Ambu A/S (AMBUB) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to this Q2 '22-'23 results call with the Ambu. My name is Britt Meelby Jensen, I'm the CEO of Ambu, and I'm joined today by Thomas Frederik Schmidt, our Chief Financial Officer. So the agenda for this meeting is that I'll go through an update on the business. I'll hand over to Thomas to take you through the financial results. And then we will, as usual, finish off with the Q&A session. But let's dive straight into the results. So in Q2, we delivered an organic growth of 4%. And if we look at the reported growth, this was 6%. And overall for the first 6 months of our fiscal year we delivered also 4% organically and 8% reported growth. Our EBIT margin is in line with our expect expectation, reporting 3.9% on the quarter and 4.9% on the full half year period. If we look at the market, and let me put a few comments on the health care market in general. What we do see out in the hospitals where activity level is a main driver for our business, we do see the activity level coming back to close where it was pre-COVID. However, in most countries slightly below the pre-COVID levels in terms of number of procedures, and that slightly lower level is much driven by the staff shortages that we see, both in Europe and in the U.S. And then we also continue to see our customers being challenged on their financial results. We launched our Zoom In strategy in November, and we are progressing well in terms of delivering on this strategy. Our focus on the strategy is to be the most customer centric in our field. And by doing that and by delivering on our strategy, we will deliver strong profitable growth. So if we look at the 4 areas on our focus on innovative solutions, we made progress in particular in 2 areas over the quarter. The first one is pulmonology, where we end up March re-launched VivaSight 2 which we recalled voluntarily in May last year. We also achieved a CE mark in Europe on the smaller sizes of our aScope 5 Broncho, which is expanding the market. And we do expect also clearance in the U.S. relatively soon for this range of products, which will further support the aScope 5 Broncho scope that we launched last year. Within GI which is also a focus area for us, we announced that we have a new product in development in the quarter, Gastro Large, a gastroscope with a larger working channel that allows more therapeutic use. So this is one that we're excited to have in development and where we have not communicated on the launch timelines. Our focus is very much on execution across the value chain and a large part of this is our transformation program that we launched with this strategy. We're overall progressing well with this strategy. And with the transformation program, a major highlight I will say is that, we returned to slight positive cash flow in the quarter driven by the inventory reductions which is part of the transformation program. We continue to be very focused also on pricing with a number of initiatives, although we still have some restrictions in the part of the business that this is contracted and then we are focusing on streamlining the portfolio. So basically looking at some of the areas where we have better products that we can offer to our customers and looking into some of the offerings that we have in selected smaller geographies. Then on the people and culture side, this remains a key focus because we are very committed to our people who are delivering the financial results. And as a natural part of the strategy that we launched end of or mid-November, we a couple of months ago did some changes to the executive leadership team to strengthen the capabilities and the competencies to deliver on our strategy. I'm therefore also very pleased that earlier this week, we had Henrik Birk joining us as the new Chief Operating Officer who will be responsible for all our operations globally. Then finally sustainability is a very important part of our strategy as well. When we hosted our Capital Market Day, end of March, we announced some of our 2025 target when it comes to our products and packaging. We focus on using more bioplastics in our products. We focus on the packaging being fully recyclable. And we focus also on helping our customers address the challenges with waste by making sure that we're also responsible in how we get rid of the products in the hospitals. These are some of the initiatives, but it goes broader than this when it comes to our commitment. The second focus we have is on net-zero emissions. And that's where we are this fiscal year developing a detailed plan on how we will achieve that which entails a number of relevant initiatives. So let me dive into the different segments now and I'll, for change, start with Anesthesia and Patient Monitoring. So overall, when we look at this area, we saw a decline starting with Anesthesia of 11% in the quarter. This comes on the back of a couple of quite strong quarters last year where we came out of the supply chain challenges, so we were able to clear both our backlog. And we also saw, in particular in Europe, some stockpiling last year, driven by the geopolitical uncertainty that increased the just over a year ago. When we then look at our Patient Monitoring business, this business, we saw a growth of 8% in the quarter. And a key driver of this was our cardiology business in the U.S. that developed very strongly. Turning to endoscopy, we delivered 11% growth in the quarter for this business, leading to a 7% growth when we look at the full half year period. This was driven heavily by growth in cysto and ENT. And also we saw for the first time in a couple of quarters growth in our bronchoscopy business. If we look at pulmonology then where bronchoscopy is the most part of, you can see here that that is actually declining by 3% in the quarter versus 10% for the full-half-year period. So when I talk about growing the bronchoscopy business, you have to remember that how we report on this pulmonology category, we also include VivaSight, the product that we voluntarily recalled last year in May and that we are just re-launching end of March. So that is what drives the overall minus 3%. Having said that, and looking at our new product, the aScope 5 Broncho. We continue to see very strong performance and satisfaction with the performance among our customers in the bronc suite doing the advanced procedures. So we're continuing to see a growing customer base here. And when we combine that with the launch of the smaller sizes in Europe and coming up later in the U.S., this puts us in a very strong position in this area specifically. Broader in bronchoscopy, we do continue to see some level of competition, as we have communicated earlier. And this is where the combined portfolio with aScope 4, aScope 5, VivaSight, and then also the Video Laryngoscope, which we have in development, will be a very important part of this full offering that we have in this in this segment. Looking at the remaining part of the endoscopy business, so the one that excludes pulmonology, so this is urology, ENT, and GI. Starting with urology, we had a very strong momentum and the total category here grew by 36% in the quarter. We see very strong growth with our cystoscope in Europe, but in particular in the U.S. And when we look at the urology space, we also have our ureteroscope in development, which will be an attractive product for us to launch in particular because a big part of this market has already converted to single-use. Then when we look at ENT, this had a strong quarter in particular, again here in the U.S., and where we see our fees indication supporting the expanded clinical use. And then finally when it comes to GI, this is the area that we stepped into the latest, but also the biggest market. So an area that we continue to be very focused on. Our key focus right now is our gastroscope where we are continuing the launch and rollout in -- with that product, where we are present now in all major target markets. And we are also receiving very strong feedback on the performance of the product among customers. So if we take a step back and look at the single-use market, I would like to show a picture that was shown at the Capital Market Day just to recap the market that we are playing in with our Endoscopy Solutions. So when we look at the big market, there's 150 million to 200 million procedures that are done annually, worldwide with endoscopes. And when we look at our target markets, this is roughly 100 million. What we aim to do was to look at the pipeline that we have, the markets and near term pipeline, and this is what you see on the left-hand side here. And when we map that across the different segments this -- we estimate a total of 23 million procedures is what we believe that we can address with this portfolio over the coming years. If we assume, moving to the next part of the slide, that these 23 million procedures are fully -- that this is fully penetrated using a blended ASP, we see a total market potential of 45 million. However, we believe that the uptake in these segments of single-use endoscopes takes time. We also believe that the uptake will be driven at different speeds across the different segments. So when we tried to put our best estimate of how this will evolve, you'll see the pies or the hobby bolts on the right-hand side where you can see how we estimate the penetration to be in these markets over -- in a 5-year time frame. And then when we also add that this is the market that we are playing in, together with the competition that is coming in, we estimate that this total market in 5 years will be roughly DKK 15 million to DKK 20 million. So with this and before I hand over to Thomas, I'd like to conclude with saying that these numbers, at least to us documents that we have a fast growing market potential also with very clear customer needs that we see when we are out there every day. We also get confirmation every day from our customers that we have a leading and very attractive portfolio. And we believe that the focus areas that we have with our transformation program and other initiatives to develop a scalable business model is what will bring us to deliver the strong, sustainable, profitable growth that we're aiming for. So this concludes my business update, and I'll hand over to Thomas to go through the financials.

Thank you, Britt, and also a very warm welcome from my side. And I'm glad to be able to now present the key financial figures for the Q2 of our financial year. It's been a good second quarter, as Britt also has mentioned, with a quarter where we delivered 4% organic growth and 6% reported revenue growth with a positive impact coming from our exchange rates -- the foreign exchange rates. For the half year, as also mentioned, it's also 4% organic growth and with a reported growth rate of 8%. Again, also hear a positive impact from foreign exchange rates. And another key event in the second quarter has surely been our capital raise. So on March 24th, we completed a capital raise where we strengthened our capital base of around about 5% of our total share capital. This has enabled us to reduce our financial leverage faster than we planned and also has enabled us with enough flexibility from a financial and operational point of view, which again gives us some flexibility to invest into attractive growth opportunities. The financial leverage has been reduced from 3.9x EBITDA in the Q1 to now 1.6x in the Q2, and that certainly gives us also a buffer in terms of the macroeconomic uncertainty that we operate in. And I'm very pleased with what we have accomplished here from a balance sheet strengthening perspective. Looking at our revenue, and looking at our revenue by geography. North America, which is our biggest region showed organic growth of 8%, driven by Endoscopy Solutions. And within Endoscopy Solutions, record demand for our products within urology and ENT. And also within Patient Monitoring, we've seen high growth rates coming from cardiology. This is certainly also very pleasing to see and is also a strong indicator of the benefits that our single-use endoscopes bring and how that actually also resonates well with our customers. Europe showed organic decline of 1%. Britt mentioned that just earlier, mainly driven by Anesthesia, where we have high comparables last year coming from backlog or reducing backlog in Q2 last year and also stockpiling due to geographical uncertainties or political uncertainties last year. In rest of the world, we have shown organic growth of 7% and similar to North America, this was also driven by high demand for our urology and ENT business and also solid and high growth within Patient Monitoring and more specifically also there within cardiology. 4% revenue growth has resulted in -- that we achieved an EBIT margin of 3.9% for Q2 which is comparable with 4.2% from the Q2 last financial year. The decrease in EBIT margin is mainly driven by reduction in gross margin and the gross margin is due to higher input prices, but also continued ramp up of our Mexican production site. Whereas, a slightly better mix have somewhat offset that increased cost from a gross margin perspective. If we compare the gross margin with Q1, there's a further deterioration or decline in our gross margin in Q2 of 2.7 percentage points, which is mainly driven by indirect production cost, as we've been very successful, and I will come back to that later in reducing our inventories. The decline in gross margin has to a large extent been offset by improvement in our OpEx ratio and OpEx ratio where we've improved by 1.5 percentage point versus Q2 last year. Our cost reduction program has certainly helped in improving our OpEx ratio, and also a very good and tight cost management throughout the year. So in Q2, we've maintained the cost from an OpEx ratio perspective of 52%, due to as mentioned, cost consciousness, allowing us far better control of our finances. So that is very pleasing also to see. And it's certainly also testament to the focus that we have put into this. As we've also mentioned in the recent Capital Markets Day, scale in our OpEx is one of the key drivers for us to improve our profitability, and it will therefore remain our focus also in the remaining year and also in the following years to come. Another key focus is cash flow, has been cash flow, still will be cash flow, and we have had a very strong focus on that. Throughout the year and also in Q2, we now start seeing how those efforts are materializing. So we've posted positive free cash flow for the quarter of DKK 21 million versus and negative cash flow in Q1 of DKK 147 million. So it certainly also shows that our free cash flow in relation to revenue now shows the right stats showing the right trajectory in Q2. The improvement is mainly coming from improvement in our net working capital, and more precisely in the net working capital a good and solid reduction of our inventories. We've reduced our inventories by DKK 136 million versus last financial year. And we start moving into a more normalizing level of that. Still work to be done and still focused, but we -- and we are coming down from a high level also. Furthermore, trade receivables has also been reduced so we have been looking at our processes and how we more efficiently could also collect cash. And within Q2 we've also improved our trade receivables and cash collection by DKK 76 million compared to the financial year '21-'22. So achieving a lower net working capital, as mentioned, also reducing our inventories are starting to show, but still will be a key focus of ours moving forward. We still have a net working capital at a relatively high level. But as you can see also here, the inventory is certainly moving in the right direction. And it certainly is a key focus, and we remain committed to improving our cash flow for the year by DKK 350 million to DKK 450 million versus the financial year '21-'22. That brings us to our financial guidance for the year. And we maintain our guidance for the year. It's important to yet again note that we are in a transition year -- in this year for Ambu. Our guidance for the organic revenue growth we confirm to be 5% to 8%. We have also earlier mentioned that the growth is expected to accelerate quarter-over-quarter, which also means that we do expect a slightly higher growth rate in the second half of this year. EBIT margin before special items, we also confirm, according to the guidance, of 3% to 5%. The EBIT margin, as one of the assumptions, is also that the gross margin is expected to decline by roughly 2 percentage points compared to last year due to input costs, Mexico ramp-up and product mix, and that will also impact the EBIT margin in the second half of this year and also due to some postponed investments that we will do in the second half of the year. But EBIT margin, as mentioned, confirmed between 3% to 5% of sales. With that, thank you very much. And we now move into the Q&A session of our presentation, and I therefore hand back to our operator, to navigate and take the first questions.

[Operator Instructions] And the first question comes from Christian Ryom from Danske Bank.

I have 2, please. So the first one is to you, Thomas, and is regarding the gross margin outlook for the next couple of quarters. So can you help us a little bit with the pushes and pulls for the margin relative to these 55.8% that you delivered here in Q2? And then the second question is with respect to your pulmonology sales in the quarter and whether the year-on-year growth in bronchoscopy sales can be attributed to contribution from the aScope 5?

Yes. So I think I can take the second question. But I think, Thomas, you can answer that -- the first.

Yes. So thank you very much, Christian for the answer. So for the full year, as mentioned, as also in the assumptions around our guidance, we do expect that the gross margin will decline by roughly 2 percentage points when we compare it against last year. A number of effects play into that, as mentioned already. Certainly, input cost is one of those when we compare against last year, Mexico ramp-up, which we continue to also do also plays into that. And then also the margin, and we've further -- sorry, the mix, we further alluded also to that especially some of our newly launched products, of course, in the ramp-up phase also comes with lower margin compared to the remaining part of our business within Endoscopy Solutions. On top of that, as you've also seen and we've talked about in the Q2, we have also seen impact from indirect production costs also coming in. And that will certainly also continue as we continue to have full focus on reducing our inventories in the second half of this year. So that will also play into effect.

And if I may just quickly follow-up. So when we talk about Mexico ramp-up and mix effects, is that expected to be an incremental -- at headwind in the second half relative to the level that we are seeing here in Q2?

So yes. To some extent, yes, that's in our planning for the -- or expectations for the second half of this year.

Yes. Yes. So you can expect our gross margin to be roughly at the same level throughout Q3 and Q4. And then maybe to comment on your other question on pulmonology. So on bronchoscopy specifically, so still the very vast majority of our bronchoscope sales remains aScope 4. So we do, of course, continue to see increasing revenue as we should. With aScope 5, we continue to see, I mean, an expansion of the customer base and also the number of customers rebuy. But again, it is -- as we have talked a bit about before, it is a gradual uptake. We are in the bronchoscopy suite where we have not been before, where they have not used single-use before. So this is, of course -- the sales cycles are taking some time. This is in line with what we also talked about at the Capital Market Day. But it is a contributor to the growth, but we also, at the same time, have had a good quarter and a good half year on our aScope 4 business, which remains a focus area. So the overall takeaway from the bronchoscopy or the pulmonology business is that the bronchoscope sale is back to growth. I think that's worth noting a lot of that by strong aScope 4. It's our completion of our portfolio with our aScope 5, smaller sizes and the VivaSight re-launch, which should contribute to continued growth. And then it's the Video Laryngoscope that we have in development, that we have not talked about a launch date for yet, but which is a high priority project. I hope that answers your question, Christian.

So the next question comes from Rickard Anderkrans from Handelsbanken.

So 2 for me, please. First, if you can quantify the statement of increasing customer base and perhaps also quantify anything on the share of customers rebuying in the GI segment. I think the highlight that the things are moving a bit slower there. So it would be interesting to just to get a sense of the magnitude of the sort of sequential improvements and expansion there.

Yes. Thanks for the question, Rickard. So we don't comment specifically on the customer base and number of customers. But I think -- I mean, there are some similarities when we look at the aScope 5 launched and also the gastroscope launch. I mean the first one, which is very similar is that we get very strong feedback from the customers on the product performance. So that is, of course, something that is very important because we can see that -- I mean, they like the product, it does the job for the procedures. Then also we continue to see quarter-over-quarter revenue growth also as we would expect. And then secondly, I mean, I think it's very important, again this about that it's a new customer group. That also means when we look at the reported revenue on Endoscopy Solutions, excluding pulmonology, GI continues to be a smaller part of that revenue because it does take time for us to go in and get familiar with how we sell gastroscopes, very much in line with how it happened when we launched the aScope. I mean, it was a gradual uptake where it took us 6 years before we saw really a meaningful revenue. We don't necessarily expect it to be that long, but we expect a continued positive trajectory. think the market is, in general, embracing single-use endoscopes much better than we saw in the past. And that we do see a spillover and familiarity in GI. Just coming back from the big endoscopy, GI conference in Dublin a couple of weeks ago, it's very clear that, I mean, we have a well-established name and recognition among key opinion leaders and key gastroenterology. So I'm very confident in our ability to deliver. And with the size of the GI market and the potential, I mean, we have to be there. But it is -- I mean, it is, as we have also talked about before, I mean, that launch phase is taking time, and it does also take time to get the meaningful revenue that will move the needle. So I hope that clarifies with -- and I know I'm not addressing your specific question for customer numbers.

That's fine. And second question, you seem to have quite tough comparables in both Anesthesia and Patient Monitoring from -- looking at Q3 from last year. So should we expect negative organic growth in these segments in the next quarter? Just it would be interesting to hear little bit how we should think about the comparables just so we don't get caught sort of wrong foot in the air moving into the next few quarters?

Yes. No, thanks for asking that. And I think it's fair to assume that we will -- I mean, we will see that -- I mean the revenue for that part of the business remaining roughly -- so Anesthesia and Patient Monitoring remaining roughly at the same level as we have seen in Q2. I mean, again, back to that, it is quite high comparable strong -- or comparable strong quarters from last year.

And the next question comes from Martin Brenoe from Nordea.

First question is regarding the flu. Can you maybe just give us a little bit of some qualitative numbers and how the flu impacted the quarter, because you delivered positive growth on the bronchoscopy business despite the flu season being pushed from Q2 into Q1? And just on the gastro, can you maybe just help us a little bit understanding it's a slow trajectory, but how slow are we talking about? Are we -- are you selling hundreds or thousands or tens of thousands? It would be very helpful to understand also.

Yes. So if I start with the flu season. So as we talked about before, I mean, it did spike in Q1, as we previously talked about. And I think when we look at the flu numbers from Q2, I mean, we saw a fairly modest level, but still -- also, I mean, as we have seen earlier in earlier years. But overall, a limited flu impact, I would say, when we look at the U.S. market in the quarter that came primarily in the first quarter of our fiscal year. And then we saw a little more flu in Europe in the quarter, but still not at any spike as we saw in Q1 in the U.S. In terms of GI, so I think I mean my comment is not -- I mean, it's not and I'm just judging from your question to say that this is an area that we are disappointed around that we don't see a strong traction in. It's more to balance in terms of when we look at the bigger picture. And I'm not going to comment specifically on number of scopes that we are selling. But we are seeing a fairly I mean, satisfactory number when it comes to customers that are buying for the first time. We're also seeing -- I mean, that customer base continuing to grow, we are also seeing the number of customers rebuying continuing. So we are actually quite confident with the traction that we see. And we also, as we went into this, I think we have had our learnings when we came out with the duodenoscope, the gastroscope is a very different story when it comes to the product performance that it's working. So it's for us a question of making sure that we continue to be out there addressing the product with the resources that we have available. And that's very clear, as you know from last year we had a couple of years back, ramped up a lot when it came to our GI sales force. We brought that down, and now we are having a more balanced sales force, addressing -- balancing across the different segments that we are in and then also being flexible so we can go after the opportunities. There's no doubt that we see this being a big market with high potential. Our focus when it comes to GI is very much under gastroscope. And we have no competition in the segment at this moment. So our -- we go, as we have talked about before, with a targeted approach of the segments where we see the biggest need and we learn from that and expand. And I think that is, I'm in general, very positive about this. It's just taking time to evolve. But as long as we are on that continues slope with the increasing customers and increasing rebuying, which we are seeing I'm very positive. At the endoscopy conference, we also showcased, of course, the product and also our Gastro Large that will -- I mean we have added to the portfolio with very strong feedback. So I'm quite confident for the future for us in this area, and it remains important.

Can I just squeeze one more question in? Just to you, Thomas. When I look at the margin guidance for the second half of the year, I mean, you're already trending towards the high end of the guidance in the first half. And in the second half, you expect to have a step-up change in the overall growth of the company. You now say that you expect flat gross margin. So why don't you expect any leverage on your OpEx in the second half of the year, because that must be what should drive some margin accretive -- some margin expansion from here?

Good. Thanks, Martin. Yes. So first and foremost, when we do look at the margin, and therefore, of course, your comment relates to the EBIT margin, of course. It will be lower in the second half of the year. If you look at -- if you take the 2 quarters that we're in, you can also see that the quarter 1 and quarter 2, there is a difference in the 2 quarters that we have reported up until now. So the continuation is impacted by, as I mentioned before, the gross margin. So -- and a big part of that will also be that we further and continue we'll see impact also from indirect production costs that we -- when we are and will continue to reduce our inventories over the coming months and quarters. So that puts a bit of a pressure, if you will, on the gross margin. And on the other hand, we will be working with the OpEx, of course, but can't compensate that in full for the remaining half of this year. So that's why we expect that we see half year over half year, slightly lower margin in the second half of the year.

And the next question comes from Niels Granholm-Leth from Carnegie.

My first question is on your growth rates for the endoscopy other categories, so the ENT, urology, et cetera. So the growth deceleration that we saw in this quarter, is that effectively explained by difficult comparatives to last year? Or why is it that growth rate keeps trending down in this segment? My second question would be on the onetime cost that you incurred in administration costs. Could you provide a little bit more color on the level of those onetime costs? And then a third question on potential onetime costs included in your net financials in the quarter.

Yes. So I think the 2 last questions are for you, Thomas. Maybe I can start with the first one. So when we look at the growth in Endoscopy Solutions, excluding pulmonology, which I think was your question. We have a strong growth in the quarter of 36%. And as we say, it's -- in particular, we see the very strong growth coming out of the U.S. it's on the urology business where we are seeing with the cystoscope, both a continued expansion in terms of the customer base. And also where we see the amount that our customers are buying is continuing to increase. I think that the -- I mean, that continued growth, even that we are expanding our base of percentage-wise that will, of course, not continue to be equally high. I think that looks to us very promising. A bit similar when it comes to ENT. We got the FEES indication last year. So that's where we continue to also see a strong growth in that area. And then we talked about GI before, that is still a smaller part of that segment. I would say, overall, I think it's -- I mean, I'm comfortable just our taking time as we have talked about in the call today. But I think that's how we will continue to expect strong growth in this part of the business. And then that combined with that we are getting back to growth rates in pulmonology, I think puts us in a good position in Endoscopy Solutions, which is our main focus. Thomas?

Yes. And so Niels, to your 2 questions, both to some extent, related to one-off costs. One being, as you asked around in our OpEx cost. And I assume you refer to our -- the cost that relates to the restructuring that we did within the executive leadership team. It is exactly one-off cost, so obviously, not something that will reoccur in the second half of this year. But it's also not a number and a figure that we will communicate. So I can't talk and won't talk too much more about that other than to say, yes, it's a one-off, and it's certainly not something that we expect in that nature to see, of course, due to the one-off nature. In the net financials, we have also, yes, had some one-offs as we've obviously done our capital increase and to the furthest point we've used that to reduce our net debt situation. And that has, of course, also come with some one-offs in our net financials that we, on the other hand, will benefit from in the second half of this year. So the net impact in Q2 was roughly on the net financials were around DKK 15 million that we then won't be seeing and actually benefiting from in the second half of this year.

So is the one-off DKK 15 million? Or is that number, the run rate?

What, sorry, again?

So is the DKK 15 million the underlying run rate per quarter in net financials or it was one-off.

No, that was the one-off. Sorry. That was the one-off. Yes.

So the underlying run rate for financials per quarter would be to the tune of DKK 10 million?

Correct.

And then can I just add one more question about your number of employees. Back in August last year, you announced the staff reduction of 200 people. But if you look at the number of employees, it's now down from 5,100 to 4,300, so quite a bit more than the 200 you announced a year ago. What's going on?

Yes. So -- yes, that's a good question. So basically, a lot of this is -- I mean, the majority of our sales force is -- of our workforce is blue collar workers, and that's where we -- I mean, we have more flexibility. So when you look at the actual numbers and the reduction, a large part of that is blue color workers that we have reduced. And that has simply been also a part of the inventory reduction. We had quite a number of products in inventory, and as we are putting that down, we have slightly adjusted some of that workforce. And then I would also say, we have also -- I mean, we have not made more workforce cuts, but we have held back on refilling positions as -- I mean, since last year in order also to manage the cost base. So these are some more recent adjustments to the workforce. But most of the -- majority of these are the blue collar workers.

But still you have effectively reduced the number of employees by 800 people.

Yes. I mean we were not exactly up at 5,100, I believe. So it's not -- I mean, that number is -- it's not a full 800 people reduction. We were close around the 4,900. But it is -- I mean, it is true that we are down a couple of 100 when it comes to our blue collar workers. Which again, I mean, as we are -- I mean, emptying some of our inventories, we will see a slight increase in that number again.

So you expect this number in this quarter to be the trough?

I mean, I think so with the current plans we have, yes. And as we are reducing our inventories on some of these products with these finished goods, we will, of course, ramp up slightly again.

The next question comes from Yiwei Zhou from SEB.

It's Yiwei from SEB. I have 3 questions here. Firstly, I just want to follow up on the EBIT margin guidance for second half. We understand the gross margin expectation. But just curious on your OpEx assumption. We have changed the assumption, talking about postponed investments in the second half. Could you maybe elaborate a bit on this? Is it in the sales organization or R&D? And what is the reason here for this?

Yes. I can take this. So I mean in terms of the postponed investments, I mean, it's basically -- it's not so much on the commercial side. It's mainly on the back office when it comes to innovation and operations that there are some costs that we have slightly postponed related to some clinical studies and so on.

And secondly, you mentioned, now with the lower financial gearing you will be able to invest in the attractive growth opportunities. Could you also elaborate a bit on this? I'm asking because this conflict with the fact that you have just the rightsized or downsized the organization and cut down the R&D spending quite significantly. So should we -- when looking at your investments -- or CapEx investments in the coming years, should we understand you are also now looking to sort of bolt-on acquisitions?

Yes. So that's a good question. And I think, clearly, and Thomas talked well about this. So I mean, with the capital increase, of course, we have now brought our debt down to a very minimum level, which is good from the interest rate cost perspective. But more importantly, I would also say it gives us flexibility on the business that we are able to invest in growth faster than we were otherwise. Having said that, I think it's important for us to stay focused and committed on our transformation program. I mean we have a clear plan to increase our profitability. But of course, we are a growth company. So that also means that, I mean, we will and need to continue to look in investing for growth. But again, striking that balance between increasing profitability. It's not that we have a strong focus on M&A right now. I believe, with the new products that we are -- we have just launched last year, with the upcoming products that we have in pipeline and the transformation program, I think it's -- there's enough for us to focus on. And it's important that we still continue to be focused on delivering on the opportunities with that and focused on execution and delivering on our transformation.

And lastly, a question on the aScope 4. Followed Boston Scientific launched did upgrade on the EXALT B, your peer Verathon recently launched the BFlex 2 and also claim the main selling point being the stronger suction power than a market-leading product. Do you still believe your aScope 4 can compete on this clinical performance? Or should we expect also a product upgrade from yours?

Yes. So you can say, I think, definitely, I think we have a very competitive portfolio when it comes to bronchoscopes. The aScope 5 is clearly, I mean, the best-in-class and the best product that is out there. So we have the full offering, I would say, is #1. And also have, I mean, the choice for the customers who -- I mean, where they need to use the best scope and go for single-use, that's -- I mean that's where we have our aScope 5, which I don't think that the BFlex 2 is near to compete against. Then you can say our aScope 4 that I see that remaining a market-leading product. It's true that there is competition coming in. And for us, I mean, we have remained fully focused on delivering on our customer needs. And of course, also, as we have done previously, I mean, we continue to improve our products and also look at how we said that we can further strengthen our products to, I mean, better deliver on the customer needs. I think that's an ongoing basis. So that's what we do on the bronchoscope specifically. And then, of course, with the Video Laryngoscope, that we will then have the full pulmonology offering, where we are also looking at, I mean, very much the full solution we are offering with the system and the bronchoscope and the Video Laryngoscope.

The next question comes from David Adlington from JPMorgan.

First one is on pricing. I just wondered if you could talk to the pricing environment across the 3 segments and maybe more specifically, endoscopy what you're seeing on the broncho side? And then secondly, just on Anesthesia and Patient Monitoring, I'm just wondering if you had any views into why you're seeing such strong stocking and destocking in Anesthesia, but less so in Patient Monitoring?

Yes. Thanks. So on the pricing first. I mean, pricing is a key priority for us, and that goes across the full portfolio. So that's -- I mean it's also on our Anesthesia and Patient Monitoring where we do -- I mean, I think we need to, I mean, have prices that also reflects the desired profitability. And the same goes for our endoscope offering. So on the aScope 5, as we have previously communicated, we are -- I mean, we do have a price premium of 30% to 50%. We are also seeing that we are able to -- I mean to deliver and get those prices for our aScope 5. And then when it comes to aScope 4, I mean, given the increased competition, it is, of course, something that we are close to and where -- I mean that -- I mean, competition, of course, also focuses on the prices. So that's, of course, where we are more modest in our expectation for pricing increases compared to other parts of the portfolio. For Anesthesia and Patient Monitoring, maybe on this inventory thing, maybe just to clarify, it's not -- I mean, this happened basically 1 year ago. And because the products in anesthesia are products that are saving live, so quite instrumental for hospitals and because we have a strong, solid business of that in Europe as well, this is where we basically saw some of the stockpiling to make sure that we have -- I mean, that the hospitals had those products in stock in the hospital. So that's really -- and this was also where we had some of the supply chain disruptions and some of the backlog that we cleared out around a year ago. So that explains why it's hitting our Anesthesia business more. On the Patient Monitoring side, as I also alluded to, this is where we see, I mean, a very good momentum when it comes to our U.S. business, in particular, on the cardiology side, where we have had a very good quarter. But overall, I would say -- yes, so overall, I would say, when it then comes to our pricing, I mean maybe to wrap that up overall, I do think that it's important to note that, I mean, we do, as we renew contracts, remain focused on pricing. But we do also -- which I think was in your question, see the hospitals being under pressure on their own financial situations, which, of course, also makes these negotiations, I mean, quite tough sometimes. But it is -- I think there is, in general, a good understanding on the other side of the table that -- I mean, that we have had increases in our input prices and that we also need to get price increases through.

And maybe just a follow-up. I mean, are you able to sort of quantify maybe across the entire portfolio, you're seeing low single digit, mid-single digit price increases?

Yes, I think we have not -- we are not out talking about specifics on the price increases and how the ratio is. But it varies, of course, across the portfolio. But we do see in some of the segments successful price increases.

So there are no further questions at this time, and I hand back to Britt Jensen for closing comments.

Thanks a lot, and we're also getting close to the hour here. So I would like to thank you all of you for attending the meeting this morning. Thanks also for the very good questions. And have a good day, everyone.