Getinge AB (publ) (GETIB) Earnings Call Transcript

Welcome to the Getinge Q3 Report 2026. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Mattias Perjos; and CFO, Agneta Palmér. Please go ahead.

Thanks, and welcome, everyone, to today's earnings call. As mentioned, I have our CFO, Agneta Palmér, with me today. And in the conference call today, we'll go through our performance and some highlights in the third quarter before opening up for the customary Q&A. So let's move to Page #2 right away, please. So if we start looking at the development of some of our longer-term strategic KPIs. We continue to clearly track in line with plan to increase the share of sales from recurring revenue, accelerating the share of sales from high-margin products like, for example, our ECLS offering and the BetaBags in Sterile Transfer, which have both had a very strong year so far. All these activities are, of course, supported by solid and effective quality processes as well. So if we look at sales from recurring revenue, it continues to make up about 2/3 of our sales, and the high-margin products are at 70% as of Q3. When it comes to quality, the number of field actions in relation to sales have decreased significantly in the last 3 years. We are currently tracking slightly above last year's level, but remain within our expected range on this KPI. These improvements should, of course, be achieved also through responsible financial leverage and an attractive long-term return on invested capital. Let's move to Page #3, please. So if we look at the key takeaways when it comes to the third quarter with an emphasis on the financial KPIs. Overall, we delivered a healthy financial performance in the quarter with top line growth. Net sales grew 2.1% organically with positive development in most of the business areas. Order intake increased by 2.6% organically. If we then look at the adjusted gross and EBITA margins, they were up in the quarter as a result of the continued positive underlying performance that we've seen for quite a while now. Margins were also supported by a remaining tariff refund of SEK 45 million. This led to another quarter with strong cash flow and a very solid financial position. Our financial leverage is at 1.5x right now, so well below the 2.5x EBITDA as we have like an internal threshold. So let's move to Page #4 and talk about some of the key events from the quarter. I think first and foremost, I would like to share the information that we recently had the results of our annual customer feedback survey, and I'm very pleased to report that our Net Promoter Score has reached an all-time high. We also had very strong employee engagement, and these are 2 KPIs that are extremely important for long-term success. I'm also happy to say that we, at the end of the quarter, initiated the launch of the new version of our ECMO platform, Cardiohelp II, in CE countries and in Hong Kong. And so far, this has been very well received by our customers. So we look forward to continuing this launch. Within our Digital Health Solutions, we launched Torin Plan Optimizer, which supports the surgical planning in hospitals, thanks to an AI-powered system. And just to quote the Head of OR Management at Klinikum Stuttgart in Germany, he mentioned that this supports better informed planning decisions and much more effective use of our existing surgical capacity. Furthermore, in collaboration with the Swedish nonprofit organization, Beredskapslyftet, we continued our support to the National Specialized Children's Hospital in Kyiv through a donation of ECMO consumables. The hospital operates one of Ukraine's leading pediatric ECMO programs treating critically ill children from across the country. And in 2025, the hospital reported that it doubled its ECMO capacity, and this continues to trend in a good direction. We're very happy to be part of supporting this important initiative. It's really clear that our donation helps sustain life-saving capability. And then just continuing on the pediatric track for a moment. We received also in the quarter, 510(k) clearance for a new smaller Edi catheter, which is used with our ventilators, and this makes it possible to support premature infants between 500 grams and 1,000 grams in weight. It's also very comforting to see that our sustainability KPIs are tracking well. Just to highlight 2 of them. Compared to last year, we have reduced our Scope 1 and 2 greenhouse gas emissions by more than 20% and the share of renewable energy is above 70%. We can then move to Page #5, please. So if we talk about then our organic top line growth, this was driven by ACT and SW in the quarter. So order intake grew 2.6% organically. The organic order intake in Acute Care Therapies increased primarily in ECLS therapy consumables and Cardiac Assist and EVH consumables. Life Science organic order intake declined slightly during the quarter. The positive performance in bioprocessing and service did not fully offset the continuing decline that we see within our washer, isolator, and sterilizer subsegment. Surgical Workflows increased mainly driven by strong performance in operating room equipment, such as surgical tables and lights. If we then look at the net sales part, we grew net sales with 2.1% in the quarter. This was mainly driven by disciplined work with pricing. Acute Care Therapies increased the net sales organically, primarily due to ECLS therapy consumables, intra-aortic balloon pumps in Cardiac Assist and also our covered stents. Organic net sales for Life Science fell slightly following a continuing decline in washers, isolator, sterilizers, and this was despite a robust growth in Sterile Transfer. In Surgical Workflows, organic net sales rose slightly following growth in Infection Control and in our Digital Health Solutions portfolio. We can then move to Page #6, please, and I hand over to you, Agneta, for a moment.

Thank you, Mattias. So overall, we continue to improve our margins, and I'm particularly pleased that the main driver of this is the underlying improvement in the business, mainly thanks to the disciplined pricing efforts that Mattias mentioned, but also positive mix shift and productivity. Let's have a look at adjusted gross profit. For the group, adjusted gross profit amounted to SEK 4.343 billion in the quarter, primarily on the back of the factors I just mentioned, but also supported by the remaining tariff refund of approximately SEK 45 million. This led to an increase of the adjusted gross margin by plus 2.2 percentage points in total. Moving on to adjusted EBITA. The effect from adjusted gross profit on the EBITA margin was plus 1.7 percentage points. OpEx increased less than inflation and adjusted for currency, OpEx had a slight positive impact on the margin by about plus 0.1 percentage points in the quarter. FX impacted by plus 0.3 percentage points. All in all, this resulted in an adjusted EBITA of SEK 1.278 billion and a margin of 15.1%. Let's move to Page #7, please. So the strong operating results further strengthened our financial position. Free cash flow was again above the SEK 1 billion mark, amounting to SEK 1.302 billion in the quarter. Compared with last year, free cash flow was impacted by the improved operating profit and changes in working capital. At the end of Q3, net debt decreased to SEK 10.4 billion due to the cash flow generation. If we adjust for pension liabilities, net debt was at SEK 8.1 billion. This brings us to a leverage of 1.5x adjusted EBITDA, which is well below the 2.5x, which we have as an internal threshold. If we adjust for pension liabilities, leverage is at 1.1x adjusted EBITDA. Cash amounted to approximately SEK 3.2 billion at the end of the quarter. So all in all, we can conclude that the financial position continues to be strong. Let's then move to Page #8, please, and back to you, Mattias.

All right. Thank you, Agneta. Just one picture as well to show the traction that we're making towards our midterm guidance span. So looking at the rolling 12-month development for adjusted EBITA margin, we have over 2 years, improved from 12% to 15.6%. Normalized, which means excluding tariffs, we are at 15.8%. So even if excluding the tariff refund of SEK 381 million in Q2 and Q3 of 2026, we are at 14.5%. In the Capital Markets update that we had in May 2024, we guided for an adjusted EBITA margin span of 16% to 19% by the end of 2028. We have a bit more than 2 years until the end of 2028. And as you can see, we are steadily closing in on the span. The main drivers which will support us getting there in spite of continued tariffs are the gradual cost release from the second half of this year, mainly impacting 2027 and 2028. And this is stemming from the regulatory submissions and the approval process when it comes to CardioSave and Cardiohelp II. We also have the mix shift to more recurring revenue and high-margin revenue that I mentioned in the beginning of the call. And we also rely on the continuous productivity measures and the key product launches that we've had recently and will have before 2028. With that, we can move over to Page #9, please. So if we then focus on the outlook for the remainder of 2026. As we all know, there's still some geopolitical uncertainties that we need to navigate. But based on the underlying demand that we see, our regular dialogue with customers, our expectation remains for an organic net sales growth to be in the range of 3% to 5% for 2026, adjusted for the phaseout of surgical perfusion. And surgical perfusion is still expected to have net sales in 2026, declining from about SEK 250 million to SEK 50 million. Year-to-date, we are at 2.5% organic growth and believe Q4 performance will take us into the span of 3% to 5%. Q4 is usually our largest quarter net sales-wise and multiple factors, especially on the customer side, impact if deliveries can go out before year-end. Here, all involved are always doing an incredible effort. We've seen this the last 3 or 4 years, and we rely on that type of performance again for the end of this year. The uncertainty here is the main reason why we're not tightening the guidance span. We can then move to Page #11, please. So just to talk about and summarize the key takeaways then. So overall, we have a solid financial performance with organic growth in top line. Margins came in healthy in the quarter, primarily thanks to the improving underlying performance in our business. Cash flow in the quarter was very strong. Our financial position also remains very solid. For 2026, we reiterate our guidance for organic net sales growth of 3% to 5%, adjusted for the phaseout of surgical perfusion. Our priorities for the last quarter of 2026, they remain the same as they've been before. So it's about addressing the remaining challenges when it comes to quality work in Acute Care Therapies. It's about sustainable productivity improvements and cost consciousness when navigating the political uncertainty that we see on a daily basis and also addressing, of course, the impact from tariffs. And most importantly, continuing creating the added value for our customers, which you could really see when it comes to the Net Promoter Score at an all-time high during this year. So with that said, I open up for questions.

[Operator Instructions] The next question comes from Philip Ekengren from Nordea.

I have 2 questions. I'll take them one by one. So starting with the outlook, that implies some growth acceleration in Q4, obviously here. Which products or segments you think will support that acceleration? And is the upper end still in place?

Yes. We don't disclose which categories we believe are most important when it comes to a specific quarter like this. I think the patterns that you've seen before, they will remain intact. So ECLS consumables is definitely one of those categories. Sterile Transfer, another one. But other than that, we don't want to single out anything specific here. And then I think it goes without saying that the lower part of the guidance span is easier and much more realistic than the upper part. But again, like I said in the summary, we do have a lot of deliveries scheduled for the fourth quarter, and there's a lot of swing factors involved there. So that's the reason for not narrowing the span.

Makes sense. And then you highlighted some positive customer response following the launch of Cardiohelp II. Are orders primarily replacing existing Cardiohelp systems? Or is it expanding your installed base?

It's a mix of both. We don't disclose this, but it's a mix of both. This is a therapy that is in general expansion mode. So it's both about replacing, but also opening up new ECMO centers and adding capacity in existing ones.

The next question comes from Ludwig Germunder from Handelsbanken.

I have a first one, which is a general question on demand. I'm interested to hear what you're currently seeing and hearing from customers. So we see some industry peers to you reporting more challenging demand situation, but you seem to be doing well, and I think you sound confident on the outlook here. But beyond the reported numbers, are you seeing and hearing from your customers right now?

I think the general situation when it comes to demand is stable and positive. We see that across most categories, and this is a pattern that's been with us for a while. I think on the challenging side, it's mostly on the big capital part in Life Science that is still sluggish. I think one of the small bright spots maybe in the quarter was that we had a little bit better momentum in the U.S. for that category, which is the first in a while. But I describe the general situation as rather stable when it comes to both the surgical procedures that are being performed and the way they drive this demand in the short term. But I also think customers seem to have long-term faith in the future and willing to also place capital orders. You saw, for example, order intake in Surgical Workflows operating tables is one example of that.

Okay. And then second question on order mix. You mentioned that the order intake was primarily increasing in ECLS therapy consumables, Cardiac Assist and EVH consumables. In the total ACT orders, do you see any change in the mix when it comes to these consumables? Or would you say that they make up a normal share of total orders?

Yes. Nothing to call out, I think, from a mix pattern. I think what we've predicted and seen for a long while keeps happening, keeps unfolding, I would say.

With that in mind, maybe just to add that Q4 is usually a bit of a different mix, more capital heavy or a seasonal pattern.

Okay. And just as a quick one, if I may. I noticed that acquisition cost in the quarter was SEK 33 million. I know it's a small number, but it's still standing out a bit compared to previous quarters. Could you comment anything on what's driving this increase?

Yes. Nothing specific other than that we remain very active when it comes to looking at M&A. So there is a good inflow in the funnel of interesting targets, and we do spend some money on due diligence in processes here, but nothing I can call out or talk about any result from here. But it's a normal part of what we do, a little bit heightened level in the third quarter, and I think that's all.

The next question comes from Erik Cassel from Danske Bank.

First question on ACT margins. You've said that quality costs were going to taper off a bit now during H2. Have you already seen that help the ACT margin now in Q3? Or is it more to come in Q4?

I think just to say that we are progressing on that trajectory that we have described before when it comes to quality cost, but it still remains elevated compared to sort of normal levels, and that will remain for some time. But that message is the same as before. Just to reiterate the drivers of the margin in ACT is a continuation of what we have talked about before. So it is pricing, it is mix, positive mix shift, and then underlying productivity factors. And then in this quarter, a little bit of help from currency.

Okay. But you can't say if the effect is going to be bigger in Q4 than it was now?

I would not count on it being bigger in Q4 than now.

Okay. And then you said on the last conference call that the event comps were going to be a lot cleaner now in H2, but it looks like events continued to fall. Do you think that's anything on timing? Or is the market still perhaps a bit weaker than what you expect?

Nothing particular to call out. I think it is a market that is normalizing in the wake of a number of players leaving the space here. And we've had an uptick in the past, but nothing specific to call out here other than sometimes there's a bit of lumpiness also when it comes to contracts on ventilators.

Okay. And then it looks like balloon pump consumables did fairly well as well. Is that some sort of effect from supply constraint being released in Europe? And also if it is supply constraint being lifted, do you have any sort of backlog that you now bring into Q4, which you sort of expect to catch up on?

I think the consumables supply, we don't really have any restrictions on. That's been fairly smooth for some time. The capacity restrictions are on the balloon pumps themselves, where you know very well the history here, and we do still have constraints when it comes to everything from certain components to manpower to build pumps. So that's the situation. And we do expect this to be a challenging situation for the remainder of this year as well. I can't call out any specific dynamic now for Q3 compared to Q4. But until we have worked through the entire supply chain situation and the capacity, I think we will have a bit of sluggishness when it comes to the hardware.

Okay. And then just a quick last one. I didn't see a mention on ECMO filing in the U.S. Do you have any update on if you're still aiming for previous communication on ECMO filing time line?

No news. Really, we will communicate once it's been submitted. We continue to have a constructive dialogue in these pre-submission meetings with FDA. But nothing new to share here.

The next question comes from Mattias Vadsten from SEB.

First one is on Life Science. So no comment on Sterile Transfer on the order side this time around. So I just want to see if this area is still showing solid performance and if momentum is holding up there?