Getinge AB (publ)

Thank you very much, and welcome, everyone, to today's conference. Today, we will first look into our performance in the third quarter and then also reflect a bit on the current market situation and our expectations for the remainder of 2025.

So we can move over to Page #2, please. So if we start then by looking at the development of some of our long-term or strategic KPIs, we can see that we continue to clearly track in line with our plan to increase the share of sales from recurring revenue products and also accelerating the share of sales from high-margin products, like our Paragonix offering, our ECLS portfolio, consumables in infection prevention and BetaBags in Sterile Transfer.

This is all supported by solid and effective quality processes as well. Sales from recurring revenue is now at 65% and the high-margin products make up more than 2/3 of sales today.

When it comes to quality, the number of field actions in relation to sales has decreased significantly, and we see this positive trend to continue also in the third quarter of this year. These improvements should, of course, be achieved through responsible leverage and an attractive long-term return on invested capital.

We can move then to Page #3, please. So if we focus then on the third quarter for a moment and the key takeaways for the quarter, we can see that we show strength in the quarter with significant growth on the top line.

Net sales grew by 9.5% organically with positive development in all business areas and all regions. Order intake also increased by 4.7% organically.

Adjusted gross and EBITA margins improved mainly due to acquisitions, healthy price increases, positive mix and also productivity gains. And this is in spite of continued strong headwind from tariffs and also currency on the EBITA margin, which then is a signal that the underlying development is even stronger.

Our financial position remains solid with our financial leverage well below 2.5x EBITDA. We can then move over to Page #4, please.

So taking a step back then and looking at some of the key activities and events in the third quarter. When it comes to our offering and customers, I'm happy to see that Sweden's first fully automated Central Sterile Supply Department at the Malmo University Hospital has been inaugurated, with Getinge's T-DOC providing the intelligence that optimizes sterile supply Management.

And by enhancing quality, patient safety, cost efficiency and also improving the work environment, T-DOC is really the critical enabler for successful operations. And this is something that we've seen for over 25 years now with this product.

Productivity is a key priority for us. And by implementing the Getinge Manufacturing Excellence program, we've been able to, for example, cut lead times by more than 20% and also reduce the COGS by about 10% for some of our key products in the product category, WIS, which is washers, isolators and sterilizers.

We've also joined forces with Philips to offer hospitals in CE markets, an integrated anesthesia workstation for the operating room. So this new solution unites the precise anesthesia delivery and the state-of-the-art patient monitoring technologies.

When it then comes to sustainability and quality, in the quarter, we got the CE Mark for our Cardiosave Intra-Aortic Balloon Pump back. This is, of course, subject to certain conditions, and we plan to gradually resume deliveries towards the end of this year.

When it comes to our implants business, we received EU MDR approval of 3 further indications for our V12 balloon expandable covered stent, and this will now strengthen our position, and it's a critical enabler for success on the European endovascular market. When it comes to our environment KPIs, I'm happy to see that our CO2 emissions from operations continue to decrease.

Let's move then to Page #5 and look at our top line performance in a bit more detail. So overall, we had a specifically strong top line performance in Acute Care Therapies and Life Science.

Our order intake grew 4.7% organically. And the organic order intake for Acute Care Therapies increased mainly due to ventilators in Critical Care and ECLS consumables.

Life Science showed double-digit growth in the organic order intake for the quarter due to very strong performance in Sterile Transfer. And the organic order intake for Surgical Workflows declined a bit in the quarter despite the strong trend that we've seen for operating tables and also consumables in Infection Control.

When it comes to sales, we grew 9.5% organically. Both Acute Care Therapies and Life Science had double-digit growth in organic net sales.

In Acute Care Therapies, this was mainly due to the very strong performance in ventilator, ECLS therapy and also within Cardiac Surgery. Organic net sales for Life Science primarily increased as a result of healthy growth in Sterile Transfer and also capital goods in the washer, isolator and sterilizer category.

In Surgical Workflows, organic net sales increased due to growth in Infection Control and also thanks to operating tables within Surgical Workplaces. We can then move over to Page #6, and I'll hand over to you, Agneta.

Thank you, Mattias. I will start on a positive note and highlight that despite some severe headwind from tariffs and FX, we continue to see improvements throughout the business, leading to higher margins.

When it comes to adjusted gross profit for the group, adjusted gross profit increased to SEK 4.051 billion in the quarter, primarily on the back of volume, acquisitions, healthy price increases and positive product mix. Adjusted gross margin was up by 0.9 percentage points in total, primarily supported by price and healthy mix.

Looking at adjusted EBITA, the positive effect from adjusted gross profit on the EBITA margin was 1.4 percentage points, thanks to what I just mentioned. Adjusted for currency, OpEx had a slight positive impact on the margin in the quarter.

FX impacted negatively by minus 0.6 percentage points in the quarter. All in all, this resulted in an adjusted EBITA of SEK 1.079 billion, improving our margin by about 1.6 percentage points year-over-year to 13.1%.

We move to Page 7, please. Let's have a closer look at the impact from tariffs.

Earlier this year, in our Q1 call, we shared some insights on our sales flows. So just to reiterate that.

About 60% of our sales in the U.S. are produced in the U.S.

For EU and China, respectively, about 10% is produced in the U.S. and about 1% of sales in EU and U.S.

is coming from China. As you know, the tariff discussions are highly dynamics, but this overview should provide a good understanding of our exposure.

In the third quarter, cost of tariffs amounted to approximately minus SEK 108 million. Adding the impact in Q2, we are then at minus SEK 218 million year-to-date.

Let's move to Page 8, please. So how are we then mitigating this and what has been the impact on the margin?

In our previous earnings call, we talked about the 3 main areas that we focus on to address this topic, and they are pricing, cost reduction and reviewing and challenging our structural setup for sourcing and production. This is, of course, nothing new, but we have intensified the efforts in all 3 of these areas.

The chart on the right illustrates the margin development year-on-year for Q3. First thing to note is the great comeback in adjusted EBITDA margin from 11.5% to 13.1% for the quarter.

What the chart also illustrates with the blue line is what the margin would be without tariffs and with the turquoise line, what it would be without tariffs and at last year's currency rates. So without tariffs, we would have landed on a 14.4% margin.

And when also neutralizing currency, we would have been at 14.9%. So this is a clear signal of our strong underlying performance and potential.

Let's move to Page 9 and look at our financial situation. We remain in a solid financial position.

Free cash flow amounted to SEK 0.8 billion in the quarter. Compared with last year, free cash flow was positively impacted by improved operating profit and changes in working capital.

Working capital days continued to develop well. And on operating return on invested capital, we improved to 12.5% on a rolling 12-month basis, which is well above the cost of capital.

At the end of Q3, net debt was SEK 11.1 billion. If we adjust liabilities, we are at SEK 8.6 billion.

This brings us to a leverage of 1.6x adjusted EBITDA, which is well below the 2.5, which we have set as the internal threshold. If we adjust for pension liabilities, leverage is at 1.2x adjusted EBITDA.

Cash amounted to approximately SEK 2.8 billion by the end of the quarter. So all in all, we can conclude that the financial position continues to be strong.

Let's move to Page 10, please, and back to you, Mattias.

All right. Thank you very much, Agneta.

So just moving then to our outlook for 2025. We will have a better balance between Q3 and Q4 this year.

If you remember last year, we had a rather weak Q3 and a super strong Q4. And I think from an operations perspective, I think we will have a smoother second half of the year in 2025.

So we're -- even though we're entering our fourth quarter with tough comparative figures, we believe that thanks to our leading position in key niches that meet the long-term increasing health care needs globally, we remain with our expectation for organic net sales growth to be in the range of 2% to 5% and our long-term financial target of over 12% EPS growth is also intact despite the headwind from tariffs and currency. So with that, we can move over to Page 12, please, and just summarize the state of the union after the third quarter.

So we've delivered strong organic growth with improved margins despite the significant headwind from tariffs and FX. Our financial position remains solid, as just highlighted by Agneta.

And we stick to our outlook for 2025, where we guide for organic net sales growth of 2% to 5%. And the priorities for 2025 are the same as they've been throughout the year, which means addressing the remaining challenges in Acute Care Therapies when it comes to the important quality work that is the #1 priority for us.

It's about sustainability productivity improvements and cost consciousness when navigating the current geopolitical uncertainty and, of course, addressing the impact from tariffs as well. And most importantly, we continue to create added value for our customers, which I think is something that is shown also through the third quarter when it comes to our order intake growth and our net sales growth.

So with that summary, I open up for questions. Thank you.

My question relates to the strong ACT growth, and you highlighted ECMO, for example. Is it possible to comment a bit more on that?

Maybe quantify how much ECMO is ECMO consumables are growing, what markets? And I'm particularly interesting to hear if there's any change when it comes to the competitive dynamics in the U.S.

Thank you. No, I think there's no -- to take the latter part of the question first, there's no significant change when it comes to competitive dynamic, I think.

And the strong growth in ACT is -- in addition to ECLS disposables, we have the growth in Critical Care and also in Cardiac Surgery, that's also positive. So U.S.

is obviously one of the key markets that have been performing well in this regard, but we don't break down and disclose numbers for the different product groups within the quarter.

But can you confirm that you're growing ECMO consumables in the U.S.?

Yes, we can.

Okay. Good.

And the same thing, Sterile Transfers within Life Science. Any specific drivers for that strong growth?

I think generally, there's -- of course, the whole destocking is over. I think that's an important prerequisite.

That's something we suffered from for a couple of years, and that's clearly over since over a year now. The other part is, of course, that there is a gradual comeback in the end market for these products.

And I think in addition to this, one needs to be aware that this is a business that is also partly dictated by large contracts, and there's certain lumpiness in the business between quarters, just to be aware of that also.

Great. And then the other question I had is, if you could comment about the upcoming timing here for filing the new Cardiosave and Cardiohelp solutions in Europe.

In Europe, we've already received the CE Mark back for our Cardiosave product. So that's behind the...

I mean, the new updated version of Cardiosave and the new...

Okay. We've not provided any updated time line on this.

This is into 2026. So the first milestone is the 510(k) submission in the U.S.

for Cardiosave. That's the next milestone that we're working towards.

And today, no update on the time line.

I was a bit curious here how it looks now with demand in ventilators. Again, a good quarter.

I think it's the fifth quarter in a row with very strong demand. So just describe a bit more in detail what you're hearing from customers.

I am at least thinking about, should we expect this trend to continue given the competition dynamics? Or are comps increasingly tough going forward, which will slow it down a bit on a year-on-year basis?

So anything that could help us here would be appreciated.

Yes, I think it's yes on both questions. We do expect this conversion to continue.

There's been -- as you probably are aware, there's been a bit of a sped-up conversion of the [ ViAir ] installed base and a more drawn-out conversion of the other 2 players installed base. And that part, I think, will continue.

But you're also right that we are meeting tougher comps now. I think the first positive developments were in Q3 last year.

And then from Q4 and onwards, we had very strong momentum when it comes to ventilator conversion in critical care.

And then a follow-up on Sterile Transfer, looking very strong. Could you just describe a little bit where we are versus maybe peak volumes during COVID in this area now?

Are we higher than that? And maybe, yes, there's some comments on specifically BetaBags also in terms of how they follow the higher demand in Sterile Transfer.

Yes. I think BetaBags definitely follow the high demand in Sterile Transfer.

They're the biggest individual product within Sterile Transfer for us. And we -- as you may remember, we had 30% decline after COVID for 2 straight years.

So we're not back at those levels yet, but it's a really encouraging comeback, I would say, where we stand right now.

And then last one for me, perhaps. In terms of the tariffs, rather flattish impact Q3 vis-a-vis Q2.

Maybe some further comments on that and then also sort of outlook for the upcoming quarter here? I could assume you may be shipped some products in July already, maybe to take away some impact.

I don't know, but some comments here would be helpful.

So yes, you are right. We managed to get some product into the U.S.

before the raise of the tariffs from 10% to 15% that were then delivered later in the quarter. So we did not have the full 15% impact in the third quarter.

When it comes to what we have ahead, we will not speculate and not guide on this. It is, as you know, a very dynamic situation.

And there are many factors impacting this. And one of them is, of course, also product mix.

A question, and it's on -- related to Page or Slide 8, where you show your -- the margin development and what it would have been without tariffs and FX. How much of that improvement is driven by price?

And how much is cost reduction and supply chain structure?

Yes. Thank you for that question.

We will not break it down in the details, but price is an important contributor to the underlying performance as is productivity improvements. So the main pieces are around what we mentioned.

It is mix. We have contribution from our recent acquisition on the gross margin and also on the EBITDA margin.

And then we have those factors, pricing and productivity.

Okay. Would it be possible to get -- you mentioned price increases.

How much you have raised your prices during the year?

No. For reasons, we do not disclose exactly the price increase.

So is it fair to assume that the sort of the majority of the increase comes from price?

Again, I will not break it down. It's also versus -- but we are -- we know that we are fairly successful in price realization, yes.

Okay. And we said earlier that between 2% and 3% price increase is what we're aiming for this year, and we are within that span.

We won't break it down further.

No, that's very helpful. My second question would be if you can talk about what kind of drivers you see for the gross margin in Q4 and also in terms of OpEx spending, if there are any things we should be mindful about going into Q4?

I think firstly, just to repeat what Mattias said, it is tough comps when we come into Q4. We had a really strong delivery quarter last year.

Some of the -- what would normally be in Q3 were sort of postponed also into Q4 of 2024, which is a tough comparison. When it comes to the margin, we will not guide on that.

But as per usual in Q4, we have a higher share of capital equipment deliveries that impacts the gross margin. And for OpEx, the same there, we will not give any specific guidance.

But generally speaking, we have a seasonal pattern that we have some elevated costs from that in Q4 related to the higher volumes. And also to mention that from now the end of the third quarter and ahead, we have Paragonix fully in our organic comparison as well.

I think also beyond Q4, I mean our main focus is on the underlying improvements that we're doing to our business for the longer term. So they, of course, have factors like our Manufacturing Excellence that we mentioned for Life Science in the report.

There's still a lot of work to do when it comes to purchasing and things like that as well. So we remain optimistic that we can continue to improve our business, but you will have some swings between quarters.

That's important to keep in mind.

Not to beat a dead horse, but I want to talk about guidance. You only need to deliver roughly 1.7% organic growth in Q4 to get to the upper end.

And I guess lower end is quite a frightening thought. And yes, sure, I get that comps are a bit more challenging.

You highlighted ventilators, for example. But can you help us pinpoint a bit more areas that you might be concerned about and as to why the upper limit is there to say?

And do you still believe that the lower end is even on the table? And what would need to happen for you to get there?

Yes. Thanks for the question.

I think we're not concerned about anything in particular in Q4. I think we have a well-working supply chain.

We are mitigating tariffs and currency effect to the best of our ability. So -- and I think the demand situation is fairly robust as well.

So there's nothing that stands out as concerning. And we've just not spent a lot of time on narrowing the guidance span here.

But obviously, if you look at the way things are tracking and so on, you can work with different probabilities when it comes to the lower and the higher end of the span, of course. But we've just not decided to invest a lot of time in that.

Like in line with the previous question, we're a lot more focused, of course, finishing the year serving our customers the way they need and helping patients and really then the longer term, 2026 and beyond towards what we've guided for in 2027 and '28 here, which we feel that we are well underway towards.

Okay. That's fair enough.

And then on Cardiosave, I know that EU is a relatively small market, but what have you been seeing now for Cardiosave that the CE Mark is back? Does there seem to be any sort of pent-up demand from customers that they're eager to order again?

Or is it fairly slow? And then also on Cardiosave, have you started to see any sort of change of use in the U.S.

after the guideline changes that happened earlier?

When it comes to the situation in the EU markets, we don't expect the resuming deliveries will have any positive impact or material impact on the fourth quarter. But we can see from and hear from customers that there is a pent-up demand.

There are customers who would like to replace their existing balloon pumps, but we -- it takes a while until we can actually have our factory focus on meeting demand for those customers. So therefore, there is no big impact in Q4 for this.

When it comes to use in U.S., we've not seen any real change there either. We're trying to serve the customers with the consumables for the installed base while working on the 510(k) submission.

That's really our key priority there. But no other changes from like a market or customers' perspective to call out.

Okay. Good.

And last question. I mean, you're reiterating long-term guidance again essentially.

And I guess with both tariff and FX being worse than at the Q2 report, reiterating the long term, I guess, implies a sort of upgrade to the underlying performance that you see. And I guess if you agree with that, where have you found that sort of upside or rather what sort of cushions have you may be removed from the initial guidance now compared to Q2?

Yes. I mean you're right.

I think the underlying development is good at the moment. So that supports us reiterating the longer-term targets despite the slightly stronger headwinds from tariffs and currency.

And the main levers for this is we touched on all of them, I think. Pricing is one where we're seeing good traction.

There is still a lot of work for us to do when it comes to purchasing, even though we have good material cost control, it doesn't mean that it can get better. We're still, I think, only partly reaping the fruits from the hard work that was done to mitigate inflation during 2022 and '23.

So we still expect that to help as well. We have a positive mix rotation, also which you can see in some of the longer-term strategic KPIs.

And we have now also acquisitions that help towards this target. So those, I'd say, are the main factors for feeling confident despite the short-term headwinds.

So 2 on Life Science, please. So first, if in Q1, you highlighted a slowdown due to -- or partly due to NIH budget constraints.

And like is some of the sales growth here seen in Q3 related to these projects? Or is it some other types of customers that are driving the sales growth in Q3?

It's very limited, I think, the positive effect from the comeback in NIH. I think there are still decisions pending to be made, both when it comes to NIH funding cuts specifically, but also the general wait and see when it -- because of geopolitical uncertainty.

So I think that's probably the bigger factor. So things have developed in a positive direction since Q1, but there's still some lingering uncertainty around these key projects, I'd say.

Okay. Great.

And then second one, just -- so with the strong order intake you saw in the segment as well, which I assume is mainly related to capital equipment, do you expect a Q4 budget flush similar to what we saw last year for the segment? Or have you seen any other indications for this year, so to say?

It's a good question, but very, very hard to answer. We didn't expect any budget flush last year, but there certainly was some of that.

So fingers crossed for that this year as well, but we -- it's too early to have any indication or view on this.

It's Ludwig Germunder from Handelsbanken here. I have 2, please.

First one, just to get a bit more clarity on the tariff mitigations. In the report, you mentioned that you're successful with the price adjustment strategy.

But in the short term, you need to absorb a large share of the tariff costs. And now I believe you said that you still have a good effect from price increases in your margin.

Could you give some clarity on this and what to expect going forward? How much more margin can we expect you to gain from price adjustments?

Yes. I think the comment is -- should be seen like this that when it comes to mitigating the tariffs specifically that we pay, the price increases aren't lined up to compensate for those.

So the price increase we talk about, they are across the board, across all our products, across all geographies. So in that sense, they help, but they're not specifically mitigating the tariffs on the product categories that are mostly going into the U.S.

here. So the 2% to 3% price improvement is a global figure and the ones when it comes to specific product groups hit by tariffs, we don't disclose in detail, but that's where we're still absorbing some of this effect.

Okay. And just a follow-up on the tariffs again.

You mentioned you managed to do some shipping before the increased tariff rates. Can you give -- can you comment on how close the 15% total hit from tariffs you saw over the entire quarter?

Is it close to 15% or under 15%?

No, we will not break it down like this, but it is still -- if I put it like this, it did not impact the full 15% did not impact fully in the 2 months that it would have if you just normalize it over the quarter, maybe, yes, a fairly big portion of what was sold in the third quarter, we managed to import before the raise of the tariffs.

Okay. And just a final question on quality, please.

Could you provide any update around the 510(k) submission for balloon pumps in the U.S.

Yes, there's no update on this right now. We're still working towards the end of this year and the second half of next year for the ECMO 510(k) submission.

All right. Thank you very much for participating in the discussion today.

We've already made the summary here, and I just wish everybody a good rest of the day. Thank you very much.