Ambu A S Ord

Hello everyone and welcome to this call where I, together with my colleague Henrik Skagbender, our CFO, I'm Britt Milby Jensen, the CEO, and together we will present the Q1 24-25 results from AMBU. Let me start with the key messages from this first quarter where we had a strong start to our 24-25 financial year. We continued with very strong organic revenue growth, posting 19.5% growth and also an increase in our profitability with an EBIT margin of 16.1%. Looking at our key focus area, our endoscopy solutions, we saw a strong growth in both segments that we report on. Our pulmonology business grew by 17.7% in the quarter and we had a growth in urology, ENT and GI combined of 23.9%. Also, we continue to be highly focused on innovation, and this is where we were excited to announce the registration of our new airway management solution SureSight, our video laryngoscopy solution that I'll come back and talk about later in this call. And then last but not least, on the back of the top line results that we announced on January 9th, we also upgraded our financial guidance for the year, which is now 11-14% in organic revenue growth and 13-15% EBIT margin before special items. Let's look at a summary of our financial results. So the 19.5% organic revenue growth and the 16.1% EBIT margin translates into an overall growth in endoscopy solutions of 20.6% and then on anaesthesia and patient monitoring we grew 17.8% in the quarter. When we look at our free cash flow, we reported a 60 million DKK for the quarter, slightly lower than some of the previous quarters. Part of this driven by increase in our inventories as we are also preparing for some of the new product launches. But we also made a lot of progress on our strategy, which I'll briefly touch upon now. As we communicated in our last call in November, we are ahead of plan when we look at our execution of our zoom-in strategy that we launched just over two years ago. Our focus on innovation continues to be strong, although if you look at our revenue across, it's vastly driven by products that have been in the market for a couple of years. But we did bring SureSight to registration, as I just mentioned. And then we're also continuing with our portfolio expansion in our urology, both with Ascope 5 uretero and Ascope 5 Cysto HD. strengthening this portfolio now having three scopes in the urology field. Then when it comes to our execution, that continues to be a strong focus and our EBIT margin not only doubled but also increased more than six percentage points versus the first quarter last year. This is not only driven by the performance in the business and price increases, but it's also driven by continuous improvement in operational leverage, which is part of the transformation program that we launched together with our strategy that we are continuing to execute on to build a more scalable and efficient AMBU that is set up for strong future growth. Then sustainability remains a key focus area. We have the bioplastic being now implemented across the full endoscopy portfolio, and we continue to also make progress on a number of other initiatives. Let me go into the different segments starting by anesthesia and patient monitoring. In the quarter, we grew by nothing less than 17.8%. If we look at this on a rolling organic growth, rolling 12 months organic growth, the growth is now 10.1%, which is also higher than what you have seen in the past years. And a lot of this is driven by the initiative that we announced a couple of years ago with the zoom in strategy that we are focusing on price increases. A lot of these price increases on some of the major contracts kicked in in Q2 of last year, so this is what is fuelling the growth in this quarter and will, after the quarter that we are in now, level off. But in addition to the price increases, we also see strong volume growth along a lot of the sub-segments, so a very healthy business in anaesthesia and patient monitoring. If we then look to the two endoscopy solution segments, starting with pulmonology, this is also a segment where we had a strong growth in the quarter of 17.7%. If we double click on this, there's a couple of factors impacting this growth, which has been higher than we have seen in the past couple of quarters. One is the timing of orders where we in this business will see some timing that affects the growth rate in the individual quarters. And in this quarter, that contributed positively. Then we also have a slight positive effect from the flu levels. Now, for us in the business, we clearly see a trend that when flu levels go up, it impacts this business positively. But it's difficult to get more specific around that because it depends on the buying patterns of our customers. But overall, we saw a slight effect in the previous quarter of this, although we do see a lot of the flu escalating in this quarter, where we also have a high comparable versus last year. Then, when we look at our Ascope 5 Bronco, we continue to see a healthy growth with this product, in particular in the US market. So overall, if we zoom back and to understand the growth that we have in this business, which varies quite a lot quarter over quarter, I think the most meaningful number to actually look at when we understand this business is the rolling organic revenue growth, where after this quarter is at 11.7% for pulmonology. Now let's look at the rest of the endoscopy segment. So this is urology, ENT, and GI, where we grew in the quarter by 23.9%. If we look at the 12-month rolling also for this segment, which is again a combination of these three areas, the growth is 27.1%. Double-clicking on the different sub-segments, if we start with urology, until now, the full growth has been driven by Ascope 4 Sisto, the product that we launched around or just over five years ago, continuing to grow very strongly. We are still too early to see any meaningful revenue from Ascope 5 Cysto HD and Ascope 5 Uretero, although we are in the launch phase and progressing well for both these products, which I will come back to. If we look at ENT, we also continue to see strong, solid double-digit growth. Here is our rhinolaryngoscope that has also been in the market for over five years. And then on GI, where we have fewer commercial resources, and focusing very specialized in selected niches, we also see very strong double-digit growth, although from a lower base than the two other sub-segments in this category. So if we look into the product launches, starting with our video laryngoscope, This is a solution that we are very excited about bringing to market because not only is pulmonology our largest segment, but this clearly expands this market, also tapping into the airway visualization with a product that has very clear synergies with both our Ascope 4 Bronco and our Ascope 5 Bronco. We are leaders in this market today, and we believe that this solution will help over the coming years to further strengthen our leadership position. The market that we are specifically addressing with the video laryngoscope is the endotracheal intubation market, where if we look at the US alone, we have more than 15 million procedures being performed every year with a video laryngoscope. If we look at the workflow and what we really help the customers with, we have an opportunity with our solution to simplify the workflow and also in combination with both Ascope 4 Bronco and Ascope 5 Bronco and even also with our other product for one and two long ventilation, VivaSight, to be able to use the same system and the advanced software that we have with this solution. So we had this registered and started a couple of weeks ago with what we refer to as our controlled market release, where we basically, for the first time, go out and have the product being used in real life settings by clinicians. So far, we have been able to perform a three-digit number of procedures with very strong results. both in terms of being able to address the specific needs that the clinicians have for these kinds of procedures, and also based on their feedback comparing to the solutions that they have been used to using. So overall, we believe that this is a product that is well position for our overall pulmonology and airway visualization portfolio to drive growth for the next couple of years. Although it will, as you see with our other products, be a slower start as we are still in the controlled market release phase moving in the near future into the actual commercial launch. Then let me look at urology. And as I mentioned before, so far our urology franchise and the great revenue increase we have had in urology has been driven basically by one product, which is our Ascope 4 system. Now we have expanded the market opportunity by launching two new scopes, the AScope 5 urethra and the AScope 5 Cysto HD, which are addressing a higher number of procedures. And with the AScope 5 urethra, specific for kidney stone removal and other procedures and the Ascope 5 Sisto HD, also a premium product with a higher image quality, which both of them tap into markets with higher price levels than we see with the Ascope 4 Sisto. It's still early days in terms of meaningful revenue recognition, but we are actually very confident with the full solution that we are providing, being able to come out with a complete system, leveraging the software and the digital platform with AVU2 Advanced and ABOX2 for all these three scopes combined. This also means that we remain the company with the largest single-use endoscopy portfolio. Again, that is all based on the digital platform and software that we continue to advance and develop. With a broad portfolio with different sizes in pulmonology, with now three scopes in urology, we have four approved solutions in GI, and then we have two different versions of our rhino laryngoscope launched. So with this, I believe we are well positioned for the coming years to deliver on our targets, and I'm happy to hand over to Henrik to go through the details of our financials.

Thank you, Britt. I'm happy to take you through the details of the financials. Before I do that, I just want to start with reiterating we believe we've come up to a very good start with Q1, and we're very happy, therefore, also to announce the guidance upgrade that we announced on the 9th of January. I'll come back and comment on the outlook for the full year at the end of my presentation. If we start by looking at our revenue, as Britt mentioned in her presentation, we had an organic revenue growth in Q1 of 19.5%, adding to that a positive currency effect mainly driven by the US dollar DKK, bringing the total reported growth to 20.4%. This was driven across all of our segments, as Britt also mentioned, both in endoscopy solutions with a strong overall growth of 20.6% and our Anesthesia and patient monitoring business growing 17.8%. Furthermore, from a geographical perspective, we also had strong growth across both North America, Europe and the rest of the world. So overall, a very strong start across the board. Turning to EBIT, an EBIT margin, a very solid EBIT margin expansion in our Q1 with a strong EBIT margin of 16.1%. If you look at the absolute EBIT, it's almost a double versus the year before landing at 243 million DKK for the first quarter of 24-25 compared to an EBIT of 126 for the same quarter last year. In terms of the EBIT margin expansion, this is driven both by gross margin and by OPEX leverage, something that I will double click on now. So double clicking on gross margin, we landed at a gross margin of 61.3% in the quarter. This was driven mainly by three overall things. One, the price increases in anesthesia and patient monitoring that are still helping drive up the gross margin within that sub-segment. Those were mainly implemented in Q2 of the last financial year in February and March and are therefore still having full effect in this Q1 and will also have some effect in Q2 of this financial year, after which it will have a smaller effect in Q3 and Q4. Besides anesthesia and patient monitoring, we also see a continuation of a higher growth level in endoscopy solutions with a higher gross margin and therefore overall also driving up the gross margin for our total business. Last but not least, we are still on a journey of increasing the utilization of our manufacturing sites, particularly the manufacturing site in Mexico. And therefore also this overall growth is also driven driving up our production efficiencies across the whole manufacturing setup. So overall, a very strong gross margin development and still a good continuation of delivering on our long term ambitions of staying above 60% on the gross margin. Turning to OPEX, we had a very solid development also in the OPEX ratio, a drop of 3.7% percentage point versus the same quarter last year. This was a combination of several things again. One, a strong operating leverage, particularly on our selling and distribution costs, as well as our administration and management costs. basically enabling us to sell more products through the established setup we have already, even though we in the first quarter and still for this financial year are investing in more commercial resources across the board. to help continue to drive organic growth and help continue to drive full effect of the new product launches. This is again also a journey that we are continuing and coming back to what we communicated also in Q3 and Q4 last year, a good continuation towards our long-term target of delivering an EBIT margin of 20%, or around 20% in 27-28. Turning to cash flow, we had a solid cash flow in Q1 of 69 million, Compared to the same quarter last year, a slightly lower cash flow, that was mainly driven by higher inventories. As Britt said, we have been preparing for product launches and that has been driving up our inventories a bit. Secondly, we also have slightly higher capex costs for the quarter. And lastly, we also had higher tax payments for Q1, which is normal and should also be expected going forward. So overall, we are satisfied with the cash flow for the first quarter and again, a continuation of the further deleveraging of our company and strengthening of our balance sheet. More specifically, if we look at the ratios, our network capital ratio for the first quarter jumped up to around 22%, again, mainly driven by inventory. Whereas our CapEx ratio against revenue for the quarter was a bit lower. Structurally, we still believe CapEx will be a bit higher going forward. So this is still a matter of finding the right level for the future. And we're still investing significantly in our business. But overall, very satisfactory development also on cash flow. Then turning to guidance for the year. As Britt mentioned on her first page, we increased the guidance for the full year on the 9th of January. So our organic revenue guidance now is 11-14% compared to 10-13% before. Our EBIT margin is 13-15% compared to 12-14% before. Double-clicking on organic growth, we maintain the view that our endoscopy solutions we expect to grow plus 15% for the year. We feel we've come off to a strong start and particular pulmonology has shown great strength in first quarter. And we believe still in continued solid momentum for that segment for the rest of the quarters of the year. On anesthesia and patient monitoring, as we communicated in Q4, we did expect a strong Q1. This was even stronger than we had expected originally, and therefore we adjusted this so we are now expecting a mid to high single-digit growth in anesthesia and patient monitoring, where Q2 will still be a higher growth level versus Q3 and Q4, where we are expecting a lower growth level given the lower impact from price increases. Finally, we maintained our free cash flow guidance at 500 million. We feel we are on a good track towards delivering on that and continuing the momentum of the journey of delivering strong cash flow also in this financial year. That concludes the financial update. And as a last note, before I hand it back to the operator, I just also want to officially announce that we are having a Capital Markets Day and inviting all of you to join on the 1st of October at the AMBO headquarters in Belleau. We look very much forward to, at that day, to elaborate even more on the exciting future we have ahead of us on the market dynamics and also the demonstrations of some of our existing and coming products. With that, I conclude my presentation and hand it back to the operator.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Questionnaires on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and 1 at this time. The first question is from Anshul Verma, JP Morgan.