Earnings Call: Q3 2020

Oct 28, 2020

Thank you very much, moderator, and good morning to everyone, and welcome to this Q3 call for OREO. You for dialing in and I will together with our CFO, Daniel Feld, take you through the Q3 report that we released at 7 o'clock this morning. Next slide please. I will start by giving you a business update for the quarter with some highlights from the business and outlook for the full year. Daniel will then walk you through balance sheet items. We'll finish off with a short summary before we open up for questions. And as always, we aim at keeping this call to an hour and finish no later than at 9 CET. Next slide, please. So we can then start with an update on the business. Next slide. After a very strong Q2, where we had visible positive effects of the COVID-nineteen situation, our estimates were that we would start to see a return to a more normal market situation throughout the second half of the year starting in Q3. We can, however, conclude that Q3 has continued with the same trends as we saw in the end of Q2, and we have as an organization continued to do a good job to adapt to the situation. We have continued to support customers and their patients during this challenging period and at the same time made sure to continue to develop OREO for the long and short term. Q3 2020 in isolation has a better than expected outcome, both on net sales and profitability. Net sales grew with 5.8% organically and profitability grew on all lines in the P and L despite continued negative currency effects. Keywords have continued to be operational leverage and good cost control throughout the value chain. Our net sales development in the quarter is a result of continued good development of our U. S. Rental business. Our core rental in U. S. Continues to grow, both driven by new long term contracts secured, but also due to high demand from COVID. Our Critical Care side in U. S. Is still heavily influenced by the COVID-nineteen situation, not as much as in Q2, but still on significantly higher levels than a normal Q3. Our capital sales of medical beds and therapeutic mattresses have also continued to grow based on significant COVID-nineteen effects. During the quarter, we have been able to deliver on a number of projects originally planned for delivery in Q4, which has helped the good net sales development in Q3 and obviously supported our customers. The entire organization has done an excellent job to adjust to this higher demand and has managed to help our customers in the best way possible. The quarter has however continued to affected by the restricted access to health care facilities in general and in particular to long term care facilities. This has led to a negative impact on our sales in our patient handling and hygiene categories. The postponement of elective surgery has also led to notable drops of DVT sales in U. S, Australia and Europe. Our rental business in Europe has developed slightly better than previous quarter, but is still not up to pre COVID levels. Service has performed slightly better than in Q3 2019, mainly due to some recovery from Q2. Our service development now depends on continued improvement in access to mainly long term care facilities. Gross margin in the quarter increased to 45.4% versus 41.8% in Q3 2019. The main driver is a significantly improved operational leverage in our U. S. Rental business through the increased volumes and good cost control. Also in Europe, we have had a well managed cost base in our rental business contributing to better gross margins. We also continue to see an improved gross margin in our medical beds business as we are selling more high end medical beds, which is well aligned with our plans here. We are seeing good effects of our continuous improvement work in our supply chain, where the increased volumes have been successfully translated through operating leverage to higher margins. Our supply chain has done a very solid job to adjust for the swings between product categories and have been able to slow down when necessary and accelerate when needed. Given the lower sales of patient handling, hygiene and DVT, there is an adverse product mix effect, but the positive actions have compensated well for this. It is also notable that we have not lost gross margin in the isolated category patient handling despite lower volumes, which is thanks to good price management and flexibility in our supply chain. The gross profit development together with a good OpEx control during the quarter has led to a significant increase of adjusted EBIT of almost 70% and that number includes negative currency effects of minus SEK 20,000,000 for the quarter. Our financial position remains strong and we continue our solid performance in working capital, especially in accounts receivable throughout the quarter. Our operating cash flow continues to improve and cash conversion is 117% for the quarter. We have in the back end of the quarter restarted our logistic and inventory overview and we'll be aggressively addressing this area mainly during 2021. All in all, we put a very strong quarter behind us. I am very pleased with how the organization continues to adapt to a constantly changing environment due to COVID, and I'm also impressed with how we continue to support healthcare in this unprecedented situation. We continue to meet our commitments short term, which allows us to drive investments into our long term journey. Next slide, please. And going into the outlook for 2020 and significantly increased global spread of COVID, especially in the end of the quarter and beginning of Q4 is obviously putting some additional uncertainty to our possibilities to predict in detail where we will end up the year. It is probably a fair estimate that the reduced access will continue, especially in long term care during Q4 and throughout the first half of twenty twenty one. But also with this uncertainty, we believe based on our own assessments and our current traction that we will be able to grow net sales organically with 2% to 4% in Q4, which means that the second half year will be very well in line with our predictions after Q2. Looking ahead, beyond this period with limited access, we feel very confident in our ability to grow our business in a good profitable way for the mid- and long term, something that we will be talking more about on our Capital Markets Day on this upcoming Monday. As a consequence of continued good cost management, we expect operating expenses to continue to decline as a percentage of net sales also in the last parts of 2020. And also here, a journey that we expect will continue in 2021 beyond. Next slide please. Before we move forward with more details on the quarter, I would like to spend some time on our acquisition of an equity stake in Bruin Biometrics, in short BBI, which in our view is going to be a real game changer for our company and a significant step in the transformation journey that we're on towards creating a company offering value added solutions to healthcare globally. The equity stake secures the global exclusive distribution rights for BBI's semi scanner, which will help caregivers to detect pressure injuries days before they are visible to the human eye. This will enable Healthcare to prevent pressure ulcers from appearing through the correct usage of our systems of pressure injury prevention, where we, as you know, currently are spending a significant effort to update our current portfolio with launches starting in the end of next year. Pressure injuries is a big burden to global healthcare systems and with our outcome based solutions, we will be able to help healthcare reach significant economic savings while benefiting millions of patients expected to generate positive impact on our net sales and earnings per share starting in the second half of twenty twenty one and will contribute significantly to both net sales and EPS development from 2023 onwards. Next slide, please. Moving over to some details around our regional development and starting with North America. In Q3, we have continued strong development of our net sales in North America, growing organically with 9.2% with the year to date growth for the region at 4.8%. Growth in the quarter is largely generated through our U. S. Rental business, where both core and especially Critical Care rental is significantly above normal levels driven by COVID effects. Our critical care rental has after some record weeks in the beginning of the quarter stabilized on higher than normal levels. Our core rental has seen good development where we see increases due to both COVID and also long term market share gains. The higher volumes has also driven significant operational leverage in our U. S. Rental business. Our good cost control and execution of the restructuring program in 2019 are obviously also playing a positive role here. As in Q2, the organic net sales growth in the quarter was held back by lower volumes in patient handling and hygiene for reasons explained before. For DVT, the decline was significant in the beginning of the quarter based on the continued postponements of elective surgery. The exit rate in September was around 85% of pre COVID volumes and we expect a step by step return to normal over the next 2 quarters based on our current assessments. Service in North America has continued our improvement journey and this is one of the areas where we will see continued good profitable growth when the market returns to a more normal state. As a quick summary, a strong performance in North America and we absolutely continue to see significant potential of profitable growth both short and long term in this region. Next slide please. In Western Europe, we had an organic net sales growth of 0.7% in the quarter. U. K. Sales was down slightly due to lower than expected sales in patient handling, hygiene and DVT and they were also affected by a lower rental volume than in Q3 last year. Our Continental Europe business had a mixed picture in the quarter. We saw very strong growth in France and Spain, but continued to see net sales weakness in our German and Dutch entities. The reasons are the same as before, where accessibility is key to a good performance in major product categories like patient handling, hygiene and service. Rental in Continental Europe picked up somewhat during the quarter with exit rates end September that was equal to last year's performance, but still below expected volumes due to lower elective surgery and low access to healthcare facilities. Our restructuring program in Europe continues to develop well. We have not charged any cost to restructuring in the quarter, but we will see approximately SEK 15,000,000 in additional restructuring cost in Q4 in relation to this program. This will take the total restructuring relating to the Continental Europe program to approximately SEK 60,000,000 this year instead of the announced SEK 75,000,000. The delta of SEK 15,000,000 will be moved to 2021, as we want to have a clearer visibility on some of the areas of improvement before we go ahead. As indicated already after Q2, we have managed to fast track more savings in current year than expected and now expect the total savings to be SEK 30,000,000 already in 2020. Additional savings to get to the announced SEK 50,000,000 on a yearly basis will come in 2021 also with the move of restructuring activities as indicated. On a year to date basis, Western Europe has grown organically with 1.2%, which I, given the circumstances, consider to be a good and solid performance. Next slide please. As we move over to our development in rest of the world, the region grew organically with healthy 12% in the quarter with markets like Australia, South Africa, Singapore, Japan and a number of our distributor markets across the globe performing well. We have seen a continued high demand and net sales of medical beds and we have showed strength in securing available profitable business during the quarter. A number of countries in the region still experiences heavy restrictions but we have still managed a good development. After Q2, we talked in detail about our development in India, where we unfortunately continued to see significant decline in the quarter as access to healthcare, especially for our rental business in India, has been very limited. Year to date, rest of the world is growing organically with 9.2%, a very good achievement given the current challenging environment. As stated before, we built our rest of world region as planned and is well positioned to continue our journey especially when the current situation around the pandemic has stabilized, both on markets with own infrastructure like Japan and also within our strengthened distributor network. Next slide please. And moving over to some financial development and the next slide. We have a significant gross profit and margin increase versus Q3 of 2019. We post a gross margin of 45.4 percent in the quarter, up from 41.8% in Q3 2019 and there are a number of factors affecting these improvements. The high volumes from our U. S. Rental business in both core and critical care continues to generate a very high operational leverage. Together with the successful deployment of the restructuring program last year, which has lowered our fixed cost base with more than SEK 30,000,000 on a yearly basis, the additional volumes driven by COVID plays a significant role. Medical beds capital sales gross margin continued to develop favorably versus last year. The increased overall sales of medical beds in the quarter is giving a slight negative product mix, but the category in isolation sees an uptick in gross margins. Like in Q2, categories like patient handling, hygiene and DVT, where we normally see above average gross margins, have all been affected by lower volumes due to COVID-nineteen and this development contributes to a negative effect on the gross profit and margin for the quarter. Our supply chain continues to work in an efficient way also during the last quarter. The increased volumes in some capital categories have compensated for lower fixed cost coverage in categories where volumes have been dropping as an effect of COVID-nineteen in the quarter. We have good traction on our review of our future logistics setup and we drive a number of initiatives as a part of our internal efficiency agenda that will continue to generate continuous improvements in the quarters and years to come. Our service business has returned to more normal net sales levels in the quarter, posting a smaller organic increase versus Q3 of 2019. There is still considerable restrictions around access for our technicians, which also drives additional costly requirements around safety procedures and personal protection equipment, all very necessary to protect the well-being of our employees and our customers, but obviously putting a strain to margin development in this area. All in all, we continue to see a good performance and cost control throughout the value chain that will assist our future journey in a good way. Next slide please. Based on the described development, our adjusted EBIT in the quarter grew with almost 70% versus Q3 of 2019. The outcome is better than expected mainly due to higher than expected net sales and good cost control. The good profitability development is there despite rather large negative currency effects in the quarter, especially visible in the 2nd part of the quarter. Translation effects is negative with minus SEK 18,000,000 in the quarter and with a smaller negative transaction effect of minus SEK 2,000,000, negative currency effect adds up to minus SEK 20,000,000 on EBIT in the quarter. It has been a very active quarter where we follow the development on the respective markets more or less on a daily basis. I am very proud of what the organization has accomplished during these very different circumstances, and I find it impressive how we managed to focus on supporting our customers and their patients and at the same time ensuring good profitable growth for the company. Finally, we have also continued to detail our strategic plans for the future and I feel very comfortable around the dedication and commitment in the organization on our long term journey at Kempen. With that, over to Daniel. Next slide please. Thank you, Joakim. And now some comments with respect to our working capital development and cash flow. We are continuing to see positive results from our persistent focus on managing the working capital throughout the organization also in the Q3. While the COVID related challenges for our supply chain remain from the Q2 in terms of inventory level optimization, we have again been able to fully compensate for this by another strong performance in receivables collection. We are especially pleased with the progress made in this area and would like to point out that our working capital days level has continued to improve from 100 in the second quarter to 96 at the end of Q3 and by 10 days since year end 2019. The net positive impact from working capital along with the EBIT improvement, means that we have followed up the record breaking operating cash flow number from the 2nd quarter with another strong performance, posting SEK 525 1,000,000 in the quarter and SEK1.4 billion year to date. Subsequently, cash conversion again exceeded our target and came in at 117.1 percent for the quarter and is now at 107% year to date. Cash flow from investing activities was SEK 191,000,000 where the main part relates to fixed assets in general and mainly in our rental fleet in particular. Next slide please. As a consequence of the positive profit development and cash flow performance, our net debt remained at the same SEK5.6 billion level as last quarter, despite the 2019 dividend being paid during the quarter. Meanwhile, our cash position remains strong and our net debt to adjusted EBITDA has decreased from 3.4 to 3.1 like for like since the end of last year. The equity ratio came in at 40.4%, which is a slight decrease since year end 2019. Back to Joakim. Next slide please. Thank you very much, Onja. Over to slide 15 and some key takeaways from this presentation. We put another strong quarter behind us with a 5.8% organic net sales growth and considerable profitability improvement growing adjusted EBIT with almost 70% versus Q3 of 2019. We continue to follow the COVID development closely and navigate the challenges and adapt to current environments. We work together to find new solutions to engage with customers digitally when we cannot access the facilities in the same way as before. We are handling the situation here and now and at the same time as we are investing in our long term agenda. We are facing a health care system under continued pressure, and we strongly believe in more outcome based solutions to get a sustainable health care going forward. I am looking forward to present our updated strategy where we will address this and also announce our new financial targets on our Capital Markets Day on Monday. We also look forward to perform a good finish to the year with continued positive development for the company. With that, I would like to say thank you for listening and we will be happy to try to answer any question you might have. So moderator, please open up for questions. Thank Our first question comes from the line of I have a question related to margins, and there are some parts in it. So what I'm trying to understand is, if the net effect from the negative product mix and higher rental volumes is having a negative or positive effect in the quarter. And related to this, I also wonder if the margin improvement year to date, how much of that is due to the unusually high rental or ICU rental volumes in the U. S. And how much is sustainable? And if we assume then rental volumes are getting more normal in 2021, does that cost savings that you will have of I think you said SEK 30,000,000, will that fully compensate for that we could assume margin continue to improve also in 2021 or is there a risk that margins will be lower next year than they have been in 2020? Thank you. Thanks, Soper. I'll probably try to answer all the questions in one as they relate to more or less the same thing. If we look at the margins for the quarter, I would say that as a summary, we have a net slight positive effect from the overall COVID situation. We do have significantly better operating leverage from our from the increased volumes in rental in the U. S, which has driven good gross margins in that area. But at the same time, we have seen a decline on both profit gross profit and gross margin due to the lower volumes of patient handling, hygiene and especially, as I mentioned during the call, on the DVT side in the U. S. In the beginning of the quarter. So my estimate would be a slight positive on gross margin from COVID. We on a general note, when if we look into a 2021 where we are hopefully back to a more normal state, we will see the most probably see lower Critical Care volumes in the U. S. We will see lower core rental volumes in the U. S. But some of the core rental volumes will stay, as I said, given that we have secured a number of long term contracts and gained market shares in that area. That equation, together with the fact that the restructuring program that we did do in 2019 has lowered our fixed cost in the U. S. Rental business with more than SEK 30,000,000 and that lower cost base will obviously follow us into 2021 as well. So there will be lower volumes of Critical Care and most probably in 2021, but we have secured a lower cost base or fixed cost base in the U. S. Rental that will continue to assist margins in rental in the U. S. So and with a more back to normal in rental, We would also see a more back to normal when it comes to how we can deliver on volumes in patient handling, in hygiene and also in DVT, where we do have 3 categories with above average gross margins. So that would obviously help on the positive side of the gross margin and gross profit development. But the message from my perspective remains is that we have as I plan to have a continuous improvement, not Rocket Exploding Development, but continuous improvement of our gross margin also going into 2021 and onwards. Could I ask you, the SEK 30,000,000 in savings, how much of that is seen in lower operating cost and how much of that is helping the gross margin? The SEK 30,000,000 that I was referring to is coming from the restructuring program that we did in the U. S. Around the rental business. So that is all in COGS, so improving the margin. Okay. And sorry? And the lower operating cost, I think it was SEK 22,000,000 in the quarter, how much of that is more long term savings and how much is just temporary effects from less traveling, etcetera? There are obviously parts of the lower OpEx that comes with lower activities in terms of traveling, accommodations, etcetera. So I can't quantify it, but I would estimate that we do see maybe SEK 20,000,000 of lower cost in the quarter based on that. It is, however, also the fact that we in which is not hitting OpEx, but it's hitting in COGS is that we do have higher cost in COGS due to the restricted access where we have a number of special procedures and the protective equipment for our employees that needs to be added at each intervention with customers or on customer sites. But that the releases hits OpEx, but the extra cost hits in Cognos. But you do have a part of the OpEx where we have savings due to or based on COVID that will probably come back as cost in 2021 when we go back to a more normal state. When it comes to the cost savings that will be that we will continue to see from, for example, the Continental Europe Restructuring Program, as I indicated, from the SEK 50,000,000 that we said that this program would generate in yearly savings, we have already this year managed to get out around SEK 30,000,000 dollars in that where most parts are coming in OpEx. So far out of those $30,000,000 I would estimate that a larger part, at least 2 thirds has come into OpEx and 1 third into COGS savings. And then on top of that, you have the restructuring program from the UK that we did in 2019, which then is generating its estimated savings of around SEK 13,000,000 on a yearly basis, evenly spread between COGS and OpEx. Okay. And okay, I'll stop there and get back in the queue. Thanks. Yes. Thank you. Our next question comes from the line of Victor Fussello of ABG. Please go ahead. Your line is open. Thanks a lot and thanks for taking my questions. I'll start I think I continue on the restructuring side. If I remember your current efforts correctly, of what was about €70,000,000 prior to today, I thought that it was going to be more of a fifty-fifty split between those savings. Has anything changed in that sense? Yes. What we said on the Continental Europe Restructuring Program initially was it was going to cost us SEK 75,000,000 and get savings on a full year basis of SEK 50,000,000 when the project program was fully implemented. We also said that in 2020, we were foreseeing around 20% to 25 percent of those SEK 50,000,000 to come into the P and L already in 2020. We have fast tracked the program in the beginning of the year. So we instead of just 20% to 25%, which would be around SEK 10,000,000 to SEK 15,000,000 worth of savings in 2020. We have accelerated and are now estimating that we would have around SEK 30,000,000 of savings already in 2020. The additional €20,000,000 of savings, as I said during the call, will come during 2021, and we feel very comfortable that we will continue to make sure that, that happens. The additional SEK 15,000,000 in restructuring cost, SEK 15,000,000 that we are not going to spend out of those SEK 75,000,000 for the Continental Europe restructuring program will be spent most probably in the beginning of 2021 as a part of the bigger program and will also then contribute to safeguarding the full savings of the SEK 50,000,000 on a yearly basis. Yes. Okay. That's clear. And just a follow-up on that. When do you think that you will hit the run rate of SEK 50,000,000 if you look at the full year next year? My view, in Q2 of 2021. Okay, great. And coming back to the European rental performance, I think that you had a steep decline in margins in 20 19. Could you just give us a comment regarding where you're at in terms of margins for your European rental business? And if anything, has changed in the time line for recouping those margins from where you stand at the moment? As you say, Q3 of 2019 when it comes to rental performance was probably a quarter to forget. We very actively then initiated our plans on getting the European rental in total back on track and something that we have initiated with bigger programs like the one that we were driving in the UK, but also with a number of incremental activities or smaller activities in our major rental countries like France, like Germany, etcetera. What we can see now is that there is not one single country in Continental Europe that today has lower gross margins than they had in 2019. All of our Continental Europe markets are performing better on gross margin in the quarter than they did the year before. So as a summary, that was a getting back to the normal state is working well and is performing absolutely on plan. What we said after Q3 and what we said also after 2019 was that our intention was to get rental under normal circumstances back to at least the profitability that we had in 2018, which was then about recuperating CHF 90,000,000 worth of gross profit in our rental business over 24 months, 2020 2021. And also under normal circumstances, we would have been tracking very well on that plan. Thank you. That's great to hear. And just a final one from my side before getting back into queue. On the SEM scanner, I would like to hear your thoughts about how that is being used today by practitioners in the U. S? For example, how many scanners could be used by the same hospital or site and how the usage of that? What I understand is a consumable part of it as well, if you could give us any flavor on that? Yes. The let me come back maybe to the full details on how the scanners are used during the Capital Markets Day, where we will have a section around that to give you some more clarity. But the interesting part with the U. S. Is not only the possibility for us to sell a scanner, where you have a sizable part of the business being disposable heads to those scanners to be compliant with the procedures that are recommended in the U. S. There is a zero tolerance around pressure injuries in the U. S. And the protocols that are used are today manual. And we believe that with the SEM scanner, we will be adding a possibility for hospitals to have a not an automated, but a repeatable procedure being done on all patients, which will be also a good complement when it comes to discussing how they have treated the pressure ulcers in the case of litigations in the U. S. So it's twofold in the U. S, where we believe that this will drive adoption rates, both that it will help the caregivers to diagnose a pressure ulcer earlier than before and in a very structured way. And it will also have a second effect, which will be mainly in the U. S. And that is on the litigation side where health care will be able to prove that they have followed a particular process and thereby having a much better case for themselves in terms of the litigation side. So it's twofold in the U. S. And that's why we believe that traction and adoption in our U. S. Side around the SEM scanner will probably be the quicker one. Thank you. That's all for me. Thank you. Our next question comes from the line of Sten Gustavo of Nordea. Please go ahead. Your line is open. Hi, good morning everyone. Two questions if I may. First of all, with regards to the organic sales growth, could you perhaps give us some flavor for how that developed month by month during the quarter, if we saw a higher growth rate by the end of the quarter than in the beginning or the other way around? That would be interesting to hear. And also if you could comment on if you have had any sales contribution from Wound Express in Q3 and how that is developing year to date? That would be great to hear. Thank you. Thanks, Dan. On the organic net sales and the phasing over the quarter, what we can say is that we saw, as I said during the call, a very high level of our Critical Care in the U. S. Rental. In the beginning of the quarter, we also saw higher than normal development of, well, rental in general. But on the other side, in the beginning of the quarter, we had very low volumes of our DVT business. Over the course of the quarter, we have still higher than normal volumes in our U. S. Rental business, but it has declined slightly, not I mean, we're still on very high levels, but it's lower than it was in the beginning of the quarter and we've seen a rebound of, for example, DVT up until the end of the quarter. So the net sales development has all in all on a from a net effect perspective been fairly equal spread over the 3 months with some changes within the product categories. When it comes to Wound Express, given that we continue to have difficult access to long term care facilities and facilities where venous leg houses are being treated in the UK, where we which is currently the country where we are selling the Wound Express. We are not selling that much of Wound Express in Q3. There is no change to the plans that we have around making sure that we by 2021 and preferably then in the back end of 2021, we'll start having our sales up and running in more countries than the UK and the Nordics where we're presently at. And also with the help of an FDA approval of wound express, we'll have started to navigate the U. S. Market as well. As we mentioned or as we have mentioned, the randomized controlled trial is delayed because of COVID and is probably 6 to 9 months delayed because of COVID. We hope to get continued reads out of both the randomized controlled trial and also the continued clinical evaluations that we have made. For example, we are running one clinical evaluation at Helsingborg Hospital in Sweden with good results. These results in a structured way. But no change really to the Wound Express side. It is difficult based on the access to facilities. But yes, there is nothing in any clinical evaluation that doesn't or doesn't make us believe that this is going to be the standard of care in the years to come. Okay. Thank you very much. Thank you. And our next question comes from the line of Christophe Lillebee of Carnegie. Yes. Just one more question for me. The strong growth you had in the rest of the world, is that almost entirely due to hospital beds? Or could you explain that strong growth? Yes. The main part of the growth is coming from medical beds in rest of the and also therapeutic surfaces. We where we have seen a huge uptick, we have managed to safeguard the volumes in a profitable way in distributor markets mainly when it comes to the medical beds. When it comes to the countries in Rest of the World where we have our own infrastructure, it's more a mixed picture. Australia, for example, is growing, but they're growing with not only on medical bills, they're growing also in patient handling and they're growing their service and rental business as well, while seeing a slight decline in DVT. Our Japanese business is growing significantly during the quarter again from low numbers, but that's more an effect of the fact that we now have registrations in place in Japan and can start selling our or a broader part of our portfolio in Japan. So it is a positive development throughout, but obviously helped by medical beds to a large extent in distributor markets. Have you signed up some new distributors that has been stocking up of hospital beds and a such effect in the quarter? No, there is absolutely no stocking up. I mean, the beds goes directly to our end to the end customers, and we get paid for them. So it's nothing about putting on stock. But what we have done when it comes to the distributor network is that when we started this journey in 2018, we had to redo larger part of our distributor network. We have signed up a number of new distributors where we've obviously it's obviously taken some time to get them going, to train them, to get them on board with all our product categories. And we have started to see traction already in 2019. We continue to see good traction additional traction based on that there has been a number of more medical beds deals over the last couple of months. But the underlying structure of our distributor network is solid and is developing step by step. So it's nothing that we have just built up for COVID. It's something that we foresee will help us also in the future. Okay. Thank you. Thank you. And our next question comes from the line of Annette Lueck of Handelsbanken. Congrats with a very impressive quarter. My question is more if the situation within patient handling, DVT and hygiene is related to restricted hospital access or focus on COVID-nineteen related matters? Or if it is a result of the economic impact of delayed elective surgery, also maybe reducing the appetite for capital spending for some hospitals? That's my first question. My view here Annette is that the lower volumes on Patient Handling and Hygiene is only related to the first part of your question, which is the lower access. We don't get access to decision makers in patient handling and in hygiene. And we due to the lower access and obviously, the very big focus we currently have on treating the effects of COVID-nineteen, there is lower interest in discussing this right now. What we can see in countries where restrictions lifted in the beginning of Q3, we saw that directly the discussions around patient handling started to accelerate. If we look at France as an example, we had which is a very important patient handling market for us, we saw a very good uptick on order intake handling directly when restrictions were lifted, which again underlines that we believe that this has to do with the COVID focus and the restricted access to health care facilities. When it comes to capital spend, as an effect of the COVID-nineteen during 2020 and if we look into 2021, we believe that yes, there will be countries and health care systems that will be under constraints, But that is also why it's so important that we continue to work with outcome based solutions because just buying a lift in the future without knowing how and where and who that should use it to get the best outcomes of that one will arguably, be less interesting over the next 5 years. So we therefore believe that our strategy that we are going to present on Monday is more vital today than it was just 8 months ago. Okay. Thank you. And I don't know how many product launches you have made, but I think it could be quite interesting to hear whether you find these virtual launches just as effective as if you do like a normal physical one? Yes. We have made I'm sort of fishing for whether we could imagine that marketing and selling expenses also in the future will be lower simply as a result of finding a smarter or more digital way of doing it? Yes. With the first one, I mean, we have done all the launches during the COVID-nineteen process or time lines with very good effects with the virtual launches that we have made. On an overall from an overall perspective, Annette, you are 110% right. We have discovered new ways of working. We have discovered that there are a number of meetings that will not need to be held physically. We are managing a lot of our education throughout both internally and externally in a virtual way with very good results so far. So a number of parts of our organization has changed the way of working, and we'll continue with that way of working also going into a more normalized time and situation. As an example as well, which I believe that quite a few other companies have done as well, we have changed our travel policy as an example, where it's now stated it's not a travel policy, it's a meeting and travel policy where the first sentence is that internal meetings should be planned as virtual meetings. And physical meetings will be when it's absolutely needed, which might not be a huge change. But if you read the sentence, you understand that it's quite a big change to a company like ours. And we believe that, that will bring further efficiencies in the way that we're working internally and externally. Okay. Thank you so much. I'll jump back. Thank you. The last question in the queue so far comes from the line of Peter Oslang at Pareto Securities. Please go ahead. Your line is open. Yes. Thank you for taking my questions. Just a quick one. I thought I think that you mentioned that part of the orders for Q4 were already delivered in Q3. Could you quantify how much sales that was? It's not huge amounts, but it's my view maybe between $20,000,000 $30,000,000 that we have been asked by our customers to fast track and which we have obviously done everything in our power to do. And that's also one of the reasons why the organic growth in the quarter came up as it did. But the underlying business is obviously performing very well as well. And but it's not affecting our outlook for Q4. We, as I said, still believe that the quarter we will be able to grow the quarter with 2% to 4% also for Q4. So even if we have pulled in $20,000,000 $30,000,000 worth of sales into Q3, we still believe that we can grow within the interval EUR 34,000,000 also in Q4. Yes, great. Thanks. Just finally on FX, I guess with the current FX levels, the FX effect on gross profit and total EBIT will probably at least be on the same level in Q4 as in Q3. Is that right? I mean, we don't have any other data points than where we are in the end of the quarter. And I said that shortly during my presentation that the we saw an accelerated negative currency effect in the back end of the quarter. And if we relate to that, that assumption is right that it will probably be in the same Thanks. Okay. So no further questions coming through at this time. I'll hand back to our speakers for the closing comments. Thank you very much, moderator. Again, we put a very strong Q3 behind us with an organic growth of 5.8 percent with significant improvements on our profitability. We continue to support our customers and their patients during this unprecedented time, and we have every intention of continuing doing so also during Q4. Thank you very much, and I hope to speak to a number of you during the Capital Markets Day on Monday. Thank you very much.