Ambu A S Ord

Hello, everyone, and welcome to this conference call presenting our Q4 and full year results from 2024-25 for Ambu. My name is Britt Milby Jensen. I'm the CEO of Ambu. And with me today, I have Henrik Skagbender, our Chief Financial Officer. So let's get going. So we'll start with the highlights from the year that we just exited. And overall, we delivered a very strong organic revenue growth of 13.1%. And if we look at our endoscopy business, that grew for the year 15.4%. This underscores the continued momentum and potential of moving patients from using reusable endoscopes to single-use endoscopes. If we look at our margins, we delivered a margin of 13 And this is impacted positively by our operational leverage, where we continue to drive scale and be more efficient. And then on the other side, we also, given we are a growth company, as the most important, we are, as we have previously communicated, continuing to invest in commercial resources and scale in order to continue to deliver that growth. At the same time, we had two external factors, and Henrik will come back to that in terms of FX and tariffs that had a negative impact on the results. What we also launched in this quarter was October 1st, where we held our Capital Market Day. We launched our next era strategy, a strong testament to the progress we have made over the last couple of years, and I'll come back to talk a bit about that as well. In connection with this, we both extended and we increased our long-term guidance towards 2930. And what we are delivering also that Henrik will present for our short-term guidance is in line with these ambitions. So if we dive into the specific results for the year, starting with the overview here, the 13.1% organic revenue growth for the quarter Q4, we delivered 10%. And if we take a step back, this is well in line with what we said a year ago when we were up here, that we were expecting to have higher growth in the first half of the year than the second half of the year, which is also what we have delivered. If we look at the split, and I'm going to comment on this shortly, we had almost 10% growth in anaesthesia and patient monitoring, 9.9%, and then the 15.4% in our endoscopy solution business. Both of these being lower in Q4 compared to the full year, again, as expected. Then our EBIT margin before special item landed at 13.0, and we ended up with a cash flow of 450. 7 million DKK positive for the year. Let's look at the endoscopy solutions revenue, starting with the respiratory organic revenue growth, where we saw, as we have also communicated throughout the quarters, a solid double-digit growth in this segment of 11.4%, and then slightly lower, 8.8% for Q4, So again, this is as expected and it's related to the timing of order in particular in the rest of world and nothing that we expect is going to continue where if we look ahead for this segment, we believe that the coming years will be continuing to be solid double-digit growth in this segment, very much driven by the breadth that we have in our endoscopy solutions. And what has been driving the growth this year has very much been our bronchoscopy solutions, and that is continuing to drive our revenue growth in the coming period, together with also starting to see increasing revenue from our newly launched video laryngoscope solution, SureSight. If we then look at the rest of our portfolio, and this is the segments that we refer to as urology, ENT and GI. Here we also had a higher organic revenue for the year of almost 20%, 19.6%, and then in the quarter slightly softer. And although we normally do not comment on the different areas, and this is very different therapy areas that we are covering in this group, I think it's fair to also explain a little bit this quarter to say that in Q4 in particular, we saw a significantly lower growth in ENT than we saw in urology and GI. Let me come back to that because this is well in line with our strategy of key focus on urology and respiratory as our two key segments. If we look at urology specific, we have now not only our ASCOPE 4 system, but we also have our ASCOPE 5 system. We have our ASCOPE uretero, which the two latter are contributing still with a fairly limited part of the overall urology revenue. But that is something that when we look ahead, we expect to continue to see good momentum on our ASCOPE4 system, but where we also will gradually see these solutions driving an increasing share of growth. And I think it's important here to pause and take a step back and say, if we look at the overall momentum that we see when we launch new solutions in the market. And when we take a couple of years back looking at our ASCO 5 Bronco, it's very clear that it takes some quarters that the launch curve, and we have talked about this a number of times, is not steep as you will see in other areas, but it's relatively more flat, but then it will also continue to grow quarter over quarter for many years, as we have shown that we see still the primary driver of the overall revenue in endoscopy is coming from solutions that have been on the market for quite some years. So this also makes us comfortable when we look at this segment that there's good momentum as we move into this year and the coming years in terms of generating growth in this specific business area. If we then look at anesthesia and patient monitoring, 9.9% for the full year. There's no doubt that this has been an extraordinary year. The revenue growth has been driven by price increases, which was also, as we had communicated, leading to a couple of quarters of very high growth and then the growth in our last quarter of 6.4% reflects the good balance of where we actually see a lot of growth coming from volume growth and also some growth still coming from price increases. This is purely driven by the fact that we have growth in the markets and that we are able to deliver on the demand from our customers. We have not launched any new solutions in this area. We have not added commercial resources. So it's basically our existing people driving the growth and also fueled by a very strong customer loyalty and acceptance and appreciation of our solutions. If we then take a look at our strategy and what we launched, because a month ago we launched a very strong ambition when we look ahead to achieve global endoscopy leadership. So this is basically on the back of a couple of very successful years with our ZoomIn strategy, where we were successful at a fairly high pace of doing the turnaround of Ambu, and then looking ahead as a strong growth company Based on the solutions, the market potential, we feel very comfortable of having an ambition of global endoscopy leadership, building on the momentum that we see in the market and acceptance of single-use endoscopy solutions. So our strategy includes some strategic choices that we have made and also a couple of strategic themes. And let me briefly do a recap of those, starting with the strategic choices. What we communicated in relation to our strategy is that there are two key areas that are our primary focus areas as we look ahead. And this is our respiratory business, formerly known as pulmonology, but now also expanded as we also have strong airways management solutions. And then we have urology. Then when we look at our ENT, we still see some strong potential to continue to grow in ENT. Although our portfolio is slimmer in this area, we are investing in new innovation to also meet a growing need for single-use endoscopy in this area. Then when we look at GI, we have a long-term ambition of unlocking gastroenterology, which is a very realistic ambition as we see it, because there are some of the same dynamics and the same needs in this segment as we see in other segments. But we also acknowledge that this is something that will take time and we are investing more limited right now, in particular when it comes to the commercial side. But we do believe that we are the ones that will eventually lead the transition to single use in this segment. All of this is then combined in our endo intelligence where we are continuing to advance the software, the AI solutions that supports our endoscopes and where we have the benefit of having one software platform for all our endoscopes combined as the only player in the field. Last but not least, we are also confirming that anesthesia and patient monitoring remains meaningful for our company, and we continue also in this area to grow. But here we are more focused on the profitable growth, meaning that we are investing less and we are expecting more scale, as you have seen in the recent results from the past year. If we then look at the strategic focus themes, let me recap these. We have four specific areas where we believe that we can continue to make a difference. The first one is very important around customer centricity, making sure that we continue to focus on our clinicians, but also expand that focus to the health systems where our broad focus endoscopy portfolio can play a role and then we see opportunities here to accelerate our adoption of single use as well also as creating more evidence both on the clinical solutions health economic and not least sustainability which is also playing an increasing role for our customers Innovation remains at the heart of what we do at AMBU and we also believe that we can deploy new technology either in-house or through an increased focus on partnerships to simply be able to be on the forefront of delivering new endoscopy solutions that plays a real role and makes a real improvement for our customers. Then to succeed with both our growth, but also with our margin improvement, it's super high on our radar to continue to build a scalable, profitable platform. We continue to see a number of efficiencies that we can leverage over the coming years, which is part of the plan that we are fully executing and that we have slightly extended. And then last but not least, the most important in AMBU to deliver on our strategy, to deliver on our plan is our people and the culture that we have built and that we really cater for in AMBU. And this is where we see great opportunities to continue to fuel this culture of growth and of empowerment because we have a lot of highly motivated and highly capable colleagues all around the world. So this is, in a nutshell, our strategy. And let me talk a bit about the growth and where we see our growth coming from. And instead of looking at the market size, which is huge, let's look at the growth in the single-use market, because this is actually what matters. And there are a couple of important points here when we look at the market. Overall, if we start on the right side here, we expect that the single-use endoscopy market is continuing to grow with over 20% CAGR, at least in the period until 2029-30. If we look at where this comes from, there's the underlying endoscopy procedure growth, which is roughly around 5%. which is very much driven by both the aging population, increasing chronic diseases, and also an increasing trend towards minimal invasive procedures. But then there is the big transition from using reusable endoscopes to single-use endoscopes, where we see that growing at least around 15% on an annual basis. And this growth we see coming from both solutions that are already on the market, most of these solutions from AMBU, and then also new solutions that are in development right now. But we do see a continued conversion where customers have agreed in many of the sub-segments that we are in that single-use endoscopy is the solution to a lot of the challenges that they have in the hospitals. And this is something that they also see as a standard of care as we move ahead. We did a survey among customers earlier this year and among potential customers as well, where they said that in respiratory urology and ENT, where we did the survey, the clinicians said that roughly 70% of their procedures can be done with a single-use endoscope. And we are far from that today. So that also explains the great potential. And let's look a little bit at what is driving this conversion to single use. And there are four main things that are the drivers. One is the higher efficiency that we see in the hospitals. So there's more and more evidence out there that that hospitals and clinics can treat many more patients when they use a single-use endoscope because they don't have to wait for a scope being available or the reprocessing that needs to be done. And this one is super meaningful in the hospitals today where resources is a constraint. Then there are better economics. If you do the full budget model, budget impact model from the hospitals, it's very clear that it comes out more economic viable to use single use. In most cases, we have the strong clinical performance where the quality of the single use scopes have reached in many segments a level where it is very strong and comparable to single use and on some aspects even better. And then we have sustainability which in particular in Europe and we are seeing also the trend in pockets of the US where sustainability really plays a role in the choices of the hospitals. So if we are to take a step back and say what is really the potential of AMBU and how do we see us, it's basically a very attractive market that we are playing in and we are as market leaders leading the structural shift to single use solutions. We have the broadest single use endoscopy and also a very strong proprietary platform to deliver this growth and the largest commercial footprint in single use. Our solutions and our innovation is very focused on meeting and solving the problems that we see with the customers so they can treat more patients with better outcomes. We have a setup which is already very competitive and scalable when it comes to cost, and this is something that we are continuing to fuel by ongoing initiatives that we have. And this is basically what brings us to a very clear path of solid double-digit organic revenue growth longer term and also a margin expansion towards 2030 that Henrik will come back to. So before I hand over to Henrik, let me just briefly talk about the endo intelligence, where we have received a couple of questions. And basically, we are not sharing all the full programs that we have in development. But what I can say is that endo intelligence is building on the hardware platform that we have, where we are also working on a next generation supported by the software that we are really continuing to improve across all endoscopy solution areas, and then AI-enabled applications. So we are basically able to support the doctors both in being more efficient before they do the procedures with the patients, during the procedures, enabling much better diagnostic support than they have been able to so far, and then also after the procedure, where there typically is an increasing level of documentation. being done where we can support. So this basically also means that with us being present in respiratory, urology, ENT and GI, with a strong offering when it comes to our endoscopes, here exemplified by our respiratory solution, adding on then additional solutions that also plays a role in helping our customers, such as the video laryngoscope that we launched. We have our VivaSight one lung ventilation, as well as our Bronco sampler set. We are basically becoming a company that can help the full procedure that they do with the patients in terms of endoscopy. And this is the way that we are moving forward. And then we have the benefit of the portfolio when we are engaging with the health systems where it's very meaningful that they can go into a room and actually plug any endoscope in and then do a procedure so they can also leverage the full hardware platform and the software that we have with our solutions. So with that, I will pause and I will hand over to Henrik and come back in the Q&A. But just by saying that we feel super confident around our new Sumo Head strategy, we are very excited about the potential that we have and we feel we are very well positioned to also strongly differentiate ourselves in solving our customer needs better than anyone else. And this is also where with a high market growth in single use transitioning from reusable, we are strongly positioned for high growth as we look ahead into the future. So with that, Henrik, over to you.

Thank you, Britt. And like Britt ended, I also want to start before I get into the financials by saying we stand here today on the back of what we feel are really solid results for 24-25 with a lot of progress on our strategic initiatives. And we also stand here today super confident, as Britt just said, and with high level of excitement with what we have ahead, with what we launched at the Capital Markets Day, guided by now our Sumo Head Strategy. And I'll also come back to that and talk a little bit about our long-term targets in connection to that, but start with, of course, reviewing first our 2024-2025 financial results. Starting with growth, we had an overall growth for the year, organic growth, of 13.1%. impacted by FX, both for the full year, but in particular for the last two quarters. So the full year reported growth landed at 12%. For quarter four specifically, we had an organic growth of 10%, as Britt also presented before, adjusted for the FX impact that in reported currency landed at 5.7, and just illustrates how impactful the depreciation of the US dollar DKK currency have been on our numbers in quarter four. In terms of business, we had a strong growth still in endoscopy, though lower than the previous quarters at 12.4, and still a solid growth also in our anesthesia and patient monitoring business with 6.4% growth. bringing the total growth across the year to 15.4% for endoscopy and 9.9% for anesthesia and patient monitoring. Very satisfactory results and in alignment with our long-term guidance and also with the ambition we set out exactly a year ago when we set the guidance. In terms of the geographical split, we continue to see very solid growth in North America and Europe. Less growth in Q4 for the rest of the world, mainly due to timing of orders, but consistently across all of the areas, strong growth. And of course, our North American growth was in reported currency, particularly impacted by the US dollar DKK depreciation. So overall, a good growth momentum and a growth momentum we also see continuing in now to 2526, something that I'll come back to when I talk about the guidance for 2526. Then turning to margin, we also landed the year on a very solid foot, we feel, in terms of our Q4, but also in terms of the full year. For the full year, 24-25, we landed at an EBIT margin of 13.0%, for Q4 alone at 10%. Importantly to note, for quarter four, as also communicated in our Q4 statement, we were impacted negatively by FX and also by tariff costs. And adjusting for that, we actually landed our Q4 at what would have corresponded to 13.4%, fully in line with our EBITDA margin expansion plan. As I also communicated in our Q3 statement, the FX impacts are temporary. We are initially impacted by the US dollar depreciation, but they will over time be compensated then by also lower COX. But it takes quarters to really see that offsetting effect. And with the continuation of the US dollar DKK depreciation, it did net-net impact us negatively for quarter four. For tariffs, I will also come back to it later. We have seen an increased tariff regime. globally, but specifically for our manufacturing coming from outside of North America that has impacted us in quarter four and will also impact us in 25, 26. But we remain very confident that with the plans we have in place already, we can mitigate a lot of this impact. It takes time to implement, like we've said from the start, depending on the initiative, six, nine, 12 months. So there will be a gradual facing. And therefore right now here in Q4, we did see a negative impact, which in part will continue into Q1 and Q2. and Q3 particular for 2025-2026. Then looking more in detail on the margin and breaking up to gross margin first and then secondary our OPEX costs. Gross margin continued a strong development, which we've been on now for 16 consecutive quarters almost, with an increase versus last year of almost a full percentage point, landing the full year gross margin at 60.2%. This, despite the negative impact from FX, is something we are very satisfied with, substantiates our ability to grow the higher gross margin business in endoscopy solutions, and also drive price increases, particularly in anesthesia and patient monitoring. In addition to this, it's also illustrating how we've continuously managed to drive efficiencies in our manufacturing footprint with better utilization of our factories, but also better throughput. So a really good result and a good continuation also towards our long-term ambition. In terms of OPEX, there was an increase in OPEX in quarter four. One, because we continued with the investments as Britt also said in her opening, investing in commercial resources. But two, in particular also because we did see effects from tariffs, which are reported under sales and distribution costs, which made the OPEX cost go up in absolute terms. That being said, we continue to see further potential for operating leverage and continue to be committed and confident on the long-term margin expansion journey where OPEX will be the main driver of our further leverage. If we then turn to cash flow, we landed the cash flow within expectations of the updated guidance for a full year cash flow of around 400 million DKK, with for quarter four specifically 130 million landing the full year at 407. This is a continuation of the efforts of driving strong cash conversion. And despite the negative impact from FX on EBITDA in particular, a continued positive momentum on also how we manage our networking capital while still making sure that we have enough safety in our supply chain and also in our inventories locally to manage customer demands where needed. So overall, a really good result. If we then break down into some of the components of cash flow, as said, EBITDA had a drop in quarter four, mainly driven by FX. Secondary, on our CAPEX, we did see a slight increase, mainly due to certain timings of investments in R&D. And last but not least, we did continue to see a slight decline in our networking capital, as also guided in the last quarter, particularly managing our inventory, but also our accounts receivable in a slightly more tight manner. while still making sure that we have enough buffer in our inventory and supply chain to manage customer demands. In addition to that, we are as part of our annual report also proposing a further cash distribution, a process we started more explicitly last year with an updated dividend policy and one that we are now extending and expanding. This concretely will consist of one, a dividend of proposed 110 million, which will be finally decided at our AGM in December, and secondary, a share buyback program of a total value of 150 million. We intend to start the share buyback program after the AGM and execute it in full before the end of the financial year, with an expectation of canceling the shares when timely needed. We do this, one, because we believe that this is the right thing to do under our dividend policy and with a continued strong balance sheet. And now, because we have a negative net interest-bearing debt, we also feel it's timely to increase the cash distribution. That said, it still leaves plenty of room for us to still have high ambitions on our M&A agenda, something that we certainly still do, despite a slightly higher cash distribution than previous years. With that, let me look more specifically now at the 2526 outlook. We are guiding for 2025-2026 a growth of 10% to 13% organic growth for the year in alignment with our SUMA head strategy. More specifically, we are guiding for endoscopy solutions a growth of more than 15%, in part with accelerated growth in respiratory and secondary by continued growth momentum in urology, ENT and GI. And we've come off to a good start on both dimensions. For anesthesia and patient monitoring, we're expecting mid-single-digit growth, which is in the higher end of our long-term guidance, and again an illustration, as Britt described earlier, of the continued solid momentum both on volume and on price increases within anesthesia and patient monitoring. With the growth composition of our 24-25 financial year, we are expecting that the total growth will be more back-end loaded. And we are expecting with very high comparables for quarter one that we will have a lower growth in quarter one, perhaps even just below double digit. But it doesn't change that our full year guidance for the year is 10-13% and we feel very confident with the start we already see right now. Turning to EBIT margin, we are for the full year guiding 12% to 14%, including an expected impact from tariffs, negative impact of two percentage points, which means that adjusted for this, we would have been guiding 14% to 16% exactly on the path of our EBIT margin expansion. Why do we see this impact from tariffs? Well, we do because despite our ability to mitigate tariffs, there is a timing of implementation of between six, nine, or 12 months, depending on the initiative. And that does mean that in particular in the early part of 25, 26 financial year, we will see higher tariff costs that will gradually decline across the year. And we're expecting tariffs to have much lower impact when we turn forward towards 26, 27, and further on, something that I'll also come back to later. That also means that with slightly lower growth, organic growth momentum for the start of the year, and a higher tariff impact, that our EBIT margin will also be back-end loaded for the financial year 25, 26. Last but not least, we're also in continuation with our ambitions from the Sumo Head strategy, guiding a cash conversion of around 40%, a continuation of our ability to drive efficient growth, make sure that we still invest in the business while we manage our networking capital in an appropriate way. And with that, let me look a little bit further ahead and come back to some of the direction setting we also gave at our Capital Markets Day as part of Sumo Head on EBIT margin more explicitly. We are, as you see on the left side on the slide, in a good position to manage the tariff situation as we've increased our manufacturing footprint in North America with our manufacturing site in Noblesville in US and Juarez in Mexico substantially during the past years, with particular expanding our production in Mexico. This leaves us good flexibility to manage that more and more of our products sold in the U.S. will be produced at these two sites, which are completely tariff exempted, Mexico included, under the USMCA tariff agreement. or trade agreement. That means that with further transfers towards our Mexico factor, which we are ramping up further, we do, as I explained just before, see negative impacts from tariffs of around two percentage points for the financial year 25-26. But we see this gradually decline and be very, very minimal when we get beyond 2026-27, which also means that despite a lower guidance for the next year at 12% to 14%, We are very confident still on our ability to deliver around 20% EBIT margin by 2027-2028 as we continue the operational leverage on OPEX in particular and we implement the mitigation actions on tariffs. And that brings me to my closure, reminding us of the targets we communicated as part of Zoom Ahead. We feel super confident, very excited, as Britt said, on the journey ahead, confident on the potential for the high growth in industry solutions, particular within respiratory and urology, but also in ENT and GI with a much more clear path for how to deliver on this and a very strong market demand for more and more single use solutions. We see an increased potential also in anesthesia and patient monitoring with a strong customer loyalty, strong product portfolio, and a continued solid volume development at a 3% to 5% growth, meaning that our full combined organic growth ambition CAGR for the period is 11% to 13%. In addition to the target on delivering approximate 20% EBIT margin by 2027-2028, as also communicated at the Sumo Head, we also lifted the EBIT margin guidance to plus 20% by 2029-2030 and across the period an average of more than 40% cash conversion. We feel these extended and increased targets is an important part of our Sumo Hand strategy and really underlines the great confidence and high excitement we feel about the future for Ambu and for single use in particular. With that, I thank you for your attention and hand it back to the operator for questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one 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 two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. And the first question comes from Jesper Ingelsen from D&B Carnegie. Please go ahead.