Ambu A S Ord

Hello and good late morning to everyone and welcome to our Q2 earnings call for Ambu, where we'll go through our business highlights and financial results from the second quarter in our fiscal year. So 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 me start with the business highlights from the first six months of our financial year, starting talking about our key growth driver, endoscopy solutions, where we are leaders in the single-use market and where we are continuing to drive a structural conversion in the market from reusable to single-use. We delivered in the first half of the year 14.1% growth. The guidance which we are on plan with for the year on endoscopy solutions is plus 15% revenue growth. We also, when we set that guidance back in November, we said that we will have a higher growth in the second half of the year than the first half of the year. So with 14.1% for the first half of the year, we are on plan to deliver on that. Also, when we look at what is driving the business, we continue to see increasing traction from our new launches. I'll get back to that later in my presentation. But it's also important to highlight that the growth momentum and what is really driving the conversion from reusable to single use, it's very much increased. the solutions that we have had in the market for many years. And this is an important highlight because this is one of the main dynamics of the business model that we have, that we are with the big wide space we have to capture from hospitals and clinics using reusable. We can deliver growth on our solutions many years after they have been introduced to the market. But other than driving the progress with our existing solutions, innovation continues to be a key lever in our business as we progress. And that's why I'm happy to also report that we have good momentum on our next generation endoscopy solutions across a number of the areas that we are in. And we are also expanding our endo-intelligence investments into the software, AI-driven solutions that is going to make an even greater impact for our customers as we look ahead. So overall, if I comment on the EBIT margin, when we adjust that for tariffs and FX, we are at 14.8% EBIT for the first six months of the year. If you look at... At the net, taking into account the tariffs and FX, we are at 10.8%. The guidance that we set out in the beginning of the year set 12% to 14%. Here, as with the revenue, we also said that we are going to be higher in the second half of the year than the first half of the year. So that also means that when it comes to our EBIT margin and profitability, we are on track to deliver on that. I'll come back later in my presentation to anesthesia and patient monitoring, where we had a decline of 2.5% in the quarter following a strong year last year. But this also means that we see a slightly different expectation for this year than we had originally expected. expected going from mid single digit to low single digit and on the basis of this we can also see that relative to the guidance for the full revenue growth that we announced in November of 10 to 13 percent we see now that we will land in the lower part of this therefore we are being transparent and down or adjusting sorry that to 10 to 12 percent so we're still within the guidance that we communicated in november but it's we are expecting to land in 10 to 12 percent rather than 10 to 13. let's look at the numbers now from q2 so in q2 the overall endoscopy revenue growth was 13.8 so close to the first quarter of this year. As I just mentioned, we had a decline of 2.5% in anesthesia and patient monitoring and thereby having a total revenue growth organic of 7.3% in the second quarter. Still, we have endoscopy solutions making up now 63% of our total revenue. When it comes to the EBIT margin, we delivered 11% growth on that one. If we look and adjust for tariffs and FX, it will be 14.5%. In terms of free cash flow, we had a free cash flow of 104 million, which is very much in line with our expectations. So let's now dive into the segment starting with endoscopy and starting with our respiratory business. So in the quarter, we grew 12.2% organically within respiratory. And if we look at the rolling 12 months, this is 10.1%, so slightly lower than this. And if we look also at what we delivered the first half in total, it's 10.3%. So we are seeing a slightly stronger growth in Q2 for the respiratory business. So this momentum that we see in this part of the business is very much driven by, on one side, the bronchoscopes where we are continuing to see a solid increase in penetration, both when it comes to AScope 4 and AScope 5. And then on top of that, we are also seeing increasing momentum on the SureSight portfolio that we have launched. And in the quarter that we are in now, we are starting in the U.S., doing the full commercial launch of our SureSight mobile, which means that we are expanding the portfolio that we didn't do in the previous quarter. So overall, we see the continued strong momentum on SureSight helping to generate... bigger franchise for SureSight alone, but also we have the synergies with the bronchoscopes that is also helping and will in the coming quarters help fuel the growth when it comes to respiratory. So overall, we are... quite pleased to see the good momentum in this segment, in particular also because we see ample of opportunity to continue to also here increase and drive the structural conversion from reusable to single-use, and we are by far leading this in this segment. Now, let me turn to the other part of endoscopy where we still report on urology, ENT, and GI together. So in this segment, we grew 15.5% in the quarter. And if we look at the overall rolling 12 months, we are at 18.3%. And if we look at the total for the first half of 25, 26, we are at 18.2%. So if we take a step back and zoom in on urology specifically, the overall driver of the growth still continues to be our sister scope. And this is, again, because we see the continued structural conversion to single use in this business. When we stood here beginning of February reporting on Q1, we said that we had seen a slightly higher number of orders towards the end of Q1 that we thought would impact this quarter that we're in with slightly lower growth rates. And this is also the key explanation between the 15.5% growth in the quarter relative to the 18.2% that we see for the total of Q1. of this first half of 25, 26. So overall, this is where we are trying to be as transparent as we can around some of the quarterly fluctuations when we can see those having an impact on the coming quarter. Also, when we look in this segment, we have new solutions that are coming out. We are still seeing continued growth and good customer feedback on these, and we are continuing to expect those to continue to make up a bigger share of the total revenue in this segment. What we also see is what we have talked about a number of times now is that the There's slightly long sales cycles in the hospitals, and also when they are to embed new solutions into the clinical workflows, which is the case when they're switching from reusable to single-use. This is taking some time, but we are very much tracking that progress and is happy to see that this progress is building over time, and we have a very strong opportunity pipeline that is turning into... real orders and also rebuying customers is increasing quite a lot. Now let me turn to anesthesia and patient monitoring. So here we saw a decline of 2.5% in the quarter. If we look at the rolling 12 months, we were at 2.5% increase. And also, please keep in mind that last year we grew 9.9% in total for this segment. If we look at the split in the quarter between patient monitoring and anesthesia, we saw patient monitoring being up by 0.4%, and then we saw anesthesia being the one dragging this down by a 4.4% decline. Now, let me just take a couple of seconds to talk about what is the dynamics that happen here so everyone understands this. And this is very much a U.S.-focused thing, and it's also very much related to a part of the anesthesia portfolio where you may remember that around two years ago, we... went out and said that we are going to customers, some of the larger customers, asking for significant price increases for a part of the business where we were simply not profitable. And at that time, we said maybe this will result in negative growth because we do have to get the prices up. Otherwise, we are willing to walk away. What happened at that time was that we actually were successful getting the higher price increases. The customers did not walk away, but what we did trade, which is fully normal in these situations, was that we went in some of the big contracts from being an exclusive supplier to giving up that exclusivity. Then we have been trending well with no impact on volumes until recently and until this quarter, where we start to see that some of these customers who accepted the higher prices but opened up for... other suppliers that they are starting to now buy from some other suppliers. So this is, in essence, what is driving the minus 2.5%. And I also have to say that the volumes that we are seeing that we are not getting now is going to continue into the next couple of quarters as well. So these are basically the dynamics, but very much... something that we have been in control of ourselves, because for this business, which is not the key part of our Zoom Ahead strategy or where we focus the most, we have to make sure that we are profitable and that we also set the prices at levels that make sense. Hopefully this is clear and this is also the reason why we are taking down the guidance for this segment for 25-26 from mid single digit to low single digit. Let me move to some of the progress that we're making with the Sumo head strategy, because since we launched that October 1st, we have had a lot of good momentum and good progress across the business. And here's a few of the highlights. So one thing that I want to call out is that we have made some enhancements to the commercial setup in the North America organization that were implemented April 1st, where we are basically taking a step back together with Scott Heinzelman, who joined us as president of North America end of August last year, to see how is it that we see the changing customer needs in the space and how are we then adjusting our setup to best serve our customers. So this is something that we have implemented. It has been implemented very well with minimal disruption, but it's something that we are continuing to get settled in on, which will bring us long-term opportunities for driving sustainable growth as we are able to better serve the customers and cater for the different stakeholders that we serve. Then on innovation, there continues to be a lot happening and we are investing quite well into innovation. We had in this quarter the CE mark for the SureSight portfolio. in Europe, as we announced some weeks back. We also, with the whole SureSight solution, which is receiving a lot of positive feedback from customers, received a design award, the Red Dot Product Design Award, When it comes to the cystoscopy portfolio, we have strengthened that with accessories that are enabling both stent removal and foreign body retrieval. So this is a way that we are continuing to complement and expand the portfolio that we have around the ASCOPE system. I mentioned intelligence, endo intelligence early in my presentation. This is also an area where we continue to invest as we see very big synergies with the endoscopy solutions that we are offering in making sure that we can improve the efficiency in the hospitals and that we can even also in the future support much better diagnosis and treatment using some of the new technologies that are now available. And then last, on the business platform, we are continuing to improve our ramp-up in Mexico, and we are on plan on accelerating that to make sure that we have a much stronger global footprint when it comes to manufacturing, first and foremost to supply our North American customers, but also in general to make sure that we have the flexibility that is required to operate in Europe in the world that we are operating in right now. Let me finish with a couple of words on innovation and where we are on our journey towards global endoscopy leadership. So if we look at our SUMAhead strategy, we are on track to deliver on that. And there's really two key things that are driving our success with SUMAhead. The first one is commercial execution with the portfolio that we already have in the market. And the second one is innovation. So if you look to the left part of this slide, this is familiar to several of you. This is an overview of the market where we work. where we have a lot of white space, meaning that when the market is fully converted from reusable to single-use, which still has a number of years to go, we are looking into a 190 billion DKK market. If we then look at the penetration levels today, where we are by far the market leader, these vary across the segments with the largest penetration in respiratory, which is where we started, and we have really been spearheading that conversion. What we are very successful with right now and where we see the growth coming from is very much driving the conversion from reusable to single-use with what you see in the middle of this page, the existing portfolio that we have across the different segments where we are present in all major segments, less focused today on the gastroenterology. But what I can also say is when we look ahead, we are investing heavily into innovation and into the future. So we have a very attractive bronchoscope solution in development, and we have further expansions also of our video laryngoscope portfolio in development. In urology, we also continue to innovate with next-generation solutions on the endoscope with added features, which really is both about increasing the quality for existing procedures, but also expanding the market as we can deliver a solution that fits more procedures than we do today. And then on the ENT with rhino laryngo, we have an a next-generation solution in development, and then we also have a number of interesting developments in gastroenterology as well. And then last but not least, because we are building everything on one software platform, it means that the hardware and the software that we are developing fits across the portfolio, which is really a key value driver for customers as they can use our software our systems across the full portfolio, but it's also a way for us to easier leverage new technology to drive benefits across all the categories here. So both we are doing specific targeted software AI driven solutions, but we are also looking at solutions that supports very much the efficiency and the workflow in the hospitals and clinics with our endo intelligence. So with that, I will conclude my presentation and hand over to Henrik to go through the financials.

Thank you, Britt. Good morning, good late morning to all on the call. I'm happy to take you through the financials, narrow a little bit in on what are some of the geographical drivers of growth beyond what Britt already talked about, talk about margin and share some more light on our considerations on guidance. So let me start with growth again. As Britt introduced, we had an overall organic growth for the second quarter of 7.3%, bringing our year-to-date growth close to 8%. Rolling 12 months, that means that we are now at an organic growth level at 9.4%. Considering the fact that there's been a lot of still depreciation of the U.S. dollar, if you look at the growth in reported currency, the reported growth was only just above 1% at 1.2%, mainly again driven by the U.S. dollar depreciation. The growth overall was highly driven by endoscopy, our main growth driver of the business, with a year-to-date growth of 14.1% and 13.8% growth for the quarter. Continued really strong results where we feel we are on plan and on track versus our guidance for the full year. On ANPM, we had a lower quarter, which is also why we're updating our guidance, which is what I'll come back to. And as Britt explained, this purely relates to our North American business, where we saw a decline in our anesthesia sales, specifically on selected customers. And with that, let me share a little bit more on what does the growth look like if we look at our different regions split geographically. EMEA and rest of the world continued the very solid track we've been on for many quarters. In EMEA and rest of the world, we see continued really strong endoscopy solution growth and also positive growth, both in anesthesia and in patient monitoring. For rest of the world specifically, we have had a couple of quarters with low growth. We saw a bigger high growth in this quarter. And this really comes back to the timing of orders that we've talked about in previous quarters, where we see bigger orders in single quarters, therefore bigger fluctuations. Whereas in EMEA and North America, it's more steady development. Coming back to North America, as Britt explained, in the just above 6% growth, 6.1 to be exact, we actually see very, very solid endoscopy solutions growth still, a track we've been on for a long time, and where in particular also our SureSight launch is having really positive effects and really positive reception from the customers. On the other hand, this is also the market where we then see the negative effect from anesthesia, where there on selected customers have been lower volumes on non-exclusive contracts, something that we are, of course, still working on mitigating. But really coming back to Bridgepoint from the premise that we also have set certain margin targets that we're not compromising. And therefore, we still have observed some of the volume losses and are managing how we can make sure we regain volume still at the right margins. If we then turn to gross margin, we feel again a good start of the year, a 60.5% gross margin for the first half year and 60.3% for the second quarter specifically. This is positively improved by a continued better absorption of fixed cost, i.e. better utilization of our production facilities. In Mexico specifically, we continue the ramp up. Secondly, a continued positive development in our product mix with now EES representing more than 60% of our total sales, 63% to be exact, and ANPM representing a lower and lower share. And with EES having a higher gross margin, that supports our gross margin. That said, particularly in the second quarter, but also for the first half, we continue to also be negatively impacted by FX, which is the only reason why we're not actually growing more in this segment. We continue to focus on how we drive price and governance, both for NMPM business, but also within industrial solutions, balancing organic growth opportunities against making sure we continue to deliver gross margin improvements. If we then turn to EBIT margin, as Peter also explained on the first page, we continue to see solid traction on our overall EBIT margin expansion plan. If we adjust for tariffs and FX, our second quarter was a 14.4% EBIT margin adjusted. And for the first half, that means we are close to 15% on our adjusted EBIT margin, again, adjusting for tariff and FX costs. In the second quarter specifically, we again had more than 50 million DKK recognized in tariff costs and also had negative effects from FX, particularly the US depreciation I talked about before. In our Q2, we are also now communicating the number of IEPA tariff that we have paid, both for this financial year and for the last. And I just want to reiterate, as stated in the financial statement, that we have not recognized any of those as income in the statement yet. And still also that our guidance does not take into account if we manage to reclaim any of those. If we look, therefore, on the right side, on the EBIT margin development, of course, the reported margin development as guided and communicated in our Q4 has been lower for the first two quarters, for the first half year of this financial year, as expected. But with our mitigation plans on tariffs, and the higher growth expected for the second half of the year, we're comfortable that with a 10.8% realized EBIT margin for the first half, we're still safely within the guidance of delivering 12% to 14% on the full year. Turning to cash flow, second quarter, as expected, delivered a solid cash flow, reminding us all that seasonality in our cash flow is that the first quarter is usually lower, second quarter better, and third and fourth quarter typically the best. Particularly in the second quarter, the positive free cash flow was driven by solid operating performance, but also a better development and decrease in our net working capital ratio. That also means that with our expectations for the second half on growth and margin, we feel comfortable that we're still on track to deliver on our full year cash conversion guidance of plus 40%, and therefore delivering a really solid cash flow for the full year, strengthening our financial position even further. In summary, therefore, looking at our guidance for the full year, we are, as Britt communicated earlier, narrowing our top line revenue growth guidance from previously 10 to 13 percent to now 10 to 12 percent. This is driven by our anesthesia and patient monitoring business, where previously we were guiding mid single digit growth. With the lower volume on the selected US accounts and the traction we see right now, we're updating this to low single digit. And this is really driving the effect on the total overall organic growth guidance. On endoscopy solutions, again, we are maintaining the guidance of plus 15%, which assumes an acceleration for second half, which is what we're still targeting and seeing in the trends. And particular on respiratory assumes an acceleration of our respiratory growth, where the suicide launch and our continued momentum on driving more sales on that and the whole bronchoscopy portfolio is really driving this acceleration. And we still feel comfortable that we can deliver on that. On the EBIT margin, we are maintaining the guidance at 12% to 14%. As said, again, second half, as we guided from the start, will be higher, with higher growth and lower tariff costs, and therefore we feel we are on good track to deliver on that. Last but not least, cash flow conversion, as I just said, also on good track, even though we are lower year-to-date, as the typical seasonality for our business is that we will have a higher cash flow in the second half, and with higher growth and higher margins, this will be even further supported. Last but not least, as part of our Q2, we are now also announcing and have started an extension, an addition of the share buyback program. We previously announced in Q4 that we would do a 150 million DKK share buyback program that we launched and have completed. Here, as part of Q2, we are now launching another additional share buyback of 300 million, starting today and ending no later than 30th of September, i.e. at the end of our financial year. That means that combined, we will this year be having a total share buyback expected of 450 million DKK, which is really a reflection of the very strong balance sheet that we have and the continued strong cash flow position and strong free cash flow. I also want to reiterate this does not change our ambition on M&A, but puts it into the perspective that organic growth is our main focus, and M&A will more be an accretive lever for technology or solutions that support our overall solution, but not be big or massively transformational. Therefore, we feel comfortable that we can deliver on this and still maintain a very solid financial position. 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. In the interest of time, please limit yourself to one question. Anyone who has a question may press star and one at this time. The first question comes from the line of Tara Lee, UBS. Please go ahead.