Embla Medical Hf S/Adr

At this time, I would like to welcome everyone to this EMBLA Medical Q2 2026 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'll be a question and answer session. I would now like to introduce President and CEO Sveinn Solvason and CFO Arna Sveinsdottir. Sveinn, over to you.

Thank you very much. Good morning and welcome to EMPLA Medical's conference call to review our second quarter 2026 results. I'm Sveinn Solvason, President and CEO of EMPLA Medical. Joining me today are our Chief Financial Officer Anna Sveinsdottir and our Head of Investor Relations Klaus Sindahl. The presentation will take approximately 15 minutes followed by a Q&A session. If you please turn to the next slide. The first half of 2026 was strong. We delivered good organic growth, an increase in profitability, and solid free cash flow. Sales in the second quarter were $259 million, corresponding to 11% reported growth and 6% organic growth. Prosthetics and neuro-orthotics continued to do very well, with double-digit growth in the quarter. This was driven by strong execution, good volume growth in mainly EMEA and APAC, and contributions from recently launched products. Raising in support grew at a more modest pace and patient care declined, but we're seeing very encouraging progress. EBITDA margin was strong at 22% for the quarter. This was supported by the good performance in prosthetics and neuro orthotics, continued cost discipline and a net US tariff refund of around $3 million. Net profit was strong, increasing by 39% and this was mainly due to strong operating results and favorable movements in net financial expenses. During the second quarter we completed the Formotion brand rollout in patient care. All patient care facilities have now moved to the Formotion brand. This is an important milestone in our patient care transformation as it brings our global Clinic network together under one patient-centered brand. And in patient care, as I mentioned earlier, we continue to see progress. However, Q2 sales were below our expectations, especially in May. And I'll come back to patient care in more detail later in the presentation. I also wanted to highlight the good progress we made in R&D during the Q2 where we launched six new products. Furthermore, we're also progressing as planned with our first dedicated microprocessor need for less mobile users, generally referred to as K2 users. We've now assembled a fully integrated system prototype which will be used for upcoming verification and validation work and we remain on track for launch in late 2027. Lastly we completed our 10 million dollars year buyback program last week and yesterday we started a new program of a similar size. Over the past five years we've invested close to 200 million dollars in R&D and innovation. As the business grows we expect to invest more while keeping a clear focus on attractive returns. On this slide, you can see some of our key product launches from recent years. They show the strength of our innovation capabilities and our consistent launch track records. We always track the impact of innovation through a metric we call R&D impact. It measures the share of annual sales generated by product launches through R&D over the last five years. In recent years, R&D impact has increased from around 15% to more than 25%. We want to increase this further by focusing our portfolio on the greatest unmet needs for the patients that we strive to serve as best we possibly can. Go to the next slide, please. MA and APAC were the main drivers of sales growth in the quarter, supported by strong prosthetics and neuro-orthotics performance in both established as well as new markets, including Ukraine. In the Americas, overall growth was more modest, but we are beginning to see prosthetics and neuro-orthotics gain momentum. We'll now go through each segment in more detail and if you turn to the next slide please. Prosthetics and neuro-orthotics grew 12% organically in the quarter. In EMEA we continue to see very strong momentum. This was driven by mainly prosthetics in key European markets as well as newer markets and again including Ukraine. Growth was supported by strong volumes and brought demand across key product categories, including bionics. And the recently acquired Stripenedder business also made a solid contribution. In the US prosthetics, growth has also started to pick up. This was supported by our core portfolio and continued momentum in bionics. NeuroOrthotics performed well in EMEA and we continued to build momentum in the US with strong growth but from a very low base. And we expect more meaningful contribution over time as the rollout of our first bionic knee joint expands. Lastly, APEC delivered another strong quarter with 9% growth, where Australia led the region with broad strength across product categories and solid growth in the rest of Asia. We turn to the next slide, please. Sales in bracing and support grew 1% in the second quarter. EMEA declined mainly due to tough competition and changing market dynamics. We had a successful launch of the new OA move brace and the form-fit Walker boot, but they were not enough to offset the decline in the region. In America, sales growth in bracing was solid, driven by higher volumes and broad demand across core products. APEC also performed well especially Australia and New Zealand. If you go to the next slide please. Sales in patient care declined 2% in the second quarter. Over the last 18 months we've been focused on building and integrating a global patient care business. Our strategic priorities are centered around enabling our clinical workforce to provide excellent patient care. as well as standardization in ways of working, ultimately building scalable systems and processes. We see consistent progress towards normalization of our top-line growth. America's region has now shown quarter-over-quarter increase in operating results for the last three consecutive quarters. APEC remains stable, while the shortfall in top-line is related to two markets in Europe, Sweden and France. In Sweden we are seeing the effects of a challenging market situation while in France we are working through integration related topics in an overall healthy market. We remain committed to our strategic priorities in patient care and expect sales performance to get better over the coming periods and gradually return to growth broadly in line with the O&P industry. That concludes my overview of the quarter, and I will now hand over to Arna to take us through the financials in more detail. Arna, please.

Thank you.

And for the next slide, please, also.

Yes, now we go to the next slide for the overview of our financials. In the second quarter, gross profit margin was 63% compared to 62% in Q2 2025. The margins benefited from strong sales in prosthetics and neural optics, and Net US Tariff refunds of $3 million. For the first half, the gross profit margin was on par with the same period last year. Opels of 243 million were 47% of sales, compared to 48% of sales in Q2 2025. Organic Opels growth was 5%, reflecting our continued focus on cost control. As a result, EBITDA margin was 22% for the quarter, one percentage point above last year. This was supported by strong performance in prosthetics and urethastics and the tariff refunds. For the first half, the EBITDA margin is 20% or on par with the same period last year. I'm pleased with our net profit performance in the quarter, which increased by 39%. This was driven by higher operating results and favorable changes in net financial expenses, mainly due to lower net exchange differences compared to last year. Please turn to the next slide for status on our cash flow and leverage. In the second quarter, CAPEX was $6 million, around 2% of sales, and this was below a guided range of 3-4% of sales. Compared to Q2 2025, CapEx was lower, mainly due to timing of investment. For the rest of the year, we still expect CapEx to be at a normalised level of 3-4% of sales. Free cash flow was strong, at 31 million in the quarter, compared to 12 million in the same period last year. Free cash flow benefited from strong operating results, lower net working capital than in the comparable quarter, as well as Modest Carpex. That concludes the financial overview and I will now hand back to Svein for closing remarks and guidance.

Thank you Arna. Please turn to the next slide. Based on our first half performance and our expectation for stronger growth in the second half, we are narrowing our fully organic sales growth guidance to 5-7%. Previously, the range was 5 to 8%. We reiterate our EBITDA margin guidance of 20 to 22%. This concludes our presentation. We would now like to open the call for questions. Operator, please move to the next slide and the Q&A can begin. Thank you.

If you do wish to ask a question, you will need to press 5-star on your telephone keypad. To withdraw a question, press 5-star again. Our first question comes from the line of Jesper Ingelsen from D&B Carnegie. Please go ahead Jesper, your line will be unmuted.

Thank you so much. I have a few questions, maybe just starting out on the profitability as you have a 3 million Benefit from tariffs here in Q2. Just trying to understand if that's all you expect for this financial year or we could see more coming in H2 and also just trying to understand the building blocks for the uptake in the market in the second half that's implied by your maintained guidance for the game market at least. Just how much of that is contingent on further tariff refunds. and then secondly in patient care and as you pointed out it has now been 18 months with the restructuring here which have been to something that it dragged to to growth it does seem like both in Q1 and also now in Q2 it's more related to Europe and you actually are starting to see some improvements in America which has otherwise been the key drag and just if you could give any sort of Indication to how strong patient care is in America at this point in time. Just understand if when the headwinds in Europe goes away, what this would mean to the underlying growth momentum here.

Thanks. Hi Jesper, thanks for your questions. First on the margin, Regarding the tariffs, the net impact here in the first half of the year is $3 million. We might get another million, but there's some uncertainty around that, so it's not going to be a material factor when we look at margin in the second half of the year. When it comes to our guidance it's important to keep in mind that seasonally the second half of the year is stronger for our business and we get more operating leverage in both our product business but especially in our patient care business. That is kind of the main drive if you will. and for why we expect margin to be higher here in the second half I mean there are also minor kind of cost topics like we're still spending a little bit of money on the brand rollout here in the first half of the year things like that which we don't expect here in the second half but the big picture is kind of the Higher operating leverage due to the seasonality in the underlying business but overall we're quite pleased with the margin development and our ability to maintain the cost line in an inflationary environment like we are currently experiencing. On the patient care side, this is a big topic for us here in Q2. It is clear that we are disappointed with our patient care results here in Q2. If we take a step back, we have, as I mentioned earlier, been taking measured steps here over the last 18 months to really build a global integrated patient care business on the back of Several acquisitions made in most of our key markets here over the last decade. We have around 200 clinics. The operating results in each and every one of these clinics will be dependent on their ability to drive patient volumes, utilize their capacity effectively and maintain the right level of fixed costs. If you look across our portfolio we've seen very healthy progress in the right direction for always an increasing number of our clinics. And as you mentioned the big progress here is that America has been perhaps our biggest challenge because this is where we have had or have sort of made multiple acquisitions and have had a fragmented platform and we are now seeing Cost over cost of improvement and results for three quarters in a row. EMEA has been where we've not performed as we expected in the beginning of the year and this is mainly related to two markets. In Sweden it's more a market related topic. Sweden is the only market where we have tensors. You win some, you lose some. We're currently in a period where we are kind of facing out of some tenders while we have won others which will kick in later so there's a little bit of impact of that and then in France it is taking simply more time than we had expected to see the results of the initiatives we are Next up is Martin Brenner from Nordea. Your line is open.

Good morning, Martin.

Martin, are you there?

Sorry, I was muted. Can you hear me? Yeah, loud and clear. Yeah, loud and clear. Sorry about that, but hi, Sveinn and Arne, and thank you for taking my questions and thank you for this presentation that you gave. Maybe just a starting point, but I think it's super interesting that you show a bit more color on the R&D side. Can you elaborate a bit on what happened from 24 to 25 in terms of Thank you very much.

Yeah, thank you Martin. It's always been a core focus for our company to make investments in innovation with the ultimate objectives of improving the lives of people with chronic mobility challenges and making the right choices in R&D is not always, it's always a trade-off and what we see here over the last years is where we have Positive impact is always when we have big new product launches on the bionic side. We have the Navi knee, we have the Icon knee, we have from College Park, we also have very solid introductions in the carbon fiber foot range, the ProFlex Terra in particular, where we once again have demonstrated our ability to provide differentiation in the feed market and demonstrate our strength in the feed market. So Martin ultimately it's a result of the choices that we have made and that has resulted in again high quality products and our ability to generate the healthy demand for these products. and going forward it's ultimately our goal to continue to invest and to grow our R&D investment over time at least in line with our sales growth and then for some periods at a higher rate than our organic sales growth. So we still have plenty to do on the R&D front and remain committed to our innovation efforts.

Thank you, and just a quick follow-up, because I think that we have discussed organic R&D versus acquired R&D, and in the end you get the same net result from this graph that we show here on slide three, but just to understand, if we were to split this out on acquired innovation versus your own innovation, how would that look like?

The vast majority is our own innovation. I mean sort of there's obviously some impact from from Furin-Gentz and College Park if that's what you're referring to but the vast majority of our generated sales are in our legacy lower limb prosthetics business that is providing the balance on these metrics.

Okay thank you and then just my second question would be on Americas and US. Can you elaborate a little bit on when you think that you will be back on sort of a more market growth track in the US? Is it sort of already here in H2? Can you maybe provide a little bit of data points on what's going on in terms of any regional differences or Any product differences or any segment differences that makes you come out a little bit softer on the American side still after having done a lot of work in the US?

Yeah, that's a good question. I mean, looking here into the second half of the year, our expectation is for a stronger second half across all three business areas. In our core prosthetics business supported by our ongoing efforts to kind of refocus our commercial efforts in addition to more impact from neuro orthotics it's encouraging to see our sales beginning to Gain some traction on the neuro-orthotics side, but growing from a low base in the US, so that's a little bit on the prosthetics and neuro also. We see good progress on our bracing business here towards the latter half of Q2 and expect that to continue into the second half of the year. And then, as I mentioned earlier, America's patient care business has We continue to show sort of gradual quarter-over-quarter movement in the right direction and we continue to expect that here in the second half of the year also. So yeah, across our three business areas we remain optimistic here going into the second half of the year.

Okay, but is it fair to say that before we should expect you to take market shares from let's say Hanger and maybe especially Ottobock? You would need to have the K2 product ready, which will only be in late 2027, because until then you will miss out on a significant part of the market growth. Would that be a fair assumption, or is that a bit too harsh?

Well, Martin, I think what we've talked about, we have a super solid bionics range. We have the Navi, we have the Rio, we have the Icon. These products are eligible for reimbursement under the expanded reimbursement code in the US and will have the vast majority of these K2 patients. But there is a patient cohort where we would benefit from having a dedicated low active product and we are encouraged with the progress we are seeing on the development front for a low active need. but whether we are, I don't believe we're losing markets here in the US but we would certainly benefit from having that particular product to strengthen our range.

Okay, maybe just one final question and then I'll jump back in the queue. We had a presentation here in the house recently which were from a humanoid distributor in Europe and you were called out as a potential long-term winner of this humanoid segment as you are probably one of the most advanced companies within robotics and especially with the hands you have a special unique knowledge and I was just wondering if you can put a few words on the long-term prospects of the humanoid and whether that is something that you could see more partnerships as we see this segment is potentially a fast-growing segment over the next 5-10 years.

Yeah, thanks, Martin. That's an interesting theme in itself, and I can provide kind of some high-level reflections. I mean, first and foremost, we are one of the companies globally that has the most kind of intellectual property or knowledge around how to apply We have lots of engineering knowledge, lots of robotic knowledge, lots of knowledge around the whole software side. So this is a super interesting theme and yes, potentially there are opportunities for Thank you very much. I'll jump back in the queue. Thanks, Martin.

Our next question will be from the line of Tobias Nissen from Danske Bank. Please go ahead. Your line will now be unmuted.

Good morning Svein and good morning Arne. Just have a few questions that start out with patient care with the promotion rollout now being complete. Like what are actually, if you can say a little bit more, what's actually going on beneath the line also in terms of like productivity and profitability. I was mainly seeing improvements here and then the revenue or you can say the volumes are a bit lagging and how should we actually see this that there was come with the sort of delay and you have a little bit more on actually what changes here in the second half of the year. I know you pointed to that the second half is usually the strongest for you but can patient care actually move back to like a market like both in the second half of the year or is this mostly like a 27 story? That would be my first question.

Hi Tobias, thanks for the question. And again, going back to patient care, I risk kind of maybe repeating some of my earlier comments, but at the end of the day, our goal in patient care is to deliver great care for the patients that rely on our services. When it comes to the financial performance, we have 200 clinics Each and every one of those clinics, the net financial results will be a result of their ability to drive patient intake, productivity as in patient visits per CPO, which is kind of the general industry benchmark for productivity, and then ultimately the fixed cost line. We have been driving very focused initiatives to address these at a high level these key levers, if you will, any retail healthcare franchise. And if I approach the situation from, again, the geographic standpoint, we see our efforts yielding positive results in the Americas market, which is the region where we have made kind of the A lot of, you could say, small to medium-sized acquisitions. And this was also the region where we were especially challenged here throughout 2025. So it's very encouraging to see that our efforts are moving our results in the right direction. Same for APAC, but where our results differ from what we had expected is mainly Europe, where we have been stable Historically, however, our kind of challenge is related to two specific markets. In Sweden, it is more kind of a market issue. It's the only country where we have tenters. You win some, you lose some. Now we are kind of going through a period where we have lost some tenters and have also won some, but those we won won't kick in until at the very end of the year. So that's a little bit of a specific situation while in France our main effort has been on the patient intake side and productivity side and we are simply not seeing as fast of a progress as what we had anticipated. We have a great business in France, a super strong team. This was kind of the last big entity where we integrated or where we implemented the brand and have been simplifying that business. but we have to acknowledge that the impact of our initiatives is slower than what we had anticipated. So overall we still believe that we are focusing on the main initiatives. We have a great patient care franchise with lots of opportunity to grow and to increase productivity and to ultimately just provide great care because that's our goal. So, but at the same time, I'm not going to tiptoe around it. We are disappointed with not seeing more traction on the top line, but we'll get there.

Okay, thanks. And perhaps just to touch on the narrowness of the top line guide, the five to seven percent, if they had an eight at the top, what's actually driving this? Is this the soft You can say patient care here in the first half of the year or is there something else related to this and what could actually need to happen in the second half of the year to reach that 7%?

Yeah, so again big picture on growth and how we think about growth. So we guide 5 to 8 which is a little bit of broad range. We have our prosthetics and neuro-orthotics business area which is driven by very structurally strong growth types where we have a strong position and lots of super solid points here in the quarter two results and growing again double digit here in this part of our business. Racing is where we have a little bit more headwinds. We expect that business to grow two to three percent but we're below that here in the first half of the year but we expect a stronger second half. Mainly supported by these new product launches that came into the picture late quarter two. But overall here if I look at the first six months of the year we're slightly better on the prosthetics and neuro side but we are slightly behind on the patient care side. Looking at the second half of the year, we still expect a good performance in our prosthetics and neuro-orthotics piece, and as I mentioned earlier, a stronger second half in bracing. But on the patient care side, we do expect second half to be stronger than first half, but it's clear that we are not where we would have wanted to be here after the first six months in patient care. That's clear.

Cool, thanks. That's all from me. I'll jump back in the queue. Thank you Tobias.

Next up is Yiwei Zhou from ACB. Please go ahead Yulang, I'll be unmuted.

Good morning and thank you for taking my questions, all the questions from my side. Firstly, Sveinn could you give an update on one of the topics we have not talked about for a long time. I remember a few years back you comment on this Ossur-ELEC solution and also share the digital platform. How does that progress currently?

Thanks for your question. That's a good topic and it kind of goes back to the bigger picture. Our ability to win market share and stay competitive in the prosthetics product market is dependent on our ability to bring the right products to market, serve our customers well, and also support our B2B customers with their efforts around fabrication. Fabrication of the customized piece of a mobility solution still remains one of the key strategic topics in our industry. There's a lot of cost in the industry around fabrication, around often and processes which are not very productive when it comes to the fabrication piece. So in our key markets we offer our core customers the ability to also do the customized piece using different technologies, using scanning technologies, but we also have our direct socket technology. So overall we've seen We've seen good progress around these topics and this is also where it provides us with strength to also be a patient care provider because in our patient care business we are also doing lots of fabrication and are working hard on simplifying some of those processes using technology like Our goal is to utilize those capabilities and offer these services to also our independent customers. So sorry for a little bit long answer because it's a very strategic theme for us, but overall we see good progress with these complete solutions on both the US side and the Europe side.

So if you compare the clinics which are using your solution, compared to one year ago and three years ago, could you quantify a bit of the percentage of the clinics, if there has been increasing or more flatus development?

Well, I don't have a specific KPI for you there, Wade, and we see some regional differences, but another key theme in all of this is not necessarily the central fabrication strategy that we talked about a couple of years ago in relation to the complete leg, but also our efforts to introduce More kind of digital workflows in our own patient care operation where we are using scanning and 3D printing to build some of the custom components. While in other markets it is you could say the traditional central fabrication value proposition is perhaps a little bit Thank you very much. B2B independent clinical customers see this as a value-add service, some of these different tracks, if you will, around how to solve for the customized piece that is needed for each and every mobility solution.

Is it fair to understand that this has been a margin driver for your own clinics, your own patient care business? You talked about the probability in your PC business have improved last quarter, also this quarter.

This is and will be one of the main kind of productivity drivers for our patient care business going forward. Yes, that's correct.

Great, thanks. And next question here on the patient care business. You have talked about for a long time, but have you lost any patients during the restructuring and rebranding process? If you can comment on this.

Well, if we look at that question kind of on a recent by recent basis, I think that has not been a major thing, no. Have we lost some patients? Probably yes. But no, if you're asking whether the whole brand change has caused confusion or anything like that, no, that's not our view. Has, however, all of this change, both with regards to brand system and process changes, has that Thank you very much. and many other drivers or issues that we've been working through. But again, I want to refer back to my earlier answer. We see good progress across our portfolio, but our issues are mainly concentrated on what are two big European markets. And we're just working super hard on working through those challenges at the moment.

Great. Very helpful. And my last question, I just want to follow up on this tariff refund. I got some numbers this morning from you that the second half it will still be a small refund benefit and is it a one million dollar net of expense per quarter or in total in the second half? If we can elaborate a bit.

We do expect, from what we submitted, we already received the payments, but it is still expected we will get in total one million additional payments for tariffs in the second half. Timing is unknown. It is still...

Okay, so it is in total one million, not a quarter.

Yes, total one million. No, total one million, but it is still uncertain about timing, but it is still being validated.

Perfect. Thank you. It's very clear. All right. Thank you.

As a reminder, press five stars to ask a question. Next up is Beatrice Fabon from Berenberg. Please go ahead, and I'll be unmuted.

Hi. Thank you so much for taking my questions. In patient care in Sweden, you expect some tenders to kick in. Could you give some color around when you expect those to kick in? And then you also, in your release, you noted that you expect to return to growth broadly in line with the O&P industry. Could you provide some color on when you kind of expect to get up to this kind of growth? And then secondly, you noted growth from new markets such as Ukraine in prosthetics and neuro-orthotics. Could you give some color here and perhaps quantify the impact on sales growth from these markets? Thank you.

Hi Beatrice, thank you. First on the patient care side, yes the Sweden market is the only market where we operate where there are tenters and there's a long list of tenters and the nature of the business is that you win some, you lose some. and currently we are seeing some impact of Tenters Lost. We have also won some but those that we've won will not kick in until very late this year. So I don't want to quantify specifically the impact but it has Yeah, that is what we refer to when we say a challenging market situation in Sweden. It's kind of we're working through this timing difference there is between tenders lost and tenders won. So, but I can't kind of quantify that more specifically, but it has a meaningful impact. That's a bit the patient care story. Yes, and going back and the other part of that question was when we expect to get back to kind of normalize industry growth. First and foremost, we expect the second half to be stronger than the first half. Our aim is to, on a one-rate basis, climb back to industry average growth here towards the latter half of the year. That's our aim. But the biggest job here is to achieve consistent, at least mid-single-digit growth, which is in line with the overall growth in this part of the value chain. We'll get there and are working as hard as we possibly can to normalize our performance in patient care. On your other question with regards to Ukraine, that is certainly impacting our numbers in Europe. There is, as we've talked about in the past, Ukraine will be a big market for prosthetics. are doing everything we can to build their presence there and be of service with regard to that overall situation. But with that said, our growth in Europe is still very strong across our traditional markets in both North and South Europe, but the demand and the growth that we're seeing for our products in Ukraine is It's still having a positive impact on the big picture, but I can't quantify that in any more details.

Okay, great. Thank you very much.

Thank you, Idris.

Our next question will be from the line of Tom Reichenfeld. Please go ahead. You will now be unmuted.

Good morning. Thank you for taking my question. It's another one on the Americas. In H2, the guide to some positive impact from the US Medicaid coverage expansion. Would you give us some more detail on the size of that tailwind and the timing?

So yes, if we look at the Americas region as we reported, it's a result of growth in our three business areas. Our prosthetics and neuro business, our patient care business and bracing. If we zoom in on the prosthetics and neuro business, we are seeing positive impact from our launch of the neuro-hydronic, the knee joint, Fuehring-Gens knee joint, which is tapping into a relatively new reimbursement code for that particular technology. And on the prosthetics side, this goes back to the overall coverage expansion for lower active patients where we do have a strong range. Again, Icon, Navi, Rio, Neat, but we would still benefit from having this focused low active product, which we were commented on earlier, which we expect to launch next year. So we continue to expect tailwind from these structural changes. and yeah for all our three business segments we do expect a stronger second half than what we see here in the first half.

Thank you and then one more question if that's okay. TAPEX is at 2% off. I know you've said that it's going to return to 3-4% and it's mostly due to investment timings. Is there any scope for it to be lowered going forward given that the patient care clinical integration is largely over now?

So we, yes, like we said, we do expect that their capex will go back to normalised level. We are seeing some timing now at the beginning of the year. We are seeing basically slow capex investments across all our categories, including these sort of improvements, which is one of the biggest investments we do in patient care. But it is just a Thank you very much. As no one else has lined up for questions, I'll now hand it back to Sveinn for any closing remarks.

Thank you very much, operator. Thanks everyone for calling in and participating here this morning. If you have any follow-ups, please reach out to our Master Relations team. Otherwise, I wish you all a continued good summer. Thank you very much.