Earnings Call: Q2 2021

Jul 16, 2021

Hello. Welcome to the Getinge AB Audio Casting Teleconference Q2 2021. Throughout the call, all participants will be in listen-only mode. Afterwards, there'll be a question and answer session. Just to remind you, this conference call is being recorded. I'm going to hand the floor to Mattias Perjos, CEO. Please begin your . Great. Thank you very much. With me on today's call, I have Lars Sandström, our CFO, who will take you through the financials a little bit later here. Let's start with moving over to page number two right away and look at the key takeaways from the second quarter of 2021. Organic net sales growth was 3.6% for the quarter. This is mainly explained by a tale of demand for ventilators related to COVID-19 in India, in combination with continued strong development in ECMO therapy products in our Life Science business area, and a comeback in cardiovascular devices. Order intake decreased organically by 6.1% compared to 2020, when we had an exception of COVID-19 related order intake, especially in ventilators. We had a favorable product mix and continuous productivity improvements, this resulted in higher margins overall, very strong free cash flow, lower net debt, and consequently, an overall strengthened financial position. We move over to page number 3, please. If we take a closer look on where we are trend-wise on orders, we can clearly see that the trends largely continue to move towards where we were in the beginning of 2020, after quite an exceptional period here due to COVID-19. However, orders of ventilators were still quite strong in the quarter due to demand from India. Overall, though, we expect orders to decline in the coming quarters. This is ventilator orders, of course. ECMO orders continue to be at a new higher level overall, confirming our strong position in this segment of the market. Cardiovascular product also continued to improve during the quarter, and we moved slightly above the level of Q2 2019 for the first time since the outbreak of COVID-19. North America is the frontrunner when it comes to the recovery to a large extent explained by a successful rollout of the vaccine. There are good reasons for expecting this part of the business to continue to gradually improve as even more people get vaccinated in North America, but also in Europe and the rest of the world here as time progresses. This means hospitals can focus more of their energy on handling the backlog of surgeries, which is still very significant. We also continue to see good order intake or good order growth in Surgical Workflows compared to the quite weak order intake one year ago. We expect this trend to continue as hospitals are focusing more and more on how to improve productivity in the Surgical Workflows in order to take care of the backlog of surgeries in an effective way. However, we are still below the 2019 level on order intake here. In Life Science, we continue to see strong order growth in all product categories, taking us to a level that is materially above the levels in the first half of 2019 and 2020. All in all, it's migrating back towards the pre-pandemic levels with the exceptions of Life Science. We can then move to page 4, please. If we then take the trends and orders that we just saw and look at what this could mean in terms of net sales for 2020 compared to 2019, it might look like something that you see on this picture. In cardiopulmonary, we expect the high demand on products for ECMO therapies to continue driving growth throughout the year, supported by our increased capacity, which is now at a new and significantly higher level, thanks to the investment program that we've been rolling out for a while now. In critical care, we expect the year to be slightly above 2019 due to us having a strong first half of 2021, even though demand is expected to be lower in the second half of this year. In products for cardiac and vascular procedures, we grew strongly year-on-year Q2, and there are good reasons for us to expect us to continue to be at a new higher level from here in order to meet the demand linked to the backlog of surgeries. North America, as I mentioned, is the first mover here as they've come further in the vaccination rollout, and there are good reasons to expect the same thing to happen in the other parts of America and of course, EMEA as well. Depending still on a successful vaccination rollout and the capacity in hospitals returning to normal or even above normal levels. As said before, Surgical Workflows order intake was positive in the first half of this year, and we participate in materially more tenders today, which is also promising. North America is first out of the starting blocks here in placing orders and in number of ongoing tenders. We expect EMEA to come to the same situation further down the road. The need for our product is clearly there, and we expect to grow orders and net sales from here. However, there is a risk that some of the orders will face longer lead times than normal and be delivered in 2022, and this is due to capacity constraints in hospitals and potential risk for supply constraints among constructors doing the actual installation work in the hospitals. In Life Science, we expect the strong growth in sterile transfer to continue at a high level, accompanied with a strong development for the Applikon bioreactors. We also expect the strong order intake in sterilizers and washers to transform into increased net sales in the second half of this year. All in all, this takes us to a better first half than expected, followed by a good second half for Getinge as a whole when compared to 2019. Are there any risks in this? Yes, of course there are. We're still in a pandemic with a fast-paced spread of the Delta variant of the virus. We see the vaccination rollout is doing its job in a good way, and hospitals are in a different and better position today to tackle this challenge. The capacity constraints that were really evident in all parts of the globe in the middle of the pandemic, they are managed in a much better way right now. We also often get questions on the supply and how potential constraints could impact our different businesses. The risk here isn't imminent at the moment for us. If the global constraints on electronics, for example, get worse and continue for a long period, we will most likely be impacted in some way as well, creating a timing issue or a phasing of net sales going forward. In this context, it's also worth mentioning that we are better prepared than ever to mitigate this using the best practice from last year's ramp-up in ventilators. We learned a lot of things when it comes to managing our supply chain. Another risk is, of course, that large projects like greenfield hospitals are delayed due to other parties, and consequently, constructed customers ask us to delay our deliveries here. At the moment, it's not a huge risk, but I thought it would be prudent to mention this in the conference here in order to be fully transparent. Having said this, we can move to page number 5. Based on what I just said here, and despite the more negative effect impact than expected, we choose to keep the outlook for 2021 unchanged at 27 billion SEK in net sales as a floor for the full year. We can then move to page number 6, please. I wanted to mention some of the key events and activities during the quarter as well. We've had a number of launches, which I think is worth mentioning in this context. One of them is that we had 510(k) clearance by FDA for 3 products strengthening the offering of the advanced ICU surgical ventilators in the U.S. market. We are doing the commercial launch of the heart-lung machine HL 40 in Europe with really good traction and good success so far. We've also launched Torin AI, helping hospitals bring down the surgery backlog in a very effective way. We've also launched a new framework for social financing and a new social bond of SEK 570 million. We've also, as part of our consolidation efforts in the group, decided to establish a customer experience center in Frankfurt, which will be very accessible to customers from all over the world. In general as well, when it comes to productivity, our improvement journey continues. I continue to be very happy with the way our organization has addressed the strategy implementation topics that we have despite the ongoing fight against COVID-19 and the ramp-up of surgeries. One example here is the consolidation of operations in New Jersey, the U.S., going from 3 factories into 1. This is going according to plan. It's expected to be finalized at the end of 2021, and it's one example of many that will continue to drive higher productivity in Getinge. With that, we can move over to page number 7, please. Order intake declined 6.1%, and net sales grew 3.6% organically. Even if we see a strong comeback in many product categories, we couldn't quite match the last year's exceptional and COVID-19 related order intake, especially when it comes to ventilators in EMEA. We can clearly see a pattern in the picture, and the reason for this is mostly linked to how far each region have come in terms of handling COVID-19. Clearly North America are further ahead when it comes to the vaccination rollout and consequently better able to take on orders and deliveries. For example, in cardiac and vascular devices, but also in Surgical Workflows as already mentioned here. The strong performance in Asia Pacific is attributable to orders of ventilators to India and very strong growth in several product categories within Life Science, especially in China, who also been progressing well in terms of vaccination. One conclusion from this is that we can expect some kind of comeback in EMEA as well to take place quite soon as vaccination starts to pay off. Can I move over to page number 8, please? Order intake in actual numbers amounted to SEK 6,934 million in the quarter. In Acute Care Therapies, we had a 20.7% organic decline in orders and a SEK 1.5 billion decline in actions. This decline is, of course, a result of the challenging comparative figures due to large orders for advanced ICU ventilators in Q2 2020. We had good order intake, good organic order growth in all other product categories in the business area, which is a very good sign. In Life Science, we had a 27.9% organic increase of orders. SEK 154 million in actual. We saw very strong growth in several product categories within Life Science and a particularly positive development in Asia Pacific. When it comes to Surgical Workflows, we had an 18.8% organic increase or SEK 199 million in actual numbers. We saw a significant organic growth in order intake in all regions from very low levels last year, which means that the order book is recovering in a good way. Growth in Surgical Workflows was particularly high in Infection Control. We can move over to page 9, please. Looking at sales then, net sales amounted to SEK 6,587,000,000 in the quarter. If we compare with 2019, net sales is up more than SEK 300 million all in all. Acute Care Therapies had 1.3% organic growth, but a decline of SEK 370 million in actual numbers. We saw strong organic growth in cardiac and vascular surgery products as a result of the increased surgical volumes, mainly than in North America. We had also continued good growth in ECMO therapy products in the quarter. We had challenging comparables, as I mentioned, in ventilators in the second quarter here of this year compared to last year. This contributed to a sharp decrease in organic net sales for this product category, and this is despite the significant deliveries to India that we had in the quarter. When it comes to Life Science, we had a 36.5% organic increase, 184 million SEK in actions. Here we saw strong organic growth in sales in sterile transfer products, in washer disinfectors, and also the bioreactors from Applikon. Invoicing also increased in service and sterilizers, even if it's not to the same extent to the above mentioned. Strong growth in all regions if we look at this from a geographical perspective, particularly good development in Asia Pacific. Surgical Workflows from a sales perspective, we had a 3.2% organic decline or SEK 198 million in actual numbers. We had slightly negative organic development, this is explained by long lead times from order to delivery and a smaller order book at the beginning of the quarter compared to the previous year. We had very good growth in Integrated Workflow Solutions during the quarter, this is worth highlighting, I think. We saw organic growth in both North and South America, albeit from low levels. The organization's focus on the offering in service and consumables as well has contributed positively during the quarter, which is a very nice also long-term benefit. Currency had a negative impact on net sales for the quarter. It was minus SEK 642 million, which equals 9.2%. We can move over to page 10, please. We had margin improvement in all of our business areas. Our adjusted gross profit decreased by SEK 99 million to SEK 3,624 million in the quarter. Negative FX effect accounted for minus SEK 371 million here. If we compare with 2019, gross profit is up more than half a billion SEK all in all. For the group as a whole, the gross margin improved year-over-year. The product mix effect is flat despite negative effect from less sales of ventilators, this is offset by the recovery of products in elective surgeries. We also saw factory absorption and service performance supporting the margin, FX had a negative impact on the margin overall. With that overview, let's move over to page 2, I leave it to you, Lars. Thank you, Mattias. Adjusted EBITDA increased SEK 32 million in the quarter, and the margin improved 1.5 percentage points to 19% in the quarter. Adjusted for currency, gross profit had a 1.9 positive impact on the margin due to the improved results in Surgical Workflows, combined with recovery, for example, in products like elective surgery. Regarding OpEx, our new way of working continues to have a positive effect. However, comparing to last year's situation with lockdown and restrictions, OpEx impact is slightly negative on the margin with 0.7 percentage points. As we come into 2021 with lower levels of depreciation amortization, used assets rolling off the balance sheet, D&A adjusted for FX is impacting the margin positively by 0.9 percentage points. Currency had a negative impact of 0.6 percentage points on the margin. All in all, this resulted in an adjusted EBITDA of SEK 1,250,000 compared to SEK 1,218,000 in Q2 2020. In 2019, we were at SEK 591 million and an EBITDA margin of 9.4%. Over to page 13, please. As we have mentioned before, currency hasn't had a material effect on our net sales and profit for the quarter due to the strengthening of the SEK year-on-year versus most other currencies. This is, of course, taken into account when we set the outlook for the year. From the left on the page, you see three major currency pairs for us, followed by a combination of small currencies with high volatility against SEK. Each of them represents a small proportion of our business, but together they stand for approximately 10%. Of course, we use strict pricing discipline and use price in major currencies in these countries in order to secure good integrated margin. You cannot mitigate all effects when you see volatility like this. The dark blue and solid line in each graph is the average rates, which we use in our financial reporting. As you can see, there is quite a substantial difference year-on-year. The dotted line represents the closing rate each month. The steep decline in the middle of each graph illustrates the shift from 2020 to 2021, and recalculation of average rates that comes with that. As we are long in USD, i.e., more revenue than cost, and U.S. represents more than 1/3 of our total revenue. Depreciation of USD in relation to the SEK of well above 10% is of course having a negative impact for us. I just want to show you this as a reminder when taking FX into account. You also find some good information on this in the annual report that was released at the end of March. Over to page 14, please. Free cash flow continues to be strong, amounting to SEK 1.2 billion. This is the result of the healthy operating profits in combination with continued good control on how we put the working capital to work. Working capital days continues to decrease. We are now down 39 days from the peak in Q2 2018. We also see continued increase in our operating return on invested capital, where we are at 21.8% on a rolling 12-month basis. One could expect to see some kind of reversal towards the long-term trend on working capital days and return on invested capital when net sales move more into normal territory. Let's move to page 15. Net debt was positively impacted by the free cash flow, taking us to SEK 5.3 billion. This also includes paying a dividend of SEK 870 million in the quarter. Last year's dividend was paid in Q3 due to the delayed AGM connected to the COVID-19. If we adjust for pension liabilities, we are at a net debt of SEK 2 billion. This brings us to a leverage of 0.7 times EBITDA, and if we adjust for pension liability, leverage is at 0.3. During the quarter, further reduction of loans have been made, and cash amounted to approximately SEK 3.5 billion at the end of the quarter. Let's move to page 17, and over to you, Mattias. Great, thank you, Lars. On page 17, just wanted to reiterate and summarize some of the key takeaways from the quarter. As we highlighted already at the end of 2019, and again after the first quarter, the market continues to move towards a new normal. We've seen the recovery that we expected when it comes to both elective surgeries, when it comes to the investment patterns among customers for more long-term infrastructure type of investments. We've been able to fight the third wave of COVID-19 together with our customers in a very good way as well. As I mentioned initially, I'm also very happy with the activity level and the progress on strategy implementation. This can be seen not the least when it comes to the margin progression, which is really positive. The improved results from our operations, of course, then generates a very solid financial position as well. All things considered, our outlook for 2021 is unchanged at least SEK 27 billion in net sales. With that summary, we open up for questions. Thank you. If you wish to ask a question, please dial 01 on your telephone keypads now to enter the queue. Once your name's been announced, you can ask your question. If your question is answered before it's your turn to speak, you can dial 02 to cancel. Our first question comes from the line of Annette Lykke at Handelsbanken. Please go ahead, your line is open. Thank you so much, congrats on a very strong result in particular to the margins. My first question goes exactly to that area. The exceptional high margins you have here in Q2, how much of this is reproducible or sustainable for the remaining part of the second half? Maybe if you're not willing to answer on that, maybe you can try to help us to indicate how much of this margin contribution is coming from these additional sold vents to the Indian market. Another question I like if you could elaborate a little bit on that, how do you see the potential new Delta of COVID-19? Maybe in some regions we will see more lockdown. Are you prepared for this? Do you think that we could risk or have a chance to see more demand for some of the COVID-19 related products you have in your pipe? Thank you. All right. Thanks, Annette Lykke. When it comes to the first question, you're absolutely right. We don't guide forward-looking on margins. As I alluded to in the summary and also in the beginning, we do see better progression than expected maybe from some of our strategic initiatives underlying. There's, I think, room for optimism in that sense. We also have some good product mix effects here that we highlighted already at the end of 2019 and after Q1, that this would be positive when things return to normal, especially related to our elective surgery type of products. The ECMO therapy product as well provides a good mix effect also. Could you- Yeah, sorry. Go ahead. No, it's just could you say anything about the vents? How much of additional margin, is it 100 or 150 basis points coming from these additional ventilators sold to India? We're not disclosing that type of granularity when it comes to our margins. I only want to highlight the good underlying progression that we mentioned after the first quarter, is going a little bit better right now, and I think we're getting the traction that we want from the different strategic initiatives. There is a positive product mix effect in here. You should also keep in mind that we still have the lower levels of costs because things haven't ramped up entirely when it comes to customer activities and some of the internal activities that's been under restrictions for quite some time now. That has a positive impact. We also had good utilizations of factories, which, if you look at Q3, normally is on a lower level because of vacation periods in large parts of the world and so on. When it comes to Q4 as well, if you look at the normal type of hockey stick effect that we have here, we will be dampened a bit because of the order pattern in critical care, but also because of the deliveries pattern that I mentioned when it comes to Surgical Workflows. If you look at Surgical Workplaces product, operating room products, and Infection Control products, these are normally longer lead times. Right now, with supply constraints around the world, possibly a little bit longer as well. Some negative leverage effects on this also. Underlying, you're absolutely right. It's going better than maybe we guided for in the first quarter, and that we believe is sustainable. We don't publish a magnitude on this. Okay. When it comes to your question about the Delta, we're certainly ready to support this. The team has done an excellent job, I think, in doing a mini ramp-up to support the ventilator demand. We had a lot of really strong book and turn in the second quarter of ventilators. We're really able to provide competitive lead times on this, and we'll be able to do that also for the second half of the year if the outbreak becomes worse than we hope. Okay. Thank you so much. Thank you. Our next question comes from the line of Kristofer Liljeberg of Carnegie. Please go ahead. Your line is open. Thank you. 3 questions. First, could you just give in volumes, ventilator sales now in the second quarter versus what you had in the first quarter and also year-over-year? Then the financial cost has come down quite a lot for a 2 consecutive quarters here. Is this a good level going forward if you look at the financial net? Finally on, you talked a little bit about this, but if you could give some more details for the lag we see in surgical sales that were down now organically versus the strong orders we have seen now for 2 consecutive quarters. When do you expect surgical sales to really start to grow? Thanks. Yeah, sure. When it comes to ventilators, I think it's important to think not only units of ventilators now, but look at the actual revenue of ventilators. We've highlighted a number of times that the product in critical care, there will be more and more connected services, consumables, and so on related to this. It's important to not just get stuck on the number of vents sold. Sorry, Mattias. I think that's more of a recurring type of business. What I'm after is the exceptional large number of machines you have been selling, and I guess they must have been down quite dramatically year-over-year, and still ACT is increasing earnings if you adjust for FX. I'm just trying to understand what the underlying business is doing. Yeah, sure. If you look at the number of vents, we had 3,600 vents sold in Q2. The other categories are going really well, and we have a positive mix effect from this. As you probably know, vents are not the highest margin category for us in Acute Care Therapies. I think the total first half-year number is about 7,500 vents. We remain comfortable that the number of around 12,000 that we have given as full year is still valid. I think you mentioned that we have a lot of orders in Q2. That's the first question. When it comes to financial cost, I think yes, it's rather sustainable. I'll let Lars add if there's anything onto this. What you could see in Q2 is reflecting the lower net debt and the lower interest cost that we have now, and that we do not see big changes going forward. When it comes to the lag of Surgical Workflows sales, this is something that we also believe is difficult to estimate right now. We do see some constraints among customers and other sub-suppliers into different hospital products that is out of our hands. Normally the lead time on average is about 6 months, but there's a bit of more uncertainty right now. Even if we wanted to, I couldn't give you a better indication of this right now. Okay, thank you. Still good gross margin or improved gross margin in Surgical Workplaces. Is that? Yeah a mix effect? You mentioned critical care or Infection Control was strong, for example. Would you say is this a mix effect or efficiency gains you have done? Well, it both. I mean, we also have IWS which has rather good gross margins. Even if they're the smallest part of Surgical Workflows, they do have a positive effect. I think the main reason is as well, that if you look at apples to apples and compare the same volume, the work that the Surgical Workflows team have done with the improvement efforts when it comes to productivity is really paying off here. That's really the bulk of it. Okay. Thank you. Thank you. Our next question comes from the line of Kit Lia, Jefferies. Please go ahead. Your line is open. Yeah. Morning, guys. Thanks for taking my question. My first one is just on Surgical Workflows as well. I guess you mentioned some delays in the delivery timing, but just in terms of the productivity measures that you are working on, is that going to improve as well going to the second half, or is margin now going to be more dependent on your sales level? My second question is on sterile transfer. I'm just wondering how much of the additional capacity that you're planning to add at the end of this year is now already being taken up by the customers? I guess for 2022 as well, if you can give some color on the revenue growth there for sterile transfer, that'd be great. I'll come back with my third question. Okay. Now, when it comes to Surgical Workflows productivity, I mean, everything that's been implemented in Surgical Workflows is really aiming for structural improvements. That will continue to be there. I should mention as well that we have good progression when it comes to service and service margins, which is not only good from a margin perspective, but also from a customer satisfaction perspective. We expect this to continue to support us really going forward. We haven't changed anything when it comes to our really longer-term outlook for the margin potential in Surgical Workflows. That remains unchanged as well. When it comes to sterile transfer capacity, everything is going according to plan. We've added the shift in the existing factories. The investment in the U.S. is going according to plan as well and will come online in the fourth quarter. We still have capacity to take orders. I think our customers in Life Science and related to the Sterile Transfer offering, they're very good at planning long-term. We do have good visibility and a good situation when it comes to planning and supporting them capacity-wise. No real concerns there. The outlook that we gave also in terms of volume for this year still holds. We expect this to be over SEK 1 billion in sales. For 2022, we haven't given any more detailed guidance than that, other than that we believe that there is continued growth both from vaccines, but also the underlying business related to biopharma manufacturing. Okay. That's great. My third question is just on ECMO. You talked about the increase in production capacity there. Can you just talk about what's been the rate of that production increase? I think for the second half of this year as well, are you planning to add more capacity compared to the first half, or is that going to be more of a steady state for the rest of the year? We don't guide on details when it comes to capacity, but we've been on a significant investment program for quite a while now that has really helped to take out some of the bottlenecks. We're in a completely different situation right now to support the market where up until this point in time, we've been the bottleneck really for growth, and we are not anymore. We can be a little bit more forward-leaning when it comes to active selling of these products as well. We've said that longer term, we believe that this is a 15%-20% growth category of our business. That's probably the best outlook I can give you. Okay. No, that's very helpful. Thank you. Thank you. Our next question comes from the line of Victor Forssell of Nordea. Please go ahead. Your line is open. Thanks a lot for taking my questions. Just to follow up on the last one on ECMO. Does your comments also imply that you will be much above those figures that you provided for your long-term growth rates, i.e., above 20% for this fiscal year? Also a quick one on your order intake in Life Science. I note the quite flattish figure in Americas. I just want to hear your comments regarding that figure and some more granularity on the performance there, especially for Sterile Transfers. Then I have one last one. Thanks. Yeah. When it comes to ECMO growth, there's no more clarity I can give you other than the longer-term guidance of 15%-20% growth. The main variations related to ECMO is, of course, there's a COVID-19 impact of this, and then there's a flu season impact. That seasonality pattern, I think, is important to be aware of. The overall long-term growth, 15%-20%, I think, is a good estimate for this part of the business. What was the second question? Can you repeat that, please? That on Life Science and your order intake, I think that the Americas figure was quite flattish, so I would just like to get some granularity on that figure overall. It is, just by nature, a bit of a lumpy business. If you look at the sterile transfer, they're normally quite cyclical contracts in terms of order intake, but with more linear development of deliveries. It's also a business that has a lot of large projects, and it's not unusual to have projects about SEK 50 million volume. When these fall into different quarters, it can give this kind of pattern. There's nothing underlying, I think, to be aware of here. It's generally a good development on all our categories in Life Science. Okay, great. Just a final one, in terms of your remediation work at Hechingen site. I'm a bit curious also if the stronger gross margin is somewhat supported from you being able to take out some costs here faster than anticipated. Also, what is your expectations or some details on the timeline here for the coming quarters? That would be interesting. Thanks. Yeah. The remediation in Hechingen is progressing according to plan. We've said that we should be done with this at the end of the third quarter. That forecast still holds. The margin progression has nothing to do with us being able to take out costs. We've not been able to do that. It's going on in full swing right now. That improvement would have to come later. It's more of a volume and mix effect right now. Great. Any sort of guidance on what that could be in terms of costs being taken out? No. We don't disclose that. We've just said that we have a significant cost related to this, but we haven't given any numbers on this. All right. Thanks a lot. Thank you. The next question comes from the line of David Adlington at JP Morgan. Please go ahead. Your line is open. Morning, guys. 2, please, from me. Firstly, on the Capital Markets Day, I just wondered if you were planning to give the type of guidance you might give, and firstly, whether you might look to update your long-term top-line guidance, and also whether you're planning to give a margin target at the event. Secondly, just a latest update, please, on where we are on the mesh litigation and when that might come to court. Thanks. For the Capital Markets Day, the date is set but not the content. We do expect to give a clearer picture on longer-term top-line guidance. I know there's been a lot of questions asked about us gravitating more towards higher growth categories. I think this is a valid hypothesis, we would like to see through all the effects of COVID-19 and really understand the longer-term dynamic there. We do expect to be able to do that at the Capital Markets Day. When it comes to margin targets, again, we're not promising anything in terms of forward-looking. We will certainly be able to provide a bit more information on the actual performance historically for several of our categories or sub-categories as well. We haven't decided on whether we will give explicit EBITDA margin guidance, for example. When it comes to mesh, there's nothing new development. It's an ongoing process. Nothing has changed that makes us change our mind on the approval that we have for this. It's been dragging out in time a bit because of COVID-19, and these are complex discussions as well. We will provide more information as soon as we have it. Thanks. Do you have any line of sight in terms of when that court case might be coming through? No, not at this point in time. We don't. Okay. Great. Thank you. Thank you. Currently, we have 1 further question in the queue. Just once again, if you do have a question, please dial 01 on your telephone keypads now. That question comes from the line of Scott Bardo in Berenberg. Please go ahead. Your line is open. Yeah, good morning, guys. Thanks for the questions. Firstly, on Life Science, Mattias, I wonder if you could help dissect a little bit the growth performance this quarter for your bioreactor business and sterile transfer. That would be helpful given the moving parts there. Furthermore, can you talk a little bit more about some of the dynamics you're seeing in bioreactors? Is it simply recovery from depressed base or are there new products and demand that are driving through here? Similar question really on sterile transfer. Perhaps talk a little bit about your AlphaPort installed base, which I think is a leading indicator to consumables. That's the first question, sir, please. Second, very brief. Can you perhaps give us some update- On the GPO status for Surgical Workflows in North America, it's good to see you on tenders. I wonder if this has anything to do with a change in status or accessibility. Also, perhaps the question you always get from me, any update from the regulator on your covered stent approval, which I think we've been waiting for for some time? Thanks. Yeah, right. Thanks. If we start with the first one, we don't give a breakdown on how much has been Sterile Transfer versus bioreactors in the quarter. I think in terms of Sterile Transfer, there's nothing that has changed in the underlying market dynamics or our own performance that makes us change our mind on the full-year outlook for Sterile Transfer. We don't disclose the install base of Alpha Port either. Things are progressing according to our own plans and what we've communicated earlier. When it comes to bioreactors, it's going a little bit better than I think anyone had expected. There is a very strong interest in the market for our type of solutions. This is looking really promising, and we have a bit of a ramp-up challenge now to really meet the market demand. We are applying everything that we have learned from ramping up other parts of our businesses before to really support this. That is maybe a change to the type of patterns we have seen before. When it comes to sterile transfer, it is in line with what we have mentioned in the past. When it comes to the GPO status, there is no decisions made yet either. They keep delaying this, so we hope to be able to come back in the next quarter or so with some decisions here, but there is nothing to announce at this point in time. When it comes to the covered stent situation, we have a constructive dialogue regarding this, but I really cannot give you a timeline for approval. We were hoping to have this in place by the end of the year. Nothing has changed that makes us change our mind on this, but it's still an ongoing dialogue with the FDA, in a constructive way, absolutely, very difficult to predict time-wise. Understood. Perhaps last question, please. Balance sheet looking very strong. I think Getinge has been a serial acquirer over the last 20, 30 years, and I can't remember a situation where your leverage has stayed at these low levels for a prolonged period. Can you talk a little bit about how inorganic growth is shaping your consideration for opportunities for the future? Are there any active targets you're working on? Is the pipeline rich, or is it more difficult in this environment? I'd like some thoughts there, please. Yeah, I think it's definitely a very active pipeline with concrete opportunities on a weekly or monthly basis. We are engaged from that perspective. The main thing that's holding us back is that valuations are very high right now and have been for a while. It is difficult to find the type of target that is a good strategic match at an attractive valuation, that we have enough synergies that we can really create value from that. It is actively ongoing. We're screening several hundred companies every year, and I think we will continue to do so as well. It's a low hit rate type of activities. Thank you. Thank you. Any more questions? We've had a couple more come through. The first is from Kristofer Liljeberg at Carnegie. Please go ahead, your line is open. Yeah, thank you. Just need to follow up on your comments about M&A and valuation. I think valuation is just, so far at least, continues to go up, I guess, for targets, and balance sheet is just getting stronger. How patient are you, and what will you do if you don't find good targets? Will you just keep the balance sheet, or would you consider paying out more cash to shareholders? Yeah. Well, first of all, we do have patience. I think that's important to underline. I've said, long before we had this type of solid financial position as well, that we never really felt constrained when it comes to looking for acquisitions, even though we have a very supportive majority shareholder as well. We've been active for quite some time and we'll continue to be active, but with patience and discipline. It's important to not erode the good position that we've created here. We've no plans for any other type of capital distribution right now. We do believe that there's enough opportunities to act on here, and we will remain patient. There's no plans for any share buybacks or additional dividend at this point in time. Okay. Thank you. Thank you. The next question comes from the line of Virendra Chauhan of AlphaValue. Please go ahead, your line is open. Yeah. Good morning. Just one question around margins from me. I think the margins in the quarter were substantially strong, and even compared to what we had last year, which are already considered fairly high. What I was trying to understand is that, what's driving these margins? Of course, you did mention that some kind of cost control was one reason, in terms of sustainability, do you think these margins are sustainable going ahead? Do you expect some kind of a pullback from these kind of levels if you expect them to be slightly lower than here? That's it from my side. Yeah. Unfortunately, we don't provide the forward-looking margin guidance. I think, as I mentioned earlier, we do have now a positive product mix effect from the recovery of elective surgeries. We do have some cost benefits because of lower activities in the wake of the pandemic as well. I think I really want to put the attention towards the structural improvements when it comes to productivity that's also supporting the margin progression right now. The mix effect, I think is turning towards more of a new normal, and we're gravitating towards better margin categories in general if you net everything out. We do expect to have the continued positive benefits from the productivity improvements as well. What will go away is the leverage effect of high ventilator sales. That's a temporary benefit. Of course, some of the overall costs that have been dampened by COVID-19 as well as activity returns to normal when it comes to customer activities and some of the internal activities, even if with some new, better ways of working. That will also normalize a bit. The net is certainly possible and positive and a bit better than maybe with the underlying margin progression that we guided for after the first quarter. Okay. Just a quick follow-up on this. If we look at the efficiency improvements and then base it off 2019, how much of these margin improvements would you tie down to the structural improvements the way you put it? Any ballpark around that? Yeah. No, we don't guide. Based on 2019. Yeah. No, I understand the question. We don't guide on this. We said after the first quarter that we have had, when you clear out the pandemic effects and everything, we've had about a one percentage point on EBITDA level improvement due to the structural productivity improvements that we do. That's a little bit better right now, and it's going better than maybe we guided for after the first quarter. I can't give you a magnitude of that additional improvement. Thank you. Thank you. As there are no further questions at this time, I'll hand back to our speakers for the closing comments. All right. Thank you very much. Thanks for engaging in the Q&A as well. I think we already made the summary there, the presentation. Nothing further to add from here. Thanks for the attention. I wish everyone a good rest of the day.