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.

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 Ulrich Trattner from DNB Carnegie. Please go ahead.

Thank you very much, and good morning, Bronwyn and the pack. And my question would relate to the growth in North America and the strong development that we have seen there. And it looks like you're continuing to grab market share and you talk about it. But is it possible to quantify how much of the growth here is coming from normalized market versus uh market share gains and especially also if you we can get some some nuances on from whom you're grabbing this market share my impression is that both irvine and the kitasato are relatively aggressive in the marketing in the region would you say that the shared basis is broad based from from all your competitors or is it from single source and as well as a follow-up would be how important is your denver facility in order to sort of grab these market share versus your competitors that are predominantly outside of the U.S. in production?

Okay. I think that's three questions in one, but I'm more than happy to answer them all, Ulrich. So actually, I'm going to start with the final part. So we do have a facility in Denver, as you rightly point out. We have manufacturing, but we also have our mail out there, as you know. We also have a laboratory in Miami and customer service there. And then we have manufacturing in San Diego. So we have a sort of a strong footprint in terms of, let's just say, what would be expected. And who are we taking share from? It's always very difficult to say, because in in the IVF market, unfortunately, unlike other areas of health care like orthopedics or cardiology, you don't have independently published data confirming the competitive position of each of the players. And equally, we report Americas together. But I can tell you, if we look at our North America growth broken out, it is significantly above cycle growth in the region. There's a lot of distraction factor going on in the market, Ulrich. You know, you have... um well the the largest competitor has has its own challenges with the with the strategic review and um I guess I guess yeah that sort of plays to our advantage um and then you have players three four and five consolidating into a new company so um what I say to the team or Rick is don't get distracted keep our heads down um you know we have a fantastic end-to-end high-quality portfolio. We've invested in the region in a really, really strong team. You know, just don't get distracted. Keep your eyes on the prize and drive share gains. I think the other thing that's really helped us is we are targeting the large clinic chains. And they are demanding high quality, but they're also increasingly looking for automation. So the combination of embryoscope... And the efficiency that that brings, you can see embryoscope, we're up 107 percent. It's not insignificant. But the sort of the combination of embryoscope, then the high quality consumables portfolio. And then, you know, we're one of the market leaders when it comes to genetic services. So we're really leveraging the full portfolio. the full portfolio. And this is a guesstimate, but I think it's broad share gain from multiple players. But the distraction factor, of course, helps. So I've answered the manufacturing footprint. I've answered the share. And hopefully, I've answered that it is well above the the market growth rates without the exact percentage. But it's healthy across the board. We obviously don't give you the breakdown. You see it by genetics, by consumables and by technologies. But what I can tell you is it is across the entire portfolio. It's everywhere, which is really nice and a healthy thing to see.

Okay, great. Thank you very much, Brian. Just a quick follow-up. As you mentioned, more consolidation and higher sort of tender activity. Is that something that is purely favoring you or are you seeing price pressure as well on the back of that?

Yeah, right now it's favoring us because the large clinic chains tend to want to deal with one supplier with a potential backup. They don't want to have to deal and contract with multiple players. I would say maybe slight bit more price pressure on the genetic side, not so much across the rest of the portfolio. But again, you know, I guess the thing, of course, with genetic services is people tend to want to go with very high trust players. And that doesn't necessarily mean that there is cost sensitive as one would expect. So I would say we're not, you know, we're not experiencing high cost, high cost pressure in the market. And typically, the larger tenders are something that that favors the larger players, us being one of them. And yeah, so I would say right now, it's a tailwind, not a headwind.

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

Thank you, Ulrich.

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

Hi, a question on APAC. Quite positive development here in the quarter and you sound a bit more positive on the market growth, I would say, but you also highlighted that last year was exceptionally weak. So I guess my question then is, when you look forward, do you see APAC sort of getting back to the maybe better sort of low to mid-digit growth again looking forward?

Yeah, it's a really good question, Jacob. It's quite a mixed bag in APAC. So happy to see the growth. But yeah, as you correctly say, Q1 was very low. I think there are some green shoots, but I wouldn't be getting too excited. It's very much regionally based. What we are seeing, and I got this question this morning from Dagens Industrie, is You know, governments across the world, and we see it here in Sweden, are really starting to improve the support for people, not just to the IVF costs, but also the cost of raising a child. So I think over the longer horizon, we would have to believe that these measures will start to kick in. But I think I would be cautiously optimistic, Jacob, on APAC. You know, it's been turbulent for quite a while. Yes, it's a good quarter and we managed to do particularly well, but I would like to see some sustained quarters of recovery before I could conclusively say that it's returning to the type of numbers that you mentioned. So in summary, it's a bit early to say. Yeah.

Okay, great. Then just a follow-up then. regarding the gross margin, which I believe is strong here in the quarter compared to the recent quarter. And as you said, Harry, I know it's very mixed sensitive, but I guess if we say that the mix on regions and products stay the same, should we expect sort of the same gross margin here as well?

Yeah, I mean, it's as I said, it's a product and market mix where consumables, which is a high gross margin product group, is growing well and technologies as well and less growth in genetics, which is the lower gross margin product group. Yeah, I think this mix we have right now is not the one time of mix. I think we can expect similar mix going forward. Maybe not to that extent, but leaning towards this mix that we saw now. And it's not, and I think we would like to communicate, it's not a coincidence. I mean, we are aiming towards growing in the more profitable areas, in the more profitable countries. And we are also, as communicated in December, we are leaving some product lines that are not so profitable yet. and leaving some low margin small countries. So these are, of course, helping us. And we haven't seen the full effect of this. It started to kick in a little bit in the end of quarter one, but more will come, the full effect we will see in Q2 and onwards. So that will help us even further on the gross margin a little bit.

That's clear. I'll get back to the Q. Thanks.

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 out on your current view of the IVF market. You sounded quite optimistic regarding cycle growth coming back to mid-single digits for 26 in the Q4 report. So has your market view changed in any way since then?

Yeah, I mean, we... It's exactly as I said at the start. There are regional differences for sure, but Europe is stable, which is good. That's our largest region. US and North America, as we know, was very rocky last year for all of the reasons that we know. It did start slow, but it's improving, which is good. So... Middle East is a disappointment, but what can we do? I mean, you can only control the controllables. APAC, to the point we've just discussed there with Jacob's question, I mean, APAC is a mixed bag, but key markets there make a very, very big difference. So I think if we, you know, Very hard to say if only, but if, you know, if everything had been normal in the Middle East, I think we would, yeah, we would have been back in that sort of range. But of course, it isn't. We're all hoping for peace and the sooner that happens, the better. But certainly things are a lot more stable than they were last year. And that's good. So, yeah, it's... It's been very, very difficult to predict, but we are starting to see, I think the words that they use on the other side of the pond is normalcy. We're starting to see more normal cycle levels, which is good. With the Middle East piece, I don't believe we're back up to mid single digit. We're not there yet with that situation, but healthier signs in most of the regions, which is good.

Okay, thanks. Very clear. And then a bit of a follow up on the gross margin side. So you mentioned mix affecting mainly APAC and Americas. But in EMEA, it seems that the mix was somewhat similar to Q1 last year. So what explains this, I think, 2% gross margin increase year over year in EMEA isolated?

Yeah, I can have a go at that, Pat. So technologies and consumables did very well in Europe in this quarter. Unfortunately, that performance was offset by the situation in the Middle East, but the higher margin parts of the portfolio are performing well in Europe. And as Pat mentioned, genetic services is lower margin, so the growth being down doesn't... Yeah, it positively affects the mix. I don't know, Pat, if you have a better way of explaining it.

No, that's it.

Okay, great. Thanks. I'll jump back into the queue.

Thank you. The next question comes from Sten Gustafsson from ABG Sundahl Collier. Please go ahead.

Yes, good morning. Thank you. So... I want to ask you about the supply issues you mentioned for one of your competitors. Well, if you could perhaps talk about what kind of products is related here and also how much of the 9 percent growth you had in the quarter is sort of related to that. if that would be possible to break out.

Yeah, so Stan, thank you for the question. So this particular competitor has had supply issues, but also recalls and legal challenges. So this has been ongoing for quite a while. So you have a little bit of a compounding impact here, Stan, in terms of, you know, I've stated in previous earnings calls, we have captured media share. We've been capturing it for a while. But with that full portfolio play and us becoming much more targeted in terms of the markets where we're playing in, where the ability to leverage the full portfolio and pull through across the rest is leading to share gains in other areas outside of media. And then our consumable growth is well above market growth. The exact split is very, very difficult to quantify. Unfortunately, I'm not being evasive. I just don't have objective data to be able to commit to a number on that. But in I mean. Consumables in North America grew 16% in the quarter. That is significantly above the cycle growth in North America this quarter. But it has been compounding, Stan. So it's supply issues, it's recalls, it's distraction. Yeah, it's multiple factors. Yeah. Yeah.

All right. Thank you very much. And if I may follow up on the gross margin, just so I understand correctly. So there are no sort of incremental improvements on your actual products. It's all related to the mix, which we should assume to sort of continue with your ambition to grow in more profitable areas both from a geographical and product mix?

Yeah, we did. During last year, we did increase prices in our regions, which, of course, have an impact still compared to last year. That is, of course, contributing. But there is no specific action on a specific product group this quarter. It's more the mix, the focus on The regions, the profitable regions and the profitable product lines, that explains the improvement in the gross margin. But there is, of course, a price effect there as well. Coming from last year, price increases. For example, we increased prices by 6% in the US last year. In the mid-year last year, I think that is still having an impact when you compare to last year.

And we have to carry the cost of tariffs as well, Stan. Don't forget that. So we have the tariff piece. Sometimes I think people forget MedTech, we have tariffs. Pharma doesn't. So, I mean, we had to pass those prices on to customers. And we did, and we did it quickly. And it helped to insulate us from the tariff effect. So I wouldn't say it's not by accident. We took... We took measures and we executed on them quickly to protect ourselves.

That's very helpful and impressive to see how the gross margin improved here. So thanks for the colour on those questions. Thank you.

Thank you, Stan.

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

Okay. Hello, everybody. My question is for the topic of innovation, which you mentioned in the report that you're planning to release new products to bring into market. Maybe you could elaborate a little bit on what sort of products this is and also how impactful you expect them to be over, let's say, the coming year or two on the P&L.

Yeah. So I would love to tell you that, but I'm not going to tell our competitors who are listening in. What I will tell you is that we have launches coming in all parts of the portfolio. So we have launches coming in consumables. We have launches coming in technologies and we also have launches coming in on the genetic services side. And, you know, Vitrolife has a wonderful history of doing M&A, but I think in-house innovation has been an area for improvement. And we really, really took a strategic decision to double down here a couple of years ago and not throw paint at a wall and, you know, try to innovate everything, but to pick the key areas that will move the needle and be impactful for for clinics and for patients. And I think what's going to come this year is the results of that R&D prioritization. But I don't know if you're planning to go to ESHRA. If you are, hopefully you should see some exciting new things there from the VitraLife group. But it's coming. And then in terms of impact on, in terms of impact, Yeah, I mean, a couple of the launches, one of the launches in particular towards the back end of this year could be quite meaningful. And equally, I would say there will be a launch probably coming out back end of this year or early next year, which we also expect to be very meaningful. So I would say two meaningful, impactful ones coming soon. And others more, I guess, what I would call issues of innovation. So, yeah.

Yeah. Okay. That's helpful. And with all respect, of course, if you don't want to disclose too much, but maybe you could help us understand if it's more of, let's say, a new product series or is it more add-ons to existing products and services? Yes.

yeah um so it's both it's some uh it's some new products it's it's other areas where we haven't had an offering before um others are improvements on rot we already have and then we also have some uh breakthroughs coming where we would be first to market with a particular technology so a sliding scale of exciting things to come, Philip.

Okay, great.

Thank you.

I'll be back in the queue.

Yeah. The next question comes from Philip Weyberg from Pareto Securities. Please go ahead.

Hi, good morning. I had a question on technologies, which was quite strong in America's So Q1 is normally on the weaker side seasonally, so I'm just trying to get a better sense of the drivers here. So first, if there were any orders pushed from Q1 to Q1, for instance, and also what kind of visibility you have going forward now in that area.

Very high visibility. We are tracking the funnel on a weekly basis. So we're intensely tracking... the funnel for embryoscopes, for the consumable revenue of embryoscopes, for the services revenue, and for the pull-through. We have built a commercial excellence engine with best-in-class industry talent, so I can tell you we are very closely monitoring this. It's not spillover orders that didn't come in in Q4 and came in in Q1. Really, what this comes down to is breakthrough in acceptance of embryoscope in the clinic chains. That's what that's what it is. And that's been more difficult for us. I mean, I think historically, Vitrolife Group has been better at selling embryoscopes to mom and pop smaller clinics. But now with the chains needing to drive efficiency and reduce costs, they really see and appreciate the advantages that embryoscope can bring. So while it takes a lot longer to negotiate the purchase of larger numbers of embryoscopes, I mean, it does, the time from lead to close is a lot longer, but when the deals come over the line, they're larger. And that's, yeah, in the case of Q1, that was a big needle mover. But we have very high visibility, very high visibility on the embryoscope funnel and... utilization and consumable revenue per embryo scope. Yeah.

Okay. Thanks. Very happy with that answer. So second one on the just Middle East situation and obviously always very difficult to answer, but the cycle impact is that mostly about people delaying starting treatment or have you seen any disruptions to your operations as well? And then just I know it's very uncertain, but do you expect any long-standing consequences from this, like we've seen with the insourcing of genetic services or maybe more a return to normal once the situation de-escalates?

Yeah. So it's mainly, as you rightly point out, Philip, it's mainly people delaying their IVF cycle. So activity is way down in the clinics. And it's everywhere because sometimes people tend to think it's just, you know, Iran, Israel, it's across the Gulf. It's across the Gulf states. So it is that the impact is pretty far reaching. I think this is going to take time to return to normal, you know, because from when a couple, and in the Middle East, it's usually a couple, it's not individuals going. So when from when a couple starts on the IVF journey, it, it, it takes, you know, a couple of months, um, before, before they're ready. And before, you know, we start actually coming into the clinic for, for retrievals and transfers and all of that. So, um, Our expectation is it's going to, even if we have peace next week, it's going to take time for the Middle East to recover from this. In terms of disruption to our operations, yeah, we do have some disruption to our operations. We have a genetic services laboratory in Dubai. So activity is obviously way down. And in terms of ability to ship to the region, that's also impacted significantly. We have up to now found ways of getting around that. But yeah, the entire region is impacted. So volumes are down, cycles are down in the clinics. We've been managing the disruption, but we haven't been unaffected.

Thank you very much for that.

Maybe the other thing, I don't want to sound too negative, but capital sales are way down in the Middle East. So our EMEA region, you know, technologies did very well in Western Europe, but capital sales are way down in Middle East, which I guess isn't surprising given the situation. So, yeah, we think it's going to take a while for this to recover. Yeah. Yeah.

Good. I'm happy with that.

Okay. Thanks, Philip.

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

I have some further follow-ups, and I'll start on a question on the U.S. If we look from the market's perspective, I would assume that Q2 last year was the weakest quarter, and I guess also Q3 was a quite weak quarter. So with that in mind, should we see potential for even better growth in that region here in the coming quarters?

Yeah, so the start of Q2 wasn't so badly impacted last year, Jacob. The latter half of the quarter was. So the quarter where we really saw the most impact was Q3. Can we accelerate faster? I mean, that's always going to be the goal, right? But we have to say Q1 was very, very strong across the board. The goal is always going to be to maintain that, but... I don't think we will see a big bump from the comps in Q2. I think where we would expect it would be more around Q3, Jacob. But it's a good point that you raise in terms of the phasing and the comps from last year.

Yeah. Okay, that's clear. And then a more general question on consumables. I'm wondering if there was any like large orders or something in the quarter that we should not expect maybe in the coming quarters?

Were there large orders? Yeah, there were some large orders in South America. So we're starting to perform well in consumables in Latin in South America. But the rest of the regions, it's pretty much steady as she goes. There are no big outliers that I would call out. Yeah.

Okay and then I also have a question on the IT projects you're running. I'm wondering if there would be any sort of I guess large investments sort of I don't know that makes individual quarters sort of deviate or should we expect sort of the current investment level to be sort of a run rate for the coming quarters?

Yeah, I think the current level is what you should expect until until further notice. I mean, there will be perhaps in the future need for bigger investments in IT. But for the time being, there are no such decisions. So you can expect the present level going forward.

Okay, great. And I just do one final and that is, if Another question on the Middle East, if it's possible in sort of any way to quantify the effect it had in the quarter, let's say if it had, you know, a one percentage point impact to organic growth, for example.

I don't think we can quantify this, can we?

We don't communicate that, we don't disclose that information.

Yeah, that's what I mean. Yeah, yeah.

But we did have, I mean, you saw the EMEA, it's a net effect of the Middle East and Western Europe. And as Bronwyn said, strong growth in Western Europe, offset by the negative growth in the Middle East. But we don't disclose the specific impact.

Yeah. I understand. Thank you very much. That's all for me.

Yeah, I don't mean to sound evasive, Jacob. We don't disclose that. But I wouldn't underestimate the magnitude of the drop in the Middle East. It's very significant. It's on fumes. You know, couples are not going forward for IVF in this environment. So it's way down. down enough that in the venture life group, it's pulled down the performance of our largest region. So we are severely impacted by this. I mean, we are. There's no doubt about it. Yeah. That's why we're happy with our 5% organic growth in local currencies, because we've managed to deliver it while navigating the Middle East situation.

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

Thank you very much for taking my follow-up question. And one question regarding product launches, and I know that you don't want to give up too much information to your competitors, but if we can just phrase it like this, your embryo transfer catheter gained 510K approval mid-year last year. Is that a commercial product now or is it still sort of in preparation?

Yeah, so you're smart, Ulrich. I always underestimate you. Yeah, that's going to be one of the ones that's coming for sure. the ETC. And of course, what's very compelling in our case is we also have embryo glue, right? So we have the ETC with the embryo glue, which is a very nice and compelling value proposition for customers. So yeah, that's going to be coming out of the gates.

All right. So it's a coming product launch. Great. A second question would potentially be more addressed to you, Per. It sounds like you're doing a traditional tail cutting as you're focusing on higher margin products, higher margin markets. This is just low-hanging fruit. How much of the portfolio are you currently reviewing and assessing beyond sort of what's been announced regarding the genetic strategic sort of review?

Yeah. No, no, it's an ongoing process. I mean, what we communicated in December is the lowest hanging fruit. There are more fruits hanging low. So we will continue to do this and we are working. It's a combination of focusing on this, but also developing, you know, tools and measures, how to measure profitability on customer level or

uh product line level and so on so it's an ongoing this uh process uh and uh yeah we will do more uh is it possible in is it possible to in any way quantify how much of totals or top line sales would be assessed or is it just a review of everything all the time

Yeah, we don't disclose that information, but we assess everything in all product groups in all regions.

Yeah. Yeah, that's great. Thank you, Per. And last question on my end. We're now approaching sort of the one year mark of the class action lawsuit being filed on your end. And we have seen the dismissal from your competitors here in the last half a year. So can you provide us with any update on the matter?

Yeah, so... Well, how long is a piece of string is unfortunately how these things go. But we see it as a positive sign that there have been other dismissals in this area. And also, you know, the case against Victor Life was... I'm not quite sure the exact legal language, but it wouldn't have been as strong, as compelling as it was against some of the other competitors. But you never quite know. But, you know, we're feeling more comfortable around this one in the US. Not to go too technical, but we also have certain clauses in our contracts which provide... additional safety for us in these types of instances. So let's just put it this way. We don't see any disimprovement or need for increased concern around these cases in the United States. In fact, we see it the opposite way.

It's a very long process as well, and we haven't received any major updates on that in the last couple of months here. So it takes time, but yeah.

That's great. And is it possible to in any way quantify how much sort of the lawsuits or sort of legal processes have cost in terms of cost beyond sort of your insurances, etc.? ?

Yeah, it's not that much. I mean, we have not accrued anything when it comes to potential claims because we don't believe in that. But that will happen. But we have accrued and we have had costs for the legal support. And that is a couple of million SEK. So far.

That's great. Thank you for taking my additional questions. I'll get back into the queue.

Thanks Ulrik. The next question comes from Sten Gustafsson from ABG Sundahl Collier. Please go ahead.

Yes, thank you. A very quick follow up on the Middle East situation. Could you, and I understand you don't want to give us the exact details on how much it has declined, but Could you share with us sort of on a normalized level how much of your sales comes from the Middle East in a normal year or normal quarter?

We don't give the exact percentage, Stan, but I can tell you it's in the single digits.

Okay. Thank you. Of global or of EMEA?

So global in a normal quarter?

Yes.

Yeah?

That makes sense.

Okay.

Perfect. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

So thank you very much for joining us over and out from sunny Stockholm. Thank you.

Thank you very much.