Vitrolife AB (publ)

Welcome to Vitrolife Q2 2026 earnings call. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Please start by asking one question followed by a follow-up question. It's then fine to queue up again for more questions. Now I will hand the conference over to CEO Bronwyn Brophy and CFO Par Eerskog. Please go ahead.

Good morning, everyone, and thank you for dialing in to the Q2 2026 earnings call for the Vitrolife Group. I would like to start with three key highlights in the quarter. We delivered record revenue of 358 million sec in consumables, which represents 15% organic growth in our America's region. A net income of 129 million SEC and an EPS of 0.95 SEC. We also launched EmbryoCath and EmbryoViewer Pro. So for the first time, we can compete in the embryo transfer segment. EmbryoViewer Pro, which we recently showcased at the ESHRA Congress, is an advanced software program for our embryoscope time-lapse system. I will now move us on, and I would like to provide you with an overview of the market in each of our regions, starting with EMEA. European IVF cycle activities appear to be at normal levels. However, in the EMEA region, the Middle East crisis is impacting IVF cycles significantly. We do not, in the Vitrolife Group, see Middle East distributors restocking at this time. In fact, the airspace has been regularly closed, so even shipping goods into the region is a challenge. In the APAC region, which I recently visited myself, in China we see that IVF cycles are declining year over year. This trend is expected to continue based on population demographics. The Southeast Asia within APAC is growing as access increases. In Japan and Korea, the combined markets are in low single digits, although the birth rate in Korea has rebounded significantly in 2026, with total fertility increasing above 0.9 for the first time in many years. So one could reasonably expect a pickup in cycles in South Korea. In the Americas region, if we look at the U.S., cycle activity was very slow at the start of Q2, so in April and May, but it started to pick up in the month of June. There were wide variations between the U.S. states with wealthier areas like Massachusetts, New York, and Southern California performing stronger. In South America, we see an increased presence of low-cost generic competitors in genetics. Cycle activity remains robust in South America, within the Americas region, just to be very specific on that one. Okay, so moving on to look at the performance in our largest region EMEA, which accounts for 37% of our global revenue, as is evidenced from our donut here on the right hand side of the slide. We delivered 1% organic growth in local currencies, excluding the exited business of NASA and GDPX. Western Europe remained strong. However, IVF cycles, as I've just mentioned, are significantly down in the Middle East, and this weighed on the regional performance. Consumables grew 4% in local currencies, with Europe performing well and the Middle East behind prior year. Technologies increased 3% in local currencies with installs in Europe offset by low capital demand in the Middle East. And we are also seeing positive trends month after month in the consumable revenue stream from our embryoscope systems. Genetics decreased by 3% with the Middle East volumes down substantially. We've been focusing on driving margin improvement in all regions. So it's very pleasing to see the positive trend in our gross margin. So if you just look at the chart for the first time, you won't have seen this in previous slides that I've presented, but we have added the gross margin trend. What you see here is a two percentage point improvement in gross margin, primarily driven in the case of EMEA by the exit of NASA and GDPX and also our operational efficiency program, which we have been focusing on across the Vitralife group. We will now move on and look at the Americas. In the Americas region, we delivered 1% organic growth in local currencies. The share of revenue coming from Americas now stands at 34%, as you can see here in the donut on the right hand side. North America performed well across the portfolio. You know that this is one of our key focus markets. We've been doubling down here for a couple of years now. South America's exit from low profit genetic accounts reduced top line growth, but it improved the regional profitability. Consumables increased by 15% in local currencies with significant gains in media in North and South America. And we are delighted with these wins because we've really doubled down to take share here. And I want to thank my team for their huge efforts in bringing these wins over the line. Time lapse decreased by 9% due to a large capital deal with the clinic chain in the same quarter last year, which most of you will likely remember. South America had a very strong capital sales quarter as we increase our focus on embryoscope, both increasing the penetration of the capital systems, but also the utilization of those embryoscopes. genetics decreased by 3% with continued growth in our key focus market of North America offset by the exit of low profit accounts in South America. This is a strategic decision. We do not want to play in low profit segments. We are a premium service differentiated company with best in class technology and genetics, and we will not follow low price generic competitors. at 3.6 percentage point improvement in our gross margin. And this is really down to our increased focus in consumables in Americas. Again, this is a strategic decision to focus on this area. And we believe we have further opportunities in consumables and in technologies, particularly in South America, but also in North America. Okay, we will now finally move on to the APAC region where we had a decline of 1% organic growth in local currencies. APAC now accounts for 29% of our global revenue. I'm delighted to report that Japan delivered strong growth, our best in several years, in fact. We continue to expand our share across the portfolio in Southeast Asia. However, as I've mentioned, demand in China slowed further as the quarter progressed. Sales and consumables decreased by 5% with a strong performance in Southeast Asia and Japan, offset by weak demand in China. Technologies increased by 6%, primarily driven by capital sales in Japan. This is particularly pleasing to see because Japan is a high penetrated market for embryoscope. So big call out to our Japan team for the really nice job that they have done there. Genetics increased by 2% across the region. So slightly above the regional growth rate for APAC at present. A 1.4 percentage point increase in gross margin driven by price increases and operational efficiency. The team on the ground have done a really nice job here. So driving price gains in a very competitive market is not an easy thing to do. And I think the Victor Life Group APAC team have done a really nice job here. Okay, so I'll move on to my final slide, at least, before I hand over to Pat. As you know very well by now, the Victor Life Group has a mission to be the leading global partner in reproductive health, striving for better outcomes for patients. We focus on three key focus areas to get to that coveted number one spot. They are growth, innovation and operational excellence. So how are we doing? Are we advancing in these key areas? So when it comes to growth, we are driving profitable growth through improved market and customer segmentation. And I think you can really see this in this quarter. We are doubling down on the markets, on the areas of the portfolio, and on the customers where Vitrolife Group can drive profitable growth. We are gaining share in consumables. I mean, 15% organic growth in the Americas immediate. That's well, well above the growth rates there. And we are increasing the penetration and utilization of embryoscope. We are also building out our platform solution with the combination of Embryoscope and eWitness. In relation to innovation, we're not just talking about innovation. We launched EmbryoCath and EmbryoViewer Pro, which we showcased at ESHRA. However, we also have more launches planned in the coming quarters. And I really want to thank our R&D team and innovation teams for the work that they've been doing there. We're also advancing the efficiency of IVF clinics, partnering with our customers and driving the use of AI in embryo selection. When it comes to operational excellence, we continue to invest in digital capabilities to improve the customer journey and our connectivity with clinics. We have taken actions and you can see this in our quarterly results. We have taken actions to optimize our cost space across Thank you everyone.

So let's start with just some more information on the geographic segments. Roman just went through the slides expanding sales and gross margin gross income and gross margin. I just want to add the market contribution then we had same pattern there as on the gross margin improvements in all regions and also for the total then so America ended up at the gross contribution market of 33.8% as an improvement of more than 4% points compared to Q2 last year. And EMEA, 39.4% compared to 35% last year. And then APAC, 44% compared to 41% last year. And in total then for virtual life group, 38.8% compared to 34.7%. So the market contribution is, of course, improved. Part of it is the improved gross margin, but also the reduction in OPEX related sales and marketing costs. Moving to the next slide. So, the highlights then. Net sales ended up at 857 million SEK. That's minus 2% growth in SEK. I will come back to more details on net sales on the next slide. Our gross income, 517 million SEK, which represents a margin of 60.3, almost 2% points improvement from last year. And then an EBITDA of 295 million SEK equal to an EBITDA margin of 34.4 compared to 27.8. In the quarter, we had, of course, the effect of the strong gross margin, but also that we are working hard on the cost reduction program. But we also have some one-time items in the quarter amounting to SEK 13 million. So the split on the sales development. We have the minus 2% growth in SEK is explained by an organic growth of 1%. But then we have the exit of the NAS and GDPX that had full effect in Q2 that represent minus 2%. And then we still have a negative currency impact on top line, although it's much less now. It's only 1% now, so that's good. So all in all, this explains the 2% negative growth in SEC. Yeah, let's have a close look at the gross margin development the last five quarters. Strong development, 2.3 percent points improvement from Q2 last year. It's a result of our strategic decision to focus on higher margin products and markets. We see an improved gross margin in all regions and all product groups. A minor positive effect is also from the mix coming from that we have growth in consumables, flat in technologies and negative growth in genetics. So we have also a positive mixed effect in the quarter. Okay, and then if we have a closer look at the operational expenses, the last five quarters, we have a reduction of 48 million SEK compared to Q2 last year. So we continue to see the reduction that we have had now for three quarters in a row. And it's reflecting the positive impact of the ongoing restructuring program and continued cost discipline. But also, as I mentioned, we have a positive one-time effect amounting to 13 million SEK. primarily driven by VAT accrual release, but also in the quarter we had a positive currency revaluation effect of 8 million SEK. It was minus 5 Q2 last year, so it's a 13 million SEK swing there. And on the cash flow, our cash flow for the quarter amounted to 140 million SEK compared to 151 Q2 last year. We had a negative impact built up on working capital, mainly driven by an increase in our operating receivables, but also built up on inventory ahead of vacation period. And then a summary of the key financials then. Sales, 871 million SEK gross, or 857 in Q2. Gross margin 60.3. EBITDA 295. strong EBITDA margin of 34.4 net income 129 compared to 100 million Q2 last year and our earnings per share 0.95 compared to 0.74 last year in Q2 and then our operating cash flow 140 million SEK compared to 151 million SEK and our net debt EBITDA ended up at 0.7 compared to 0.9 Okay, and then as one also mentioned yesterday, the board approved a shared repurchase program, which we communicated through a press release yesterday night. It's a program to repurchase shares up to a maximum of 500 million SEK starting tomorrow until the AGM 2027. This program aims to optimize the capital structure and enhance shareholder value. The repurchase will be made on Nasdaq Stockholm in line with applicable regulations and treasury shares may not exceed 10% of outstanding shares. And this repurchase program is in addition to virtualized group dividend policy. The AGM on the 5th of May 2026 approved a dividend of SEK 1.10 per share, totaling a SEK of 149 million SEK for full year 2025. So that was my last slide. So we open up for Q&A.