Earnings Call: Q3 2021

Oct 22, 2021

Ladies and gentlemen, welcome to the Television Audiocast with Penny Conference Q3 2021. For the first part of this call, all participants will be in listen only mode. And afterwards, there will be a question and answer session. Today, I am pleased to present CEO, Simon Ostergaard. Please begin your meeting. Thank you very much, and good morning, good afternoon, everybody on the call. Simon Ostergaard, CEO of Cellavision. I have my CFO, Magnus Blix with me. I'm pleased to present our interim Q3 report today. I'll briefly give a short company market introduction leading into our Q3 financials and a bit how we interpret the current market situation. And then as I said, we're very happy to take any questions. Next slide, please. In fact, two slides forward. Yes, Slide number 3. I will continue as we get the technology sorted. So just a brief introduction on Celavision. Celavision is operating within the field of hematology, so blood based analysis. We are our mission is to be a leader in global digitalization of automated block analysis and not just a leader. In fact, our mission and our ambition is to be the leader. We've built the market over some 20 years. And we have based our business now also on staining cells, as you see on the picture here, Blood sales, we are using digital imaging combined with artificial intelligence and algorithms to allow us to see The actual box cells that enables us to classify and characterize box cells. So that leads into diagnosis. So we our vision is to replace traditional microscopes in blood labs. So that's superior workflow solutions. It's about standardization and providing high quality results that can lead to diagnostic certainty. Next slide, please. The market is kind of composed of Large Labs. This is the market that we have been working on for quite a number of years. So we see the market as approximately 17,000 And the large labs are characterized by doing more than 130 samples watt samples per day. The workflow is really we are aligned with the hematology players Providing instruments that sits upstream to the actual digital cell morphology. So we estimate that Approximately 2,500,000,000 blood samples are managed throughout the cell counters per year. And about 1 out of 7 We'll lead into morphology analysis to analyze the patient's AMP in-depth. This is really the cell calendar is evaluating the distribution of the red, white blood cells and the platelets. Any abnormalities examined by microscopy and the morphology. So this is where The diagnosis around anemia infections could be cancers like different types of leukemia or myeloma are diagnosed. So this is what you see on the right hand side. This is our instruments. We believe we've penetrated just over 20% or 22% in this segment With our large systems that you see depicted here. So there's still a large portion of labs where it's done manually And that is the addressable market that we are tapping into. On the next slide please, you will see that we also Characterize the labs as small to medium labs. Here the sample size for small labs is kind of characterized by Less than 30 samples and then you have the medium hospitals. It's a gray area that's what is what, but that's where you have The number of blood samples ranging between 30 130. There's a somewhat smaller blood volume going to these labs. However, there are many more labs. So in this, the best estimate is around 100,000 labs Globally, same story in terms of what we're looking at and the symbiotic relationship between the cell counter And also the microscopic analysis. The difference in this workflow is that we actually also process After our acquisition of RAIL Diagnostics where we have a stain reagent portfolio, we also have Smaller non automated devices that can assist in the pre analytical steps of the staining process here. And that leads into a recent instrument, the DC1 on the right hand side, that we launched In 2019 in Europe and in 2020, we launched it in the U. S. So that brings me into the overview of the hematology workflow on the next slide please. And here we have outlined the large lab and the small labs the different stages. What you see, I will talk a little bit about our channel on the next slide, but our distribution partners, they are Managing or they are selling the cell counters and the stainless for the large labs. And here we amneal with them providing our stains and also Our digital cell morphology solutions. Whereas in the smaller labs, we as said on the previous slide, we also take a larger share since we can actually Also contributing the pre analytical phase. So I'd say the The reagents that we recently acquired really allows us to differentiate with a solution that builds a total solution around Reagents software hardware. So we can really provide diagnostic Certainly, I have in control of all parameters and by then eliminate human errors. Also I'd say for this slide, When we talk about large labs and small labs, I think what we are looking into also as we have launched DC1, we're really looking into the lab structure. So whether it's integrated labs, so labs large labs that are associated with smaller labs in a network that's Typically, the small labs in this setting is what we call satellite labs. And then we also have what we call standalone labs in the small segment. So labs that operate with a somewhat lower blood sample volume and they are not necessarily they are not associated with the Agile Labs. This leads me into our channel and our business model, both upstream and downstream. On the next slide please. Here you will see that we execute and partner with our with the hematology Players in an indirect business model. So we work closely with them. We transact via them, our partners. However, we work closely with the actual labs, the end users using our solutions. So we have a global market support organization where we are presently in 40 countries. And so we have a symbiotic relationship where we work both and understand the market at first Hand, but we take part in the tenders that includes both the cell counters and the digital cell morphology units. On the manufacturing side, we have a mixed setup. We have we own the design Of all our solutions that being Regence Instruments Software, however, on the assembly side, we have outsourced assembly Here in Sweden, and we have in house manufacturing of our reagents in Martilac, France. We are now around 200 employees. So it's a relatively slim setup where we manage the entire value chain. And on the slide, you will also see some of our partners from the channel. Brings me into the next slide, which is the generic strategic agenda slide that speaks a bit about the areas of focus. I'll say for number 1, geographic expansion. Sort of on the I'd say on the So coming out of the pandemic period, we're certainly considering where to expand and really Trying to accelerate our sales and marketing efforts now that we can do more and we can have more in a growing number of interactions. So that's very exciting for our company and our team and our customers. On the segment expansion, So this is really seen from the fact that we went from only catering or servicing the large labs and now having the DC1 solution Gradually being adopted. We are getting increasing the amount of market understanding as we sell MultiC1s. So we have in Q3 spent quite a lot of calories on really understanding the customers that we have that have Successfully acquired our solution and the reasons behind. So I'll speak a bit more about that later. On the innovation side, we're ramping up Some of our investments and that's the OpEx increase is primarily in R and D. So projects that have been on hold during COVID, they are now ramping up In line with our long term product development goals. We have a pretty rich agenda and we want to improve and sustain our position As the leader within digital cell morphology. So we're also having long term initiatives that we've spoken about in prior in this year When we acquired the FDM technology. So we're still working on that at the feasibility stage. For the number 4, streamline supply chain, I'd say this quarter, we have been hit by global supply chain shortages of the Semiconductor chips, so some of our products or subcomponents were affected. So we at some point, we thought we had some headwinds here. However, we have mitigated it also in Q3. So we are mitigating by using Some of our engineers actually validate alternative key components. And of course, inventory management, proactive inventory management is part of the equation here. So we're working really to manage the crisis, which is probably not a short term crisis, but we have our eyes on the ball and we manage not to strengthen our partnerships and our relationships with our distribution partners, and especially now that pre sort of that we're getting after the COVID season, Momentum is evolving. We can start seeing each other face to face. So we are really looking forward to that especially in 2022. I would say on the partnering side, we've also we formally in Q3 beginning of Q3, we terminated our Distribution with Mindray, it's effective in February 2022. We reported that in the Q2 report, but it actually belongs to the Q3 report. So there are no change to that relationship. We keep servicing our customers and we'll do so. So that's pretty much it. We know that there's been a We've seen a launch in Q3, marketing launch, but we will keep on monitoring the situation with Mindray. And as soon as We're actually able to acquire an instrument or get hold of an instrument. We will assess the solution they are offering. However, it's not available for the time being. Essentially, we actually welcome competition. We've been leading this field 4 years. But we strongly welcome competition because it actually helps us adopt Digital cell morphology, which we really think is a true benefit for the patients out there. That brings me into the financials. So I will fast forward to slide number 10. The 3rd quarter, 2021, We had revenues of SEK132 1,000,000, which is equivalent to And organic growth of 50% 52% organic and then 2% headwind from FX. It's important to say that the growth rates are obviously up against Q3 2020, which was indeed not a good quarter for us. There we did SEK88 1,000,000 a year ago. So it was what's called an easy compare. However, generally, I'd say Q3 is kind of the lowest quarter. It's a low quarter. Typically, we take a dip As a result of seasonality, this year around, we were able to almost maintain Our Q1, Q2 level of revenue. If we dig into the different regions And put a bit more color on the situation. We in America, we ended at 48,000,000 So we've been on an upward trajectory in Americas and this sort of since COVID really hit Us in back in Q2 last year. Then we've gradually improved. This year around, we are pretty flat In Americas, in Q3, this quarter obviously, We were we are seeing increased market activity as a general rule of thumb here. We were able to attend the in Atlanta, which is a big annual show for our industry. However, there were no international attendees. So generally on the American side, I said it's moving along. We're not quite back to the level Pre COVID, we see less symposiums and there is less virtual attendance to the symposiums running. Generally, we hear that it can be more difficult to access accounts that are new. However, you can service existing accounts. And large tenders, it's more characterized by a lot of smaller deals and not that many large tenders from the IDNs. Then I'd also highlight that we still see Attraction for our DC1 or interest a lot of interest on the activity level. I will speak about that on the next slide, so I'll park that for now. And actually also emphasize on the reagent side that for the Americas, we are getting reviews Our MCEH and there is an interest in our methanol free MCEH reagent due to its That's part of our strategy. APAC here, we went up by 14%. So we ended at 18,000,000 So that's equivalent to 14% growth. This is the region where we feel we are mostly affected by COVID. So there are still restrictions going on. We see we had stable sales in China and we had some of the Smaller countries around Southeast Asia were actually relatively strong. And then we had Low contribution from Japan, which was also due to a spillover effect into the coming quarter. That was more about phasing. Good news is that we previously reported that we failed the EMC test To get the DC-one instrument approved in China. So we have now successfully repeated that. And now we are up to doing performance testing and electricity safety testing. So that is pending and ahead of us. But our outlook is that we expect launch the DC1 in China during 2022. In EMEA, we had a very strong Travel and access is becoming easier. It's obviously against a very low compare of $40,000,000 which The lowest quarter in a long time for EMEA growth wise. But we see traction and we also CEC1 is kind of really getting out there and that is Not unusual since we launched it in 2019. However, we had ramp up during manufacturing ramp up during 2019 and then COVID came. So I'll talk a little bit more about the sales cycle, some of our observations on the next slide. But we are pleased to see that there is acceptance For and the underlying value proposition appears to be rich for the DC1. In reagent wise, we did recoup the EUR 3,000,000 that we reported that we were missing in Q2. So that supply issue was sold. We see growing demand though from a small base In smaller countries, but we highly appreciate it. The reagent market is characterized by being many accounts. It takes Quite sometimes you get acceptance in by the different labs. And however, once you are getting the adoption, You're ending up with recurrent revenues, which is really the beauty. In addition So the ability to control the pre analytical steps in our diagnostic solution. We want to share that we when we look at our reagent revenue, we are seeing a healthy growth and year to date. We split our region revenue into at the high level into regions that supports the hematology market versus Non hematology, so we have some other regions for microbiology, etcetera. And we have had 18% growth year to date in our hematology reagents and single digit for other reagents. We think that is a healthy state. It kind of emphasizes the quality of our reagents and how they're appreciated out there. And it accounts for more than half of our reagent business. So we are very pleased with that. Taking the next slide, there's a few highlights. I'd say just I think I've outlined the situation on the COVID, on the supply chain, We will certainly continue to monitor the situation and do investments in inventory management if needed. And we may also have to validate other critical components. But as I said, we are very pleased to get through the quarter With no implications. On the DC1, I think it's obviously it has been challenging to promote a new solution. It's easier for network labs Because they already they have adopted digital cell morphology for the smaller labs not associated with hospitals. It's not only the DC1, It's also the adoption, the understanding, the appreciation for digital cell morphology. So now that we are Coming out of the COVID-nineteen activity level is really seeing having more positive traits. Then we are pleased to see some data points that we have analyzed throughout the quarter. When we look at our Q3 Q2, Q3 sales at DC1, we can see that there's an appreciation For the DC1 in Network Labs, in the U. S. In particular, the majority of the DC1 is associated with Network Labs. And this is probably also the early adopters since we've only been around for less than a year or about a year. Whereas in Europe, there is this is actually where we sell 50% of our DC1s, also a bit earlier launch obviously. But here we actually see majority in standalone labs. And so the value proposition around standardization and the quality, the consistency It's highly appreciated and expressed by our current customers. The other point I want to emphasize is that we'll also analyze we tend to emphasize that there's a long sales cycle. So we wanted to understand that and continuously will do so. We've analyzed also kind of the sales pattern of our large systems. And if we look at that, there's a long sales cycle. It's influenced By sort of both equipping our distribution partners with the knowledge and understanding our solution, We work together with them, but there's still actions to be taken there and a continued training going on. There's the phase of really conveying the message Towards lab personal, as well as timing it with the budgeting cycle. So that means when we analyze our sales, It can be 2 to 4 years for a large system to take place. So that's what we see when we look historically. For the DC1, We expect that the cycle will be somewhat less because of we've already created a market for digital thermophilia, especially around the Network But also because it's a smaller investment. So after the 1st year here, we are pretty pleased with what we've seen And we will continue to drive and push for building these digital thermal ecosystems where we have our current large Solutions combined with the DC1. On the reagent distribution, I will emphasize that we are Obviously, having our sales coming out of EMEA, that's the sales number that I alluded to. And then we are looking at APAC. We are working hard to expand into APAC. So we are doing evaluations. There are different drivers to get the reagents up. There are drivers around evaluation of the stains, registration, promotions to partners, but also adoption of these stains by partners. And it also comes with the timing of when new inflations takes place. That's when you can validate new reagents. So there are a number of variables to actually To hide reagent adoption. But we're on it and we have successfully we already in South Korea and Hong Kong, there are other Countries coming up throughout the coming year, you see them in Australia and then and China. And Probably my key points that I want to emphasize on the rating side. Let's scope for the P and L here. So just a few comments. And on the next slide, please. Here we go. Thanks. So I said net sales of $132,000,000 up against $88,000,000 year over year. It translates into we had a pretty reasonable gross margin. And as I said, we increased our operating Expenses, so we spent $55,000,000 sorry, dollars 57,000,000 equivalent to 43%. And then that translated into an EBITDA of around €42,400,000 so an EBITDA margin of 32 percentage points. So the increase on the operating was really the internal ramp up on the R and D side. We also capitalized R and D expenses a bit more like €9,000,000 versus €5,000,000 a year ago. And I think on the EBITDA side, I think it's important to kind of emphasize the demonstration of a scalable That's also what you see on the following slide. But the fact that when we have revenue growth in this business model here Combined with our business operations, it leads into increasing profit margin. So we went from 28% up to 32% given the lift on the top line. Cash flow was healthy. We had an operating cash flow of SEK 49,000,000 which was gave us a total cash Around SEK 20,000,000. I'd say what I'd highlight here is that we had a one off where we terminated Our factoring services in out of RAIL Diagnostics, so that's where we decided to finance with SEK9 1,000,000 this quarter that I've just emphasized. Taken together, what we believe was a relatively strong quarter. So on the next slide, I think I will I've already alluded to it, but here you actually see the dynamic and the way we throughout the COVID period on the low Chart, you see the ability to ramp down once there is a global pandemic crisis and the top line was missing out. We had 2% growth last year. And now as we're starting to really see where we are Hailing throughout 2021, our ability to ramp up and pull it down on the bottom line as demonstrated on this chart. With that, I think we should open up for questions. So thanks for your attention throughout the presentation. We have a question from Ulrik Trautner from Carnegie. Please go ahead. Your line is open. Thank you very much, and good day, Simon and Magnus. I have a few questions, if I may. Starting off with a fundamental one, and I do understand that the market data is not perfect. However, listening to your presentation for the last Couple of years. The question is, you report the same number of samples that you are addressing Each and every year, is the market in terms of samples performed not growing? Or is it just that the data is not perfect? It's hi Ulrich. Thanks for your question. I'd say it's more to the latter. The data, there's a lot of insecurity around the data. The market in hematology would grow with, I'd say, low single digits. And you'll probably expect the same amount of growth on the number of blood samples. But adjusting 2,500,000,000 or 4,000,000,000 blood samples with that percentage point, there's so much Uncertainties around how many labs are there, how many samples are there for you. So it doesn't really change the way we look at the market. Okay, great. Thanks. And on to semiconductor shortage and effects during the Q3. It looks like you have mitigated these effects and especially based on your comments. Were there any sort of negative effects On sales in Q3 that is in transitory or would you say that you handled it In a way that it didn't have any negative effect? Again, I'd go for the latter here. I think the team did an job in actually mitigating. We were hit by issues early in the quarter. It's meant that we were able to mitigate it Throughout the quarter, so it had no impact. And we'll obviously Sort of monitor and work closely with our suppliers on how to mitigate any potential future issues. Thank you. Next question is on RAL or reagent sales. And as you mentioned, euros 3,000,000 pushed from Q2 into Q3. And adjusting for that, it looks like we have 2 quarters in a row now with Quite stable sales of around €20,000,000 to €21,000,000 And these should be rather stable, right, as Quite a lot of these revenues are recurring. Is this a new normalized level, which seems to be A bit lower when just comparing to the pre COVID levels? And what's the reason behind that? I'd say The level here is probably signaling that I think this is recurring revenue. So for the portion of our sales in the reagent business Going to the hematology labs, that's that we expect that to be relatively stable and growing double digit. I think that's also why we report the year to date number here after Q3, And we expect that to remain. Okay. And high capitalized R and D, It's been quite high in the last few quarters. So do you believe it's around 7% of sales? And in Q3, it made up 20% of EBIT. Is these ongoing projects related to the China registered study for the DC1? And should we assume that Capitalized R and D is going down or how should we view capitalized R and D going forward here over the next few quarters? It's not related to the China registration. It's I'd say it's a relatively we're looking into a relatively stable All going up as we project ourselves into the future. Thank you. And on to Mindray and this being a 2 part question. Your predecessor made A big number on Mindray enabling your penetration into China. And what's your plan on approaching China now? And Do you share his view that Mindray was an important partner going into China? As well as 2nd question relates to Mindray as well. As mentioned, Mindray is developing their own system. Any news on how I'd say Mindray was not the only partner we have in China. And I think in the last quarterly report, we shared kind of We had around 40 systems with migraine. So they were not a significant partner as is. We think we can Still we certainly still have a play in China, obviously not with Mindray. However, The fact that they that we now have another player, of course, it's a competitor head to head within DT We see it more we see us being part of a total solution To deliver customer value across the hematology lab. So we see us as competing together with our partners. And that's where we actually welcome the competition because it means that we may be able to deliver more customer value by Adding digital cell morphology to more cell counters out there. So we certainly still see China as an important market Even though it's not going to be in together with migraine, but in competition with migraine. And do you know how far along they are in reaching the market with your own system? What we know what we've seen here in Q3 is that the late September launched a marketing campaign. And We from to our best knowledge, we don't think there are we can transact and actually place an order as an in customer. So we don't quite know where they are. What we've seen out there is currently prototypes that has been tested at hospitals. So that's kind of the knowledge we have. Great. Thanks. And last question on my end before I get back into the queue. And once again, a 2 part question. On the DC1, what would you consider to be the risk of that instrument cannibalizing On your Large Slabs segment in Emerging Markets, my interpretation is that It looks like Large Labs rather would have a DC1 in emerging markets, China, India, than buying your Large Lab instruments. Do you see any risk there? As well as if you can provide us with some more information on how many DC1s have been placed to date? Yes. I'd say you can look at the coin in 2 ways. I'd say I'd put it this way that the TC-one is an opportunity in markets where The large systems may be price prohibitive. So we see an opportunity in Delivering the DC1 to labs where maybe manpower is not limiting, which means that the workflow advantage you gain from the large systems can be compensated by staff, but you can still get the diagnostic certainty that comes out of the DC-one. So we see it as an opportunity in those markets with having the TC1 as part of the equation here. You had a second question. Sorry, can you repeat that? Yes. It was on how many DC1s you uploaded. Okay, got it. Yes. There I'd say, as I said, we have traction and we are now in the triple digit arena of Nombor Systems. Perfect. Thank you very much. And I'll get back into the queue. Appreciate it, Luke. Thank you. The next question comes from Felix Beynon from SFO. Please go ahead. Your line is open. Yes. Hi, Simon. Thank you very much for the presentation so far. And obviously, the strong numbers, great to see you Going back on track and well done on the semi shortage, obviously. My first question would relate to software. I see that it's another strong quarter for software sales in Europe. Can you briefly reflect probably on what is driving this And whether that kind of revenue run rate can be maintained going forward? Yes. I think the upshade in software is especially around our remote review. It's also a function of our adoption of TC-1. I think that's probably the main point, Felix, that I would emphasize. And as we continue to build these, we tend to call them ecosystems where we have both large and big Instruments across the hospital networks, we see an opportunity to Continue with some substantial growth in the software. Perfect. Thank you. The other area I'm always interested to hear about is that Australian tender that you won a couple of years ago. And where we stand with that, I know that they've obviously suffered heavily from COVID lockdowns, so probably There's not been any progress, but I just want to be sure that this tender remains 1 and that they don't Change their mind and try to cancel or probably you've also delivered some equipment. Just an update would be great. That's great. Thanks, Felix. Yes, so the tender in New South Wales, so the Sydney area Has certainly been impacted by COVID. In general, we I think most we understand the situation in Sydney. Even though they have opened up for more traffic across Australia and also in Sydney, It's a challenge getting into hospital still. So digital telematology is not considered critical. That's the news we have, means that it is somewhat hard to progress. I think the other prerequisite for that tender is around the laboratory information system. So there's a prerequisite to get this running and get this network up and running around the LIS systems. And so there's an IT Program as an enabler for this comes prior to really implementing the systems, Sorry, the digital cell morphology systems. So I think it's not going to be a quick fix. Also, it's probably a tender that we will work upon in the years to come. Very good to hear. Thank you. And then just two more questions. The first one on, I remember in the past, the strain protocols have been an area that you've been working on and then trying to develop since the merger with Merau. So any progress that you've made there in developing or in probably gaining feedback So this is the staining protocol for MCDH. I believe that is being alluded to here. Yes. So the yes, wonderful. So we've launched MCDH and it's launched in Europe. Seth, we see a potential also to bring it into Americas with via our partners. So we're working on getting it to work on the SMS devices of our partners. And we're also registering the MCDH in the U. S. As a 510 class 2 device. I think in terms of APAC, we are launching not MCDH, but it's what's called classic stains. And there, protocol wise, we are done. So it's more about evaluation, registration and Actually driving the launch of the reagents over the in the different across the different countries as I alluded to. Before we get the short answer here, Felix. Perfect. Very interesting. As always, last question is My view of the business, and I think you always alluded to that as well, is that it's really sales and education in the market is all about physical interactions. So as we emerge from COVID, and I think in the world, it's difficult to use your own Perspective and anchor to what you experienced in your region. But if I talk to people in Korea, their social distancing is very much very high on the agenda. So it's really difficult to judge the picture globally. So you could give us some a bit of your views about physical interactions, in which market it's possible, what you've done so far and also what you expect going forward probably in Q4, but more interesting even in 2022, As we talk about educating about DC1, as we talk about launching new protocols, etcetera, Just to get a bit more flavor and see about the different markets and areas, what we're planning, what we should be expecting going forward. Yes. But you're absolutely spot on that physical interactions in this type of business is super critical. You can do a lot virtually and you can explain so much, but actually getting the lab personnel to a situation where they will able to adopt And change their working procedures from manual to automated, it takes trust And understanding of the solution, so that's really endorsed by physical interactions and in particular in hospitals that are not running digital cell morphology. So I think that's key. The other key I'd say around physical interactions is with our partners. Of course, we want to strengthen our relationships and our strategic agendas together with them, Both medium small medium but also long term and meeting in person is pivotal in this context. So that's something we will also focus on, getting the alignment of our innovation charts together. I think that's the key and their physical interactions are key. Then my last point would be on top of physical interactions, I think what we've seen in COVID is also the whole hospital system across the on the global arena Has been challenged, which means that also budgeting cycles have been up for grabs. Funding and finance have been resounded to more, let's say, critical areas. So that's another it's not just that we cannot come through the front door and be together with the stakeholders and the customers. It's also financial drivers that has been a challenge and which we believe We'll normalize as we enter the new year. Perfect. Thank you very much. And as always, I'm very excited to see the progress from you. Best of luck. Thanks, Elad. I appreciate it. Thank you. We have a question from Hans Bostrom from Trinity Delta. Please go ahead. Your line is open. Hey, good morning. I just had one question. And if it would be so kind to clarify what the mitigation actions have been As regards to your semiconductor shortage, I wasn't really quite clear on that. And just to be able to assess the durability of this, Should this component shortage continue, it is likely in the coming quarters. Thank you. Sure. Yes, the mitigating action has been to identify alternative components For shock components and test them. So test them on performance, but also validate them to make sure that we could repeat The results of the alternative components and subsequently secure supply of those alternative components. That has required some engineering hours. So we have been we found the necessity to pause A few things to get the right people to actually validate these alternative components. But as I said, We have that capability in house. So we've been able to execute relatively fast. That has been the main Driver for mitigating the shortage from our side. And what's your level of comfort that those all tides components will remain available in the foreseeable future. Yes. I'd say it's primarily been 2 different components. And for those particular components, I'm starting to build confidence that we have those components under control and can build sufficient inventory. But we will also be looking we are looking broad at our portfolio of components and actually are ready To also tie up a bit more working capital, should that be needed to mitigate Any future crisis that may arrive. Okay, great. Thank you. Pleasure. Thank you. We have a follow-up question from Felix Beeman from SFO. Please go ahead. Your line is open. Yes. Sorry, Simon. Magnus, just one follow-up. A number that I saw with the number of employees, if I'm right, Increased quite substantially to EUR 201,000,000. So quite a bit of hiring going on in the Q3. I would probably that also comes from The acquisition, the small acquisition that you had announced, just to clarify where that comes from? Thank you. Yes, it's primarily at ramp up cost of both primarily R and D, primarily R and D. So and then maybe in previous reports, the number should have said 185,000,000 I think it said 180,000,000. So I think we it's more an updated number here. Right. Good to hear. And then as we speak, anything on the cat or veterinary? We are continuing our assets to Sure. Existing customers. We're kind of getting the feedback that our solution is Amongst our largest network is really value adding. So we are continuing to and are super committed to serve that segment. That's kind of the new we are focusing more on the human side. We consider that to be a large much larger An attractive market. But since we actually feel our solution can support the VEP and we have the offering, Then we are continuing to grow the business as good as possible in that arena. So Yes. So that's probably the situation. Probably American Americas? Yes. Okay. Thank you. Pleasure. Thank you. We have no further questions, so I will pass back to the speakers. Yes. I would just use the opportunity to thank you all for listening in. We are pleased to announce The Q3 reports where we as we say, we have what we believe is strong sales and earnings growth with improving market conditions. Of course, as you've learned this morning or afternoon, there's a bit of sort of it varies a bit across the region as to where we are. But the bottom line is that we see a positive outlook and we are continuing our efforts to invest Also on the R and D side to keep on driving the our position and our leadership within digital cell morphology And to keep up with any competitors who may enter the field. So thank you a lot for your time. I wish you a good day from here.