...All right. Good morning! Happy Wednesday, everyone. Welcome to this earnings call, where we will cover the third quarter, 2024 , summarizing our business in July, August, and September. So, I'm Fredrik Ruben. I'm the CEO of Dynavox Group.
I'm Linda Tybring, the CFO of Dynavox Group, and I will present the financials later on.
Great. So for those of you who have participated in these calls before, you will be familiar with we will start with a recap of what the Dynavox Group is about. We will then summarize the main takeaways from the quarter, we will dive deeper into the financials, and thereafter, we will open up for a Q&A session, and you will be able to submit your questions during the live session in the chat function here in Teams, and we, of course, always welcome offline questions sent by email to Linda's email, which you can see on the slide here, linda.tybring@tobiidynavox.com. Okey-dokey, so a brief overview of Dynavox Group then first.
First and foremost, it's super important to reiterate our mission and our vision, and I know it's super dear to not only the roughly 800+ colleagues of ours around the world, but also to our ecosystems of partners and investors. And our vision is a world where everyone can communicate. We will contribute to this via focusing on our mission, which reads, "To empower people with disabilities to do what they once did or never thought possible." And this also summarizes two of our main user stories. The first one, the do what you once did, that might be the person who led a normal life until a diagnosis, such as ALS, which rendered her unable to control her body or communicate like before.
And the never thought possible, that can refer to a child diagnosed at an early age with a condition such as autism or cerebral palsy, where, thanks to our solutions, he can do much more than the world around him ever thought possible. And on the picture here to the right, you see Christopher. He is from California in the U.S., and he's one of our amazing young users diagnosed with non-verbal autism, and he's a great example of that. The market that we serve is hugely underserved. Some 50 million people have a condition so grave they simply cannot communicate unless they have a solution like ours. We estimate that every year, about 2 million people are being diagnosed, and yet we estimate that only some 2% of those are actually being helped, and that means that the rest remain silent.
The main reason for this is lack of awareness, also among the professionals and the prescribers tasked to assist these users, and combined with poor healthcare reimbursement systems. We operate on a global footprint. Today, some 3/4 of our business stems out of the U.S., and that's largely because of a reasonably well-functioning funding system that was established some 20- 30 years ago. However, our products are sold in about 65 markets around the world, of which U.S., Canada, U.K., Ireland, Denmark, Sweden, Norway, and now, most recently, Australia and New Zealand are markets where we sell directly, while the other markets are served by a network of some 100+ reseller partners.
Our staff is distributed in a similar way as the revenue, meaning that some 70%+ of our staff is based in North America with our U.S. headquarters in Pittsburgh, in Pennsylvania, and our second-largest office is our headquarters here in Stockholm. But we have branch offices in several European countries, as well as in Suzhou, in China. And we are today over 800 employees in total in the group. With prior acquisitions, we established or increased our presence, specifically in Belgium, France, Germany, Ireland, Denmark, and then, as I said, most recently in Australia and New Zealand. But I will come back to that.
We provide a comprehensive portfolio of solutions, ranging from, if we start, on this slide to the left, content and the language system, such as the world's leading library of communication symbols, they're called PCS, and the leading solutions of off-the-shelf or custom-made synthetic voices of the highest quality and with a large diversity of languages, ages, ethnicities. Then, if we move on, we have highly sophisticated communication software, which is then obviously tailored towards the type of user, which can vary greatly based on the needs. Moving on, we develop and design devices with cutting-edge technology and medically certified durability, including communication aids controlled via eye tracking and accessories, such as our Rehadapt mounts. We have a services portfolio to help our users through the complexity of obtaining and getting funding for solutions.
Last but not least, we are there to help our users, the therapists, the caregivers through our global teams of support resources. As mentioned, we operate this model globally, and it's important to note that each piece of this pie is critically important and also a significant differentiator in making us absolutely unique. Our go-to market model is predominantly as prescribed aids, so some 90% of our revenue comes from either public or private insurance providers. This also means that we have a solid paying customers, and we have always been resilient towards changes in the overall economic climate. Okey-dokey, but now we will go back to focusing on the main topic of today, namely the earnings reports for the third quarter here in 2024 . If we're looking at the highlights, we had another solid quarter when it comes to revenue growth.
The growth compared to the same quarter previous year sums up to 18% if we adjust for a 4 percentage point negative currency effect. This continues the trend that we've had now for the past nine quarters. However, revenue in this specific quarter was negatively affected short- term by actually a successful product launch that happened in early September. If we adjust for this, the underlying growth is estimated to be over 20% in the quarter in local currencies. Some further background on the reason for what I just said. Our products are prescribed and hence undergo a sometimes lengthy and administratively complex funding process before they can be approved for payment by the insurance provider, and then eventually shipped from us to the customer.
And when we launch a new product, a customer who is already in the funding process for an equivalent product of the current portfolio, then he or she may elect to resubmit their order with the newly launched product instead, and the switch adds anywhere from days to weeks before we can finalize the order. And in this specific case, the suite of new touch control products launched in September, they are clearly upgrades from the then current product, and hence, orders that would have otherwise been finalized and shipped in September, now slips into the coming quarter. There are no other effects, such as significant obsolescence or customer churn, that will affect coming quarter. It's merely a timing effect, and that happens over the shift from one quarter to the other.
As mentioned, we continue to improve our product portfolio then with products and service that really sets the. This recent launch solidifies our already strong offering, and I will actually come back a little bit more on specifically these new products later on. Our work to improve awareness and competence continues, specifically among the prescribers and the professionals in our space. Our North American market, remember, the biggest market, continues to show solid, strong growth, and it's by far the largest and most influential market, both for us and actually for the entire industry. Our strong momentum, which we've seen lately among the younger user base, continues. Often, these are children and young users with autism. They rely on our symbol communication solutions and, in particular, our software called TD Snap, and the non-eye tracking touch- controlled communication devices portfolio.
Our OpEx levels increase, but this is merely a consequence of the investments to secure our future growth, building the foundation for a much, much bigger company in the future. And we continue to invest in our staff, mainly in sales and marketing functions, as well as in back-end systems and tools. We also continue to improve our profitability at an even faster pace. So our operating profits increased by more than 25% in the quarter, despite the pushed revenue from the product launches in September. And then last but not least, on October 1, we closed the acquisition of Link Assistive, which has been our long-standing reseller partner in Australia and New Zealand, and I would like to shed a little bit more light on this acquisition in specific.
The acquisition of Link Assistive in Australia and New Zealand brings us closer to our customers in these markets. It facilitates our work to support people with disabilities and communicate more effectively. Dynavox Group solutions will comprise the majority of Link Assistive's revenues already today, and as our companies, we have been long-standing partners. Australia, as a market, is already one of the countries with the best reimbursement system for our types of assistive technology, but even here, we feel that there's much, much more to be done. We have proven before that going direct in more markets enable us to grow much faster organically, and of course, we believe that the same case will be relevant here also in Australia and New Zealand.
We closed this deal on October 1, and thus we welcomed some 20 new colleagues to the team. From a financial perspective, Link Assistive's turnover in 2023 was over AUD 8 million, with an adjusted EBIT margin of around 10%. We paid AUD 8 million upfront in cash, but with a potential earn out of up to an additional AUD 5 million after two years based on the financial development of the company. Of course, Link Assistive will carry our complete portfolio of products and solutions, including then the newly launched products, TD Navio and TD I-110. That brings me to my next slide, where I would like just to briefly mention what they're all about.
TD Navio and the new TD I-110 that you can see on the picture here, they were launched on September 5, and we are already shipping them to customers around the world. They are extremely robust, and endure an all-day active life and can be personalized to meet the user's various needs. TD Navio, which is an iPadOS-based device, comes in three different sizes, allowing for a diverse set of use cases, while the TD I-110 is a 10-inch Windows-based device. This product basically replaces the user's language and voice, and hence they can, if they need to be, be very, very loud, and they support a full range of sounds, allowing the user to be heard in all types of situations.
I believe that this product sets a new standard for some of the most important features of our user group and those, just to understand what the needs for our user group are, is portability, of course. They're lightweight, specifically designed for easy carrying. They're available in different sizes and, for different hand sizes. They're durable. I mean, you can safely take them wherever you go because it has the built-in supports, glass screen protectors, protective cases, and they're actually backed by a five-year warranty from us. They're dependable. They allow for all-day communication because it has a very long battery life, and they charge really, really fast via a single port. These products are purpose-built. These are not consumer products.
They have access ports for assistive technology, switch buttons, can be mounted on beds, wheelchairs, and much more. And again, they come including our, all our software titles, which, of course, means that it's the leading symbol communication, a software called TD Snap. Okie dokie. Now I will actually hand over to you, Linda, to take us deeper into the financials for the quarter.
Thank you for that, Fredrik. Yes, the revenue for the third quarter came in at SEK 483 million . It was an 18% year-on-year growth after adjusting for currency effects. M&A contributed with some 3%, and hence, the organic growth was 15%, continuing a good trend for the past nine quarters. However, as Fredrik already mentioned, revenue was negatively impacted in the short- term by the successful product launch. And adjusting for this, the underlying FX-adjusted growth is estimated to be over 20% in the quarter. We continue to globally see fastest growth in our autism customer group. The gross margin ended up at 69%, an increase of 0.4 percentage points.
The improvement was mainly driven by currency, some positive impact on the scale effects from increased sales, while increased freight costs had some negative impacts on the gross margin. So EBIT for the quarter increased by 26% to SEK 61 million , or 12.6% versus last year, 11.4%. Our OpEx increased by 16% organically. The OpEx increase mainly relates to staff increases. We added 140 FTEs, including the acquisitions that we did last year. A majority of these were added in the sales and marketing organization, in addition to the annual salary adjustment that went into force in April 1st. As Fredrik already mentioned, we continue to invest in systems and tools to manage a growing business and to set up to be able to handle more business and much bigger than today.
Operating expenses were affected by non-recurring costs of approximately 1 million related to acquisitions activity, and the cost of existing long-term incentive program was affected by increase in the Dynavox share price during the quarter. The associated cost increased by approximately SEK 4 million . R&D cost, the net R&D cost decreased by SEK 5 million . If we look at the earnings per share, it increased by 30% from SEK 0.33 per share to SEK 0.43 , and for the quarter, the cash flow after continuous investment was positive SEK 7 million. This is negatively impacted by the increased inventory levels related to the product launch, and this is actually typically how this has historically patterned out with major launches. Cash at hand ended at SEK 121 million .
Net debt was SEK 646 million, and the total use credit facility and term loan at the end of the quarter was SEK 679 million. Net debt over last 12 months EBITDA was 1.6x . Fredrik, should we conclude the call?
Yes. Thank you, Linda. So before we open up for questions from you, I'd like to reiterate some of the main takeaways from the third quarter of 2024. So we continue to show solid growth, a trend that we started already in Q2, 2022, so more than two years ago. We grew revenue by 18%, adjusted for currency, and the equivalent year-to-date growth is then 23%. The solid growth was actually in spite of the short-term negative effect caused by the successful product launches. And if we adjust for this, the underlying growth in the quarter was estimated to be over 20% in local currencies. The strong momentum among the younger user base continues, mainly among children and young users with autism.
Our profitability continues to move upwards with an organization that scales much better day by day, and as Linda mentioned, earnings per share increased by 30%. The previously acquired companies contribute well and were developing favorably, and as of October 1 , we now also add Australia and New Zealand to countries that we call home. Given the continued and sustainable growth, we continue our investments in systems, tools, etc., to prepare ourselves for be able to successfully manage a future business that is much, much larger than today. We revised our financial targets earlier this year. I believe it was in February, and we expressed them with the time horizon of three to four years. The first one was to, on average, grow revenue by 20% per year, adjusted for currency effects, including then contributions from acquisitions.
And in local currencies, the year-to-date growth sums up to some 23%, which means that we have found the revenue growth momentum to build on. The market that we serve remains hugely underserved. We with the example of growth levers that we have spoken about today, sales expansions, adding to local presence, operational excellence, and our examples of M&A, that will continue to build our growth journey. If we then move over to profitability, the targets is expressed as delivering EBIT margin that reaches and exceeds 15%. Again, we have proven to build a strong growth with incremental improvements in profitability, and we obviously need to continue to invest in future growth with improvements in scale.
Example of that is continue to grow better through educating the prescribers that become more self-sufficient out in the market, and of course, more satisfied customers. That leads to higher degree of replacement sales. The recipe here is rather simple: continue our revenue growth, high and stable gross margin, and a total operating expenses that increases at a lower pace than our revenue growth. The consequence is that we see good opportunity to further leverage how revenue growth translates to reaching and exceeding an EBIT margin of 15%. Then last but not least, we did an updated dividends policy, where we expressed that we will distribute at least 40% of the available net profits to shareholders.
We have an attractive cash flow profile, and given the growth opportunities, we need, of course, to maintain a capital structure that enables strategic flexibility to pursue growth investments, including, obviously, acquisitions. But we're still expected to, over time, generate excess cash, and hence our policy is therefore to distribute at least 40% of available net profits to shareholders via either dividends, share repurchase, or similar programs once time so allows, and we deem that it's the right prioritization. All right. With that said, I'm stepping a little bit to the left, and I'm inviting Christian Hall, who is monitoring the questions from the audience. Hi, Christian.
Hi.
Hi.
Nice to be here. Okay, so please submit any questions that you have. So I will start with the impact on the top line of the product launches. Could you please elaborate a little bit more on the impacts and the reasons?
Sure. First of all, this is the normal pattern for us, and since our customers they don't buy our products over the counter. They are almost always 90% of revenues as prescribed aids, which means that to obtain a product, you go through a funding process, sometimes quite administratively burdensome and lengthy. In that process, we had a lot of clients that obviously were in the process of obtaining our then current devices, but when we launched a new product, we offer our products, "Do you want to switch to this newly launched product?" In quite a number of cases, they decided to do so.
But what happens then is that the funding process, you add days, weeks, or something to the process, and then, in this case, pushed some of those orders to be shipped and build and turn into revenue for us outside of the third quarter. We estimate that when we sum this up, that the underlying, FX-adjusted growth would, in the quarter, not have been 18%, but rather, about 20%. We're talking about millions of dollars here in essence.
And do you expect to catch up these sales, all of it, in Q4, or?
I would say that the majority will. We're adding days or weeks to it, then of course there might be certain elements that slips into the future, but it's fairly front-loaded, I would say.
And so far in Q4, you have seen the impact, clearly?
I will talk about Q4 when it's in February, but we feel quite confident about it.
What about in Europe? You saw not such a high growth in that quarter, in this quarter. Is this largely impacted by the launch or?
Yes, we have. Outside of the U.S., we have a mix of reseller sales and markets where we operate directly, and you're absolutely right. Also, these markets, obviously, our own reseller partners and our staff were informed about new products, so there's definitely some delaying effects also outside of the U.S. on this, which affected the growth in that region negatively in the quarter.
Okay. Uh-
I think it's perhaps important to say that these products are very much towards the autism sector. These are non-eye tracking devices that you use your hands or fingers or similar modes to operate. This is our fastest growing customer segment, and also percentage-wise, growing very well outside of the U.S. It's a product launch that fits really well into kind of what the current demand is like.
Regarding the OpEx growth organically, which continues, do you expect to keep on growing at the same rate going forward, or in terms of OpEx?
The simple model is, of course, that we want OpEx to grow at a slower pace than revenue growth, but where we do spend our money is quite unchanged from previous quarters. It's predominantly in sales, customer-facing roles, sales and marketing, and then to some degree, also making sure that we have a back-end system and back-end organization to manage a growing company. So those are where we typically spend additional dollars.
Okay. As far as I can see, I don't see any further questions. Do you see any further questions? No.
Okay. All right. That was swift. We are, as always, super happy to answer questions offline, over email or, in investor meetings. With that said, if I can just click the next slide, we conclude today's earnings call. We, of course, look forward to seeing you back again on February 5th to summarize then our business in the fourth quarter of 2024 . Thank you very much.
Thank you.