Kinnevik : Transcript teleconference

Quarter 1 Report 2022

Thursday, 21st April 2022

Highlights of the Quarter

Georgi Ganev

CEO

Introduction and speakers

Good morning everyone and welcome to the presentation on Kinnevik's results for the first quarter 2022. I'm Georgi Ganev, Kinnevik's CEO, and with me today is our CFO, Erika Söderberg Johnson, our Chief Strategy Officer, Samuel Sjöström, and our Director of Corporate Communications, Torun Litzén.

Global events

War in Ukraine

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.

Macro-economic background

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.

Agenda

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.

Highlights of the quarter

Movements in NAV

Now, let's move on to page 3, where we have summarised 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 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.

Public portfolio developments

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. 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 two 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.

Follow-on investments

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.

First in equality, diversity, inclusion

Finally, during the quarter the international consulting firm Equality Group published an index on the equality, diversity and inclusion in private equity and 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.

The future of work

Three elements

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 three elements which we believe will last. Firstly, the rollout of new technologies and increased digitalisation. Secondly, the mainstream acceptance of remote working and gig jobs. And thirdly, the war for talent and increased expectations for benefits and social security.

Jobandtalent

Over the last months, Kinnevik has invested in all three of these trends. Last year, we invested in Jobandtalent, a 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 innovative service offerings.

Omnipresent

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 theiroperations into new markets in ways they simply could not achieve without the support of Omnipresent. Co-founders Matthew and Guenther have built a team that is uniquely strong and can deliver on the vast market opportunity.

SafetyWing

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 co-founders Sondre, Sarah and Hans on their continued growth journey.

Doubling down on Lunar

Granted a banking licence

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 licence 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 Sjöström, for a deep dive on our new NAV statement.

Net Asset Value Statement

Samuel Sjöström

Chief Strategy Officer

Redefined categories

Increasing transparency

Alright, thanks. So we're on page 6 by now. 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.

Refined portfolio categorisation

So what are we doing? Well, we're breaking up healthcare 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 catch-all 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 isrequired to direct your attention to it. categorisation of our portfolio.

And this we believe is a much more refinedHowever, our portfolio spans a very diverse set of businesses so no categorisation 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 webpage.

More specific metrics

In five core baskets

If we flip ahead to page 7, these five 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.

New data points

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 categorisation. So going forward we're disclosing aggregated financial metrics and valuation multiples for each of these five 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.

Value weighted

And the averages you see here and you see in the report, these are weighted by value, alright? 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.

See note 4 for unlisted assets

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 scrutinise how we value our unlisted investments.

Unlisted investments

Unpacking the write-down

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