Good morning and welcome to the presentation of Aker BioMarine's result for the first quarter 2025, where myself, Matts Johansen, the CEO, and the CFO, Katrine Klaveness, will take you through the financials and the highlights of the quarter. Another good quarter for Aker BioMarine, delivering close to $51 million of revenue, up 5% from the same quarter last year, and a significant improvement on the EBITDA, up 59% from the same quarter last year. Human health ingredient continues positive development, 16% growth on the top line and 36% growth on the EBITDA. It is good to see consumer health products also back into growth territory. Human health ingredients continue its focus on getting closer to break-even and deliver $0.4 million negative EBITDA with stable revenue, one step closer to that break-even point.
Key milestone for the quarter is that we have kicked off the first human clinical trial for our new Lucereta product that will eventually, if successful, generate the first health claims for the new brain ingredient that we have developed over the last couple of years. Good development. This is now the ninth quarter in a row where we deliver year-over-year growth. You see a significant improvement on the EBITDA on the right side, both driven by stronger performance on human health ingredient, but also a better cost position across the company. Some more details in the different segments, starting with human health ingredients. As mentioned in the beginning, we are growing 16% year-over-year, with the krill oil sales growing 15% year-over-year. That growth is coming in several regions, but China continues to deliver good growth. Europe as well, strong growth.
Also, the new emerging market of South America is showing good growth and contributing to a strong first quarter of 2025. EBITDA continues to drive up, $11.3 million EBITDA for human health ingredient. That is the best quarter we have had since the heydays of Korea in 2020, with a significant improvement driven by both more volumes, better prices, and also lower cost of goods as a result of more volume sold and produced. Following the feed transaction, we have restructured the human health ingredient segment by moving many resources from our Norway, Oslo office to our Houston site, creating both a product and manufacturing hub around our Houston technology and the team over there. That is implemented during the first quarter, meaning that we have given severance packages to those impacted here in Norway and started the hiring process in Houston.
A new leader is also in place in Houston that will deliver that kind of new plan for Houston and products and manufacturing going forward. When it comes to tariffs, which is a big topic these days, so far we have not had a significant impact from that. We are importing krill raw material to our plant in the U.S. That is a Norwegian product coming from our old Norwegian vessels with 10% tariffs on the value of that raw material coming into the factory. Our second exposure is products being sold from the U.S. to China, where China has put big tariffs on products made in the U.S.. There have always been high tariffs between the U.S. and China. Historically, it has already been between 20% and 25% tariffs between the U.S. and China.
U.S. or Chinese dietary supplement brands have set up their manufacturing hubs in New Zealand. Therefore, also historically, most of our volumes sold into China, we ship through New Zealand, and then it gets manufactured and processed there and then into China, and through that not getting any tariffs. That route is still also zero tariffs. Now we're looking into how we can optimize the sales that we have currently directly into China through the same route. This is a moving picture with tariffs, but so far we do not see a significant impact of those tariffs on our business. I mentioned a new clinical trial for Lucereta started. We have a lot of preclinical data indicating the strong benefit this ingredient will have on brain health.
Now we have started the first human clinical trial where we will test what will be the direct impact on your cognitive functions after taking Lucereta. Those data will generate the first health claims. I'm also very happy to announce that we have been granted a $2 million grant from the European Union in a consortium with a couple of other companies and universities across Europe to do other clinical trials on Lucereta in the coming three years. $26 million in revenue, up from $22.4 million in the same quarter last year and $11.3 million in EBITDA, showing that nice development on the EBITDA that you can see on the bottom side. A couple of years ago, we initiated a turnaround plan for our human health ingredient business that's been quite successful, and that's what's been driving the growth we have seen the last nine quarters.
We are now going through kind of an iterative process on a new strategy to take kind of the next growth wave for human health ingredient. I wanted to show a few highlights from some of that work. What you see on this slide here is some selected markets on the right side. The different colors indicate the red part in the bottom is the sales that we are doing. The blue part is krill oil sales from competitors. The light blue is what we indicate as the potential in these different markets across the world. Into that big omega-3 market, you can see the numbers on top on gray, the size of those omega-3 markets. If you look at all the way to the left on this slide, you can see that we have about 5% market share in the global omega-3 space.
5% of any omega-3 sold anywhere in the world is sold by us. Then about half a percent is sold by a competitor of ours. The rest is fish oil. We believe that it should be possible for us to reach 15% to 20% market share because we have seen that in other markets where we are successful. Like the mass market in the U.S., we know and we have seen that we can get 20% market share when you have good distribution, meaning several brands on the shelf. It is easy for consumers to find the product. Some of those brands spend some money on marketing to educate consumers. If you have those two things, we know we are able to get towards 20% market share. That is our growth story.
It's all about how we go from that 5% market share today up to the 15 to 20% market share that we should have on a global level. The work around that is hard, but still very simple. You need to get better distribution, meaning convince brands to launch new krill products on the shelf. We need to convince the brands that already have a product on the shelf to invest in marketing to educate consumers. If we are successful with these two things, we will grow our market share from that 5% up to 15 to 20%. On top, the global omega-3 market is growing about 6% per year that we will piggyback on.
What we have done now is that we have gone market by market, channel by channel, looking at what our market share is, looking at what the potential in that market or that channel is, and then creating a strategy for how we close that gap. As you can see, in the U.S., we have 6% market share with a high potential to grow. In China, we have 7%, indicating some of the successes we have had lately. As another example, you can see Korea there with that spike. In 2020, krill oil was between 50 and 60% of the overall omega-3 sales in Korea. We know it's possible to get there. Right now, the sales is very limited. You can look at the blue bars and you can see which is competitors on the right side. In China, there's 4% market share with competitors.
That is more or less the only place we have competition today, local Chinese manufacturers selling to local Chinese companies. Taking this a little bit further, when we talk about how to drive that market share up, more distribution, more consumer awareness, we have also done consumer research across these markets to understand what is the consumer awareness today and how well is our value proposition recognized in those markets. I'm just taking out two examples here now. First, on the right side is China, where you can basically see in this survey we run, 29% of those that we survey, they are aware of krill. Out of those 29% that are aware of krill oil supplements, 48% of them have tried it once or more. That does not mean that 48% here buy it every day or every month, but they have tried it once.
Out of those that have tried it once, when you ask them what is the value proposition for krill or what is the best source of omega-3, you can see here 76% of them know that omega-3 from krill is the best source. Basically what this tells us is that the value proposition is quite clear. People get it. We need to work on two things, get that awareness up towards 100%, and then work with those 48% that have tried it once to make sure they try it many, many times. You do that by having the product available. Driving awareness through marketing, through our partners, and having increased distribution by convincing more brands to drive it. We can have a look at Korea, which is a market many including us are very interested in.
This is a survey just did last month, the same thing there. Even if it's now, what is it, four years, even five years since we stopped selling krill in Korea, the awareness is still very high, 47%. Quite low part of the population at least remember that they've been taking the product. Again, out of those that have been taking the product, they know the value proposition. This tells us that the Korean market is intact. The awareness is still very, very high. It's all about getting those campaigns going successfully and getting that distribution up. Talking about Korea, it's been political turmoil in Korea now for a while. It hasn't been the right moment to launch campaigns as the kind of anchor of those campaigns is home shopping.
For home shopping to work, people need to be bored at home watching home shopping channels. When a lot of things are going on in Korea, people watch the news, not home shopping. Things are normalizing in Korea now. The economic outlook for Korea is looking more promising. We believe that in the not too distant future, we will be going live with our partners with new campaigns in Korea. Moving over to consumer health products, back into growth mode, 4% growth year over year. First quarter is generally a low quarter seasonality-wise. We are growing quarter over quarter. Last year, we struggled with those inventory impacts by retailers building down inventory levels. We were selling less into retailers than they were selling out. Now that's kind of balanced out. We are following the general development of the market.
In the first quarter, the overall dietary supplement market in the mass market in the U.S. grew 3%. We are doing slightly better. That also shows that despite kind of challenging times in the U.S., during the first quarter, the supplement industry is still growing quite healthy. EBITDA is improving, $1.9 million up from $1.7 million, driven by good cost control in the company. Consumer health products is focused on the biggest retailers in the U.S. Currently, we have 10 retailers that we serve. During the quarter, we have added on two new large retailers in the kind of customer or retailer portfolio of our business. One of them is Whole Foods. I'm sure you all heard about Whole Foods. We will now start this autumn to make the Whole Foods branded dietary supplements, or at least some of them, in those stores. The same with BJ's.
BJ's may be less known here in Europe, but it's the third biggest club chain in the U.S. after Costco and Sam's Club, which already are customers of us. Lang is also seeing some quite interesting development on the line. Emerging business, the most important here is to look at the right bottom side, which is the EBITDA getting closer to that break-even point. What we have done in the first quarter is that we have pulled back on cost and marketing investment quite significantly. It's good to see that we're able to uphold sales at a stable level doing that, taking us one step closer to that break-even point. Core itself, $0.3 million negative EBITDA, significant improvement from the previous quarters. Then $0.4 million in totality for all emerging businesses and the portfolios we have there.
I reported also last quarter, we have a process ongoing with Understory, our protein business that's still undergoing and with several interested parties. We are pursuing that towards conclusion in not too distant future. With that, I will give the word to Katrine Klaveness, the CFO, that will take us through the financials.
Good morning. I will take you through the financials for the first quarter 2025. First quarter 2025 marks a good start of the year for the group with 5% growth from Q1 last year, totaling revenues of $50.8 million, up from $48.5 million last year. We had growth in both key segments. The human health segment is up 16%, driven by increases per Superba Krill Oil sales, both higher volume and higher prices, and a broader product portfolio, including QHP, algae, and PL+.
The consumer health segment is up 4% with a multivitamin gummy showing growth after the launch last year. The emerging business segment is down 32% compared to the same quarter last year due to high recognition of Amazon revenues in Q1 last year. Gross margin for the group was at 40%, slightly up from 39% same period last year. SG&A shows steady improvement across all segments as a result of cost focus and continuous implementations of new initiatives in both human consumer products and emerging businesses. Both Understory Protein and ION are booked as discontinued businesses as there are ongoing sales processes. Hence, net results for these items are shown on this line. For comparable figures, the feed ingredient segment was included in the full year 2024 of $195.8 million.
Adjustment for the quarter amounts to $3.5 million and includes costs related to the feed ingredient transaction and the restructuring with severance packages accrued for in Q1. Adjusted EBITDA was $9 million, up from $5.7 million same period last year, indicating an EBITDA margin of 18% in the quarter. The non-operational segment called LM Other consists of all the corporate costs and includes the majority of the non-recurring costs related to the aftermath of the feed ingredient transaction, including the restructuring and the IT migration process. $3.1 million of the $3.5 million in totality in adjustments are booked in this segment in the quarter. If removing all the non-recurring costs, the underlying annual SG&A run rate for corporate is between $10-$12 million, down from $19-$20 million before the feed transaction.
The bridge between SG&A cost and the adjusted EBITDA includes a negative internal profit elimination of $0.8 million and a positive income from transitional service agreement with Arcus Air of $1.5 million in the quarter. Most of the TSA work is now completed, with the exception of the IT migration project continuing into Q3 this year. Adjusted EBITDA from this segment is negative $6.8 million, with the underlying figure being on par with Q1 last year. Positive change in working capital for the quarter includes an increase in inventory for consumer health products, in addition to settlement of a few larger supply payments related to the feed ingredient transaction. Additional feed transaction costs will be settled throughout this year, further reducing payables. Investments of $2.4 million in the quarter included mostly maintenance and upgrade investments related to the Houston plant, but also some development CapEx mainly for the algae projects.
We expect the full year CapEx to be in the range of $6 to $8 million, with the main development work being related to algae and some Lysoveta development costs. Cash flow from operations was negative at $11.1 million, mainly as a result of a change in working capital, paying down feed ingredient transaction cost of about $7 million, as well as build-up of inventory in the consumer health segment. Cash flow from investment was negative $2.4 million from maintenance and upgrades of the Houston plant, as well as the algae development project. Cash flow from financing was positive, $14 million, as a result of additional draw under the bank facility. Net cash flow in the quarter was $1 million, ending the quarter at $16 million in cash and available liquidity of $25 million, including the bank facility.
Going forward, cash could be affected by the new tariff regime, as Aker BioMarine will be subject to duties both on import of the Nutramil into the U.S., as well as retaliatory tariffs when exporting krill oil to other countries, for example, China. However, mitigating initiatives have been identified, including a duty drawback program, as we export most of what we process from the Nutramil. We are also looking into alternatives for krill oil supply to China, as Matts had already alluded to. Based on current estimates, we do not expect the negative effects to be significant. Interest-bearing debt amounts to $157 million, up from $145 million last quarter, as a result of additional draw under the bank facility. The debt includes a bond of $151 million swapped to U.S. dollars through a cross-currency swap and a bank overdraft of $30 million.
At net interest-bearing debt over adjusted EBITDA of 4.8, we are in compliance with the leverage covenant under the bank facility, and we are also in compliance with a cash covenant of $7.5 million under the bond agreement. Ending this section with a look at the balance sheet. Q1 2024 includes feed ingredients, so comparison with Q4 2024 is recommended. Limited change in assets. All assets, both PPE and intangible, are depreciated and amortized according to plan. Inventory is down in the human health ingredient segment, but this is offset by an increase in the consumer health segment. Cash is at $16 million, up from $15 million last quarter. Assets held for sale includes the group's investments in ION and Understory Protein of $35.5 million. On the liability side, current liabilities, including the bank facility, are up $14 million.
Accounts payable are down $7 million as a result of supplier payments mentioned earlier. Equity ratio is 44% for the quarter. That concludes the financial section, and I'll leave the word to Matt to close off the presentation.
Thank you, Katrine. We'll now take you through the outlook for the business, starting with human health ingredient, where we expect to continue to grow that business. On the back of that strategy and those market slides I showed earlier in the presentation, we see great potential for growth, and we see a good pipeline of business opportunities for us there. We expect the profitability to increase on the back of that, as we are able to utilize our operational leverage, as you will see our bottom line and then EBITDA growing faster than the top line.
For consumer health products, we expect to be back in modest growth territory after a challenging 2024, now following the expected development on our points of sales performance of our products. For emerging business, it's all about getting that into break-even territory. We do that by both optimizing costs and growing the business, but maybe more importantly, seeking transactions, selling those assets to companies that can utilize those assets in a better way than we can currently at Aker BioMarine. For corporate, Katrine talked about, we have taken our cost base from $19 million when we were one company together with the feed ingredient. Now we have established a new cost level in the corporate segment of between $10 and $12 million, and we expect to stay at that level going forward. That concludes the presentation.
We will now open for questions, and you can send in your questions to ir@akerbiomarine.com, and then we will answer them. We are now ready to answer the questions that have been sent in, and you can also continue to send in questions on ir@akerbiomarine.com.
All right, Christopher Vinter here on the Q&A side. Let's see if there's any questions coming in. Okay, first questions here. Have you noticed any demand impact due to softer consumer confidence in the U.S. post-Liberation Day?
No, no impact seen so far. Generally, dietary supplements are very strong in negative cycles. We've seen that in the previous kind of recessions that have been globally. With our consumer health products, we follow point-of-sales data on a weekly basis. So far, we don't see any impact from that.
Over to algae.
What's the status on algae now, and how much did you sell during Q1?
Quite limited sales. We had a few hundred thousand dollars in sales, so quite limited. As we talked about in the previous quarter, we had some production challenges in our Houston factory with quality. We have now identified all those problems, designed solutions to it, tested it, and got it confirmed on small scale, and are now implementing it in a larger scale and waiting to also get it confirmed on larger scale. We expect that the algae business will pick up in the second half of 2025.
To Lysoveta, how much annual spend will go into the clinical trial?
There are two clinical trials for two clinical programs. We got European Union grant of $2 million. Our contribution to that program is only $150,000 over the next three years.
That is a consortium of several universities across Europe and a couple of ingredient companies that are testing their products in a battery of, kind of, yeah, test schemes related to longevity and brain health. For the clinical trial that we're running ourself, it's going to be about $1 million in costs related to that.
Okay, should we expect a similar level to marketing spend in emerging business as in Q1 going forward, or was this a temporary effect?
No, we are cutting back on marketing. It will go a little bit up and down from quarter to quarter, but generally, we're holding back on the marketing spend and driving towards that break-even point, which is the most important kind of KPI for that business now.
Okay, are there any large new krill clients you are targeting now?
Yes, we have several targets in our portfolio.
Last year, we got about 40 new brands or customers on board. We expect to get about the same amount this year. Some of them are large brands, some of them are smaller. Sometimes it's kind of hard to identify beforehand who will have success and who will be big customers. Sometimes it's the small brands that really hit it and become very large, and sometimes the big brands are not successful and not able to drive big volumes. We have several large opportunities in our pipeline.
Okay, what's the strategy for South Korea? Are you launching any sales starts?
Yeah, I mean, we are also selling B2B in Korea, meaning that we sell to other brand holders in the Korean market. I mentioned on the call earlier today that we are expecting to start campaigns probably around the summertime.
It hasn't been the right environment for running campaigns in Korea during those political turmoils that's been now because people are not paying attention to home shopping channels, which is the main channel for driving consumer awareness in Korea. Things are normalizing now, and the economic outlook for Korea is also pretty positive. We know that our partners now are working with new campaigns. We'll see about the timing when they hit. It's all about kind of hitting that campaign right, the timing right, so you get that positive ROI and can get that positive spiral going. Our partners are also very careful to make sure that once we launch, we will be successful.
What was the South America's total krill sale in 2024, and what was it in this quarter?
Yeah, I need to follow up on detail on that question.
I don't have the numbers on top of my head, but we have very good growth in Mexico. Mexico is now bigger than Canada, just as an example, and are growing very strongly. We're putting focus now on some of the other kind of emerging South American market, like Brazil, that has a big potential for our business.
We go on. Yeah, you kind of touched upon this, but when do we expect to see the re-entry of South Korea materialize for the krill oil business? What are the key hurdles encountered? I don't know if you want to elaborate a bit more, or?
Yeah, I mean, it depends on our partners when they launch and how things will develop kind of in the market and the kind of political landscape in Korea in the coming months.
Let's say we can hope for a relaunch now this summer. Again, the hurdle has been to make sure that when they launch, they're able to kind of get the consumers' attention and quickly get success because that's what's going to drive that positive spiral that we've seen in the previous years.
A question on margins here. Could you provide an indication on the gross margin for Superba QHP and algae oil in the quarter?
What was it earlier? Superba is the high-margin product. We carry a gross margin of above 50%, while QHP Plus and algae is lower-margin product. That will be diluting the human segment overall in this quarter and also going forward. You can also see that when you compare with previous quarters when we didn't have that broad product portfolio.
Yeah, and maybe just add that there was quite little algae oil sale in the quarter. In terms of margin, then we're left with Superba and QHP.
Yeah, so what do you think about mid-long-term sales potential of a product such as Lysoveta?
I think the potential for Lysoveta is very high. I mean, it's a unique product. No one else has it. It has a unique mechanism published in Nature, kind of the most kind of impactful scientific publications. We have big beliefs in that product. I think we said when we launched it some years ago that this is kind of the biggest and most promising launch we have had in the history of the company, meaning that it has a potential bigger than Superba. It is starting from scratch.
In comparison to algae, where there is a market and we can go in and take market share, LPC products don't exist on the market. We have to build awareness of the kind of categories as long as we alongside selling it. It is going to be kind of step by step, a little bit the way that the Superba business has been built up from scratch, but definitely very promising in terms of what it can become in the future.
Thanks. Yeah, you have previously talked about limitation related to cross-border export, especially to China. What is the status on that now?
Yeah, we talked about that in the previous quarters, that there is some change of paperwork between China and the different countries in terms of what documents need to be following the products when you do this cross-border e-commerce.
All the countries need to go through a process to update the documents. In some countries, that goes fast. In some countries, it goes slow. As of now, I think all countries that used to take that route into China are approved, except the U.S. Given the current relationship with the U.S. and China, we will see when that kind of gets working. All the other routes work, and we see that some of the U.S. customers, they're starting to use the other routes through Canada, for instance, which is approved quite recently. I think as of Q2, things should be normalizing in our business in China, and we should not have an impact from this kind of challenge anymore.
On some growth rates in sales, what was your Superba annual revenue growth rates in key countries such as the U.S. and China during Q1? Maybe answer generic or.
Yeah, I think we can answer the generic. If you just look at kind of last 12 months, kind of looking at a little bigger chunk than just a quarter because that can be very impacted by if you get the PO at the end or the beginning of a quarter. Generally, we saw 17% growth in the U.S. over the last year, 40% in South America and Europe, which is one region for us, 60% in China. We see generally good growth rates.
We delivered 16% now in the quarter, and I think we have a good outlook for the rest of the year and the coming years too when it comes to growth in these markets.
Will you use your existing clients when pushing Lysoveta into the market, meaning easier access to market versus krill oil when you needed to build the entire supply chain and clients?
Yeah, that's one of the strengths of using, call it the Superba platform, if you like. One part is the manufacturing side of things, but the other part is the market reach. We already have a big chunk of the most prominent dietary supplement brands already in our customer portfolio, which means the doors are open, and we don't have to kind of go through that first hurdle of getting them interested in getting that meeting.
We will definitely use that when rolling it out.
There are no more questions at this point, so maybe give it 10 more seconds and see. Yeah, I guess that concludes the Q&A.
Okay, thank you for joining, and see you next quarter.