary clinics? And how should we perceive? If this was a big heavy volume-driven quarter within that specific area of Specialty Pharma, are they fully stocked now with the new products? Or how should we perceive the -- I guess, the underlying demand there for that specific area that drove growth in Q2?

[Fredrik Ullman, executive]

So it's -- so the customer base are the large retailers in the U.S. So it's a direct-to-consumer business. We've seen good underlying growth or end demand for these products and good -- we have very good brand equity in that space. And those retailers will choose to go. They are split up into different regions, Northeast, Southeast, et cetera. And so they decided then to go into a specific region or subregion in the U.S. But that's something we've seen. That business has been growing very strong for a few years now.

We're not done yet. What we've also done is to improve the product portfolio since we acquired the company roughly 1.5 years ago. So they had a relatively limited product portfolio when we acquired the company, and we have now invested in the company, and we have developed a number of new products in that space which is part of driving that growth.

[Adela Dashian, analyst]

Are we talking about both physical retailers and online retailers? Or is there a...

[Fredrik Ullman, executive]

It's physical. It's mainly physical. Yes. It's the Costco, Trader Joe's and such.

[Adela Dashian, analyst]

Yes. Okay. And then lastly, on the margin expansion. I know you've already commented on this a bit throughout the call. But we -- aside from a mix effect in Specialty Pharma, you've also had, I guess, a ramp-up in investments being made and you did mention quite briefly that you don't see further expansionary efforts to be made in the second half of the year? Is that how we should perceive it? Are you done with you have the investments now?

[Fredrik Ullman, executive]

Yes.

[Adela Dashian, analyst]

Okay.

[Fredrik Ullman, executive]

I mean we're -- it's really minor things like we had cheaper people, that's not going to move the needle on the group level. But we have the -- if you look at the underlying businesses, they are delivering margin expansion. The 2 areas where we have invested, as I mentioned, we have strengthened the central team to be able to operate on the public stock market over the last 2 years, and that team is now fit for fight, and we are able to deliver reports faster than before.

And the other thing is the tech team in -- our growth bets in Heiland.com within Veterinary Services, where we have strengthened our tech team to be able to launch that platform in more geographies, which we're getting ready to do. So that's -- those are the 2 areas, but we're not expecting to continue to increase OpEx at this point. Focus is to drive operational leverage and drive profit expansion.

[Adela Dashian, analyst]

So if anything, we're looking at a more efficient business going into the second half of the year and that coupled with ongoing high organic growth should be able to -- you should be able to continue to deliver on this underlying momentum that you've had thus far into the year? Is that how we should view it?

[Fredrik Ullman, executive]

That's right.

[Operator]

The next question comes from Kristofer Liljeberg from Carnegie Investment Bank.

[Kristofer Liljeberg-Svensson, analyst]

I have 3 questions. First on Nextmune. Would it be possible to comment how much that business is growing if we exclude this exceptional performance for Specialty Nutrition? Second quarter, group in MedTech surprised me here, given that there should been a negative phasing effect from the Annual Order Program boosting Q1. So could you maybe comment a little bit more about how you're able to grow 8% organically for MedTech this quarter despite that?

And final question is related to the continued negative EU items that you have for more or less all business areas. So could you explain that a little bit? Is it still driven by M&A? Or is it more integration, restructuring of the business? And how should we think about that for the second half of the year?

[Fredrik Ullman, executive]

So maybe I could take the first 2 questions, and I'll let Carl-Johan elaborate on the last one. So on Nextmune business, excluding Specialty Nutrition, we are growing high single digit. And so we're seeing actually strong growth across therapeutic areas and geographies in that business. And in MedTech, why are we growing strong there? So the pull forward -- the AOP program is predominantly in North America. And actually, in the quarter, strong growth is coming from EMEA and Asia Pacific region where we've seen very, very strong growth. So those 2 regions don't have an AOP program. So it's pure organic growth essentially. I hope that answers your question, Kristofer. I would...

[Kristofer Liljeberg-Svensson, analyst]

Were you growing in the U.S. for MedTech in the second quarter as well?

[Fredrik Ullman, executive]

We did, yes. Yes, we grew organically also in the U.S., but we're also -- we pushed -- I mean APAC and EMEA drove even more growth.

[Kristofer Liljeberg-Svensson, analyst]

And then about the nonrecurring EU items.

[Carl Johan Boudrie, executive]

Yes, on the nonrecurring items for the quarter, they mainly consist of 2 parts. And as you said, one of the elements is acquisitions. And the second element is related to the VOI dispute. So those are the 2 main elements of the nonrecurring items in the quarter.

Looking ahead, as you say, acquisition-wise, our focus is to make sure that we take care and sort of extract the value from the acquisitions made and the VOI dispute costs. As said, our focus is making sure that this process is hopefully finalized as soon as possible. So I would say that's some color on maybe the NRIs and looking at maybe what to expect going forward.

[Fredrik Ullman, executive]

So Kristofer, I think we grew 8% [Technical Difficulty].

[Operator]

The next question comes from Patrik Ling from DNB Markets.

[Patrik Ling, analyst]

Just one short follow-up question on leverage. Maybe you can walk me through it a little bit because when I look at your report on the footnote on Page 30, I actually get a quite a different number for your net debt. Maybe you can talk me through that and see where it's wrong?

[Carl Johan Boudrie, executive]

You said Page 13 or...

[Patrik Ling, analyst]

Page 30 where you have the net debt. If you just have sum all these items up, you end up with a net debt of EUR 351 million approximately. But it actually adds up, if you do it for the same quarter last year.

[Carl Johan Boudrie, executive]

Okay. And you say -- and that EUR 296 million.

[Patrik Ling, analyst]

Yes. So I get EUR 351 million instead when I just add those numbers up.

[Carl Johan Boudrie, executive]

Yes. And I would say the difference, I said, in looking at the litigation and the receiver for the litigation.

[Patrik Ling, analyst]

And what item would that end up in?

[Carl Johan Boudrie, executive]

I think it's good for -- so the litigation, that's excluded in -- so it's a current receivable where we -- the litigation that we -- as said, the receivable from the sellers from the litigation process, and that's recorded as a current receivable and excluded from net debt. So that should be excluded in order to reach the EUR 296 million.

[Patrik Ling, analyst]

Okay. And how much is that? Was that EUR 58 million or something? Yes?

[Carl Johan Boudrie, executive]

Yes, roughly. But we can follow up this separately and walk you through.

[Patrik Ling, analyst]

Yes. But if I look at it like this, as long as there's some uncertainty whether you will get that money or not, it still is I mean your net debt at this point in time should be EUR 351 million instead.

[Carl Johan Boudrie, executive]

We are -- as I said, we think that we have a strong position under the agreement with the sellers and the indemnification protection under the agreement. And that's why -- so our position is confident in retrieving the funds. And as sort of as of such, that receivable is included in the net debt calculation.

[Fredrik Ullman, executive]

I guess it's also fair to say that the auditors have -- see that the same way.

[Patrik Ling, analyst]

Okay. But in sort of a table like that, maybe you should have that in -- as a positive item and not only include the cash and cash equivalents because it looks kind of strange when it differs.

[Fredrik Ullman, executive]

It's a good point.

[Carl Johan Boudrie, executive]

Yes, that's a good point.

[Fredrik Ullman, executive]

Thank you, Patrick.

[Operator]

The next question comes from Peter Verdult from Citi.

[Peter Verdult, analyst]

Peter Verdult from Citi. Two questions. Fredrik, first just good luck with next chapter when you depart. I suppose, just before you leave -- when it comes to -- you said yourself, the business, you've tripled the business, you've been very acquisitive. Could you just give us a sense how well not you think the business is integrated going forward for the next person whoever he or she may be, just the level of integration you think has been achieved. You saw that going forward or an area of improvement? And then just more generally, just could you characterize M&A inorganic growth is a big part of your strategy that you laid out at the IPO 2 years ago. Could you just characterize the current environment? I realize you're not going to talk about specific assets, but could you just broadly characterize the current environment to do stuff, valuation expectations that you're comfortable or not to go above 3x leverage and the willingness or not to use equity going forward? So just any sort of flavor you can give us would be helpful.

[Fredrik Ullman, executive]

Yes, sure. So on your first question, Peter, well, the reason I choose to step down now is that I think it is a good phase for the company. The company is in very good hands, very strong leadership teams and a relatively high level of integration. So systems are in place, central data warehouses in place, we have full transparency on data, organization is set up and organization delivers. So I thought it's better to hand over in such a phase of the company than when you are in the midst of one or numerous M&A transactions. So I'm actually not at all concerned. And I'm staying very close to the team and to the Board.

And of course, I'm not disappearing going anywhere. So I'm also available to support the team. But I chose to -- I just want to have a little bit more time with my family than in the last 7 years of running quickly and being -- traveling a lot. So this is the reason. And so I have no concerns on that front.

And the question on the M&A environment, there's still -- if you look at this market, it's still a highly fragmented market, and there's still a lot of opportunities when you start to look at the breadth of our business, and the -- both in terms of product categories, therapeutic areas and geographical footprint, many regions we are not in, but we just started to tap into Brazil with now 600 clinic members in that family in Brazil, but we have hardly touched it yet. We've gone into Japan with MedTech. That's the world's second largest market. But we still have to go and explore that region. South Korea is another region that could be super interesting. So there's still a lot to do.

On the valuations, I don't -- it's -- I would say that with cost of capital that has gone up, my impression is that the number of transactions have maybe gone down slightly. And as to our willingness to go above 3x or pay with shares or whatever, we're looking at -- we have -- we continue to have an interesting pipeline. We're looking at these. And when the time is right and we think that we have a highly strategic acquisition that would require more equity, then we'll speak to investors, but that's not on the radar at this point.

[Operator]

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Fredrik Ullman, executive]

Well, thank you, everyone, for participating in the call today, for also very good questions. Again, I think I'll just reiterate, I think we are in a very strong position, very strong organic growth, good teams in place, good systems in place, a very strong innovation pipeline and a motivated crew to continue to build Vimian and take it to the next level. The search for a new CEO is ongoing, and we'll update you on that when we have more information to share, but very bullish about the future and the months and years to come.

Thank you so much for today, and enjoy the rest of the summer.