Ambu delivered 21% organic revenue growth in Q3, driven by an 81% increase in Visualization sales. COVID-19 significantly increased the demand for Ambu’s resuscitators and single-use scopes primarily in Europe and Asia Pacific. The rest of the portfolio was negatively affected, as elective procedures reduced sharply in April and May. As a result, full-year guidance is reduced to approx. 26% organic growth with an EBIT margin of approx. 12%.
“We will emerge from the COVID-19 crisis as a stronger company, and the benefits of single-use endoscopy are clearer today than before the pandemic started. Our visualization business grew 81% in the quarter and we are well under way to exceed a million single-use endoscopes sold this year. In this quarter, we were also able to advance our innovation agenda and enter urology and GI, the largest markets in endoscopy. These are important milestones in our journey to become the world’s most innovative single-use medtech company,” says CEO Juan Jose Gonzalez.
Highlights for the quarter
- For Q3, revenue totaled DKK 947m (vs. DKK 773m LY), equal to 23% reported growth. Year-to-date reported growth was 22%. Organic growth for Q3 and year to date was 21% and 20%, respectively.
- EBIT before special items for the quarter was DKK 156m (DKK 155m) with an EBIT margin before special items of 16.5% (20.1%), while EBIT before special items year to date was DKK 399m (DKK 462m) equating to an EBIT margin before special items of 14.8% (20.9%).
- In Q3, Visualization achieved organic growth of 81%, Anaesthesia declined by -1%, and Patient Monitoring & Diagnostics (PMD) declined by -32%. Year to date, Visualization grew 60% organically, Anaesthesia 3% while PMD was negative by -10%. Organic growth is driven by a high demand for bronchoscopes and resuscitators, with geographical variations, but negatively impacted by other products within Anaesthesia and PMD that are used for elective procedures.
- For the quarter, North America declined -10%, while Europe grew 59% and Rest of World grew 31%. Year to date, North America grew 7%, Europe 38% and Rest of World 15%. The negative growth in North America was mainly ascribable to Anaesthesia and PMD, which declined -18%.
- Sales of single-use endoscopes reached 337,000 units for the quarter and 830,000 units year to date. Sales volumes were thus up 74% and 58%, respectively, relative to last year.
- The aScope™ Duodeno has been granted designation as a breakthrough device by the FDA and received 510(k) clearance on 17 July 2020. This is our third launch of the year in single-use endoscopy and shows Ambu’s ability to develop and bring to market advanced single-use endoscopy solutions.
- Following the FDA clearance of our aScope™ Duodeno, we have conducted several product demonstrations in the U.S. with positive feedback from physicians. We are also building deep expertise within the field of gastrointestinal (GI) endoscopy on the back of creating our GI commercial organization in the U.S. In terms of our clinical study, the plan was to start 1 September 2020. However, as the COVID-19 recovery is taking longer than expected, hospital administrations have been unable to confirm the start date of our clinical study, and we therefore expect this to commence later than initially planned.
- Travel restrictions and delays from suppliers caused by the COVID-19 pandemic have impacted the launch of our colonoscope and gastroscope that was planned to be launched in Q2 2020/21 and which we now expect to launch in H2 2020/21.
- Gross margin for the quarter was 64.7% (56.4%). The comparison with last year should be adjusted for the effect of inventory write-downs following the discontinuation of the SC210 colonoscope in Q3 2018/19. Adjusted for this effect, the gross margin increased by approx. 5 percentage points. The gross margin year to date was 62.2% (58.8%).
- Capacity costs for the quarter totaled DKK 457m (DKK 281m), corresponding to an increase of 63% for the quarter and 52% year to date. Capacity costs are increasing primarily due to the investments in commercial infrastructure announced in June and August 2019 and in May 2020. Our commercial expansion is progressing as planned and is as previously announced expected to be fully completed by the end of Q1 2020/21.
- Net working capital to revenue ratio was 17% (21%) by the end of the quarter based on rolling 12-month revenue. Our supply chain has been significantly impacted by the strong increase in demand caused by the pandemic, and for certain product categories our global inventories are lower than what we would like them to be in the longer term.
- Free cash flow before acquisitions totaled DKK 187m (DKK 148m) for the quarter and was negative year to date at DKK -92m (DKK +204m), which is in line with our investment plan. The EUR 40m milestone payment associated with FDA clearance of the duodenoscope falls due in Q1 2020/21.
- The organic growth for the 2019/20 financial year is now expected to be ‘approx. 26%’ compared to previously ‘26-30%’ as the impact of COVID-19 has been more protracted than expected, especially in the U.S. This impacts volume of elective procedures and the revenue contribution from our Anaesthesia and PMD portfolios. As a result, we now expect growth for our Anaesthesia and PMD portfolios to be slightly negative for the full year 2019/20. Our full-year expectations for Visualization are unchanged, and we still expect to sell more than 1 million endoscopes in 2019/20. As a result of the lower growth for the full year, our expectations for EBIT margin before special items are reduced from ‘12-14%’ to now ‘approx. 12%’. The outlook for the 2019/20 financial year is therefore:
- Organic growth of approx. 26%.
- EBIT margin before special items of approx. 12%.
- Sales of more than 1 million endoscope units (unchanged compared to previously announced outlook).
A conference call is held today, Wednesday 26 August 2020, at 10.00 (CEST). The conference is broadcast live via www.ambu.com/webcastQ32020. The presentation can be downloaded immediately before the conference call via the same link. To ask questions in the Q&A session, please call the following number five minutes before the start of the conference: +45 3544 5577 and enter the following access code: 70317768#.
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