Ambu A S Ord

Thank you and welcome everyone for our quarterly three earnings. We are excited to have all of you this morning. Let me start with key messages for this call. First of all, the transition to single-use endoscopy market continues to accelerate. Over the last three months, we saw the safety communication from the FDA in bronchoscopy, recommending sterilization of reusable endoscopes when available. And the adoption of single-use bronchoscopy when treating patients at increased risk of spreading infection. That's basically increasing the cost of using reusable bronchoscopy and at the same time clearly encouraging healthcare systems, all healthcare systems to consider single-use bronchoscopy for certain patient profiles. And that will accelerate the penetration of the single-use bronchoscopy market. In addition, we saw the CMS reimbursement for single-use duonoscopy in the inpatient setting effective October the 1st approved. That basically means that in 40% of all duonoscopy procedures in the United States, there will be an economic incentive to use our Descope Duo given our prices. And we consider that between the support from the FDA encouraging all healthcare systems to use innovative technologies, and then the economic incentive from CMS in the case of Medicare and Medicaid patients, that the creation of a single-use colonoscopy market is going to accelerate. Now, it's not just about the market. It's also about where we are in terms of our performance. And we basically continue our accelerated growth on the back of new product launches. Our total company growth was 7%. And in terms of visualization, we were actually able to match the record peak that we had last year where we grew 81% growth. And if you look at our two-year CAGR, our visualization business is actually growing at a compound annual growth rate of 36%. From a volume point of view, in the first three quarters of this year, we have already sold 1.1 million endoscope units. And that is more than our entire volume last year. Our ASCOB Bronco continues to perform strongly. We don't see any impact in terms of pricing or in terms of competition. And in addition to that, what we are seeing is a very rapid growth of our ASCOB ENT and SYSTEM, where we continue to grow double digits quarter over quarter. These markets are significantly larger than pulmonology and will represent very important growth engines for us going forward. And in addition to that, we are very excited that we are four weeks from launching our ESCOPE Duo 1.5 and we have already filed for our single use gastroscopic system. ROA Scope Castro and our AVOX2, which have been already submitted for FDA clearance. And if we step back and we look at where we are heading, it is clear that we are going to emerge as a leading single-use endoscopy player. We are on target to introduce 20 new products by 2022-23. Half of them will happen next year. Next year, we have more launches than most of our key competitors combined. We are accelerating the construction of our new high-scale, low-cost manufacturing plant in Mexico. This is going to be the largest single-use endoscopy plant globally and reflects our ambitions in terms of growth. And we are also strengthening our leadership team and board of directors as we move into the next phase of our journey. And we are glad to see such a strong caliber of leaders joining our leadership team and being proposed to join the board. So let's look at the specifics. So if we look at the market, On the left hand side, what you have is the US medical device reports on reusable endoscopy related contamination and infections since 2014. And in 2014, there were 170 cases reported in the US. By 2020, we have 1,880. This is a growth of 11 times versus 2014. Now, it's not that there are more and more problems in terms of contamination. What's happening is that the awareness of the contamination issues that have existed all the time is actually increasing. And this will continue to increase because if you look at the FDA safety communications, both in bronchoscopy, urology, and They are not only asking hospitals to increase the quality of reusable reprocessing. They are not only recommending to use single use in specific situations, but they are also asking hospitals to monitor and report contamination related issues more closely. And on the back of that, what we expect to see is the true issue in terms of contamination in reusable endoscopy, which makes even stronger the case for authorities around the world to promote the transition to single-use and the creation of a single-use market. That's why we are confident that by 2025, we expect the market to be $2.5 billion. And in that process, it will be one of the largest new markets created in medical devices. Now with that attractive market emerging, let's see where is Zambu today and where are we heading? So first of all, in terms of our performance, we have delivered a two year figure of 14% compared to part of three, 2018-19. That make us one of the fastest growing medical device companies globally. And this is driven by our visualization business, which is growing at an impressive 36% CAGR. In terms of core, we continue to see volatility in terms of elective procedures. And the situation varies significantly by geography. Today, we are flat relative to two years ago. And we expect vaccine rollout continue and the situation stabilize. that the latest procedures will continue to come back in the market and on the back of that, our core business will improve. Now, in terms of visualization, it has been a record quarter for us in terms of visualization. This has been the highest number of units sold in every quarter in the history of FANBU. Actually, if you look at our entire, third three quarters volume, we already sold more than the total units we sold in the entire last year. And again, the growth is not just driven by our Bronco business, if you look at it year to date, where we continue to strengthen our relationships with GPOs and with IBMs, we actually have over the last six months secure preferential agreements with eight of the top ten IDNs in the U.S. But on top of that, we are seeing very rapid growth of our ENT and system, which are actually growing double-digit growth quarter over quarter. And they are doing that in an environment where elective procedures are still the threats. where access is still not 100% back to where it was. And just give you a sense in terms of how powerful these growth platforms are going to be for the future of AMBU. If you remember the total number of endoscopy procedures in ENT and SISTO combined, you're talking about 16, 17 million procedures which is six times more than the number of procedures in pulmonology. And that is just an incredible opportunity for us as we move forward. Now, if we look at the evolution of these two platforms, you can see that there is a volatility depending on the COVID-19 pandemic, but overall it's a very rapid penetration. One of the things we're excited about is that our success in EMT and system is not driven by contamination concerns. Those are not really issues in the decision making of healthcare systems. Our growth is driven by the performance of our growth from a technology point of view and is driven by the significant convenience and flexibility that we offer. It's a very good example that if we are able to bring more advanced technology, if we are able to practice in a way that it is a parity with reusable endoscopy, the benefits of our launches will allow us to participate in every single endoscopy segment. Now, of course, it's not just about that. Our future is very exciting. And I have to say, I think this is probably going to be the last year where we are able to show you our visualization pipeline in one slide. We are running out of space. But we are basically on target to introduce 20 new products by 2022 and 23. Half of the launches are going to be introduced in 21-22, including our S-COP5 system. And our ESCO 5 design has been completed. It is done. The timing of the launch is actually related to the regulatory approval of our Xbox 2, which we are trying to make sure we deliver against our promise on the ecosystem. That basically means that all scopes can work with our Xbox. to this hospital significant flexibility to allow them in an operating room to do a gastroscopy, and then a urethroscope procedure, and then a bronchoscopy procedure. In addition, we are adding one more pro to our pipeline, which is our ESCO-5 bronchosampler. And then in terms of GI, we are on track for the launch of our Ascope Duo 1.5. We actually just had a session with our top key opinion leaders from the US. They represent ERCP systems that account for the largest volumes in the country. And we went through all the improvements we are making, the elevator, the better image resolution, the better functionality. And we are excited in terms of how this S-COP Duo 1.5 will do. And, of course, we are launching this prod ahead of the expansion of reimbursement to inpatient procedures in October, which is going to be a very important moment to bring a single-use tonoscopy prod with superior performance right when ERCP systems have the economic incentives to transition. And in addition, we have filed for our S-COP gastro and ABOPS II to the FDA for approval. Now, let me just spend a couple of moments to highlight two of our 10, over 10 launches that we're having next year. And these actually, give you a glimpse in terms of the quality of our innovation, the strength of what we are trying to do, and more importantly, how, on the back of this innovation, AMBU is going to be transformed. So let me start with our ASCOP gastro and ABOX2. First of all, as most of you know, gastroscopy is an over 20 million procedure market. So if you look at the number of endoscopy procedures pulmonology and ENT and cystoscopes, all of them combined, they are actually smaller than the total number of procedures in gastroscopy. So this is a very large market for us. And we are introducing a high-performance centroscope, which includes the most advanced high-definition image sensor with maneuverability that we have tested that is on par with reusable scopes. We also have had reviews with top gas procurement leaders in both the US and Europe. And the testing and feedback supports our ability to address procedures that account for approximately half of the total market. And we will be able to tap into that market potential right from the moment we introduce the product. And we are introducing our ESCO 5 PRONCO high definition. And this is building on all of our experience introducing our previous system. In terms of performance, we know based on seeing competitor launches that our product have a superior image quality and handling. And it is going to be the strongest product single-use bronchoscope available in the market at the time that we launch. And with that, we will be able to enter into the Bronco Suite. And remember, there are about 3 million procedures in pulmonology. There are 2 million procedures in the Bronco Suite, which is a completely new market segment for us. And this ESCO 5, when we launch, will be integrated with our newest display technology platform, our AVOX 2 and our AV2 Advanced. So sometimes I get questions in terms of whether AMBU is prepared for the competition. The question I would say is whether the competition is prepared for AMBU, especially in bronchoscopy. If we look at what we are going to build, we are building the most comprehensive airway offering in the market. Our launch is in 2021 and 23. In addition of what we have already done in terms of DSCO4, a sampler set and our VivaSight 2. We're introducing our X-POP 2, our ESCO 5 Bronco, our ESCO 5 Bronco for specialty procedures, the ESCO 5 Bronco for smaller patients, our ESCO 5 Bronco for, ESCO 5 Bronco sampler, our next generation of video laryngoscope, and all of these connected, which will provide hospitals in airways departments with significant flexibility, basically able to address any type of bronchoscopy procedure with one complete system. That's why we say we have significant growth opportunities in EMT, significant growth opportunities in SYSTEM. We are entering into all these new segments. But our bronchoscopy business is one that will continue to grow going forward. And it will continue to grow because we are going to continue to have superior technology with the best economic offering and with commercial agreements that will prefer the position for our business. Now, when you look at the momentum we are finding in terms of volume and all the launches in front of us, we have decided to accelerate the construction of our Mexico plant. Now, this is going to be the largest single-use specialization plant. And again, it reflects the scale of our ambition and future growth expectations. And as you can imagine, building this plant and having it ready for next year will not only secure capacity, but will also help to mitigate supply chain disruptions. It will eliminate the need to air freight visualization products from Malaysia to the U.S. It will give us a dual sourcing strategy, which will give more reliability. And we are very excited to see our Mexico plant become operational in 2021-22. And let me just finish this business update, welcoming new members of our management team and also being excited with new members being proposed by the Board of Directors of AMBU to join us. We have Brent Scott, who is going to be our new President of Asia, joining us on October the 1st. He has over 30 years of experience in Asia Pacific, 24 of which were with Striker and he was one of the key leaders on building the region. This is very important because we consider Asia Pacific to be a region with significant growth potential. We have made very important investments. Just to give you a sense, our base in Japan is going so well that in q3 we saw the equivalent just in q3 we saw the equivalent of our entire group last year and we are just starting with our uh esco for bronco uh we are launching emt and fisto and opportunities in japan and australia and korea and china are significant uh we also have welcome barcelona our new chief marketing officer who comes from johnson and johnson medical devices and where he used to run a global and U.S. spine. Spine is a category with very rapid innovation, where you have multiple launches hitting the market at the same place, and he's going to lead our portfolio strategy and, of course, the execution of all of our launches. And at the board of directors level, we also have two new board members being proposed for our annual shareholders meeting. We have Suzanne Larson, the CFO of MoneyClean, with over 10 years of CFO experience in public companies and deep expertise in corporate finance, strategy, and business development. And we also have Michael de Trau, who was a former company group chairman of Johnson & Johnson Medical Devices. He led Ethicon globally, which is the largest surgery company with over 50 billion DKK in sales. Significant experience, not just across the US, Europe, and Asia Pacific, but also around building a new market, new segments, and competing through rapid innovation. what we are seeing across the organization. Our ability to bring top talent from across medical devices to help us to fulfill our journey. It reflects how excited they are to join a company with our potential and also how we are actually getting ready for what is going to be an exciting new phase in our journey. And with that, let me pass you with Michael Hoidar, who will talk about our financial results.

Thank you, Juan Jose. On July 1st, we disclosed preliminary numbers for Q3, and we adjusted the outlook for the full year. The actual financial performance for Q3 is aligned with the disclosure that we have here today, but allow me to go through the numbers for the quarter. In Q3, our revenue increased organically by 7% and 16% year-to-date. If we compare two years back, i.e. back to Q3 18-19, which was before the pandemic, the annual average organic growth rate since then was 14% for the total company. In Q3, visualization for the quarter went flat with organic growth of 0% and 29% year-to-date. The three-year organic revenue CAGR for visualization came in at 36%, which reflects the increased usage and penetration of single-use bronchoscopy we've seen from before the pandemic to now where COVID-19 fit in demand is leveling out. In the quarter and combined for all regions, we sold record 386,000 units of endoscopes and more than 1.1 million units for the year to date. Thereby, we have already now exceeded the full volume of units sold the entire last fiscal year. In the quarter, core posted a positive growth of 15%, which is made up by a mixed effect from anesthesia, posting a slightly negative growth of minus 1%, and PMD posting 44% positive growth. The negative growth in anesthesia is a result of elective procedures gradually returning offset by reduced demand for resuscitators and supply chain constraints. The high growth in PMD also shows how electric procedures returning on the back of low comparatives in the same quarter last year. Finally, our EBIT earnings ended at 88 million DKK with a margin of 9% for the quarter and 336 million and 11.2% year to date. On slide 15, we show the geographical distribution of this quarter's revenue and organic growth rates. North America accounted for 43% of revenue in the quarter and reported an organic growth of 32%. Visualization in the U.S. grew organically by 47% in the quarter, positively influenced by product launches and with a two-year revenue cap of 20%. For the core business, elective procedures activity in America continues to improve, but with significant variability by state and with the Delta variant picking up in many states. Year-to-date, America posts organic growth of 16%. Europe accounted for 44% of revenue in the quarter, with sales declining relative to prior year and an organic growth rate being negative at minus 10%. For visualization, growth for the quarter came in at minus 26% on back of a record high comparable last year. The two-year revenue cake for visualization, however, in Europe is at 48%, which underlines the very strong performance that we have seen. In Europe, elective procedures continue to recover and accrue. is improving, but supply chain constraints is showing an impact in the quarter with lower growth in anesthesia as shipments from Asia to Europe were delayed. For the rest of the world, we posted an organic growth of 7% with visualization at 31% and a two-year revenue tender of 64%. The rest of the world remains significantly impacted by national lockdown across all main markets in Asia and Latin America, leading to negative growth in both anesthesia and PMD. Now, on slide 16, allow me to comment on the financial effects we see in the current environment showing impact on our supply chain and procurement activities. A combination of strong demand for our scopes and delays in the global container freight market have for Q3 forced us to continue air freighting single-use endoscopes and some core products. This has led to increased OPEX, but that has been required to support customers' needs. In the quarter, distribution costs relating to air freight and increased shipping costs accounts for approximately additional 13 million DKK of costs and yesterday approximately 32 million. We expect a full year impact from increased freight costs of approximately 55 million DKK or 1.4 percentage points of our EBIT. At this time, it's difficult to say for how long this will continue, but we do expect it to last far into next year. Our free cash flow for the quarter is negative with 113 million DKK. This is mainly driven by increased inventories due to the longer lead times when shipping from factories in Asia to our main markets in America and Europe. Part of the increase is also caused by increased inventory of raw materials and components to increase safety stock levels and to ensure continuity in our manufacturing. Lastly, we have seen a trend of increasing prices on raw materials and components used in manufacturing, and we do expect this to continue into the fourth quarter. Now let me go through the key numbers in our P&L. Revenue for the third quarter came in at 973 million DKK equal to the mentioned 7% organic growth and a reported growth of 3%. Revenue for the first nine months was 2.9 almost 3.0 billion DKK corresponding to reported growth of 11 and organic growth of 16%. The 5% gap in reported versus organic growth is caused by the depreciation of the US dollar versus DKK. The gross margin for Q3 came in at 62.5, which is two percentage points below our Q3 last year, due to mix, but in line with our second quarter this year. Last year, the relative contribution from visualization was high, which led to a more plausible mix. As in previous quarters, negative effects from reduced average selling prices are very minimal. Social capacity costs for the quarter were 520 million DKK, corresponding to a 14% increase compared to Q3 last year, with increased costs across all categories. As mentioned previously, we have continued to average scopes, and this has contributed to a higher level of cost within the selling and distribution cost line. EBIT ended at 88 million DKK in the quarter, with a margin of 9.0%, And for the first nine months, EBIT came in at 336 with a margin at 11.2%. On slide 18, I will just mention some of the highlights for our cash flow and balance sheet. Free cash flow before acquisition for the quarter was negative with the mentioned 113 million DKK corresponding to 12% of revenue. For the first nine months, free cash flow came in negative at 138 million DKK or 5% of revenue. Investments for the quarter come in at 181 million DKK including investments relating to Mexico and are as expected. As discussed, the negative free cash flow are driven by the required additional investments into inventories, finished goods as well as raw materials. Working capital revenue relative to 12-month revenue is thus up by 4 percentage points to 21% of revenue by end of the third quarter. Lastly, total net interest-bearing debt came in at 638 million DKK and a gearing at 1.1 times ETA. The decrease in net interest-bearing debt over last year is driven by the capital increase and sale of treasury shares performed in January. And lastly, on slide 19, On the 1st of July, we updated the outlook for this year as a result of an increased impact from COVID-19 pandemic. A revised financial guidance for 2021 is repeated today and is as follows. Organic growth of approximately 17%, including expected growth in visualization to be above 30% for the full year. EBIT margin of approximately 10%. and social number of endoscopes could be sold to exceed 1.4 million units. And with these words on the financial performance, let me give the word back to you, Juan. Thank you very much.

Thank you. I mean, this quarter three reflects what we have been discussing over quite some time. First of all, the developments to support the creation of a single-use endoscopy market. The strong growth momentum of the company on the back of a strategy focus on superior innovation. Our strength in terms of high-scale local manufacturing, modular R&D engine that allow us to bring to market not only a larger number of products, but also faster in a very efficient way. And how in the back of all of that, we are going to emerge as a leading single-use endoscopy player. Let's just open for Q&A now.