Good morning everyone, and welcome to this Q2 2022-2023 results call with 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. 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. Let's dive straight into the results. In Q2, we delivered an organic growth of 4%, and if we look at the reported growth, this was 6%. Overall, for the first six months of our fiscal year, we delivered also 4% organically and 8% reported growth.
Our EBIT margin is in line with our 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 healthcare market in general, what we do see out in the hospitals where activity levels is a main driver for our business, we do see the activity level coming back to close to where it was pre-COVID. However, in most countries, slightly below the pre-COVID levels in terms of number of procedures. That slightly lower level is much driven by the staff shortages that we see both in Europe and in the U.S. Then we also continue to see our customers being challenged on their financial results.
We launched our ZOOM IN strategy in November. We are progressing well in terms of delivering on the strategy. Our focus on the strategy is to be the most customer-centric in our field. By doing that and by delivering on our strategy, we will deliver strong, profitable growth. If we look at the four areas on our focus on innovative solutions, we made progress, in particular in two areas over the quarter. The first one is pulmonology, where we, end of March, relaunched 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. We do expect also clearance in the US relatively soon for this range of products, which will further support the aScope 5 Broncho 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, GastroLarge, a gastroscope with a larger working channel that allows more therapeutic use. 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, a large part of this is our transformation program that we launched with the strategy. We are overall progressing well with the strategy and with the transformation program. A major highlight, I'll say, is that we return 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 is contracted. 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. 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. 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 Birch joining us as the new Chief Operating Officer who will be responsible for all our operations globally. Finally, sustainability is a very important part of our strategy as well. When we hosted our Capital Markets 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 are 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. 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. Let me dive into the different segments now, and I'll for a change start with anesthesia and patient monitoring. 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 quite 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 just over a year ago.
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 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.
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 relaunching end of March, 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 bronch suites during the advanced procedures. We are 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. This is where the combined portfolio with aScope 4 Broncho, aScope 5 Broncho, 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 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. 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. 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. Finally, when it comes to G.I., this is the area that we stepped into the latest, but also the biggest market. 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 with that product, where we are present now in all major target markets. We are also receiving very strong feedback on the performance of the product among customers. If we take a step back and look at the single-use market, I would like to show a picture that we showed at the Capital Markets Day just to recap the market that we are playing in with our endoscopy solutions. When we look at the big market, there's 150 to 200 million procedures that are done annually worldwide with endoscopy, with endoscopes. 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 in a near-term pipeline, and this is what you see on the left-hand side here. When we map that across the different segments, 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 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.
When we try to put our best estimate of how this will evolve, you see the pies or the Harvey balls on the right-hand side where you can see how we estimate the penetration to be in these markets over in a five-year timeframe. 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 five years will be roughly DKK 15 million-20 million. 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. We believe that the focus areas that we have with our transformation program and other initiatives to develop a scalable business model, it is what will bring us to deliver the strong, sustainable, profitable growth that we are aiming for. This concludes my business update, and I'll hand over to Thomas to go through the financials.
Thank you, Britt. Also a very warm welcome from my side. 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 with a reported growth rate of 8%. Again, also here, a positive impact from foreign exchange rates. Another key event in the second quarter has surely been our capital raise.
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 3.9 times EBITDA in the Q1 to now 1.6 in the Q2. That certainly gives us also a buffer in terms of the macroeconomic uncertainty that we operate in. 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. Within endoscopy solutions, record demand for our products within urology and ENT. 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 had 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 is a further deterioration or decline in our gross margin in Q2 of 2.7 percentage points, which is mainly driven by indirect production costs, 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, an OpEx ratio, where we've improved by 1.5 % point versus Q2 last year. Our cost reduction program has certainly helped in improving our OpEx ratio. Also a very good and tight cost management throughout the year.
In Q2, we've maintained a cost from an OpEx ratio perspective of 52%, due to, as mentioned, cost consciousness, allowing us far better control of our finances. That is very pleasing also to see, and is certainly also a testament to the focus that we have put into this. 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. We've posted positive free cash flow for the quarter of DKK 21 million versus a negative cash flow in Q1 of DKK 147 million. It certainly also shows that our free cash flow in relation to revenue now shows 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. We start moving into a more normalizing level of that.
Still work to be done and still focus. 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. Within Q2, we've also improved our trade receivables and cash collection by DKK 76 million compared to the financial year 2021-2022. 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, inventories certainly moving in the right direction.
It certainly is a key focus, and we remain committed to improving our cash flow for the year by DKK 350 million-450 million versus the financial year 2022, 2021-2022. That brings us to our financial guidance for the year. 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%-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% - 5%. The EBIT margin, as one of the assumptions, is also that the gross margin is expected to decline by roughly 2 % points compared to last year due to input costs, Mexico ramp-up and product mix. 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% - 5% of sales. With that, thank you very much. 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.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question comes from Christian Ryom from Danske Bank. Please go ahead.
Good morning and thank you for taking my questions. I have two, please. The first one is to you, Thomas, and is regarding the gross margin outlook for the next couple of quarters. 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? Then the second question is respect to your pulmonology sales in the quarter and whether the year-on-year growth in bronchoscopy sales can be attributed to a contribution from the aScope 5 Broncho. Thank you.
Yeah. I think I can, I can take, the second question, but I think, Thomas.
Yeah
start with the first.
Yes. Yes. Thank you very much, Christian for the answer. 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 % points when we compare it against last year. A number of effects play into that as mentioned already. Certainly input costs is one of those when we compare against last year. Mexico ramp-up, which we continue to also do, also plays into that.
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. That will certainly also continue as we continue to have full focus on reducing our inventories in the second half of this year. That will also play into effect.
Yeah.
Thank you. If I may just quickly follow up. When we talk about Mexico, ramp-up and mix effect, mix effects, is that expected to be an incremental headwind in the second half relative to the level that we're seeing here in Q2?
Yes. To some extent, yes. That's in our, that's in our, planning or expectations, for the, for the second half of this year.
Yeah.
Okay. Thank you.
Yeah, you can expect our gross margin to be roughly at the same level.
Yeah
...throughout the Q3 and Q4. Maybe to comment on your other question on pulmonology. On bronchoscopy specifically. Still the very vast majority of our bronchoscope sales remains aScope 4. We do, of course, continue to see increasing revenue as we should with the aScope 5. We continue to see, I mean, an expansion of the customer base and also the number of customers rebuying. Again, it is, as we have talked a bit about before, it is a gradual uptake. We are in the bronchoscopy suites where we have not been before, where they have not used single use before. This is of course, the sales cycles are taking some time. This is in line with what we also talked about at the Capital Markets Day.
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 Broncho business, which remains a focus area. The overall takeaway from the bronchoscopy or the pulmonology business is that the bronchoscope sales is back to growth. I think that's worth noting. A lot of that by strong aScope 4 Broncho is our completion of our portfolio with our aScope 5 Broncho smaller sizes and the VivaSight relaunch, which should contribute to continued growth. 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.
Great
...question, Christian.
Yeah, it does. Thank you.
The next question comes from Rickard Anderkrans from Handelsbanken. Please go ahead.
Right. Good morning, and thank you for taking my question. Two for me, please. First, if you can quantify the statement of, you know, increase in customer base and perhaps also quantify anything on, you know, the share of customers rebuying in the GI segment. You seem to highlight that things are moving a bit slower there. It would be interesting to just to get a sense of the magnitude of the sort of sequential improvements and expansion there. Thank you.
Thanks, thanks for the question, Rickard. We don't comment specifically on the customer base and number of customers. I mean, there are some similarities when we look at the aScope 5 launch 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. Also we continue to see quarter-over-quarter revenue growth also, as we would expect.
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 as 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 six 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.
I 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 a 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 gastroenterologists. I'm very confident in our ability to deliver. With the size of the GI market and the potential, I mean, we have to be there. 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.
I hope that that clarifies with our. I know I'm not addressing your specific question for customer numbers.
That's fine. Thank you. Second question, you seem to have quite tough comparables in both anesthesia and patient monitoring from in looking at Q3 from last year.
Mm-hmm.
Should we expect negative organic growth in these segments in the next quarter? Just be interesting to hear a little bit how we should think about the comparables, just so we don't get caught sort of wrong foot there moving into the next few quarters.
Yeah, no, thanks for asking that. I think it's fair to assume that I mean, we will see that, I mean, the revenue for that part of the business remaining roughly. Anesthesia, patient monitoring remaining roughly at the same level as we have seen here in Q2. I mean, again, back to that it is quite high comparable, strong, or comparable strong quarters from last year.
Thank you very much.
The next question comes from Martin Brenøe from Nordea. Please go ahead.
Hi. Thank you so much for taking my questions. First question is regarding the flu. Can you maybe just give us a little bit of some quantitative numbers on how the flu impacted the quarter? Because you delivered positive growth on the bronchoscopy business despite the flu season, being pushed from Q into Q two, into Q one. 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 you selling hundreds or thousands or tens of thousands would be very helpful to understand also. Thank you.
Yeah. If I start with the flu season, as we talked about before, I mean, it did spike in Q1 as we previously talked about. 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. Overall a limited flu impact, I would say in when we look at the US M arket in the quarter, that came primarily in the first quarter of our fiscal year. 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, I think, I mean, my comments 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 and 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. We are seeing a fairly, I mean, satisfactory number when it comes to customers that are buying for the first time. We are also seeing the, I mean, that customer pace-base continuing to grow. We are also seeing the number of customers rebuying continuing. We are actually quite confident with the traction that we see.
We also, as we went into this, I think we had, 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 is working. 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. That's very clear as you know from last year, we had in a couple of years back ramped up a lot when it came to our GI sales force. We brought that down, and now we're having a more balanced sales force addressing balancing across the different segments that we are in. 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 on the gastroscope, and we have no competition in the segment at this moment. 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. I think that is. I'm in general very positive about this. It's just taking time to evolve. As long as we're on that continuous slope with 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 GastroLarge that I mean, we have added to the portfolio, with very strong feedback. I'm quite confident for the future for us in this area, and it remains important.
Okay. Thank you. Can I just squeeze one more question in, just to you, Thomas?
Yes.
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 when 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, yeah, some margin expansion from here.
No good. Thanks, Martin. 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 take the two quarters that we're in, you can also see that quarter one and quarter two, there's a difference in the two quarters that we have reported up until now. The continuation is impacted by, as I mentioned before, the gross margin.
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. That puts a bit of a pressure, if you will, on the gross margin. 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. That's why we expect that we see half year over half year a slightly lower margin in the second half of the year.
Okay. Thank you so much.
The next question comes from Niels Granholm-Leth from Carnegie. Please go ahead.
Yeah. Yes, good morning. My first question is on your growth rates for the endoscopy other categories, so the ENT, urology, et cetera. 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 rates keeps trending down in this segment? My second question would be on the one-time cost that you incurred in administration costs. Could you provide a little bit more color on the level of those one-time costs? A third question on potential one-time cost included in your net financials in the quarter. Thank you.
I think the two last questions are for you, Thomas. Maybe I can start with the first one. 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%. 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, I mean, that continued growth in even that we are expanding our base or 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, that's where we continue to also see a strong growth in that area. I mean, 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 and taking time as we have talked about in the call today.
I think that's how we will continue to expect the strong growth in this part of the business. 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. So Niels, to your two questions, both to some extent related to one-off cost one. One being, as you asked around, in our OpEx cost. 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. It's also not a number and a figure that we will communicate.
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. To the furthest point we've used that to reduce our net debt sit-situation. 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.
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.
Is the one-off DKK 15 million or is that number the run rate?
The what? Sorry, again.
Is the DKK 15 million the underlying run rate per quarter in net financials or what?
No, that was the one-off.
It's one-off.
Sorry. That was the one-off.
Okay.
Yes.
Okay. The underlying run rate for financials per quarter would be to the tune of DKK 10 million?
Correct.
Can I just add one more question about your number of employees. Back in August last year, you announced a staff reduction of 200 people. If you look at the number of employees, it's now down from 5,100 - 4,300. Quite a bit more than the 200 you announced a year ago. What's going on?
Yeah, so, yeah, that's a good, a good question, Niels. Basically a lot of this is, I mean, the majority of our sales force is... or of our workforce is blue collar workers, and that's where I mean, we have more flexibility. When you look at the actual numbers and the reduction, a large part of that is blue collar workers that we have reduced. And that has simply been also a part of the inventory reduction. We had quite a number of products and inventory, and as we're putting that down, we have slightly adjusted some of, some of that workforce. 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. These are some more recent adjustments to the workforce. Most of the majority of these are the blue collar workers.
Still, you have effectively reduced the number of employees by 800 people.
Yeah, I mean, we were not exactly up at 5,100, I believe. It's not a... I mean, that number is, it's not a full 800 people reduction. We were close around the 4,800-900. It is... I mean, it is true that we are down a couple of hundred 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.
Okay. You expect this number this quarter to be the trough?
I mean, I think so. With the current plans we have.
Yeah.
Yes. As we are reducing our inventories on some of these products with these finished goods, we will of course ramp up slightly again.
Okay. Thank you.
The next question comes from Yiwei Zhou from SEB. Please go ahead.
Hi, it's Wei from SEB. Good morning, Britt and Thomas. Thank you for taking my question. I have three question here. Firstly, just want to follow up on the EBIT margin guidance for second half. We understand the gross margin expectation. Just curious on your OpEx assumption. You have changed the assumption, talking about a postponed investment in the second half. Could you maybe elaborate a bit on this? Is it in the sales organization or R&D? What is the rationale for this?
Yeah. I can take this. 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.
Yeah.
Okay. Great. Thanks. Secondly, you mentioned now with the lower financial gearing that you will be able to invest in the attractive growth opportunities. Could you also elaborate a bit on this? I'm asking because this conflicts with the fact that you have just the right size or downsized the organization and cut down the R&D spending quite significantly. Should we when looking at your investment, or expected investment, in the coming years, should we understand you are also now looking into some sort of board organizations?
That's a good question, and I think clearly, and Thomas talked well about this. 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. 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. 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.
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 have just launched last year with the upcoming products that we have in pipeline and the transformation program, I think 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.
Okay, very clear. Lastly, a question on the aScope 4. Followed Boston Scientific launch or did upgrade on the XLB. Your peer, Verathon, recently launched the Bflex 2, and also claim the main selling point being the stronger suction power than the 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 you?
You can say, I think definitely, I think we have a very competitive portfolio when it comes to bronchoscope. The aScope Five is clearly, I mean, the best in class and the best product that is out there. We have the full offering, I would say is number one, and also have, I mean, the choice for the customers who, I mean, where they need to have use the best scope and go for single use. That's, I mean, that's where we have our aScope Five, which I don't think that the Bflex 2 is near to compete against. You can say our aScope Four that I see that remaining a market leading product. It's true that there is competition coming in.
For us, I mean, we have remained fully focused on delivering on our customer needs. Of course, also, as we have done previously, I mean, we continue to improve our products and also look at how is it that we can further strengthen our products to, I mean, better deliver on the customer needs. I think that's an ongoing basis. That's what we do on the bronchoscope specifically. Of course, with the video laryngoscope that we will then have the full pulmonology offering where we're also looking at, I mean, very much the full solution we are offering with the system and the bronchoscope and the video laryngoscope.
Okay. Thank you. I jump back to the queue.
The next question comes from David Adlington from JPMorgan. Please go ahead.
Good morning. Thanks for taking the questions. First one is on pricing. I just wondered if you could talk to the pricing environment across the three segments and maybe more specifically in 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 are seeing such strong stocking and destocking in anesthesia, but lesser in patient monitoring.
Yeah. Thanks. On the pricing first, I mean, pricing is a key priority for us, and that goes across the full portfolio. I mean, it's also on our anesthesia and patient monitoring where we do, I mean, think we need to, I mean, have prices that also reflects the desired profitability. The same goes for our endoscope offerings. On the aScope 5, as we have previously communicated, I mean, we do have a price premium of 30%-50%. We are also seeing that we are able to, I mean, to deliver on and get those prices for our aScope 5.
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, competition of course also focuses on the prices. That's of course where we are more modest in our expectation for price 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 one year ago where...
Because the products in anesthesia are products that are saving lives, 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 the hospitals had those products in stock in the hospital. That's really. 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. 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 US B usiness, in particular on the cardiology side, where we have had a very good quarter. 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. 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.
Great. maybe just a follow-up. I mean, are you able to sort of quantify maybe across the entire portfolio, are you seeing low single digit, mid-single digit price increases?
I think we are not out talking about specifics on the price, increases and how the ratio is, but it varies of course across the portfolio. We do see in some of the segments, successful, price increases.
Okay.
There are no further questions at this time, and I hand back to Britt Meelby Jensen for closing comments.
Thanks a lot. 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.