Embla Medical Hf S/Adr

At this time, I would like to welcome everyone to this emblematical Q1 2025 conference call. Today's call is being recorded. If you have any objections, please disconnect at this time. All participants will be on listen-only mode throughout the presentation, and afterwards there will be a question and answer session. I would now like to introduce CEO Sven Silversen. Sven, over to you.

Thank you very much, and good morning, and welcome to the Ampla Medical conference call where we will review the first quarter for 2025. I'm Sveit Solvason, President and CEO of Ampla Medical, and joining me on today's call is our Chief Financial Officer, Artmar Svensdottir, and Ampla Medical's Head of Investor Relations, Klaus Sindahl. The presentation should take approximately 15 minutes, after which there will be an opportunity to ask questions during a Q&A session. If you now go to the next slide, please. We are off to a reasonably good start here in 2025. Sales in the first quarter amounted to 203 million, and organic growth came in at 4%, where we had a particularly good few weeks at the end of the quarter. Growth was strong in our prosthetics and neuro-orthotics segment, supported by, I would say, continuous good momentum and solid volume growth in EMEA and APAC regions, while year started out on a softer note in the Americas following a strong end to quarter four of last year. Our EBITDA margin for the quarter came in at 18%, one percentage point above the same period last year. The stronger margin was driven by the positive effects from the cost reduction initiatives implemented in manufacturing one year ago, in quarter one last year, as well as a positive contribution from product mix and continued cost control. We're pleased to welcome Andre Rothka-Temple-Merkel as our new Executive Vice President of R&D. Andre previously served as a partner at McKinsey & Company and brings more than 25 years of experience and a proven track record across all organizational levels. During quarter one, we also advanced our Navi and ICON bionic needs into full launch, following very encouraging user feedback during our pre-launch activities. In neuro-orthotics, we have now crossed the one-year milestone on our integration of purine GANS, which we acquired in Q1 of last year, and we're pleased with the progress, and we continue to move ahead according to our plan of expansion into new international markets. In patient care, our promotion plan continues to be gradually rolled out to existing markets that we operate in. During the first quarter, clinics in Norway were rebranded to promotion, and our clinics in Sweden are up next here in quarter two. Similar to André's appointment, we are also pleased to announce Conor Hart as our new EVP of patient care in the first quarter, and most recently, Conor served as our vice president of patient care in Europe. prior to that held various roles at Österøya and TOTS Bionics. We reinitiated our share buyback program in early February as our net interest rate over EBITDA has reached our target range of two to three times. And the purpose of this program is to calibrate our capital structure and ultimately reduce the company's share capital and adjust thereby distributing capital back towards shareholders. Now, despite the variability in performance across regions, we are overall pleased with the performance here in the first quarter in an environment with higher uncertainty on the global economic outlook. We do reiterate our full year guidance of 5% to 8% organic sales growth and 20% to 21% deep demand. We can please turn to the next slide for an overview of the key highlights for the first quarter, please. Sales in EMEA and APAC were strong this first quarter. We delivered 7% organic growth in EMEA. The strong growth trajectory we saw in prosthetics and neuro-orthotics from 2024 continued in key European markets during the first quarter. In APAC, our sales came in strongly, as well with 13% organic growth driven by solid performance in both prosthetics and neuro-orthotics, as well as patient care. Lastly, sales in America saw a decline of 1% in the first quarter, mainly due to lower sales across markets in our patient care business area. Turn to the next slide, please. On prosthetics and neuro-orthotics, we delivered 9% organic growth for the quarter. In EMEA, as earlier mentioned, we see strong momentum from last year continue. to be driven by good volume growth across all key markets, coupled with an increased uptake of our recently launched innovations, such as Navi and Proplex Terra, our new mechanical feed solution. Growth was also strong in APAC, supported by good growth in Australia, where we are seeing the reimbursement backlog from last year delay in the approval flow impacting our APAC sales positively. The good growth was, however, partly offset by somewhat softer sales in other APEC markets. In Americas, our performance was more modest growth, as communicated previously sales of MAVI and ICON related to the US Medicare coverage expansion program are yet to contribute meaningfully as both products went into full launch in quarter one. We expect both bionic needs to address active K2 amputees consistent with the coverage standards published by Medicare. The uptake is, however, expected to increase gradually in the periods to come as positives are gaining experience from fitting the first patients and submitting reimbursement claims. The initial feedback we're getting from the first patients from a clinical performance perspective is very encouraging and we will continue our focus and efforts to enable more active K2 functional level entities to gain access to advanced bionic knee technology. Lastly, our neuro-orthotics business is moving ahead according to plan, following the expansion into new international markets last year. We turn to the next slide, please. Sales in bracing and support were flat in the first quarter, while we have seen pockets of growth in key European markets, such as Germany, Benelux, and the Nordics. We also see a decline in other markets where especially the UK market has been challenging. In America, we recorded a good start to the year in pricing, which was somewhat offset by slower growth towards the end of the quarter. In APEC sales ended down, mainly explained by a decline in China. And the decline in China and other Select markets in APEC is partly offset by very good performance in bracing in Australia and New Zealand. We have yet to see any material effect from tariffs in our bracing businesses. Tariffs on products produced in China only came into effect towards the end of the quarter. If you go to the next slide, please. Sales in patient care ended flat. Solid growth in select European markets, such as Norway, counterbalanced by softer growth in other key markets. In APAC, we recorded strong growth driven by the recovery of reimbursement backlog in Australia following the delay in reimbursement processing a year ago. In America, our patient care sales declined across all major markets, mainly due to lower patient volumes, as well as low approval process of reimbursement claims. And this somewhat correlates with moderate development we also saw on the product side of business. This concludes our sales performance overview for the quarter, and I would like to hand it over to you, Arne, to go through the financials in more detail.

Thank you, Sveit. If you can please turn to the next slide for an overview of our financials. In the first quarter, the gross profit margin was 63% compared to 62% before special items in quarter one, 2024. The one percentage point gross profit margin expansion for the quarter They are supported by cost reduction initiatives in manufacturing implemented in Q1 2024, positive product mix and manufacturing efficiency. OPEX amounted to 106 million or 52% of sales in Q1 which compared to 104 million excluding special items for the same period last year. Consequently, we delivered an EBITDA margin of 18%, which is one percentage point above the last year's level. The improved profitability is mainly driven by increasing gross profit margin and effective cost control in SG&A, while currencies impacted earnings positively by 30 basis points net of hedging for quarter one. Net profit increased by 45% in Q1 and amounted to 12,006,000,000 of sales compared to 8,004,000,000 of sales in Q1 2024. The increase is driven by stronger operating result and the absence of special items this quarter compared to Q1 2024. If you please turn to the next slide for the status of our cash flow and leverage. During the first quarter, CapEx was $6 million, or equivalent to 3% of sales. CapEx has come down since last summer as facility expansion programs to support our growth have now been concluded. All things equal, we expect our CapEx to remain at a normalized level of 3% to 4% of sales for the remainder of the year. Our free cash flow remains strong in the first quarter with $8 million, or 4% of sales, compared to negative free cash flow of 7 million in Q1 2024. The increase in cash flow is benefiting from strong operating results and less capex than in the comparable period last year, partially offset by changes in net working capital. It should, however, be noted that free cash flow is seasonally low in the first quarter of the year. Our inventory remains slightly elevated following the build-up of inventory related to the global launch of Navi and Icon in quarter one. As I mentioned in the beginning of the call, we have re-initiated our share back program in February. Also, net interest bearing debt to EBITDA ratio is back within our target range. During quarter one, we bought back around 300,000 shares. With this overview on our financials, I'll hand over to Sveit for his closing remarks and comments around our guidance.