Earnings call transcript: Vitrolife Q1 2025 results disappoint, stock drops

Vitrolife AB reported its Q1 2025 earnings, revealing a significant miss on both earnings per share (EPS) and revenue forecasts. The company’s EPS was reported at 0.74 USD, falling short of the expected 0.986 USD. Revenue also missed expectations, reaching 842 million USD compared to a forecast of 897.08 million USD. This underperformance led to a 6.59% drop in Vitrolife’s stock price, closing 10.3 USD lower than the previous session. According to InvestingPro data, the company maintains a "GREAT" overall financial health score of 3.08, despite recent challenges. The stock is currently trading near its 52-week low of 14.75 USD, potentially presenting value opportunities for investors.

Key Takeaways

• Vitrolife’s EPS and revenue both missed forecasts significantly.
• The company’s stock price fell by 6.59% following the earnings release.
• Organic growth was recorded at 3%, excluding discontinued business.
• The APAC region faced challenges, impacting overall performance.
• Vitrolife maintained a strong position in time-lapse technologies.

Company Performance

Vitrolife’s overall performance in Q1 2025 was mixed, with a slight increase in total sales by 1% in local currencies. However, the company faced challenges in meeting market expectations, particularly in the APAC region, which was affected by cultural factors. Despite these hurdles, Vitrolife continues to hold a strong market position in its core technologies.

Financial Highlights

• Revenue: 842 million USD, missing the forecast of 897.08 million USD.
• Earnings per share: 0.74 USD, below the expected 0.986 USD.
• Gross margin improved from 57.1% to 57.4%.
• EBITDA stood at 257 million USD, with a 30.6% margin.
• Net income was reported at 100 million USD.

Earnings vs. Forecast

Vitrolife’s actual EPS of 0.74 USD fell short of the forecasted 0.986 USD, marking a miss of approximately 25%. Revenue also did not meet expectations, coming in at 842 million USD compared to the projected 897.08 million USD. This significant miss contrasts with previous quarters where the company had been closer to market forecasts.

Market Reaction

Following the earnings announcement, Vitrolife’s stock experienced a sharp decline of 6.59%, closing 10.3 USD lower. This reaction reflects investor concerns over the company’s ability to meet expectations and the broader implications of regional challenges.

Outlook & Guidance

Vitrolife is focusing on growth, innovation, and operational excellence, with expectations for recovery in the APAC region in the latter half of 2025. The company is also preparing for potential U.S. IVF reimbursement announcements and monitoring tariff impacts.

Executive Commentary

Bronwyn Brophy O’Connor, CEO, emphasized the company’s unique position in offering end-to-end IVF solutions, stating, "We are the only competitor who have both a time lapse system embryoscope and a lab control solution." She also highlighted the focus on impactful R&D programs.

Risks and Challenges

• Supply chain issues and potential tariff impacts could affect costs.
• Market saturation in key regions may limit growth opportunities.
• Macroeconomic pressures could influence consumer spending and investment.
• Cultural factors, such as those seen in the APAC region, may continue to pose challenges.

Q&A

During the earnings call, analysts inquired about the dynamics of the APAC market and the company’s tariff exposure. Vitrolife addressed these concerns, explaining their mitigation strategies and emphasizing the non-material impact of tariffs.

Full transcript - Vitrolife AB (VITR) Q1 2025:

Laura, Call Coordinator: Hello, and welcome to the VitraLife Group Interim Report Q1 twenty twenty five. My name is Laura, and I’ll be your coordinator for today’s event. Please note this call is being recorded. And for the duration of the call, your lines will be on listen only mode. However, you will have the opportunity to ask questions at the end of the call.

I will now hand you over to your host, Bronwyn Brophy O’Connor, to begin today’s conference. Thank you.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Thank you, and good morning, everyone. This is Bronwyn Brophy O’Connor, CEO of the Vitra Life Group speaking, and I’m joined by Helena Wennenstrom, the acting CFO of the Vitra Life Group. So thank you for joining. I would like to move you to the first page and start with the Q1 twenty twenty five highlights. So starting with our largest region, which is EMEA.

We delivered 14% growth in EMEA when excluding discounted business. So really strong performance in our largest region and it’s actually across the board in that region, all markets. Second point I would like to highlight is Americas. So growth of 9% in Americas driven by strong performance in North America. Most of you will be aware that we have been doubling down in The U.

S. And North America. A lot of our efforts have been going in there over the past twelve months. So it’s nice to see us starting to reap the benefits of those investments. And then the third point is we strengthened our organizational structure.

As a company, we have three main strategic priorities: growth, innovation and operational excellence. So clearly, operational excellence and innovation, very strong priorities for the company and we appointed a Chief Operating Officer and a Senior Vice President of Innovation to bolster and lead these programs in the company. I would like to move you then to the next page and we will discuss the first quarter key financials. So this was a quarter, as I guess for most companies, with multiple factors to navigate, obviously the tariffs, but particularly challenging for us and Persons in our case was the discontinuation of business in a large market in our EMEA region. Despite this, we delivered revenues of million, an organic growth of 13% when excluding this discontinued business.

Our gross margin increased to 57.4%, and EBITDA was $257,000,000 in the quarter, corresponding to an EBITA percentage of 30.6%. We did have a negative FX impact in the quarter of SEK 13,000,000, but we also have higher selling expenses due to our U. S. Ramp up in what I’ve just mentioned there, our key focus markets for growth. Operating cash flow was SEK 69,000,000 in the quarter, and Helena will take us through in detail the precise timing of factors at play here and then earnings per share of 0.74.

I would now like to move you on to the next slide, please, where we will discuss our sales and growth per geographical segment. So sales of $270,000,000 in Americas with 9% growth in the quarter. North America performed very well with double digit growth in the quarter. So Americas, as you can see, is now our second largest region. We have up to now been vying to that position with APAC and Americas, but Americas clearly now in second position in terms of revenue contribution.

In EMEA, sales of $334,000,000 in the quarter, a growth of eight percent in local currencies, organic growth in local currencies and 14% when adjusted for discontinued business. Strong growth, as I mentioned, across all markets in the region, which is great to see, so our largest region performing very, very strongly. And then APAC, a challenging quarter in our APAC region with exceptionally high comps to compete with. The year of the Dragon in 2024 clearly impacted cycle numbers and revenue. Importantly, I would like to highlight that we do not see any market share losses in our APAC region, And I will spend a bit of time in the coming slides to take you through the precise impact of the year of the Dragon on the financial performance of the APAC region.

So if I can now move you on and we will discuss market region EMEA in more detail. So sales of $334,000,000, as I mentioned, an organic growth of 8%, fourteen % excluding discontinued business. We saw strong sales across the entire consumables portfolio, which is great to see. So we’re really benefiting from our pull through strategy of leveraging the full breadth of the Vitralife Group portfolio. This was also a record quarter for technology sales in the region with the highest penetration of time lapse globally.

So I wouldn’t call it a mature region in terms of time lapse, but it is the region with the highest number of systems installed. So great to see the growth here. A weaker performance in genetics in the region, but this is, as I mentioned, the region impacted by the discontinued business, and genetics has been performing well in that market. Our Witnessing solution is starting to gain some very nice traction, which is great to see, and we signed an agreement with one of the largest clinic chains in EMEA to roll out our solution across their network in partnership with them. So lots of nice green shoots on our witnessing solution.

And I think leveraging and pulling through, as I mentioned, leveraging the full breadth of the portfolio, both embryos, both consumables and witnessing is proving to be a very compelling value proposition to our customers. Then I would like to draw your attention to the chart below and the normal quarterly phasing, which you can see. So typically, in the Future Life group, Q4 is our highest revenue quarter, followed by Q3, then Q2, and Q1 is normally our lowest revenue quarter. And I think it’s important to point out this quarterly phasing in the context of the dynamic that we saw in APAC, which I will explain in the coming slides. So all told, a really great performance in our largest region, market region EMEA across all markets in that region and right across the portfolio with the exception, as I mentioned, of genetics and very positive signs on the Wizzness sale.

Okay. I’d now like to move you through to the market region Americas. So with sales of $270,000,000 in the quarter, we delivered an organic growth of 9%. North America has started to ramp up nicely and in fact we delivered our best quarter in North America in 11 quarters. So we’re starting to get some very nice traction in what has been a focus market for us for some time.

Steady growth in consumables, however in North America, however, we did have a weaker quarter in LatAm in the consumables portfolio and that diluted the Americas impact slightly. Technology is performing very well, good to see. We’re continuing to drive penetration of our embryo scope and across North America. And then genetics performed very strongly during the quarter, driven by our PGT-eight family of tests. We’re seeing some new customer wins there, so some very nice ramp up across the PGT-eight family of tests.

And I’m happy to say that we have not seen any impact from the PGTA lawsuits in The U. S. In fact, our growth in PGTA tests is accelerating. Again, then if I can draw your attention to the chart below, you will see the quarterly phasing with a slight tweak. So I would like to highlight that Q2 twenty twenty four was a particularly high quarter in Americas because we secured a significant time lapse order during that quarter.

However, historically, again, in Americas, we typically see a pattern of Q4 being the strongest followed by Q2, Q3 and then Q1, which is a slight anomaly in the phasing in 2024 due to that large Technologies order. Just in terms of phasing of Technologies in general, with the consolidation in the market on the clinic side, we do tend to see and experience larger fluctuations in our technologies business. This is because larger chains tend to make larger purchases. And we’ve been seeing that. I mean you can see it in Q2 last year, but we’re starting to see more of that.

It does make forecasting more challenging, but we have also been investing in commercial excellence in order to tightly monitor our funnel and enable us to forecast more accurately in terms of technology sales. So a good quarter in Americas, and we’re delighted to see the traction in North America and also good to see no impact on the PGT A test, but rather, in fact, it is accelerating. Okay. I’d now like to move you to market region APAC. And here, I would like to start by drawing your attention to the graph below, where you can see that in 2024, APAC did not follow the normal quarterly phasing of Q4, Q3, Q2 and Q1.

Why? 2024 was the year of the dragon and couples hoping to have a baby born in this luckiest of years had to undergo IVF in quarter one twenty twenty four or the first month of quarter two twenty twenty four to potentially make this a reality. This impacted both cycle numbers phasing and made the comps very challenging. So you can clearly see on the graph below, in 2024, Q1 was by far our largest quarter, followed by Q2, then Q3 and then just slightly below that was Q4. So not an unusual year impacted by the year of the Dragon.

It may sound strange to Westerners and Europeans to be talking about dragons when it comes to an IVF reporting, but this is the reality across Southeast Asia, China and Southeast Asia. To compound Matasen, Q1 Twenty Twenty Four was also an exceptionally strong quarter for technology. So we had very high comps to navigate and then to compound Matasen, Q1 Twenty Twenty Four was a record breaking quarter for Engrias coke sales across APAC China, Southeast Asia and Japan. Now I would like to say that we did see some signs of recovery starting to show in the cycle numbers towards the March. So January and February, very tough.

But towards the March, we started to see things picking up. And then if I could bring you your eyes back to the chart, as you can see from the chart, the phasing becomes more favorable in the second half of the year. In addition, based on what we have seen towards the end of the quarter and expect to see going forward, we predict that the cycle numbers will be returning to normal levels as the year progresses. So a challenging quarter for our APAC Region. I’d like to move you on then to the next slide where we will look at our revenue per segment and our product group.

So you are used to us reporting geographical segments and business areas. Our business areas are now covered under product groups. So I just want to point that out so that everybody can follow the presentation. So if we look then at the revenue by geography, we can see that the EMEA region is now our largest region with 40%, been our largest region for quite a while, but it has put some distance between it and the other regions with this strong quarter that we’ve just delivered there. Americas is now our second largest region, 32% and APAC falling back into third position with 28% growth.

We are all navigating challenging and dynamic factors in the macroeconomic environment. And I think this good geographic balance that we have in the Vetralife group has proved critical. So we can see that not having an overreliance on any one region is a very healthy thing in the changing times. EMEA performing very strongly, as I mentioned, despite the higher level of penetration and Americas now our second largest region, and this is really driven by the acceleration that we’re starting to see in North America, which, of course, has been a strategic decision of our company to focus on the largest IVF market in the world. If I could bring you then over to the chart on the right hand side, just to take you through the balance in terms of the revenue by product groups, we are also well balanced from a product group perspective, as you can see.

Although I would point out for technologies that this can fluctuate to a larger or greater extent, and this is increasingly being impacted by purchases of larger volumes of embryoscopes by the clinic chain. So all in all, if you look at the rolling twelve months of our technology sales, you can clearly see an upward trajectory, but we do see more fluctuations between the quarters. I’m now going to hand you over to Helena, who will take you through some of our key financials, and I’ll speak to you then in a few more minutes.

Helena Wennenstrom, Acting CFO, VitraLife Group: Thank you, Bramen. And we are now on Page number nine, and I will dig a bit deeper into the geographical segments, which are Americas, EMEA and APAC. Starting on the right hand side, as Bramwin mentioned earlier, we had a sales of million and a gross margin of 57.4%, an improvement compared with the previous year and the sales amount to SEK841 million with a gross margin of 57.1%. The market contribution amounts to SEK300 million with a contribution margin of 35.6%. Corresponding quarter previous year amounted to SEK311 million with a contribution margin of 37%, a decrease by 1.4 percentage points negatively impacted by product and market mix.

Let’s now take a deep dive into geographical segments from the left hand side. In Americas, we had a sales of million with an organic growth of 9% in local currencies driven by strong growth in North America. Sales in consumables increased by 2% in local currencies negatively impacted by order facing in LatAm and sales in technologies increased by 9% in local currencies as we continue to drive penetration and utilization of Enbrews Group. Sales in net increase by 12% in local currencies with strong performance across the region and we did not see any impact of our targeted PDCA test revenue as a result of the PDCA class action. The gross income amounted to SEK145 million with a gross margin of 53.7% compared to last year’s gross income of SEK141 million with a gross margin of 56.9% negatively impacted by product mix.

The selling expenses have increased in the quarter from SEK58 million to SEK77 million since we have continued to invest in sales and marketing capabilities in the key markets. The market contribution for the quarter was 25.3%. In EMEA we had a sales of SEK354 million with an organic growth of 14% in local currencies excluding discontinued business. The gross income of SEK 199,000,000 with a gross margin of 59,600,000 is a significant improvement last year’s compared to last year’s gross income of SEK170 million and corresponding gross margin of 54.8%. Sales in consumables increased by 9% in local currencies and 60% excluding discontinued business, driven by strong sales across the portfolio.

And sales and technologies increased by 46% in local currency and 47% excluding discontinued business with high growth across technologies. Space and genetics decreased by 11% in local currencies and 5% excluding discontinued business. And the selling expenses have decreased from million to SEK68 million and we can see a higher contribution margin for the quarter 39.2% an improvement since last year’s contribution margin of 32.3% positively impacted by product mix. In APAC, we had a sales of SEK238 million with an organic growth of minus 50% in local currencies compared to previous year. The comparable quarter last year was exceptionally strong for consumables and technologies and sales in consumables decreased by 3% in local currencies and technologies decreased by 38% in the third currencies, negatively impacted by timing of capital orders.

Sales in genetics decreased by 2% in local currencies. And the gross income of SEK139 million with a gross margin of 58.4% which is lower than previous year’s gross income of SEK117 million and corresponding gross margin of 60.1%. The selling expenses have also decreased from SEK42 million down to SEK38 million. And APAC had a contribution margin for the quarter of 42.4%, which is lower compared to last year’s contribution margin of 45.2%, which is volume related. Moving on to the Slide number 10.

On this slide, will comment on Q1 financial highlights. As earlier mentioned, the sales amounted to SEK842 million compared to previous year with sales of SEK841 million gives us 1% increase in local currencies, 0% in SEK3 percent in local currencies excluding discontinued business. As part of our ongoing risk assessment procedures and to ensure we continue to comply with all applicable international sanctions, we decided to discontinue activities in certain markets in EMEA as we announced in the Q4 report 2024, representing less than 3% of our annual revenue and this is effective from 01/01/2025. The gross income amounted to SEK483 million compared to SEK481 million previous year and improved the gross margin slightly from 57.1% to 57.4%. All in all this gives us an EBITDA of million compared to SEK272 million previous year and an EBITDA margin of 30.6% compared to 32.4% last year.

The decrease in margin is primarily due to foreign exchange impact and increased selling expenses in Americas. Moving on to the next slide. Some comments about operating expenses. We continue to invest in sales and marketing capabilities in key markets contributing with an increase of selling expenses from SEK169 million to SEK183 million. R and D expenses have decreased mainly due to a reduction in expenses for external services and a slight increase in capitalization.

Administration expenses are slightly lower than previous year. Other operating items amounted to minus SEK9 million versus positive SEK7 million comparable quarter mainly affected by foreign exchange impact of minus SEK30 million in the quarter versus plus SEK1 million comparable quarter. It is related to translation effects in connection to revaluation of working capital at the closing rate. Going to page number 12. So let us now look at some key financials and do a small recap.

We are growing sales of 1% in local currencies and 0% in SEK. However, we had a growth of 3% in local currencies excluding discontinued business. A strong growth in EMEA despite the headwind of discontinued business, and strong growth in Americas driven by strong growth in North America. APAC had an organic growth of minus 15% in local currencies and the comparable quarter last year was exceptionally strong in consumables and technologies as we heard from mentioned earlier. The gross margins improved from 57.1% to 57.4%.

The EBITDA amounted to SEK257 million compared to SEK $272,000,000 and an EBITDA margin of 30.6% for the quarter twenty twenty five compared to 32.4% for the previous year. The decrease in margins primarily due to foreign exchange impact and increased selling prices in Americas. The financial net amounted to minus SEK10 million compared to minus SEK24 million previous year primarily it’s positively impacted by foreign exchange gains and interest expenses was SEK 70,000,000 compared to SEK 23,000,000 previous year. Net income amounted to SEK 100,000,000 compared to SEK150 million previous year which gives us an adjusted earnings per share of SEK0.74 compared to SEK0.85 previous year. Taxes amounted to minus CHF41 million compared to million previous year.

The increase is driven by restructuring activities with open taxes, geographical market mix. Historically, the normalized average tax rate amounts to approximately 23%, twenty five % depending on the geographical market mix. Operating cash flow amounted to SEK69 million for the year compared to SEK198 million previous year and changes in the working capital had a negative effect of SEK111 million this year compared to SEK39 million previous year mainly driven by reduced trade payables and the tax paid with a year over year increase of SEK53 million more of a time in market. And we have a strong balance sheet with an equity ratio of 78.9% and a net debt to EBITDA of 0.6% compared to 0.9% previous year by the end of the quarter. And I will now hand over to you again, Brommyn.

Thank you, Helena.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: So focus for 2025. We essentially have three key focus areas. One is growth, two is innovation and three is operational excellence. And then, of course, we need to discuss the seemingly ever changing macroeconomic environment. So on growth, we’re going to continue to drive share gain in key markets leveraging the full breadth of the portfolio.

It’s working. We would argue quite strongly that we are the only competitor in the market that has a full end to end solution for IVF clinics around the world and we need to leverage the full breadth and extent of our portfolio. I think EMEA did that particularly well in this quarter. Accelerate penetration of our combined embryoscope and lab control solutions. So again here, we’re the only competitor who have both a time lapse system embryoscope and a lab control solution.

And we are pairing them together nicely. We were delighted to sign an agreement with one of the largest clinic chains in EMEA and we have more of those deals in the pipeline. So this is really, really critical and a key differentiator for us. Deliver best in class quality and customer service. This has been a core strength of the Vitralife Group for many years, and we will continue to deliver high quality and best in class customer service to differentiate ourselves from the competitors that we face.

So three key focus areas when it comes to growth. On innovation, we’ve rationalized our R and D pipeline and we’re really doubling down on the larger programs that are linked to our platform and which we believe will move the needle. So we’re prioritizing the R and D programs that will deliver solutions to help clinics automate, which they desperately need to do, scale and then very importantly, outcomes for patients. We’re also strengthening our market access capabilities. Your R and D pipeline without market access capabilities, you’re not going to be able to get the leverage.

So we want to make sure that not only are we developing best in class products and services, but that we are able to bring them to market faster. So that’s a key focus area for our new Senior Vice President of Innovation, Rickard Erickson, who knows the IVF market very well and is a long standing neutralized group employee. Third focus for twenty twenty five is on operational excellence and efficiency, really important. So we are investing in digitalization in our manufacturing and also on the Laboratory Services side. This is to enable us to increase capacity, but also to drive efficiencies.

And I think we’ve been doing a nice job there and you’ve seen nice and good steady progress in our margins as a consequence of that. So we will continue to double down our efforts there. Automating manufacturing to increase capacity as well as the key growth drivers in our portfolio. So it’s not just automate for automate sake. We are ensuring that we automate where we believe we also have the greatest opportunity to grow.

And then just to comment on the macroeconomic environment. We invested, as I’m sure most companies did, a significant amount of man hours to get a really clear picture and indication of our trade flows in and out. We are a truly global company. You can see that from our regional revenue split. And we’re also a global company in terms of our manufacturing footprint, having sites in The U.

S, Europe and also in Asia. So we have mapped out all our flows. We’ve been running tariff scenarios for well, it seems to be endless, but we did get on top of things, I’m happy to say, very, very early. And we’ve been taking proactive measures, clearly on the cost side, to mitigate any impact from the tariffs. That said, as I’m sure most companies are in a similar position, we will not be able to fully absorb all of the tariff costs and would inevitably have to pass some of them on in the form of price increases if this situation is to continue.

But I would say overall as a company, we do have a natural hedge owing to the fact that we have manufacturing in three continents. So we’re absolutely not being complacent. We’ve been very much on top of this. But I guess inevitably, would

Helena Wennenstrom, Acting CFO, VitraLife Group: have to

Bronwyn Brophy O’Connor, CEO, VitraLife Group: share the burden with our customers. So with that, I would like to thank you for your attention, and I believe we will now open up for Q and A.

Laura, Call Coordinator: Thank We will now take our first question from Jacob Lemke of SEB. Your line is open. Please go ahead.

Jacob Lemke, Analyst, SEB: Yes. Good morning, and thank you for taking my question. My question relates to EMEA and particularly consumables, which looks very strong here in the quarter. I’m wondering just what drove that and if there are any phasing effects impacting Q1?

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Good morning, Jacob. Thank you for the question. It’s a strong performance across the region, and it’s actually across the entire portfolio. Media disposal devices, it’s everywhere. So really, really good to see.

I never like to see an overreliance on any one part of the portfolio or on any one market, but it’s across the board in EMEA. And I think what’s particularly pleasing to see is this is the region that has to navigate the exit of a large market. So we did have some concerns in terms of their ability to deliver, but they actually beat our internal forecast. So it’s across the board, portfolio wise, and it’s across all markets.

Jacob Lemke, Analyst, SEB: So I guess then you would expect this, yes, momentum to continue in the coming quarters as well?

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Yes. I mean, there’s we have a good pipeline. We have been taking share for quite a while. So it’s always challenging to keep taking share at that level. But I also think we have some very momentum.

I think this is the region that’s probably doing the best job, Jacob, in terms of leveraging the full portfolio that we have, and they’re pulling through very nicely. So they have been performing in certain parts of the portfolio towards the back end of last year, but now we’re starting to see that divergence across the broader portfolio. They’re also the region that has the benefit of being the first to launch and scale the witnessing solution. So that’s also proving to be a very compelling value proposition in terms of combining that with embryo scope. So yeah, they’re they’re doing a good job and and and it’s across the board, and we’re going to be pushing them hard to to continue to keep delivering across all markets and and, again, you know, across the portfolio.

Laura, Call Coordinator: And we will now move on to our next question from David Johansson of Nordea. So

David Johansson, Analyst, Nordea: two from my side, please. So as you said, Bronwyn, relatively weak performance in APAC and China due to the reversal of the Dragon Baby boost. So it would be interesting to hear, I think, if this has rebounded strongly now and maybe towards the end of the quarter and also into April since I understand this now will be considered the year of the horse? And also, if it’s reasonable to assume growth here looking at the full year? I’ll start there with the first one.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Yes. So thank you, David, and great questions. I have to say, as a CEO of a public company, it feels weird to be talking about animals, but I’m going to have to answer your question by explaining it in the context of animals. So please forgive me, and I hope this doesn’t impact my credibility by talking about dragons, snakes and horses. So 2024, Year of the Dragon, and as I mentioned, you can see it in the bar chart, it was a huge quarter in quarter one.

Now the dynamic that we’re facing at the moment is 2025 is the year of the snake. Asians don’t want snake babies. And we tend to think that this is a China factor. It’s not. It’s China, all of Southeast Asia, even parts of Japan can be impacted by this.

So 2025 is the year of the snake. However, after April 17, to be very precise, couples undergoing IVF would not have a baby born in the year of the snake. They would have a baby born in the year of the horse, which is a better year to have a baby than the year of the snake. So we do we did start to see some green shoots of recovery in terms of cycles towards the back end of the quarter, late March, which is good to see. I think the key indicator, which we’re all watching for, is after April 17 when we get into essentially IVF timing for babies born near the horse.

But I think overall, our we have a very strong regional leader there who’s been with the company for a very long time, knows the market like the back of her hands. And she don’t expect cycle numbers as do we. We do expect cycle numbers to recover to more normal levels as the year progresses. So it has had a significant impact across the region. I think very importantly for us, what we’ve been tracking is during this turbulence, have we lost share?

We don’t see any reports of lost share. It’s more a case of lower order volumes from the customers that we have as opposed to a customer loss. So that gives us a sense of comfort in terms of we have a very strong position, as you know, in APAC in terms of share, particularly in China, but we haven’t seen share losses. So yes, two things will help us as the year progresses: one, we move into the year of course, so expecting cycles to return to more normal levels. And then you can see from the phasing impact from the bar chart that the Snake impact in the second half of twenty twenty four is obvious.

So our comps become a little bit easier as the quarters progress. So I’m sorry, it’s a very long winded answer to explain a complicated topic that is a little bit challenging for Westerners to get their head around, but it is a reality in Asia.

David Johansson, Analyst, Nordea: Well, that’s I think that’s clear anyways. And then just my follow-up question, which is on tariffs. Could you please maybe walk us through the impact of this as well as timing? And I also understand you don’t expect to be able to fully compensate on pricing. So I wonder if you can elaborate a bit more on that given where we are currently on this.

Yes.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: So clearly, situation. We did get in early. We started to run scenarios very early even before the announcements modeling, yes, modeling different percentages. I don’t think anybody expected it to go up to 145, but that’s where we are. I think overall, as a company, again, I don’t want to be complacent or sort of downplay the tariff impact, but it’s not huge to the Vetrolife group.

That said, we wouldn’t want to fully absorb it. We wouldn’t be able to fully absorb it. So we have already started to take cost actions. I think most companies are in the same boat. We are preparing to roll out price increases.

We will inevitably have to do that and share the burden with our customers. So we’re lined up and ready to go with that. By the same token, I don’t know, listening to the BBC business this morning, there seems to be some talk of potentially some back down, but we have to be ready for the we have to be ready and are preparing for the worst case scenario. So we sort of don’t want to be deploying price increases to customers and then all of this comes down. But at the same token, we can’t be caught wrong footed or late.

So we are getting ready to deploy some of those price increases, and we have already initiated cost containment measures. So yes, it’s I think the golfing analogy is of our puts and takes. We are relatively lucky given our manufacturing footprint. So we do produce in two sites in The United States. We clearly produce in Europe, and we produce in Asia.

So that does help for sure, but it it it doesn’t fully mitigate. So, hopefully, I’ve answered your question, David, in as much as I can without giving away too much information. It is that clear, David? Yeah? Okay.

David Johansson, Analyst, Nordea: Yes. It’s it’s good enough. Thank you. Those are my questions.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Thank you very much.

Laura, Call Coordinator: We will now move on to our next question from Ulrik Vedner of Carnegie.

Ulrik Vedner, Analyst, Carnegie: And I won’t focus on the petting zoo in China, but rather on the American market. And I’ll try to squeeze in a few questions into one and then a follow-up. The 2% organic growth for consumables in Americas and you talk about weakness in Latin America. How is the market sort of how is the growth looking in North America? And are you still grabbing market share?

As well as we are now closing in on Trump announcing its plan for IVF reimbursement in The U. S. But what is the actual capacity in the system? I think it’s an important question potentially to address prior to the announcement of Yes.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Okay. Yes. So thanks for your questions, Ulrich. So let me start with U. S.

What we call in North America because obviously we have Canada in those numbers as well. So North America is doing well. I would say I have to be very careful now because the competitive landscape has changed. So I don’t like to give away too much, and I’m sure we have some competitors listening in. But I we believe, looking at the numbers and our estimated cycle growth, we are still taking share in certain parts of the portfolio in North America.

We are because the growth rates are well above the cycle growth rates. So I wouldn’t say it’s fully across the board that we’re taking share, but definitely across certain parts of the consumables portfolio, we are taking share. In genetics, we are definitely taking share. There’s no doubt about it, particularly in relation to PGT A. So we’ve not been impacted by the lawsuits at all.

The growth is very strong. It was actually in North America, had our strongest quarter, as I mentioned, in 11 quarters. We also had our strongest quarter in genetics, I believe, in 12 quarters. So genetics doing very well, and it’s particularly the PGT A family of tests. So that, as you can imagine, is a good sign.

As Helena mentioned, you know, we we haven’t been impacted by the by the the lawsuit. So that’s good. So yes. So sort of d day for us for the Trump announcement is the March 18, we believe. A lot of positive rhetoric coming out of the administration, not just from Trump himself, but also from the Vice President Vance.

And we do expect a positive announcement. It’s in sync the order. Certain states are already there. Like California is California is already there, to being having mandated access. And actually, as you know, a little bit like Europe, not all states are created equally, California happens to be a state where we have a particularly strong presence.

So that is sort of boosting our growth there too. So March 18, announcement comes out. But yes, you are 100% correct. The challenge is capacity in the system. So even if President Trump, you know, signs the order, access for everyone and agrees to pick up the tab, the the capacity isn’t it’s just not there in the system.

There aren’t enough REIs. There aren’t enough embryologists. I think we all, you know, as a collective ecosystem, desperately wants to be able to scale to help more patients, but they’re they’re just their capacity just isn’t there. And I think that’s why the strategic focus of the Vitralife Group in terms of our platform, helping with automation, placing the embryo scope at the heart of the IVF clinic where it helps with workflows and reduces labor costs, that’s gonna be really, really important. That as well combined with the with the witnessing system, which also helps in terms of staff not having to constantly, you know, stop and check and write and and do all of those manual steps that that happens today.

So it would be great news for sure, but it would take time and significant investment in capacity in order to be able to provide a step up in the level of yes, in the level of capacity that versus what we currently have today. So hopefully, I’ve answered your couple of mini questions

Ulrik Vedner, Analyst, Carnegie: perfect. And then just a follow-up on the tariff and tariff exposure. And potentially more on the competitive situation here because I know it’s from your largest competitor, Cooper, they have production production of their media Sage like Global and the Regal Basin. Europe and Puerto Rico, they are obviously impacted by tariffs, whereas you have your production in The U. S.

In Denver as well as you have your production of your needles and catheters, if I’m not mistaken, in San Diego, whereas Cooper, they have their manufacturing in The U. K. And in Denmark. So would you say that your competitive positioning in The U. S.

In terms of tariffs and risk of increasing prices is potentially more favorable compared to your competitors. And I would guess that time lapse would be the product of exposure for the tariffs given it’s producing in Denmark. But then again, as you mentioned, the capacity constraints in the system would essentially need to be handled by certain type of efficiency gains and that’s where time lapse plays in and you are close to a monopoly in that area. So just your your take on that would be very helpful.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Yes. So do you know what I love about you, Ulrich? You always do your homework, and you keep me on my toes. So, yes, you’ve just listed all our production sites, so thank you for that. Honestly, I can’t I can’t comment for Cooper because the reality is each and every company has to map out the trade flows, and and and that’s what we have to do.

What what I would say is both companies are are pretty global, and it really depends on on the flows and on the capacity. It’s it’s not just where you produce. It’s the capacity that you have at that production site. So this it’s kind

Helena Wennenstrom, Acting CFO, VitraLife Group: of it’s

Bronwyn Brophy O’Connor, CEO, VitraLife Group: multifactorial. All I can say is that is that in our case, we do produce on three continents. I just think in the whole tariff situation, being a European headquarter business is not a bad thing. We’re sort of seen as the more neutral party at the table. There are other words that I could use, but let’s just call it the neutral.

Certainly, the sentiment in China right now is significantly more favorable towards doing trade with Europe. That’s evidence. That’s been openly stated. So I think that’s something that we can use to our advantage. It’s been a very successful market.

We’ve invested a lot in APAC. So I think that’s an opportunity. But then we are committed to The U. S. Market.

We do have our production sites there. Very importantly, I think, given the current situation. And yes, then with time lapse, we have a couple of flows. It’s not like it’s all one way traffic from Denmark to The US or or, you know, Denmark outbound. It’s it’s it’s a little bit more more intricate than that.

The, you know, the the the thing with time lapse is it is it is unique. We are the only company that has a time lapse system with this level of capability. We’re also the only company that has a time lapse system with this level of capability combined with the witnessing system. So these are the things that we have to leverage. But equally, we have to take cost containment measures.

We have financial commitments that we this is shareholder money at the end of the day, and we have to meet our commitments and behave responsibly. So I can only comment for our company. We’re taking all of the measures that we could possibly take in order to insulate ourselves. I don’t think anybody likes to have to pass these challenges on to customers. We like to partner with our clinics.

It’s how we build strong relationships with them, but it’s certainly at the current rate, I mean, not in the 145 levels. I think most people would reasonably expect that prices will have to be passed on. So hopefully, I’ve answered your second question,

David Johansson, Analyst, Nordea: Yeah. Yeah. That was great. Thank you very much. Yes.

Laura, Call Coordinator: Thank you. We’ll now take our next question from Philip Ikenrun of ABG, Sandal Collier.

Ulrik Vedner, Analyst, Carnegie: I want to circle back a little bit to the sourcing and tariffs. Could you please specify maybe a range of how much U. S. Sales is sourced locally from The U. S?

I understand that might be difficult, but just if you can provide a range that will be very helpful.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Yeah. So I won’t give percentages, although I do know them. Because to to Ulrich’s earlier point, we we we obviously do have some pretty big big competitors that we’re competing with. But but I I guess, luckily, for us, with the production that we have in The US, we do have media production in in Denver, which is good, and we have pretty reasonable capacity there. And we have good capacity in San Diego on the disposable devices side.

So that does help us in terms of being able to supply US demand, which is good. That said, it cannot fully meet the The US demand. We we we, you know, inevitably have to ship from Gothenburg to meet some of that demand. And ironically, for us as a company, we decided to focus on The U. S.

Market. We’ve been scaling up really nicely. We’ve just delivered our strongest quarter, taking share across the portfolio. And this doesn’t come at the best time for us when we’re starting to gain some really nice traction. But that said, I can’t give you a percentage.

Don’t want to do that. I don’t think it will be shrewd, but I would say that a not insignificant percentage of our U. S. Supply can be covered by U. S.

Production. So hopefully, Philip, I’ve at least helped to answer your question.

Ulrik Vedner, Analyst, Carnegie: Yes. Yes, makes Maybe

Bronwyn Brophy O’Connor, CEO, VitraLife Group: just overall in terms of the tariff mapping that we did, the overall impact even with the very high current tariff rates was less than than we expected. So when we went down meticulously through each and every line, The total impact was less than we expected as a company.

Ulrik Vedner, Analyst, Carnegie: Good to know. And on that, are there any shipments taking place between U. S. And China in terms of components or parts that go into the production? Can you say anything about that flow?

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Yes. We don’t have a huge amount that has to be said in in terms of components. It’s more US, Europe on the on the components side. So it’s it’s basically more US, Europe or Asia, Europe. We don’t have we don’t have a lot U.

S.-China components. That’s not a big factor for us.

Ulrik Vedner, Analyst, Carnegie: Good to know. Thank you very much. I’ll get back into the Okay.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Thank you, Philip. You’re welcome.

Laura, Call Coordinator: Thank you. And we will now take our next question from Susanna of SHB. Your line is open. Please go ahead.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Susanna Kwikbergh here from Handelsbanken. I’d like to start with a question on Latin America. Can you maybe give us a little bit more information as to why you had a softer quarter here? Susanna, and thank you for the question. Yes.

It is this one is quite a simple one. So basically, quarter four was a very strong quarter for LATAM with high consumables and high embryoscope sales. So that has really impacted the LePan performance in quarter one. It’s been softer on the technology side. Again, we did start to see a little bit of a pickup towards the back end of the quarter, particularly on the consumables, but the high embryo scope sales in Q4 did impact the LATAM performance.

So that sort of pulls out. Americas, as I mentioned, North America, very nice performance, double digit growth, but the LatAm softness did pull back down to to 9%. So it’s a it’s a phasing issue, Suzanna. Okay. And then just a question about your innovation policy.

You’ve so you’ve highlighted it, but you’re also scaling back on a number of programs. Maybe you can explain a little bit more about that and also how your r and d costs are coming down. Yes. Yes. So I’ll take the first part, and I’ll maybe hand over to Elaine, and she can talk you through a little bit around our R and D capitalization.

So we had a pretty significant innovation funnel, as you can imagine, on the genetic side, also in consumables and then, of course, in technologies. And we really want to double down and focus on the programs that are going to move the needle. I think we would prefer to make four or five programs that really move the needle become a reality than to dilute ourselves. So we’ve rationalized. But on the programs that we have selected to double down on, we have increased investment.

And they are mainly the programs relating to our platform, our automation, some of our next generation technologies. We’re investing more as well, actually, next generation with the thing to take that to the next level. We spoke during our Capital Markets Day in terms of the marrying of AI and genetics. We believe that, that’s a game changer. We’re the only company that would potentially be able to do that right now.

So that’s getting a lot more focused. So it’s really a case of, again, prioritizing and focusing our efforts where we believe we’re going to get the greatest returns. And I think as well, very importantly, research is really important, we’re in a space where outcomes are pretty low. But you can’t do research without doing product development, and we need to be developing solutions combined with research. And I think, importantly, the market access piece.

Regulatory approvals and barriers have been up around the globe. You can have a fantastic quarantine pipeline, which if you don’t work on the clinical evidence, on the reimbursement, on the FDA submissions, on the China NMPA submissions, then you’re not able to bring those products to market. So we’ve doubling down in that area and brought in a best in class industry talent in terms of leading our market access function under Rick Roderickson, our SVP Innovation. So it’s really about focus, Susanna, focusing on the things where we think we’re going to move the needle most. So I see it as a very good thing.

And Lena, maybe do you want to cover the Yes, I can do. Yes.

Helena Wennenstrom, Acting CFO, VitraLife Group: As you see, the recent development of Kempen’s SIS has reduced from 33,000,000 to SEK26 million in Q1 in 2025 and that is mainly due to reduction in expenses for external services. This is just a minor increase in capitalization otherwise that is the only thing is different between the years. Yes.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Okay. So to just clarify, what are you shifting away from? So we’re rationalizing the number of programs. We’ve we’ve had a lot of different projects. So, you know, multiple developments of new tests or there’s there’s just been a lot in the r and d funnel, Zanit.

So it’s a rationalization of the total number of projects in the R and D funnel. Thank you. Yes. Thank you, Susanna.

Laura, Call Coordinator: Thank you. We’ll now take our next question from Johan Redeye. Your line is open. Please go ahead.

Johan, Analyst, Redeye: Great. Thank you for taking our questions. The first one, on the phasing side, when you sort of accommodate line with sanctions and the 3% level, is there any what about the level of uncertainty on that dynamic?

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Apologies, Johan. I just missed a slight part of your question. Was on would you mind repeating? Yes?

Johan, Analyst, Redeye: Yes. It’s regarding the phasing and your accommodation of sanctions. It’s some you’re guiding for some 3% for the 25% And

what about the uncertainty? That’s not set in stone, presumably.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Yes. So we do have this 3% headwind on the sanctions market. If that situation were to be resolved, and I believe there were, well, some signs this morning, some positive, some maybe not so positive. But if that situation were to be resolved, we we would go back into that market and could go back into that market pretty quickly. We wouldn’t expect the impact to be any worse than the minus three percent because it’s been a complete excess.

There are no residual there are no residual sales, no residual revenues. So that’s as negative an impact as we’re going to feel this year or to be impacted by this year. Is that

Helena Wennenstrom, Acting CFO, VitraLife Group: compared So the discontinuation is from effective from January 1 to no phase meeting?

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Yes. Yes. Exactly. Yes. Does that help answer your question, Johan?

Johan, Analyst, Redeye: Yes. Thank you.

Ulrik Vedner, Analyst, Carnegie: And

Johan, Analyst, Redeye: also regarding the tariffs, you’re expecting to absorb quite a significant amount of this impact. But is there a risk that the areas where you don’t have the expect to be able to absorb? What about the ability to transfer and increase prices? It may be that some of these areas are also areas where it’s tougher to increase prices.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Yes. Yes. So I think the two key levers that we have there are obviously cost containment measures. So we’ve already started to initiate cost containment programs across the company to mitigate some of the impact. And then the second lever that we would have to pull would be in the form of passing on price increases to our customers.

So it’s really sharing the tariff burden. It’s not taking it all in house, but rather sharing it. That said, I do want to highlight on the tariffs. It’s not that we are not impacted by tariffs. We are.

But I would highlight the impact as we mapped out the the the trade flows and and all of the indications and all of the different percentages that have been targeted in the past number of of weeks and months. We we we do have a tariff impact, Johan, but it’s not very material. So I think a combination of cost containment and minimal price increases would be enough to see us through. We’re not talking about passing on very significant price increases to our customers here at at all. We’re talking, you know, low single digits.

Yeah.

Johan, Analyst, Redeye: Yeah. That’s helpful because presumably, your customers are also facing some cost pressure and price pressure elsewhere and the level of competition is not static either.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Yes. Yes. Yes. Exactly. So yes, I mean each competitor is is is going to have to decide for themselves.

I I would assume most will be taking a similar a similar approach. It really depends on the magnitude of the impact that that each of the key competitors is is going to face. But yes, maybe logic will prevail, Johan. I’m not. Logic and common sense may prevail, but we have to take proactive measures, proactive and timely.

I think it’s great to talk about proactive measures, but we have to do them in time to protect our financials.

Johan, Analyst, Redeye: Yes. And what about the transparency on these cost efficiency measures and the price changes? Are these will we be able to see some impact already in Q2? Or is that later in ’25?

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Yes. I mean, I I I think with with the current situation that that we’re facing now, we we already have to deploy cost cost reduction measures up on it in certain areas. So you’ll you’ll probably start to see that slowly coming down. What I would say is we’re not gonna pull back on investing in growth. We’ve been growing really nicely in in North America.

It’s paying off. We’re getting the return, so we don’t we don’t want to pull back. And I don’t think it’s good to be pivoting and changing course. Strategy is working. We’re doing well in our focused markets.

Yes, we did have a challenging quarter in APAC. There’s a very reasonable explanation for that. But we’re we’re not we’re not gonna pull back on the sales and marketing piece because growth is a is a huge focus for us. So it will be more, you know, focusing on on the the admin, the back office costs, what can we get on margin, that that they’re the areas that we’re looking at.

Johan, Analyst, Redeye: Excellent. Thank you.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Yeah. And external services. Sorry. Very important.

Helena Wennenstrom, Acting CFO, VitraLife Group: So yeah.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Thank you very much for the questions, Johan. Okay. I think we’re up on time.

Laura, Call Coordinator: Indeed, that was our last question. I will now hand it back to Brundman for closing remarks. Thank you.

Bronwyn Brophy O’Connor, CEO, VitraLife Group: Yes. So I would just like to thank you all for your time, your attention and your excellent questions this morning. I think we’re all navigating some pretty dynamic environments, but we very much appreciate your questions. I think they were from myself and Helena. Yeah.

Thank

Helena Wennenstrom, Acting CFO, VitraLife Group: you. Thank

Laura, Call Coordinator: you. This concludes today’s call. Thank you for your participation. You may now disconnect.

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