Release Date: August 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ambu A/S (AMBFF, Financial) reported a strong organic revenue growth of 15% in Q3 2023/24.
- The endoscopy solutions segment saw a significant growth of 18% in the quarter and 21.6% over the first nine months of the fiscal year.
- The EBIT margin before special items improved to 12.9%, indicating better profitability.
- Free cash flow for the quarter was DKK163 million, showcasing strong cash management.
- The company received approvals for two new solutions, aScope 5 Uretero and aScope Duodeno 2, in both the US and Europe, expanding their product portfolio.
Negative Points
- There is a risk of losing contract volumes due to price increases in the anesthesia and patient monitoring segments.
- The company is still facing challenges in fully utilizing its manufacturing footprint, particularly in its Mexican factory.
- Despite strong growth, there is uncertainty in the fast-growing urology and ENT segments regarding the timing of large orders.
- The company experienced a significant increase in administrative costs in Q3 due to investments in strategy and IT projects, which may not be sustainable.
- The market for single-use endoscopes is becoming increasingly competitive, with new entrants from legacy scope players and Chinese manufacturers.
Q & A Highlights
Q: We saw quite a jump in admin costs in quarter three. Would this be the run rate for admin costs going forward?
A: No, the increase in admin costs in Q3 was due to extra investments in several projects, both strategy and IT-related. This is not a new normal for admin costs. We are focusing on investing more in the commercial organization and IT, but admin costs should be flat or even decrease slightly in the coming quarters. - Henrik Bender, CFO
Q: How do you see the long-term conversion potential in the bronc suite relative to the OR ICU segment?
A: We still see room to grow in the OR ICU segment despite some level of saturation. For the bronc suite, we believe there is significant long-term conversion potential, similar to what we have seen in the OR ICU area. - Britt Meelby Jensen, CEO
Q: Should the assumption still be that for '25, the main growth drivers will be the aScope 5 Cysto and ENT, while uretero and gastro products will take longer to become meaningful growth drivers?
A: Yes, the majority of growth next year will come from existing products like aScope 5 Cysto and ENT. The ureteroscope and gastro products will take time to ramp up, but the ureteroscope has different dynamics as it enters a market with some level of single-use penetration. - Britt Meelby Jensen, CEO
Q: How much additional runway do you have on improving utilization on the Mexican plant?
A: We see potential for more gross margin expansion for several years, mainly driven by better utilization of our Mexican factory, which is still underutilized. We are also improving output from existing factories like Penang. - Henrik Bender, CFO
Q: How should we think about the growth trajectory going into Q4, especially on the pulmonology side?
A: We see momentum continuing but still have some uncertainty due to price increases in anesthesia and patient monitoring. We are not pulling in orders to meet guidance and are focused on long-term growth. - Britt Meelby Jensen, CEO
Q: Is it the right time to use OpEx scalability to improve margins, or should you scale up the distribution and sales force more?
A: Our main focus is on driving continuous growth while also expanding margins. We are hiring more salespeople and optimizing our distribution footprint. The focus is on profitable growth without compromising long-term investments. - Henrik Bender, CFO
Q: What kind of feedback have you received from customers on the ureteroscope?
A: We have conducted over 100 patient cases and received very positive feedback. We made minor adjustments based on feedback and are now comfortable with the product quality. The launch phase does take time, but we are excited about the offering. - Britt Meelby Jensen, CEO
Q: Can you comment on the competitive dynamics with legacy scope players entering the single-use space?
A: The market is getting more crowded, but we are not losing significant volume to competitors. We continue to focus on innovation and quality. The market still has 97% white space for single-use conversion, which is a positive for Ambu. - Britt Meelby Jensen, CEO
Q: How will you be notified of losing contract volumes in the core business?
A: There are two dynamics: immediate notification when bidding for new contracts and a gray area where we remain a supplier but share volumes with another vendor. We monitor closely and have seen less volume loss than anticipated. - Britt Meelby Jensen, CEO
Q: Can you provide more color on the adoption of gastro products relative to your expectations?
A: We are pleased with the uptake in gastro, focusing on niche-by-niche approach. We have shifted commercial resources to fast-growing segments but see potential in gastro with selective investments. - Britt Meelby Jensen, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
