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.

Thank you, Bronwyn. And now we are on page number eight. So this means that we then look into our geographical segments and go down to market contribution. And as you know also then that the market contribution is also depending on the product mix. in the various regions. And if we start then with Americas, as Bronwyn just went through here, we have seen consumable growth. We have been flat for technologies and declined then for genetics. All in all, with the product mix, that brings us to a market contribution of 33.4% for the quarter, which is actually a bit stronger than compared to the same period last year. Moving on to EMEA, where we had growth then in consumables with 8%, a decline in technologies, and a slight decline in genetics. There you see that the market contribution went a bit lower compared to last year, to 32.4%. Moving on then to APAC, where we had a strong growth in consumables with 22%, technologies grew 37%. and the decline then for genetics with 5%. All in all, this brings us down to a market contribution up to 45.2%, which is then an increase compared to the same quarter last year. All in all, this is why you also then see the gross income and how that is distributed amongst the regions and also our selling expenses and how that is distributed among the regions and the total market contribution of 37% for the quarter. So moving on to the next slide, slide number nine, where we will then look again on the financial highlights for the quarter. Starting then, of course, then with the net sales, 841 for the quarter compared to 854 last year, which means that we go down 2% in SEIC. But the most important thing is the organic growth in local currencies. And there we were flat compared to the last year. So that means, all in all, that the currency impact for the quarter was negative for 13 million. Going down in the income statement, we have a slight increase then in the gross margin to 57.1%. Again, as we have talked about, it was a positive product mix, but also then the market mix, as I explained on the previous slide, also had an impact on the gross margin. All in all, this brings us down then to an EBITDA of 272 million SEK compared to 262 last year, which gives us an EBITDA margin of 32.4. So moving on then to the next slide to look into the operating expenses, where you can see are on a similar level as they were a year ago. And as we have talked about previously also, that is that we are continuing then to increase our investment in innovation. You see that the R&D expenses are, well, actually slightly lower, but we have started to capitalize a bit more on R&D compared to what we've done before. It's not material, but it goes in that direction. And if it becomes material, then we will be a bit more explicit on the magnitude for it. But what that says is that we have projects that we are working on that are in such a stage and phase that we can decide to do capitalization on them. All in all, it was a bit minor negative currency effect, specifically on the OPEX. You see that the selling expenses are approximately on the same level, same as admin expenses for the quarter. So all in all, we had a slight negative currency impact impacting this quarter. Moving on to the next slide, where I would summarize the key financials. Again, sales, 841 million. We have gross margin of 57.1. Going down then to EBITDA, 272. Margin, 32.4%. Net income improvement, then 215 million SEK. Again, we have slightly improved our financial net. Taxes are slightly lower for the quarter. and also the cash flow that we are generating for the quarter continues to be positive. So we are just south of 200 million for the quarter compared to 160 the same period last year, which again strengthens our financial position where we continue then to go down in the ratio of net debt to EBITDA, which is on the rolling 12 months. So there we are now at 0.9 compared to 1.3 Q1 last year and one times in the full year of 2023. So with those words, I will give it back to you, Bronwyn.

Thank you, Patrick. So I'm sure most of you are starting to get used to seeing this slide, but it's a very important one. So the corporate strategy of the Vitrolife Group, this is essentially our blueprint to return the company to double-digit growth in the long term. And we are very much executing on each of the key priorities here, and I'll touch on that in the coming slides. Maybe just to pull out one point on the sustainability, which is very, very important to us. And I think our commitment to sustainability has been recognized, which we are very grateful and appreciate. We are now part of the OMX Sweden small cap 30 ESG responsible index. That's quite a mouthful, but that was a great honor. And as I said, we are very grateful. So very much sticking to the blueprint. And I will now bring you on to the final slide in our deck, which is the focus for the rest of the year. Okay. So, priorities, focus and priorities, very, very important to the VitraLife group. So, these aren't fourth ranked, but priority, first priority is to increase our share and penetration in the US and China. How are we progressing on that particular metric? Clearly, we have dashboards where we're tracking, but just to give you some sense of the changes that we're making, we appointed a senior vice president for North America on the 1st of April. reporting directly to me and sitting on the executive management team of the company. So we now have an American at the top table, which I think is great. We've also increased our direct commercial headcount in China. We're reaping the benefits of this across the board, media, time lapse, and we are continuing our strong momentum there. We are increasing our market share in consumables. I think we have opportunities to take even more share. Media we're doing particularly well on. I think we have opportunities in disposable devices. There are challenges for other competitors out there, so we have been scaling up our manufacturing capabilities in order to be able to meet the increased demand. Time lapse, very unique to the Vitrolife Group. We need to continue to increase our penetration and utilization there. I think we've been doing a very nice job. What we're really starting to gain, where we're really starting to gain good momentum is on the workflow and automation benefits. As we know, labor constraints globally, and I think customers are really starting to see, appreciate the workflow and automation benefits that they get by bringing the embryoscope to the very core of the clinic. So good momentum there, and we want to keep that going. We need to accelerate the growth across the broader genetics portfolio. We have a lot of reliance on PGTA and Aira, and we have some fantastic tests like carrier screening and non-invasive. Revenue is starting to tick up nicely, but we need to accelerate on that. By bringing our genomic kits into our genetic services business area, I think we clearly have an opportunity to better segment and target those customers that are insourcing versus outsourcing. So I think there's an opportunity there to optimize that segmentation. It doesn't have a tick mark. It's not complete, but it is in motion. And then I do think driving increased adoption of genetic services outside of the U.S. is something that we need to continue to do. As I mentioned earlier in the deck, we are seeing genetic testing growing double digit in APAC. It's also growing nicely in EMEA. But we would expect that trend to continue. So some headwinds in the U.S., but clearly opportunities outside of the U.S. And then driving our operational excellence program, very important that we continue to do this. We have appointed a dedicated program leader working across all of our business areas and functions. So looking forward then by executing and staying focused, very important that we stay focused on these priorities. We expect to continue our strong momentum in consumables and technologies In our genetics business area, we need to better leverage the entire portfolio across all of the tests. We need to better segment and target, as I mentioned, on the insource-outsource. And I think we have opportunities outside of the U.S., thereby enabling our genetics business area to become a growth contributor in the latter half of the year. So, thank you very much for listening, and I will now hand back to the moderator for the Q&A session.

Thank you, ma'am. Ladies and gentlemen, as a reminder to ask a question, please signal by pressing star 1 on your telephone keypad. If you find that your question has already been answered, you may remove yourself from the queue by pressing star 2. Again, please press star 1 to ask a question. Now, our first question comes from Ricard Anderkrans from Handelsbanken, please go ahead.

Right, good morning and thank you for taking my question. So first one, could you please quantify the organic growth contribution from genomics and genetics services in the quarter respectively just to get a sense of the magnitude of the declines and could you also talk about the visibility you have on returning to what I presume is sort of mid single-digit growth profile for the genetics

business in second half so that's the first one thank you let me take the first part of that one we do not really specifically quantify that one you obviously can do your own math since we have done the comps compared to 2023 and so forth but what you will then discover is that the the The genomics business compared to 2023 has got a quite significant decline in revenues over the quarter. Due to that, we again, as Bronwyn said, we had a relatively strong content in the first quarter 2024. So I think you can look into the numbers and get to that magnitude.

Yeah, maybe the only thing I would add, without giving too many details, because we have a direct and strong competitor in this area. So just in terms of materiality of genomic kits as a part of the now newly formed genetics business area, it's not very material, but I think the percentage decline in the quarter is what's having the most impact. So in terms of materiality, I wouldn't say it's very sizable, but I think the magnitude of the decline versus the significant stocking up on Verisique in quarter one and quarter two, it has to be said last year, that's where the challenge is coming from. So I hope, Ricard, we've managed to answer your question without divulging too much in terms of revenue coming from each of the particular areas.

All right, fair enough. But on the visibility on returning to sort of, I guess, mid single-digit growth profile or something else for the genetics business in the second half, maybe you could add some of the building blocks you expect to fall in place there.

Yeah. Definitely the comps are more challenging in quarter one and quarter two because of PGTA era and the kitted. So we would expect things to improve in the second half of the year, quarter three and quarter four. There are definitely green shoots in genetic testing outside of the U.S., I also think just on the Aira piece as well, which we've suffered quite a bit from in the last few quarters, that decline has slowed in the US. I never want to say it has bottomed out because we've talked about it on a couple of occasions, but the bleeding has significantly slowed. On the kitted piece as well, most of the stocking happened in the first half of the year. But customers have been slower transitioning to embryo map from VeriSeq than we would like. So we've been putting a lot of commercial focus on accelerating the return to growth on the genomics kitted piece. Patrick, I don't know if there's anything else you would add there.

All right, clear. And final one from my end. Is it possible to quantify or elaborate on the magnitude of the tailwind or benefit in terms of share gains you're seeing in media right now relating to quality issues? One of your competitors, both perhaps, you know, how much was it in Q1 and how should we think about it going forward? That would be helpful. Thank you.

Yeah, sure. Great question. So. We don't have publicly available share data, which is a little bit unfortunate. But we do know cycle growth is approximately 5%. And I can tell you in all regions on media, we are growing significantly above that. And we're talking to 3x multiples. So we are definitely taking share. It does take time for customers to switch media because, of course, it has to be validated as part of the clinic workflow. But we are definitely seeing significant share gains in the US. We're seeing share gains in North America. South America, I'm just looking at the stats here. Share gains in Europe, pretty much across the board. And in APAC, share gains everywhere, significant share gains everywhere. So some very nice tailwinds on media, which of course is also positive in terms of the margin story too. So yeah, really nice momentum on the media side. And as I said, we've increased our capacity there. while, very importantly, maintaining our very strict quality parameters. So we have, one could argue, the strictest quality regime of media in the business. So scaling up while maintaining quality can be a challenge, but we are managing to do that, and that's enabling us to take the share. Yeah. Thank you for the question.

Thank you for taking my questions.

Yeah.

Thank you. Our next question comes from Jacob Lemke from SEB. Please go ahead.

Hi, and good morning. I have a few questions, and I'll take them one by one. So, firstly, on the genomic kits, is it possible to comment on the sales development compared to Q4, as well when you anticipate to get back to the sort of levels you had before changing the product?

We can both take that one. Will I go first? Okay, and then you can. Good morning, Jacob. Thank you for the question. So in relation to Q4, the trend is slightly better, but not materially different from the Q4. So, you know, maybe just to sort of take us back to 2023, because I think we really need to understand the 2023 dynamics to be able to explain the 2024. So we had significant stocking in Q1 on VeriSeq, even bigger stocking in Q2 on VeriSeq, a slow quarter three and a slow quarter four. And of course, customers have to transition. There was no choice. VeriSeq was being discontinued. So customers have to transition. In Q4, we started to see some of the customers returning. We're still seeing that in Q1, but it is definitely slower than we would like. Best predictions given the funnel that we have, and of course, we're looking at all of this data on a SKU and customer by customer basis, but I really think it's going to be the second half of the year before we start to see recovery on the kitted business, Jacob. Patrick, is that... I don't know if that's the best way to explain. Yeah.

Okay. My next question is on genetic services. And I'm just wondering, in general, if there's been any sort of new insourcing activity here in the quarter or recently?

I'll take that one, Patrick. Thanks again, Jacob. Maybe let's start OUS first. OUS, no insourcing, but we wouldn't have expected that. Double-digit growth in APAC and good growth in EMEA. In the US, no, we haven't seen additional large-scale insourcing. We haven't seen additional insourcing in general. But what's really kind of hurt us on Q1 in North America is it was the end of quarter one, beginning of quarter two, when we lost essentially our largest customer for PGTA to insourcing. So Q1 2023, we had the full benefit of that customer. So that very much impacted the PGTA comparable for Q1 2023 and Q1 2024. But we haven't been impacted by any additional PGTA in sourcing aside from that.

Maybe just to add to a bit more context, I mean, Bronwyn mentioned that one in the report previously as well, but I mean, we are growing quite nicely with the testing portfolio outside of US with both in EMEA, both in APAC, not just on the PDTA, but also in the underproduct lines, except ERA, which overall is a bit of a decline in the quarter as well. But the underproduct lines also continue to grow. Some of it from a bit lower base, but the momentum looks pretty good in some of those areas as well.

Okay, and just to follow on, I mean, I know you didn't answer to Rikard's question really, but Based on what you're seeing now in genetic services, do you see that you can get back to growth in that business in Q2 or Q3 perhaps?

The challenge is the comparables for the kitted business here, as Bronwyn explained previously. That was a strong quarter one, but an even stronger quarter two. So from that perspective, the comps is a bit more challenging. And then obviously we have had the impact here of the other insourcing and also on the ERA. But so all in all, I mean, just to reiterate again that you have to look into the second half of the year to look into growth for the genetics business.

Yeah, I would say that, Jacob. It's really going to be the second half of the year as the quarters go on that we will see the improvements. Maybe just one other point that we haven't mentioned. US cycle growth in general was pretty slow in January. So just across the board, even in areas where we performed strongly, you know, like media, we did, it was kind of more middle of January before the US started to trend upwards just from a market perspective. So I think that also kind of impacted US numbers overall across the board. Yeah, so just kind of maybe a little bit of additional market context for you. But based on all of our leading indicators and all of the metrics that we're tracking, it's really going to be the second half of the year before we see an improvement in genetics. So, again, the two combined businesses in the genetics business area.

Okay, and then... Just finally on APAC and how we should think about seasonality. I mean, it seems like you had an exceptionally strong Q2 last year. How should we view that going into Q2 now?

Yeah, that's a fantastic question. We did have an exceptionally strong quarter last year. Another one of our competitors was exiting the market. So, I mean, the growth rate at the moment in APAC is fantastic, as you can see, particularly in China and Southeast Asia. To maintain the growth numbers that I'm looking at in front of me is going to be challenging because they are very, very high. But that said, we have fantastic momentum across the board. So we do expect, you know... double-digit, you know, strong double-digit growth to continue. If it can be of the magnitude that we're currently seeing, I think that would be challenging. But just, again, purely based on exactly what you're pointing out, it's a very strong quarter too. But, again, you know, across the entire portfolio, strong share gains, great momentum in technologies, which is really, really good to see because we've been focusing on that. So I think another strong quarter expected for APAC of the magnitude that we're currently seeing, I think it would definitely be challenging for China and Southeast Asia to maintain these types of growth figures. Is that fair to say, Patrick? I don't know if there's something else you would add there.

Absolutely. No, I think also, I mean, keep in mind, if you look a bit back to Q2 last year as well, I mean, that's really where it China particularly then opened up after COVID. So you had a strong rebound in China in the second half of last year. And then it was slightly slower in the rest of 2023, but now positive momentum as well. So, yeah.

Okay, that's very clear. And that's all from me. Thanks.

Thank you. As a reminder, to ask a question, please signal by pressing star 1 on your telephone keypad. And our next question comes from Ulrich Tratner from Carnegie. Please go ahead.

Great. Thank you very much. And I won't go into genetics anymore since you've already gotten a ton of questions there. So let's talk about consumables. And you mentioned China and Strong momentum in the quarter, tough comps for Q2. I've noted new reimbursement initiatives for China here in recent times. Any visible effects that you have seen in Q1, or is it too early to call out?

Yeah, it's a fantastic question. So, first of all, good morning, Ulrich. Thank you for the question, and it's a great question. We see slow and steady increments, I would say, when it comes to the opening up of reimbursement. It's not like China has kind of opened the floodgates providing nationwide coverage, but we do see on a province-by-province basis slow, steady improvements. And we can reasonably expect that to continue. given the birth rate challenges that we see all over China. We also see it in Japan. So I think we can reasonably expect that to continue slowly but steadily, Ulrich.

Great. And in the Q4 call, you were really optimistic about the prospects and the growth rate out of India. Could you provide us some granularity on the development in that region?

Yeah, so India is continuing to do well. Very high growth in genetic services, which is good to see. I think media is steady. Time lapse, slower quarter in population. in technologies in India. But again, I think across the portfolio, we're still seeing India performing strongly. And the growth in genetic services, particularly in India, is definitely one of the highlights and one of the standouts. So it is a lower-priced market. You need to bear that in mind. But in terms of cycle numbers, high cycle numbers, high potential, So, yeah, it continues to be both an opportunity and we can definitely see some tailwinds coming out of India for the company. Yeah.

Great. And for America, a bit of a mixed picture here, but we're seeing gross margin and market contribution jumping up quite significantly in the quarter compared to at least the second half of last year. Is this related to the product mix and weakness in genetic services or what is happening here?

Yes, you're spot on. It's related to the product mix. I mean, genetic services doesn't have the same margins as our consumables business. We're doing very well on consumables, particularly well on media, definitely taking share there. And also Kitted, right? Kitted is particularly impacted in North America, and the margins on the Kitted business are some of the lowest margins we have across the portfolio. So definitely the higher performance in consumables, comparatively higher performance in consumables, helps the margins across the board, actually, and that's exactly what's happening in North America. Yep, you're spot on there, Ulrich. Thank you.

Great, great. And if I can just continue, as you mentioned, the margin contribution from the different products. And is there any difference in terms of margins for the embryo map versus the Verisec now when you're seeing customers transitioning into the new kit?

There's not a significant – no, there's not a – There isn't margin improvement, let's put it that way. I think it pretty much stays the same, the VeriSeq versus EmbryoMap. So EmbryoMap does have additional features. It has improved workflow. It has higher throughput. I think we'd like it to be validated with even higher throughput. So maybe there are some opportunities to take price there, and we're definitely looking at that But in terms of margins, it's in and around the same.

Yeah. Okay, great. And if we were to stick on the U.S. market or bridge into technology, you had a very strong Q4. Q1 looks to be more flat-ish. What's the current business momentum for technology in the U.S.? And a follow-up question on technology. And you mentioned, and this is an interesting part, There's a more increasingly portion of service and consumables in the time-lapse offering. Can you help us provide us with some type of granularity in terms of what's the contribution from service and consumables of overall technology sales?

Okay, so I think the first part, you take the second part. Okay, so North America actually did particularly well on time lapse. They had double-digit growth. So the challenge that we had was South America. So America, of course, is the two regions. U.S. is 80 for technologies, give or take, without revealing too much, give or take. more than 75% of the revenue on technologies coming from North America, the challenge was actually South America. So there is very good momentum on time lapse in North America, but South America had a weaker quarter for technologies, and that actually pulled down the Americas region. Just to give you a sense of comfort, we did have a number of time lapse installations planned for Brazil, but we couldn't get them through in the quarter. The orders came in very, very late, and to have the orders shipped, installed, and the revenue recognized in Brazil was a challenge. But the good piece of news there, or the silver lining, is we did get those installations done the first week in April, which helped the start. So actually, TimeLapse is doing well in North America. It was South America that neutralized the growth there. Patrick, would you want to take the second half of the question?

If you go back on the second part of the question, again, as you say, I mean, the recurring part of the business of technologies continues to increase and is doing so and has done so over the last, and continue to do so as well. And that consists then of the service revenues. That is also then on the revenue when it comes to IDAS score and software. But it's also then the consumables part of it, right? Because there are dishes that is needed to run the embryoscope and that is also a part of the technologies business. On top of that one also for the clinics that are using Our consumables product, primarily then media, that goes also hand-in-hand. But it's also then called the recurring business and with the consumables primarily dishes that we mean when we say consumables for technologies.

Ballpark. I think based on our latest Salesforce data, approximately one-third of the revenue is now coming from consumables. on technology, and it's growing rapidly, which is great. That said, Ulrich, penetration of time lapse as a percentage of total incubators globally is still low. So time lapse has a lot of runway, but we don't just want to be selling capital. We want to obviously increase, as Patrick said, the dishes and the consumables revenue. But yeah, directionally, it's already over a third of the revenue. coming from consumables, which is great.

That's great. Just a quick follow-up on that one. How is, if one word sounds, well, healthy, can you just explain how such a contract is established? Is the majority of your customers entering into a service contract over X amount of years where you are the provider of these services, and that is renewed? post five years or whatever. How does it work?

Yeah, so basically two ways. When people purchase the embryoscope initially, they can purchase three or five years. So we have different packages, platinum, gold, silver, as most people segment and target capital with service and consumables. So a customer can purchase the time lapse with a specific period of service included in the package. And the time lapse, they're very reliable and they tend to run for a lot of years, maybe too many years. So what we typically find is then after that three or five year period, the customers just purchase the additional revenue. So I think at the moment we are benefiting from the bump of we're doing a lot of installations and thereby also benefiting from upfront service revenue. So it's a bit of a mix.

And just some clarification, have the IDA score changed the dynamic in any way?

Yeah, great question. It is, of course, it's changing the dynamic, definitely in the MEA. So I think that's the region where IDA score is doing best. We, you know, we do need to take IDA score through the FDA for regulatory approval in North America. So at the moment, you know, we've had fantastic traction on time lapse, but it's based primarily on improvements in workflow and automation. So I think there's opportunities once we clear the regulatory hurdles for IdaScore in North America. But yeah, absolutely. I mean, the customers that use IdaScore, they love it. Who's not going to love it? You know, it's definitely something that has been very well received and is very well received and appreciated by customers. And then I think we're seeing increasing interest for IDISCOR in APAC2.

Great. Thanks for taking my question and I'll get back into the chair. Thank you.

And our next question comes from Sven Gustafsson from ABG Sandal Collier. Please go ahead.

Good morning. Thank you for taking my questions. I'm not sure if this is a question or I just want to hear your thoughts on more than a question itself. Given what's happening or happened earlier in Alabama, the state of Alabama in the U.S., what your thoughts are on that and what you hear from your colleagues and customers and what the risk you see if there are any risks that this could spread potentially to other states as well. That would be great to hear your view on that topic.

Yes. So thank you, Sven. Great question. And certainly something that was of particular concern, of course, as events evolved in the U.S. I think what's interesting on this one is that customers, doctors, patients and industry and policymakers all came together in unison to sort of stand up and stand against the situation that was happening in Alabama. And clearly, well, certainly from what we found from that group that came together is that majority of people in the state clearly want to preserve fertility services but well as we know in the US the majority don't always get to have their say at least not not all of the time so definitely I think the risk has been averted there's always going to be an element of this type of risk I think in in the US in particular states and but there was support on both sides of the political spectrum, both Democrats and Republicans, for preserving fertility services. I think the other thing to bear in mind here is that the prevalence of infertility is so high. We're talking about one in six people, so everybody will know someone who is experiencing or has experienced infertility issues. hence why there tends to be a higher degree of sympathy and thereby a higher degree of support for fertility services than you would see versus other challenges that are happening in, let's call it, women's health in North America. So I would say broad-based support across the political spectrum, across industry, across payers, providers, doctors, clinics, and patients, and that essentially helped to avert. There was legislation also put through in the Alabama Senate to protect providers. That was the big concern for the vitro life group, that it wouldn't just protect clinics and doctors, but that it would also protect providers and manufacturers. And we did manage to achieve that. So we're not complacent about it. It's definitely something that we are staying very close to. Our legal team in the US are monitoring it particularly closely. We're monitoring it as an industry. We're monitoring it with our customers. So, you know, I think the situation has been averted, but we just have to stay very close to it. But for the reasons that I have mentioned, we would, I suppose, remain quietly confident that fertility services will be preserved in the U.S. Yeah. Patrick, I don't know if there's anything you would add to that. No?

Excellent. Thank you. And I appreciate your answers here. But it's still the case that the IVF business has been closed down, at least in general in the state of Alabama. Is that correct? Even though it's probably a very tiny part of the total, but it's... Yeah, yeah.

No, it was paused, but that is not the case anymore. So it was paused because clearly nobody wanted... to break the rules, but that is not the case today, Sven. It has been restarted in Alabama. And it is a very, very small percentage of the... I don't want to diminish the challenge, but it is a... I mean, Alabama... most of the fertility services in the U.S. are provided along the north, basically the northeastern and the western Californian seaboard. So it is a tiny proportion, but still, it's a situation that everybody has to take, you know, particularly note of, stay close to the situation because we wouldn't want it to spill over into other, I guess, like-minded states is probably the best way to describe it. Yes. But no, services are rerunning again in Alabama.

Okay. Thank you very much.

Thank you. Yeah. Thank you for the question.

Thank you. Thank you. And it appears there are no further questions at this time. With this, I'd like to hand the call back over to our host for any additional closing remarks.

So thank you very much for your time. Thank you for all the great questions. And with that, we will close out the call on behalf of Brahman and Patrick and the Vitrolife Group.

Thanks a lot. Thank you.

This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.