Vitrolife AB (publ)

effects arises from the net investment in foreign subsidiaries. Revelation impacts the equity. Assets and liabilities translated at the closing date rate. Revelation impacts other operating items. Transaction effects attributable to income and expenses converted at the average rate for the period. However, transactions in foreign currency are measured in functional currency at the exchange rate that applies on the transaction date. Now over to impact that has been observed in this result for the period. In Q1, if I could draw your attention to the arrow on the right hand side, we can clearly see a significant strength in Swedish crown versus other currencies by the end of the quarter one, which impacted the result with translation effect of minus 13 million SEK, but no major transaction effects in the period. In Q2, Swedish crown currency has been less volatile and we can see less impact of translation effect in the operating expenses amounted to minus 5 million SEK for the quarter, but significant transaction effects in the result. Going to the currency effects in sales Q2 2025, it's amounted to 73 million SEK, corresponding to minus 8% for the quarter. And currency effects on the sales year-to-date 2025 totaled to minus 77 million SEK, representing approximately minus 4% for the period. Notably, only minus 4 million SEK of this impact relates to the transaction effects from Q1 2025. A large part of the transaction effect was visible already in the gross result. But when it comes to operating costs, there is a counteract effect of foreign cost and their currency impact. But still, we have a large part of the operating cost in Swedish krona. As a reference, in 2024, changing the Swedish crown exchange rate against Vitrolab Group all top currencies of plus minus 10% would have an effect on income before tax of plus minus 141 million SEK for the full year. We are short in Danish crowns and in Swedish crowns, long in all other currencies as shown in the annual and sustainability report for 2024 in new 2. And by that, I will hand over to you, Bronwyn, again.

Thank you, Helena. We can now move to the next slide titled Sales and Growth for Geographical Segment. Sales in the Americas region increased by plus 5% despite the very challenging IVF climate in the United States post the IVF executive order that I have previously mentioned. The growth that we delivered was primarily driven by share gains in genetic services in North America. The comparables in technologies were exceptionally challenging as we grew 174% in technologies in Q2 2024 due to closing a large embryoscope deal with the clinic chain. Even with these very high comps, Technologies America were only minus 1% behind the previous year. A strong performance in our largest region, EMEA, driven by what has to be said an exceptional performance in our consumables business across the region, delivering 17% growth in local currencies, excluding discontinued business. We most definitely took share from competitors in several categories. This region also had substantial comparable challenges in technologies as we grew plus 50% in Q2 in 2024. um sales in apac were flat with continued market weakness in china although we saw a more robust recovery in southeast asia the overall cost of raising a child in apac appears to be impacting cycle numbers in the wider region and if i can draw your attention then to the share of total sales you can see that emea continues to be our largest region with 33 share of total sales followed by america's with 34 okay i'll now move on and we'll take a deeper look at market region emea so as i said a strong performance by our largest region driven by europe a vitralife group stronghold it has to be said where we continue to expand our market leadership position in several key markets and parts of the portfolio In the region, our total growth was minus 8%, impacted by minus 5% in currency and minus 8% in discontinued business in the quarter. To repeat, our organic growth in local currency excluding discontinued business was plus 5%. Sales in consumables were plus 17% in local currencies, excluding discontinued business. And I want to thank the team for the fantastic job that they did taking share across the portfolio in all markets. Sales in genetics in this region were impacted by the situation in the Middle East, but we did see steady growth across the portfolio in other markets, which was encouraging to see. then a tough quarter here for technologies in the region as i previously mentioned however what is very encouraging to see here is that the revenue per installed embryoscope is increasing steadily okay we will now move to market region americas so tough market conditions as i mentioned in parts of the america region and this is as a result of the ivf executive order which started to impact cycle levels as we moved into Q2. In the vitro life group, we conducted a patient survey across the high volume IVF states in America, and it confirmed that couples were delaying their IVF treatment while awaiting clarity on financial support. The statement from the White House, just for those of you who haven't had a chance to read it, the statement from the White House, and I will quote was, to aggressively reduce out of pocket costs for IVF. Clearly, when this materializes, this will be good for patients, but we are still in a holding pattern awaiting further news from the US administration. Total growth of minus 6% impacted by minus 11% currency factor here. So an organic growth in local currencies of plus 5%. As I mentioned before, an exceptionally strong comparable quarter last year for technologies due to a large purchase from one of the biggest clinic chains, cross-border clinic chain in fact. But what I would say, despite the drop in cycles and the very strong comps and technologies, we still managed to deliver growth. And this is due to share gains in our genetic services business, which is performing very strongly this year across the entire portfolio. So some good, strong share gains and momentum in genetic services. Okay. I'd now like to move on and take a deeper look at market region APAC. Market conditions in APAC are quite mixed from one market to another. Cycles have not returned to pre-Dragon levels in China and Australasia is flat and even negative in certain parts. But Southeast Asia is showing good signs of recovery. What we are seeing across the region is the delaying of capital purchases as chains and individual clinics, in fact, manage their cash. Total growth of minus 8% impacted by minus 7% due to currency fluctuations, so a flat organic growth in local currencies. Negative growth in technologies despite a healthy sales funnel of embryoscopes because we are impacted by these delayed capital purchases, especially in the larger markets. The shining light here is again our consumables business, which is performing well due to share gains from competitors as opposed to cycle growth. And in fact, consumables performed well in all markets, even those impacted by lower cycle growth rates. So with that, I will hand you back over to Helena, who will take us through the geographical segments.

Thank you, Rowan. We are now on page number 10. where I will provide a more detailed analysis of the geographical segments Americas, EMEA and APEC. Starting on the right hand side, as Bonwin mentioned earlier, tutors sales amounted to 871 ms with a gross margin of 58%. In comparison with the previous year sales were 941 ms with a gross margin of 59.9%. The market contribution was 302 million SEK with a contribution margin of 34.7%. In the same quarter last year it was 369 million SEK with a contribution margin of 39.2%. A decrease of 4.5 percentage points primarily driven by currency fluctuation changes and slightly increased supply chain costs. Let us now take a closer look at the geographic segments. On the left hand side, in the Americas, sales totalled 295 million SEK, reflecting a 5% organic growth in local currencies, but a decline of 6% in SEC. negatively impacted by currency of minus 11%. As Bromin mentioned earlier, we had a solid growth despite a significant drop in cycles following the US IVF executive order. Gross income totaled 160 million SEK with a gross margin of 54.2%. This compares to last year's gross income of 181 ms and a margin of 57.3%. A decline primarily driven by currency fluctuations, however, an improvement by 0.5 percentage points compared to previous quarter. Selleck's expenses for the quarter rose from 63 million SEK to 75 million SEK, reflecting ongoing investments in sales and marketing in the US, as previously announced. The market contribution margin for the quarter was 29%, representing an improvement of 3.7 percentage points compared to previous quarter. Sales in EMEA declined by 3% in local currencies and by 8% in SEC, totaling 326 million SEC. The sales were negatively impacted by currency of minus 5%. Excluding discontinued business, sales increased by 5% in local currencies. Gross income was 195 million SEK with a gross margin of 59.9% compared to 250 million SEK and a margin of 60.5% last year. The decrease was mainly due to currency effects and product mix. Selling expenses decreased from 90 million SEK to 81 million SEK. The market contribution margin for the quarter was 35%, slightly down from 31.5%, affected by currency fluctuation, product mix and lower selling expenses. In APEC, the sales amounted to 250 million SEK, reflecting flat organic growth in local currencies, but an 8% decrease in SEK, primarily due to a minus 7% currency impact. Gross income was 150 million SEK with a gross margin of 59.8%, which is lower than previous year's gross income of 169 million SEK and a gross margin of 61.6%. However, there was an improvement of 1.5 percentage points compared to the previous quarter. Selling expenses increased from 42 ms to 47 ms, and the market contribution margin for the quarter was 41%, down from 46.7% last year. Let's move on to slide number 11. On this slide, I will comment on Q2 financial highlights. As earlier mentioned, the sales amounted to 871 million SEK compared to previous year with a sales of 941 million SEK corresponding to a flat growth in local currencies, a 7% decrease in SEK and 3% in local currencies excluding discontinued business. As part of our ongoing risk assessment procedure 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 2024 report, representing less than 3% of our annual revenue effect from 1 January 2025. The gross income amounted to 505 ms compared to 564 ms previous year, corresponding to a gross margin of 58% down from 59.9% previous year, negatively impacted by current fluctuations and slightly increased supply chain. In the second quarter operating expenses increased primarily attributable to the previously communicated investment in expanding sales and marketing capabilities in the US as well as increased administrative expenses driven by ongoing activities within the company and part of it is to be considered as one of costs. Operating expenses were also impacted by minus 5 ms when revealing assets and liabilities at the closing rate by the end of the quarter. All in all, this gives us an EBITDA of 243 million SEC compared to 327 million SEC previous year, which consequently gives us an EBITDA margin of 27.8% compared to 34.7% last year. The decrease in margin is heavily impacted by transaction and translation effects driven by a strengthened SEC against other currencies. Furthermore, the margin was also affected by increased selling expenses, mainly in US, combined with the impact of product and market mix. Let's move on to slide number 12. Some comments about our operating expenses. As previously communicated, we continue to invest in sales and marketing capabilities in key markets resulting in an increase in selling expenses from 196 million SEK to 203 million SEK. R&D expenses have risen slightly year-over-year by 2 million SEK. Administrative expenses are higher and related to ongoing activities within the company and part of it to be considered as one of costs. Other operating expenses totaled to 6 million SEK remaining flat compared to same quarter last year. However, the operating expenses are mainly affected by translation effects of minus 5 million SEK in the quarter versus minus 3 million SEK in the comparable quarter. related to revaluation of assets and viability at the closing rate. Let's move on to slide number 13. Let us now look at some key financials. Here I will focus on the year-to-date numbers. Sales for the first half year amounted to 1.7 billion SEK corresponding to a flat growth in local currencies, a decrease of 4% in SEK and a 3% decrease in local currencies excluding discontinued business. The gross margins decreased from 58.6% to 57.7% and the EBITDA amounted to 500 million SEK compared to 600 million SEK corresponding to an EBITDA margin of 29.2% versus 33.6% previously. The decrease in margin is heavily impacted by transaction and translational currency effects driven by strengthened SEC against other currencies, but the margin was also affected by increased selling expenses mainly in US and the product and market mix. The financial net amounted to minus 15 million SEK compared to minus 48 million SEK previous year. Primarily positively impacted by foreign exchange gain by 8 million SEK compared to minus 4 million SEK previous year. Interest expense amounted to 31 million SEK compared to 48 million SEK previous year. Net income amounted to 198 NOK compared to 258 NOK previous year, heavily impacted by currency fluctuations, which gives earnings per share of 0.74 Swedish kronor compared to 1.06 Swedish kronor previous year. Taxes amounted to minus 73 million SEK compared to minus 77 million SEK previous year and the effective tax rate was 26.9% for the first half year compared to 23% same period previous year. The increase this year is driven by restructuring activities with holding taxes and geographical market mix, main part effective in Q1 2025. Historically, the normalized average tax rate amounted to approximately 23-25% depending on the geographical market mix. Operating cash flow amounted to 220 million SEK for the first half year compared to 434 million SEK previous year. Changes in the working capital had a negative effect of 134 million SEK this year compared to 62 million SEK previous year affecting all working capital items. The tax pay with a year-over-year increase of 81 million SEK is a timing matter. And we have a strong balance sheet with an equity ratio of 78.8% and the net debt to EBITDA on 0.8 compared to 1.0 previous year by the end of the quarter. And additionally, in the beginning of July, we also have signed a 300 million euro loan agreement consisting of the return loan to refinance the existing debt and evolving a facility for general purposes. And I will now hand over to you again, Roni.

Thank you, Helena. So the focus for the rest of the year, well, growth. Number one is to continue to drive share gain in key markets, leveraging the full breadth of the portfolio. I think particularly on the consumable side, we've been doing this really well for several quarters now. Second imperative is to accelerate penetration of our combined embryoscope and lab controlled solutions. At the recent ESHRA Congress, we showcased new additional features on our lab control and also the integration of embryoscope and our eWitness, which was very well received by our customers. And then very important to deliver best in class quality and customer service, both of which are synonymous with our company and help to differentiate us from our competitors. In relation to innovation, we have prioritized those programs that deliver solutions to help clinics automate, scale and improve outcomes. So essentially what we're doing is prioritizing the platform related R&D programs. And we've also strengthened our market access capabilities, particularly to help us with some of the US approvals. In relation to operational excellence, I guess the key point I would like to highlight here is automating our manufacturing to increase capacity of key growth drivers. This has been really critical to meet the demand forecast in our consumables business in particular, where we have been gaining share for several quarters across the portfolio. And then in relation to the macroeconomic environment, well, it's clearly quite volatile. Additionally, we need to stay very close to the evolving situation with tariffs and the US IVF executive order in the US. We can clearly see that a majority of patients have postponed, not cancelled, have postponed their IVF treatments in the US. there's only so long that you can do this for because the window for successful IVF is very small. So I guess we will see as the months progress, well, first of all, how soon we can get an update from the US administration and then for how much longer are patients going to postpone. And then I think very importantly as well for our EMEA region, our largest region, which is performing very well, is to be ready to rescale activities in the Middle East in the event that certain markets reopen there. So with that, I'd like to thank you for your attention and we'll now hand over to the moderator to open up for Q&A.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. Please start by asking one question followed by a follow up question. It's then fine to queue up again for more questions. The next question comes from Ulrich Trattner from DNB Carnegie. Please go ahead.

Thank you very much. My question would be on your impression on the underlying growth for respective markets in Q2, both mainly for EMEA and America, and potentially specifically for the U.S., what is driving your market share gains in EMEA consumables as well as in Americas genetics?

Yeah, so thank you for the question, Ulrik. I think part one is what do I think the underlying growth is in EMEA and Americas, correct?

Yes, that's correct.

Yeah, so cycles are down. Cycles are down in the US, but of course for us, America's is US, Canada and South America. But cycles specifically in the US are down versus the previous quarter. So Q1 they were tracking healthily, I would say. And they are down versus Q1 and down versus last year. It's not canceling of cycles per se, it's postponement. I mean, obviously that statement came out from the White House on the 18th of February. It was a very strong statement. ivf is expensive in the us so you can completely understand why patients would would pause um so cycles are down um which to me highlights that our consumables for uh performance and our genetics performance more specifically in north america is very strong that's down to share gains we've been taking share in genetic services not genomics so much but in genetic services in North America for several quarters now. And that really drove the growth in the America's region. EMEA cycles are positive, so cycles are growing, but they're not growing to the level of our consumables gains. And really where we're taking share is it's across the consumables portfolio, Ulrich. As you know, we have been taking share on the media side for quite a while, but we're now taking share in other parts of the consumables portfolio. So disposable devices, pipettes, needles, basically everywhere. I mean, to... to have the growth of of 17 excluding discontinued business is significantly double digit uh above above what the cycle growths are in the region so hopefully i've answered your question the way you intended it yes absolutely and just a follow-up question on generics in in the us

What specific tests are driving growth? And I also note that you've submitted sort of dismissal of the class action suit, the PGTA class action suit during June. So the first question then would be follow up would be which tests are driving growth? Secondly, have you seen any material impact from this on PGTA sales for the US isolated?

Yeah, so I can answer the second part first because it makes the first part easier. There's no impact because the PGTA family of tests is what's driving the growth. It's the largest part of the revenue and it's... It's driving the growth. It's so it's significant. And that's I mean, if you if we look at our 12 month rolling by test, obviously we don't divulge this information. I'm sure we have plenty of competitors listening in this morning, so we don't divulge that by test. But it is the largest part of the revenue in North America. And it's performing well. And it has not been impacted in any shape or form by the class actions.

Great. Thank you, Bronwyn. And I'll get back into the queue.

Sure. Varsha, good. Thank you, Ulrich.

The next question comes from Stan Gustafson from ABG Soondal Collier. Please go ahead.

Yes, good morning. A question on the... cycle growth in the U.S. during the quarter. Can you comment anything about if there were any differences sort of in the start of the quarter compared to the end of the quarter if the growth rate picked up by the end of the quarter or if it's similar growth month over month?

Yeah, so excellent question, Sten, thank you. The cycles got slightly better as the quarter advanced. So the biggest drop was at the biggest drop was at the start of the quarter. It was a little bit less in April, you know, sorry, April, May, June. Essentially, April was bad, May a little bit less bad and then slightly better in June. So it would appear that um i i never like guessing when it comes to executive order to be honest but it would appear based on our data that patients had waited the the 90 days then when they saw that nothing was coming out obviously the big beautiful bill was going through the house and that was the focus of the administration but i think As patients saw that there was no update coming on the IVF executive order, they slowly started to return to the clinics.

Yeah. Excellent. Thank you.

So the phasing was. You're welcome.

And then if I may squeeze in some sort of a follow up there, but sort of on the broader growth for the for the company. It's been relatively muted now for the first half and what do you see near term for the coming two quarters in terms of do you expect growth to improve or can you give any guidance on the outlook for the second half that would be helpful?

yeah so so typically we don't guide but i'll i'll try to give you my my um based on what we see it it's quite region specific stan so um ma is looking looking very solid actually um so that's looking looking good europe across the board is is looking pretty good and for us as a company i don't know what it's like for our competitors but for us as a company we're performing well in in all markets the exception of the middle east which we all know the reasons why that has been has been impacted um asia is very much a mixed bag so so uh cycles have not recovered in in china um they're not they're better than the levels that they were at in quarter one but they have not returned to pre-dragon levels so so china's looking looking soft southeast asia's looking you know a lot better um so it's a little bit of a little bit of a mixed bag in in apac And then the biggest question is obviously the Americas, because North America is the largest part of that market by quite a distance. Cycles had been trending very nicely. It's the largest IVF market in the world. And in the context of being a large market, it also had, prior to the executive order being signed, one of the healthiest growth rates globally. So the postponement or I guess the delay in providing clarity to couples on what that additional financial support will mean, that's making it very difficult to make a call on North American growth. What we do know for sure is that there's pent up demand because speaking to our clinics and to the clinic chains, but also to some of the smaller clinics, They're not seeing patients cancelling cycles. They're seeing them postpone them, which is completely understandable. I mean, IVF is very expensive in the United States and any financial assistance is going to go a long way. In many ways in relation to the US, if we could just get clarity either way, it would be good for growth. Either financial assistance is coming, that's fantastic, or financial assistance is not coming and we can get back to the healthy growth rates that we've had in the market for several years. So it really depends by region, Stan. The sooner we get clarity in the United States, the sooner we can get the growth up.

Excellent. Thank you very much for your comments.

Yeah, you're welcome. Thank you for your questions.

The next question comes from Jakob Lemke from SEB. Please go ahead.

Hi, and good morning. A question on technologies. So in Q2 here, you talked about a bit of a weaker quarter in APAC. America seems to be more of a stronger quarter. So just in general, what is your outlook and sort of how is the pipeline for technologies here, the coming quarters across the regions?

Yeah, so thank you for your question, Jacob. So the pipeline is good. I mean, even in APAC, the pipeline is pretty good for embryoscopes. But we are seeing, again, I'm going to take you through the three regions because the dynamics are quite different by region. So in APAC, Good funnel, very good funnel, even in the markets where cycles are, you know, haven't recovered to historic levels. But we're seeing continued delays in capital purchases. So, again, it's not like the embryoscope orders are being cancelled. It's it's delaying. as clinic chains and individual clinics, I guess, hold on to their cash in volatile times. EMEA is our most penetrated region for embryoscope. um but embryoscope has has been performing well there um and i guess the other thing you need to we we need to think about here jacob is the consumable revenue per embryoscope we don't we don't divulge exactly what that is um but it's it's becoming a a healthier proportion and that's trending very nicely in in emea um and then in america's we've really been focusing on on embryoscope we've been getting some very nice traction there the funnel has been building but again there we have a little bit of a holding pattern less than a pack it has to be said we have a little bit of a little bit of a holding pattern on technologies um just with the whole uh executive order i guess sort of impacting confidence a little bit but the funnel overall for embryoscope is healthy it's the timing of when of when the systems come in and we do see um the time to order which we which we measure uh the time to order is is taking longer it's increasing but consumables revenue per embryoscope across the globe is is increasing nicely so hopefully that gives you a a bit of a flavor jacob

Yeah, and just on APAC then, when do you think this sort of caution from the clinics will move away and they can start to execute their orders?

Yeah, it depends on the markets in APAC. So, I mean, you know, if we just take China as an example, as I mentioned, cycles haven't returned to sort of historic or pre-Dragon levels. um and and i guess the clinics in general would like to see there are some green we have seen some green shoots nothing to get too excited about um but i guess the clinics are are waiting for a little bit more confidence on on the cycle side i mean reimbursement has been improved it hasn't had an impact yet you know our government's going to become more aggressive on the reimbursement side we look what happened what's happened in south korea the government's gone very aggressive on on financial support and it has helped um you know the chinas and japans of this world are likely going to have to do the same if they really want want to move the needle so all of that sort of helps confidence in in investing in in an embryoscope um And then, Jacob, was there a second part to your second question that I missed or have I clarified?

No, you clarified. Maybe if I can just shoot in a more general question before getting back in line. So, you know, I guess 2025 has been a sort of tougher year for many of your key markets. But when you now look into 2026, what are you seeing there? And also, do you think it's possible to get back to your sort of growth target of 10% in next year?

Yeah. So again, it comes back to the three part story. We think EMEA is good and steady, particularly Europe. Europe is better than good and steady. That's for the VitraLife group. We're doing very well in EMEA. If financial support comes in the US, then we will see an uptick in in cycles that would be expected. It won't it won't be explosive because the capacity is not in the system right now. It would take time for that to filter through. But, you know, any financial support in US will help the the Americas region. I guess where I would be more cautious is on is on APAC. um because we do have several large markets there when i say large i mean large in in absolute numbers of ibf cycles and we see that you know despite improved reimbursement the cycles quarter over quarter you can have snakes dragons and all these sorts of things but if you if you look at the rolling 12 24 month cycles it's it's it's not very exciting so APAC seems to have more endemic challenges, one of which is the cost of raising the overall cost of raising a child. And I think that's why you're starting to see some of the government step in. So I think, you know, again, it may a study more optimistic for for America's, but more conservative outlook for APAC.

OK, thanks, I'll get back in line.

You're welcome. Thank you, Jacob.

The next question comes from Johan Unneris from Red Eye. Please go ahead.

Great. Thanks for taking our questions. The first one, I can follow up on. On the U.S. side, clearly the consumers or the clients are hesitant and postponing. Is there an element of... that the administration budget also affects the clinic in terms of activity and perhaps encouraging patients to go further.

I'm sorry, Johan, I'm struggling to hear you a little bit, so I think your question and correct. Maybe could you repeat the question? Yeah, yeah, yeah. If you could, that would be great.

Let's see, I can change perhaps go directly. Maybe my iPhone phone was great. Yeah, is that better?

Yeah, that's much better.

Thank you. I'm just sorry for the confusion. Now it's sealed so it doesn't pop over automatically. Yeah, no, your message regarding U.S. in terms of patient behavior is pretty clear. It seems to be that a lot of patients are postponing and not canceling. But in terms of there is, of course, the changes, of course, in budgets and administration, is that having an impact perhaps in how the centers are incentivizing their patients to go further? There could be an element of that as well, I suspect.

Yeah, we're not the industry, not VitraLife Group. So reproductive health as a whole isn't so impacted by some of the central government cuts or cuts to things like NIH funding. I mean, we're not completely immune to it, but most of the clinics in the United States are part of a chain, 60%, and most of those chains are privately owned. um there are some for sure there are some clinics that are linked to academic centers like you know the the columbias and cornells of of this world but so far the sort of funding on that reproductive health side hasn't been impacted i mean the the administration has been pretty clear not just president trump but just the wider administration has been very clear that they want americans having more babies um and and they're very pro providing support for couples to do that or for individuals to do that um so so we haven't re you know to date i couldn't say we've been impacted by that in any material way yeah great and a similar question related to impact then um go ahead johan sorry No, I was going to say healthcare, which would be significantly impacted, but not really our space. Yeah.

Yeah. And in the APEC region, the sort of more regional approach doesn't seem to work very well, or at least it's causing friction, to put it mildly. um at the same time the reimbursement seems to improve what should we expect here should we expect more reimbursement to try to kick start the market from a central perspective or should we expect the the regional approach to to be start to be backtracked from to some extent yeah um difficult to predict but i think

I think the green shoots that we're seeing in countries like Korea, where the decline is halted and from a very low base, it has to be said. But I think that's going to become a proxy for how aggressive governments are going to go. And what I would say is what we're hearing much more of in APAC is not just IVF reimbursement and coverage, but improved support for the cost of raising the child. So things like tax breaks or payments for having children. So I think where we're going to see more support is on the sort of additional costs of raising a child as well as reimbursement costs for IVF. You know, are they going to do this? Are they not? I don't think they're going to have any choice if you look at the declining birth rates. I mean, this is this is only going in one direction. So the biggest factor here is people are having less children. They're delaying having the children that they do have, which means they inevitably or a lot of them are going to need IVF support. And population decline is very stark now globally. There was a recent UN report published in April. So governments will have no choice but to step in. I don't see them standing by and watching their populations fall off a cliff. So APAC in general, Asia in general, is going to have to get more aggressive on helping couples in the case of APAC to have a child and child raising costs.

That, of course, sounds very realistic and likely, but indirect incentives and support may, of course, take some time to get traction and go through Parliament and the likes.

Yeah, exactly. No, I think you're right. I think in the shorter term, that's going to take time for sure.

Yeah. Okay. Thank you.

You're welcome, Johan.

The next question comes from Ludvig Lundgren from Nordia. Please go ahead.

Hi. So two questions from me on costs. OPEX sales was 42% here in Q2, the highest level in quite a while for Victor Life. I wonder if there was any sort of one-off costs in the quarter and how we should think about OPEX sales moving into H2.

Helena? As we said earlier, there are ongoing activities within the company that has actually increased the cost for this quarter and part of it is considered to be one of costs of it. Some of it will continue, but part of it will be one of for this quarter.

Okay, thank you. And then On the FX side, I suppose that has also affected margins quite a bit here in Q2. So I wonder if you could share the organic OPEX growth for the group in Q2.

As I said also earlier, it has been offsetting a little bit of the costs in it, but the major part is on the gross income part. So we have still quite a major part in the Swedish crown in our OPEX.

Okay, thank you.

Thank you, Ludvig. Thank you. The next question comes from Susanna Quekborner from SHB. Please go ahead.

Hello, and thank you for taking my question. I just wanted to follow up on the big question. So regarding the margin decline that we saw in the Q2 report, should we think of that as a one-off, or is it fair to continue assuming the financial targets in terms of the EBITDA? And then as a follow-up question, I wanted to just sort of get a better grasp of Japan because historically their contribution in APAC and specifically the benefits you've seen in sales as a consequence of reimbursement. So maybe you can give us a little bit of granularity on that. Thank you.

Yes, so I'll hand over to Helena to take your first question, and I'll take your Japan one, if that's okay, Susanna. Thank you for your questions.

Thank you, Susanna. As well, the margin then, part of it is coming from the currency, as we have already mentioned. But also some of it now is coming into play. It's not a major cost, but it is coming in our cost for supply chain here during Q2. And as you know, that is still on the pace going forward as well. And then we have also some minor effects from product mix and one-offs also in the margin. Okay.

Yeah, Japan, Susanna, that's an interesting one. And it's nice to get a question about Japan. So Japan, very large IVF market, really good or comparatively good reimbursement system. And the reimbursement system has been gradually improving and including things like wider, wider genetic testing. So what we see in Japan is we see some signs of pickup on the consumable side of the portfolio, which is good. What I can't give you is a breakdown of how much of that is coming from cycle growth and how much of it is coming from share gain. But we estimate internally that that our Japan consumable growth is mainly coming from share gain. But it's good to see it. What I would say is Japan is also impacted by the delaying on the capital purchases. So that's not just, it's across APAC, even in the markets that are showing some green shoots like South Korea and Japan. um but it you you know you're correct it's it's a sizable market it has good reimbursement um i think in fairness to to the ministry of health in japan they are increasingly trying to find ways to support couples on on the reimbursement and on the financial side and maybe some of those green shoots are starting to come through yeah so hopefully that answers your questions susanna Yes, thank you.

Welcome. Next question comes from Ulrich Trattner from DNB Carnegie. Please go ahead.

Thank you very much for taking some additional questions. And also on the OPEC side, I understand the rationale behind you increasing your selling expenses, especially in America. However, admin expenses up more than 10% year over year. And refer to ongoing activities. What are these ongoing activities? And I think, Helena, you mentioned that there would be some one-off in these, if you can explain what these one-offs are, that would be very helpful.

Kind of one-off is more that we have working with with a legal support here in relating to the class actions lawsuit in US, as well as we have some costs as well in relation to insurances connected to this as well in US.

Great. And what is ongoing activities then that would sort of make up the rest of this?

Yes, I would say that the major part of it is really one-offs in the quarter, but some of it will continue.

But we should see it as these ongoing activities and one-offs being mostly related to the class action lawsuits in the US on different cost posts.

Yeah, what I would say, Ulrich, is sorry, Helena, to jump in your turf, but we've been very tightly controlling everything from headcount, T&E, costume, and obviously that's the responsible thing to do. So it's not a sort of a blow up in any area. It's been, you know, a couple of small items. I think Helena's correct there. It's not the majority, but a significant proportion of it in this quarter comes from defence costs for the PGTA legal action, which you can see is starting to advance slowly, and then insurance costs related to the PGTA class action. uh maybe not the majority of it but a significant proportion of that some of that is is one off um not all of it but some of it is is is one-off cost so for example the on a specific legal defense that's going to be one off on insurance that tends to be a little bit longer term so hopefully that's a little bit more clarity for you on that one yeah um absolutely yeah but not like we have any particular line that's sort of blowing up we've been we've been in tight

on top of it yeah we've been very much very much on top on on top of the cost so yeah although that's great thanks for that for the granularity and and some additional like an additional question here on my end and I'll get back uh it's on the discontinued markets if there's any Do you estimate any sort of dramatic changes in H2 versus H1 in terms of those markets contribution to both top line and bottom line or just kind of the same?

Yeah, so the biggest impact from the discontinued business was in this quarter. This was the biggest one actually in EMEA. Then we get more back into the range that Helena talked about, which was 3.2%. So it doesn't get lumpier, Ulrich, as the quarters advance. Yeah, this is the biggest one. This was the strongest quarter in that market in 2024. So it gave RMA an additional headwind this quarter. Yeah.

Perfect. Thank you very much.

Maybe your backup question, because I know how you think. Well, I know partially how you think. Do we see additional activity in countries close to that discontinued market? No, we don't. We don't see that. So, yeah.

That's great. And the same on profitability as well, not only top line, I guess. sorry did you catch my my last follow-up there no I think we was disconnected so so please did you have another question okay it was not Yeah, yeah. Sorry. It was just clarification that it was not only on the strongest on top line, but also on bottom line.

Yeah.

In the discontinuing markets.

Yeah, exactly. So this quarter was strongest on top and bottom. And it gets to more. Great. Yeah. And it gets to more normalized discontinued levels in Q3 and Q4. This was the quarter where it had the greatest negative impact, I guess is the simplest way to put it. Yeah.

Perfect. Thank you very much.

Yeah, you're welcome. Okay.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

So I would just like to thank you all for your time this morning. Thank you for your questions. And I wish you all a very nice summer vacation on behalf of myself and Helena. Tack så mycket and hej då.