Vitrolife: Earnings beat on higher sales and gross margin - ABG

- 10% beat on EBITDA vs cons
- Strong growth in Technology, but continued weakness in Genetics
- Estimates likely up 2-4% on EBITDA for consensus

Q2 results
Vitrolife reported a strong set of numbers in Q2 with higher sales and gross margin than expected, but sales growth in Geneticts continued to weigh down on the total organic growth for the company. Total organic growth of 4% (vs ABGSCe 0% and vs cons +1.5%) driven by +3% growth in Consumables (ABGSCe +6%), +40% in Technologies ABGSCe +7%), and -7% Genetics (ABGSCe -7%). The Technologies division had very strong growth in both EMEA and North America, and helped by a large order for Time Laps in North America. Total sales in Q2 of SEK 941m (+5.4% vs ABGSCe, and +3.2% vs cons) and EBITDA of SEK 327m (+10.8% vs ABGSCe, and +10.0% vs cons). The beat on EBITDA vs ABGSCe was due to higher gross margin and higher sales as core opex of SEK 341m was 6% higher than expected. Gross margin in Q2 came in at 59.9% (ABGSCe 57.3%, cons 57.2%).

Outlook and estimate changes
Management has not provided a specific outlook for 2024 but reiterates its five-year financial target of >10% organic sales growth, >33% EBITDA margin and below 3x on Net debt/EBITDA. Management talk about an acceleration in growth during H2 and the company will continue to investments in its sales and marketing organisation, similar message as communicated earlier in the year. We expect consensus estimates to come up 2-4% on EBITDA on the back of the Q2 results

Share price view
The share has been relatively strong going into Q2, moving up 4.5%% over the past five days, but is down 7% YTD. Given the earnings beat in Q2 on EBITDA and expected earnings revisions we expect the share to react positively today, up 2-4%, in line with the expected earnings revisions.

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