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.

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 Ludwig Germunder from Handelsbanken. Please go ahead.

Ludwig Germunder Yes, good morning and thank you for taking my question. I'll keep it to one as wished, and I want to keep it to genetics. And just to make sure we get things right, you mentioned how the genetics exits of tests are impacting the group development. But if you break it down and focus just on the genetics development, how do you see things moving following the exits of the test, and how do you see things progressing going forward?

So thank you for your question, Ludwig. I just want to make sure that I understand it. So having exited NASA and GDPX, how do we see the genetics business going forward? Is that correct?

Yes, exactly. So for the remainder of what was left, basically.

Yeah, so obviously we actually have completely exited those two tests now. Most of the revenue came from the EMEA region, so that's the region that has been most impacted by this exit. But as is also evidenced in South America, we are also exiting low profit accounts. So we, you know, there are in certain parts of the world, primarily in Latin America, We see an increase in generic competition with very low prices. We're not going to play in low cost generic segments. So we have been exiting certain accounts in that region as well. It has had a top line impact in the quarter, but it improves our We will continue to do that. If we see an opportunity to improve the profitability of our business and it doesn't make sense to stay in lower profit accounts, we will continue to do that. We are very much doubling down on driving profitability. profitable growth across all portfolios. The main areas where we have lower profit accounts are on the genetics side. So we will continue to do portfolio or I guess account rationalization is probably the best way to do that going forward. It benefits our profitability and it allows us to focus on driving growth in the more profitable parts of the portfolio.

I don't know if you would add anything to that.

Did you have a follow-up question?

Yeah. Yes, please. I want to stay on genetics and we're talking about profitability. I know that you don't disclose the divisional profitability, but given that this is an, you know, thing to improve profitability, could you give any more colour about how we should think about genetics profitability and how it will move following this, or is it possible to say anything?

Yeah, what we can say, which I also mentioned in previous courses, that we increase our focus and our ability to analyze profitability on customer level and market level to help us to guide which account and which market we should focus on and which one we should not focus on. So we have increased our toolbox and our competence and focus in this area to drive profitable growth. And that will continue. We will continue to work on this in order to improve our growth, prosper growth journey.

Thank you for taking my question.

Thank you, Ludvig. The next question comes from Jakob Lemke from SEB. Please go ahead.

Yes, good morning. My question is relating to the Middle East, and I'm wondering if you can comment on roughly how much it has declined in the quarter and also if you're able to decipher any trends in any direction in the recent weeks or months.

Yes, so good morning, Jacob. Thank you for your question. So we don't divulge, as you know, we don't divulge Middle East revenue or percentage decline. But, I mean, it is significant and it has been significant since the start of this war, I guess, if we're calling a cat a cat. It's a war. What I would say is that when the negotiations between US and Iran seemed to be going well, there was a slight pickup in June and people were feeling more positive. But, of course, we've seen a reverse in that trend in the past couple of days. I know the market receives very mixed messages on the Middle East. The reality is, and we see this, cycles are significantly down across the entire Middle East region. The airspace has been closed on and off. Obviously, it's not just Iran or UAE, it's Bahrain, it's Iraq. It's very, very difficult to even do business in that region right now. You know, based on what we saw in June, if a deal can be reached between the Iranians and the Americans and the Strait of Hormuz opens back up, we feel that the cycles would return, you know, to normal levels. I don't want to say quickly, but, you know, the demand is there. The problem is doing business is extremely difficult. So... The sooner we have peace and an agreement, I think the faster the region can get back to growing again. But it is in negative territory right now. The cycles are negatively down significantly versus last year. And we see that in all clinics. Yeah. So it's a very difficult question to answer, Jacob. I'm not trying to be evasive, but it depends on factors outside of our control, I'm afraid.

Okay, that's fair enough. And then my follow-up then is on Europe, which you say is strong. Is that, you know, that you are growing sort of slightly above the cycle growth rate or is it sort of substantially above cycle growth rate, would you say?

I'd say it's above the market growth rate. I wouldn't say it's substantially. But we are growing above the market in Europe. That's our stronghold and we intend to keep it.

Good, I'll get back into the queue and come back.

Thanks, Jacob.

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

All right, good morning. I also got a question on genetics here, perhaps focusing on Americals. So kind of, you know, it's impacted by the exit as you have reported, but, you know, if we dig in a little bit closer into the report, you report the growth numbers even excluding those exits. So it seems to be minus 3% instead of minus 4%. So I'm just struggling to understand a little bit on the US growth in genetics. Are you seeing any kind of acceleration and did it actually grow in this quarter?

Genetics in North America absolutely grew in this quarter. We're doing really well there and have been for several quarters now. So North America is in very good shape. But we are exiting low profit accounts in South America. That's a fact. So genetics, South America is significantly down. It's a strategic decision. It's low-profit accounts. There are generic low-cost competitors come in. We're not going to follow the market down. We have a lot of opportunities in consumables and in technologies in South America, and we would prefer to focus our team's efforts on accelerating the growth there, which they absolutely did in the quarter. than focusing on low-profit genetics accounts. But I can tell you, Philip, we don't give the breakdown, but North America is performing very nicely in genetics.

Yeah. Okay, thanks for that. And then perhaps the follow-up from the previous question that Ludviga asked as well, just in general on genetics. So organic growth is still negative across the company. even when excluding the exited business. So I'm just curious, you know, what is the path back to growth for this area? Yeah.

So it's all going to be about focus. And I don't think we should look at specific products or specific tests. What we want to do is advance the growth of the Vitrolife Group company across the entire portfolio. If we believe we can accelerate faster in certain areas, which we do, that's where we will double down. But it's very much a portfolio play. What we're not going to do is stay in low profit tests, low profit markets and low profit customer accounts. We are not going to do that. The name of the game for our company is driving sustainable, profitable growth. Um, so to pass earlier point, our commercial excellence is much more sophisticated now. So we have been building pricing muscle, um, our visibility is really, really good. It's been improving all the time. Um, so this allows us to segment the market in a much more sophisticated way. And, uh, you know, as, as I mentioned during one of my slides in genetics, we have premium products, we have differentiated technology. We're a full-service provider, and that comes with premium prices, and that's where we will drive our growth. We will drive our growth in the premium segments of the genetic services market, not in the lower-cost segment.

Okay, thank you. Thank you so much.

I'll get back into the game. Thanks, Philip.

The next question comes from Elvin Rolder from DNB Carnegie. Please go ahead.

Hello and good morning to you, Bronwyn and Per. I have two questions here as well. Perhaps beginning a bit on China, considering your comments about IVF cycle activity in the region and the upcoming years here. What are your kind of expectations about price levels in China the coming years? Do you fear that kind of like price... pricing levels will fall given that the clinics will have to fight for fewer cycles or that vendors to the clinics will become more aggressive in pricing and defending their utilization. Can you give some comments about that and how we should think of growth margins in China as well?

Yeah, that's a great question. Thank you. So, as I mentioned, I'm just back from China. I spent some time there to really understand the market dynamics. Our prices are actually performing very well in China. In fact, we have price gains in China. We feel confident about being able to protect those prices because we have a very strong share. We have a really good reputation for quality. And Chinese clinics, I mean, everything in IVF is about success rates. That's what it's all about. And in order to drive and increase your success rates, clinics typically like to use premium proven quality products. And China is no different. So we don't feel price pressure in China in the segments where we play. I would anticipate there will be an increase in price competition in the more commoditized areas. But for embryoscope and for media and for needles, where we also have a differentiated offering, we don't. We believe we can hold pretty firm on our pricing. So no expectations on a decline in the profitability of the China market. And I think you can see, if you look at the... At the gross margin and the contribution margin, as Par showed, we actually have a positive trend there and we feel pretty good about that going forward.

Okay, great. Thank you. And then the second question relates to the exit of genetics in the South American markets. Are these markets or accounts that you're exiting also customers within your consumables branch? Have they been using both genetics and consumables apart from vitreolife and agenomics? And if so, how are they responding to this decision to discontinue the genetics leg in these markets?

Yeah, so it's a bit of a combination, to be honest. So we have some customers who have embryoscope, use our consumables and genetic services, but it's a bit of a mixed bag. I would say overall in South America, it's probably the region where we have one of the lower levels of complete portfolio purchasing. So there are other parts of the world, EMEA primarily, where you'll tend to have, you know, I don't want to say full vitro life users, but higher total vitro life utilization. So in South America, we do have a lot of large accounts that may could primarily or have been primarily genetic services and not necessarily users of consumables and technologies. But, you know, the lower levels of profitability in power, you can comment on this as well. The lower levels of profitability in South America, we've had this for a while. We've been carrying this for a while. And so, you know, it just... I guess the lower cost competitors entering, it just accelerates our decision not to play in lower profit accounts. There's an opportunity cost to doing that. And look at our margins, they're excellent. So it doesn't make sense to have sales teams focusing on either driving growth or defending accounts that have really low levels of profitability when we have a really nice portfolio where we can drive much more profitable growth for our company and our shareholders.

I think it's a combination of the situation in South America and our strategic decision not to play in low profit accounts, but also it's also because we have increased our ability and transparency of reviewing and analyzing our profitability on account level and market level and customer level and so on. So it's led to our strategic decision to step away from low margin business.

Noted. Thank you so much for taking my questions. I'll get back in the queue.

The next question comes from Carlos Moreno from Premier Miton. Please go ahead.

Hello. I just want to kind of pull together what we've been talking about almost in the previous few questions. It just seems that, you know, you presented the greater, greater than 10% top line targets at the end of 2023. And yet it seems, I mean, you're off, but slowly, slowly. and it just seems that you've totally changed the strategy to one of very low top line net growth if any and for all the good reasons it's a nicely profitable business and you know high profitability it just seems that over the next five years I mean we're almost waiting for the new chief executive to tell us this right that organic growth for the business and it's a nice business fit for life but there isn't going to be much organic growth because you're going to get constant pressure on the low end of the genetics. And cycle growth is just not going to be that strong. China's got issues. That's a big market. I just feel very frustrated as a shareholder. We're basically in at least 12-month limbo before we have new targets that are going to look very different to the old targets. And it feels slightly odd that the greater than 10% targets were ever presented, i.e., Yeah, I don't quite know. It's a bit of a big question. I just feel very frustrated. Yeah, anyway, that's my question.

Okay, I can start. No, I mean, the targets are set by the board. They are now into the third year and the underlying assumption on organic growth was between five and seven percent of market growth and us taking market shares on top of that. And as you clearly seen recently, we are not there. We are not on the five to seven percent underlying market growth. And then of course, it is a challenge to be at 10% organic growth right now. If the market comes back to those underlying market growth, then we have a good chance to reach the 10%. But in this quarter, we are far off, of course, with the with the softening in the markets.

Yeah, I guess the only point that I would add, Carlos, is those targets were set to the point that Pat has made when IVF cycles were at higher levels. The market is soft right now. There's the situation in the Middle East. I think it's very clear what's happening in China. We know the macroeconomic situation isn't good there. So the market is soft right now. And we are driving profitable growth in the markets and in the areas of the portfolio where we see opportunities. There is growth to be had. It's not the type of growth that we would want or shareholders would want. So we're doubling down on the more profitable areas. That's a fact.

Yeah, it just doesn't seem that, you know, it seems more structural than cyclical. It just seems that, you know, the decision to move up the profit, to focus on where there's more profitable niches and a lot of the big trends like China, they aren't. I mean, to say they're cyclical is a bit misleading, really. They are medium-term, if not long-term issues. And unless there's a massive change in government strategy, massive reimbursement, which is unlikely, You know, Vitralife net top line isn't going to be very much over the next five years. Simple as that, really. It's just very odd to have such a mismatch between what's the reality and what are the targets set by the company. But anyway.

I think there are very wide regional variations, Carlos, to your point. China, it definitely appears structural, for sure. North America has shown very positive green shoots, but the geopolitics there make it very volatile. Western Europe is there or thereabouts, but there are parts of the world that clearly have structural issues. And then there are opportunities in other parts. China is the largest IVF market in the world in terms of cycles. So it does have an impact on the global cycles when demand is soft there. Thanks. Thank you, Carlos.

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

Thank you. I have a few more questions. I'll start on the work you're doing with restructuring and the continuation of products and countries. On the sales line, it seems like the impact here in Q2 is a bit smaller than you communicated. I think the impact is 11 million in the quarter, I think based on what you said before, it should have been more like 20. So have you discontinued all the tests, or is there more to come here going forward?

Yeah, we have discontinued all the tests. And we communicated in December that we'll have an impact of 2% to 3%, and it had an impact of 2% in Q2. So from a percent point of view, it's in line with what we communicated in December. So it is according to our expectation.

Okay, so there's no more revenue that is going to go out going forward?

No, we have completely exited those two tests. We are not performing them any longer. I think the last one will be the end of Q1.

Okay then on the savings part, wondering how much you have realized here in Q2 and also if you are at sort of full run rate exiting Q2?

Yeah. No, we are not at full run rate yet, Extinct Q2. We communicated a restructuring program with a restructuring reserve of 55 million. We have consumed more or less half of that. We will continue into Q3 to execute on the planned restructuring but we are in line with our plans and we will most likely finish according to plan also end of Q3 as we have communicated so the full saving of 65 million on annual basis will be reached but on the other side we will also continue to invest in our key markets and key functions and IT and so on offsetting some of that 65 million. So you cannot expect to see a 65 million reduction on or improved EBITDA because we at the same time also invest in prioritized area. But we are in line with the restructuring plans.

Okay, good. And then I'm also wondering which TML line this VAT reversal is in?

It's in the other operating income expense.

Good and then maybe a final question also. If you can comment on how much sort of earnings gain you get year over year from the timing of the FCE conference, which I think is in Q3 this year and I think Q3 last year.

Yeah, I think the effect is 5 million SEK that we took in June last year, but we didn't take this year in June.

Okay, good. Thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 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 all for dialing in. Hopefully we've been able to answer most of your questions. If you do have any, of course, you can follow up with our investor relations team. We wish you all a very nice summer from everyone here at the Vitrolife Group. Thank you very much.

Thank you.