Vitrolife AB (publ)

Hello and welcome to the Virtual Life Group Interim Report Q1 2025. My name is Laura 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 will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register a question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Bronwyn Broughy-O'Connor, to begin today's conference. Thank you.

Thank you and good morning, everyone. This is Bronwyn Broughy-O'Connor, CEO of the Vitralife Group, speaking, and I'm joined by Helena Wennerstrom, the Acting CFO of the Vitralife Group. So, thank you for joining. I would like to move you to the first page and start with the Q1 2025 highlights. So starting with our largest region, which is EMEA, we delivered 14% growth in EMEA when excluding discounted business. So really strong performance in our largest region, and it's actually across the board in that region, all markets. Second point I would like to highlight is Americas, so growth of 9% in Americas driven by strong performance in North America. Most of you will be aware that we have been doubling down in the U.S. and North America. A lot of our efforts have been going in there over the past 12 months, so it's nice to see us starting to reap the benefits of those investments. And then the third point is we've strengthened our organizational structure. As a company, we have three main strategic priorities, growth, innovation, and operational excellence. So clearly, operational excellence and innovation, very strong priorities for the company. And we appointed a chief operating officer and a senior vice president of innovation to bolster and lead these programs in the company. I would like to move you then to the next page, and we will discuss the first quarter key financials. So, this was a quarter, as I guess for most companies, with multiple factors to navigate. Obviously, the tariffs, but particularly challenging for us and persons in our case, was the discontinuation of business in a large market in our EMEA region. Despite this, we delivered revenues of 842 million SEC and organic growth of 1% and 3% when excluding this discontinued business. Our growth margin increased to 57.4% and EBITDA was 257 million SEC in the quarter, corresponding to an EBITDA percentage of 30.6. We did have a negative ethics impact in the quarter of $13 million, but we also have higher selling expenses due to our U.S. ramp-up in what I've just mentioned there are our key focus markets for growth. Operating cash flow was 69 million second a quarter, and Helena will take us through in detail the precise timing of factors at play here, and then earnings per share of 0.74. I would now like to move you on to the next slide, please, where we will discuss our sales and growth per geographical segment. So sales of 270 million SEC in Americas with 9% growth in the quarter. North America performed very well with double-digit growth in the quarter. So Americas, as you can see, is now our second largest region. We have up to now been vying for that position with APAC and Americas, but Americas clearly now in second position in terms of revenue contributions. In EMEA, sales of 334 million set in the quarter, a growth of 8% in local currencies, organic growth in local currencies, and 14% when adjusted for discontinued business. Strong growth, as I mentioned, across all markets in the region, which is great to see. So our largest region performing very, very strongly. And then APAC, a challenging quarter in our APAC region with exceptionally high comps to compete with. The year of the dragon in 2024 clearly impacted cycle numbers and revenue. Importantly, I would like to highlight that we do not see any market share losses in our APAC region. And I will spend a bit of time in the coming slides to take you through the precise impact of the year of the dragon on the financial performance of the APAC region. So if I can now move you on and we will discuss market region EMEA in more detail. So sales of 334 million FEC, as I mentioned, an organic growth of 8%, 14% excluding discontinued business. We saw strong sales across the entire consumables portfolio, which is great to see. So we're really benefiting from our pull-through strategy of leveraging the full breadth of the virtualized groups portfolio. This was also a record quarter for technology sales in the region with the highest penetration of time lapse globally. So I wouldn't call EMEA a mature region in terms of time lapse, but it is the region with the highest number of systems installed. So great to see the growth here. A weaker performance in genetics in the region, but this is, as I mentioned, the region impacted by the discontinued business, and genetics had been performing well in that market. Our With the Think solution is starting to gain some very nice traction, which is great to see, and we signed an agreement with one of the largest clinic chains in EMEA to roll out our solution across their network in partnership with them. So lots of nice green sheets on our witnessing solution. And I think leveraging and pulling through, as I mentioned, leveraging the full breadth of the portfolio, those embryos growth consumables and witnessing is proven to be a very compelling value proposition to our customers. Then I would like to draw your attention to the chart below and the normal quarterly phasing, which you can see. So typically in the future life group, Q4 is our highest revenue quarter, followed by Q3, then Q2, and Q1 is normally our lowest revenue quarter. And I think it's important to point out this quarterly phasing in the context of the dynamic that we saw in APAC, which I will explain in the coming slides. So all told, a really great performance in our largest region, market region EMEA, across all markets in that region and right across the portfolio, with the exception, as I mentioned, of genetics. And very positive signs on the wisdom sale. Okay, I'd now like to move you through to the market region, America. So with sales of 270 million sets in the quarter, we delivered an organic growth of 9%. North America has started to ramp up nicely, and in fact, we delivered our best quarter in North America in 11 quarters. So we're starting to get some very nice traction in what has been a focused market for us for some time. Steady growth in consumables, however, in North America, however, we did have a weaker quarter in the town in the consumables portfolio, and that diluted the America's impact slightly. Technology is performing very well, good to see. We're continuing to drive penetration of our embryoscope and across North America. And then genetics performed very strongly during the quarter, driven by our PGTA family of tests. We're seeing some new customer wins there, so it's a very nice ramp-up across the PGTA family of tests. And I'm happy to say that we have not seen any impact from the PGTA lawsuits in the U.S., In fact, our growth in PGTA tests is accelerating. Again, then, if I can draw your attention to the chart below, you will see the quarterly phasing with a slight tweak. So, I would like to highlight that Q2 2024 was a particularly high quarter in Americas. because we secured a significant time-lapse order during that quarter. However, historically, again, in Americas, we typically see a pattern of Q4 being the strongest, followed by Q2, Q3, and then Q1, which is just a slight anomaly in the phasing in 2024 due to that large technologies order. Just in terms of phasing of technologies in general, with the consolidation in the market on the clinic site, we do tend to see and experience larger fluctuations in our technology business. This is because larger chains tend to make larger purchases. And we've been seeing that. I mean, you can see it in Q2 last year, but we're starting to see more of that. It does make forecasting more challenging but we have also been investing in commercial excellence in order to tightly monitor our FOMO and enable us to forecast more accurately in terms of technology. So a good quarter in America and we're delighted to see the traction in North America and also good to see no impact on the PGTA test but rather in fact it is accelerating. Okay, I'd now like to move you to market region APAC. And here I would like to start by drawing your attention to the graph below, where you can see that in 2024, APAC did not follow the normal quarterly phasing of Q4, Q3, Q2, and Q1. Why? 2024 was the year of the dragon. and couples hoping to have a baby born in this luckiest of years had to undergo IVF in quarter one 2024 or the first month of quarter two 2024 to potentially make this a reality. This impacted both cycle numbers phasing and made the comps very challenging. So you can clearly see on the graph below, in 2024, Q1 was by far our largest quarter, followed by Q2, then Q3, and then just slightly below that was Q4. So an unusual year impacted by the year of the dragon. It may sound strange to Westerners and Europeans to be talking about dragons when it comes to and IVF reporting, but this is the reality across Southeast Asia, China and Southeast Asia. To compound matters then, Q1 2024 was also an exceptionally strong quarter for technology. So we had very high comps to navigate, and then to compound matters, Q1 2024 was a record-breaking quarter for embryo scope sales across APAC China, Southeast Asia, and Japan. Now, I would like to say that we did see some signs of recovery starting to show in the cycle numbers towards the end of March. So January and February, very tough, but towards the end of March, we started to see things picking up. And then if I could bring your eyes back to the chart, as you can see from the chart, the phasing becomes more favourable in the second half of the year. In addition, based on what we have seen towards the end of the quarter and expect to see going forward, we predict that the cycle numbers will be returning to normal levels as the year progresses. So a challenging quarter for our APAC region. I'd like to move you on then to the next slide where we will look at our revenue per segment and our product group. So you are used to us reporting to your RASA segments and business areas. Our business areas are now covered under product groups. So I just want to point that out so that everybody can follow the presentation. So if we look then at the revenue by geography, we can see that the EMEA region is now our largest region with 40%, been our largest region for quite a while, but it has put some distance between it and the other regions with this strong quarter that we've just delivered there. And Merit is now our second largest region, 32%, and APAC falling back into third position with 28% growth. We're all navigating challenging and dynamic factors in the macroeconomic environment. And I think this good geographic balance that we have in the vitro life group has proved critical. So we can see that not having an over-reliance on any one region is a very healthy thing in the changing times. And they are performing very strongly, as I mentioned, despite the higher level of penetration. And America is now our second largest region. And this is really driven by the acceleration that we're starting to see in North America, which, of course, has been a strategic decision of our company to focus on the largest IVF market in the world. If I could bring you then over to the chart on the right-hand side, just to take you through the balance in terms of the revenue by product groups, we are also well-balanced from a product group perspective, as you can see, although I would point out for technologies that this can fluctuate to a larger or greater extent, and this is increasingly being impacted by purchases of larger volumes of embryoscopes by the clinic chain. So all in all, if you look at the rolling 12 months of our technology sales, you can clearly see an upward trajectory, but we do see more fluctuations between the quarters. I'm now going to hand it over to Helena and take you through some of our key financials, and I'll speak to you then in a few more minutes.

Thank you, Bronwyn. And we are now on page number nine. And I will dig a bit deeper into the geographical segment. which are Americas, EMEA, and APEC. Starting on the right-hand side, as Bronwyn mentioned earlier, we had a sales of 842 million SEC and a gross margin of 57.4%, an improvement compared with the previous year when the sales amounted to 841 million SEC with a gross margin of 57.1%. The market contribution amounted to 300 million SEC with a contribution margin of 35.6%. Corresponding quarter previous year amounted to 311 million SEC, with a contribution margin of 37%, a decrease by 1.4 percentage points, negatively impacted by product and market mix. Let's now take a deep dive in the geographical segments from the left-hand side. In America, we had a sales of 270 million SEC, with an organic growth of 9% in local currencies, driven by a strong growth in North America. Saving consumables increased by 2% in local currencies, negatively impacted by order phasing in Latin. And phasing technologies increased by 9% in local currencies, as you continue to drive penetration and utilization of embryo scope. Phasing genetics increased by 12% in local currencies, with strong performance across the region. And we did not see any impact of our target PGTA test revenue as a result of the PGTA class action process. The gross income amounted to 145 million SEK with a gross margin of 53.7%, compared to last year's gross income of 141 million SEK with a gross margin of 56.9%, negatively impacted by the product mix. The selling expenses have increased in the quarter from 58 million SEK to 77 million SEK, since we have continued to invest in sales and marketing capabilities in the key markets. The market contribution for the quarter was 25.3%. In EMEA, we had a sales of 334 million SEK, with an organic growth of 14% in local currencies, excluding discontinued business. The gross income of 199 milliseconds with a gross margin of 59.6 is a significant improvement compared to last year's gross income of 170 milliseconds and corresponding gross margin of 54.8%. Sales in consumer goods increased by 9% in local currencies and 60% excluding discontinued business. Treatment by strong sales across the portfolio. And states in technologies increased by 46% in local currency and 47% excluding discontinued business with high growth across technologies. States in genetics decreased by 11% in local currencies and 5% excluding discontinued business. And the selling expenses have decreased from 69 million SEK to 68 million SEK. And we can see a higher contribution margin for the quarter. 39.2%, an improvement since last year's contribution margin of 32.3%, positively impacted by product mix. In APAC, we had a sales of 238 million SEC, with an organic growth of minus 50% in local currencies compared to previous year. The comparable quarter last year was exceptionally strong for consumables and technologies, and sales in consumables decreased by 3% in local currencies, And technologies decreased by 38% in the third currency, negatively impacted by timing of capital orders. Saving genetics decreased by 2% in local currencies. And the gross income of 139 million SEK with a gross margin of 58.4%, which is lower than previous year's gross income of 117 million SEK and corresponding gross margin of 60.1%. The selling expenses have also decreased from 42 million SEK down to 38 million SEK. And APAC has a contribution margin for the quarter of 42.4%, which is lower compared to last year's contribution margin of 45.2%, which is volume-related. Moving on to slide number 10. On this slide, I will comment on Q1 financial highlights. As earlier mentioned, the sales amounted to 842 million SEK compared to previous year, with sales of 841 million SEK. This gives us 1% increase in local currencies, 0% in SEC, but 3% in local currencies, excluding discontinued business. As part of our ongoing risk assessment procedures, and to ensure we continue to comply with all applicable international sanctions, we decided to discontinue activities in certain markets in EMEA as we announced in the Q4 report 2024, representing less than 3% of our annual revenue, and this is effective from 1st of January 2025. The gross income amounted to 483 million SEK compared to 481 million SEK previous year, and improved the gross margin significantly. slightly from 57.1% to 57.4%. All in all, this gives us an EBITDA of 257 milliseconds compared to 272 milliseconds previous year, and an EBITDA margin of 30.6% compared to 32.4% last year. The decrease in margin is primarily due to foreign exchange impact and increased selling expenses in Americans. Moving on to the next slide. Some comments about operating expenses. We continue to invest in sales and marketing capabilities in key markets, contributing with an increase of selling expenses from 169,000 to 183,000. R&D expenses have decreased mainly due to a reduction in expenses for external services and a slight increase in capitalization. but restoration expenses are slightly lower than previous year. Other operating items amounted to minus 9 million SEK versus positive 7 million SEK comparable quarter, mainly affected by foreign exchange impact of minus 30 million SEK in the quarter versus plus 1 million SEK comparable quarter. It is related to translation effects in connection to revaluation of world capital at the closing rate. Going to page number 12. So let us now look at some key credentials and do a small recap. We are growing the sales of 1% in local currencies and 0% in SEC. However, we have improved 3% in local currencies, excluding discontinued business. A strong growth in EMEA, despite the helping of discontinued business. A strong growth in America, driven by a strong growth in North America. APAC had an organic growth of minus 15% in local currencies, and the comparable quarter last year was exceptionally strong in consumables and technologies, as we heard from you mentioned earlier. The gross margins improved from 57.1% to 57.4%. The EBITDA amounted to 267 million SEC, compared to 272 million SEC, and an EBITDA margin of 30.6% for the quarter 2025, compared to 32.4% for the previous year. The decrease in margins primarily due to foreign exchange impact and increase in expenses in Americas. The financial net amounted to minus 10 million SEK compared to minus 24 million SEK previous year. Primarily, it's positively impacted by foreign exchange gain, and interest expenses lost 70 million SEK compared to 23 million SEK previous year. Net income amounted to 100 million SEK compared to 150 million SEK previous year, which gives us an adjusting earnings per share of 0.74 Swedish kronor compared to to France previous year. Taxes amounted to minus 41 million SEK compared to 28 million SEK previous year. The increase is driven by restructuring activities, withholding taxes, geographical market mix. Historically, the normalized average tax rate amounts to approximately 23-25% depending on the geographical market mix. Operating cash flow amounted to 69 million SEK for the year compared to 198 million SEK previous year. And changes in the working capital had a negative effect of 111 million SEK this year compared to 39 million SEK previous year, mainly driven by reduced trade tables. And the tax pay over year increase of 53 million SEK is more than the time we mentioned. And we have a strong balance sheet with a liquidity ratio of 78.9% and a net debt to EBITDA on 0.6 compared to 0.9 previous year by the end of the quarter. And I will now hand over to you again, Dawn.

Thank you, Helena. So, focus for 2025. We essentially have three key focus areas. One is growth, two is innovation, and three is operational excellence. And then, of course, we need to discuss the seemingly ever-changing macroeconomic environment. So on growth, we're going to continue to drive share gain in key markets, leveraging the full breadth of the portfolio. It's working. We would argue quite strongly that we are the only competitor in the market that has a full end-to-end solution for IVF clinics around the world, and we need to leverage the full breadth and extent of our portfolio, and I think EMEA did that particularly well in this quarter. Accelerate penetration of our combined embryoscope and lab control solution. So again here, We're the only competitor who have both a time-lapse system embryoscope and a lab-controlled solution. And we are pairing them together nicely. We were delighted to sign an agreement with one of the largest clinic chains in EMEA. And we have more of those deals in the pipeline. So this is really, really critical and a key differentiator for us. Deliver best-in-class quality and customer service. This has been a core strength of the Nutrilite group for many years, and we will continue to deliver high-quality and best-in-class customer service to differentiate ourselves from the competitors that we face. So three key focus areas when it comes to growth. On innovation. We've rationalized our R&D pipeline and we're really doubling down on the larger programs that are linked to our platform and which we believe will move the needle. So we're prioritizing the R&D programs that will deliver solutions to help clinics automate, which they desperately need to do, scale, and then very importantly, improve outcomes for patients. We're also strengthening our market access capabilities, your R&D pipelines, Without market access capabilities, you're not going to be able to get the leverage. So we want to make sure that not only are we developing best-in-class products and services, but that we are able to bring them to market faster. So that's a key focus area for our new Senior Vice President of Innovation, Rickard Erickson, who knows the IDF market very well and is a long-standing Future Life Group employee. Third focus for 2025 is on operational excellence and efficiency, really important. So we are investing in digitalization in our manufacturing and also on the laboratory services side. This is to enable us to increase capacity, but also to drive efficiencies. And I think we've been doing a nice job there and you've seen nice and good steady progress in our margins as a consequence of that. So we will continue to double down our efforts there. automating manufacturing to increase capacity as well of the key growth drivers in our portfolio. So it's not just automate for automate's sake. We're ensuring that we automate where we believe we also have the greatest opportunity to grow. And then just a comment on the macroeconomic environment. We invested, as I'm sure most companies did, a significant amount of man hours to get a really clear picture and indication of our trade flows in and out. We are a truly global company. You can see that from our regional revenue split. And we're also a global company in terms of our manufacturing footprint, having sites in the US, Europe, and also in Asia. So we have mapped out all our flows. We've been running tariff scenarios for years. Well, it seems to be endless, but we did get on top of things, I'm happy to say, very, very early. And we've been taking proactive measures, clearly on the cost side, to mitigate any impact from the tariffs. That said, as I'm sure most companies are in a similar position, we will not be able to fully absorb all of the tariff costs and would inevitably... have to pass some of them on in the form of price increases if this situation is to continue. But I would say overall as a company, we do have a natural hedge owing to the fact that we have manufacturing in three continents. So we're absolutely not being complacent. We've been very much on top of this. But I guess inevitably we would have to share the burden with our customers. So with that, I would like to thank you for your attention, and I believe we will now open up for Q&A.

Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Kindly be reminded to limit yourself to only one question and one follow-up. Thank you. We will now take our first question from Jacob Lemke of SEB. Your line is open. Please go ahead.

Yes. Good morning, and thank you for taking my question. My question relates to EMEA and particularly consumables, which looks very strong here in the quarter. I'm wondering what drove that and if there are any phasing effects impacting Q1?

Yeah, so good morning, Jacob. Thank you for the question. It's a strong performance across the region, and it's actually across the entire portfolio. Media, disposable devices, it's everywhere. So really, really good to see. I never like to see an over-reliance on any one part of the portfolio or on any one market, but it's across the board in EMEA. And I think what's particularly pleasing to see is this is the region that has to navigate the exit of a large market. So we did have some concerns in terms of their ability to deliver, but they actually beat our internal forecast. So it's across the board, portfolio-wise, and it's across all markets.

So I guess that you would expect this, yeah, momentum to continue in the coming quarters as well.

Yeah, I mean, we have a good pipeline. We have been taking share for quite a while. So it's always challenging to keep taking share at that level. But I also think we have some very good momentum. I think this is the region that's probably doing the best job, Jacob, in terms of leveraging the full portfolio that we have. And they're pulling through very nicely. So they have been performing in certain parts of the portfolio towards the back end of last year, but now we're starting to see that divergence across the broader portfolio. They're also the region that has the benefit of being the first to launch and scale the witnessing solution. So that's also proving to be a very compelling value proposition in terms of combining that with Embryoscope. Yeah, they're doing a good job, and it's across the board, and we're going to be pushing them hard to continue to keep delivering across all markets and, again, you know, across the portfolio.

Okay. Thank you very much.

Thank you, Jacob.

Thank you, and we will now move on to our next question from David Johansson of Nordea. Your line is open. Please go ahead.

Hi, yes, good morning. Thank you for taking my questions. So two from my side, please. So as I said, Bronwyn, the relatively weak performance in APAC in China due to the reversal of the Dragon Baby boost. So it would be interesting to hear, I think, if this has rebounded strongly now, maybe towards the end of the quarter and also into April, since I understand Davis now will be conceived the year of the horse. And also if it's reasonable to assume growth here, looking at the full year. I'll start there with the first one.

Yeah, so thank you, David, and great questions. I have to say, as a CEO of a public company, it feels weird to be talking about animals, but I'm going to have to answer your question by explaining it in the context of animals. So please forgive me, and I hope this doesn't impact my credibility by talking about dragons, snakes, and horses. So, 2024, year of the dragon, and as I mentioned, you can see it in the bar chart, it was a huge quarter in quarter one. Now, the dynamic that we're facing at the moment is 2025 is the year of the snake. Asians don't want snake babies. And we tend to think that this is a China factor. It's not. It's China, all of Southeast Asia, even parts of Japan can be impacted by this. So, 2025 is the year of the snake. However, after April 17th, to be very precise, couples undergoing IVF would not have a baby born in the year of the snake. They would have a baby born in the year of the horse, which is a better year to have a baby than the year of the snake. So we did start to see some green shoots of recovery in terms of cycles towards the back end of the quarter, late March, which is good to see. I think that the key indicator which we're all watching for is after 17th of April when we get into essentially IVF timing for babies when born near the horses. But I think overall, we have a very strong regional leader there who's been with the company for a very long time, knows the market like the back of her hand. And she don't expect cycle numbers, as do we. We do expect cycle numbers to recover to more normal levels as the year progresses. So it has had a significant impact across the region. I think very importantly for us, what we've been tracking is, you know, during this turbulence, have we lost share? We don't see any reports of lost share. It's more a case of lower order volumes from the customers that we have as opposed to a customer loss. So that gives us a sense of comfort in terms of, you know, we have a very strong position, as you know, in APAC in terms of share, particularly in in China, but we haven't seen share losses. So, yeah, you know, two things will help us as the year progresses. One, we move into the year of the horse, so expecting cycles to return to more normal levels. And then you can see from, you know, from the phasing impact from the bar chart that the snake impact in the second half of 2024 is obvious. So our comps become a little bit easier as the quarters progress. So I'm sorry it's a very long-winded answer to explain a complicated topic that is a little bit challenging for Westerners to get their head around, but it is a reality in Asia.

Well, I think that's clear anyway. And then just my follow-up question, which is on tariffs. Could you please maybe walk us through the impact of this, as well as timing? And I also understand you don't expect to be able to fully compensate on pricing, so So I wonder if you can elaborate a bit more on that, given where we are currently on this. Thank you.

Yeah, so clearly a very dynamic situation. We did get in early. We started to run scenarios very early, even before the announcements, modelling different percentages. I don't think anybody expected it to go up to 145, but that's where we are. I think... Overall, as a company, again, I don't want to be complacent or sort of downplay the tariff impact, but it's not huge to the Vitor Life Group. That said, we wouldn't want to fully absorb it. We wouldn't be able to fully absorb it. So we have already started to take cost actions. I think most companies are in the same boat. We are preparing to roll out price increases. We will inevitably have to do that and share the burden with our customers. So we're lined up and ready to go with that. By the same token, you know, I don't know, listening to the BBC business this morning, you know, There seems to be some talk of potentially some back down, but we have to be ready in our preparing for the worst case scenario. So we don't want to be deploying price increases to customers and then all of this comes down, but at the same token, we can't be caught, you know, wrong footed or late. So we are getting ready to deploy some of those price increases and we have already initiated cost containment measures. So, yeah, it's, you know, I think the golfing analogy is of our puts and takes. We are relatively lucky given our manufacturing footprint. So we do produce in two sites in the United States. We clearly produce in Europe and we produce in Asia. So that does help for sure. but it doesn't fully mitigate. So hopefully I've answered your question, David, in as much as I can without giving away too much information. Is it back here, David? Yeah?

Okay. Yes, good enough. Thank you. Those are my questions.

Thank you very much.

Thank you. We will now move on to our next question from Ulrich Fretner of Carnegie. Your line is open. Please go ahead.

Thank you very much. I won't focus on the petting zoo in China, but rather on the American market. I'll try to squeeze in a few questions into one and then a follow-up. To present organic growth for consumables in America, when you talk about weakness in Latin America, How is the market sort of, how is the growth looking in North America, and are you still grabbing market share? As well as, we are now closing in on Trump announcing his plan for IVF reimbursement in the U.S., but what is the actual capacity in the system? I think it's an important question potentially to address prior to the announcement. Yes. Okay.

Okay. Yeah, so, time for your questions, Ulrich. So, let me start with US, well, we call it North America, because obviously we have Canada in those numbers as well. So, North America is doing well. I would say, I have to be very careful now, because the competitive landscape has changed, so I don't like to give away too much, and I'm sure we have some competitors listening in. But we believe, looking at the numbers and our estimated cycle growth, we are still taking share in certain parts of the portfolio in North America. We are, because the growth rates are well above the cycle growth rates. So I wouldn't say it's fully across the board that we're taking share, but definitely across certain parts of the consumable portfolio, we are taking share. In genetics, we are definitely taking share. There's no doubt about it, particularly in relation to PGTA. So we've not been impacted by the lawsuits at all. The growth is very strong. Actually, in North America, we had our strongest quarter, as I mentioned, in 11 quarters. We also had our strongest quarter in genetics, I believe, in 12 quarters. So genetics... And it's particularly the PGTA family of tests. So that, as you can imagine, is a good sign, as Helena mentioned, you know, we haven't been impacted by the lawsuit. So that's good. So, yeah, so sort of D-Day for us, for the Trump announcement is the 18th of March, we believe. A lot of positive rhetoric coming out of the administration, not just from Trump himself, but also from the Vice President Vance. And we do expect a positive announcement. It's interesting to see, Ulrich, certain states are already there. Like California is already there, close to having mandated access. And actually, you know, as you know, a little bit like Europe, not all states are created equally. And California happens to be a state where we have a particularly strong presence. So that is sort of boosting our growth there too. So 18th of March, announcement comes out. But yes, you are 100% correct. The challenge is capacity in the system. So even if President Trump, you know, signs the order, access for everyone, and agrees to pick up the tab, the capacity isn't, it's just not there in the system. There aren't enough REIs, there aren't enough embryologists. I think we all, you know, as a collective ecosystem, desperately want to be able to scale to help more patients, but the capacity just isn't there. And I think that's why the strategic focus of the VitaLife group in terms of our platform, helping with automation, placing the embryoscope at the heart of the IVF clinic where it helps with workflows and reduces, you know, labor costs. That's going to be really, really important. That as well combined with the witnessing system, which also helps in terms of staff not having to constantly, you know, stop and check and write and do all of those manual steps that happens today. So it would be great news for sure, but it would take time and significant investment in capacity in order to be able to provide this step up in the level of capacity versus what we currently have today. So hopefully I've answered your

Yeah, that was perfect. And then just a follow-up on the turf and turf exposure. Potentially more on the competitive situation here, because I know from your largest competitor, Cooper, they have production of their media sage like Global and Origo based in Europe and Puerto Rico. They're obviously impacted by turfs, whereas you have your production in the US in Denver. as well as you have your production of your needles and catheters, if I'm not mistaken, in San Diego, whereas Cooper, they have their manufacturing in the UK and in Denmark. So would you say that your competitive positioning in the US in terms of tariffs and risk of increasing prices is potentially more favorable compared to your competitors? And I would guess that time lapse would be the product of exposure for the tariffs, given it's produced in Denmark. But then again, as you mentioned, the capacity constraints in the system would essentially need to be handled by certain type of efficiency gains, and that's where time lapse plays in, and you have close to a monopoly in that area. So just your take on that would be very helpful.

Yeah. So... Do you know what I love about you, Ulrich? You always do your homework and you keep me on my toes. So, yeah, you've just listed all our production sites, so thank you for that. Honestly, I can't comment for Kusper because the reality is each and every company has to map out the trade flows and that's what we have to do. What I would say is both companies are pretty global and it really depends on the flows and on the capacity. It's not just where you produce. It's the capacity that you have at that production site. It's multifactorial. All I can say is that in our case, we do produce on three continents. I just think in the whole tariff situation, being a European headquartered business is not a bad thing. We're sort of seen as the more neutral party at the table. There are other words that I could use, but let's just call it the neutrals. Certainly the sentiment in China right now is significantly more favourable towards doing trade with Europe. That's evidence that's been openly stated. So I think that's something that we can use to our advantage. It's been a very successful market. We've invested a lot in APAC. So I think that's an opportunity. But then, you know, we are committed to the U.S. market. We do have our production sites there. Very importantly, I think, you know, given the current situation. And yeah, then, you know, then with time lapse, we have a couple of flows. It's not like it's all one-way traffic from from Denmark to the US or, you know, Denmark outbound. It's a little bit more intricate than that. You know, the thing with time lapse is it is unique. We are the only company that has a time lapse system with this level of capability. We're also the only company that has a time lapse system with this level of capability combined with with the witnessing system. So these are the things that we have to leverage. But equally, we have to take cost containment measures. We have financial commitments that we, this is shareholder money at the end of the day, and we have to meet our commitments and behave responsibly. So I can only comment for our company, we're taking all of the measures that we could possibly take in order to insulate ourselves, I don't think anybody likes to have to pass these challenges on to customers. We like to partner with our clinics. It's how we build strong relationships with them. But certainly at the current rate, I mean, up in the 145 levels, I think most people would reasonably expect that prices will have to be passed on. So hopefully I've answered your second question a little bit.

Yeah, yeah, that was great. Thank you very much.

Of course, you're good. Thank you. We'll now take our next question from Philip Ikenren of ABG, Sandal Collier. Your line is open. Please go ahead.

Good morning, Rowan and Helena. Thanks for taking my question. I want to circle back a little bit to the sourcing and And, Taris, could you please specify maybe a range of how much U.S. sales is sourced locally from the U.S.? I understand that might be difficult, but just if you can provide a range, that would be very helpful.

Yeah. So, I won't give percentages, although I do know them, because to Ulrich's earlier point, we obviously do have – some pretty big competitors that we're competing with. But I guess luckily for us with the production that we have in the U.S., we do have media production in Denver, which is good, and we have pretty reasonable capacity there. And we have good capacity in San Diego on the disposable devices side. So that does help us. in terms of being able to supply U.S. demand, which is good. That said, it cannot fully meet the U.S. demand. We inevitably have to ship from Gothenburg to meet some of that demand. And ironically for us as a company, we decided to focus on the U.S. market. We've been scaling up really nicely. We've just delivered our strongest quarter recently. you know, taking share across the portfolio and, you know, this doesn't come at the best time for us when we're struggling to gain some really nice traction. But that said, you know, I can't give you a percentage. I don't want to do that. I don't think it would be shrewd. But I would say that a not insignificant percentage of our U.S. supply can be covered by U.S. production. So hopefully, Philip, I've at least helped to answer your question. Maybe just overall in terms of the tariff mapping that we did, the overall impact, even with the very high current tariff rates, was less than we expected. So when we went down meticulously through each and every line, the total impact was less than we expected as a company.

Good to know. Thank you. And on that, are there any shipments taking place between U.S. and China in terms of components or parts that go into the production? Can you say anything about that flow?

Yeah, we don't have a huge amount that has to be said yet. in terms of components. It's more U.S.-Europe on the components side. So it's basically more U.S.-Europe or Asia-Europe. We don't have a lot U.S.-China component. That's not a big factor for us.

Good to know. Thank you very much. I'll get back into the line.

Okay. Thank you, Philip. You're welcome.

Thank you, and we will now take our next question from Susannah Quikberg of SHB. Your line is open. Please go ahead.

Hello, Susannah Quikberg here from Hondas Banking. I'd like to start with a question on Latin America. Can you maybe give us a little bit more information as to why you have a software course here?

Yeah. Good morning, Susannah, and thank you for the question. Yeah, this one is quite a simple one. So basically, quarter four was a very strong quarter for LATAM with high consumables and high embryoscope sales. So that has really impacted the LATAM performance in quarter one. It's been softer on the technology side. Again, we did start to see a little bit of a pickup towards the back end of the quarter, particularly on the consumable, but the high embryo scope sales in Q4 did impact the LATAM performance. So that sort of pulled down. America, as I mentioned, North America, very nice performance, double-digit growth, but the LATAM softness did pull that down to 9%. So it's a phasing issue, Susanna.

Okay. Okay. And then just a question about your innovation policy. So you've highlighted it, but you're also scaling back on a number of programs. Maybe you can explain a little bit more about that and also how your R&D costs are coming down.

Yeah, yeah. So I'll take the first part and I'll maybe hand over to Elaine and she can talk you through a little bit around our R&D capitalization. So... We had a pretty significant innovation funnel, as you can imagine, on the genetic side, also in consumables, and then, of course, in technologies. And we really want to double down and focus on the programs that are going to move the needle. I think we would prefer to... you know, make four or five programs that really move the needle, become a reality, down to dilute ourselves. So we've rationalized, but on the programs that we have selected to double down on, we have increased investment. And they are mainly the programs relating to our platform, our automation, some of our next generation technologies. We're investing more as well. actually next generation witnessing to take that to the next level. We spoke during our capital markets day in terms of the marrying of AI and genetics. We believe that that's a game changer. We're the only company that would potentially be able to do that right now. So that's getting a lot more focused. So it's really a case of, again, prioritizing and focusing our efforts where we believe we're going to get the greatest returns. And I think as well, very importantly, research is really important, and we're in a space where, you know, outcomes are pretty low. But you can't do research without doing product development, and we need to be developing solutions combined with research. And I think, importantly, the market access piece. You know, regulatory approvals and barriers have gone up around the globe, you can have a fantastic warranty pipeline, but if you don't work on the clinical evidence, on the reimbursement, on the SCA submissions, on the China NMPA submissions, then you're not able to bring those products to market. So we've been doubling down in that area and brought in a best-in-class industry talent in terms of leading our market access our market access function under Rickford Ericsson, our SVP innovation. So it's really about focus, Susanna, focusing on the things where we think we're going to move the needle most. I see it as a very good thing. And, Nina, maybe do you want to cover that?

Yes, I can do. Yeah. As you see, the research and development consensus has reduced from 33 million to 26 million in Q1 in 2025, and that is mainly... due to a reduction in expense for external services. This is just a minor increase in capitalization. Otherwise, that is the only thing that is different between the years.

Okay, so to just clarify, what are you shifting away from?

So, we're rationalizing the number of programs. We've had a lot of different projects. So, you know, multiple developments of new tests or there's just been a lot in the R&D funnel, Susanna. So it's a rationalization of the total number of projects in the R&D funnel. Okay. Thank you. Yeah.

Thank you, Susanna.

Thank you. We'll now take our next question from Johan Lleras of Red Eye. Your line is open. Please go ahead.

Great. Thank you for taking our questions. The first one, on the facing side, when you sort of accommodate a line with sanctions and the 3% level, is there any, what about the level of uncertainty on that dynamic?

Apologies, Johan. I just missed a slight part of your question. Would you mind repeating? Yeah?

Yeah, yeah. It's regarding the facing and your accommodation of sanctions, are you guiding for some 3% for the 2025 impact? And what about the uncertainty? That's not set in stone, presumably.

Yeah, so we do have this 3% headwind on the sanctions markets. If that situation were to be resolved, and I believe there were, well, some signs this morning, some positive, some maybe not so positive. But if that situation were to be resolved, we would go back into that market and could go back into that market pretty quickly. We wouldn't expect the impact to be any worse than the minus three because it's been a complete exit. There are no residual sales, no residual revenue. So that's that's as negative an impact as we're going to feel this year or to be impacted by this year. Is that fair?

So the discontinuation is effective from 1st of January to mid-May.

Yeah, exactly. Does that help answer your question, Johan?

Yes, thank you. And also regarding the tariffs, you're expecting to absorb quite a significant amount of this impact. But is there a risk that the areas where you don't have the expect to be able to absorb, what about the ability to transfer and increase prices? It may be that some of these areas are also areas where it's tougher to increase prices.

Yeah. Yes. So I think the two key levers that we have there are obviously cost containment measures. So we've already started to initiate cost containment programs across the company to mitigate some of the impact. And then the second lever that we would have to pull would be in the form of passing on price increases to our customers. So it's really sharing the tariff burden. It's not taking it all in-house, but rather sharing it. That said, I do want to highlight on the tariffs. It's not that we are not impacted by tariffs. We are, but I would highlight the impact as we mapped out the trade flows and all of the implications and all of the different percentages that have been touted in the past number of weeks and months. We do have a tariff impact, Johan, but it's not very material. So I think a combination of cost containment and minimal price increases would be enough to see us through. We're not talking about passing on very significant price increases to our customers here at all. We're talking, you know, low single digits.

Yeah. Yeah, that's helpful because presumably – your customers are also facing some cost pressure and price pressure elsewhere, and the level of competition is not static either.

Yeah, yeah, yeah, exactly. So, yeah, I mean, each competitor is going to have to decide for themselves. I would assume most will be taking a similar approach. It really depends on the magnitude of the impact that each of the key competitors is going to face. But, yeah, maybe logic will prevail. I'm not... Logic and common sense may prevail, but we have to take proactive measures, proactive and timely. I think it's great to talk about proactive measures, but we have to do them in time to... to protect our financials.

Yeah. And what about the transparency on these cost efficiency measures and the price changes? Will we be able to see some impact already in Q2 or is that later in 2025?

Yeah. I mean, I think with the current situation that we're facing now, we already have to deploy cost reduction measures in certain areas. So you'll probably start to see that slowly coming down. What I would say is we're not going to pull back on investing in growth. We've been growing really nicely in North America. It's paying off. We're getting the return. So we don't want to pull back. And I don't think it's good to be – pivoting and changing course. Our strategy is working. We're doing well in our focus markets. Yes, we did have a challenging quarter in APAC. There's a very reasonable explanation for that. But we're not going to pull back on the sales and marketing piece because growth is a huge focus for us. So it will be more, you know, focusing on the admin, the back office costs, what can we get on margin. They're the areas that we're looking at.

Excellent. Thank you.

Yeah, and external services. Sorry, very important. So, yeah. Thank you very much for the questions, Johan.

Okay, I think we're up on time. Indeed, that was our last question. I will now hand it back to Bronwyn for closing remarks. Thank you.

Yes, so I would just like to thank you all for your time, your attention, and your excellent questions this morning. I think we're all navigating some pretty dynamic environments, but we very much appreciate your questions. I think they were excellent, and we wish you a good day. Thank you very much from myself and Helena.

Thank you.

Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.