Welcome to the conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions- and- answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now I will hand the conference over to the speakers. Please go ahead.
Good afternoon, everyone, and thank you for joining Stille's quarterly conference call for Q3. My name is Ulrik Berthelsen, and I am the Group CEO of the Stille Group. I am joined today by our Group CFO, Niklas Tyrén, who will take you through the financial overview shortly. I will start with the key highlights for the quarter and provide an update on the development of the business. Overall, we are very pleased with the third quarter. We delivered another quarter of strong, profitable growth and a very strong cash flow.
Revenue increased to SEK 171 million, corresponding to a total growth of 23% and organic growth of 17%. Rolling 12-month sales exceeded SEK 700 million for the first time ever. Profitability also continued to improve. EBITDA before non-recurring items increased by 29% to SEK 34 million, and the EBIT margin before non-recurring items increased to 14.4% from 12.5% last year. Cash flow from operating activities more than tripled to SEK 34 million from SEK 10 million last year. In Surgical Instruments, organic growth was 19%.
Better product availability allowed us to shorten delivery times and reduce backorders. Underlying demand remains strong, but reported growth does benefit from delivering previous backorders. Surgical Tables grew by 9% following the record second quarter, with continued robust demand for both imagiQ3 Legacy and Medstone. For the first nine months, organic growth was 20%. The EBITDA margin before non-recurring items was 20.3%, and earnings per share more than doubled. To summarize, Q3 shows continued strong demand, better delivery performance, and an improved financial position.
Let me briefly elaborate a bit more on the operational progress behind the quarter. In July, we said that our priority for the second half was to continue improving delivery performance, and I am pleased to say that we made significant progress in the third quarter. Within Surgical Instruments, more effective supply management and increased production, particularly at S&T in Switzerland, allowed us to shorten delivery times and reduce backorder levels. This matters beyond the quarter. Better product availability strengthens confidence among our customers, as well as partners, in our ability to deliver, and that helps to stimulate future demand.
We are not done yet, though. Delivery performance remains a key priority for us, and we will continue to work on supply management and production capacity to make sure that we scale our supply for future growth. In Surgical Tables, demand remained robust after the record second quarter, supported by both imagiQ3 Legacy and Medstone. For the first nine months, table sales are up around 30% versus 2025.
On the commercial side, we are increasing the pace of our activities through our direct sales teams as well as our partners around the world, leveraging the full portfolio of the Stille Group. In summary, operations and the commercial side are moving in the right direction, and that is what we see reflected in the numbers. With that, I will hand over to Niklas, who will take you through the financials in more details.
Thank you, Ulrik. If we start looking at the revenue. The revenue in the quarter was SEK 170.6 million , an increase of 22.9% compared with the same period last year. Organic growth was 16.5%. Surgical Holdings contributed further with SEK 8.9 million in the quarter of acquired revenue. This is lower than in the previous quarters because Surgical Holdings was acquired during Q3 last year. So the acquisition impact from that is limited to the month of July. Currency translation had a positive impact of SEK 2.1 million on revenue, and in constant currencies, the total growth was 21.5% and organic growth was 15.2%.
As Ulrik mentioned, we surpassed, on a rolling 12-month basis, SEK 700 million for the first time, reaching SEK 711.4 million at the end of Q3. If we move on to earnings. Starting looking at the gross margins, they improved to 49.9% compared to 48.8% last year. Excluding Surgical Holdings, the acquisition impact of Surgical Holdings gross margin was 50.5%. This improvement was mainly driven by positive mix impacts. EBITDA before non-recurring items increased by 29% to SEK 33.7 million , and the margin increased by 0.9 percentage points to 19.7%.
EBIT before non-recurring items increased by 42% to SEK 24.5 million , and the margin improved by 1.9 percentage points to 14.4%. Excluding the acquisition effect, the EBITDA margin improved by 1.3 percentage points and the EBIT margin by 2.3 percentage points. Operating expenses increased by around 20%, slightly below sales growth, reflecting the larger group and continued investment in our organization, but nevertheless leveraging the higher sales to improve the margins. Currency translation had a negative impact of SEK 0.4 million on EBIT before non-recurring items.
This quarter merits a little bit closer look on non-recurring items as they occurred both in this year and last year in the quarter. Starting with this year, non-recurring items were a net positive of SEK 4 million , consisting of tariff refunds of SEK 5.2 million , and partly offset by SEK 1.2 million of costs related to organizational restructuring. Last year, non-recurring items were SEK - 7.1 million relating to transaction costs for the Surgical Holdings acquisition. Reported EBIT after non-recurring items was SEK 28.5 million in 2026 and SEK 10.2 million in 2025.
Looking a bit closer on the segments, Surgical Instrument sales increased by 27% to SEK 133.8 million with organic growth of 18.9%. EBIT before non-recurring items increased by 21% to SEK 20.4 million, and the reported EBIT margin was 15.3% compared to 16% last year, mainly reflecting the incorporation of Surgical Holdings and adverse currency translation impact. Excluding the acquisition effect, the margin was broadly stable, down 0.2 percentage points, which is explained by above mentioned currency translation.
Surgical Tables sales increased by 9% to SEK 36.8 million and EBIT before non-recurring items increased to SEK 4.1 million from SEK 0.5 million last year. The margin improved to 11.2% from 1.5% last year. For the first nine months, the Tables EBIT margin was 11.8% compared with 3.8% last year. If we look at the cash flow and financial position, cash flow in the quarter was strong. Cash flow from operating activities was SEK 34 million, compared with SEK 10.2 million in Q3 of 2025. The improvement was driven by higher earnings, with working capital broadly neutral in the quarter.
For the first nine months of 2026, operating cash flow was SEK 91.2 million compared to SEK 39.5 million last year. Cash and cash equivalents were SEK 170.7 million at the end of the quarter, and we had a net cash position of SEK 60.6 million. Net debt/EBITDA was - 0.4x, and the equity/assets ratio was 69.2%. In summary, overall, the third quarter combined strong organic growth, improved profitability, and a very good cash generation. For the first nine months, revenue has increased by 37%. EBITDA before non-recurring items has increased by 44%, and operating cash flow has more than doubled. With that, I hand back over to you, Ulrik.
Thank you, Niklas. To conclude, Q3 was another strong quarter. We continued to grow organically, improved margins and cash flow, and made clear progress on delivery performance. Looking ahead, our priorities are to scale instrument supply to support our continued growth, strengthen commercial execution and customer access, and leverage the strong imagiQ3 momentum to gain further market share. We will continue to develop the group's capabilities and infrastructure required for the future. With a net cash position, strengthened margins, and improving delivery performance, Stille is in a very strong position to take the next step, both organically and through selective acquisitions. With that, we are happy to take your questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Christian Lee from Pareto Securities. Please go ahead.
Thank you for taking my questions. I will take them one by one. Could you please give us a status on the supply situation? Are you now back to normal?
Thank you very much for your question, Christian. In terms of the supply chain situation, we have made significant progress during the quarter. As we have talked about continuously during 2026, we expect a gradual decrease in backorder level, and the following Q3, we still remain with elevated backorder levels. It has been reduced during the quarter, and we expect to see a further reduction during Q4 as well.
Okay, great. Thank you very much. Could you please talk about how demand for instruments look right now? You have said it remains strong. Would you say that it is in line with your long-term growth target?
When we look at the instrument demand all the way back from 2025 when we talked about it, we have been pleased with the underlying demand, and that has continued during the third quarter. The challenges we've had in the past has really been the supply side. Again, good progress on that front. This is also something we believe is very crucial for supporting the future demand on the instrument side that we can deliver on time. Strong development on demand and again, good progress on the delivery situation.
Yeah. Okay. Thank you. Could you please elaborate a little bit on what is driving demand for both instruments and tables right now? Is it specifically your products that are benefiting, or is it more market-driven?
I think it's a combination of both. We see on the table side, if I start with that, there is an effect of investments happening in the care setting. For example, in the U.S., we are seeing Ambulatory Surgery Centers, Office Based Labs and so on increasing. We're also seeing infrastructure programs, as we alluded to during the second quarter, for example, in Central and Eastern Europe. That is helping to drive growth. Clearly, when you look at the growth we've had for tables during the first nine months, we are taking market share from what we see, and that is driven by a very strong product.
We came out with imagiQ3 at the very end of 2024, and this is where we can see now with a strong commercial execution, good product delivery, and a strong product, that that is really helping us to drive growth. In terms of Surgical Instruments, I would say it is a combination. We are very proud of the portfolio of products we have. There is an underlying growth in the market, but that is more a mid-single-digit growth on instruments driven by increasing population, better access to healthcare, and so on. What we see is a good demand for the products we have due to the quality and the specialized nature of these.
Excellent. Thank you. Very clarifying. My last question is regarding the EBIT margin for instruments that was slightly down year-over-year in the third quarter. Was it purely mix effect, or I'm wondering why you're not seeing a positive scale effect, which sales up 27% year-over-year.
This is a dear topic for most of our calls with the margin. Let's start having a look at the reported numbers as you refer. First of all, there is the impact from the Surgical Holdings acquisition, which explains the larger part of the deviation versus last year. The remaining is explained by currency translation. So excluding both of those effects, margins are basically flat or stable with last year. As you also mentioned, and that we have talked about before, margins are impacted by a number of different mix impacts. It is product mix, it is market mix.
Depending on which market we sell, margins will look differently, and also depending on the sales channel, margins will also look differently. Selling through a distributor has one margin profile, and going direct has a different margin profile on both gross margin and EBIT margin. We are always going to strive at improving efficiency in our operations and improve the margin and the leverage that we can get out of the growth that we see. That being said, we are looking at sales of being the main driver of bottom-line growth rather than a margin optimization approach, so to speak, if that helps.
Okay. Thank you. Could you help me understand the margin development for the instruments? During the two last quarters, EBIT margin has been around 15%, but in the previous two quarters, in the fourth quarter and the first quarter of this year, the EBIT margin was around 18%. So how should we consider the underlying EBIT margin for instruments going forward?
I would say that overall, in general, looking at the year- to- date, margin profile is rather reflective of where we are and where we stand. Isolated quarter can have quite a lot of impact from the mix impacts that I mentioned. Over time, that will even out. So that's the way I would look at it.
Okay. That is clear. Thank you very much.
The next question comes from Filip Wetterqvist from SB1 Markets. Please go ahead.
Good morning, Ulrik and Niklas. A couple of questions from me. I take them one by one. The first one on instruments. Could you give us some color on the performance across your portfolio between Stille S&T, Surgical Holdings, and Fehling? So maybe, give us just some color on the development between the brands would be very helpful.
Sure. Thank you for the questions, Filip. As you know, we do not disclose the details of the individual brands in terms of the exact revenue. That being said, to give you a little bit of color on it, I would say that when it comes to Fehling on the cardiothoracic side, neuro and spine, as well as S&T on the microsurgery, both of those brands are performing very strongly in the instrument side at the moment.
I think that is a testament to the premium instruments we have in surgical niches that look very good, combined also with an improved delivery situation, making these highly specialized products available to surgeons around the world. So those are probably two that I would highlight again as showing a very positive performance.
All right. That is clear. Thank you. On the tariff refund, you received SEK 5.2 million. Does that cover all tariffs you have paid since the new tariffs were introduced last year, or was it just a small part of it?
It is a part of what we expect to see or expect to recover. I would guesstimate it at around 60% of what we would expect to see.
We can assume some more refunds in Q4 as well?
That is our target, to be able to recover that. Then obviously it is always going to depend on the administration in the U.S. when you actually get the refunds back and if they are approved.
Yeah. All right. That is clear. Elaborate a little bit on the gross margin. You talked about it a little bit, but on our numbers, the gross margin appears to be down a little bit more than 200 basis points year-over-year when I exclude the Surgical Holdings and the tariff refund, and we had some positive FX effects in the quarter. Is this mainly a mix effect that you have seen stronger sales in tables, or what are the main drivers behind the decline in the underlying gross margin?
Sorry, you were talking about the year-to-date gross margin or the—
No, in the quarter. If you compare Q3 to Q3, I think it was down 200 basis points when excluding tariffs and the Surgical Holdings acquisition.
Okay. Let me clarify then. The tariffs are, we do not gross report on the tariffs. The non-recurring items is the only place in the P&L that they appear, so they are not included in the gross profit. It is a net reporting of the tariffs. They do not appear. They are not in gross profit.
The SEK 5.2 million is a net effect and not the gross refund.
No, what I am saying.
The cost.
No. Let me try to be clear. You could report it. You could include the tariffs in the gross margin in this instance, and then take it back out in non-recurring. That is not the way we do it. We report the full impact of the tariff refunds on a separate reporting line, which is named then non-recurring items.
Okay. Yeah, I understand. That's clear. Thank you. All right. Then last question, if I may, on your organic growth target. Do you see 10% year-over-year as realistic? The markets you are in are growing probably mid-single digits, which mean you have to take quite a substantial market share to achieve this year-over-year, but do you view this as a realistic target?
Yeah. Thank you, Filip, for the question. It is, of course, an ambitious target. It's part of our long-term guidance to deliver +10% organic growth. We do see that as a realistic target, and that comes back to the market share position that we have on the global market. We are still a relatively small business in the overall scheme of Surgical Instruments. We believe with a strong execution across this, then we will be able to take market share continuously over the coming years.
That is also why you hear me talk about the commercial execution, supporting our partners, strengthening our direct teams. We believe we have a very competitive portfolio, but a very uneven market share when you look at it on the global markets. That is why we think that despite a, let's say, mid-single digit market growth, that we can outperform that and continue to take share in the market.
All right. Yep. That's all from me. Thank you.
Thank you very much.
Thank you.
The next question comes from Oscar Bergman from Redeye. Please go ahead.
Hello, Ulrik and Niklas. Thanks for taking my questions. I have a few. Maybe you've already sort of touched upon them, but we'll see if you can provide any additional information. First off, and I'll take them one by one, but first off, I'm wondering if you can shed some more light on how much of the growth in Surgical Instruments were driven by, well, fulfillment of previous backorders and how you view the underlying demand going into Q4.
Yeah. Thank you for the question, Oscar. This is something we've been asked and been discussing on a continuous basis. We have not disclosed our backorder levels simply because we don't think that this is a long-term situation where we should have. Therefore, also, we do not disclose the specific organic sales growth in the quarter, what came from backorder fulfillment, what came from orders coming in. That being said, we are pleased with the underlying development in the business. We see a solid momentum.
We see a lot of opportunity also. I would say one of the things that really stands out for me is that when I speak to our customers, when I speak to our partners around the world, they are starting to really see the difference that we are making on the supply side. Of course, as I alluded to earlier on, this basically means that people will get even more keen to be promoting our products actively. Our customers will have more confidence in our ability to deliver. Unfortunately, again, can't be more specific on the exact split, but we are confident in the underlying demand and really pleased on the progress we're making on the delivery situation.
All right. Thanks. If we turn our heads to Surgical Tables, you have delivered two strong quarters in a row. Just wondering if you can provide any sort of outlook for 2027.
We don't provide the specific outlooks on individual segments, nor year by year outlook. We have the three targets that we communicate publicly on our organic growth target, +10%, our EBITDA margin of 25% and our leverage of less than 3x net debt/EBITDA. When it comes specifically to tables, I would say I'm extremely pleased with the effort from the team and from our partners in really seizing the opportunity we have with the imagiQ3. We have seen very strong demand throughout the year, and really going back to Q3 in 2025, we started to see very strong development.
As I've talked about before, this, of course, is a different business than the instrument business. It's capital equipment. These tables last a long time. That also means that the development is a little bit more lumpy. When you look at the growth we've had in 2026, that has clearly been extraordinary. We're talking about very high numbers of growth of around 30% versus 2025.
That is clearly not a growth you should just extrapolate going into 2027. We think we're in a very strong position to continue to take market share. But again, as we discussed earlier on the market growth for instruments, clearly the market for tables is not growing at 30%. We're happy with the position we have. We believe we can continue to grow in the segment, but 30% next year might be a stretch.
Thanks. I've been talking to some investors that all have the same sort of thesis. It's not a big part of the case, of course, but some investors are asking about the Surgical Tables segment and what could perhaps make you seriously considering divesting the Surgical Tables segment. What would have to happen in the business for you to potentially divest that part?
Tables is an important part of who we are, and it's an important part of the business. It's 23% of the revenue year- to- date, so it's an important leg of the business. Over the past five years, the business has changed quite a lot. It used to be the biggest segment. Now it's a big segment, an important segment. As the business evolves, we will continue to look at the composition we have. But we are very pleased with the performance of this segment and see this as being an integral part of who the group is.
Okay, thanks. I just have a final question, and that's in regards to acquisitions. Just wondering which geographies do you find most attractive and how you view the U.S. as a hunting ground for companies to buy, basically.
M&A is something that is very high on a lot of questions we get asked by investors and analysts. It is an important part of our agenda. We have an active acquisition agenda and continue to look for opportunities that we can believe or that we can see add value to the group as a whole. When we talk about the U.S. market, this is the largest market for Surgical Instruments in the world, the largest market also for tables. Very attractive. In terms of M&A, there definitely are a number of interesting opportunities in the U.S. market.
I would say when you look at them purely in terms of numbers, you will find more in Western Europe. That comes back to that there are simply more companies, both on the branded side as well as on the manufacturing side in Europe than what you will find in North America. We see good performance in the U.S. in the organic side, but on the inorganic side, I would say U.S. is high on our radar and so is Western Europe.
Just a follow-up question, or maybe not a question, maybe more of an observation, but I suspect the price tag would be higher than the 7x or 8x EBITDA you purchased so far in Western Europe if you were to buy in the U.S.
I think I will avoid speculating too much on. I think that comes a lot down to the specific nature of the targets that we're evaluating.
Okay, great. Thanks. Have a great Friday.
Thank you very much. We had a couple of other things. I think it is just worth maybe commenting on one question we have gotten in terms of the inventory position, just how that has evolved. It did increase slightly during the quarter. I am thinking, Niklas, maybe you want to just add a couple of comments on that?
Yes, I can. As we have also talked about before, our main focus is really on ensuring that we can deliver according to our customers' demand. We are therefore have been and on a case-by-case basis, will continue to invest in inventory if that means that we can get the products to our customer in a fast and orderly fashion.
That is something that we have also done in the third quarter, specifically for S&T, which helped us actually deliver these good sales growth numbers for the quarter. Overall on working capital, the net impact of the movements in working capital is fairly neutral. Meaning that even if we invest in inventory, when we are able to sell the products, we will also build up receivables as we will have a neutral cash position because we deliver to our customer.
Super. I believe that is all the questions we have. Thank you very much for taking the time to listen in to our quarterly conference call. Thank you very much and have a nice weekend.