Vitrolife AB (publ)

Good morning, everyone, and welcome to the Vitrolife Group Q1 2026 earnings call. Thank you for dialing in. I am joined by Pad Eiderskog, the CFO of the Vitrolife Group. And I'd like to start this morning and today's presentation by providing you with an update on the latest dynamics that we are seeing in the reproductive health market. broken this down into three key areas, markets or regions, customers and competitors. So let's start with the markets. What we're seeing is European IVF cycles are remaining stable. We see cycle growth rates starting to increase in North America after a slow start to the year. And what I would point out is we're starting to see in increased seasonality there, whereby January is a particularly slow month and the growth tends to accelerate as the calendar year progresses. Middle East IVF cycle activity is significantly down, as one would reasonably expect, given the geopolitical situation. In APAC, the markets are performing stronger than expected, but I would like to point out that Q1 2025 was exceptionally low. And then the other dynamic that we are seeing is an increase in regulation of genetic testing. We welcome this as we believe it's in the best interests of patients. The VitraLife group has a lot of competence in the area of regulatory affairs and market access in general. I'll now move over to discuss the customers. Consolidation is continuing with chains expanding their footprint in all regions. We see an insourcing of genetic services in the Middle East. I guess that's not surprising given the drop in IVF cycles that I have mentioned and clinics increasingly looking for sources of revenue. We're also seeing an increase in RFPs or tenders from clinic chains. This tends to favor the full portfolio larger players. So again, we see this as an advantage for the Vitrolite group. And then finally, demand for automation is high and it's increasing as clinics strive to improve their efficiency. Of course, this is one of the core pillars of the Vitrolife Group strategy to help clinics with automation. OK, moving on then to competitors. In the market, there have been supply issues from competitors in parts of the consumables portfolio in particular, and we have taken advantage of this dynamic capturing share. Interestingly, we're seeing an increased presence of low cost genetic competitors in low price regions. I think this is going to be an interesting one to watch because regulatory demands are going up. And I think grabbing share at low prices is going to be tough to maintain as the regulatory demands increase. We, as you know, at the VitraLife Group have a goal of driving sustainable, profitable growth. So we will not be engaging in low price competitive tactics. And then I think this is an interesting one to point out. Competitive activity is regionally based, despite the fact that on paper we face global players in terms of the competitive landscape. The Vitrolife Group is a true global player as evidenced from our regional revenue split. However, we don't face the same competitors across the key markets. All right, we'll now move on and I'll take you through some of the key highlights. America sales. So America sales increased by 11% and the strategic investments that we have made in North America are clearly paying off. So we're starting to see this quarter after quarter now. And if anything, the growth in North America is accelerating. We're happy to see our gross margin back up at 59.9. In fact, this is one of our strongest gross margin performances in a long time. We are becoming more sophisticated in terms of our ability to leverage the full portfolio in the key markets where we have decided to double down. And then consumable sales increased by 9%. It was difficult to pick either consumables or technologies because technologies also had a very strong performance in the quarter. But I think this consumables number clearly demonstrates that we are improving our competitive position globally. The technologies growth, by the way, for those of you who haven't seen the number yet, is plus 11%, as I said, organic growth in local currencies. All right, let's now move into the regions. And we will start with our largest region, which is EMEA, accounting for 38% of the global revenue of the Vitralife Group. Sales of 312 million SEC in the quarter, a decline of 1% in local currencies. We had robust growth in Europe, offset by declines in cycle volumes in the Middle East. This is not lost share, it's cycle volumes. And as I said, Europe performing well. Sales and consumables were flat. The Middle East is impacting the region's performance as a whole. Sales in technologies decreased by 2%, with very strong sales, actually, in Europe, both of capital and consumables in technologies, offset by a significant decline in capital sales in the Middle East. I would like to point out here that Europe is our most penetrated region for embryoscope, but clinics' need for automation is driving demand, and I think what's particularly pleasing is about the technology's numbers is the consumables revenue per embryoscope is accelerating nicely. Sales in genetics decreased by 2% due again to the situation in the Middle East. And of course, in this region, This is actually the region most impacted by the exit of certain tests in the genetic services portfolio. But I would say broadly across the region, strong performance in Europe, offset by decline in IVF cycles in the Middle East due to the situation there. Okay. Let's move on now and we will take a look at market region Americas. So as you all know, we made a strategic decision to invest in sales and marketing in North America, but particularly in the United States. And we are now delivering strong double digit growth in the largest IVF market in the world in terms of revenue. Sales of 264 million SEC. an organic growth in local currencies of 11%. What I really like about the performance here is that it's strong across the entire portfolio. It's everywhere. So, and well above the market growth rates. Sales in consumables increased by 16%. And this is driven by share gains in high volume centres. This has been one of the key growth drivers for us and an area where we have very much doubled down and brought in specialist talent to work with us in the large clinic chains. Sales in technologies grew by 107% as we increased adoption of embryoscope in the large clinic chains. And sales in genetics increased by 2% with a strong performance in North America, offset by a decline in low-priced markets in South America. So to conclude very strong performance in America's driven by North America. And in this occasion, particularly by the United States. Okay. Finally, we move to APAC. So the APAC market, as you well know, has been turbulent for several quarters. So we are pleased to see some signs of recovery. We delivered sales of 232 million sec in the quarter, an organic growth of 7%. I should also point out, as you can see here from the donut, that APAC now accounts for 29% in terms of share of revenue. Higher market growth than we've seen for several quarters, partially due to a low Q1 in 2025. Consumables grew by 15% with a strong performance across the portfolio in key markets. So what we're really starting to see now is that our ability to leverage the strong position that we have in media and other areas is serving us very well in terms of our ability to start acceleration growth across the other parts of the consumables portfolio. Technology sales increased by 5% as we increase our embryoscope penetration. And in genetics, sales declined by 6%. And this is primarily due to the timing of genomic kits orders from major clinic chains. This can have big swings from one quarter to the next. But I would say again, to conclude here, overall pleased to see APAC back in growth terms. All right. I'm going to move on to my final slide before I hand you over to Pat. As you know, we have a mission to be the leading global partner in reproductive health, striving for better outcomes for patients. Of course, we are executing on our quarters, but very importantly, we need to stay on track in terms of executing on our long term strategy, helping us to become that leading global partner. And I'd like to give you an update in terms of how we are doing in relation to growth, innovation and operational excellence. So when it comes to growth, we're driving profitable growth through improved market and customer segmentation. We've become much more sophisticated, strategic, and I would say premeditated in terms of which markets we're going to play in, which markets we're not going to play in, and same goes for customers. And this is all in the name of driving profitable growth. We're gaining share by leveraging the full Vitrolite Group portfolio. We are a true end-to-end provider for large clinic chains. We have consumables, we have technologies, and of course, we have a full service in terms of genetics. And then we are accelerating penetration of our embryo scope and lab control solutions in clinic chains. And as I mentioned in my opening slide, demand for automation to prove clinic efficiency is high and it's only increasing in terms of innovation. We have a strong pipeline of new products, of new tests and solutions that we are going to be bringing to market in the coming quarters. And we're very excited about this. Innovation is an area where we decided to double down over the past two and a half years. We're also advancing the efficiency of the IVF clinic workflow through the use of AI and our iDiscord software in embryo selection. And then when it comes to operational excellence, we're investing in IT and digital capabilities, as we've mentioned several times. This is to improve the customer journey, but also to improve connectivity with the large clinic chains. And this is where we're winning. You can see this from the results of that connectivity piece is very important. And then we are taking actions to optimize our cost base across operations and back office. And of course, you're very familiar with the restructuring program that we announced in December. So with that, I'm going to hand you over to Pat to take you through the financial highlights.

Thank you, Bronwyn. So some numbers. Our net sales ended up at 807 million SEC. It's in SEC minus 4% growth, heavily impacted by negative currency, as we have seen now for four quarters in a row. I will come back to that in the next slide. Our gross margin ended up at 483 million SEK with a gross margin of 59.9, which is one of the stronger we've seen for many quarters. And our EBITDA ended up at 251 million SEK and a margin of 31.1. The increase in margin was driven by product and market mix, strong growth in consumables and strong growth in technologies and strong growth in APAC. That's what I mean with the product and market mix. So go back to the net sales stand. We ended up at 807. We had a 5% positive organic growth in local currencies, but with the current situation that started actually 12 months ago, we still see that. So a negative impact from currency of 9% on the top line, ending up in a SEC growth of minus 4%. So on the gross margin, 59.9, it's one of the strongest quarter in gross margin due to a strategic focus on key markets and product groups. We had strong sales in technologies and consumer goods, two product groups with high gross margin and also very strong sales in APAC with high gross margin. So this is behind the product and market mix comment. If you look at the segment, Bronwyn already talked about the sales. But if we look at the gross income and gross margin, we see an improved gross margin in all regions. Very, very positive. Fifty six point one in America as compared to fifty three point seven. 61.7 in EMEA compared to 59.5 and 61.7 versus 58.4 last year. So strong improvement, good improvement in all regions in gross margin. On the market contribution, 25.9 versus 25.3 in Americas, 38.8. versus 39.2 in EMEA and in APAC 43.4 compared to 42.4. So all in all, we had a slight improvement in market contribution, a total 35.9 versus 35.6 last year, quarter one. If we look at then at the operation expense development, the last five quarters, we see a reduction versus the last three quarters, and it's flat versus Q1 last year. And I will come back on some details on that. The restructuring program that Bronwyn mentioned is on track. We don't have that much impact in Q1 when it comes to savings. The savings will kick in starting Q2 and also Q3. So on the latest on the OPEX, it's flat compared to Q1 last year, but we see an increase in selling and marketing that's related to the investment we've done in Americas. The problem explained. We also have a slight increase in admin that is related to IT spendings. And then the increase in R&D of 6 million compared to Q1 last year is significant. is related to spendings that have been allocated to support upcoming product releases and launches. So the increase from these three have been offset by positive currency revaluation effect that is booked in other income expense. So all in all, it's flat compared to last year. Then on the cash flow, we usually comment upon the middle bar here, the cash flow from operating activities, which ended up at 172 million SEK. Last year it was 69. Of that cash, we have invested 44 million in the ongoing investment in the new production facilities in Gothenburg, but also R&D investment in product development projects. And then of the remaining cash, we have reduced our loans by 66 million SEK and ended up at cash flow for the period of 61 million SEK. And then to summarize then, the key financials, 807 million SEK representing a 5% organic growth in local currencies. Strong gross margin, 59.9. Strong EBITDA margin, 31.1. Our net income 101 million SEK in line with last year. Earnings per share, 0.74. And our cash flow that I just explained, 172 million SEK versus 69 last year. And our net debt to EBITDA 0.6, a slight improvement from last year. And then our proposed dividend is 1 krona 10 öre per share. By that, we open up for Q&A.

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