Vitrolife AB (publ)

Welcome to Vitrolife Q3 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 welcome to the Vitrolife Group Q3 earnings call. I'd like to start, as I usually do, with the Q3 highlights. And the first highlight I would like to bring to your attention is our growth in technologies. 21% organic growth in the quarter driven by all regions. And I have to say the team is doing an excellent job driving both penetration and utilization of embryoscope. The second highlight is that our restructuring program is on plan and on time. In fact, we have an 8% growth reduction in head count. So we have been both efficient and effective. at taking out cost. And then finally, the third point I'd like to highlight is our strong earnings per share, 0.94 sec, and this is driven by improved net income and the share repurchase program. Okay, I'd like to take you on now to the next slide and provide you with a market overview broken down by regions, starting with the EMEA region. In Europe, we saw IVF cycle activity picking up in the quarter. In the Middle East, demand remained subdued, but there are signs of improvement. We saw capital sales were strong in the region and orders on longer shelf life items started to pick up. So we see this as a green shoot. Reimbursement is improving. We see in Sweden, the number of cycles has increased from three to six. We see improvements in the reimbursement in Denmark, also in Poland. And there have been some positive announcements from NICE in terms of coverage in the UK, or at least the need for improved coverage in the UK. Next, if we look at the APAC region in terms of China, which is the largest IVF market in the region, IVF cycles are down versus last year. However, other major APAC markets are trending positively, including some that had been flat for quite some time. Reimbursement is also improving in this region for married couples. I'd like to highlight that. So in most parts of the APAC region, coverage typically only supports married couples. There have been some announcements recently, as recent as September, in fact, in Taiwan, announcing new measures to stimulate IVF activity. And then finally, to the Americas, the Americas has the highest cycle growth of the three regions. We can clearly see that the US market is moving towards an insurance paid system. So as more states mandate coverage, employers are providing insurance cover for IVF for their employees. Final point I'd like to make on Americas is that clinic chains continue to expand their footprint, buying up independent clinics. Okay, well, I'll move us on now. and we will take a look at the performance of EMEA, our largest region in terms of revenue, now accounting for 38% of the total. In the EMEA region, we delivered revenue of 333 million SEK, a strong performance with 11% organic growth. Europe is growing strongly and signs that the Middle East expects a return of cycles with capital sales increasing in the region. So this is the point I was making on the previous slide. While we don't see a pickup in the day-to-day activity, we do see clinics starting to reinvest. Consumables plus 2% in local currencies with high growth in Europe impacted by lower demand in the Middle East. technologies plus 22% in local currencies as clinics invest in embryoscope to increase workflow efficiency. I have to say that we're delighted with this performance. EMEA has the highest penetration of time lapse globally. So the team did a really great job and beat certainly our internal expectations. Genetics grew 15% driven by the regain of genomic kit accounts. The services part also performed well. And then in relation to gross margin, as you can see from the chart, gross margin is down 0.8% and this is due to product mix. Okay, we will move on now and take a look at the Americas region. So we delivered 292 million sec . . . The strategic exit from low profit genetics accounts reduced sales but improved profitability for the region as a whole. Consumables delivered plus 8% in local currencies driven by share gains in media. In fact, we grew double digit in media in both North and South America. technologies plus 48% in local currencies driven by strong capital sales in North America. We now have some good traction and clinics are looking for every opportunity to improve efficiency. Genetics minus 1% with South America offsetting growth in North America. And as I've explained, this is a strategic decision to exit low profit genetic accounts in South America. Gross margin increased 1.1 percentage points to 55.1 and the market contribution rose to 29.3 from 26. Okay. Finally, we'll move to the APAC region, where we delivered revenue of 260 million sec and organic growth of 2%. As you can see from the chart, this is our highest revenue quarter in quite a while. A softer quarter for consumables with minus 5% organic growth, and this is due to weak demand in China and the phasing of distributor and large chain orders in the APAC region. Technologies performed strongly, increasing by 11%, primarily driven by China. So despite the soft market conditions in China, we do see clinics continuing to invest in embryoscope. Genetics grew 8% driven by genomic kits and a soft comparable quarter last year in this region. And gross margin here also increased 0.7 percentage points to 61.1, up from 60.4. Okay, I'll move on to my final slide before I hand over to Pat. So you all know, or at least you should know at this stage that the Vitrolife Group has a mission to be the leading global partner. We don't want to be two, We don't want to be three. We want to be the leading global partner in reproductive health, striving for better outcomes for patients. We have five key strategic pillars, which can be grouped into the following three areas, growth, profitable growth, innovation, and operational excellence. So how are we doing? How are we performing in terms of advancing our strategy and advancing our mission? Well, when it comes to profitable growth, it's very clear from the results this quarter that we are increasing the penetration and utilization of embryoscope across all of our regions. Our key focus market, we explicitly stated that we would double down in North America. We have, and this region is delivering double digit growth. In genetics, our focus on key tests and profitable markets is improving our profitability. When it comes to innovation, I really want to thank the team. I want to thank our commercial team, but I also want to give a shout out to our innovation team. The Freshness Index and the Vitrolife Group, which is a measure of the percentage of revenue coming from products launched in the past three years, is at an all-time high. And again, three years ago, we decided we were going to double down on innovation. It's paying off. In fact, 2027 is set to be our best year on record in terms of new product launches. We have significantly reduced the amount of time to achieve regulatory approvals. So as we all know, in medical devices, you can have the best R&D funnel in the world, but if you cannot navigate the regulatory processes and boards across the globe, you won't launch anything. So we're really happy We are protecting our EBITDA while making investments in digital capabilities. As an example, we launched a new patient portal in the United States. which is doing really, really well. And then finally, I want to give a shout out, of course, to the Gothenburg folks. We are developing a state of the art manufacturing facility in Hogsburg in Gothenburg. It's progressing really, really well. And I have to say the operations team there are doing an outstanding job at building this state-of-the-art facility. So in terms of our strategy, advancing very well, doing what we said we would do and striving ever more forward towards that mission of becoming the leading partner in IBF. And with that, I'll hand you over to Pat.

Thank you, Bronwyn. So I will cover then the financial highlights for Q3. Starting with some more information about the geographical segments. Broman already covered the sales and gross margins, so I will not repeat that. But on the market contribution, starting with Americas, we ended up with 86 million SEK, which is a margin improvement reaching 29.3 versus 26. And in EMEA, 126 million SEK, 38.0 contributing margin. compared to 39.9. And finally, then APAC, 111 million SEK, which represent and contribute a margin of 42.8 versus 42.1 last year. So moving on to just high highlights of the numbers then. We had a net sales of 884 million SEK, which is a 6% growth, both in SEC and organic growth. And gross income reaching 523 million SEK, which represents a margin of 59.2 compared to 58.9. And then finally, our EBITDA was 279 million SEK, an improvement from 253 last year and representing a margin of 31.6 compared to 30.3. The margin increase was driven by higher sales, but also somewhat improved gross margins. And if you look at the quarterly sales and the EBITDA in percent of net sales, we have, as I said, 884 million SEK compared to 835. The last three quarters, we've seen a gradual increase. And also, if you look at the EBITDA margin, we have a gradual improvement quarter by quarter as some of you might remember Q2 we had some one off positive items hitting the result that's why the 34.4 was temporarily a little bit higher than normal And then move to the next to explain the journey from last year to this year's sales, starting with 835 last year, we saw an organic growth excluding exited businesses to 6%. And then we had this negative impact from the exited businesses, NAS and GDPX that we announced in December last year that had a negative impact of 2% on the top line. But also in this quarter, we had a positive currency impact of representing 2%, which in all in all in SEC gives us a growth of 6%. If you look at the gross margin development, the last five quarters, we ended up at 59.2, a slight improvement from Q3 last year. In this quarter, we had a positive impact from the US tariff refund of 9 million. We also had a small positive mix effect from a somewhat smaller share of genetic services. But on the negative side, we had a high material cost, which is a combination of US dollar purchased materials and also general cost inflation on our raw material. And then Q3, we always see this as a seasonal effect from a fixed cost absorption related to manufacturing. So this is a comparison Q3 to Q2. This effect is approximately 0.7 points. And on the operational expenses, we had a small decrease, 3 million SEK. We do see savings from the restructuring program, both in OPEX, but also in cost of goods sold. For the OPEX part, the benefits from the savings is offset this quarter by somewhat higher bad debt provision, but also the inflation driven salary increases. We also had a positive effect from currency hitting OPEX of 3 million SEC in the quarter. So I would like to give you an update where we are. Bronwyn already mentioned this, but some more details on the restructuring program. So it's on plan and on time with most of the planned activities by end of Q3 this year, as we communicated in December 2025. As you know, the target scope was to exit GDPX and NASA and some low profit markets. And we also said that this will give us an annual savings of 65 million SEK. So where are we now then? So, yeah, we have delivered most of the identified actions and that has resulted in a headcount, a gross headcount reduction of 8%. But over the same time, same period, we have invested in headcount in sales and marketing and IT and other roles. representing an addition of 2.5% headcount. So all in all, we have a net headcount reduction of 5.5% compared to December last year when we announced the program. The 8% headcount reduction generates savings of 20 million SEK in the quarter, showing up both in the cost of goods sold, but also OPEX. These savings have been offset with a higher material cost that we are facing, salary increase driven inflation and the bad provision above normal levels and the cost associated with the new hires. The restructuring so that we put aside of 55 million in Q3, we have used 43 million SEC by end of Q3. So a quick update on the cash flow then. 224 million in operating cash flow compared to 255. The working capital contributed minus 5. Q3 last year was positive 37 contribution. So it was a net effect or a swing effect of 42 million decline. And also we had somewhat higher tax paid in the quarter compared to Q3 last year. So that explains 16 million negative impact on the cash flow. But we also had a better starting point this quarter with a higher profit. So that had a positive impact of 34 million SEK. So all in all, the best cash flow quarter the last four quarters. And also, I would like to give you an update on the status on the share repurchase program that we announced in July. The board approved to launch a shared repurchase program up to 500 million SEK. Up to end of September, we have purchased shares for 246 million, representing 2,695,000 shares, which we hold. And that is approximately 2% of the outstanding shares by end of September. So the program continues under the rules and also the limits provided by the AGM up to the end or until the next AGM. So good progress on the program in line with our expectations. And then a final recap on the financial numbers then. Sales 884, 6% organic growth compared to Q3 last year, and a slight improvement on gross margin. EBITDA of 279 million SEK versus 253. Slightly improved EBITDA margin. Same goes with the EBITDA margin, 28.9 versus 27.6. net income 124 million SEK compared to 102 and the earnings per share that Bromby mentioned 94 Öre compared to 75 Öre and in the end operating cash flow 224 million SEK compared to 255 and our leverage net debt EBITDA ended up at 0.8 compared to 0.7 And by that, we leave the room for Q&A.