Embla Medical Hf S/Adr

Welcome to EMPLA Medical Conference Call for Q2 2025. Today's call is being recorded. If you have any objections, please disconnect at this time. All participants will be in a listen-only mode throughout the presentation. Afterwards, there will be a question and answer session. To ask a question, please press 5 star on your telephone keypad. I would now like to introduce President and CEO Svend Sulvason and CFO Arne Svensdottir. Please begin your presentation.

Thank you very much, and good morning, and welcome to the Ampla Medical Conference Call, where we will review the second quarter of 2025. I'm Fred Sjölandson, President and CEO of Ampla Medical. Joining me on today's call is our Chief Financial Officer, Arne Svensdorf, and Ampla Medical's Head of the Investor Relations, Klaus Sinter. The presentation should take approximately 15 minutes, after which there will be an opportunity to ask questions during a Q&A session. If we go to the next slide, please. Sales in the second quarter amounted to 232 million, representing 7% reported growth, of which 5% was organic. Growth was strong in the prosthetics and neuro-orthotics segment, mainly driven by the continued momentum in MEA, and supported by solid contributions from our recently launched innovation. Growth in Americas and APAC was also good, led by the prosthetics and neuro-orthotics segment, while sales in patient care remained flat. Sales in bracing and support experienced a slight decline. The EBITDA margin was strong at 21% and 20% for the first half of the year, compared to 19% in the first half of 2024. The margin increase for the first half was driven by robust sales in prosthetics and neuro-orthotics, solid efficiency in manufacturing, and continued cost-disadvantaged G&A. In line with sales performance in the first half of the year and with the expectation of stronger growth in the second half, we narrow our guidance to 5-6% organic sales growth for the full year. On the EBITDA margin, we reiterate our full year guidance at 20 to 21%. The guidance continues to assume some absorption of tariffs while we continue to deem it too speculative to quantify and provide exact guidance given the frequent tariff rate changes. After quarter two, we continue to be pleased with the progress we've made so far on our strategic initiative. Last week, we announced the signing of an agreement to invest in a maturity share in privately owned Streifen Enter auto production. We are very excited about this investment, which is a strong strategic fit to our growth 27 strategy and will ultimately enable Emplemedical to reach more patients with a now broader product offering. In neuro-orthotics, we are also pleased to see that Turing Gans has been awarded a new reimbursement code in the United States for their microprocessor-controlled knee joint. The neuro-hydraulic joint is the smallest and lightest micro-hydraulic knee joint on the market today, and the L-code award represents a significant opportunity for our neuro-orthotics business in the important U.S. market. I'm also pleased to report that we're now more than halfway through unifying our patient care facilities under the Promotion brand. And during the second quarter, patient care facilities in Iceland, Sweden, and Finland were rebranded to Promotion. Lastly, we are pleased to be honored by Forbes magazine for championing accessibility and by Iceland's president for excellence in global exports. If you'd now turn to the next slide, please. Last week, we announced the signing of an agreement to invest in a majority share in privately owned Stripenator. Stripenator is an international developer and supplier of orthopedic mobility solutions. In addition to its prosthetics, the company also sells orthopedic materials and equipment to O&P clinics, a very important offering within our industry. I also want to note that the agreement captures the product business, while the network of O&P Clinic's striped metal currently operates will remain with the striped metal group. In 2024, the business realized sales of 25 million euros with 70% of sales related to prosthetics and orthopedic materials. Today, the majority of sales are generated in Germany, while the company also sells into other key European markets and distributes into the Americas and the IPEC regions. And this investment in the Stripenet business represents a very strong strategic fit to our Goal 27 strategy, offering an attractive opportunity for AmpliMedical to become a, you could say, a more full range provider to a larger cost of the global O&P market, including potential to expand our reach in emerging or private pay markets. We are very excited to welcome the Strife Editor team to the AmpliMedical family. The cooperation between the two businesses will help secure a leading position in the growing O&P market with now also a stronger value line offering. The transaction is largely to be financed through a SEER issue worth 93 million Danish kroner, in addition to some cash components and performance-related payments. The closing of the transaction is still subject to regulatory approval. Pending this, the transaction is not expected to have any material impact on the financial guidance for 2025. If you now please turn to the next slide for an overview of our regional performance here for the second quarter. We had good growth across all regions with strong sales in EMEA as the region delivered 7% growth driven by continued momentum in prosthetics and neuro-orthotics. Growth in Americas and APAC region was also good at 3%, led again by the prosthetics and neuro-orthotics segment. Can we turn to the next slide, please? On prosthetics and neuro-orthotics, organic sales growth was 9% in the quarter. The strong growth momentum we've seen over the last several quarters and across key European markets continued in quarter two. Growth was driven by strong volume growth in addition to good uptake from our recently launched innovation. In America, the performance was very encouraging as we see signs of improvement in the region, especially in the latter half of quarter two, following a somewhat soft first quarter. The good growth in the region was supported, again, by high-end solutions with positive impact from newly launched innovation. Lastly, our sales performance in the APAC was solid, driven mainly by markets such as Australia and New Zealand, while sales were somewhat softer in the rest of Asia. In new orthotics, the business is moving ahead according to plan. Our focus remains on ramping up the new market. Should we go to the next slide, please? Sales in bracing and support declined by 2% in the second quarter. In EMEA, sales ended soft for the quarter despite good performance in selected regions. While in Americas, sales were also soft, partly ascribed to lower patient volumes for elective procedures and moderate price pressure. AIPAC experienced some recovery from previous quarters with good growth in markets such as Australia and New Zealand. Our Brazilian support business experienced some impact during the quarter from the US tariffs on imports from China. And on July 2nd, the Centers for Medicare and Medicaid Services released a proposed rule with a section dedicated to its competitive bidding program. The new rule is designed to reduce Medicare spending in certain off-the-shelf orthosis categories. The proposed rule does in its current form not identify which orthosis and braces will be subject to the next regulation. competitive bidding round, nor does it specify the timeline for implementation. And since several factors related to the proposed change remain uncertain, we believe it's too premature to disclose the potential impact. We go to the next slide, please. Sales in patient care ended flat for the quarter. Very good performance in several European markets, which was partly offset by softer sales in other markets, and also partly impacted by Easter holidays shifting between current and comparable quarters. In America, our patient care business showed increased momentum following a very soft first quarter. Lastly, our sales in APEC were impacted by timing, as sales in the first half of the year were strong. Now this concludes our sales performance overview for the quarter. I would now like to hand it over to Arna to go through the financials in more detail. Arna, please.

Thank you. Please turn to the next slide for an overview of our financials. In the second quarter, the gross profit margin was 62% compared to 64%. The positive impact from strong sales in our prosthetic and neural prosthetic segments, supported by manufacturing efficiency, was offset by softer sales in the rest of the business, as we experienced less benefit of scale on our fixed manufacturing costs, in addition to some impact from U.S. tariffs. For the first half, the gross profit margin for special items was on par with the same period last year. OPEX amounted to $111, or 48% of sales, in Q2, compared to 105 million, or 49% of sales, in the comparable quarter. OPEX growth was 2% organic in the second quarter, or below our organic sales growth, and in line with the solid cost discipline we have on the SG&A side. Consequently, we delivered an EBITDA margin of 21% for the quarter, which is one percentage point below last year's level, impacted by a softer gross profit margin in quarter two. However, for the first half, the EBITDA margin expanded from one percentage point to 10% versus 90% in the same period last year. The margin expansion was driven by higher gross profit margin and cost discipline in SG&A. Net profit grew 5% for the quarter and 17% for the first half. Growth in net profit was positively impacted by strong operating results, but negatively impacted by an increase in net financial expenses in the quarter, largely due to non-cash currency fluctuations. Please turn to the next slide for the status on our cash flow and leverage. During the second quarter, capital was $10 million and 4% of sales, and within the guided range of 3% to 4% of sales. Capital increased in the quarter in comparison to quarter one, mainly due to timing of investments in manufacturing equipment. All things equal, we expect our capital to remain at a normalized level of 3% to 4% of sales for the remainder of the year. Our free cash flow was $12 million in the quarter compared to $18 million from the same period last year. Our free cash flow benefited from strong operating results that was partly offset by net working capital, mainly a temporary increase in account receivable due to stronger sales in the latter half of the quarter and an elevated car tax level in quarter two. Our levels were 2.6 times at the end of the quarter, The net increase in our net interest credit debt is mainly due to currency effect as part of our loan portfolio is in euros. Lastly, we entered into a new 50 million euro loan agreement with Nordic Investment Bank with a seven-year term and also brought back more than 600,000 shares for approximately $3 million during the second quarter. And with this, all of our financials, I will hand over to Sveig for his closing remarks and comments around our guidance.