Getinge AB (publ)

Welcome to the Gitanji Q3 Report 2023. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing star 5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Matias Perjos and CFO Agnetha Palmer. Please go ahead.

Thank you very much and thanks everyone for joining today. We can move directly to page number two and the key takeaways from the quarter, please. So we look back at a quarter where we continue to see strong global market momentum for our products. Order intake growth for getting as a whole increased by 10 percentage points, of which organic growth amounted to 7.4%. And this is thanks to positive development in all business areas except for life science. And it's a good geographic spread as well when it comes to the order intake. Net sales increased by three and a half percent in the quarter, where organic growth was flat to last year. Adjusted gross margin in life science and surgical workflows improved in the quarter. However, it decreased in acute care therapies and also for the group as a consequence of this. And this is mainly due to negative mix inflation and under absorption. This was partly mitigated then by healthy price increases, which signals that our products are attractive to customers. And even if our financial leverage has increased somewhat after the acquisition of Paragonics, our financial position remains solid. With that, we can move over to page number three, please. So I wanted to take an opportunity to highlight some of the key activities and events in the quarter. And if we start with sustainability and quality in the quarter, the notified body TIFSYD reinstated the CE certificate for the HLS and PLS consumables that are used for ECLS or ECMO therapy. TÜV Syd also extended the temporary suspension of the CE certificate for the intraordinary balloon pump, CardioSave, until July 1st, 2025. This decision has no material financial impact for us and the extended time period will now allow us to improve the product in line with the regulatory requests that we have. We're still able to supply the CE markets with our interordic balloon catheters. And furthermore, and as informed about earlier in the quarter, we made a provision of 482 million SEC related to the ongoing negotiations with the CGU in Brazil. If we then move to offering and customers, our servo ventilators received official cybersecurity clearance, which is called authority to operate certification from the US Defense Health Agency. This means that the ventilators are allowed to be purchased by the US Department of Defense and operate within their strict networking environments. We consider this an important quality stamp and proof of our strategy to provide safe device connectivity for our customers. Within our life science business, we acquired assets of the US-based company Intact Solutions with technology that makes aseptic treatment and transfer safer and more effective throughout the complete bioprocessing value stream. In September, we also completed the acquisition of Paragonics Technologies, which is a leading US company within the fast-growing market for organ transport products and services. We see a strong fit with getting us existing product portfolio, our technologies and also our global sales reach. Paragonics will form a new product area within acute care therapies called transplant care and will be an additional lever for us in our purpose as a company to help save more lives globally. We can then move over to page four, please. So as I mentioned earlier, order intake grew by 10% in the quarter, where 7.4% was organic growth. Net sales increased by 3.5% and 0.2% of this was organic growth. Order intake grew in all regions, and the increase in organic order intake was especially strong in Americas, driven by acute care therapies and the surgical workflows. From a net sales perspective, we had organic growth around 1-2% in Americas and EMEA, whereas APAC declined organically compared to last year's strong performance. We can then move over to page number five, please. This takes us to the outlook then where we reiterate our previous guidance for 2024 and we expect organic net sales growth to be in the range of 2-5% and in addition to this we expect recent acquisitions to contribute with 3-5%. We can then move to page number 6 please. So we move into dissecting the order intake per business area a bit. In acute care therapies, the organic order intake increased strongly during the quarter, mainly in critical care, in cardiac surgery and in cardiopulmonary. For life science, the order intake declined organically, mainly due to fewer orders for steam sterilizers compared to the comparable quarter last year. There was a positive performance in bioprocessing and the growth in sterile transfer also continued. In surgical workflows then the organic order intake increased overall mainly thanks to a double digit increase both in infection control and in digital health solutions while orders in surgical workplaces declined slightly. So all this together summarizes to 7.4% organic order intake growth and in actions growth was 10%. Let's move over to page number seven then. So looking at the sales breakdown for the quarter, organic net sales in acute care therapists decreased slightly during the quarter, mainly due to a lower number of consumables sold in cardiac assist and lower sales of ECLS hardware in cardiopulmonary. Furthermore, temporary supply chain challenges have impacted net sales negatively in the quarter, but we are expecting this situation to improve in Q4. In acute care therapies, we saw continued growth within critical care as well. And if we move to life science, the life science organic net sales declined mainly due to lower sales in bioprocessing and sales of isolators. This was partially offset by the strong performance within sterile transfer. However, net sales from High Purity New England in the quarter makes up for all and a little bit more of this. If we then move to surgical workflows, organic net sales for surgical workflows increased following growth in all product categories. And I also want to point out that the acquisition of Healthmark continues to contribute to growth in a material way for surgical workflows. Acquisitions contributed to an increase in net sales of 535 million SEC in the quarter. Currency had a 286 million negative impact on net sales for the getting a group in the quarter. Recurring revenue increased while sales of capital goods was down year on year. Can I move over to page number eight, please? So looking then at the gross margin and the gross profit, the adjusted gross profit decreased by 91 million SEC to 3 billion 799 million SEC in the quarter, where currency effect impacted negatively by 151 million SEC. The group's adjusted gross margin declined by 2.8 percentage points versus last year, mainly attributable to negative mix inflation and under absorption. This was partly offset by healthy price increases. Inflation is mainly attributable now to employee cost. We have seen a decline when it comes to material cost. We see good traction in normalizing cost of materials thanks to the purchasing initiatives that we have been working hard on for the last couple of years also. For acute care therapists, the adjusted gross margin decreased by 5.6 percentage points, mainly due to lower sales, negative mix effect under absorption and higher quality improvement costs compared to the comparable quarter. For life science, the adjusted gross margin increased by 2.9 percentage points as a result of price adjustments, productivity improvements and also mix. And this was partly offset by higher materials and employee costs. Certical workflows adjusted gross margin increased by 1.2 percentage points to a large extent thanks to the strong performance of acquired health mark, of price adjustments and also of mix effects. Overall, I'd say we are pleased to see that the integration of the acquisitions made last year have developed according to plan, even a little bit better in some case, and that the business performance has been above expectations. So on that positive note, I hand over to Agneta and page number nine.

Thank you, Mattias. So adjusted EBITDA declined by 198 million and the margin came in three percentage points lower, mainly then coming from the decline in the gross margin. Adjusted gross profit had a negative effect on the margin by 2.7 percentage points due to what was just mentioned by Mattias. However, on the OPEX side, adjusted for currency, we really start to see encouraging signs on OPEX, which had a 0.4 positive impact on the margin in the quarter due to operating leverage and positive contribution from acquisitions. Adjusted for currency, depreciation and amortization had no impact on the margin. And finally, FX impacted negatively by 0.7 percentage points. All in all, this resulted in an adjusted EBITDA of 903 million and a margin of 11.5%. Over to page 10 please. Free cash flow amounted to around 0.4 billion. Lower operating profit and higher financing costs contributed negatively. Working capital, however, increased to a less extent than last year. We do see positive development in operating receivables, where we have been able to leverage learnings from previous periods and apply those in many of our markets. The provision made for Brazil has no impact on the cash flow in the quarter. Working capital days continue to be well below 100. We are now at 91 days. We continue to be below trend on operating return on invested capital with 10.4% on a rolling 12-month basis, which is still above the cost of capital. Let's then move to page 11, please. The change in net debt year over year is due to the acquisitions that were finalized in the fourth quarter of 2023 and in this quarter, taking us to 11.3 billion in net debt at the end of the third quarter. If we adjust for pension liabilities, we are at 8.6 billion. And this brings us to a leverage of two times EBITDA, which is well below the two and a half times which we have communicated previously as a threshold. If we adjust for pension liabilities, leverage is at 1.5 times EBITDA. This signals that we remain in a solid financial position even after the recent strategic acquisitions, and this is according to our plan. We intend to work this down going forward. Cash amounted to approximately 2.2 billion by the end of the quarter. So all in all we can conclude that the financial position continues to be strong. Let's then move to page 13 and back to you Mathias.

All right, thank you, Agneta. And on page 13, I just wanted to take the opportunity to summarize the key takeaways again. Main one is that we continue to see strong order intake growth across regions and most of our product categories as well. Temporary supply challenges have impacted both net sales and especially margins in acute care therapies in the quarter, but we are expecting the situation to improve in the fourth quarter. Even if financial leverage has increased somewhat after the acquisition of Paragonics, our financial position remains solid, and we reiterate our guidance for the full year, so 2-5% organic net sales growth, and in addition to this, we expect the recent acquisitions to contribute with 3-5 percentage points of growth. So the current priorities for us are addressing the remaining challenges in acute care therapies. This is the number one priority for the whole company. We're also working on sustainable productivity improvements and remain cost conscious when it comes to expanding our business. And we continue creating added value for our customers, both through organic development, the investments that we make in R&D, for example, and also inorganically, like with the acquisition of Paraconics.

with that said i open up for questions thank you if you wish to ask a question please dial pound key 5 on your telephone keypad to enter the queue if you wish to withdraw your question please dial pound key 6 on your telephone keypad If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Eric Castle from Danske Bank. Please go ahead.

Hi, good morning, everyone. So first question, I mean, in the report, you're saying consumables down in balloon pumps and hardware down in ECMO. I mean, naturally, some think that might be the SA that are having some impact, but I also know that comps were really hard for both last year. I mean, I just have to ask, is there an aspect here of market share losses in either of these business areas, or is it just purely comps?

Yeah, thanks, Eric. A bit hard to say. I think it's definitely a comps effect in there. We have no information on any significant market share losses. I think we're expecting that customers will find a second source for ECMO hardware, but there's nothing material in the quarter that we can call out due to this.

All right, thank you. And then how much of the strong order intake that you're seeing now within within ACT relates to ECMO consumables and are you seeing any sort of trends that based on these issues that you have now in Q3 that customers are looking to maybe build their own safety stocks in Q4?

I don't think we have not been able to supply enough for anyone to build really safety stocks. I think we have gotten out of the backorder situation outside of the EU markets at least. But we have no evidence of anyone kind of trying to stockpile this. And we are now from the first week of October back to delivering now with the new packaging solution also to see markets. So we're hoping for a more stable supply situation going forward.

I was thinking more of the order side. It sounded like you were talking about deliveries, but it's the same story for orders.

Yeah, sorry, I misunderstood that then. No, I think there's nothing I can call out in the order pattern that indicates any stocking at customers.

Okay, perfect. Just the last question. I mean, how high were the costs related to quality and regulatory this quarter when it comes to equipment balloon pump? And have you changed review in any way for where the full year cost will end up?

No, it's broadly in line with what we communicated. We don't detail out everything that we invest now in upgrading products and fixing. Like the changeover now we had in the factory when it comes to the HLS, PLS production. So nothing really to add of material nature in that regard.

All right. Thank you, Mattias. I'll jump back into you.

Thank you.

The next question comes from Mattias Vadsten from SEB. Please go ahead.

Yes. Hi. Good morning. I will start off with tweaking the question on ECMO a little bit. Strong in Q2 in cardiopulmonary week during Q3 with what appears then to have been stability in production in Q2 and with problems here in September. Based on sort of common quarters for ECMO, do you see growth mainly being reliant on sort of your internal supply stability, if you get what I mean? And then if you could comment on what makes you comfortable that production will be more stable going forward. That's the first one.

Historically, our production capacity has been a limiting factor when it comes to growing the business. I think with the new packaging now implemented for CE markets and the production being up and running again, we're certainly hoping for a more stable supply and that we won't be the bottleneck to growth, as much as I can say on that going forward. I think it's anyone's guess right now what the flu season will do this year. I mean, the last couple of years we've seen really no effect from that, but that's something we'll have to evaluate in the coming months here.

Thanks for that. The next one, orders, if we look on life science, orders remain well above sales last month. So question is, I guess, do you see organic sales growth get going here in Q4 already? I appreciate you won't comment on sort of margins in the order book, but what kind of product areas do you expect to be growing strongly here into 2025? That's the next one.

So Q4, we anticipate that it is a strong delivery quarter for life science. If we look at the margins going forward, as you can see in the last couple of quarters, we have had a pickup of the beta-bacterial transfer, which is comparatively within life science, high margin products. But it is, as you know, very subject to the product mix in life science.

Good. And I will limit myself to one more question. So also, you flag critical care having strong orders, whereas events is the largest part. So if you could comment to what extent this is due to an ease in competitive pressure in this area. That's the last one.

Yeah, I will say we confirm that, of course, that we have an uptick in orders, but it's too soon to confirm that it is due to the movements in the market. So we'll have to come back on that. I anticipate in the first half of 2025 before we can conclude on that.

Thank you very much. Thank you.

The next question comes from Christopher Liljeberg from Carnegie Investment Bank. Please go ahead.

Thank you. Three questions. First, if you could quantify the effect on sales from the production or delivery issues you have here for ECMO consumables in the quarter.

So to quantify the effect of the reinstatement of the CE mark, is that your question? Or can you clarify, please?

Yes, exactly.

Yeah. So we will share this. It is not material overall, but there is an effect of some between 50 plus million shift between the third and the fourth quarter.

On sales?

On sales.

Okay. And you also said that there were some additional costs for this. So is it possible to say how much this has impacted earnings in the quarter?

I will not single that out and quantify that effect, but there is an effect of that for sure that we've had to make adaptations to production and supplier interactions, etc.

But if we instead look at the total impact on EBITDA from all the quality issues, which has varied between 100 and 200 million before, is it possible to give that figure for the quarter?

Yeah, so if we say we do have, as you say, those elevated quality costs in line with those levels. In Q3, the main pieces for what we have already mentioned, the underabsorption piece, which is partly related to that we have to make adaptations to our production processes mainly. We also had some more scrapping, but the main thing is the negative mix and the currency that we have mentioned.

Yeah, but you can't say whether it's 100, 200 million or even more this quarter.

We say that what we have said for the full year, that those are the levels of quality related cost. And then additionally, we have had some under absorption for this in the third quarter and some scrapping, I would say.

Okay. And could you remind me what you have said the impact will be for the full year?

So we said in the range of half a billion and now we are trending a bit above that. With the additional under absorption.

OK. My other two questions, one is if you could just comment a little bit on the strong order growth in surgical workflows, we saw a couple of years ago the catch up from the pandemic and now it seems to picking up again, particularly in the US. So whether you have more Jone Peter Reistadler, Better momentum gaining market share and then my third question relates to the comment about acquired business contributed to organic growth from from Q4 is it possible to say how much. Jone Peter Reistadler, To businesses are are growing right now, thank you.

I can comment on the infection control. We've had a good comeback after the pandemic as you stated. Right now in the quarter the main positive contribution was from infection control and from digital health. I wouldn't say that's a continued pandemic catch up. I mean, in some cases there are large products when it comes to infection control that we win and that has a positive impact. Digital health is a smaller part of surgical workflows, but with good underlying growth momentum. And there's been a long period where customers have been very, very focused on this post pandemic operational struggles that they've had. There's been a lot of other large IT investments that have kind of pushed out the types of solutions that we do in digital health. So it's encouraging, I think, to see that seem to be bandwidth and budget for these type of investments now as well. So those are the main factors. I would not say that we are gaining market share in the US or anything like that. We're trying to hold the fort there, but it's no market share gain.

And then when it comes to the acquisitions, we stick by the guidance that we have given them for the whole year. And as we mentioned, we have a contribution of 535 million in Q3. And we have a healthy growth in these areas. So that is what we expect to see in line for Q4 as well.

Okay, thank you.

Thank you.

The next question comes from David Johansen from Nordia Markets. Please go ahead.

Hi, thank you for taking my questions. First one I had was on the additional restructuring you have done in acute care therapies of 97 million. You know, is this quality cost, you know, for the new packaging solution for ECMO consumables or is there something else new in this quarter? Thank you.

Yeah. So that is a number of sort of right-sizing initiatives that we are running across the different functions of our company to address our cost base. So it's not primarily linked to the quality piece.

Okay, then I'd like to follow up on that. You know, I was wondering then on the large layoff you have done at your Wayne production facility in the US. Can you elaborate on what has happened there and what the reason is for this, you know, reducing headcount to this degree? Thank you.

We'll not comment on that individual case, but it's not the large layoff that we have done in the Wayne facility. We always review our teams and how they should have the best prerequisites to deliver. We have done that in Wayne, but it's not the main thing.

Okay. But it's one of the initiatives you're taking in the 97 million restructuring then?

Yes, that is correct.

Yeah. Okay. Perfect. Then just a quick one on the regulatory situation for cardiac assist in Europe. Has something new come up? what is the reason for the extended suspension period? Thank you.

No, nothing new has come up. It's just that like we indicated when we got the CE certificates suspended, some of the technical challenges with the existing balloon pump platform just can't be solved in a short period of time. So I think the extension now allows us to work through the remaining couple of challenges that we have yet to resolve. But nothing new has happened. It's in line with expectations.

Okay, perfect. Those are my questions.

All right, thank you.

The next question comes from Isia Noor from Morgan Stanley. Please go ahead.

Hi, good morning. Thanks for taking my questions. My first one is on the ACT restructuring costs, kind of similar to the question before this. What functions are you reducing, and which segments within ACT does this relate to, and does this reflect a lower growth outlook for ACT in 2025?

Yes, so it is broadly, so I will not single out any specific functions, but it's both within the supply chain of the business area, in the sales organization, and in the supporting functions that we work with right-sizing initiatives. We do not expect this to have any, if anything, positive effect on our profitability going forward.

I think it's important to state overall that it's really about trimming and adjusting to inflation across all our businesses. So we have restructuring costs not only for ACT, but we have that for our other parts of business as well. So this is normal course of business and really just trying to mitigate the reality of inflation that we've had for the last couple of years.

One question on the, I think you mentioned 50 million of push out from the ECMO supply issues. That doesn't really explain the magnitude of the drop in sales in Q3. Can you just explain kind of what was the driver of the shortfall in your ACT business in Q3?

Yes, I would say, firstly, we had very tough comps from last year. So that's important to keep in mind that we had some catch up of deliveries coming into Q3 of last year. So that I would say is the main impact, apart from what was mentioned.

Okay, my last question is on the life science business. What was the growth rate for China specifically? And did you see the trend worsen sequentially into October?

We don't disclose growth rates on individual country levels, but we called out double-digit growth in both China and the US for bioprocessing in the quarter, but that's the only details we will share.

Okay.

Thank you very much.

Thank you.

The next question comes from Oliver Reinberg from Kepler Chivro. Please go ahead.

Thanks very much for taking my questions. Three also on my side. Matthias, can you just provide a bit of color on the aftermath? I mean, the FDA letter occurred in May so that we are now half a year down the road. Can you just provide some kind of color what you hear from the FDA, from clients, from competition? I think you talked about that there's a broader trend to find alternative sources. Any kind of update on the situation would be helpful. Thank you.

Yeah, sure. I mean, there isn't that much update to provide. There's been no new news from FDA. We continue to have the weekly meetings that we've had for a long time with them. And we do see eye to eye on the on what we need to implement on our product platforms to address the concerns that they have raised in the letter to health care providers so that work is is progressing according to plans so nothing new on that front when it comes to customers we've spent a lot of time with our local organization clarifying what this actually means there's been a lot of confusion and misunderstandings of the of the content of the letter so there's been a dialogue with many customers around this The main concerns raised by customers still relate to supply situation, being able to get products primarily for ECMO therapy. We do expect though that customers will develop alternative sources, that they will have a plan B in place. We don't see any major cancellations or anything today, but I think like we said when this first happened in May, we do expect customers to think about their sourcing strategy and have an alternative to us as well. We don't see any major impact at all of this right now, but we still keep an eye on this month by month and quarter by quarter.

Okay, perfect. Thank you. Second question will be in China. Can you just provide a kind of a broader update on the demand situation there and any kind of color whether you see any uptake in terms of stimulus trends or if you have any insights when the stimulus packages could support your demand situation?

we're aware of the stimulus package and we continue to to monitor and keep a dialogue with customers we do expect that it will be some some tailwind from from this we we can't see that that has impacted the quarter at all uh so far so if if anything it's a future effect of this and something we'll have to uh to come back with uh with more information when we see any material changes okay super and third last question just on the gona transaction it was obviously kind of

larger capital deployment at 10 times EV sales. Can you just provide a kind of bit more insights on the kind of growth prospects like what growth do you expect in heart and lung? How significant is the contribution from abdomen and any kind of color? What do you expect outside US? Any insights when you, what kind of sales perspective overall and when you expect this to earn a kind of cost of capital? Any kind of discussion around that would be helpful.

Yeah, we will come back. We've owned them for two weeks in the third quarter, so it's a little bit too early to make too many conclusions. What I can say is that we're extremely happy to have now Paragonics as part of our portfolio. It's a great strategic fit with especially our cordial pulmonary business in ACT. The reception from customers has been exceptionally positive, every one that we've interacted with. And Paragonics closed the quarter with very good momentum, and we expect that to continue. The growth drivers for this market we expect to be sustainable for the foreseeable future up to the next 10 years. But I really can't, with this short period that we've owned the company, make too many other conclusions. So we look forward to coming back on this once we've closed out 2024. All right.

Understood. Thanks so much. Thank you.

The next question comes from David Adlington from JP Morgan. Please go ahead.

Hey, guys. Thanks for the questions. Really just wanted to focus on margins. Obviously, you've reiterated the revenue guidance, but we're now in the middle of October, still no margin guidance. Just wondered if you could give us maybe some expectations for this year and thoughts into next year just relative to Obviously, you're down 300 basis points year-on-year this quarter, 30 basis points year-to-date. Just wondering if you're expecting any margin expansion this year with a stronger Q4. And then just also that trajectory into next year will be helpful as well. Thank you.

Yeah, thanks, David. We will stick by what we communicated back in May in the capital markets, which is a rather flattish margin for this year. In absolute numbers, that is, of course, then an increase given the growth that we have. But we stick by that perspective.

And then thoughts into next year, given the moving parts?

You will have the same answer there. We stick by that outlook that we gave in May.

Okay, thanks.

All right. Thank you, David. Any other questions here?

The next question comes from Sten Gustafsson from ABG Sundahl Collier. Please go ahead.

Yes, good morning. First one, follow up on David's question here. Could you remind me what you guided for in May in terms of margin outlook for 2025? That would be my first question. Please.

Yeah, we have. We have shared that material, but it's a rather flattish development.

Also for 25. Yes. Yep, excellent, thank you. So and then on ECMO and HLS. It's something like you said you you haven't lost anymore get share, but you expect customers to start to use. other suppliers. And we have seen recently also new products being approved here in Europe from one of the competitors, for example, on ECMO. So my question is, what type of growth outlook do you see for your ECMO and inter-EU balloon pump franchise for the coming year? I know you don't typically guide on specific products, but some sort of direction would be good in relation to your overall organic growth guidance.

Yeah, no, absolutely. I think in this one we have actually guided a bit earlier. We've said that when it comes to our cordial pulmonary business, which is essentially ECMO or ECLS, we've said that we expect a rough growth around 8% for this business over time. Bear in mind, though, that is a somewhat lumpy business, partly due to the supply chain and quality challenges that we've had. But the underlying growth for the therapy is expected to be around 8%. Balloon pumps is a different story. That's always, or at least the recent history, been a slower growth category. So underlying growth there is more in the range of 2-3%. And obviously also still with some lumpiness like you've seen in the last couple of years when it comes to both supply, but also some of the regulatory hurdles that we need to pass for this business.

Okay, thank you for that level of detail. And you still expect to be able to grow cardiopulmonary 8% even with increased competition?

I think the beauty of this is that it's a growing therapy overall with a lot of potential therapy and indication expansions that can be done. And I think if you look at, for example, the stand business where we were alone for quite some time and we had new entrants expanding the market, we do expect to be able to grow around 80%. Even with the new competition, we do expect this segment will grow as a whole. It's a very powerful therapy for patients and room for indication expansion. So short answer is yes.

Okay, great. Thank you. My last question is to clarification. You talked about delayed shipments here in September of roughly 50 million. Is it fair to assume that that had a negative impact then on EBIT A of 30 million? which we then should add back to Q4 if, well, provided that the shipment will take place now in October.

Yes. So that's a fair assumption on the sort of margin of those products. Then we have had other additional costs in Q3 to sort of adjust production to this new CE Mark product.

I think it's important to keep in mind it's a complex operation, the manufacturing of these products. It's not only that the products that don't get shipped and that margin impact. We're producing these now in a new packaging as well under partly new conditions, which has meant extra costs during the quarter as well. And under-absorbed.

But in terms of adding, I tried to adjust my numbers ahead of the report. So I took out a little bit more. So now when I need to put that back into Q4, obviously the costs are already sort of gone. But the 30 million in EBITDA is a good approximation of the shipment.

Yes, that's the value of those.

Excellent. Yeah. Excellent. Thank you. All right. Thank you. That's all for me. Thank you.

Thank you. The next question comes from Rickard Anderkrans from Handelsbanken. Please go ahead.

Hi, and thank you for taking my questions. First one on the guidance. So, you know, I guess some of us out here are curious and wondering why it was the organic growth guidance wasn't narrowed given where we are in the year. You know, it's quite a wide range of outcomes it implies for Q4. So maybe you could elaborate on some of the swing factors to get you to the low versus the high end respectively. And where do you expect to end the year on the higher or the lower end of the growth guidance? I'll start there. Thank you.

yeah thank you for that question uh so we will stick by what we have communicated in terms of guidance i will not give a narrowing span i will say this that you have seen the order book it's very strong uh we have all the teams lined up to deliver for this in in in q4 and but but there are risks on the timing so just to say that is why we still remain with the rather it is a high supply high production Q4 that we have in front of us.

Okay that's clear thank you and secondly on the following up a little bit on the US ECMO inter-orthic balloon pump franchise so you mentioned that you see signals of customers maybe diversifying but sort of it would be interesting to hear a little bit on the visibility into customer behavior? Would a customer tell you if they intended to transition away or switch? And do you think that the recent HLS supply disruptions could increase the risk of customers transitioning given that you also mentioned that supply is a critical concern for a lot of customers?

Yeah, I didn't say that we've seen a lot of customers starting to transition. I said that we will be surprised if they didn't create Plan Bs and created a second source for this. And we know there are discussions going on in customers here, but you have the whole range of customers. Some saying that we will stick with the platform that we're happy with from Geringe. Others said that most likely we will need to find a second source at least as well. but the impact of that is is much too early to uh to say so i think that's that's really all the light we can shed on it when it comes to the supply situation the supply constraints in q3 were more for the sea market so not for for the us i think the us supply situation has improved the last few months And the main frustration earlier with customers has been that they haven't had enough supply. We are out of a backorder situation now in the US, so that should not be a factor that creates mitigation to competitive platforms.

Very clear. And just a final question on the FDA quality record backlog. How are you tracking towards resolving the backlog?

There's been really good progress in the third quarter. We are well over 99% done with that now and expect now in the fourth quarter to resolve the main open issues.

Very helpful. Thank you for taking my questions. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Aysia Noor from Morgan Stanley. Please go ahead.

Hi, just thanks for fitting me in. Just a housekeeping question for Anita on the below EBIT items. Should we expect any more one-off impacts in Q4 or 2025 from either the Brazil provisions or the ACT restructuring? And then on the interest costs, that was running a bit higher in Q3 versus the first half run rate. So would it be fair to assume a more elevated figure for Q4? Thank you.

Yeah, thank you for those questions. For Brazil, it is, as we have communicated, not final yet, but this is the best assessment and we don't expect any material changes in Q4. For restructuring, we are, as mentioned, running a number of rightsizing and productivity initiatives, and some of those will impact, not to the same extent as in Q3, but there will be some impact also in Q4. And then finally, coming into the interest expense that is related to the higher debt level, higher net debt as a consequence of the acquisition of Paragonix. And this is completely according to plan.

Thank you. Thank you. The next question comes from Christopher Liljeberg from Carnegie Investment Bank. Please go ahead.

I want to follow up on your comment about margin before. I understand the comment about flattish margin this year, but for next year, could you maybe explain the rationale for what will not make the margin improve next year if you would have lower impact from quality costs, less cost inflation? It seems demand is pretty good.

Thank you. So in the guidance that we have given, that is what we stick by, so to speak. And we are very, as you know, very subject to mix. We have a slightly different mix coming into 2025. So that is with high growth in some of the acquisition areas, mainly then in surgical workflows, which is very, very good profitability for us. But from a mix perspective, impacting uh the margins overall for the company so that is that is part of it and also that we see um stronger growth in some of the product areas with with slightly different margin composition but we do expect like you say that we we will remain on on elevated quality cost levels also last year we've not given guidance on on the exact levels here but but that is part of it as well

Okay, thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Great, thank you very much. I think we've already gone through the summary here, so nothing else to add from our side other than thanking you for taking the time to join us today, and I wish you a good rest of the day. Thank you.