Arjo AB (publ) (ARJOB) Earnings Call Transcript & Summary

Thank you very much to all of you joining this Q&A session and a warm welcome. And we do this as a follow-up to the press release that was sent out this morning, and my intention is to provide you with a short introduction and then open up for Q&A. Next slide, please. To start with, pressure injury prevention is one of Arjo's purpose areas, and we have a solid offering around the intervention and prevention of pressure injuries that we will continue to develop and focus on. With the agreement with BBI around the Provizio SEM scanner, we wanted to add a tool for assessment and risk indication that could leverage that part of the prevention side away from less accurate manual assessment. Despite the -- which I would like to underline by key opinion leaders and authorities like FDA well-recognized utility of the SEM scanner. The sales uptick has been significantly slower than expected. This is due to the previously explained circumstances around the challenges that health care have seen over the last 3.5 years. First, with the pandemic and in the recent 2 years with a significant need to focus on short-term problems and handling the effects of a severe shortage of stock. This has led to significantly longer lead times, implementing new methods and procedures and our protocols, including SEM scanning has been far off the conversion rates that we have forecasted. As I have described in QA sessions before, we have, in good faith in discussing with BBI for a longer period on possibilities and conditions to extend our joint agreement. Unfortunately, we can now conclude that we will not be able to find common ground for a new agreement. The main reason for this is that the parties are standing too far away from each other in terms of, for example, commercial development targets as well as other cooporation processes. Negotiations will now continue around how the cooporation should be exited in the best way for our customers and obviously, for the 2 companies. We do not have detailed information around this process to date, but have seen a clear need to communicate our general decision for full transparency to our stakeholders as soon as possible, leading to today's market information. We will, of course, provide more information when we have a final agreement in place. And for your information, the current agreement is valid until the 31st of December this year. Next slide, please. So what does this mean for Arjo? First, and very importantly, our strategy around moving ourselves to become a mobility outcome partner in health care globally stands stronger today than ever before. We see significant opportunities in developing our outcome offering in both patient handling and pressure injury prevention in the coming years as well as developing our capital sales, consumable service and rental offering. Our offering in the prevention and intervention side of pressure injury prevention will remain a strong development area for Arjo also going forward. We have continued to launch our outcome programs in this area in U.S. and other countries as per our existing plan. These programs are designed to focus on the intervention side, therapeutic mattresses and clinical support as example, and are agnostic to which assessment tool that is needed. With the ending of our cooperation with BBI, it will now be up to our customers to decide on which assessment to use to achieve the fastest route to significant prevention with existing procedures. The implementation efforts of SEM and new protocols with health care have been driven with high focus on designated markets. We have made significant investments into trying to achieve breakthroughs with limited success, as I've described before. We will now turn also this capacity and focus fully towards driving our own business in pressure injury prevention and other important parts of our business like, for example, outcome programs in patient handling. We continue to see a healthy demand for our product categories in capital sales. We continue to see good growth in our service and rental and our upcoming product launches in end 2024, '25 and '26, will help to drive growth align with our 3% to 5% interval in 2024 and onwards. To be clear, also with today's communication and our decision around SEM, our outlook for 2024 to have growth within our interval of 3% to 5% remains. And we continue to see good opportunities to drive continued profitability improvements in line with what we have seen in 2023 and beginning of 2024, where the effects of SEM scanner has been very limited. With that short summary, I would like to open up for any questions. So moderator, please go ahead.

The next question comes from Kristofer Liljeberg from Carnegie.

Yes. Two questions. Just if you -- you said that they shouldn't expect the sales growth 3% to 5% this year. Could you just confirm that that's what you expect that you should be able to grow also in coming years without any uptick from the SEM scanner? And then just curious what would happen with your 10% ownership stake in BBI?

Yes. I can confirm that based on what we see today, we believe that we will be within our interval 3% to 5% for 2024 and the coming years. We have, as I said, good momentum of the, if I may say, to core Arjo business around pressure injury prevention, around patient handling, around service and rental, and we continue to see that also going forward. And with the additional focus that we are putting on outcome programs in patient handling and in pressure injury prevention, we believe that we will be in the 3% to 5% interval also for the years to come after 2024. The 10% stake that we have in BBI is something that we will discuss with BBI as a part of the discussions now on how to and the best way to leave our joint cooperation. I will need to come back to you with more information on how those 10% will be handled, but they are there, and we will obviously need to address them.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you very much and very short summary. We look forward to develop Arjo based on our very strong, in my view, strategy and the good drive in demand that we see for our products, for service, for rental and for the drive that we are putting on outcome programs in patient handling and pressure injury prevention. Thank you.