Ambu A S Ord

Good morning everyone and welcome to this Q2 2022-2023 results call with Ambu. My name is Britt Melby Jensen. I'm the CEO of Ambu and I'm joined today by Thomas Frederik Smit, our Chief Financial Officer. So the agenda for this meeting is that I'll go through and update on the business. I'll hand over to Thomas to take you through the financial results. And then we will, as usual, finish off with the Q&A session. But let's dive straight into the results. So in Q2, we delivered an organic growth of 4%. And if we look at the reported growth, this was 6%. And overall, for the first six months of our fiscal year, we delivered also 4% organically and 8% reported growth. Our EBIT margin is in line with our expectation, reporting 3.9% on the quarter and 4.9% on the full half-year period. If we look at the market and let me put a few comments on the health care market in general, what we do see out in the hospitals where activity levels is a main driver for our business, we do see the activity level coming back to close where it was pre-COVID. However, in most countries, slightly below the pre-COVID levels in terms of number of procedures and that slightly lower level is much driven by the staff shortages that we see both in Europe and in the US. And then we also continue to see our customers being challenged on their financial results. We launched our zoom in strategy in November and we are progressing well in terms of delivering on the strategy. Our focus on the strategy is to be the most customer centric in our field and by doing that and by delivering on our strategy we will deliver strong profitable growth. So if we look at the four areas on our focus on innovative solutions, we made progress in particular in two areas over the quarter. The first one is pulmonology, where we end of March relaunched Vivacyte 2, which we recalled voluntarily in May last year. We also achieved a CE mark in Europe on the smaller sizes of our Ascope 5 Bronco, which is expanding the market. And we do expect also clearance in the US relatively soon for this range of products, which will further support the Ascope 5 Broncoscope that we launched last year. Within GEI, which is also a focus area for us, we announced that we have a new product in development in the quarter, GastroLarge, a gastroscope with a larger working channel that allows more therapeutic use. So this is one that we are excited to have in development and where we have not communicated on the launch timelines. Our focus is very much on execution across the value chain and a large part of this is our transformation program that we launched with the strategy. We are overall progressing well with the strategy and with the transformation program. A major highlight I'll say is that we returned to slight positive cash flow in the quarter driven by the inventory reductions which is part of the transformation program. We continue to be very focused also on pricing with a number of initiatives, although we still have some restrictions in the part of the business that is contracted. And then we are focusing on streamlining the portfolio. So basically looking at some of the areas where we have better products that we can offer to our customers and looking into some of the offerings that we have in selected smaller geographies. Then on the people and culture side, this remains a key focus because we are very committed to our people who are delivering the financial results. And as a natural part of the strategy that we launched end of or mid November, we a couple of months ago did some changes to the executive leadership team to strengthen the capabilities and the competencies to deliver on our strategy. I'm therefore also very pleased that earlier this week we had Henrik Birk joining us as the new Chief Operating Officer who will be responsible for all our operations globally. Then finally, sustainability is a very important part of our strategy as well. When we hosted our Capital Market Day end of March, we announced some of our 2025 target when it comes to our products and packaging. We focus on using more bioplastics in our products, We focus on the packaging being fully recyclable and we focus also on helping our customers address the challenges with waste by making sure that we are also responsible in how we get rid of the products in the hospitals. These are some of the initiatives, but it goes broader than this when it comes to our commitment. The second focus we have is on net zero emissions, and that's where we are this fiscal year developing a detailed plan on how we will achieve that, which entails a number of relevant initiatives. So let me dive into the different segments now, and I'll for a change start with anesthesia and patient monitoring. So overall, when we look at this area, we saw a decline starting with anesthesia of 11% in the quarter. This comes on the back of a couple of quite strong quarters last year where we came out of the supply chain challenges so we were able to clear both our backlog and we also saw in particular in Europe some stockpiling last year driven by the geopolitical uncertainty that increased just over a year ago. When we then look at our patient monitoring business, this business, we saw a growth of 8% in the quarter. And a key driver of this was our cardiology business in the US that developed very strongly. Turning to endoscopy, we delivered 11% growth in the quarter for this business, leading to a 7% growth when we look at the full half-year period. This was driven heavily by growth in Sisto and ENT, and also we saw for the first time in a couple of quarters growth in our bronchoscopy business. If we look at pulmonology then where bronchoscopy is the most part of, you can see here that that is actually declining by 3% in the quarter versus 10% for the full half year period. So when I talk about growing the bronchoscopy business, You have to remember that how we report on this pulmonology category, we also include Vivacide, the product that we voluntarily recalled last year in May and that we are just relaunching end of March. So that is what drives the overall minus 3%. Having said that and looking at our new product, the Ascope 5 Bronco, we continue to see very strong performance and satisfaction with the performance among our customers in the Bronx suites doing the advanced procedures. So we are continuing to see a growing customer base here. And when we combine that with the launch of the smaller sizes in Europe and coming up later in the U.S., this puts us... in a very strong position in this area specifically. Broader in bronchoscopy, we do continue to see some level of competition, as we have communicated earlier, and this is where the combined portfolio with ASCOPE4, ASCOPE5, vivacide, and then also the video laryngoscope, which we have in development, will be a very important part of this full offering that we have in this segment. Looking at the remaining part of the endoscopy business, so the one that excludes pulmonology, so this is urology, ENT, and GI. Starting with urology, we had a very strong momentum, and the total category here grew by 36% in the quarter. We see very strong growth with our sister scope in Europe, but in particular in the US. And when we look at the urology space, we also have our ureteroscope in development, which will be an attractive product for us to launch, in particular because a big part of this market has already converted to single use. Then when we look at ENT, this had a strong quarter, in particular again here in the US, and where we see our fees indication supporting the expanded clinical use. And then finally, when it comes to GI, this is the area that we stepped into the latest, but also the biggest market. So an area that we continue to be very focused on. Our key focus right now is our gastroscope, where we are continuing the launch and rollout with that product, where we are present now in all major target markets. And we are also receiving very strong feedback on the performance of the product among customers. So if we take a step back and look at the single-use market, I would like to show a picture that we showed at the Capital Market Day just to recap the market that we are playing in with our endoscopy solutions. So when we look at the big market, there's 150 to 200 million procedures that are done annually worldwide with endoscopes. And when we look at our target markets, this is roughly 100 million. What we aimed to do was to look at the pipeline that we have, the marketed and near-term pipeline. And this is what you see on the left-hand side here. And when we map that across the different segments, we estimate a total of 23 million procedures is what we believe that we can address with this portfolio over the coming years. If we assume, moving to the next part of the slide, that these 23 million procedures are fully penetrated using a blended ASP, we see a total market potential of 45 million. However, we believe that the uptake in these segments of single-use endoscopes takes time. We also believe that the uptake will be driven at different speeds across the different segments. So when we try to put our best estimate of how this will evolve, you see the pies or the Harvey balls on the On the right-hand side where you can see how we estimate the penetration to be in these markets in a five-year time frame. And then when we also add that this is the market that we are playing in together with the competition that is coming in, we estimate that this total market in five years will be roughly 15 to 20 million Danish kroner. So with this, and before I hand over to Thomas, I'd like to conclude with saying that these numbers, at least to us, documents that we have a fast-growing market potential also with very clear customer needs that we see when we are out there every day. We also get confirmation every day from our customers that we have a leading and very attractive portfolio. And we believe that the focus areas that we have with our transformation program and other initiatives to develop a scalable business model, it is what will bring us to deliver the strong, sustainable, profitable growth that we are aiming for. So this concludes my business update and I'll hand over to Thomas to go through the financials.

Thank you, Britt. And also a very warm welcome from my side. And I'm glad to be able to now present the key financial figures for the Q2 of our financial year. It's been a good second quarter, as Britt also has mentioned, with a quarter where we delivered 4% organic growth and 6% reported revenue growth with a positive impact coming from our exchange rates, the foreign exchange rates. For the half year, as also mentioned, it's also 4% organic growth and with a reported growth rate of 8%. Again, also here, a positive impact from foreign exchange rates. Another key event in the second quarter has surely been our capital raise. So on March 24th, we completed a capital raise where we strengthened our capital base of around about 5% of our total share capital. This has enabled us to reduce our financial leverage faster than we planned and also has enabled us with enough flexibility from a financial and operational point of view, which again gives us some flexibility to invest into attractive growth opportunities. financial leverage has been reduced from 3.9 times EBITDA in the Q1 to now 1.6 in the Q2. And that certainly gives us also a buffer in terms of the microeconomical uncertainty that we operate in. And I'm very pleased with what we have accomplished here from a balance sheet strengthening perspective. Looking at our revenue and looking at our revenue by geography, North America, which is our biggest region, showed organic growth of 8% driven by endoscopy solutions. And within endoscopy solutions, record demand for our products within urology and ENT. And also within patient monitoring, we've seen high growth rates coming from cardiology. This is certainly also very pleasing to see and is also a strong indicator of the benefits that our single-use endoscopes bring and how that actually also resonates well with our customers. Europe showed organic decline of 1%. Britt mentioned that just earlier, mainly driven by anesthesia, where we had high comparables last year coming from backlog or reducing backlog in Q2 last year, and also stockpiling due to geographical uncertainties or political uncertainties last year. In the rest of the world, we have shown organic growth of 7%, and similar to North America, this was also driven by high demand for our urology and ENT business, and also solid and high growth within patient monitoring, and more specifically also there within cardiology. four percent revenue growth has resulted in that we achieved an ebit margin of 3.9 for q2 which is comparable with 4.2 percent from the q2 last financial year the decrease in ebit margin uh is mainly driven by reduction in gross margin. And the gross margin is due to higher input prices, but also continued ramp up of our Mexican production site. Whereas a slightly better mix have somewhat offset that increased cost from a gross margin perspective. If we compare the gross margin with Q1, there is a further deterioration or decline in our gross margin in Q2 of 2.7 percentage points, which is mainly driven by indirect production costs, as we've been very successful, and I will come back to that later, in reducing our inventories. The decline in gross margin has to a large extent been offset by improvement in our OPEX ratio and OPEX ratio where we've improved by 1.5 percentage point versus Q2 last year. Our cost reduction program has certainly helped in improving our OPEX ratio and also a very good and tight cost management throughout the year. So in Q2, we've maintained a cost from an OPEX ratio perspective of 52% due to, as mentioned, cost consciousness, allowing us far better control of our finances. So that is very pleasing also to see. And it's certainly also a testament to the focus that we have put into this. As we've also mentioned in the recent Capital Markets Day, scale in our OPEX is one of the key drivers for us to improve our profitability, and it will therefore remain our focus also in the remaining year and also in the following years to come. Another key focus is cash flow. Has been cash flow, still will be cash flow. And we have had a very strong focus on that throughout the year. And also in Q2, we now start seeing how those efforts are materializing. So we've posted positive free cash flow for the quarter of 21 million versus a negative cash flow in Q1 of 147 million. So it certainly also shows that our free cash flow in relation to revenue now starts showing the right trajectory in Q2. The improvement is mainly coming from improvements in our net working capital, and more precisely in the net working capital, a good and solid reduction of our inventories. We've reduced our inventories by 136 million versus last financial year. and we start moving into a more normalizing level of that. Still work to be done and still focus, and we are coming down from a high level also. Furthermore, Trade receivables has also been reduced. So we have been looking at our processes and how we more efficiently could also collect cash. And within Q2, we have also improved our trade receivables and cash collection by 76 million compared to the financial year 2021-2022. So achieving a lower net working capital, as mentioned, also reducing our inventories are starting to show, but still will be a key focus of ours moving forward. We still have a net working capital at a relatively high level, but as you can see also here, inventories certainly moving in the right direction. And it certainly is a key focus, and we remain committed to improving our cash flow for the year by 350 to 450 million DKK versus the financial year 2021-2022. That brings us to our financial guidance for the year. And we maintain our guidance for the year. It's important to yet again note that we are in a transition year in this year for AMBU. Our guidance for the organic revenue growth we confirm to be 5 to 8%. We have also earlier mentioned that the growth is expected to accelerate quarter over quarter, which also means that we do expect a slightly higher growth rate in the second half of this year. EBIT margin before special items we also confirm according to the guidance of 3-5%. The EBIT margin as one of the assumptions is also that the gross margin is expected to decline. by roughly two percentage points compared to last year due to input costs, Mexico ramp-up and product mix. And that will also impact the EBIT margin in the second half of this year and also due to some postponed investments that we will do in the second half of the year. But EBIT margin, as mentioned, confirmed between 3% to 5% of sales. With that, thank you very much. And we now move into the Q&A session of our presentation. And I therefore hand back to our operator to navigate and take the first questions.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. And the first question comes from Christian from Danske Bank. Please go ahead.

Yes, good morning and thank you for taking my questions. I have two, please. So the first one is to you, Thomas, and it's regarding the cross-margin outlook for the next couple of quarters. So can you help us a little bit with the pushes and pulls for the margin relative to these 55.8% that you delivered here in Q2? And then the second question is, with respect to your pulmonology sales in the quarter and whether the year-on-year growth in bronchoscopy sales can be attributed to a contribution from the ASCOPE 5. Thank you.

Yeah. So I think I can take the second question, but I think, Thomas, you can start with the first.

Yes. So thank you very much, Christian, for the answer. For the full year, as mentioned, as also in the assumptions around our guidance, we do expect that the gross margin will decline by roughly two percentage points when we compare it against last year. A number of effects play into that, as mentioned already. Certainly, input cost is one of those when we compare against last year. Mexico ramp-up, which we continue to also do, also plays into that. And then also the mix, we further alluded also to that especially some of our newly launched products, of course, in the ramp-up phase also comes with lower margin compared to the remaining part of our business within endoscopy solutions. On top of that, as you've also seen and we've talked about in the Q2, we have also seen impact from indirect production costs also coming in. And that will certainly also continue as we continue to have full focus on reducing our inventories in the second half of this year. So that will also play into effect.

Thank you. And if I may just quickly follow up. So when we talk about Mexico ramp up and mixed effects, is that expected to be an incremental headwind in the second half relative to the level that we're seeing here in Q2?

So, yes, to some extent, yes, that's in our planning or expectations for the second half of this year.

Yeah.

Okay, thank you.

Yeah, so you can expect our gross margin to be roughly at the same level throughout Q3 and Q4. And then maybe to comment on your other question on pulmonology, or bronchoscopy specifically. So still the very vast majority of our bronchoscope sales remains Ascope 4. So we do, of course, continue to see increasing revenue as we should with the With ASCOPE 5, we continue to see, I mean, an expansion of the customer base and also the number of customers rebuying. But again, it is, as we have talked a bit about before, it is a gradual uptake. We are in the bronchoscopy suites where we have not been before, where they have not used single use before. So this is, of course, the sales cycles are taking some time. This is in line with what we also talked about at ASCOPE. at the capital market day. But it is a contributor to the growth. But we also at the same time have had a good quarter and a good half year on our ASCOPE4 business, which remains a focus area. So the overall takeaway from the bronchoscopy or the pulmonology business is that the Broncoscope sales is back to growth. I think that's worth noting a lot of that by strong Ascope 4. It's our completion of our portfolio with our Ascope 5 smaller sizes and the Viva site relaunch, which should contribute to continued growth. And then it's the video laryngoscope that we have in development that we have not talked about launch date for yet, but which is a high priority project. I hope that answers your question, Christian.

Yeah, it does. Thank you.

So the next question comes from Ricard Anderkrans from Handelsbank. Please go ahead.

Right. Good morning, and thank you for taking my question. So two for me, please. First, if you can quantify the statement of increasing customer base and perhaps also quantify anything on the share of customers rebuying in the GI segment, you seem to highlight that things are moving a bit slower there. So it will be interesting just to get a sense of the magnitude of the sort of sequential improvements and expansion there. Thank you.

Yeah, thanks for the question, Richard. So we don't comment specifically on the customer base and number of customers, but I think, I mean, there are some similarities when we look at the Ascope 5 launch and also the Gastroscope launch. I mean, the first one, which is very similar, is that we get very strong feedback from the customers on the product performance. So that is, of course, something that is very important because we can see that, I mean, they like the product, it does the job for the procedures. Then also we continue to see quarter over quarter revenue growth also as we would expect. And then secondly, I mean, I think it's very important, again, this about that it's a new customer group. That also means when we look at the reported revenue on endoscopy solutions excluding pulmonology, GI continues to be a smaller part of that revenue because it does take time for us to go in and get familiar with how we sell gastroscopes very much in line with how it happened when we launched the Ascope. I mean, it was a gradual uptake where it took us six years before we saw really a meaningful revenue. We don't necessarily expect it to be that long, but we expect a continued positive trajectory. I think the market is in general embracing single-use endoscopes much better than we saw in the past, and that we do see a spillover and a familiarity a familiarity in GI. Just coming back from the big endoscopy GI conference in Dublin a couple of weeks ago, it's very clear that we have a well-established name and recognition among key opinion leaders and key gastroenterologists. So I'm very confident in our ability to deliver And with the size of the GI market and the potential, I mean, we have to be there. But it is, I mean, it is, as we have also talked about before, I mean, that launch phase is taking time, and it does also take time to get the meaningful revenue that will move the needle. So I hope that clarifies, and I know I'm not addressing your specific question for customer numbers.

That's fine. Thank you. And second question, you seem to have quite tough comparables in both anesthesia and patient monitoring from looking at Q3 from last year. So should we expect negative organic growth in these segments in the next quarter? Just be interesting to hear a little bit how we should think about the comparables just so we don't get caught sort of wrong foot in the air moving into the next few quarters.

Yeah, no, thanks for asking that. And I think it's fair to assume that we will, I mean, we will see that, I mean, the revenue for that part of the business remaining roughly. So anesthesia, patient monitoring remaining roughly at the same level as we have seen here in Q2. I mean, again, back to that it is quite high comparable strong quarters from last year.

Thank you very much.

And the next question comes from Martin from . Please go ahead.

Hi, thank you so much for taking my questions. First question is regarding the flu. Can you maybe just give us a little bit of some quantitative numbers on how the flu impacted the quarter because you delivered positive growth on the bronchoscopy business despite the flu season being pushed from Q2 into Q1. And just on the gastro, can you maybe just Help us a little bit understanding it's a slow trajectory, but how slow are we talking about? Are you selling hundreds or thousands or tens of thousands would be very helpful to understand also. Thank you.

Yeah, so if I start with the flu season, so as we talked about before, I mean, it did spike in Q1 as we previously talked about. And I think when we look at the flu numbers from Q2, I mean, we saw a fairly modest level, but still also, I mean, as... as we have seen in earlier years. But overall, a limited flu impact, I would say, when we look at the U.S. market in the quarter. That came primarily in the first quarter of our fiscal year. And then we saw a little more flu in Europe in the quarter, but still not at any spike as we saw in Q1 in the U.S. In terms of GI, so I think, I mean, my comments is not... I mean, it's not, and I'm just judging from your question to say that this is an area that we are disappointed around and that we don't see a strong traction in. It's more to balance in terms of when we look at the bigger picture, and I'm not going to comment specifically on number of scopes that we are selling, but we are seeing a fairly... I mean, satisfactory number when it comes to customers that are buying for the first time. We are also seeing, I mean, that customer base continuing to grow. We are also seeing the number of customers rebuying continuing. So we are actually quite confident with the traction that we see. And we also, as we went into this, I think we had... We have had our learnings when we came out with the Dudenoscope. The gastroscope is a very different story when it comes to the product performance that is working. So it's for us a question of making sure that we continue to be out there addressing the product with the resources that we have available. And that's very clear, as you know, from last year we had in... a couple of years back ramped up a lot when it came to our GI sales force. We brought that down and now we are having a more balanced sales force addressing balancing across the different segments that we are in and then also being flexible so we can go after the opportunities there's no doubt that we see this being a big market with high potential. Our focus when it comes to GI is very much on the gastroscope and we have no competition in the segment at this moment. So we go, as we have talked about before, with a targeted approach of the segments where we see the biggest need and we learn from that and expand. And I think that is, I am in general very positive about this. It's just taking time to But as long as we are on that continuous slope with increasing customers and increasing rebuying, which we are seeing, I'm very positive. At the endoscopy conference, we also showcased, of course, the product and also our gastrolarge that we have added to the portfolio with very strong feedback. So I'm quite confident for the future for us in this area, and it remains important.

Okay, thank you. Can I just squeeze one more question in, just to you, Thomas? When I look at the margin guidance for the second half of the year, I mean, you're already trending towards the high end of the guidance in the first half. And in the second half, you expect to have a step-up change in the overall growth of the company. You now say that you expect flat gross margin. So why don't you expect any leverage on your OPEX in the second half of the year? Because that must be what should drive some margin expansion from here.

Yeah, thanks, Martin. Yeah, so first and foremost, when we do look at the margin and therefore, of course, your comment relates to the EBIT margin, of course. it will be lower in the second half of the year. If you take the two quarters that we're in, you can also see that the quarter one and quarter two, there's a difference in the two quarters that we have reported up until now. So the continuation is impacted by, as I mentioned before, the gross margin. And a big part of that will also be that we further and continue, we'll see impact also from indirect production costs when we are and will continue to reduce our inventories over the coming months and quarters. So that puts... a bit of a pressure, if you will, on the gross margin. And on the other hand, we will be working with the OPEX, of course, but can't compensate that in full for the remaining half of this year. So that's why we expect that we see half year over half year, slightly lower margin in the second half of the year.

Okay, thank you so much.

And the next question comes from Nils Kranholm from Carnegie. Please go ahead.

Yes, good morning. My first question is on your growth rates for the endoscopy other categories, so the ENC, urology, et cetera. So the growth deceleration that we saw in this quarter, is that effectively – explained by difficult comparatives to last year, or why is it that growth rates keeps trending down in this segment? My second question would be on the one-time cost that you incurred in administration costs. Could you provide a little bit more color on the level of those one-time costs? And then a third question on potential one-time cost included in your net financials in the quarter. Thank you.

Yeah, so I think the two last questions are for you, Thomas. Maybe I can start with the first one. So when we look at the growth in endoscopy solutions, excluding pulmonology, which I think was your question, we have a strong... growth in the in the quarter of 36 percent and as we as we say it's in particular we see the very strong growth coming out of the u.s it's on the urology business where we are seeing with the sister scope both a continued expansion in terms of the customer base and also where we see the amount that our customers are buying is continuing to increase so i think that the I mean, that continued growth, even that we are expanding our base percentage-wise, that will, of course, not continue to be equally high. I think that looks to us very promising. A bit similar when it comes to ENT. We got the fees indication last year, so that's where we continue to also see a strong growth in that area. And then we talked about GI before. That is still a smaller part of that segment. I would say overall, I think it's, I mean, I'm comfortable. Taking time as we have talked about in the call today, but I think that's how we will continue to expect strong growth in this part of the business. And then that combined with that we are getting back to growth rates in pulmonology, I think puts us in a good position in endoscopy solutions, which is our main focus.

And yes, and so to your two questions, both to some extent related to one-off cost, one being as you asked around in our OPEX cost, and I assume you refer to the cost that relates to the restructuring that we did within the executive leadership team. It is exactly one-off, so obviously not something that will reoccur in the second half of this year, but it's also not a number and a figure that we will communicate. So I can't talk and won't talk too much more about that other than to say, yes, it's a one-off, and it's certainly not something that we expect in that nature to see, of course, due to the one-off nature. In the net financials, we have also, yes, had some one-offs as we've obviously done our capital increase and to the furthest... point we've used that to reduce our net debt situation. And that has, of course, also come with some one-offs in our net financials that we, on the other hand, will benefit from in the second half of this year. So the net impact in Q2 was roughly on the net financials were around 15 million that we then won't be seeing and actually benefiting from in the second half of this year.

So is the one of 15 million or is that number the run rate?

The what, sorry, again?

So is the 15 million the underlying run rate per quarter in net financials?

No, that was the one of, sorry, that was the one of. Okay. Yes.

Okay. So the underlying run rate for financials per quarter would be to the tune of 10 million.

Correct.

And then can I just add one more question about your number of employees? Back in August last year, you announced the... A staff reduction of 200 people. But if you look at the number of employees, it's now down from 5,100 to 4,300. So quite a bit more than the 200 you announced a year ago. What's going on?

Yeah, so that's a good question. So basically, a lot of this is, I mean, the majority of our workforce is blue-collar workers, and that's where we have more flexibility. So when you look at the actual numbers and the reduction, a large part of that is blue-collar workers that we have reduced. And that has simply been also a part of the inventory reduction. We had quite a number of products in inventory, and as we're putting that down, we have slightly adjusted some of that workforce. And then I would also say we have also, I mean, we have not made more workforce cuts, but we have held back on... on refilling positions since last year in order also to manage the cost base. So these are some more recent adjustments to the workforce. But the majority of these are the blue-collar workers.

But still you have effectively reduced the number of employees by 800 people.

Yeah, I mean, we were not exactly up at 5,100, I believe. So it's not a, I mean, that number is, it's not a full 800 people reduction. We were close around the 44,900 people. But it is true that we are down a couple of hundred when it comes to our blue-collar workers, which again, as we are emptying some of our inventories, we will see a slight increase in that number again.

Okay, so you expect this number this quarter to be the trough?

I think so. With the current plans we have, yes, and as we are reducing our inventories on some of these products with these finished goods, we will, of course, ramp up slightly again.

Okay, thank you.

The next question comes from Givaisu from SEB. Please go ahead.

It's Wei from SEB. Good morning, Barry and Thomas. Thank you for taking my question. I have three questions here. Firstly, I just want to follow up on the EBIT margin guidance for second half. We understand the gross margin expectation, but just curious on your OPEX assumption. You have changed the assumption talking about a postponed investment in the second half. Could you maybe elaborate a bit on this? Is it in the sales organization or R&D? And what is the rationale for this?

Yeah, I can take this. So, I mean, in terms of the postponed investments, I mean, it's not so much on the commercial side. It's mainly on the back office when it comes to innovation and operations that there are some costs that we have slightly postponed related to some clinical studies and so on.

Yeah. Okay, great, thanks. And secondly, you mentioned now with the lower financial gearing, you will be able to invest in the attractive growth opportunities. Could you also elaborate a bit on this? I'm asking because this conflicts with the fact that you have just the right size to downsize the organization and cut down the R&D spending quite significantly. So should we, while looking at your investment or perfect investment in the coming years, should we understand you are also now looking into some sort of bottom positions?

Yeah, so that's a good question. And I think clearly, and Thomas talked well about this. So, I mean, with the capital increase, of course, we have now brought our debt down to a very minimum level, which is good from the interest rate cost perspective. But more importantly, I would also say it gives us flexibility on the business that we are able to invest. invest in growth faster than we were otherwise. Having said that, I think it's important for us to stay focused and committed on our transformation program. I mean, we have a clear plan to increase our profitability. But of course, we are a growth company. So that also means that, I mean, we will and need to continue to look in investing for growth. But again, striking that balance between increasing profitability It's not that we have a strong focus on M&A right now, I believe with the new products that we have just launched last year with the upcoming products that we have in pipeline and the transformation program. I think there's enough for us to focus on and it's important that we still continue to be focused on delivering on the opportunities with that and focused on execution and delivering on our transformation.

Okay, very clear. And lastly, a question on the ASCOPE4. Following Boston Scientific's launch and upgrade on XLB, your peer Verizon recently launched the B-Flex2 and also claimed the main selling point being the stronger suction power than the market-leading product. Do you still believe your SCOPE4 can compete on this clinical performance, or should we expect also a product upgrade from you?

So you can say, I think definitely, I think we have a very competitive portfolio when it comes to bronchoscopes. The Ascope 5 is clearly, I mean, the best in class and the best product that is out there. So we have the full offering, I would say, is number one. And also have, I mean, the choice for the customers who, I mean, where they need to use the best product. scope and go for single use, that's where we have our Ascope 5, which I don't think that the B-Flex 2 is near to compete against. Then you can say our Ascope 4, that I see that remaining a market-leading product. It's true that there is competition coming in. And for us, I mean, we have remained fully focused on delivering on our customer needs. And of course, also, as we have done previously, I mean, we continue to improve our products and also look at how is it that we can further strengthen our products to better deliver on the customer needs. I think that's an ongoing basis. So that's what we do on the bronchoscope specifically. And then, of course, with the video laryngoscope, we will then have the full pulmonology offering where we are also looking at, I mean, very much the full solution we are offering with the system and the bronchoscope and the video laryngoscope.

Okay, thank you. I'll jump back to the queue.

Thanks. The next question comes from David Edlington from J.P. Morgan. Please go ahead.

Yeah, good morning. Thanks for taking the questions. First one is on pricing. I just wondered if you could talk to the pricing environment across the three segments and maybe more specifically endoscopy, what you're seeing on the bronchial side. And then secondly, just on anesthesia and patient monitoring, I'm just wondering if you had any views into why you were seeing such strong stocking and destocking in anesthesia, but less so in patient monitoring?

Yeah, thanks. So on the pricing first, I mean, pricing is a key priority for us, and that goes across the full portfolio. So, I mean, it's also on our anesthesia and patient monitoring where we do, I mean, think we need to, I mean, have prices that also reflect the desired profitability. And the same goes for our endoscope offerings. So on the ASCOPE 5, as we have previously communicated, we are, I mean... we do have a price premium of 30% to 50%. We are also seeing that we are able to deliver and get those prices for our Ascope 5. And then when it comes to Ascope 4, I mean, given the increased competition, it is, of course, something that we are close to and where, I mean, that competition, of course, also... focuses on on the prices so that's of course where we are more modest in our expectation for price increases compared to other parts of the portfolio for anesthesia and patient monitoring maybe on this inventory thing maybe just to clarify it's not i mean this happened basically one year ago, and because the products in anesthesia are products that are saving lives, so quite instrumental for hospitals, and because we have a strong, solid business of that in Europe as well, this is where we basically saw some of the stockpiling to make sure that we have I mean, that the hospitals had those products in stock in the hospital. So that's really... And this was also where we had some of the supply chain disruptions and some of the backlog that we cleared out around a year ago. So that explains why it's hitting our anesthesia business more. On the patient monitoring side, as I also alluded to, this is where we see, I mean, a very... good momentum when it comes to our US business, in particular on the cardiology side, where we have had a very good quarter. But overall, I would say, yeah, so overall, I would say when it then comes to our pricing, I mean, maybe to wrap that up overall, I do think that it's important to note that, I mean, we do, as we renew contracts, remain focused on pricing, but we do also, which I think was in your question, see the hospitals being under pressure on their own financial situations, which of course also makes these negotiations, I mean, quite tough sometimes. But it is, I think there is in general a good understanding on the other side of the table that, I mean, that we have had increases in our input prices and that we also need to get price increases through.

Maybe just to follow up, are you able to quantify maybe across the entire portfolio, are you seeing low single-digit, mid-single-digit price increases?

Yeah, I think we are not out talking about specifics on the price increases and how the ratio is. But it varies, of course, across the portfolio. But we do see in some of the segments successful price increases.

Thank you.

So there are no further questions at this time, and I hand back to Britt Melby Jensen for closing comments.

Thanks a lot, and we're also getting close to the hour here, so I would like to thank you, all of you, for attending the meeting this morning. Thanks also for the very good questions, and have a good day, everyone.