Vitrolife AB (publ)

Hello and welcome to the Interim Report Quality Tree 2023. My name is Caroline and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call your lines will be on listen only mode. However, you will have an opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand over the call to your host, Mr. Patrick Toth, to begin today's conference. Thank you.

Thank you. Good morning, and welcome to the conference call for the interim report, third quarter 2023, for the Virtual Life Group. Today is the 27th of October, and the time is now 10 o'clock. My name is Patrick Toth, and I'm CFO for the Virtual Life Group, and I will now hand over the word to our CEO, Bronwyn Belfast.

Thank you, Patrick. Good morning, everyone. For those of you who haven't met me, my name is Bronwyn Brosey. I joined the Deep for Life group on the 1st of August, so just coming up on my first 90 days with the company. I'm a MedTech executive with 26 years experience working in the healthcare and life sciences industry. So I spent quite a bit of my career working at Johnson & Johnson, at Medtronic, and more recently at Thermo Fisher Scientific, where in fact I was based out of Uppsala, Sweden. I thought it might be useful just to start by sharing some of my perspectives and observations coming in to the industry and into the vitro life group. So I'll start maybe by sharing some of the perspectives on the market. We're clearly operating in terms of reproductive health in a market that is growing. primarily due to increases in maternal age, but access to care does remain limited, primarily due to affordability. We're seeing a lot of consolidations of clinics by the large chains, but I guess something that stood out to me as I traveled around the globe is that the procedures are still quite labor-intensive, making scalability a challenge. That in turn brings, I believe, an opportunity to bring a lot more automation and digitalization to the workflow to support our customers. What we currently see is a heavy reliance on the expertise of individuals working in the clinics. Something quite unusual then that I haven't seen in most of the areas where I have worked in healthcare, and that is we see that standards of care can differ by region. In the context of reproductive health, as an example, we see a lot of genetic testing in the US, so it does play quite a large role there. However, that's not the same in other areas of the globe. My conclusions on the Vitrolife Group, again, I'm only 90 days in, but I believe as a company, we're very well positioned within this growing market. So we're in a growing market, but we also have a lot of potential to develop that market. I believe our company provides best in plant service. Our products are synonymous with quality. And everywhere I go around the globe, people talk about in very positive terms, the support that we provide to our customers. I think our time-lapse platform, Embryoscope, is a core source of differentiation for the virtual life group, and this technology brings automation to the very core of the IVF clinic. And then I guess the other thing that stands out for me is the sheer breadth of our portfolio, end-to-end, from products to tests to services. which allows us to address those differing standards of care, which I have observed. So I will now move to page three of the presentation and start with some of the Q3 highlights. We experienced improvement in our growth margin to 55.7% during the quarter, and this is primarily driven by product and market mix. Very strong growth in EMEA of 14% in local currencies. We experienced this across the portfolio and across the region. So very nice to see this. And we had our GX Media EMDR approved. This very much strengthened our position as a global leader in media. And in fact, during the quarter, we had double digit growth in media again during this quarter. So very much a source of strength for the neutralized group. I will now move us to page four and take you through some of the numbers in more detail. I guess the key summary from this slide is that we did deliver profitable growth globally despite experiencing headwinds in the US. So sales for the quarter were 848 million SEC. That's an increase of 6% in SEC and an increase in organic growth of 3% during the quarter. I would like to point out that we do see quite a variation in regional performance with EMEA and APAC doing well, but we were challenged in the U.S. Coming on to margin, as I've already mentioned, we increased our margin to 55.7, and this is coming from, as I just mentioned, product and market mix. On EBITDA, EBITDA margin of 33.9%. The EBITDA margin is even stronger given non-recurring SEC of 24 million for the same quarter last year. So I would say good performance also on the EBITDA margin. And then just looking at the first nine months of the year, EBITDA margin and cash flow both performing well. If we look at our total sales of 2.6, that's 10% increase in SEC and 5% in local currency. And if I could now ask you to move to page five of the presentation, we will discuss the sales and growth down at the regional detail. Okay, so here you can see the variation in regional performance that I have just discussed. So in America, we had an organic growth of minus 8%, in the Maya, 14%, so very strong performance there, and in APAC, 5%. The decline in the US, I would like to address that first, The decline here is related to a fall in sales of our Aira test, combined with a loss of PGTA sales due to enforcing of testing by a large customer, which we mentioned in the previous quarter. So very much Aira and the enforcing of that particularly large chain impacting heavily on the American results. If I come to EMEA, we had a very strong performance in EMEA with all business areas performing well. In fact, we delivered 44% growth in technologies with strong demand across the region for embryoscopes. APAC performance was 5%. In APAC, we had both our consumables and our genetic services performing well. In China, in fact, we delivered double-digit growth, so very strong performance yet again in China. Our challenge in APAC was on the technology side, and essentially we had a very strong Q3 last year with multiple time-lapse installations, most notably in Japan, and this made the comparables on the technology side challenging. However, I would say that on the genetic services and consumables portfolio, just to reiterate that, we did perform well. In terms of the regional contribution, again, this is something that has jumped out at me as an incoming CEO, and that's the share of the total sales. So we do see a very healthy spread in terms of regional contribution, with 33% coming from Americas, 37% from EMEA, and 30% from APRAC. I will now move to slide six and take you through more details on our consumables business area. In consumables, I think we saw steady, I believe we saw steady and consistent growth across all regions. We delivered an organic growth in local currencies of 8%. 7% in America, as you can see, 7% in EMEA, and 9% in APAC. We are taking share in media. I just want to point out that we are doing very well on the media side. We continue to take share And we have invested in more automation in our media production in order to be able to meet demand because we do forecast continuing strong demand on the media side. I would like to call out quarter two of this year, which was particularly strong. And there may be questions in terms of our ability to maintain that momentum. Q2 was particularly strong because we saw a lot of pent-up demand, most notably in the APAC region and particularly in China, which led to a very strong quarter in Q2. We now see the growth normalizing, returning to more normalized levels. But at the same time, we do still see growth above market in Q2. the APAC region. So in summary, a steady and consistent performance across our consumables business area. I would now like to move you to slide seven of the presentation, where we will discuss the technologies business area. Good to see on the technology side that we are back in double-digit growth. So we saw organic growth here in local currencies of 14%, America's performance was 5%, EMEA 44%, and APAC minus 8%. Time-lapse brings a lot of automation to the core of the lab, and it is a key differentiator for the VITR life group. So it is important that we continue to grow double digits in technology. We want to continue to do that and, in fact, accelerate that trend. We see EMEA doing really well with new customer installations across multiple countries. And if I come to APAC, we were challenged, as I mentioned, by the strong comparables in Q3 of last year. However, our pipeline for time lapse and embryoscopes in Q4 in APAC is very strong. China, as I mentioned, is doing very well with time lapse, and we won a number of new tenders during the quarter. So again, time lapse back in double-digit growth, we're seeing strong revenue on the capital sales, but also our consumable service pull-through is performing very nicely. If I can now ask you to turn to page eight of the deck, where we will discuss the genetic services business area. So in genetic services, we had an organic growth in local currencies of minus 5%. EMEA and APAC both performing well with 9% growth in both EMEA and also, in fact, in APAC. but we experienced a decline in the Americas region of minus 15%. The US performance was impacted by the declining ERA, and we were also impacted, as I previously mentioned, by the insourcing of PGTA. ERA, just to put into context, is approximately one-fifth of the sales of genetic services And I would like to address the actions that we are taking to remediate the decline that we are experiencing on Aira. So we are generating additional clinical evidence with the non-selection trial. We are also working on in-market use protocols with our customers and also improving on education for our users. And then finally, and very importantly, we are reinforcing the intended use of the ERA test, which is in risk patients, repeated implantation failure patients. With these actions, it is our goal and our aim to mitigate against the decline that we are experiencing in ERA, both in the U.S., but we are also experiencing ERA decline in EMEA. EMEA and APAC then performing well despite the decline in era. And in fact, we saw double-digit growth for PGTA in both EMEA and APAC. And what we are seeing across the genetic services portfolio is a steady increase in growth across the newer tests that we are bringing to market. We did announce at ESHRA that we've launched eight new products. Some of these products are tests coming down the genetic services side of the portfolio. And I think our teams, our commercial teams across the globe are doing a very nice job at accelerating the growth of these tests and reducing our reliance on Airob, but also bringing more innovation, very importantly, to our customers. And with that, I would like to hand over to Patrick, who will take us through our geographical segment.