Vitrolife AB (publ) (VITR) Earnings Call Transcript & Summary

Good day, and welcome to the Vitrolife AB Interim Report Q2 2022 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Thomas Axelsson. Please go ahead, sir.

Thank you very much, and welcome all to the interim report Q2 for Vitrolife, the 15th of July. The speakers of today will be Patrik Tolf, the CFO of Vitrolife and myself, Thomas Axelsson. Please go to the next page, and we will start the presentation. To summarize our achievements in Q2. I would like to show some financial numbers regarding what we have achieved as a group. Everything today, where I will say it will be in Swedish currency. So just a reminder about that. Sales second quarter, SEK 829 million, and it was a growth of 117%. The organic growth was 18% in local currencies. And pro forma, when we look on the complete growth, the growth was 14%. Gross margin, we received 56.8%. EBITDA margin of 32.9% and in absolute numbers, it was SEK 273 million. Earnings per share for this quarter, SEK 0.96. It's a growth with 22%. To -- I would like to say that it is pleasing to see the underlying growth in these numbers. To explain those more in detail, Patrik and I will then go through the numbers in some presentations then. I will then start on Page #3, doing that. So please change page. On this page, it is sales and growth per market region. And I will comment more about the markets and later on regarding the business areas. The total growth in local currencies was 99%. And as I said before, the organic growth was 18% and pro forma 14%, really good numbers, and those are excluding COVID-19 testing. Let's start from the left and look into the different regions that we have. And it is a pleasure to say that our ambition and our strategic intention, what we have achieved is to have a good balance between the 2 largest regions, the region Americas and the region EMEA. Sales in Americas was SEK 296 million. And as I said, it is the largest region. We have good growth in let's say, the Northern part of Americas and Latin America. Really pleasant to see that the Latin America is coming back in all matters in a number of cycles and a number of performance within the genetic testing. The region overall, it is -- we can see that it's been growing. So I think that we are in line with the market growth. The climate on this market is difficult to judge going forward with the different clinic change, what will happen. But what's important for this market is to do combined offers. And part of the organic growth is through our ambition to enter into and talk to the customers with our complete offering. Then the next region, EMEA, organic growth didn't exist, it was flat. And going back to what I have said regarding the customers. We had a good growth in some product areas. But was -- but what has happened in this region during the quarter is that 2 things. One is that comparison with last year, the largest customers within genetic services is not any long reducing the services from Vitrolife. And that business was already on the way out when we did the acquisition. Another thing is comparison with last year. The Time-lapse business, the technology business had a really strong last year. And when you compare that, it's always like Time-lapse is going back and forth depending upon larger orders. Market in EMEA. We are coming from an exhibition last week, ESHRE, the largest one globally and the projections going forward from -- in this region is that some customers are a little bit less optimistic than before. But I don't have any clear directions or can do any judgments regarding if the business will continue to grow in or if it will stabilize a little bit on the current cycle numbers. Next region, Asia. Yes. Organic growth, 41%. It is so difficult to judge this region. Our biggest market is there, China. And in China, China cycle growth, IVF cycle growth are not growing, but we are growing extremely well. And that's due to our service level and the support that we have done to the customers when they have had supply problems from other companies. So good, good growth in China. It's also picking up a little bit in Southeast Asia and India, but I wouldn't say that there is any major impact. Technology, media growing good. Last region on this page is Japan Pacific. There are changes going on within the market. We know that during this quarter, the reimbursement system in Japan started to do. And when a new reimbursement system is coming into place, initially, there are some uncertainty regarding what it means for the clinic and what it means for the patients. What's good so far is that we have good growth there. We can see that we are having products that are within the reimbursement system. So really good growth for those products. However, we also have a product that earlier was paid out of the pocket and currently are not in the reimbursement system. So if they use that product, they will not be able to have to, let's say, get the benefit from the reimbursement system, and that is the PGT-A testing in Japan from genetic testing. Overall, extremely good growth within all regions. So please go to the next page, and we will see what the consumer did. Consumable, 15% in local currencies, good growth. What I would like to emphasize regarding the consumable business is the fantastic work that our colleagues has done within the supply chain. It has been a struggling time for more or less 2 years. And why the global sourcing and that we've been able to keep up the service level has been good reason for our growth in local currencies. And if you are looking down to Page 4 at the right corner, you can see good growth in Asia. That's what I said before regarding the China and our service level and good growth in the Japan Pacific due to the insurance system due to our good support there products that have been introduced in the last couple of years in many respects then. EMEA and Americas, 2%, 3% growth, that is a little bit down what I would expect, but that is mainly due to less sales of kits within the consumable business for genetic testing. Please go to the next page and look on technology business. Technology business goes up and down. This quarter, extremely good quarter. It is a growth of 29% in local currencies and the increase in sales is coming from the hardware situation. And why are we growing there? I mean it can go up and down between the quarters, but we can see that we had for the last 2 quarters, SEK 140 million, SEK 141 million in sales is mainly due to 2 things: easiness of use, the support for embryo selection and embryo decision, let's say, by iDAScore or our software. But the growth in America and the growth in Japan Pacific is also coming from a large extent of the standardization, the workflow, the importance, especially in U.S. to deal with inflation, let's say, the challenges with getting the competent labor and getting efficiency. So it looks really good. Another thing for technology business in this quarter is that we had an MDR certificate, and that is already done. Demands incredible work. I'm very proud to say that for the future, the customers can continue to buy and they know that they will have the support and the long-term commitment from our side by an MDR certificate. Change page please, Genetic Services business area. Differences between the region, I think is still good growth, 7% in local currencies. In Americas, we have had 10% growth, which is really good. And when I say really good is that there is a mix right now in Americas for genetic services, especially U.S. where the price pressure on PGT-A and having a growth in that territory and also being able to close a couple of new deals looks promising our ambition to have scalability within the U.S. organization. EMEA, I mentioned that before about the EMEA situation then is that it is due to 2% growth is due to drop of one customer. If we take away that customer underlying very good growth within the EMEA region. Asia, good, Japan Pacific changes of the product portfolio, where we are having less PGT-A, but more of the 3 products, the ERA product, those that are for the judgments of the timing for doing a transfer of an embryo regarding the endometrium. So very good growth in all 3 business areas. And by that, I would like to come into the next page, and it is together for successful growth. In a situation where we quite a company. We have looked into the different kind of business areas. And when we bought genomics and what we have been judging and what we are doing is that our focus is on the fertility journey. And all of our organization and what our focus will be on the future is for fertility and reproduction. And it is in that customer segment that we can do a positive change. And it is that segment also that we can provide better clinical outcome. So going forward, we will need all the resources and all our ambition and competence to continue the product development and to work together with our customers in this field. You know that we will need to do product development for our key product areas so we can continue to be a leader in this field. It is for embryo selection, evaluation or diagnostics depending upon what product it is. It is also for easiness of use everywhere, let's say, typically for the culturing or the vitrification. It is also for the standardization. And by knowing what the customers and have a core customer focus, I think it is, I don't think we know that it is easy for us to come up with cost-effective ways for the customers. and of course, also our continuous development to be the leader within the field of genetic services. To do that, it is all about the customer offering where we have the synergies and what we can do for them. We already started in many different ways, and we have implemented joint organization structure for Japan, the group in Japan, Pacific and part of Asia. And we merged the organization, especially to strengthen our ability to meet the customers in that region. And while we've started that to do that is that it's so good in time together with the situation when the regulatory environment and the payment systems has changed in Japan. And all of that is to try to listen to them, have a focus on the customer offering in that site. Due to that, if you're focusing on something, you are defocusing on something else. As a consequence of this focused strategy and customer offering, that is our core market strategy. We will not continue with the business line GPDx and oncology. I've talked about that we have looked into the area and our conclusion is that we are not the right company to have success in that field because we are not big enough and we don't have the focus on that area. We will, however, keep some of the GPDx product line that are related to the reproduction field within selected market end customers. We have a strong offering in some markets. And everything about this is the customer and what we can do for the customer. As a consequence, all other resources, product development and activities in the GPDx and oncology line will be downsized in the coming quarters. And the changes that we have done to the organization already started then in downsizing is that a just organization where we will not do any COVID testing. It is also a situation where we have listened to customers and see what the demand in and what kind of maturity the market has for genetic testing. So restructuring of the operations has been done and will be done in Argentina, Korea, Vietnam, and also China. Important to say that all other laboratory structures, development and competence and everything regarding the fertility reproduction area will be kept and also grown with focus resources. I will not continue saying more about the growth and the situation then for getting our business for in line for future growth within the fertility journey. I will then hand over instead to Patrik. Please, next page, and Patrik will start.

Thank you, Thomas. Now we are on Page #8, focusing on the highlights -- on the financial highlights for the second quarter. And our sales increased then to SEK 829 million, which was then an increase in local currencies of 99%, and that also then includes then the acquired revenue of SEK 341 million. When we look on the performance, the relevant [numbers] we also then exclude COVID testing and also based on the pro forma. So that's where we grew 14% in local currencies, excluding COVID testing. You can also see that we have increased both gross income to SEK 470 million and also then the EBITDA to SEK 273 million. Relevant comparison number there is then the pro forma numbers. And you can see that we have increased the gross margin with 1.6% units to 56.8%, and a slight increase in EBITDA margin than 32.9%. Next page. Going in then to the net sales and taking off then from the pro forma net sales of the second quarter last year of SEK 696 million. You can also see now that we have then a decline in the COVID-19 sales and we can also see that we continue then to grow. So the SEK 91 million is the continued sales growth and we have a currency impact for the second quarter on sales of SEK 70 million leading up then to SEK 829 million in total sales for the second quarter. Moving to the next page, EBITDA. And here, we take off from the legacy Vitrolife during the first quarter last year of SEK 134 million. Then our increase in sales and the gross profit had a positive impact whilst then the gross income comparison then with the gross income for the second quarter last year compared to the gross income margin for this year, meaning that we have the a slight decline then in the contribution from gross margin for the new group. OpEx, now for the consolidated group, is SEK 169 million, and then we add back depreciation and amortization ending up then with the EBITDA of SEK 273 million, corresponding then to a margin of 32.9%. Also see that the EBITDA per share continued to grow. And for the second quarter, it was SEK 2.01 per share, which corresponds to a growth of 63%. Next page. Our OpEx, you can see that the OpEx then on pro forma basis have increased with SEK 46 million or an increase of 18%. That is due to, as we say here, normalized business activities. We have doing more customer interactions. So selling expenses have increased with SEK 19 million compared to last year. And also, as Thomas mentioned here, when we talk on noncore operations, that has also then led to an increase of both administrative and selling expenses. So in total, an increase of 18% on the operating expenses. Moving to the next page. To summarize on the financials is that we continue to grow. And you see that one, of course, in the sales numbers, you see that one in the numbers then for EBIT and EBITDA. So we are above or slightly above in all numbers, if you then compare to the second quarter pro forma numbers on that side. Also then on back on the increased cash flow and also then the improved EBITDA, the net debt-to-EBITDA goes down to 2.4%, and that was 2.9% during the first quarter here. So. Next page. If I then summarize to the -- for the second quarter. As we said, we have strong growth particularly then on the business areas, consumables, technologies, but also then a growth slightly lower compared to these 2 business areas in genetic services, but all in all, strong growth on that side. IVF consolidation impact, as Thomas mentioned, we are phasing out some clinic change or one clinic change in EMEA. But on the other hand, we have recently also then signed another contract or a new contract with another big clinic chain in Americas that we will face in going forward on that side as well. So the impact then from the IVF consolidation. You can also see that we are now a more balanced group and America is now our largest market region in tight position then versus EMEA, which all in all means that we have a more balanced sales distribution globally. And the proof of quality and our quality efforts is the MDR, which gives us a good position going forward. And as Thomas mentioned, going forward, our focus will be on the fertility business. Moving to the next slide and the last slide is that we continue to keep the statements that we have done in the past as well for the long-term outlook meaning that we will continue then to broaden our product and service offering and the market growth is according to our view, continuously 5% to 10% in monitors terms, and we will continue to expand our sales. With those words, I leave it back to the operator for Q&A session.

[Operator Instructions] Your line is now open, please go ahead.

This is Patrik Ling at DNB. I have a couple of short questions. First, when it comes to downscaling of GPDx and the oncology operation, could you just remind us how large that operation is as of now? And whether that one is profitable as of now and what we could expect going forward from changing or shifting out that operation?

Okay, Patrick here then. Okay. Patrik, please go ahead, Patrik.

The operations that we will do is -- I mean, the downscaling and the activities that we will do will definitely then support the journey that we have when it comes to the EBITDA margin of 25%. That's one of the reasons why we take this action so that we can continue then to focus on the profitable growth for genetic services business.

And Patrik, I can fill in a little bit on. We don't go through all the numbers, but to help you a little bit is that lost business. That's the reason it has been a development business. Oncology has not yet started. It has been a very good development for some of the test within that field, but it takes time to get it into commercial shape. GPDx we have a good business in a few regions, but expansion then into other regions and with more resources and development has been a negative side. So that's the reason why we are have been looking into it because, as I said, there's been some advantages for the customer segment that are doing reproduction. But outside that, it has not been any favors for they say our customers only expenses. But it's a good team. So it's been a difficult -- very difficult decision.

And just so I understand it, will this -- if you just close down the operation, will this free up capacity in the laboratories? Or is this something that you could potentially divest from the operation?

We are trying -- we are having discussions, but the situation is that it is partly embedded. So when we do -- when we are then downsizing the structure from the embedded side that will free up some resources within the laboratories, of course, but it will also free up some resources that has a mixed situation within sales and marketing. But unfortunately, we will reduce the number of employees. And by that, some of the capacity will get out of the system. But what we will focus on, I mean, more focused on bioinformatics, more focused on the development from our team. So that's what will free up resources for our focus activities.

Okay. Great. Great. I also had another question regarding China. You said that the cycle growth in China was flat approximately in the quarter, but you were taking significant market share and we're growing 41%. And could you elaborate a little bit what is exactly driving this growth? And why are you so successful in the market that is pretty much flattish?

It is a difficult question. I mean, we have asked ourselves what -- the situation is that what we have done, and we were having a negative side from this 2021 in Q4 and the beginning of 2020 in the beginning of 2001, when we were doing specific China products for the media side. And then in back then trying to give a good estimate on what inventory level, what should they buy was a challenge, and we had some scraps. But we said that, okay, let's take that scrap because it is a profitable business, and it's better to keep the customer happy. So with the situation of the clinics closing and open, closing and opening in China, we have been able to have an inventory in China with only products for the Chinese market. And when competition has had some challenges in getting products in due to what's happening with the harbors and the flights and everything, we have had that inventory. So an increase of our service level has made that, in some cases, I do believe that they have bought from us because they can't have the products from their old suppliers. And some also is coming from that due to the challenge that they had will go for us going forward. But I'm trying to be humble here, it is very difficult to judge the Chinese market today, very difficult.

Okay. Great. To understand that. Thank you, Thomas, and thank you, Patrik. I jump back into the queue now. Thank you.

We will take our next question. your line is open, please go ahead.

Good Morning Thomas and Patrik Ulrik Trattner from Carnegie here. I have quite a few questions. I think I'm actually going to start off where Patrik left off, and that is on the super strong consumable sales and taking market share. And what's your take on the Cooper and Cook merger and FTC potential announced the trust concerns regarding it being positive on your end on the consumable side? Are you taking market share broadly? Or is this especially located for the Asian markets?

Ulrik, combined 3 questions, as I see. The Asian market, it has been a growing market for us. We can see that in the consumer business, it is a mix then, of course, Asia, Japan Pacific was -- we are growing there. It is a difficult situation in China, I just said to Patrik, it's difficult to judge the market. If this going to be a long-lasting situation. But at least it feels good that the customers are appreciating our service level. The next question was regarding FTC regarding the consumable business and the situation between Cooper and Cook. We don't know what's going on. We only know that it is an acquisition situation going on from Cooper side and that they will finalize this, what they said during the year. And we are just waiting to see what the outcome are and we don't have any more information than the public information on, Ulrik.

Okay. Great. And just on the underlying growth in both Americas and EMEA, 2% and 3%, respectively. It sounds like it's on the low side. What's your estimates on how the market is growing in terms of cycle?

Yes. First quarter, I saw growth. It was not any -- it's difficult to say that it was a growth. April, we are coming from the ESHRE, we have been judging this, and it's difficult to say what's going to happen. Talking to some clinics, clean exchange in Europe, the management there. They have seen a decline in number of customers that are waiting in line. So in some places, that is not any at all. Asking them why they can't, of course, give us a clear answer. But with the changes within the macro economy, that can give them some, let's say, the couplers they want to do it, maybe they will wait and see what's going to happen with their interest rates and so on. So I mean, we all know about the macro economy. That could be a sign of slowdown. I had a discussion with customers in the Pacific area. They have seen the same. They have experienced, quite a long queue in 2021. Currently, it is a balance between the inflow of new customers and what they can perform. So that's their U.S. a difficult mix right now sees a little bit similar trend there where the expectation on this 10%, 15% cycle growth constantly, that's been from, let's say, 2020 Q4 and forward is not within the market. It seems to be slowing down. And that's the only qualified guess that I have right now.

Okay. Great. And on to genetic services, growth of 7% adjusted for COVID, it sounds a little bit low, but then once again, you're talking about this one large IVF genetic contract being phased out and then securing a new large contracts for the coming year in the U.S. Should we assume that these are sort of balancing each other out? Or is this net positive?

I think it is net positive. There are things within genetic services if we look into this. Americas, it is the -- if you take the U.S., it is the market with most cycles being done by genetic testing. It is a market where PGT-A is under price pressure. So if we see about the number of the testing that we will do and the prices with the prices going down, that could be flat even if we are increasing the number of tests. So what we are doing here, and this is regarding the focusing is to work with scalability because when prices go down within the mature area, it is to get scalability. And that partly is changing the laboratories. It is also doing product development to have a more efficient kit and process. So by that, we can come back to a better set situation with profitable growth within the Americas. Within the EMEA I can't really predict what's going to happen because as I said, clinic change are being tens of being built. They will go for in-house or they will go for out-house. And with bigger customers, -- we -- if you gain them, it's really good, if you don't gain them then you have a loss. But overall, the situation of Vitrolife being able to work with those after their demand. If they would like to do in-house, then we can supply and have that from the consumer side. If they would like to have all the services out-house, then we have genetic services as hopefully, their first choice. So I'm positive regarding the EMEA development. And as I said, the EMEA region overall is growing with good double digit, and we lost our biggest customers. So that's impacting it. Japan Pacific, good growth in a high profitable area within Endometrium side. PGT-A business will go down due to that they had to pay out of pocket, a complete cycle. However, the customers, we can see that already in Japan, what I'm talking about is that when they have reached an age of 41, 42 and they would like to better clinical outcome, PGT-A is a good help and then they prefer to pay a complete cycle out of the pocket and include a PGT-A testing. So long term, no, I'm not so worried about this business, definitely not. I see this as a great potential.

Great to hear. And just to stay on the genetic service and you have ongoing commercial and operational excellence program in place, right? And I noted that you -- stated that you reduced staff in Igenomix by around 7% compared to Q1. Have we seen the effects of this in the Q2 numbers? And is this something that is ongoing in this commercial and operational excellence program? Or should we consider that to be concluded?

Thanks, Ulrik. We -- the actions that we have taken here is not in the Q2 numbers. The reduction of personnel that we have been doing will have an impact from Q3 and onwards. And also, those are actions that we have taken so far, but they will be needed and additional activities here as we talked about. And when it comes to focusing on our fertility journey, meaning that we do not then focus on the GPDx and oncology. So there will be more actions, and those numbers are not into the Q2, but some actions are already done. Taken that we see then a lower run rate when it comes to cost from the third quarter, and then there will be additional measures taken here throughout the rest of this year.

Great. And I'm very pleased to see that you're now focusing the GPDx. And just one quick question here. Will they incur any extra cost related to closing down or sort of sizing down the oncology part of it. My impression is that it's mainly OpEx. Should this be any sort of extraordinary costs in the following quarters related to this?

You're right that it's mainly OpEx at this stage. But depending a bit on how we will close this one, it may also lead to some additional cost for closing that out as well and that we are digesting, and we will get back to you on that side itself and everybody, of course, on that side.

Great. One last question on my end. SEK 28 million in sales related to COVID testing. Could you give us some hint on the margin of these tests? Have these been margin dilutive or created for Igenomix in the quarter?

Margin dilutive on that side.

Perfect. Congratulations on the good quarter.

We will take our next question.

Johan Unnerus, Redeye. Follow-up questions, good questions, by the way. Can you give us some more color on the -- what we can expect in terms of potential savings then during Q3, Q4, these measurements once they are in place, so to speak?

What we say is that the actions that we will take here during and some of them we have already done here, but then will have an impact then from the third quarter and onwards. Our activities that we will take or have taken that will support the journey to the EBITDA margin of 25% for the genetic services business on that side. So that's where we think that we shall be in the short run with genetic services. And then continuously, we will work more when it comes to operational excellence and so forth because we think that the genetic services business has a potential to reach 30% when it comes to EBITDA margin in the long run.

Thank you. And what about the 25%? Is this sort of within reach on the run rate already early '23?

Yes. So I mean we are focusing them on these activities to be achieved here in the coming quarters on that side.

Okay. And another clarification is regarding these larger contracts. Can we expect some additional negative impact in Europe? And what about timing for the support on the American side?

We -- situation is that we are focusing more and more on these large customers, and they are focusing more and more also on getting partnerships. So the situation with the consolidation is that we can see that they're starting to have more in-depth negotiations, partnerships, and it's not all about money. It is about what we can provide the services or integration of IT support systems, clinical portals, et cetera, et cetera. So right now, we are not under any renegotiations right now with old clinics in Europe. In U.S., as we said, we have gained one. And the situation here is that talking about what clinic chain it is or what clinical chain that we have lost is not what we did partly due to that that's something that those customers do not want to have disclosed. I look positive on the changes overall. I do.

That's useful. And can we say anything about the dynamic likely [ then now we are ] going forward? Will these sort of large contracts and partnerships be more important? And are you in...

Yes, they are. Yes, they are. I mean yes, we should be also very objective because when changes is happening within customers, you know that the marketing sales-oriented organization, maybe feel it more than what the real impact is. But in Europe, there are a lot of changes. But the situation then in Asia and the Japan Pacific are not the same. In U.S., it has not reached a situation where so much is being currently under an exit process or a divestiture process within those. I do believe that it is in Europe, we will see the biggest impact from the clinic chain, however, there are a lot of business that do not want to belong to clinic chain. There are public care centers in Europe, too. So there is a mix between those things. But most importantly is that they will ask for a situation where they can gain something out of it, like efficiencies, standardization, may be involved in research that can benefit their clinic is quite early because they want to -- they are in this and they won't have a partner so they can get an advantage compared to their own competitors. So it is the situation. If you choose that one, you can't choose the other one. So it's going to be a balance between also the bigger players that are supporting those. If a gets it, b will not and vice versa. So it's going to be, as it usually is in a business that gets mature, fewer, larger players.

Interesting. And just finally can be say something regarding the currency impact on earnings, I guess, in reported terms? I mean you're very transparent on sales, but I don't see much regarding earnings, is slightly neutral.

You can see that one in the report and the impact then on EBITDA, SEK 28 million net positive on that side. I mean, you saw the sales impact was SEK 70 million, and the EBITDA is then SEK 28 million currency impact on that one. And that is, of course, reflected on the overall currency exposure that we have, where we are in net ran long in all currencies except for Swedish crowns but also then the localization when it comes to the cost structures throughout the world with the localization of production facilities and laboratories.

We will take on our next question. Your line is open, please go ahead.

This is Jakob Lembke at ABG. I have a few questions. And my first question is on the technology side, and you mentioned the increased interest following your software offering. I'm just wondering sort of the status of the iDAScore and how much of the technology sales that are recurring currently?

Okay. I was, yes, the iDAScore, no changes there. It is improved. It is approved and regulatory approval, we can use it within Europe. We are not regulatorily approved in U.S. We are continuing the route together with FDA, and that's a challenge. I can't give any good directions or guess when we have it to approve there. The growth within the hardware side that we have seen in Europe the last 1 year, a little bit more than that are related to a large extent, the situation where we see that they can get more efficiency savings in time with an accurate support system like iDAScore. In Japan, also, there are usage and please as there are publications and discussions how that could also be used for day 3. So it is a continuous development of it. So U.S. technology business, you see in Americas growth of 174%. And do you think it was nothing is coming the software side on that. Recurring business then, yes, it is recurring business on maintenance, software and consumables and if you combine all of those today and you see a life span of around 5, 6 years on the hardware, over life period, half hardware half recurring business. But that's -- if you look at overall investment period for the -- from the clinic side.

Okay. Understood. And my next question is a follow-up on the consumables growth in Europe and Americas. I mean also considering what you said about some caution from customers in EMEA. How should we think about sort of the growth here in the fall and into next year, given the sort of macro situation we're seeing?

Good question. I tried to answer that before. We are not changing the situation that is an underlying good demand. Everything is talking for continuous growth. If we look into history, and I think you know this well, it's been very, very few times in the macro economy that the macro economy has impacted in a longer period on the IVF side. So it was some at the financial crisis, 2008 in U.S. There was some when they changed the reimbursement system in Germany in 2004 or something. Otherwise, it's been small waves on the top on the cycle. So I don't believe there's going to be any changes compared to what we have seen as long-term growth of cycles. I do, however, believe that unusual expansion of cycles that we have seen in 2001 with the growth of 15%, 20% in some areas. I don't believe in those. I believe that the market will come down to a normal like growth between 3% to 7% or something like that, depends upon the market. I'm talking about the global numbers. And then monetary growth, as Patrik said, a little bit higher due to that they are changing towards more technology, more genetic services. And it is in that field that we have, let's say, a competitive edge.

Okay. Understood. And my final question is on the phasing out of the large services contract in Europe. And I guess this is an effect of the sort of consolidation we're seeing among your customers. So -- just wondering a bit on how you see the net effect of the consolidations in losses and gains of customers?

Right now, we can't say what's going to happen and see plus or minus. What I believe is that with size the IVF clinic chain will go for in-house services of basic tests PGT-A. However, they will maybe do that, we can believe, and then they will have a more advanced test that they can't get normally from someone else than just a few, few players like ERA testing, so they will send those out to external. And in that case, we have an ability to work with them for the products that they use from the consumables, but not from the genetic services. However, clinics that we can see that in the discussion with the U.S. clinics right now, what is it that they would like to focus on? They would like to focus on their customers. I mean they want to focus on the patient journey to do the best for the patient and to do the best for the patient it is that they are spending their resources focused on everything that is around the patient journey and doing a genetic testing, only, let's say, a supplier of genetic testing, it is not going to be their core business. That can be our core business. So I think it's going to be back and forth a little bit initially. But at the end is going to be that they have to be a full provider or they're going to go through with outside sourcing due to their focus. A long explanation, but I think we're going to see the divided business in the largest clean exchange. But you need quite a large structure to actually invest and do this by yourself and genetic counseling. And every service that is around is a bit naive to believe that you can only set up a test center and then perform the testing. There's so much around it with the quality system, the counseling and the development of these products.

Okay. I understand. That was all of my questions. So thanks for answering those. And congrats on a good quarter.

It appears there are no further questions at this time. Mr. Thomas Axelsson, I'd like to turn the conference back to you for any additional or closing remarks.

Thank you very much for being an operator for this call, and thank you very much for those listening in. And I -- those that are in Northern Europe, I wish you a good vacation and those that are not in Northern Europe. I hope that you will have a good day and goodbye.

This concludes today's call. Thank you for your participation. You may now disconnect.