Vitrolife AB (publ)

Welcome to Vitrolife Q3 2025 earnings call. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their 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. Now I will hand the conference over to CEO Bronwyn Brophy and Per Eerskog. Please go ahead.

Good morning, everyone. I would like to welcome you to the Vitralife Group Q3 2025 Earnings Report. My name is Bronwyn O'Connor and I'm joined this morning by our new CFO, Pad Iadarsgog. So I will now move you on to the first slide with our Q3 2025 highlights. I would like to start by highlighting three key achievements during the quarter. The first highlight is that we delivered 5% organic growth in local currencies, excluding discontinued business, despite the fact that the reproductive health industry as a whole has continued to face substantial macroeconomic and geopolitical challenges during the quarter. The second highlight I would like to bring to your attention is our growth in Americas. Sales increased by 11% in local currencies with strong growth across the entire portfolio and in all markets in the regions. And finally, we delivered strong operating cash flow of 255 million SEC related to positive contributions from our networking capital. We'll now move to the key financial highlights. So starting with the market, conditions remain challenging in some of the key markets in the IVF industry. However, we did see some small and early signs of recovery in Americas. In EMEA, Western Europe is performing well. However, the market in the Middle East remains impacted by the geopolitical situation. APAC also shows some signs of recovery with the exception of China. Cycle growth in APAC overall remains below the other regions. Sales. So sales in the quarter amounted to 835 million SEIC, an increase of 5% in local currencies excluding discontinued business and minus 4% in SEIC impacted by minus 7% due to currency effects. Gross margin stable, in fact, slightly positive at 58.9%. And EBITDA was 253 million SEC in the quarter. An EBITDA margin of 30.3. This was also impacted by a negative currency impact. And then strong operating cash flow of 255 million SEC from our net working capital, as I mentioned previously. We will now move on and take a look at our sales and growth per geographic segment. We're very pleased, in fact, with our sales performance in Americas, delivering 11% growth. And even more pleasingly is we saw growth across the entire portfolio and in all markets. So just bear in mind, Americas is the US, North America, and also South America. IVF cycle growth is showing early signs of recovery in the US. However, share gains drove our growth rates above the market growth rates. Growth in EMEA was 4%, excluding discontinued business. Once again, we delivered strong growth in consumables as a result of share gains in key markets in Western Europe. The geopolitical situation in the Middle East has impacted the region overall, but all other markets in EMEA remain strong for the Vitralife Group. Sales in APAC increased by 1%, the first positive quarter for the Vitralife Group year to date. We delivered strong growth across all markets in the APAC region, with the exception of China, where cycles remain depressed despite improved reimbursement. And then another point that I think is critical to point out is the healthy regional revenue contribution of our company. This has been instrumental in helping us navigate the challenging economic environment. So if you look at our share of total sales, we now have 33% coming from Americas, 37% coming from EMEA, and 30% coming from APAC. Okay, we'll now move into market region EMEA and take a closer look. So EMEA remains our largest region delivering sales of 309 million sec in the quarter and an organic growth of 4% in local currencies. Again, this quarter, Sales in consumables were strong, plus 7% in local currencies, excluding discontinued business due to share gains in key focus markets in media and disposable devices. Sales in technologies, plus 6% in local currencies, driven mainly by customer wins for our lab-controlled solutions, which is really nice to see. We are seeing demand steadily increase for our witnessing solution and customers also really like the integrated embryoscope and e-witness solution. Genetics performance was negatively impacted by the Middle East, however, a strong performance by our genetics business in Western Europe. Okay, we'll now move on to market region Americas. A very strong quarter in our America's region, despite the fact that cycles have not fully recovered in the United States. With an organic growth of 11% and strong growth across the entire portfolio in all markets in the region, we believe we are fully leveraging our relevance to our customers. The strategic investments that we have made in sales and marketing in the US resulted in us delivering our strongest quarter in 11 quarters, which share gains in key parts of the portfolio. Strong growth in technologies driven by increased adoption of embryo scope across the region, which is great to see. This has been a key focus area for us, as many of you will know. And we are also starting to build a healthy pipeline of customers seeking to install our witnessing solution. So the combined offering of embryoscope and witnessing is also starting to gain traction in North America, as we are experiencing in this quarter in EMEA. Okay. And then our market region, APAC. APAC, the first positive quarter of the year to date. So APAC delivered an organic growth of 1% with strong growth in all markets across APAC with one exception, that exception being China. We delivered share gains in disposable devices and our media market position remains very strong across the region. Coming back then to China, despite the increasing reimbursement, we don't yet see an uplift in cycles. Consumer confidence, we expect, is also impacting the timing of patients presenting for IVF. I do want to point out that we are focusing on other key markets in the region where the Vitrolife Group holds strong positions and cycle growth is increasing. I will now hand over to Pad and he will take you through our geographical segments.

Thank you, Bronwyn. We are now on page nine, where I will provide some more details of the geographical segments, America, EMEA and APAC. On America, sales amounted to 276 million SEK, reflecting 11% organic growth in local currencies and 1% growth in SEK, negatively impacted by currencies. The strong growth can be seen across the portfolio. Gross income amounted to 149 million SEK with a gross margin of 54. This compares to the last year's gross income of 144 million SEK and a margin of 52.7%, an improvement of 1.3% points compared to previous quarter, mainly driven by product mix. Selling expenses for the quarter rose from 69 to 77 million SEK, reflecting ongoing investments in sales and marketing in the US as previously announced. The market contribution margin for the quarter was 26.0 compared to 27.5 last year, impacted by the increased investment into sales and marketing capabilities in Americas. Moving to EMEA, sales declined by 2% in local currencies and by 6% in SEC, totaling to 309 million SEC. The sales were negative, impacted by currency of minus 4%. Excluding the discontinued business, sales increased by 7% in local currencies. Gross income was 192 million SEK with a gross margin of 62.0 compared to 198 million SEK and a margin of 60.4 last year. Also here mainly driven by the product mix. The selling expenses decreased from 73 million SEK to 68 million SEK. The market contribution margin for the quarter was 39.9% compared to 38.1%, explained by an improved gross margin and lower selling expenses. In APEC, sales amounted to 250 million SEK, reflecting an increase by 1% organic growth in local currencies, but a 6% decrease in SEK, negatively impacted by currency. Gross income was 151 million SEK, with a gross margin of 60.4%. which is lower than previous year's gross income of 167 million SEK and a gross margin of 62.8, a decline of 2.4 percentage point compared to previous quarter. Negatively impacted by currency and negative product and market mix within APEC. Selling expenses decreased from 48 million SEK to 46 million SEK. The market contribution for the quarter was 42.1 down from 44.7 last year. Let's move to the next slide. Then Q3 financial highlights. As earlier mentioned, the sales amounted to 835 million SEK compared to previous year, with the sales of 867 million SEK corresponding to 3%. growth in local currencies and 4% decrease in SEC and 5% increase in local currency excluding discontinued business. The gross income amounted to 492 million SEC compared to 508 million SEC previous year, corresponding to a gross margin of 58.9, margin up from 58.6 previous year. The margin improved from a positive product mix, despite the negative impact from the currencies. In the third quarter, the increase in operating expenses was mainly driven by investment in capabilities, especially within IT and digitalization. All in all, that gives us an EBITDA of 253 million SEC compared to 289 million SEC previous year. which gives us an EBITDA margin of 30.3 compared to 33.4. The decrease in margin is mainly impacted by currency fluctuation as well as an increase in investment in capabilities, especially within IT and digitalization. Let's move on to the next slide. Some comments about the operating expenses. In Q3, our operating expenses were 20 million lower than Q2 this year, but compared to Q3 last year, OPEX was 40 million sec higher, though last year's Q3 was lower than normal levels. Overall, Q3 aligns well with our average OPEX level over the past seven quarters, reflecting a consistent and stable cost trend. On the selling expenses, we had higher selling expenses in the US due to the investment in sales and marketing, but it was offset by lower cost in the other regions, so it stayed stable. On administrative expenses, it was increased by the strategic investment in IT and digitalization. Our R&D expenses slightly decreased year over year, mainly due to timing. And then on other operating expenses, this is mainly related to currency fluctuations. Next slide, please. And then finally, we will comment upon the year-to-date numbers. Sales for the first nine months amounted to 2.5 billion SEK, corresponding to 1% growth in local currencies, a 4% decrease in SEK, and a positive 4% growth increase in local currencies, excluding discontinued business. The gross margin decreased It decreased from 58.6 to 58.1, mainly due to currency fluctuations. The EBITDA amounted to 253 million SEC compared to 888 million SEC, corresponding to an EBITDA margin of 29.5 versus 33.5 previous year. The decrease in margin is heavily impacted by currency effects driven by a strengthened SEC against other currencies. The margin was also negatively affected by the increased selling expenses, of 577 million SEK in the US, but also negatively by the product and market mix. Net income amounted to 301 million SEK compared to 375 million SEK previous year, heavily impacted by currency fluctuations, which gives earning per share of 2.23 Swedish krona compared to 2.76 Swedish krona previous year. Our operating cash flow amounted to 475 million SEK for the first nine months compared to 640 million SEK previous years, where of 255 million SEK came from Q3. Changes in working capital had a negative effect of 97 million SEK this year compared to 97 million SEK last year. Our leverage net debt to EBITDA improved to 0.7 compared to 0.8 previous year by the end of the quarter. And by that I will now hand over to you again Bronwyn.