Vitrolife AB (publ)

Good day and welcome to today's Vitrolife interim report, first quarter 2024 conference call. Throughout today's recorded presentation, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. You may press star 1 at any time to register for questions. At this time, I'd like to hand the call over to Mr. Patrick Tolf, Chief Financial Officer. Please go ahead, sir.

Thank you. Good morning to you all and welcome to the earnings call for the first quarter 2024. Time is now 10 o'clock and it's the 18th of April 2024. My name is Patrick Solve and I am CFO then for the Vitrolife Group. You will find the presentation that we will present on our website, vitrolifegroup.com. And I will now hand over the word to our CEO, Bronwyn Brophy.

Thank you very much, Patrick, and good morning, everyone. I will now move you to page two of the deck, which is our Q1 highlights, and just to get started there. So three key points to highlight on this page. Margins, very stable, both on gross margin and on EBITDA, gross coming in at 57.1 and EBITDA at 32.4. We again had a very strong quarter in our APAC region and I'll talk about that in quite a bit of detail in the coming slides. 19% China still continuing to drive significant growth. And then in our genetics business area we have now moved our product area known as genomics into our genetics business area and I'm going to explain that in a couple of moments. Maybe just one other point to highlight which isn't called out on this particular page and that is we also increased our net income to 115 million SEK. So the rationale for moving our genomic kits into what was formerly known as genetic services business area is so that we can better segment and target the market based on whether clinics are insourcing or outsourcing their genetic testing. As most of you are aware, the vitro life can provide a solution for both customer segments, and by making this move, we will be able to do this in a more coordinated way. I'll now move you to the next slide, please, where we'll take you through the key financials. So sales for the quarter of 840 million SEC, that's a decline in SEC of 2%, and it's flat in local currencies. Our growth margin improved slightly to 57.1. This is mainly attributable to product and market mix. On EBITDA, we delivered 272 million SEC, as I mentioned, a margin of 32.4, and we increased our operating cash flow from 160 million SEC to 198 million SEC. Earnings per share also increasing from 0.74 SEC to 0.85 SEC. So maybe just to explain prior to me going down into the regional breakdown, what are the primary reasons for the flat growth in local currencies? So despite the fact that both our consumables and technologies business performed very strongly across all regions, there were three key factors impacting our ability to drive growth in the quarter. Factor number one, quarter one, 2023 was a record sales quarter for genetic services. And we had not yet been impacted by the enforcing of one of our largest customers in the US. Second factor, era sales in the US were declining in quarter one, 2023. However, that decline accelerated in Q2, making the comparables on era also challenging. And thirdly, in our genomic kitted business, customers stopped up on VeriSeq in both quarter one and quarter two of 2023 due to its impending discontinuation and prior to transitioning to our embryo map technology. So we will see this impact across all of our regions. So if I can then move you to the next slide and we will look at the regional breakdown. So starting with the Americas, we had sales in the Americas of 248 million SEC. That is a decline of 14%. The Americas region was, in fact, the region that was most impacted by the three factors that I have just mentioned. However, despite this, in North America, we did deliver double-digit growth in both media and time-lapse. Over now to the EMEA region. In EMEA, we had sales of 310 million SEC. This is a decline in local currencies of 2%. We did deliver above-market growth across the entire consumables portfolio, not just on media but also in disposable devices, and genetic testing did perform well in this region. However, genomic kits were significantly down, thereby impacting the growth. The Middle East and Turkey continue to perform very well and be one of the growth drivers for the region. And we also continue to see strong growth in genetic services in India. So that's a trend that has continued from quarter four. APAC. In our APAC region, we delivered sales of 283 million SEC, a growth of 19%. Sales in the region continued to perform very strongly. It's not just in China, which is doing exceptionally well, but also in Southeast Asia. So these would be the two biggest markets in the region. Media and genetic testing grew in high double digits, and we had, it's very rare that I would get to say this, but we had triple digit growth on embryoscope in China and in Southeast Asia. I think another point worth noting is that APAC, with the growth rates that we have been delivering now quarter on quarter, is now our second biggest region, now the second biggest region for the Vitralife Group. Okay, I will now ask you to move on to the next slide and we will take a look at our consumable business area. So in our consumable business area, we delivered revenue of 329 million SEC and organic growth of 12% in local currencies. Media is definitely the star performer here, which is good, with growth rates well above the market, and we are clearly taking share in all regions. So you see 12% in terms of total consumable growth, 8% in EMEA, 22% in APAC, and 5% in Americas. Our disposable devices, on disposable devices, we do have an opportunity in America to improve our competitive position. It was a little bit soft in the quarter, so despite the fact that media did well, I think we'd like to see the disposable devices also accelerating in the U.S. We have increased our capacity here in order to be able to better supply our customers and have improved supply continuity, but overall, consumable business area, very, very strong, good share grains across all regions, and we expect this trend to continue. Okay, I will now move us on to our genetic business area. So, in this area, which I have now previously explained, it now comprises both genetic testing and genomic kits. we have a decline in revenue here of 12% in local currency. Okay, so minus 12% globally, minus 21% in the Americas, minus 3% in EMEA and minus 5% in APAC. Genetic testing actually grew in EMEA and it delivered double digit growth in APAC, but we experienced a sharp decline in our kitted business in all regions. attributable to the stocking factor, which I've previously explained. This happened in both quarter one and quarter two of 2023. This impacted our growth rates. And in North America, we had the additional negative impact of PGTA and ERA. Okay, moving on then to our technologies business area. So in our technologies business area, we had sales in the quarter of 166 million SEC. Just to maybe provide some context, I think the bar chart explains this pretty well. We had our largest quarter ever in Q4 2024. So we were very conscious of continuing this really strong momentum that we're seeing in technologies, both on the capital and on the consumable side, and ensuring that we maintained the focus coming into quarter one 2024. Sales of 166 million sec in quarter one is actually a record for quarter one. So clearly this is mainly a capital sales business. It can be lumpy. We did expect a drop because Q4 is always our strongest quarter, but 166 million sec is actually the strongest ever quarter one that we've delivered here. I think it could have been even stronger. We had a number of installations in the Americas, North and South, that spilled over into quarter two. So we've actually seen quite a strong start in April. And I think that would have helped drive higher growth in the Americas. But anyway, pipeline looks very good, very strong April. And I think overall, we're really pleased with the trends that we are seeing in technologies, not just on the capital side. But I think what's particularly pleasing to see is that we are now increasing our consumables, and our service revenue per time-lapse unit installed. So I will now hand you over to Patrick, who will take you through the geographical segments.