AddLife AB (publ) (ALIFB) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the AddLife Third Quarter Conference Call. Presenting today will be Christina Rubenhag, CFO; and myself, Fredrik Dalborg, the CEO since September. So let's get started with the presentation where we go through some of the highlights. The quarter and the first 9 months of the year, and then we'll open up for questions after that. So the third quarter was really a growth in a changing market. We saw a growth of 14% in the business, which is pretty strong. We did see, of course, a significant and expected growth in the COVID sales. But as expected and planned, this was compensated by acquired growth. Looking at the organic growth, it was 2% for the quarter. And on the Medtech side, we saw that the organic growth and margins were a little bit lower than expected and primarily driven by low surgery activity during the summer months. We'll get into more of that detail later on. So the COVID sales dropped by about 50% compared to the same quarter last year, but slightly up actually compared to the previous quarter, the second quarter of 2022. So here, we see a little bit differences in the different countries. In some parts of Southern Europe, we saw a surge of COVID during the summer. And in some countries, we see a continued high level of testing going on. But it's fair to say that in most parts of Europe, we see testing going on primarily just before surgery or for health care professionals. So taking a little bit closer look at the sales and EBITDA for the third quarter. As I mentioned earlier, the growth was 14% and organic at 2% and, of course, representing the significant part of growth was the acquired growth of 16%. We also saw a positive currency effect in the quarter. It's important to note here that we saw an effect of a reversal of a contingent consideration of SEK 85 million. So that has had a big effect, a positive effect on the profitability. And if we -- and that we have to take into account. Looking at the quarter, the growth was 15%. And here, we can really see a strong effect of the strategy that the company has applied that is foreseeing the impact or the negative impact of reduced COVID sales compensating that by acquisitions. And as you can see in the graph, this approach has worked both in terms of sales, so more than compensating for the drop in COVID-related sales by acquisitions and the same thing on the EBITDA level. So moving into the Labtech business area. Indeed, the growth from COVID was a negative 48% but very, very positive. Organic growth was 5%. One small acquisition was completed. The COVID testing primarily now is down by PCR and that's primarily used for hospital staff and patients before surgery. Right now, the team is working quite hard to make use of this installed base of instruments that can also be used for other types of tests, for example, influenza. Looking on the more traditional types of testing such as blood gas, pathology, microbiology, the business there is quite stable. On the research and laboratory side, we saw a strong development there for research and drug discovery. And that's something we continue -- we expect to continue going forward. The team is quite active in launching new products and growing in areas such as next-generation sequencing, cell therapy, bioprocessing and cancer immunology. We also entered into a new agreement for distribution of sepsis products. So quite a lot of interesting activities going on there. Moving on to Medtech. Again, acquisition-driven growth there, while we saw the organic was flat on the total of the quarter. That was mainly driven by a little bit slower number of surgical procedures happening all over Europe. In particular, in the southern part of Europe, we saw that during the summer months, there was some recurrence of COVID, and so that probably slowed down surgeries as well. And of course, it's important to note that all over Europe, the recovery, addressing this long-waiting list of patients that do need surgery, that recovery is happening, but it is slower than expected. This is largely due to the fact that many of the health care systems across Europe are really facing challenges in terms of staffing. So nurses and doctors have, to some extent, left the hospital world. So we see that, that recovery is happening, but it will take time. It will be happening over -- not months, but years probably. So that was one factor that slowed down a little bit expected growth for us in that area. We also saw some supply challenges meaning that some suppliers were not able to deliver to us to the way we had expected. And there was also a bit of a turnover in suppliers where we're replacing all the products with new ones from current and future suppliers. So looking at the margins. It was, of course, impacted by the SEK 85 million contingent consideration. And so if we adjust for that, the EBITDA margin was 7.5%, obviously lower than we had expected. Looking at the health services in general, the elective surgeries were a bit slow, but it's positive to see that during the latter part of the quarter in September, we saw that -- we saw an increase in the number of surgeries started. So -- and that was also evident in the order intake. So a bit of a weakness during the summer months. But as we approach the end of the quarter, it did improve. On the home care side, we see a strong interest in our unique complete solution for home care. This is something that's really addressing some -- an important need in society as the population gets older, and we see a significant potential for cost savings in the society here. One of our products, Camanio Care. We have signed contracts with 6 municipalities in Sweden and started activities in 4 of those. We expect to invest continuously in this platform to further develop it, but it's important to note that it is indeed in a commercial phase right now. So expecting -- so on the organic growth side, it's important to note that it was flat during the quarter as such. But again, towards the end of the quarter, it did improve. So talking about the home care portfolio that we have, this is something quite unique. I think we all realize the fact that the population is getting older and more and more people do need support in their daily living. For the society this is, of course, a challenge to manage this increased number of patients and for the patients themselves is much preferable to be able to stay at home for a longer period of time. But of course, with attaining the quality of life and safety. So many companies are active in this field. But I do think that, AddLife has a unique approach to this. We are active in a number of hardware products in the home adoption and mobility area, where we provide different products to adjust and adapt bathrooms and kitchens, for example, for needs of elderly people and also mobility. In addition to that, we have alarm systems and sensors provided by many of our portfolio companies. And then finally, the Camanio additional offering in digital solutions. So all of these 3 we can tie together in a nice package allowing for the societies and the individuals to indeed actually live home for longer with the reduced need for hospital and home care. So the Camanio product fits very nicely into this overall portfolio, which does set us apart. In addition to this, we are also quite used to dealing with a somewhat complex buying patterns in this area, consisting of both private persons, municipalities and regions. I also want to take a look at our acquisition approach during the past 2 years and clarify some of the things around that. So here, you see a slide showing the most recent acquisitions across Europe. And as you can see, it's a mix of Medtech acquisitions as well as Labtech. We made a few acquisitions. On the Labtech side, that includes Bio-Connect Group, for example, building a position for us in the Benelux area with advanced research and biomedical products. The JK Lab acquisition was a nice example of an add-on to our current portfolio and the BioCat as well, research and by medical products. Looking on the Medtech side, the Healthcare 21 acquisition that you're -- many of where you're quite familiar with, was a major one, but indeed, a platform acquisition, allowing us to be able to do interesting add-ons and O'Flynn is a nice example of that. So with the Healthcare 21, we broadened our portfolio quite a bit, got access into new countries and open up a new platform for smaller add-on acquisitions. The same thing is true for MBA, which is a company with quite advanced surgery products giving us a strong foothold in southern part of Europe and also a platform to build on for future acquisitions. We talked about Camanio and Telia Health Monitoring really strengthening our portfolio on the home care side with, we would say, market-leading digital offering. Fischer Medical, a smaller company in Denmark, but also in advanced surgery and allowing us an opportunity to build Nordic business in this very interesting segment and with based on a very, very high service provision. And finally, AddVision also a relatively large acquisition for us, providing a strong platform in Central Europe. This is also in advanced surgery in the eye surgery, ophthalmology area. So that wraps up a little bit of a background on the acquisitions and the strategic rationale. And the main message here is with those acquisitions, we have a very interesting future ahead of us here in the ability to add to these new platforms with smaller acquisitions. So with this, I hand over to Christina to talk a little bit about some of the financials.

So we had 2 long-term financial goals. One is profit growth measured as EBITDA and the target is 15% year-over-year. Currently, we are at 3%, with reference to the very profitable quarters where we benefited from COVID sales. The other goal is profitability measured as profit over working cap with a target of 45%, where we are currently at 69%. Summarizing the quarter in figures, we had sales growth of 40% at a gross margin that was at the same level as previous year. The increase in our head expenses relates to the acquisitions that we have done. Looking at EBITDA that has been impacted by the investment in digital solutions that Fredrik talked about. So if you compare that to previous year, this is an impact. The EBITDA margin, excluding the reversal of the continued consideration was SEK 9.7 million and going down further down in the profit and loss, we have interest expenses amounting to SEK 22 million about half of the financial net compared to SEK 17 million previous year. Cash flow from operating activities was very weak in the quarter, mainly relating to lack of inventories. We have, during the quarter, had disturbances in the supply chain, meaning that we have increased inventory to be able to ensure deliveries to customers. Also, we had huge delayed deliveries at the end of the quarter that reached our inventories. The debt level is somewhat high right now, and we are actively working to lower that one, that is the ambition. Looking at the covenants in the bank agreements, we have 2 of them, interest coverage ratio and equity ratio, and we have good headroom on both of them. During the year, we have increased the bank facilities relating to the acquisitions and during the quarter, we have renegotiated bank facilities, in fact half of them, from current bank facilities to a 3-year loan with an option to stand at for additional 24 months. And with that, I hand over to you again, Fredrik.

Thank you very much. Okay. So to sum up, we are seeing a solid and growing underlying market demand in the areas where we are active. And in those areas, in the selected niches or segments that we have chosen, our market position is quite strong. So looking at the organic growth in Medtech as well as the margin, it was indeed lower than expected. As we mentioned earlier, due to lower surgery activity during the summer months and some supply challenges relating to changes in our supplier base. So these have been identified and we are working to improve them and also, of course, working to improve the cash flow in the future quarters. The teams are actively working on price increases because, of course, in the inflation market, we see that happening. But this is really a strength of the companies in our group. They're very active always on price management, working with negotiations, updating prices and also working on the product mix and the mix, including additional services. So this has historically been a strength of ours. And of course, with a strong service and support that we provide, we do have a good negotiation position in that sense. Our ambition is, of course, to reduce debt. And in parallel to that, we are working quite proactively to develop our acquisition pipeline for future growth. We do see in this current market environment, a lot of opportunities for value-creating acquisition. And that's based on the fact that AddLife is now a much bigger company with a strong presence, not only in the Nordics, but all over Europe. And with the recent platform acquisitions, we have many, many more options to choose from. That combined with the fact that we do see valuations in potential acquisitions targets coming down. We see a lot of opportunities for value-creating acquisitions going forward. So that's a bit of a summary of the AddLife third quarter. And so now we open up for questions.

Hope you hear me well. Regarding the covenants, are they soft or hard? So what would happen if you break one of the covenants? I know that there's a lot of space now, but what if...

If so, we will have a discussion with the bank to see what will happen. But like I said, there are lots of headrooms right now.

Okay. Yes. And also on the Labtech division, the COVID-related sales, I expected quite less COVID-related sales, but it was higher than expected. How should we think about the COVID-related sales going forward in the coming quarters as well? Are these sustainable levels at SEK 150 million? Or...

That's a little bit hard to predict. They were indeed significantly lower than the quarter -- the similar quarter last year. But compared to Q2, they were indeed higher. So it's a little bit hard to estimate. But we do think that they will remain at a relatively low level going forward. But it is indeed really hard to say. It will be impacted by if there are new flare-ups of the pandemic in some countries. We also see there are differences in how these things are approached. Some countries do a lot -- continue to do a significant amount of testing. So it's a bit hard to predict, to be frank. So maybe, Karl, if you want to raise a question.

Yes. I have a couple of questions here. But maybe if we just -- my question is regarding just the net debt-to-EBITDA ratio here because it seems to me that you have included the reverse contingent consideration in the rolling 12 months EBITDA. So I'm just wondering if excluding this, this is correct that we get to a net debt to EBITDA of around 3.7 to 3.8 on the rolling 12 months. Is that approximately correct?

Debt funds correct, yes.

Okay. Yes. Just to check there. And then maybe I have a question on the Medtech side. I think that's what stands out in this quarter here and what people are interested in. So maybe if you can say anything regarding the Medtech activity. What are you seeing in September and also maybe in October? Are you expecting to see positive organic growth in Q4. And start with that, and then we'll go into margins later on.

Yes. Thanks, Karl. I think indeed, Medtech was weaker than expected. As we did mention, we saw in -- primarily in Southern Europe less activity than expected in terms of surgery. We did see an increase in COVID in that period and in that geography. So that slowed things down. We also see that health care systems are kind of recovering from COVID. A lot of strain, a lot of extra work for the staff, meaning that they were not able to immediately take on this huge backlog or waiting lists in terms of surgery that we all see. So this recovery hasn't been as quick as we had thought. We do see it happening, though, and it will happen over time, but it will take longer than expected. It will be, it would be an effect of many months and probably years before this entire backlog will be addressed. Of course, it varies by country, but we can see across Europe, there is this staffing shortage that is happening, meaning that immediately addressing it will not be possible, but it will take time. So answering your question there, the first 2 months of the quarter were quite slow on that end. But as we came into September, indeed, the situation did improve. We saw organic growth in September, and we saw also improvement in order intake. So we think that the situation will improve in Q4 in Medtech.

Okay. It sounds clear. And looking on the margins, then I think that was also a bit weaker than I had anticipated. Is it possible to give some flavor on what is driving this? I mean a lot of medtech companies have seen margin pressure now during the last couple of quarters. But maybe just -- I mean is it the fair assumption that your acquisition of AddVision is not really performing according to plan, given that you reversed this consideration as well?

So we did reverse the consideration. I would say though that, that consideration was based on quite high targets that were set up during the process, those high and quite ambitious targets were set up also not taking into full account the impact that COVID would have on elective surgeries. So that needs to be stated. We are not performing as well as we were hoping in that part of the business. We know pretty well what needs to change. It -- some of it is external. We do expect the number of surgeries to increase, but also there were some challenges on the supplier side. Some suppliers were not able to deliver as expected due to internal problems really, be it MDR, IVDR or internal quality problems and so on. And then as usual, in our business, there was a change in some of the manufacturers, suppliers. And we are replacing those products with new products from -- either from the current suppliers we already have or with new products. So those are really the main items that made the both revenues and profitability to be a little bit weaker in that particular area than we had.

Okay. Just a question there on the supply side because this is also next question relating to the inventories. Is that demand driven that you're seeing that -- or has there been like shortages or do you understand the question, like is it that you haven't been able to deliver due to supply? Or is it demand that has been weak or...

It's a combination. The demand is weak due to the fact that surgeries have been postponed during summer months and so on and due to resource constraints in the hospitals. Then some of our suppliers were not able to deliver. So that also had a clear impact both on sales and profitability. So the profitability that issue that we have in an area is largely driven by volumes and issues with some of the suppliers, yes.

Okay. So then on the cash flow, are you expecting that to reverse or be better in the upcoming quarter? Or are you seeing continued inventory buildup?

Well, we will be addressing it clearly, and we think it will improve in the coming months. So I mean, maybe it requires a little bit of explanation. What has happened here is that we have seen for some time during the quarter and earlier than that, also disruptions in the supply chain, right? So many of the deliveries that we were expecting were delayed. And then towards the end of the quarter, some of these disruptions seem to have eased. So a lot of shipments were completed, so many weeks of shipments arrived towards the -- in the end of the third quarter. So that means indeed, we filled up the warehouses, but that's a good thing in certain ways because we were able then to meet many of the orders that were on kind of in waiting mode but on the negative side, we weren't able to ship all of that volume during the third quarter. So we continue to work on that. So that's clearly a big factor here. There is one other factor, and that's since we have seen for quite some time, disruptions in deliveries and an increased level of uncertainty and unpredictability in how the products come to our warehouses, we have built a little bit of inventory to be able to retain a good service level for our customers. That's in certain ways, what they have come accustomed to expect of us. So that's also a factor that now should ease given that we see an improvement in the predictability of deliveries into our warehouses. So we do think that, that should improve. We should see an effect on that during Q4.

Okay. Sounds like better volumes in Q4 in the metrics side. But that's great. And just the last one from my side. And that a little bit more big picture regarding inflation, higher salaries, et cetera, which we're seeing. I mean, a lot of medtech companies seem to be some heavy pressure right now with inability to raise prices, et cetera. So I'm just curious regarding how you think going into next year, what one should have for kind of margin expectations? Because I think historically, the former CEO has been talking about maybe EBITDA margins of around 13% or so. Would just be interesting to hear your thoughts on how one should think in -- on the margin side next year.

Well, so you are raising an important and good point here. I mean, we do see -- we are in an inflation environment. Obviously, we do see suppliers increasing prices, so that is happening. That's also partly a negotiation topic, but it is happening. On our end, what we are doing to tackle that is, of course, to talk to our customers and talk about pricing increases and so on. We are in the situation that we have many long-term contracts, which is a good thing with the stability in the business, but it means that we will have to renegotiate prices with our customers in a good way. We see that there is an openness for that. Sometimes, of course, a long-term agreement is a long-term agreement, but we feel that we are oftentimes able to have a fruitful and good discussion with customers about that particular issue. And of course, price increases are not only coming from us. It's coming from all suppliers. And then given the fact that we are a company with the strong customer relationship and providing valuable service, we do think we can have that dialogue. But it will be something that we will be working on very diligently, and it's happening already, of course. So that's something we have to keep in mind. I would also say that our company has a strong history of working quite actively with pricing, not only with list prices that we update oftentimes more than once a year. But also, we're working with product mix, working with service provision and so on. So that's important going forward. So we think we can manage this but of course, it's not without effort. And we don't give profitability outlook. But what we have mentioned that once the dust settles from the COVID situation, we should be roughly in the range that you're mentioning.

Okay. Because, I guess, just sticking on the margins, I think Labtech, of course, will be down next year or that seems reasonable to me at least, given the very strong Q1 results here. It depends on COVID, of course. But Medtech, are you seeing pressure -- continued pressure there also into next year? Or is this -- do you think it's more like volume related to Q3?

Well, I think the drop here is more volume related and related to the certain situations with suppliers that I mentioned. So we do think that we will improve profitability in Medtech. Absolutely. But you're correct, of course, that the high COVID -- the highly -- the high COVID margins in Labtech, that's not sustainable. And it's important to note that even if we sell a little bit of COVID products still in this year and maybe a little bit going forward as well. Some of that may be a little bit lower margin than at the peak of the COVID.

And that is due to lower, let's say, what you say, you don't get a lot of volume leverage, I guess, or the same volume leverage as when you sell SEK 500 million [indiscernible] SEK 150 million.

Yes, there is that. We don't get the volume leverage in the same way. And of course, our business is volume sensitive in that way. But also some of the COVID sales more recently may not have been at the same profitability level.

Okay. I think that was all for me.

Yes. And then we have Charles, you wanted to ask some questions as well.

Hello, yes. A few topics to cover, please. First of all, on acquisitions. You mentioned valuations are coming down. What's the reason for that? Are they just becoming a bit more sensible or a bit more stressed themselves perhaps by COVID and the impact on volumes? And with pricing coming down, has the competitiveness increased from other potential acquirers and, in fact, has the volume of potential opportunities changed as well?

Well, so we do think that over time, the pricing expectations should be coming down given the market expectation. We see some of that already, but that's a trend we do expect to see going forward. I think in general, the activity has been somewhat reduced in terms of we're not being approached as frequently by sellers. But our strategy is, of course, to work quite proactively in this area. We have a great network. We always had a great network, but now the network is even bigger with platforms all across Europe. So -- and also as we're working through our prioritization and strategy for the coming years, we can be much clearer in which segments we want to expand and grow. So from that sense, we can be more proactive as well in finding attractive business opportunities. So in short, we think we do see some of it, but we do think going forward, valuations will come down a little bit. We don't see the stress perhaps as you mentioned, but we do think that valuations will come down. Activity in terms of how many companies are approaching us has been a little bit reduced, but that we can compensate our own more proactive approach going forward. So I hope that's an answer Charles.

It is, yes. And just in terms of the strategy on the Medtech side, in particular, you mentioned that quite a few of the smaller bolt-on deals were in advanced surgeries of different sorts. Is that part of that strategy that you mentioned? And can you give us a sense of what multiples are being sort of required to pay for -- to win those sorts of deals?

Well, yes, so that -- you're correct. Advanced surgery is an area that we like for many reasons. It's a good niche and a good segment for us that we combine great selection of products with a strong -- really strong service and support offering as well. So that gives a unique value. This is something that many -- the companies that we have acquired recently are really, really strong in and something we want to build on going forward. I think it's -- talking about multiples, it's a little bit hard to give a generic statement on that. I mean, historically, we've paid around 7x EBITDA on acquisitions like a historical average. And -- but if looking at the bigger companies that the multiples have been higher. So if indeed, we find nice add-on acquisitions to support strategies, for example, in advanced surgery, as you mentioned, we're thinking that it will be a smaller company and more close to our traditional multiples that we have been paying.

And just finishing off this acquisition topic, in terms of your balance sheet, do you think you still have balance sheet flexibility to continue to see these bolt-ons?

We do think we have that for sure. But as mentioned, we want to reduce the debt first. So we want to -- so we feel no rush to close deals in the coming months like that. Maybe something smaller will happen, but we have no rush in that sense. So we prefer to pay down debt a little bit more. So maybe something smaller happens in the coming months, but we don't see a huge uptick in activity this year for sure.

Okay. And then just 2 small ones to finish, please. In terms of COVID effect on demand. Do you think that over time, health care systems are becoming more resilient to COVID waves and therefore, there should be a little bit less volatility going forward? Or should we just assume that further ways will equate to lower volumes?

I think, obviously, I think we're close to the end of this pandemic it seems, but who knows what's going to happen in that area. I think the pandemic and other factors did indeed result in a staffing shortage in the health care system. That seems to be consistent as we talk to companies, our companies across Europe. But that means also that they need to focus more on that to sort out the staffing situation. We see that the number of surgeries are increasing again after the summer. So that's what we expect. It won't be a huge effect to quickly just handle the waiting lines that won't happen. It would be a more gradual effort to kind of piece by piece reducing that backlog. Of course, for us as a company, we need to try and help the health care systems in any way we can to make that more efficient, be it service provision or more automated products or other ways to increase the productivity in the health care system.

Okay. And my last one, please. You mentioned on the supply side, one of the reasons there was difficulty from some suppliers as to do with MDR. Is that a major reason? Is that across lots of different suppliers? Is it in any particular sort of therapeutic area or product type? Just a bit more color on that would be interesting, please.

Yes. Well, I think it's not a huge thing. It happened to a few suppliers of ours that they are facing some challenges in that area. But of course, as you probably know, it's a big shift for companies in this space. And there is a race now to complete everything that is required for those approvals to be put in place. So this is something we are watching closely in the coming months and quarters here to make sure we handle well. Not a big thing at this point, but it may -- it will probably impact more suppliers going forward. All right. Thank you, Charles. And I think we have Anna here as well, raising your hand.

It's Anna from Handelsbanken. I have a few questions. You touched upon the margins quite a bit. But if we maybe could look into the details of the gross margin. For example, it's stable year-over-year, but it's down a bit sequentially. Could you maybe just give us some explanations and maybe your expectations going forward in the more shorter term?

So do you mean gross margin on the group level or on...

Exactly.

Yes. Yes. So I think I'll give a short answer, and maybe Christina can fill in as well. I think over time, that we are seeing a reduced volume from COVID-related sales. And so that's a big one because the margins in that space used to be quite favorable. It varies also by country and over time. And I think, so we do have some COVID sales still, but that is probably at a slightly lower margin than some of the really big deals earlier. So that is one effect for sure. And then, of course, on in the Medtech business area where we've seen some shifts in the products. That may also have had a gross margin impact because some of the products that we saw a reduction in volumes or a shift towards other products that also had a little negative impact on gross margin. So maybe you want to fill in something there, Christina?

Product mix has quite an impact like Fredrik is saying. So I think that's right.

All right. Anything in addition to that, Anna?

Yes. So maybe expectations going forward, do you think that product make is going to continue then to maybe be less favorable from the current levels? Or you think you're going to be quite stable or...

Well, so in the longer term, if you look further back, of course, that COVID impact that will not change. We -- it should gradually decrease the number of -- the volumes of COVID sales and probably the COVID sales we still have, won't be as profitable as during the peak of the pandemic. So that effect is probably there. Otherwise, I think we can't really estimate exactly how that's going to develop. It will be a product mix question. It will be a question about, of course, price increases from suppliers. Our increases that we can use in relation to our customers and improve, increase prices there. So those are some of the moving parts.

Okay. And just my last question is basically on mainly looking at Labtech. I mean for this quarter, you were able to deliver additional COVID sales in comparison to the last quarter. When we're continuing, if we're continuing to see the volumes going down within the COVID-related ones, is there any cost savings to be made? I mean, do you have a cost base currently that is set up to handle these sort of sales? Or how should we think about the cost aspects of the margins going forward?

Yes, that's a great question. I think we're quite proud of how the companies have been able to handle a pretty significant surge in volumes from COVID. I would say that, that was -- that has been handled very much within the framework of the organizations as they stand. So meaning we haven't added a lot of people to handle that increased volume. So it's been great work by the teams to handle that with the current company profile that they have. So there's not a lot of extra capacity for COVID, if you will. But of course, that's been a huge workload and reasonably at the expense of other activities. So in that sense, we're quite happy about a number of new businesses that are being added in the Labtech side, a lot of new distribution agreements that we have signed for new and exciting products like we mentioned earlier, we mentioned some growing areas in next-generation sequencing, cell processing and so on, but also in the area of sepsis. So we're seeing that the companies can now perhaps work on addition of other products and to increase the volume again. And we have proven quite tangibly that we can handle higher volumes in our current structure. So that will be a focus now to indeed grow the volumes based on the current profiles of the company. One thing to maybe add is, of course, after many, many months of COVID restrictions, we haven't been able to travel to meet customers and so on, and we haven't been able to attend all the conferences, those conferences have been canceled. Now that type of customer interaction and the commercial activities are resuming. So that may give a little bit extra cost in the organizations. But apart from that, our focus now will be to increase volume. We have proven that we can increase volume without significant cost increases. Well, thank you for a good and insightful questions and for attending this conference call. Of course, if you have follow-up questions, contact Christina or myself on the phone or e-mail, we'll try to answer your questions as well as we can. So in summary, we're pleased to see that we are growing nicely as a company our strategy of replacing COVID sales that is in decline with new and acquired growth in Medtech that is working. We see a strong underlying demand. We see it growing because of increased need for elective surgeries and increase capacity for that over time. So there is indeed a strong underlying demand here, and we have good stability in that sense. We are a bit disappointed with the margin development, and that will be an important area of focus, and that's -- those are already active initiatives to sort that out. Also, the cash flow was not as good as we were expecting, and that's due to -- largely due to the warehouse buildup which is a positive thing over time because we are now able to deliver in a better way to customers. But of course, in this quarter, we did tie up too much capital in warehouses and so on. So that will be an IO focus going forward. And of course, debt reduction is a key factor, combined with our growth ambition to continue organic growth as well as acquired growth going forward. So that, I think, sums up this call. And again, thank you for your time and interest and for good questions. And we will be open to further questions offline, if you want to call or e-mail. Thank you very much, and have a good day.

Thank you.

Thank you. Bye.