Earnings Call: Q2 2021

Jul 16, 2021

Hello, and welcome to the Getinge AB Audiocaster Teleconference Q2 2021. Throughout the call, all participants will be in listen only mode and afterwards there will be a question and answer session. Just to remind you, this conference call is being recorded. I'll now hand the floor to Matthias Pijs, CEO. Please begin your question. Great. Thank you very much. With me on today's call, I have Lars Sandstrom, our CFO, who will take you through the financials a little Let's start with moving over to Page number 2 right away and look at the key takeaways from the Q2 of 2021. Organic net sales growth was 3.6% for the quarter. This is mainly explained by a tale of demand for Later related to COVID-nineteen in India in combination with continued strong development in ecmotherapy products in the Life Sciences 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-nineteen related order intake, especially in ventilators. We had a favorable product mix and continuous productivity improvements, and this resulted in higher margins overall, very strong free cash flow, lower net debt and consequently, overall strength and financial position. We'll then move over to Page number 3, please. So if we take a closer look on where we are trend wise on orders, we can clearly see that the trends Largely continued to move towards where we were in the beginning of 2020 after quite an exceptional period here due to COVID-nineteen. 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 Ben to rate the orders, of course. Exmoor orders continue to be at a new higher level overall, confirming our strong position in this segments 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-nineteen. North America is the front When it comes to the recovery, to a large extent, explained by a successful rollout of 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. Hospitals can this means hospitals can focus More of their energy and on handling the backlog of surgeries, which is still very significant. We also continue to see good order intake Good order growth in Surgical Workflows compared to the quite weak order intake 1 year ago. We expect this trend to continue as Focusing more and more on how to improve our activity 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 twenty nineteen and 2020. So all in all, it's migrating back towards the pre pandemic levels with the exceptions of that side. 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 the 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 ecmotherapies 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 twenty twenty one, 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 And there are good reasons for us expecting to expect us to continue to be at a new higher level from here in order to meet the demand linked The backlog of service there is. North America, as I mentioned, is the 1st mover here. 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. Of course, depending still on a successful vaccination rollout and capacity in hospitals returning to normal or even above normal levels. As said before, Surgical Workforce 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 a 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 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 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 Aplicon bioreactors. We also expect the strong order intake in sterilizers and washes to transform into increased net sales in the second half of this year. So all in all, this takes us to better first half than expected, followed by a good second half for getting as a whole when compared to 2019. So are there any risks to this? Yes, of course, there are. We're still in a pandemic with a fast paced spread of the delta variant of the virus. However, we see that vaccination rollout is doing its job in a good way and hospitals are in a different and better position today to tackle this So 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. But if the global constraints on electronics, for example, get worse and continue for a long period, we will most likely be impacted in some As well, creating a timing issue or phasing of net sales going forward. In this context, it's also worth mentioning that we are better Better 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, construction Customers asked 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 In order to be fully transparent. Having said this, we can move to Page 5. So based on what I just said here and despite the more negative FX impact than expected, we choose to keep the output 2021, unchanged at SEK27 1,000,000,000 in net sales as a floor for the full year. We can then move to Page number 6, please. I wanted to I mentioned 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 have 510 clearance by FDA for 3 products strengthening the offering of advanced ICU servitor ventilators in the U. S. Market. We are doing the commercial launch of the HeartLang Machine HL40 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 SEK570 1,000,000. We've also, as part of our consolidation efforts in Panter 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 We 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-nineteen and the ramp up of surgery. So one example here is the consolidation of operations in New Jersey, the U. S, Going from 3 factors 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 getting it. With that, we can move over to Page number 7, please. Order intake declined 6.1% and net Sales grew 3.6 percent organically. So even if we see a strong comeback in many product categories, we couldn't quite match The last year's exceptional and COVID-nineteen related order intake in 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 it's really not come in terms of handling COVID-nineteen. 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. The strong performance in Asia Pacific is attributable to Orders have ventilated to India and very strong growth in several product categories within life science, especially in China, will also be 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? So order intake in actual numbers amounted to SEK6.934 1,000,000 in the quarter. In Acute Care Therapies, we had a 20.7 percent organic decline in orders and SEK1.5 billion Decline in actions. So this decline is, of course, the result of the challenging comparative figures due to large orders for advanced ICU ventilators in Q220. We had good order intake, good organic order growth in all other product categories in the business area, which is a very good In Life Science, we had a 27.9 percent organic increase of orders, SEK 154,000,000 in action. 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 percent organic increase or SEK199 1,000,000 In actual numbers, we saw here 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 Ternical Workflows was particularly high in infection control. We then move over to Page number 9, please. Looking at sales, Net sales amounted to SEK6.587 billion in the quarter. If you compare with 2019, net sales is up more than SEK300 1,000,000 all in all. Acute Care Therapies had 1.3% organic Growth by the decline of SEK370 1,000,000 in actual numbers. We saw strong organic growth in Cardiac and vascular surgery products as a result of increased surgical volumes, mainly then 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 on top of this year compared to last year. So 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, SEK180 SEK4 1,000,000 in actions. And here we saw strong organic growth in sales in sterile transfer products, in dishwashing disinfectors and also the bioreactors from Aptico. Invoicing also increased in service and Steroidis even if not to the same extent to the above mentioned. Strong growth in all regions, if you look at this from a geographical perspective and particularly good development in Asia Pacific. Turning to workflows from a sales perspective, we had a 3.2% organic decline or SEK198 1,000,000 In actual numbers, we had slightly negative organic development and 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. So 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. Currently had a negative impact on net sales for the quarter. It was minus SEK642 1,000,000, Tech, which equals 9.2%. We can then move over to Page 10, please. We had margin improvement in all of our business areas. So our adjusted gross profit decreased by SEK99 1,000,000 to SEK3.624 1,000,000 in the quarter. Negative FX effect accounted for minus SEK371 1,000,000 here. If we compare with 2019, gross profit is up more than SEK0.5 billion all in all. For the group as a whole, the gross margin improved year on year. The product mix is flat. Product mix effect is flat despite negative effect from less sales of ventilators because this is offset by the recovery of products in elective surgeries. We also saw factory absorption and service performance supporting the margin, and FX had a negative impact on the margin overall. So with that overview, let's move over to Page number 2, and I leave it to you, Lars. Thanks, Mattias. Adjusted EBITDA increased €32,000,000 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 electro surgery. Regarding OpEx, our new way of working continues to have a positive effect. We're comparing to last year situation with lockdown and restrictions. OpEx is slightly impacted slightly negative on the margin with 0.7 percentage points. And as we come into 2021 with lower levels of depreciation amortization, Due to assets rolling off the balance sheet, D and 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 CHF 1,250,000,000 compared to CHF 1,218,000,000 in Q2 2020. And in 2019, we were at SEK591 1,000,000 and then data 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 year on year versus most other currencies. This is, of course, taken into account when we set the outlook for the year. And from the left, on the page, you see 3 major currency pairs for us followed by a combination of small currencies with high volatility and SEK. And each of them represent a small proportion of our business. But put together, there they stand for approximately 10%. Of course, we use split pricing discipline and use price in major currencies in these Countries in order to secure good integrated margin, but you cannot mitigate all effects when you see volatility like this. The dark blue and solid line in each graph is average rates, which we use in our financial reporting. And as you can see, there is quite a substantial difference year on year. The dotted line represents the closing of each month. The steep decline in the middle of each graph illustrates a shift from 'twenty to 'twenty one and recalculation of average rates that comes with that. As we are long in U. S. Dollar, I. E. More revenue than costs. And U. S. Represents more than onethree of our total revenue. Depreciation of USD in relation to the Swedish kroner Well above 10% is, of course, having a negative impact to us. I just want to show you this As a reminder, when taking FX into account, we also find some good information on this in the annual report that was released at the end of the March. Over to Page 14 then please. Free cash flow continues to be strong, amounting to SEK1.2 billion. This is the result of a healthy operating profit. In combination, we'll continue good control on how we with the working capital at work. Working capital days continues to decrease. We are now down 39 days from the peak in Q2 2018. And we also see continued increase in our operating return on invested capital, where we are at 21.8% on a rolling 12 month And one could expect to see some kind of reversal towards the long term trend on working capital days and with our invested capital, the net sales move more into normal territory. Then let's move to Page 15. Net debt was positively impacted by the free cash flow, taking us to SEK5.3 billion. This also includes paying dividends of SEK817 1,000,000 in the quarter. And last year, the event was paid in Q3 due to the delayed AGM connected to the COVID-nineteen. And if we adjust for pension liabilities, we are at the net debt of 2,000,000,000. This brings us to leverage of 0.7x EBITDA. And if we adjust potential, I think the Leverage is at €0.3. During the quarter, further reduction of loans have been made, and Cash amounted to approximately SEK 3,500,000,000 at the end of the quarter. Let me move to Page 17 and over to you, Madel. Great. Thank you, Lars. So on Page 17, just wanted to reiterate and summarize some of the key takeaways from the quarter. So as we highlighted already at the end of 2019 and again after the Q1, 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 The investment patterns among customers for more long term infrastructure type of investment. And we've been able to fight the 3rd wave of COVID-nineteen 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 27,000,000,000 in net sales. So with that summary, we open up for questions. Thank you. And our first question comes from the line of Annette Luke Handelsbanken, please go ahead. Your line is open. Thank you so much and congrats on a very Strong results 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 second half? And 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 events to the So the events to the Indian market. And then another question I like, if you could elaborate a little bit on that. How do you see the potential new delta version of C90? And maybe in some regions, we will see more lockdown. Are you prepared for this? And do you think that we could risk or have a chance to see more demand for some of the C19 Related products you have in your pipe. Thank you. All right. Thanks, Annette. When it comes to the first question, you're absolutely right. We don't guide what we're looking on margins. But we 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. So there is, I think, room for optimism in that sense. And we also have some good product mix effects here that we kind of 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 eczema therapy product as well provides a good mix When it comes to yes, sorry, go ahead. And yes, could you say anything about the vents? How much of I mean additional margin, is it 100 or 150 basis points coming from these additional ventilators sold to The basis points coming from these additional ventilators sold to India? No, we're not disclosing that type granularity when it comes to our margins. So I only want to highlight the good underlying progression That we mentioned after the Q1 is going a little bit better right now. And I think we're getting the traction that we want from the Strategic initiative. There is a positive product mix effect in there. 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. So that has a positive impact. We also had good utilizations of factors, 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. And When it comes to Q4 as well, if you look at the normal type of hockey stick effects that we have, we will be dampened a bit Because of the order of patent in Critical Care, but also because of the deliveries that patent that I mentioned when it comes to Surgical Workflows, if you look at Jurgical workplace product, operating group product and infection control products. These are normally longer lead times. And right now, with constraint around the world, possibly a little bit longer, so some negative leverage effect from this also. But underlying, you're absolutely right. It's going better than maybe we guided for the Q1 and that we believe is sustainable. We don't Kind of publish a magnitude on this. Okay. And then when it comes to your question about the Telstra version, we are 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 return in the Q2 of So our ventilator, so we're really aiming 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 Christophe Lillebee of Carnegie. Please go ahead. Your line is open. Thank you. Three questions. First, could you just give in volumes ventilator sales now in the second quarter versus what you had in the Q1 and also year over year. And then the financial cost has come down quite a lot For 2nd consecutive quarter here, is this a good level going forward if you look at the financial math? And then finally on, put a little bit about this, but if you could give some more details for the lag we The Surgical sales that were down now organically versus the strong orders we have seen now for 2 consecutive quarters? And when do you expect Surgical sales to really start to grow? Thanks. Yes, 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 We've highlighted a number of times that the product in Critical Care, they will be More and more connected services, consumables and so on related to this. So it's important to not just get stuck on the number of events. But we Sorry, Mattias. But I think that's more of a recurring type of business. What I'm after is The exceptionally 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? Yes, sure. If you look at the number of events, we had 3,006 100 Vents sold in Q2. But 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. And I think the total first half year number is about 7,500 events. And we remain comfortable that the number of around 12,000 that we have given a full year is Still valid. And I think we have big Lot of orders in Q2, but So 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 on to this. But what you could see in Q2 is affecting the lower net debt and the lower interest Of course, that we have now and that we do not see big changes going forward. And 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 kind of out of our hands. So Normally, the lead time on average is about 6 months, but there's a bit of more uncertainty right now. But even if we wanted to, I couldn't give you a better indication of this right now. Okay. Thank you. And still good gross margin or improved gross margin In the Solitude Workstations. Is that Yes. And a mix effect? You mentioned Critical Care or Infection Control was strong, for example. So would you say is this a mix effect or efficiency gains you have done? Yes. Well, it's both. I mean, we also have IWS, which has rather good gross margins. They even if they're the smallest part of Surgical Workers, 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 Surrogate Workflows team have done with the improvement efforts when it comes to productivity It's really paying off, yes. So that's really the bulk of it. Okay. Thank you. Our next question comes from the line of Kitley at Jefferies. Please go ahead. Your line is open. Yes. Good morning, guys. Thanks for taking my question. My first one is just on surgical workflows as well. I guess you mentioned some delays 1, 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? And then my second question is on Stera Transfer. I'm just wondering how much of the additional capacity that you're planning to add at the end of this year It is now already being taken up by the customers. And I guess for 2022 as well, if you can give some color 1? On the revenue growth there for sterile transfer, that would be great. And I'll come back with my 3rd question. Okay. Now when it comes to Surgical Workflows productivity, I mean, everything that's been implemented in Surgical Workflows is really aiming for the structural So 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 But also from a customer satisfaction perspective. So we expect this to continue to support us really going forward. And we haven't changed anything when it comes to our really longer term outlook for the margin potential in Surgical 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 Q4. 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. So we do have good visibility and a good situation when it comes to planning and supporting them Capacity wise, so no real concerns there. And the outlook that we gave also in terms of volume for this year still holds. We expect this to be over SEK1 1,000,000,000 around SEK1 1,000,000,000 in sales. For 2022, we haven't given any more detailed guidance than that other than that we We believe that there is continued growth both from vaccines, but also the underlying business related to biopharma manufacturing. Okay, that's great. And then my third question is just on ACMO. You talked about the increase in production capacity Can you just talk about what's been the rate of that production increase? And I think for the second half of this year as well, are you planning to add more capacity compared to the first half of 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 Investment program for quite a while now that has really helped to take out some of the bottlenecks because we were in a completely different situation right now to support the market where we've up until this point in time, we've been the bottleneck here really for growth and we are not anymore. So we can be a little bit more forward leaning when it comes to active selling of these products as well. And we've said that longer term, we believe that this is a 15% to 20% growth category of our business. So that's probably the best outlook I can give you. Okay. That's very helpful. Thank you. Thank you. And our next question comes from the line of Victor Forssell of Just a 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. And So a quick one on your order intake in Life Science. I know 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. And then I have one last one. Thanks. Yes. When it comes to ECMO growth, there's No more clarity I can give you other than the longer term guidance of 15% to 20% growth. Of course, the main Variations related to ECMO is, of course, there is a COVID-nineteen impact of it. And then there is a flu season impact. So that seasonality pattern, I think, is important To be aware of, but the overall long term growth, 15% to 20%, I think is a good estimate for this part of the business. And what was the second question? Can you repeat that? 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 sale transfer, they're normally quite sizable contracts in terms of more intake 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 50,000,000 second volume. So When these fall into different quarters, they can give this kind of pattern. But there's nothing underlying, I think, to be aware of here. It's generally a good development of all our categories in Life Science. Okay, great. And just a final one in terms of your remediation working at Hashing Insight. 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. And also what is your expectations or some details on the time line here for the coming quarters? That would be interesting. Thanks. Yes. The remediation in Hettingen is progressing according to plan. We've said that we should be done with this at the end of the Q3 and 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. So that improvement would have to come later. It's more of a volume and mix effect right now. Great. And any sort of guidance on what that could be in terms of cost 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. All right. Thanks a lot. Thank you. The next question comes from the line of David Adlington at JPMorgan. Please go ahead. Your line is open. Good morning, guys. So 2, please, from me. Firstly, on the Capital Markets Day, I just wondered if you were planning to give just 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? And then secondly, just a latest update please on where we are on the mesh investigation when that Yes, for the Capital Markets Day, I mean, the date is That but not the content. We do expect to give a clearer picture on top longer term top line guidance. I know there's been a lot of questions asked about us gravitating to more towards higher growth categories. And I think this is It's a valid hypothesis, but we would like to see through the effects of all the effects of COVID-nineteen and really understand the longer term dynamics here. 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, but we will certainly be able to provide a bit more information on the actual performance historically for several of our categories or Subcategories as well, but we haven't decided on whether we will give explicit EBITDA margin guidance. And when it comes to mesh, there's nothing new development. It's an ongoing Nothing has changed that makes us change our mind on the approval that we have for this. So it's They've been dragging out in time a bit because of COVID-nineteen and these are complex discussions as well. So we will provide more information as soon as we have it. Thanks. And 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 one further question in the queue. So just once again, if you do have a question, And that question comes from the line of Scott Bardo in Berenberg. Please go ahead. Your line is open. Good morning, guys. Thanks for the questions. So firstly on Life Science. Matthias, I wonder if you could help dissect a little The growth performance this quarter for your BioReactor business and sterile transfer that would be helpful given and the moving parts there. And furthermore, can you talk a little bit more about some of the dynamics you're seeing in bioreactors? Is it simply recovery from the press base or are there new products and demand that are driving through here? Similar question really on As Daryl trying to perhaps talk a little bit about your Alpha Port installed base, which I think is a leading indicator to consumables. So that's the first question, sir, please. 2nd, 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 is anything With a change in status or accessibility and also perhaps the question you always get from me, any update from the regulator on your covered event approval, which I think would be mindful for some time? Thanks. Yeah, right. Thanks. If we Start with the first one then. We don't give a breakdown on how much has been the transfer versus bioreactors in the quarter. I think In terms of the transfer, there's nothing that has changed in the underlying market dynamics or our own performance that makes Change our mind on the full year outlook for sterile transfer, and we don't disclose the installed base of Asaport's either. But things are progressing according to our own plans and what we've communicated earlier. When it comes to bioreactors, it's 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. So this is looking really promising, and we have a bit of a ramp up challenge now to really meet the market demand. So we're applying everything that we've learned from ramping up other parts Our business is before to really support this. So that's maybe a change to the type So, patents we've seen before. When it comes to sterile transfer, it's in line with what we've mentioned in the past. When it comes to the GPO status, there's 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's nothing to announce at this point in time. When it comes to the coverage stand situation, we have a constructive dialogue regarding this, but I really can't give you a Time line for approval. We're 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, but very difficult to predict time wise. Understood. And perhaps last question, please. Balance sheet looking very strong. I think Getinge has been It's here or acquire 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. So 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. Yes, 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, very high right now and have been for a while. So It is difficult to find the type of target that is a good strategic match and an attractive valuation that we have enough Synergies that we can really create value from that. So it is actively ongoing. We're screening several 100 companies every year, and I think We will continue to do so as well. But it's a low hit rate type of activity. Thank you. Thank you. Any more questions? We've had a A couple will come through. The first is from Christopher Liberby at Carnegie. Please go ahead. Your line is open. Yes. Thank you. I just need to follow-up on your comments about M and 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. So how patients are you? And What will you do if you don't find the targets? Will you just keep the balance sheet? Or would you consider paying out more cash to shareholders? Yes. Well, first of all, we do have patients. I think that's important to underline. And I've And 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. So 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. And we have 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'll Remain patient. So there's no plans for any share buybacks or additional dividend at this point in time. Okay. Thank you. Thank you. And the next question comes from the line of Virendra Johan of Alpha Valley. Please go ahead. Your line is open. Yes, good morning. Just one question around margins from me. So I think the margins in the quarter were substantially strong. And even compared to what we had last year, which was already considered fairly high. So what I was trying to understand is that what's driving margins? Of course, you didn't mention that some kind of cost control was one reason. But then in terms of sustainability, do you think these margins are sustainable going ahead? Or do you expect some kind of a Pull back from these kind of levels if you expect them to be slightly lower than here. So that's it from my side. Yes. Unfortunately, we don't provide forward looking margin guidance. But 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. And then I really want to put the attention towards the structured improvements when it comes to productivity that's also supporting the margin progression right now. So 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. And we do expect to have continued positive benefits from the productivity improvement as well. So what will go away is the leverage effect of high ventilator sales. That's kind of a temporary benefit. And of course, some of the overall costs that have been dampened by COVID-nineteen as well as activity returns to normal when it Customer activities and some of the internal activities, even if we have new better ways of working, that will also normalize a bit. But The net is certainly possible and positive and a bit better than maybe with the underlying margin progression that we guided for after the Q1. Okay. Just a quick follow-up on this. Like if you look at the efficiency improvements And then base of 2019, so how much of these margin improvements would you tie down to the structural improvements the way you Let me ballpark it on that. Yes, yes. No, I understand the question, but we don't guide on this. We said after the Q1 that we have had when you clear out the pandemic effects and everything, We've had about a 1 percentage point on a beta level improvement due to the structure for activity improvements that we do. That's a little bit better right now and it's going better than maybe we guided for after the Q1, but I can't give you a Magnitude of that additional improvement. Thank you. And 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 and A as well. And I think we already made the summary there, the presentation.