Vitrolife AB (publ)

Hello and welcome to the fourth quarter and full year report 2023. My name is Caroline and I'll 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'll 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'll be connected to an operator. I will now hand over the call to your host, Mr. Patrick Tolf, to begin today's conference. Thank you.

Thank you. Good morning and welcome to the earnings call for the fourth quarter and full year 2023. Time is now 10 o'clock and the date is the 2nd of February 2024. My name is Patrick Tolf and I am the CFO for the Virtual Life Group. And I will now hand over the call to our CEO, Bronwyn Brophy.

Thank you, Patrick. Good morning, everyone, and thank you for joining. If I can now move you to the second page of the deck, we will start with the highlights for quarter four. So, as you can see, we have delivered improved margins, both gross and EBITDA, with gross margin increasing 2.7 percentage points versus the same quarter last year, and EBITDA margins of 32.5%. This, in the case of the EBITDA margins, is mainly attributable to product and market mix. We had a fantastic quarter in our technologies business. In fact, it was the highest quarter ever with double-digit growth across the regions and very robust growth in two of our key strategic markets, namely the US and China. And then, as most of you will be aware, we launched our new corporate strategy at our Capital Markets Day that we hosted in Stockholm in December, where we set out our new corporate strategy, the five key strategic pillars that we believe will help us to drive long-term, sustainable, profitable growth for our company. And we also updated our long-term financial objectives. So I will now move you to the next slide, please, where we will look at the key metrics and also take a look at the performance in the full year. So sales for the quarter of 904 million SEC, that's an increase in SEC of 6%, but in organic growth in local currencies, that is a growth of 5%. I've already spoken about margin and EBITDA. You will also see that our operating cash flow increased to 171 million SEC for the quarter. If we look then at the full year, we see sales of 3.512 million SEC, that is a 10% increase in SEC versus the previous year, and 5% organic growth in local currencies. Our EBITDA performance, similar in terms of percentage versus 2022, so 1.136 million on EBITDA, delivering the margin of 32.3. And our operating cash flow for the year went up from 6.36 to 7.57, earnings per share also increasing. Just to give you then the full year performance in local currencies in terms of our three business areas, consumable performance for the year in local currencies was 9%, technologies 11%, and genetic services excluding discounted business minus 1%. So that is the performance by business area for the full year. I will now move you to the next slide and we will look at sales and growth per geographical segment in local currencies. So let's start with the Americas and it's important to bear in mind here that Americas includes both North and South America. Organic growth in the Americas was minus 5% in the quarter. We had a very strong performance in technologies, but the overall growth of the region was impacted by a decline in genetic services, most notably in the ERA test. I would like to highlight that the performance of ERA in North America does appear to be stabilizing, but versus the previous quarter last year, of course, it did have an impact. EMEA performance for the quarter, plus 6%. We had double-digit growth in technologies, despite the fact that Europe does have higher penetration rates for our time-lapse embryoscope. ERA was also impacted in the EMEA region, but the volume of ERA testing and the revenue contribution is less material, and we also moved more rapidly here with our remediation plan. I think as well across the genetic services, we do see nice growth in some of our other tests, and we saw solid growth across the consumables portfolio in the EMEA region. APAC's 16% growth, a fantastic performance across the portfolio, especially in China, which is a key market for us. China delivered triple-digit growth off an increasingly large base in technology. So really, really nice to see this. But it's not just a story about China. India and other key large markets in the region are also doing very, very well. So very strong performance in APAC. And then if we look at the contribution by region, we do see a healthy split with, of course, 32% of the share of total sales coming from Americas, 38% from EMEA, and 30% from APAC. And I think with that substantial growth and sustainable and consistent growth that we're seeing in APAC, we would expect that contribution to increase going forward. I'll then move you to the next slide and we will move into looking at our sales by business area. So our core consumables business performed well with media doing particularly well, double digit growth in APAC. and above market growth in most of our key markets. Media business is of course very central to the success of Utilize Group and we have increasing market shares in most of our main markets. However, our genomics kitted business was impacted by substantial stocking up in the first half of the year while customers transitioned to our new embryo map technology and probably Really, the best way to explain this phenomenon is actually to look at the bar charts. You'll see that in the first quarter and in the second quarter of 2023, they were particularly strong in consumables. It was strong across the board, media, and disposable devices, but the performance of our kitted business was standout, and we do see the impact of that stocking prior to customers transitioning. Just to give you some figures, genomics increased, genomics kitted, business increased 21% in quarter two and 15% in quarter one. What I would say is that in the final month of the year in December, we did start to see customers ordering. So it appears that transition and phasing should be leveling out. North America was the region that suffered most from this kitted impact. But aside from that, good performance, as I said, across core consumables and most notably in media. I will now move you to the next slide where we will cover genetic services business area. So, total growth for the quarter in local currencies was minus 2%. America's, again, north and south declined due to the ERA impact. So, ERA declined 20%. in the quarter versus the same quarter last year. And that PGTA sourcing that we mentioned in the first and second quarters of 2023, still going through our numbers. So it will be the end of quarter one, beginning of quarter two, before we get a clean base and comparison there. Aside from that, we did see growth across the rest of the portfolio in genetic services. So it's good to see the diversification of the revenue into some of our non-invasive and newly launched tests. EMEA, interestingly, 6% growth in EMEA. EMEA was also impacted by Aira, as I previously mentioned, but it is a less material proportion. We have executed on our mediation plans and we did see good growth in some of the other tests in the genetic services portfolio in EMEA. And then APAC, 16% growth for the quarter. Very strong growth in some of the key markets. I'd like to call out India, which is doing very, very well, and the base there is becoming material. So good performance in APAC, I would say robust performance in AMEA. Americas, we are addressing, of course, the decline in error, but we do see that leveling out month on month. And then finally, if I can move you to the technologies business area. Look, this was a fantastic quarter. It was our largest revenue ever. You can see there 206 double growth in all regions. So 31% growth in local currencies, 13% in EMEA. This is a great performance in a market that's more penetrated for time lapse, especially Western Europe. APAC growth of 37%. China is doing great. very, very well. Triple digit growth in two of our key markets, so US and China, as I said. And I think what's also a very healthy sign in this business is we're seeing some nice traction in terms of the consumable revenue and technologies and also the service revenue. America's great to see traction on time lapse in the US. I think our customers there are really starting to see the benefits of the workflow efficiency that Embryo brings Embryoscope brings to the very heart of the clinic. So it is off a lower base, but nonetheless, it's good to see us getting traction in North America. So I think the other point I'd like to highlight before handing over to Patrick is we did set out on our Capital Markets Day the importance of these two markets to us. And of course, time lapse and technologies is a key cornerstone in terms of the owning the platform strategic pillars. So good to see that we are starting to get some nice traction in those two critical markets. So with that, I will hand over to Patrick.