Vitrolife AB (publ)

Good morning, everyone, and welcome to the Vitralife Group Q4 report. I'll now move you to the first slide of the presentation. Let me start with the highlights. We delivered 6% organic growth in local currencies, excluding discontinued business, beating our own internal forecast for the quarter in relation to the top line. Strong growth in Americas, again driven by North America. I should also call out that APAC also performed very well in the quarter with 10% organic growth in local currencies. And the third point that I would like to highlight is that following a strategic review of our genetic services business, we announced a restructuring program in December. This will allow us to focus on the key tests and markets with stronger prospects for profitable growth. I'll now move you on to the next slide, please, and take you through the key highlights. So sales in the fourth quarter were 891 million SEIC, an organic growth in local currencies of 6%, as I mentioned, but significantly impacted by minus 10% from currency effects. Gross margin was 58.6 when adjusted for the restructuring. This was a decrease versus Q4 2024, which was exceptionally strong. Additional factors impacting the gross margin are a currency impact, which is the majority, in fact, the regional mix. So you will see in the coming slides, we are increasingly having a greater percentage of our revenue coming from Americas, And then we also have a mix effect within consumables in APAC, where we had a targeted campaign in disposable devices. Moving down then to EBITDA, we had EBITDA of 251 million SEC in the quarter, equating to an EBITDA margin of 28.2%. We also have a significant negative currency impact here, just under 3%. um regional mix and product mix as i mentioned also in relation to margin is is playing a role and we do have higher opex here due to strategic investments that we made in sales and marketing in north america of course that also helped us to drive the growth there and also in it where we have made investments to support our customer journey and also enabling us to drive growth in north america I'd like then to comment on the operating cash flow, 160 million sec. Clearly here the starting point is lower for the reasons that I have just explained. Last year we also had a positive effect from changes in net working capital. So then for the full year, we have organic growth in local currencies, excluding discontinued business of 4%. And actually Par in his final slide of the financial section will take you through the full year numbers in detail. Okay, moving on then please to the sales and growth per geographical segment. So I'll start with Americas, where, as I said, we delivered 9% organic growth in local currencies, driven by a very strong performance in our key focus market of North America. Americas, as you can now see, accounts for 34% of our revenues. Moving on then to EMEA, a challenging quarter for our EMEA region, as we expected, due to very high technology quarter across the region in Q4 2024. I do want to highlight that Europe is performing well. However, genetic services in the Middle East is impacting the overall EMEA results. A great quarter of consumables across the region with share gains in key focus markets. EMEA now accounting, as you can see there, for 34% of the share of token sales. Okay, moving on then to APAC, we have strong growth in APAC, up 10% organic growth in local currencies, and this region outperformed our internal expectations in both consumables and technologies. Okay, we'll move on now and take a deeper dive into each of the regions, starting with market region EMEA. Sales in EMEA were 333 million SEAC, a decrease of minus 1% in local currencies, excluding discontinued business. Consumables delivered 11% growth, well above market growth levels. And this was driven by share gains in key focus markets where we decided to double down. So you're really going to see that focus is the name of the game for us. As I previously mentioned, we were very challenged to deliver growth in technologies in this region due to the comps with last year, so this decline was forecasted and expected. What I am pleased with is the run rate revenue coming from the consumables part of technologies is performing strongly. Moving into genetics then in the EMEA region, genetics is performing very well in Europe. However, clinics in the Middle East have insourced activities to boost their income during the downturn from the geopolitical situation, and we don't expect this business to return. Typically, when clinics insource, it tends to stay that way. Moving on then to market region Americas. Americas, we had sales of 299 million sales in Americas and organic growth of 9% in local currencies. We delivered strong growth across the entire portfolio in all markets in the region, which was great to see. The investments we have made in sales and marketing in North America are clearly paying off and there is no doubt that we are taking share in this key region for the Vitrolife Group. We have been focusing the team on increasing the penetration of embryoscope, and we were delighted to see a 40% growth in technologies in this region in the quarter. Genetics also continued to perform well, driven by share gain momentum. Earlier in the year, we had taken quite a bit of share in North America, and that share gain momentum continued in Q4. Okay, I will now move you on to market region APAC and give you some more colour on the performance here. So a strong finish to the year in our APAC region. Growth of 11% in local currencies in consumables driven by share gains in disposable devices where we launched a targeted campaign. We delivered 13% growth in technologies as clinics finally released year-end budgets, thereby allowing for investments in capital purchases. So overall, a strong finish to the year after a tough first half in APAC. I will now hand you over to Pat, who will take you through further details on our geographical segments.

Thank you, Bronwyn. We are now on page number nine in the deck, where I will provide more details of the geographical segment Americas, EMEA and APAC. Starting with the Americas on the left side. As Bronwyn mentioned, SACE amounted to 299 million SEK, reflecting a 9% organic growth in local currencies and a minus 4% growth in SEC, negatively impacted by currency. Gross income amounted to 167 million SEK with a gross margin of 55.7. This compares to last year's gross income of 171 million SEK and a margin of 55.0. An improvement of 0.5 percent points driven by the products mix despite the negative impact by the FX effect on the gross margin. Selling expenses for the quarter rose from 76 million SEK to 83 million SEK, reflecting the ongoing investments in sales and marketing in the U.S. As previously announced, the market contribution for the quarter was 27.9% compared with 30.5% last year, impacted by the increased strategic investment into sales and marketing capabilities. Let's move on to EMEA. There we have a minus 7% decrease in local currencies and minus 13 in SEC, totaling to 333 million SEC sales. The sales were negatively impacted by currencies and the discontinued business. Excluding the discontinued business, sales decreased by minus 1% in local currencies. Gross income was 195 million SEC with a gross margin of 58.5 compared to margin of 63.9 last year, mainly driven by the restructuring reserve, negative currency and product mix effects. The gross margin excluding the restructuring was 60.2. Selling expenses increased from 82 million SEK to 100 million SEK Excluding the restructuring cost, the selling expense amounted to 79 million SEK, which is in line with last year's EBLN. The market contribution margin for the quarter was 28.4% compared to 42.4% explained by restructuring cert and publics. The adjusted market contribution was 36.4%. In APEC, sales amounted to 259 million SEK, reflecting an increase by 10% organic growth in local currencies, but a 2% decrease in SEK, negatively impacted by currency. Gross income was 155 million SEK, with a gross margin of 59.9%. which is lower than previous year's gross income of 170 million SEK and a gross margin of 64.2%. A decline of 4.3% points compared to previous quarters, negatively impacted by currency and products mixed within the consumables in APAC. The selling expenses increased from 40 million SEK to 45 million SEK. The market contribution margin for the quarter was 42.5, down from 49.1, last year explained by lower gross margin and somewhat higher OPEX in the quarter. Let's move to the next slide. On this slide, I will comment on the Q4 financial highlights. starting with net sales. As earlier mentioned, the sales amounted to 891 million SEK compared to previous year with a sales of 959 million SEK corresponding to a 3% growth in local currencies, a minus 7% decrease in SEK and positive growth of 6% in local currencies excluding discontinued business. The gross margin income amounted to 522 million SEK compared to 586 58.0 down from 61.1. Q4 2024 was an exceptional strong quarter from a margin perspective. Adjusted for the restructuring, the margin Q4 this year was 58.6, which is more in line with our historical performance. The drop in the margin is explained by mainly currency effect, but also regional mix effect, and also the mix effect coming from the consumables in APAC. And then I move to EBITDA. EBITDA, all in all, this gives us an adjusted EBITDA of 251 million SEK compared to 337 million SEK previous years, as I just mentioned. This was an exceptionally strong quarter last year. This gives us an EBITDA margin of 28.2% when adjusting for restructuring expenses compared to 35.1% last year. The drop in margin is explained by currency effect, freedom of mix effect, and mix effect within the consumer rules in APEC. Okay, let's move to the next slide where I will go more into the latest on the operation expense development last year compared to this year. of 361 million SEK, and this year we ended up at 378 million SEK. And let me explain the bridge here then. On the selling expense, we saw an increase. I'll start over. This is excluding impairment and restructuring reserves. So this is clean from those on-time bookings. So the selling expense, increased by 6 million SEK, reflecting the investment we have done in North America in sales and marketing. The admin expense, we saw a reduction of 2 million We still have some increased IT expenses here, but that has been offset by reduction in other admin areas. So a positive net effect. On the R&D, we saw an increase of 5 ms in the quarter compared to last year, which is mainly a phasing effect. And the spending here is in line with our effort to increase our R&D expenses in preparation of new product launches. And on the other operating expenses, In this one, we also have the FX effect from our revaluation of accounts receivables and accounts payable had a negative effect in total. Okay, thank you. And then key financials. Here I will focus on the year-to-date column mainly. And the sales stand for the full year amounted to 3.5 billion SEK corresponding to a 2% growth in local currencies, a 5% decrease in SEK, and a 4% increase in local currencies excluding discontinued business. The gross margin decreased from 59.3 to 58.1, mainly due to currency effects. The adjusted gross margin is 58.2. The EBITDA for the full year amounted to 949 million SEK compared to 1,225 million SEK corresponding to an EBITDA margin of 27.6 versus 34.0 previous year. The adjusted EBITDA margin was 29.2. for the full year. And again, the decrease in the margin is heavily impacted by currency effect driven by a strength in SEC against other currencies. The margin was also negatively affected by the increase on OPEX, which I explained is mainly selling expenses in North America and our IT investment. Net income amounted to 390 million SEC compared to 540 million SEC previous year, heavily affected by the currency fluctuations. This gives an earnings per share of 2.89 krona compared to 3.78 krona last year. On the operating cash flow, it's amounted to 675 million SEK for the full year compared to 907 million SEK previous year. The main reason is the underlying result, but also we had a negative impact on the changes in networking capital this year, explaining part of the difference. Our leverage net debt to Ebitda ended up at 0.7 compared to 0.7 previous year. The proposed dividend from the board is 110 per share, which is the same as last year. And I will now hand over back to you again, Bronwyn.

Thank you, Pat. So moving on then to the focus for 2026. And as always, we will focus on three key areas, on growth and innovation and on operational excellence. And I'd like to start with growth. we will continue to drive share gains in key markets and that's very important we're not going to be all things to all people in key markets leveraging the full breadth of the portfolio i think one of the statistics that we've been tracking very closely is the percentage of customers who are now buying across consumables technologies and genetic services and this is trending up nicely So the strategy of leveraging the full breadth is working and will continue to drive share gains using our portfolio position. The second point on growth is acceleration, penetration of our combined embryoscope and lab control solutions. We've really doubled down here. That's why we're particularly happy with the 40% growth in North America in Q4. And it's really as a result of this combined embryoscope and lab control solutions. Third point, very important. We have been investing in commercial excellence capabilities for the past 12 months. It improves our segmentation. It helps us to drive profitable growth. And back to the point around taking market share, we've been tracking this very closely now with much more advanced metrics than we had previously. So we will further leverage the commercial excellence capabilities in 2026, again, to drive that profitable growth. Moving on then to innovation, we have prioritized the programs that will have the greatest impact and relevant for customers and patients. I think that's very important. And then we do hear clinics and customers crying out for help with automation. So we will further develop and we continue to invest in our IVF platform. this will ultimately help clinics to automate, to scale, and to drive efficiency. And actually, if you look at the integration that we now have between Embryoscope and our witnessing solution, you can see the forays that we are making in that area. In relation to operational excellence, we have invested in IT and digital capabilities. We need to make further investments there to improve the customer journey. This is really also helped us in North America last year, and then some of the key focus markets in APAC in Europe, and it also helps to increase our efficiency. Another focus area in relation to operational excellence heading into 2026 is we want to drive improvements in our internal processes and workflows to optimize our cost base. And then, as you know, the Vitrolife Group doesn't like to issue guidance, but we just wanted to give an opinion on the macroeconomic conditions as we turn the corner and are now into 2026. We do expect market conditions to return to more normal levels this year, thereby providing greater opportunities for us to drive profitable growth. So this will be the focus for the company in 2026. And with that, I think we can now move into Q&A. Thank you very much for your attention.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 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 Jakob Lemke from SEB. Please go ahead.

Yes, hi, good morning. My first question is on the gross margin. You mentioned regional mix here during the call. I just want to clarify that is this mainly related to the sort of different business mix you have in the regions or are there anything else behind that in the regional mix? And then also if you can sort of give an indication of sort of 58, 59% gross margin is the normal we should expect going forward.

Yeah, on the gross margin, as we explained, it's a big impact from currency, but also partly it's regional mix. It's less impact from, it's a negative impact, but it's less impact compared to the current impact. And it's very much driven by the growth in U.S., Yeah, and what was the second part of your question?

No, just given the moving parts, I guess the range between sort of 58% and 59% on the gross margin is something we should expect going forward.

Yeah, I can take that one. And maybe just to add one point to Pat's point, just on the gross margin, Jacob, because I know you know us very well. So there is a regional mix effect. Pat is spot on there with the U.S. growth. I guess everybody knows that one. There is also a mix effect within consumables in APAC. So you can see that there. In terms of what you can expect going forward, Q4 last year wasn't normal. It was abnormally good. I think we will return to more normal levels, more in the 59% range. We're not expecting them the mixed effect to be this extreme as we move through 2026. We're also working on initiatives to improve our profitability in North America. As you know, North America has a big component of genetic services, but obviously the more we can increase technologies, penetration, embryoscope, and share gains on consumable size, that helps. yeah, I guess this quarter we're sort of comparing two extremes, if you like, but we expect to return to more normal gross margin levels in 2026. Does that help to answer your question without me repeating too much?

Is that okay, Jacob?

Yeah, that's very clear. Then my follow-up question is just on trying to understand the admin costs here in Q4, because, I mean, you had sort of surprise high admin costs in Q4 last year, and now they're also looking quite high when we disregard the one loss as well. And yes, sort of just what is really behind that and also what you expect for costs related to the legal process in the US for 2026.

Yeah, on the admin cost, in there we have IT and then we have other support functions like finance and HR and legal. And IT spend, as we have communicated also previous workers, have increased somewhat as we invest in our IT capabilities. That increase in IT that we've seen in the last couple it has been partly offset by reduced admin costs in other areas such as finance, legal and HR. So this level you see right now is the underlying base. We have also communicated in December a restructuring program where we are attacking or admin cost and selling cost in 2026.

Okay and if you could comment on expectations on legal costs maybe for 2026?

We have not made any reservation for legal costs related to the class action in the US and we don't plan to either, we don't see the need for that.

Okay, thank you.

Thank you, Jacob.

The next question comes from Ulrich Trattner from DNB Carnegie. Please go ahead.

Good morning, and thanks for taking my questions. A little bit further, we're going to dig a little bit deeper into this IT investment you're doing, if you can provide us with some more specific on what it actually is, how big are these investments, and for how long do you expect to invest into essentially the back end of your business?

I can take this one, Pat. Yeah, so I guess IT investments going into two key areas, Ulrich. The first part is on the customer-facing, customer journey, digitalizing how we interact with clinics but also with patients. And this is a key enabler of driving growth. particularly in North America, but also increasingly in Western Europe. So I would say that's category one. We're also making investments in IT that will allow us in time, and it will take time, to improve our efficiencies. So that can be efficiency in lab operations, Things like limbs, obviously, when you're running a services business, you don't have to have the best of every system, but you want to be able to drive efficiency and also scale. So apart from the customer journey, the other investments are going into, I guess, what I would call backbone investments. Now, again, we have to be pragmatic here. They need to be linked to driving growth. and we're not expecting to be best in class and everything related to IT, but we do believe there is a need to make investments in order to support our growth ambitions. Does that answer your question a little bit?

Sure, yeah, and I'd love to clarify. So it sounds like there's not IT investment into IT, products it's more customer like more in sales and marketing kind of it infrastructure rather than it investment into products yeah i think that's a fair comment yeah um i mean we are as part of our or d program as you know i mean we've

We've openly stated that we are aiming to build an end-to-end IVF platform. So there are some digital investments there, but the vast majority are going on the customer sales and marketing drive growth side. Either drive growth or help us to improve efficiency. So yeah, you're correct with that assumption.

Great. And just a follow-up question on the general OPEX math and quantification of FX effect on EBTA, if you're able to give us some hint on the quantification of the negative FX effects here for Q4. I know the top line effect here, but how big was the effect on EBTA?

Yeah, all in all the effect on the BDR margin is approximately two and a half percent points affecting the BDR margin negatively.

Great. Thank you and I'll get back into the queue.

Thanks Ulrik. The next question comes from Stan Gustafson from ABG Sundahl Collier. Please go ahead.

Good morning. First of all, clarification or maybe confirmation. Did you say that the adjusted contribution margin for the EMEA region was 36.4% in the quarter?

Adjusted margin. Can you repeat the question, Sam?

Yeah.

Can you repeat the question, Stan? Sorry, you just went out of the critical moment.

Yeah, sure. I think you mentioned the adjusted contribution margin in the EMEA region.

Yeah, it is. The adjusted one is 36.4.

Okay, great. So my question is, what exactly are you restructuring in the EMEA region?

and how should we think about sort of will there be savings coming out of that or what exactly have you done in the region yeah i mean this instruction is connected to the announcement we made in december related to the genetic services business we are We are stopping providing two product lines, it's GDPX and NAVSE, and we are also exiting some markets. And of course that affects the whole company, but it has a larger effect on this region compared to the other regions. So the restructuring cost is related to people to a large extent. that are affected by this restructuring action that we are taking.

Yeah, maybe to expand a slightly different way, Sten. We announced the restructuring, as Pat mentioned, in December. The region that's most impacted by that restructuring is EMEA. The reason why EMEA is the most impacted region is because most of the NASA and GDPX revenue was in that region. And most of the markets that we will be exiting is within the EMEA region. So that's, yeah, maybe a slightly different way to explain it. Does that answer your question?

Yeah, absolutely. That clarifies a lot. And I do remember you announced it and we were discussing, you know, different potential cost savings coming out of it. So it all makes sense. Thank you very much. I'll get back into the queue. Thank you.

Thank you, Stan. The next question comes from Ludwig Germunder from Handelsbanken. Please go ahead.

Yes, thank you. Good morning, and thank you for taking my question. So I'll stick to the one question, and it's about the organic growth that you, I think, 3% reported, but 6% excluding discontinued businesses. Would you be willing to help us understand the phase out of the product? For how long will the tests continue to be a part of your sales? and when they expect the phased out products to be fully phased out.

Yeah, this continued business doesn't relate to the exiting of these two product lines. This relates to the exiting of the markets announced also last year, or December 2023 we announced that. The exiting of these product lines that we announced last December are taking place right now. We expect it to be finalized in Q1.

Yeah, most of it should be. Yeah, sorry, just one correction. So we exited that market. I think most people know which market it is. So we exited that market in December 2024. So we have a full 2025 having to explain organic growth in local currencies, excluding discontinued business. And it was because of that exit of that sizable market in Q4 2024. With the restructuring that we announced in December, our goal is to have, essentially to be fully out of those tests and most of those markets by the end of the first half. We have set ourselves an accelerated target on that. So we, in certain instances, we'd like to be done and dusted by the end of Q1, but our commitment in that announcement is by mid-year. Does that help to answer your question? Just to make sure we're not confusing a previous market with the current. And there are a lot of put and takes here, so I do apologize. Yeah.

Yeah, thank you for clarifying. And just to follow up on that, do you expect the organic growth, which was 6% now, do you expect that growth to continue to be around that growth rate over the next year? Or how should we think about the future?

Yeah, I don't like to guide and I don't like to guess. The only thing I can say to you is that we are expecting market conditions to return to more normal levels. I mean, last year it wasn't normal in any shape or form. We had a big impact effect in Q1. We had a Trump-US administration effect in Q2 and Q3. So, we do expect more normal market conditions this year. um what i guess what does more normal mean there are big regional variances now as you can see um but what we've decided to do as a company is double down where the where the growth is and obviously protect what we have where the growth is is a little bit slower so i don't want to guide all i will say is is that we and and i hear the same from some of our competitors on scripts um I think as an industry, we're expecting more normal market conditions this year. The key thing for us is not just driving growth, it's driving profitable growth. So big focus this year on ensuring that we get the right portfolio balance in the regions. I think North America is doing fantastically well. We're really happy that the investments there are paying off, but we need to continue to drive embryoscope penetration. We need to continue to take share gains in consumables. So I don't want to guide, I'm not going to fall into the trap, but hopefully I've given you more colour around how we see things in 2026 and more of a return to normality. But again, It's got to be about profitable growth.

Yeah, thank you. I'll get back into the queue.

Yeah, you're welcome. Thanks, Ludvig.

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

Yes, hi, and thank you for taking my questions. So I wanted to start off a bit on the same theme here on the IVF market environment, and I think in Q3 you highlighted that you saw a pickup insight just towards the end of the quarter. So, I just wonder how this has tracked throughout the quarter and, yeah, like into January here, has it continued to improve, basically?

Yeah, good question. So, as I mentioned before, we didn't sort of see an explosion of pent-up demands in in North America following the announcement from the White House in October. But we did see a steady pickup in the cycle growth in the final weeks of the quarter, and that seems to be continuing into Q1. It's very early to say. I haven't even seen our full January numbers yet. I was at JP Morgan and I spent a lot of time visiting customers as well in the US and the sentiment seems to be better. What I would say is that the announcements that were made in relation to very significant price reductions, everybody now realizes that that's not the case. But there's clarity now in the US in terms of what the cost of a cycle is going to be. There are other things like, you know, California becoming a mandated state. That's something that was delayed for quite a while. So, I mean, it's one state within the United States, but it's a big one. So I think there's a little more optimism in California in particular in terms of, of cycle rates slowly but surely picking up as we advance through 2026. And then I don't want to make it all about North America. How do we feel about the rest of the world? Western Europe is looking good and steady and cycle growth seems to be, again, approaching more normal levels. The Middle East, that's had a big impact, the geopolitical situation there. And then, as we view APAC, I've commented many times, we believe that there are endemic issues in China in relation to improving the birth rate and the cycle growth, but the government is also increasingly stepping in and approving funding. There are opportunities in other parts of Asia, which I'm not going to go into for competitive reasons. So, you know, relatively, you know, relatively normal growth rates returning, we expect, but there will be regional differences. And I think the key thing for us, back to the point that I made on our commercial excellence capabilities, you know, we're really getting laser focused in terms of where we're doubling down and where we're not going to double down. So where do we see the greatest opportunities to drive profitable growth? Does that answer your question, Ludwig? I don't want to be going around the world giving my sort of prognosis, but that's how we see things at a corporate level.

Yes, very clear. Thank you. And then I just had a follow-up on the gross margin in APAC here. So you highlighted that there was some negative product mix from campaigns, I believe. So I just wonder if it's possible to quantify this in some way, and also, like, will this affect also Q1, Q2, looking into 2016?

I mean, I can take the second part. No, we expect the margins in APAC to normalize in 2026. I don't know, Pat, in terms of quantifying the mix, we probably can't.

No, we don't disclose the detailed effect, but it had an effect, not only in APAC, but also on the total gross margin for the group. We don't disclose the number.

What I will say is it was a strategic decision to go after a growth opportunity. It was a targeted campaign. I mean, 10% growth in APAC, I don't think anybody expected that. It surpassed our expectations, but I think it surpassed our expectations more on the technology side, on the consumables side. we very much decided that we we had an opportunity to take share and in disposable devices and we went for it yeah okay and just very quick on that so like when you have gained some share now in q4 in a pack like will that also improve growth ahead in a because that's a reasonable assumption I mean, that's what we're trying to do. APAC has been pretty stagnant for a lot of the reasons that I've mentioned. The market growth in APAC is pretty stagnant, but we believe we had an opportunity to take share from a couple of competitors in relation to a specific part of the portfolio. So, yeah, we went for it. Will that continue in 2026? I mean, taking that magnitude of share, that will be tough, but we do have the share gain momentum. So it should definitely improve our disposable device performance in APAC in 2026. Does that make sense without me giving away too much information? Hopefully I'm helping to answer your question.

Yes, yes, very clear. Thank you. I'll jump back into the queue.

Sure. Thank you.

The next question comes from Johan Andres from SB1 Markets. Please go ahead.

Thank you for taking our question, and congratulations to the progress made in the U.S. market, especially as you're investing in commercial REITs. Well, there's some questions relating to growth margins. First, the small one, EMEA, I think you referred to some

in sourcing does that has an impact on margins in that region and i will second questions so um good morning johan thank you for your compliments on north america we're going to take it graciously because we are very pleased with our north america and and i think we should bear in mind It's only two years ago that we decided that we were going to go after growth in North America and to be seeing the returns after only having made those investments not so long ago is pleasing to us. Now, we're not losing the run of ourselves. We have a long way to go, but we are pleased with the progress there. So let's touch EMEA. So what has happened in the EMEA region? Actually, it's probably best explained in my CEO comments. And that is with the downturn in activity due to the geopolitical situation in the Middle East, what we have seen is that clinics have insourced some of their genetic services business. And we have seen historically when clinics insource, we saw this in North America three years ago, typically the business, you might get, you know, drip feeds of it coming back. It's rare that you get all of that genetic services business back. So clinics in an endeavour to boost their revenues have insourced. They've taken the opportunity to insource. The impact on margins, that's a good question. It's also a tough question. It's not necessarily a negative thing because the margins in genetic services are lower versus the rest of the portfolios. They're lower than technologies and consumables. So it doesn't necessarily, you know, imply a negative margin mix in the region. What we do need to do in this region is we have to make up for that lost business, right? So we got to drive share gains across the rest of the portfolio and we have to drive share gains in the other markets in the region. I think we're particularly happy with the consumables performance in EMEA, so you can see on page 22 of the report. It's 11% organic growth in local currencies, so that's good. Technology is a very tough quarter, but if we can move the needle on technologies there, the run rate on technologies is doing very well. That will also help the EMEA margin mix. So it's a very long explanation to your question, Johan, but there are quite moving parts on that one. But hopefully I'm giving you context there.

Yeah. Excellent. Thank you. And then perhaps the more important question on the US, it's often easier to improve gross margin when you have better traction as you seem to have, but the process of improving gross margins, changing the products makes them perhaps a working on efficiencies as well as you alluded to. Could you provide any timelines on those dynamics?

Yeah, I mean, the thing is, Paddy, you can chip in here as well, but the investments in sales and marketing, they're done now. I mean, we don't envisage making any further investments in sales and marketing. I would say they're fully loaded. So now we have to drive productivity, right? So the revenue per commercial investment, the revenue per sales rep, that needs to go up. We made those investments. It's taken time. but we would expect productivity improvements in terms of revenue generation coming out of those commercial investments. There is a mixed component, and we are really focusing on embryoscope and witnessing. That's evidenced in the 40% growth in the quarter. We're going to keep doubling down there. I think what... What we like is that clinic chains are increasingly seeing the workflow benefits from Embryoscope. It's a big capital outlay, but it also drives efficiency. So that's good. And then, Johan, we have to look at pricing. I mean, we're still operating in an inflationary environment. We can't carry those costs so inevitably. And the team did a very good job, actually, in North America last year on pricing, we managed to mitigate a significant amount of the tariff impact. But yeah, I mean, inflation is still there and we will have to look at pricing opportunities actually in all of the regions.

Maybe I can just add, you know, we have made our investments in the US. We don't intend to increase the level. We have done the work now. So now we have this fixed cost there. And we aim for further growth in North America. And if that happens, of course, the contributor margin will gradually improve. If we continue to see growth in North America or America's and keep the OPEX level constant, which is our plan.

Yeah. And any sense of the effect on growth margins? Should we expect improved growth margin in the Americas, especially in the U.S. market 26, or could you provide some flavor on that?

I mean, with everything fully loaded, our aim and our goal is absolutely to improve the gross margin in North America. I'm sticking my neck out here. You're going to track me on that metric. But that's what we have to try to do, right? I mean, it's very clear in the numbers in this quarter. We've had a fantastic performance on the top line. North America is doing great and APAC did wonderfully well. But we have to work on the margin piece because we don't want America to become dilutive overall. So absolutely the strategic name of the game and where we're doubling down is on the areas where we can improve the margin from what is becoming our fastest growing region. And it's the largest IVF market in the world. So we want to win there, but we want to win there driving margin improvement. Does that answer your question? Yeah, sort of. Do you want to try out in a slightly different way and I can see if I can do better without... Yeah?

What are you missing?

No, no, no. I'm pleased that I understand the complexity. Of course, it's difficult to provide... and precise feedback for 26. But, yeah, I can see the work in progress.

Yeah, exactly. Thanks, Johan.

The next question comes from Philip Einerson from Red Eye. Please go ahead.

Okay. Hello, everybody. So I wanted to start on something you mentioned both in the call and also in the report, namely the market normalization in 2026. Maybe if you could expand a little bit on this statement and to what extent you expect this to be and the graduality of it. Thank you.

Yeah. Great question. So historically, cycle growth has been in the mid single-digit range. That was not the case in 2025. You know, based on our best intelligence, and we are very close to the market, but also you can hear it in the competitive commentary and also on the clinic side, the cycle growth was significantly impacted in 2025 for a multitude of regions, which I'm not going to bore everybody with by repeating it. You know, I absolutely hate going back to this Zodiac thing, but we don't have snakes, dragons this year. Hopefully we don't have presidential statements on IVF. I mean, they're done, they're passed. So that created a lot of noise. The situation in the Middle East seems to be holding. Western Europe is looking pretty stable. Cycles are, you know, are definitely returning to more normal levels there. So, you know, we're not getting very excited in terms of an explosion in IVF cycles. That's absolutely not happening. But based on Q4, you know, early indicators, and again, we are – we've really become laser focused on steering vitro life in a metric driven way, particularly on the commercial side. And the leading indicators there, you know, do point to more normal cycle levels. The second part of your question then is how quickly do we get there? How long is a piece of string? That's a little bit harder to predict, right? I guess, well, I don't guess. What we envisage in our company is a slow, steady return to more normal levels. But, you know, will we get there in Q1? Maybe. Should we be there in Q2? I mean, unless we have some big disturbances, we would be expecting to get back to those more normal levels in Q2. Does that answer your question?

Yes, great. And then I have one more follow-up. Obviously, currency has been a big topic in 2025 and in Q4. Can you maybe elaborate a little bit on if there's any measures taken to limit the impact in 2026, given eventual ongoing uncertainty on the macroeconomic level?

Yeah, currency has been a huge impact for us and for many Swedish companies having exports. It has to give you a flavor of it. and the Euro was more like 7-8% and the Danish Krona, which is also an important currency for us, was also some 8%. Yen was 14%, so we had a huge impact on currency. So what do we do? We don't really know what happens. We don't work with hedging in our company. What we are trying to do better is to increase our natural hedge by balancing purchases in certain currencies matching the revenue stream. This takes time, so I don't expect us to fix that in a short while, but this is something we need to increase our focus on going forward to improve our natural hedge.

The next question comes from Sten Gustafsson from ABG Sundal Collier. Please go ahead.

Hi. Thanks for taking another question. Going back to the very strong performance in Asia or APEC region, 10%, obviously very impressive, and you talk about tough in China. Did you... Did you have positive sales growth in China despite the soft market?

Yeah, we don't give country breakdown, but maybe the best and fairest way that I can answer that question is that we had growth in almost all countries in the APAC region in Q4. Even, so, I mean, on the technologies piece as well, Stan, it was a tough year for capital purchases, but we saw a release of budgets and it was literally in the final couple of weeks of the year. Lucky we had enough embryoscopes in stock to be able to service the demand because it was quite an uptick in the last, basically in the last three weeks. But it was, yeah, I'm not going to answer country specific, but I will tell you is most of the countries in APAC had a positive performance in Q4.

Sounds great. And any countries doing extremely well, unusually well, or was it more across the board?

No, I don't think there was any sort of extreme. I don't think there was any sort of extreme. So, you know, we did have a targeted campaign on disposable devices. We saw an opportunity to take share from competitors. And, I mean, Sten, you know us very well. We've already taken a lot of share in media in APAC. So share gain opportunities are tougher to come by, much tougher to come by. So we've been looking at APAC as part of our strategic review. And we said, where do we have opportunities to take share? We can't, you know, continue to sort of grow with the market. And we identified disposable devices as a double down. So we went for that across the region. And then the other big sort of needle mover was we still believed there were opportunities on the embryoscope side. Even though clinics were, you know, sort of managing the capital piece and when they were released, we were able to capitalize on that. We don't have a certain genetics component here, but so yeah, no, there was no explosion in any one particular country. That didn't happen.

Sounds good. 10% is an impressive number, given the softness in China.

Yeah, absolutely. Thanks very much, Dan. Thank you.

Thank you.

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

just had a short follow-up, just on technologies in North America, if you can elaborate on what countries, what sort of customers and so on.

Yeah, that's my favorite question, Jakob, because we had 40% growth in America. It was across the region. I think what pleases us most here is that we are starting to crack into the chains. And we came very close, very, very close to having one of the largest cross-border chains in North America going full embryoscope. I think we were too short, two embryoscopes short of a particular chain being fully converted to embryoscope. And that's been tough for us, right? Because historically in North America, we've been able to sell one-off embryoscopes, but we weren't really cracking the chains. And you can understand why. I mean... They're big. It's a big investment. But that started to happen. It started to happen last year. We've adapted our go-to-market model. We now focus on a key account manager style. So we have people specifically targeting and talking to the C-suites of the large clinic chains. And it's paying off. So what drove that big 40% increase is we're starting to move the needle on embryoscope in the chains. It's been a heavy lift, but we're getting there now. And then I think very importantly, as I always say to the team, don't just sell embryoscopes. You have to make sure that they get used. So the other metric that we're tracking, back to our commercial excellence dashboards, is we're checking the revenue generated per embryoscope. So we don't just want clinic chains investing in embryoscope, we want them investing and using them to drive efficiency. And we're starting to see the run rate in technologies, that component is picking up very nicely. But it's all markets in Americas. But I should give a shout out to North America because I think the team did a really great job there.

Does that answer your question, Jacob?

Okay, thank you. Yeah? Yep, that's great. Thank you.

The next question comes from Ulrich Trattner from DNB Carnegie. Please go ahead.

Thank you. And on genetics and EMEA and the insourcing, as you noted, you don't expect these sort of share losses to be regained, given that they've gone internal. But is it possible to quantify the risk of continuous insourcing as we did see in the Americas two, three years ago? Or is this more temporary, like related to the macro? Or is this a continuous trend?

Yeah, it's a great question, Ulrich.

The ones who have insourced are the larger ones. So I never like to be complacent, okay? And we don't take any customer or any business for granted, and we have to earn our crust every single day. But the... The customers that have insourced in the second half of 2025 are the bigger ones. So I guess, and I want to be really clear, I wouldn't call it share losses. It's definite insourcing. We can see it. We know the clinics. We have the names. We know the players' events. people working there. So I think the biggest impact is likely behind us, Ulrich. Okay. And again, you know, we've seen this with insourcing in North America. It doesn't always – well, first of all, it's not as easy as people think. In any services business, scale is important. Economies of scale, they're very important. And I think a lot of clinics that did insource, particularly in North America, didn't get the type of gains that they expected. Let's see if the Middle East are able to do it more efficiently or better, but it hasn't always paid off, the insourcing. Yeah. I thought you were going to ask me an error question, Ulrich.

I was waiting for it.

Okay. Thank you.

Thank you.

Yeah, I think we're finished now. I'd like to thank you all for your time and attention this morning, for your great questions. We very much appreciate it. So from Stockholm, from myself and Pat, and from Emily Wilson in Investor Relations, thank you all very much and have a wonderful day.