Vimian Group AB (publ)

Welcome to the Vimean Group Q4 Report 2024. 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 pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Patrick Erickson, CFO Carl Johan Zetterberg, Boudry. Please go ahead.

Good morning. This is Patrick, and thank you for joining us. We're going to jump straight into it and start with some of the highlights from the fourth quarter results that we just reported. We delivered an all-time high revenue for an individual quarter in the fourth quarter with strong organic growth, and that is well ahead of the animal health market. Our cash flow from our operations were very strong as well in this quarter, and it corresponds to a cash conversion ratio of 115%. We also increased our operating profit during the quarter. And we're very pleased to have incorporated and consolidated the animal dental business with IM3, starting on October 1st this year, last year. And they have made a great start and a good contribution to Demian in the first months that they've been with us. So now turning to the quarter in more detail. We delivered 27% revenue growth, which led us to this record sales of 104.9 million euros. We continue to see double-digit growth of 15% organically, with exceptional performance from our specialty pharma unit. We looked at the adjusted EBITDA. We grew 9% in the quarter compared to the fourth quarter in 2023. But remember that that quarter in 2023 benefited from a 1.5 million euro capitalization of our R&D expenses. that was related to quarters one, two, and three in 2023. If we exclude this one-time impact of the higher capitalization rate in Q4 23, the adjusted year-over-year EBITDA growth for us was 17%. We started to look at the margin bridge here. As you can see, our margin came in at 23.4%. And we wanted to show this bridge here, the impact of the R&D cap compensation is about half of this margin walk. And we end up with a like-for-like margin for 23 at 25.6%. We had a one-time impact from specialty pharma where we wrote off a customer receivable, a one-time nature that will not be repeated, that impacts us with 90 basis points. And then we have a margin decline in our MedTech business driven by two items. The first one is we decided to make investments in the fourth quarter to grow our market share in the orthopedic U.S. market to gain share there. And then that had a margin impact. And then secondly, we've incorporated now IM3. As you recall when we announced that, the margin profile of IM3 is a little bit lower than the fleet average of Vimeo. And when we combine it, we'll get this margin impact as well. The rest of our group had psychomotor improvement and accretion, and that was predominantly driven by our veterinary services group. We now turn to specialty pharma. It had a simply exceptional organic growth of 22% of the quarter. It was primarily driven by very good growth across each of our different therapeutic areas. Especially three out of the four were just stellar. The contribution that came from specialty pharmaceuticals and specialized nutrition was exceptional. And in our specialized nutrition, we ran a couple of sales campaigns in various states out in the U.S. for the first time that proved to be very successful. In 2024, about a third of our growth was generated from our cross-selling activities. initiatives, and this number has been very stable throughout the year, and we continue to see great benefits from the cross-selling programs. Our underlying margin development was stable year over year, and when we include the higher levels of capitalization, as we've highlighted a little bit, and the write-off of the customer AR. If we exclude these two, and adjust for it, the EBITDA for specialty pharma grew by 23%. Now turning to our MedTech business, we looked at the total revenue for MedTech, which would include our acquisition of IM3. We grew 41% in the fourth quarter. We will start to include IM3 in our organic growth number in the fourth quarter this year, and we're there off to an amazing start, as I mentioned previously. We reported 4% organic growth, and we continue to see challenges in the U.S. high-end surgical market. Our EMEA and APAC region, which constitutes about one-third of all orthopedic business, reported slightly lower organic growth in the fourth quarter, but delivered high single-digit growth for the full year. We completed 52 in-person trainings throughout the quarter, and we had 855 participants in those and had as many participants on top of that participating in various virtual trainings. And as we mentioned earlier, we've taken some investments in the U.S. to gain market share and to drive growth in 2025. And these investments include intensified education programs, sales, and marketing initiatives. We see an impact from the consolidation of IM3 on the margin for MedTech as well, and we report an 18% adjusted EBITDA growth for this segment in the fourth quarter. And as we have talked about about a year ago when we talked about our AOP program, the annual ordering program in the U.S., this quarter is the last quarter that we will continue to make reductions in the AOP program. And we expect this to have a slight negative impact on the revenue for MedTech 2021. But we fully expect to deliver full growth for the full year. Now turn to the veterinary services business. Again, a very strong quarter with 16% organic growth. We reached 8,400 members here by the end of the year and continue to cement the position as the global leader in service platform. The strong profitability that the team has shown here is driven first by the great growth that we see, and also we've had opportunities for a very positive mix. This part of our business is now preparing for new market entries, so we're reinvesting some of our margins in 2025 into further growth in this segment. And you should expect our margins to normalize in this business and be more like the first half of 2024 going forward than the second half that has exceptionally strong margins. If we turn to the adjusted EBITDA growth for our VET services, it was a remarkable 35% in the quarter. Now, turning to the diagnostics business, we're very pleased to see that this part of our business has now returned to double-digit growth, 12%. This is driven by some launches of new products, innovation that we've had in the pipeline. The team have worked hard to turn the business around, and we're pleased to see some of the fruits of that hard labor. We also want to note here that the livestock market continues to be unpredictable, but we're optimistic about this business and we think about diagnostics as a growing business for 2025. Also, before we leave this slide, just a quick comment to say that the commitment to diversifying this group into more companion animal continues. And we are committed in 2025 to continue that investment in launching products of share-side nature, point of care for the companion animal segment of diagnostics as well. So you can expect us to have the same sort of more detailed trial that we have shown so far. So with that said, I want to thank you for your attention here. I'm going to hand the mic over to Kalyan, who will go through our financials in a little bit more detail. Kalyan, over to you.

Thank you very much, Patrick, and hello, everyone. And as Patrick said, let me give you some further comments and details on the financials for the fourth quarter. Adjusted EBIT A in the fourth quarter was 24.6 million euro, which corresponds to an increase of 9%. This represents a margin of 23.4%, and as outlined by Patrick in previous slides, The reduced year-on-year margin is driven by quarterly effects, especially pharma and medtech. We report an operating profit of 12.5 million euro, a significant increase from last year's result of 2.7 million. Items affecting comparability clearly continue to impact the quarter, with a total of 6.2 million euro. This is mainly costs relating to acquisition activities in medtech and specialty pharma, as well as continued high level of legal costs in the U.S. patent litigation. In the U.S. patent litigation, the main hearing in the process is happening now in February, which will drive high legal costs impacting items affecting comparability also in the first quarter. Net financial items was 2.5 million euros and consists of three main components. First, finance expense of minus 4.2 million euro with an average interest rate of 5.3% during the quarter, which was offset by 0.6 million of interest income. The second element is the quarterly discounting impact of minus 1.9 million euro And a positive impact of 4.5 million euro from probability adjustments on continued considerations, which in the quarter mainly relates to an adjustment for Borough of Australia. And lastly, a positive impact of 3.4 million from non-realized effects on the evaluation of debt. The income tax expense for the quarter amounts to 2.4 million euro at an effective tax rate of 16%. In total, this resulted in a net profit for the quarter of 12.5 million euro, with an earnings per share of 2 euro cents for the quarter. Looking at the cash flow for the first quarter, cash flow from operating activities reached 24.4 million in the fourth quarter. An improved cash generation compared to the same period last year, as well as previous quarters of this year. Networking capital amounted to 100.1 million euro at the end of the quarter, equal to 25% of revenue. An increase from 80.8 million at the end of September, which equaled 23% of revenue. The majority of the increased working capital is a consequence of the IM3 acquisition, and the rest of the increase is mainly a result of lower accounts payables. Our efforts to reduce inventory in Medtech have continued to yield results with further reductions in the fourth quarter. Cash flow from investing activities of 30.5 million euro primarily reflects timing effect from financing of the IM3 acquisition. and litigation receivables, as two of the sellers have fully paid their settlement. Cash flow from financing activities are minus 29.8, as we have continued to pay down debt in the quarter. At the end of the period, net debt amounted to 221.9 million euro, which is an increase from 140.3 million at the end of the third quarter, due to the acquisition of IM3. External ending of €215.9 million, which is approximately €24 million less than at the end of the third quarter, as we have continued to repay debt in the quarter. Leveraging the quarter equaled 2.0x compared to 1.3x at the end of the third quarter, following the IM3 acquisition. With this financial review of the quarter, I would like to hand the word back to Patrick for concluding remarks before we open up for the Q&A session.

Thank you, Kalyan. Looking back in 2024, we delivered a 13% toll growth, 9% organic growth, and 9% adjusted EBITDA growth, despite a challenging market situation for the U.S. surfer market. Our cash flow was significantly higher this year. We delivered $58.1 million in cash from operations, and that corresponded to about 70% cash conversion for the full year. All in all, 2024 was an eventful year for us here at Vimeo. We laid the foundation for our next phase of growth in the journey here, and I'm really pleased that we set new financial targets. We had a successful rights issue. We strengthened our balance sheet. We prepared ourselves for more accretive M&A, and we made an entrance in the fast-growing market dish of veterinary dentals. So all in all, very positive finish of the year. And then maybe if we were to look at our priorities going forward, we remain positive of the overall health market, and it continues to grow. The underlying growth trends with humanizations of pests remains very strong. And there's millions and millions of untreated animals out around the globe where we have an opportunity to treat them, and that represents a long-term growth opportunity for us. We live in a world where there's geopolitical uncertainty, and we continue to monitor those very carefully. We're an entrepreneurial company and an agile organization, as you know us. And we're well equipped, I believe, to very quickly adapt to the new circumstances and adjust to it. So far, we know we see limited exposures to the various different geopolitical things that are being announced every day. Looking ahead, we will continue to drive strong organic growth. We'll work on our operational improvements, really to create a fully scalable business will deliver on our people agenda and will continue to execute on our M&A pipeline. In the near term, we're preparing and focusing on the uplift to the main market, and we have a target and an ambition to be able to complete that at the end of this quarter. I'm excited about the year to come, and I'm very pleased to conclude that we are well positioned to drive growth and profitable growth for the 2025 and beyond. With that, I'd like to thank you for your attention so far, and operator, please open up for the Q&A section of the call. 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. The next question comes from Adela Dashian from Jefferies. Please go ahead.

Good morning, and thank you for taking my questions. A couple from me. Can we just maybe start on the write-off that you mentioned being temporary in nature? Can you give us some background on what led to that?

Sure, and good morning, Adela. I guess you're referring to the accounts received of the write-down that we conducted, especially the farm in the quarters.

Yes, the write-down, sorry, yes.

That's related to one specific customer where there's no issue from a customer point of view. This is a healthy customer. But unfortunately, this relates to historic events where our delivery and sales documentation wasn't up to standard for this customer and our processes were not in place. And as a consequence, we couldn't fulfill the obligations from the customer's point of view and get paid for the amount that we sold. And as a consequence, we've taken a cautious approach and written down this total receivable of these products to this customer.

Okay. All right. On MedTech, you're mentioning that we should expect a continuation of similar patterns from the leveling down the AOP system in Q1 this year as well but you didn't say anything about expectations on orthopedics in 2025 and when I take the growth experience in Q4 of 4% and Couple that with maybe some additional hand-wins from the AOP. I mean, I know you don't give us guidance, but how should we end up with positive growth for the full year? That would entail, I'm assuming, high single digits for MedTech for the remaining quarters.

Yeah, so thank you for the question. In the first quarter, we're going to do the last AOP adjustment. I would think about the first quarter as a slight decline in organic growth for MedTech in the implant part of that business. Although we do think for the full year this is a growth business for sure, and it will recover in the second, third, and fourth quarter and come back to market plus rates in terms of growth.

And then if I can also ask on the investments that you've undergone to increase your market share within the orthopedics business, what's the rationale behind that? Were you seeing that you were losing market share or is it more taking advantage of a weak market and growing your market share versus what it has been previously?

Yeah, thank you. We wanted to see a lot of white space, as we've talked about before, in this market. And we wanted to run some tests if we could decouple our growth from the market growth. And the way that we did that in Q4 was to increase our level of investment in the marketing activities, starting with significantly more training and education activities. As we reported, we trained 1,600 people in the fourth quarter alone in this part of our business. We coupled that and paired that with sales activities and incentive programs on that, both for our customers and for our own team, and then backed that up with very strong marketing. We had a higher presence and a more intense presence at trade shows in the fourth quarter and paired that with a lot more both online and offline marketing to support it. And All these three activities altogether had a margin impact in the fourth quarter. If you think about the margins in this business going forward, you think about them being better in Q1 than they were in Q4, but not quite as good as they were in Q1 last year. That's how we're kind of modeling that going forward in the first quarter.

Got it. All right. I have a couple of more questions, but I'll just ask one final and then get back into the queue. On this legal settlement with the main hearing happening in February, do you expect deliberations to start right away, or is this going to continue to be a prolonged process?

It's a very good question. We're continuing to follow kind of the pace of the legal system and the proceedings that are happening now should end up with a verdict in court. And that is one way to conclude this. I think it's too early. First of all, it will take time before the verdict is done and being publicized. But it could be that it's over at that point. And we do hope so. We have settled with three out of fours. We have one seller left, and we hope to clear that as well. From a timing standpoint, this is always really hard, and things take longer in the legal system in America than maybe in other places in the world. But I think about this as something that we have a resolution to before the end of this year and hopefully a lot sooner than that.

Okay, great. I mean, without commenting on the legal process, I know that can be a sensitive subject, but it did seem here that you are equally as confident on resolving it with the positive outcome as you have been in the past, correct?

Yeah, our case continues to be very strong. I think it's evidenced partly by three out of four. I've already said that the full amount Two out of these three have paid us. The third one is paying on the agreement that we made with them on the payment plan. So, you know, there is one item left here, and we're resolving that the way that the legal system empowers us to do. We continue to believe we have a very strong case here. That's unchanged.

Fantastic. Thank you.

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

Good morning, and thank you for taking my questions. Following up a bit on MedTech, are you seeing any signals of improvement in the market heading into Q1 in the U.S.? And I also noticed, as you called out, that the rest of the world sort of decelerated growth here in Q4 to low single digits. Anything in particular we should be mindful of in the rest of the world, or should we expect sort of deceleration heading into 25 in that part? I just wanted to check those two things. Thank you.

Yeah. So maybe I can start with the market in the U.S. There was a positive signal coming out of one of the data sources that we tracked in December, but it's an index that covers only a month's worth of surgical procedures, and we think the time period on which that's measured is too short to draw any conclusions from it. So we tracked this index. I mean, for those of you who recall, that same index had a very positive signal in September, and then it fell back on the following month. So although we like to see positive signs, there's too early to say that the market is turning. We don't see the market further deteriorating. We believe it's bottomed out. But it's too early, in our opinion, to call whether it's improving or not for the first quarter or not. We didn't get data. We monitored this very closely, and we'll be knowing a lot more in a few months here when we get a few more data points under our belt. But it's too early. I don't think it's going to get worse in the market. It might get better, but it's too early to say. Now, maybe switching to your question about Europe. and the rest of the world there. We don't draw the same conclusion. We think it's temporary there. It's a number of different mixed reasons why the total came in a little bit slower on growth. And remember, that area consolidated for the full year delivered high single-digit growth in the full year. So we think this is temporary. The reasons for different markets to be a little bit softer is different, and they're easy to explain. So we think it's temporary. We think it's going to blow over, and we don't see this as a systematic market issue at this point.

Okay, that's clear. And following up on MedTech, looking at margins, we're down quite significantly year over year. Can you help us? think about the medtech margins for 25, you know, a lot of moving parts here with the acquisition of IM3 and growth investments, et cetera. So any help we could get sort of piecing together the puzzle for the coming quarters and the year ahead would be helpful.

Yeah, absolutely. And to give you some more color, I think as Patrick said, there will be an impact if we just look short-term in Q1, given the continued phase-out of AOP. Having that said, both for the first quarter and for the full year, we are expecting more normalized margin development in, say, med-tech orthopedics going forward. We've done the investment that we saw were needed in the fourth quarter. So from a MedTech perspective, looking at orthopedics, we expect a more normalized margin pattern for 2025. Then, as you pointed out, of course, be mindful of the inclusion of IM3 in our numbers that have a lower margin than fleet average. So there's a negative mix impact on consolidating IM3. On IM3, our... We're clearly working to ensure that margins over time will improve for IM3, and for IM3 or MedTech Dental alone, we will see a like-for-like margin improvement over time.

Okay, but what's a normalized margin level for the non-IM3 MedTech business? I mean, we have quite limited history, I guess.

So what we expect for this year, if we look at the full year, we expect margins to be on a similar level as we've seen in the last couple of years. Be mindful, of course, there's been seasonality in previous years in MedTech that we're facing up. But if you look on the full year margin in the last two years, that's where we see a normalized margin for our MedTech orthopedic business.

Okay, that's clear. And then the final follow-up. So what was the, could you quantify the organic growth and the beta margin contribution from IM3 in Q4?

Sorry, Richard, just again, you said the... Yeah, so what was the organic growth and the beta margin from IM3 in the quarter? So organic growth from IM3, we have not disclosed that number. IM3 has contributed with 10.1 million euros of revenues in the first quarter.

Okay. Thanks for taking my questions.

The next question comes from Marco Pires Cox from Barclays. Please go ahead.

Hi there, morning. Just a couple of questions from me. Firstly, just following up on the medtech business and the growth outside of the U.S. You mentioned softness in some markets there that were easy to explain. Could you maybe provide a bit more color on what was driving the softness here outside of the higher comparison base? And then secondly, if we look at the diagnostics business, I think you said you expect this business to return to growth in 2025. Maybe if you could just provide some color on your level of comfort with margins in this business versus consensus and whether you think a low to mid-teens margin here for 2025 is feasible. And then one final question, just on Paris. My understanding is that you're not that exposed to tariff risk currently, but if you could provide some color of what parts of your business you have production within the U.S., I believe this is only specialty pharma, but any clarification here, that would be great. Thank you.

Okay, thank you. I'll start with the first question. I'll let Paul, you'll want to cover two and three, I think. So... Your first question was about a little bit of additional color on the European MedTech market, and it's a little bit different thing. So first of all, just to frame this up, MedTech is about one-third of our business, and Europe APEC is one-third of that. So a third of a third, if my math is right, is about 10% of all of BMEA. And in there, we have obviously a lot of different countries, so it's a big mess. But I'll give you an example of a couple of things that we see in there. We have one country where we have very strong comps. I think, just provided a very high jump-off point for this year. Their growth is, therefore, a little bit weaker. Their underlying growth rates are actually very good when you compensate for that one-time effect. We have another market that is... The run rates are stable, but they're a little bit lower, at a little bit lower clip. But they have performed the same way throughout the quarter. And then we have a couple of areas where we think it's order timings. where some customers have probably optimized their cash flow and their order patterns and perhaps not placed those orders at the end of the year that they maybe did in prior years. So, you know, when you take that full picture, there's a lot of signals in here, and they're very diverse in terms of how they sound and the reasons for them. So that's why we think this is temporary. When we received those similar signals, you know, in the second quarter in the U.S., all the signals said the same thing. Wherever we looked, whatever data points we poked at, they all said the same thing. It's the mark. This is not what we're hearing and what we're seeing when we poked at this in MedTech today. And maybe I've covered the revenue side of the diagnostics questions, and then tell you why maybe you can cover the two remaining questions. So we do see diagnostics as a growth business this year. The livestock market is still volatile. We think we can compensate that with the innovation that we have recently launched, and it's been well-received, and there is good legs and runway for those to perform well throughout 2025? And, Colleen, why don't you talk about the margins and the developments there?

Yeah, so margin perspective for diagnostics, and just as Patrick said, we expect diagnostics to continue to grow as we go into 2025, just as we saw in the fourth quarter. And that will have sort of a positive impact from the margin perspective, where we see the margin level for the full year of 2024 is a reasonable margin level for diagnostics for 2025 as well, as we continue to invest in our companion animal diversification in the diagnostics business. And then on your last question around tariffs, Of course, very, very relevant question, and there is a lot of uncertainty in this area at the moment and going forward. And we're, of course, monitoring this very closely and taking, you could say, precautionary steps in going through how we can work with our supply chain, our pricing, our suppliers to make sure that we mitigate any potential effect. As Patrick said earlier on, we see limited impacts from the tariffs that's been announced last week and two last weeks. And predominantly, just as you pointed out, it's especially for specialty pharma where we see some potential impact from a short-term perspective as in one of the therapeutical areas, we have a larger majority of the sales manufactured or produced in Mexico. But as I said, we are taking a lot of precautionary steps to ensure that we diversify supply chain and work with our customers and work with our pricing to mitigate any potential effects from the tariffs. Thank you.

The next question comes from Kavya Deshpande from UBS. Please go ahead.

Morning. Thank you for taking my questions. Two, please. The first is on specialty pharma. Would you be able to provide us with more background on the national sales campaign in the US, please? So which kind of customer segments are you targeting? By what channels? And should we expect this to be an annual thing every Q4? And then my second question was around diagnostics. What exactly were the new products that drove the inflection in growth there? Were they all livestock related or did this refer to the companion animal health products? side. And also just with regards to your investments there, would you be able to provide us with more detail on where exactly these are going to support the diversification of this business? Thank you.

Thank you. I'll do the first question here and I'll let your one handle the second one. So in specialty pharma, we partnered with one of our largest retail partners in the U.S. And together with them formulated a program to get better shelf space exposure for our products and to create a campaign around those products. It's the first time we've ever done this in the company, and it was one of the very successful trials together with this partner. And it's turned out to be a huge success. And we've done that in a number of different states, and this is a national retailer. We didn't even do it across all of America, but we tested it and tried it in a number of states, and we hope that we have an ability and an opportunity to do it soon again because we really like the results of it. But that drew significant top-line growth in that segment and for Specialty Farm as a whole.

Yes, and then on diagnostics and a little bit on the innovation, what drove good traction in Q4 and also the investment in diversification. So if we start with the first element then and the new product introductions, that's relating to innovations that we've done in especially the livestock segment. that we've taken to market in our solutions for the livestock segment, where we've seen a good response from the market and a good traction on those new sort of introduced products in the second half of the year. When it comes to companion animal, and as we announced in the beginning of last year, we are investing to diversify our business in companion animal. where we today predominantly have one technology that we've launched in AI parasitology. And the investments that we are taking and that we started in Q2 last year and we continue to do this year are predominantly market-related in sales and marketing efforts, making sure that we get a good traction in taking this product to the market. business from to revenue around companion animal solutions.

Well, thanks very much. And if I could squeeze in just one quick follow-up on the specialty farmer question, please. Given your comp for Q1 is not too dissimilar from Q4, I mean, is this kind of organic growth that you printed this quarter the sort of exit rate that we should be thinking about for the rest of the year? Or is it, as you said, this was a trial sales campaign and it's more under discussion whether you'll be something like this again. Thank you.

So the growth in specialty pharma, we've seen a good performance for specialty pharma throughout the entire 2024. I think as Patrick said on the national sales campaign, that's something that we hope to replicate going forward, but it was a little bit of a special element now for Q4. So the organic growth in specialty pharma was maybe a bit stronger than what you would say is the exit rate for the business, but we've seen a good performance for specialty pharma throughout the year, and we continue to have a positive outlook for specialty pharma also for 2025, especially as we are very pleased with the initiative on cross-selling that We have been driving through 2024 where we see a lot of additional runway in that initiative that accounted for roughly a third of the organic growth that we saw in specialty pharma for 2024.

Thank you very much.

The next question comes from Arvid Nikander from Carnegie. Please go ahead.

Good morning, and thanks for taking my questions. So now that we're a bit into 2025, could you provide some insights on next price increases? Have you faced significantly more resistance compared to last year, coming off a period of high inflation? And can you give us a feeling for the magnitude in Specforma and Medtech specifically? I guess last year, some of your Specforma competitors were mentioning I think the digital increases, including some fairly established franchises in the DERMA and allergy segment. Is the industry now reverting to something closer to the 3 to 5% we've seen historically? And what are your expectations for next June and move over in 2025? Thank you.

Yes, good morning, Arvid. Back on what you alluded to, pricing through this last year was driven by high inflation, a little bit higher than what we expected for this year. We're expecting, from an overall group perspective, price increases of low to mid single digit across the group. Of course, there's some variation looking at different segments and different geographies. If we take U.S. MedTech specifically, We will pursue a more cautious approach on price increases near term. As we've discussed, I think, at length, that the U.S. surgery market continues to be a little bit softer. And as a consequence, we'll pursue a more cautious approach on price increases for U.S. medtech this year.

Okay, great. Thank you.

The next question comes from Adrian Elmlund from Nordia. Please go ahead.

Hi, guys. Good morning. Just a short question for me here. How do you view the margins of EM3 going ahead? Is it possible to get the margins to reach, like, the segment medtech margins or group margins stand alone, or do you sort of have to make – both on acquisitions or roll-ups, if you will, to reach more group-level margins.

So, as we've said, IEM3, they have a different margin profile than the rest of the MedTech business and to our center as the Medinian business, why there's a negative mix effect in consolidating IEM3 into our numbers. We will continuously improve the margins within IM3 as we continue to drive strong organic growth, as we continue to drive a different mix from a sales perspective where, as we've discussed, we're moving more to consumables and we see scale in that business going forward. So margins will, on a life-for-life basis, continue to improve for IM3. Having that said, and to your question, sort of where do we think margins will end up, we're confident that IM3, they can achieve margins that are, you say, on VMI and fleet average. And then, of course, it depends on the type of acquisitions that we can find in the dental space, but potentially with different type of acquisitions, we can see a different mix within MedTech dental as well from a margin perspective and hopefully on the positive side.

Okay, thanks. And a follow-up to that maybe. When we look at the M&A pipeline ahead, is the sole focus only to acquire sort of bolt-on acquisitions to IOM3, or would you also be interested in maybe pivoting into a new platform as well?

Yeah, we have expressed an interest to do both on acquisitions into IM3 and strengthen the dental presence that we have. We are continuing to cultivate our pipeline and add to our pipeline for both specialty pharma and medtech in general in our veterinary services business. And what we're really looking for there is companies that have complementary products and companies that can help us strengthen our geographic footprint or geographic density in markets that we're interested to enter. So the pipeline is very focused to execute on our strategy for value creation, but we look at specialty pharma, medtech, and veterinary services.

Okay, thank you. That was all for me.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Kavya Deshpande from UBS. Please go ahead.

Sorry, I just wanted to squeeze in with one more question, if possible, please. Just on your outlook for the animal health market growth for this year, is it fair to assume that that's sort of remaining within 5% to 7% and so specifically for companion animal health market? Thank you.

Yeah, that's a great question. It's a question we sometimes ask other people too. We continue to believe that the market is very healthy and it's very strong. Whether it's going to end up in exactly that range or not, we don't know, but we don't have a better number than that. So I think that that's a fair assumption and a fair assessment today. If you think about our business, we have an express strategy to be in niches in this business, and we target niches that have a higher growth rate than the average market. So our business, biased portfolio should grow faster than the market. And then through the initiatives that we run, like cross-selling for specialty pharma and white space capture through education and medtech, et cetera, we will gain additional growth and come up to the double-digit growth that we're targeting every year.

Got it. Thank you. And just if I could just follow up on the white space initiatives in medtech. I noticed this quarter there seemed to be more of an emphasis on virtual trainings. in MedTech, is this sort of likely to be the case going forward? And in the past, what have you seen in terms of the customer retention rates from doing virtual trainings and getting them on your products versus in-person training? Thank you.

Yeah, so, you know, first of all, you know, in MedTech, what you really get trained on is surgical procedures. So, you know, a lot of the trainings that are in person would have, you know, components of placing implants into either models or cadaver or things like that to really get comfortable and skilled in the procedure as such. So you will never see like a 100% virtual. I'd be a little bit afraid of that because I would like the surgeons to be hands-on experienced and be really good at it. So those trainings will continue. Having said that, though, the way you can prepare for surgeries like that, there are some theoretical components that are conducive to deliver on a virtual environment. And that's also to meet our customers who would like more flexibility. And that allows you to focus, when you get together, on the hands-on aspect. And you can cover some of the theoretical things prior to showing up. And I think it's a way to enhance the overall quality and the delivery of it. And also adjust to our customers' needs for a little bit more flexibility on when and how they get training.

And these customers pay for these trainings, right? Or are they given free?

Yes, you pay for all of them. Absolutely. If you find a free training, you should take it. In our experience, you know, these are highly value-added trainings. They'll provide you – the teachers that we engage in this are some of the best surgeons in the world. And you equip someone with the skills to start an entirely new revenue stream in the practice. There's an enormous amount of value in the actual training series, and we do charge for all of them. We're not trying to make a profit out of them. It's not a profit center for us, but we also don't want to lose money on it.

Thank you. The next question comes from Adela Dashian from Jefferies. Please go ahead.

Just one final one from me as well. I guess following up on the M&A discussions previously, I mean, one of your peers stated this morning that they are seeing a more favorable outlook for the M&A market just in general. And I want to be, I guess, mindful of your current leverage ratio, but... Are you also seeing the potential for deals to materialize being more robust in 2025? Or is that a trend that really hasn't impacted you in 2024? Is your pipeline essentially more firm this year than what it was at this point last year is what I'm asking.

Yeah, our pipeline is growing, and there are a number of very interesting acquisition candidates in that pipeline. And as you would expect from someone that has made as many acquisitions as we have, we always have ongoing dialogues and discussions and calculations with a target that fits in our strategy and that have attractive valuation principles associated with them.

Great. Thank you.

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

Well, thank you so much for your attention and your questions today. We concluded the year with a strong finish, and we looked at – with excitement to 2025. We think we're very well positioned to continue to drive strong, profitable growth in 2025 and beyond. And we thank you for your attention today and look forward to seeing you soon again. Have a wonderful day. Take care.